Filed electronically with the Securities and Exchange Commission on
December 3, 1998
File No. 33-12938
File No. 811-5076
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 12 / X /
--
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 13 / X /
--
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
---------------------------------------
(Exact Name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, Illinois
--------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 537-7000
Philip J. Collora, Vice President and Secretary
Scudder Kemper Investments, Inc.
222 South Riverside Plaza
Chicago, Illinois 60606
-----------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On __________________ pursuant to paragraph (b)
/ X / On February 1, 1999 pursuant to paragraph (a)(1)
/ / On __________________ pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
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<TABLE>
<CAPTION>
PART A
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Item No. Item Caption Prospectus Caption
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<S> <C> <C>
1. Front and Back Cover Pages Cover Page and Back Cover Page
2. Risk / Return Summary: About the Fund
Investments, Risks and Expense Information
Performance Past Performance
Investment Objective and Principal Strategies
Principal Risk Factors of the Fund
3. Risk/Return Summary: Fee Expense Information
Table
4. Investment Objectives, Investment Objective and Principal Strategies
Principal Investment Principal Risk Factors of the Fund; Principal Strategies and
Strategies and Related Risks Investments; Related Risks
5. Management's Discussion of Not Applicable
Fund Performance
6. Management, Organization and Investment Manager
Capital Structure Portfolio Management
7. Shareholder Information Transaction Information
Share Price
8. Distribution Arrangements Distribution and Taxes
Transaction Information
9. Financial Highlights Financial Highlights
Information
Cross Reference - Page 1
<PAGE>
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
CROSS-REFERENCE SHEET
(continued)
Items Required By Form N-1A
---------------------------
PART B
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Item No. Item Caption Caption in Statement of Additional Information
-------- ------------ ----------------------------------------------
10. Cover Page and Table Cover Page
of Contents Table of Contents
11. Fund History Investment Manager and Underwriter
12. Description of the Investment Policies and Techniques
Fund and its Additional Investment Information
Investments and Risks Investment Restrictions
13. Management of the Fund Officers and Trustees
Investment Manager and Underwriter
14. Control Persons and Officers and Trustees
Principal Holders of Investment Manager and Underwriter
Securities
15. Investment Advisory Officers and Trustees
and Other Services Investment Manager and Underwriter
16. Brokerage Allocation Portfolio transactions
and Other Practices Brokerage Commissions
17. Capital Stock and Investment Policies and Techniques
Other Securities
18. Purchase, Redemption Purchase, Repurchase and Redemption of Shares
and Pricing of Shares Net Asset Value
19. Taxation of the Fund Dividends and Taxes
20. Underwriters Investment Manager and Underwriter
21. Calculation of Performance
Performance Data
22. Financial Statements Financial Statements
</TABLE>
Cross Reference - Page 2
<PAGE>
LONG TERM
INVESTING
IN A
SHORT TERM
WORLD
February 1, 1999
Prospectus
Mutual funds:
o are not FDIC-insured
o have no bank guarantees
o may lose value
Tax-Exempt California Money Market Fund
The Securities and Exchange Commission does not make any
judgements as to whether any mutual fund is a good investment.
Nor does it judge the accuracy or completeness of any
mutual fund prospectus It is a federal offense to suggest otherwise..
<PAGE>
CONTENTS
ABOUT THE FUND.................................................................3
Investment objective and principal strategies..................................3
Principal risk factors of the fund.............................................3
Past performance...............................................................4
Expense information............................................................5
Principal strategies and investments...........................................6
Related risks..................................................................8
Investment Manager.......................................................10
ABOUT YOUR INVESTMENT.........................................................11
Buying shares............................................................11
Selling and exchanging shares............................................12
Distributions and taxes..................................................13
Transaction information..................................................14
2
<PAGE>
ABOUT THE FUND
Investment objective and principal strategies
The objective of the fund is maximum current income that is exempt from federal
and State of California income taxes to the extent consistent with stability of
capital. The fund's investment objective and policies may be changed without a
vote of shareholders.
The fund pursues its objective primarily through a professionally managed,
diversified portfolio of short-term high quality California municipal
securities.
The investment manager actively manages the fund's portfolio:
o with respect to the short-term interest rate outlook
o by selecting securities for superior price or income performance
Principal risk factors of the fund
Money market funds are not insured or guaranteed by the FDIC or any other
government agency. Although the fund strives to maintain a $1 share price, it is
conceivable that you could lose money invested in the fund.
Because of their short maturities, liquidity and high quality, money market
instruments, such as those in which the fund invests, are generally considered
to be among the safest available.
Credit enhancement. From time to time, a significant portion of the fund's
securities is supported by credit and liquidity enhancements from third party
banks and other financial institutions, and as a result, changes in the credit
quality of these institutions could cause losses to the fund and affect its
share price.
Concentration and single state investing. The fund may invest up to 25% of its
total assets in debt obligations of a single issuer or of issuers in a single
industry, and may invest without limitation in municipal securities the income
on which may be derived from projects of a single type. This means the fund's
investment returns are more likely to be impacted by changes in the market value
and returns of any one issuer. In addition, because the fund focuses its
investments in the municipal securities of one state, adverse economic,
political or regulatory occurrences in that state will have a greater impact on
investment returns than would be the case for a money market fund investing
nationally.
3
<PAGE>
Portfolio strategy. The portfolio management team's skill in choosing
appropriate investments for the fund will determine in large part the fund's
ability to achieve its investment objective.
Past performance
The chart and table that follow illustrate the changes in the fund's performance
from year to year, as well as performance over time. Of course, past performance
is not necessarily an indication of future performance.
Total returns for years ended December 31
- --------------------------------------------------------------------------------
BAR CHART
- --------------------------------------------------------------------------------
Since it's inception on _______________, the fund's greatest quarterly gain was
______ % (cite calendar quarter), and the fund's greatest quarterly loss was
_______% (cite calendar quarter).
Average Annual Total Returns
Tax Exempt California ____Index
Money Market Fund
For periods ended
December 31, 1998
One Year __.__% __.__%
Five Years __.__% __.__%
Ten Years __.__% __.__%
The _____ Index is a widely recognized unmanaged measure of ___________. Index
returns assume reinvestment of dividends and, unlike the fund's returns, do not
reflect any fees or expenses.
4
<PAGE>
Expense information
The following information is designed to help you understand the costs of
investing in the fund.
================================================================================
Shareholder fees: Fees charged directly to your account in the fund for various
transactions.
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases (as a % of offering price) None
- --------------------------------------------------------------------------------
Maximum Sales Charge on Reinvested Dividends None
- --------------------------------------------------------------------------------
Redemption Fee None
- --------------------------------------------------------------------------------
Exchange Fee None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (as a % of redemption proceeds) None
================================================================================
================================================================================
Annual fund operating expenses: Paid by the fund before it distributes its net
investment income. These are expressed as a % of average daily net assets, for
the year ended ___________.
- --------------------------------------------------------------------------------
Investment management fee
- --------------------------------------------------------------------------------
Distribution (12b-1) fees
- --------------------------------------------------------------------------------
Other expenses
- --------------------------------------------------------------------------------
Total fund operating expenses
================================================================================
Example
This example illustrates the impact of the above fees and expenses on an
account with an initial investment of $10,000, based on the expenses shown
above. It assumes a 5% annual return, the reinvestment of all dividends and
distributions and "annual fund operating expenses" remain the same each year.
The example is hypothetical: actual fund expenses and return vary from year to
year, and may be higher or lower than those shown.
Fees and expenses if you sold shares after:
==============================================
1 Year
- ----------------------------------------------
3 Years
- ----------------------------------------------
5 Years
- ----------------------------------------------
10 Years
==============================================
5
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Principal strategies and investments
The fund invests at least 65% of its assets in tax-exempt obligations of the
State of California and its political subdivisions. Under normal market
conditions, the fund invests between 80 - 100% of its assets in tax-exempt debt
obligations issued by or on behalf of the State of California and other states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities. These are
generally referred to as municipal securities.
The fund will invest only in municipal securities that at the time of purchase
meet one of the following criteria:
o rated within the two highest ratings of municipal securities by a
nationally recognized statistical rating service;
o guaranteed or insured by the U.S. Government as to the payment of
principal and interest;
o fully collateralized by an escrow of U.S. Government securities;
o have at the time of purchase Moody's short-term municipal securities
rating of MIG-2 or higher or a municipal commercial paper rating of P-2 or
higher, or S&P's municipal commercial paper rating of A-2 or higher;
o if unrated, longer term municipal securities of that issuer are rated
within the two highest rating categories by Moody's or S&P; or
o determined by the investment manager to be at least equal in quality to
one or more of the above ratings.
In addition, the fund limits its investment to securities that meet the quality
and diversification requirements of Rule 2a-7 under the Investment Company Act
of 1940.
Municipal securities are debt obligations issued to obtain funds for various
public purposes, including the construction of a wide range of public facilities
such as airports, bridges, highways, housing, hospitals, mass transportation,
schools, streets and water and sewer works. Other public purposes for which
municipal securities may be issued include:
o the refunding of outstanding obligations
o obtaining funds for general operating expenses
o the obtaining of funds to loan to other public institutions and
facilities.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of
6
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facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source.
Individual municipal securities may lose value for many reasons, including:
o a downgrade in credit rating
o in the case of bonds issued to finance projects, an adverse change in the
real or perceived value of the project
o an early call by the issuer
o loss of tax free status
The fund may invest in securities having rates of interest that are adjusted
periodically or that "float" continuously according to formulae intended to
minimize fluctuations in values of the instruments. The interest rate on these
variable rate notes ordinarily is determined by reference to or is a percentage
of a bank's prime rate, the 90 day U.S. Treasury bill rate, the rate of return
on commercial paper or bank certificates of deposit, or some similar objective
standard. Generally, the changes in the interest rate on variable rate notes
reduce the fluctuation in the market value of such notes. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation or
capital depreciation is less than for fixed rate obligations. The fund currently
intends to invest a substantial portion of its assets in variable rate notes and
variable rate loan participations. Variable rate demand notes have a demand
feature which entitles the purchaser to resell the securities at par value. The
rate of return on variable rate demand notes also varies according to some
objective standard, such as an index of short-term tax-exempt rates. Variable
rate instruments with a demand feature enable the fund to purchase instruments
with a stated maturity in excess of one year. The fund determines the maturity
of variable rate instruments in accordance with Rule 2a-7, which allows the fund
to consider certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument.
The fund's portfolio is actively managed with respect to the investment
manager's assessment of the outlook for interest rates. Individual securities
are purchased and sold based on the investment manager's determinations of
geographic and sector strength and relative value.
While not a principal strategy, the fund may also invest in:
o reverse repurchase agreements
o taxable investments
o certificates of participation
o securities issued on a when-issued or delayed delivery basis
o bonds subject to both the individual and corporate alternative minimum tax
7
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In addition, the fund may utilize financial futures contracts and options, and
may hold cash and other temporary investments such as repurchase agreements.
More information about investments and strategies is provided in the Statement
of Additional Information. Of course, there can be no guarantee that by
following these strategies, the fund will achieve its objective.
Related risks
Investors should be aware that certain California constitutional amendments,
legislative measures, executive orders, civil actions and voter initiatives, as
well as the general financial condition of the State, could result in certain
adverse consequences for owners of California municipal securities. For
instance, amendments in recent years to the California Constitution and statutes
that limit the taxing and spending authority of California governmental entities
may impair the ability of the issuers of some California municipal securities to
maintain debt service on their obligations. Other measures affecting the taxing
or spending authority of California or its political subdivisions may be
approved or enacted in the future. Some of the significant financial
considerations relating to the fund's investments in California municipal
securities are summarized in the Statement of Additional Information.
8
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Financial highlights
The tables below are intended to help you understand the fund's financial
performance for the past several years. The total return figures show what an
investor in the fund would have earned (or lost) assuming reinvestment of all
distributions. This information has been audited by Ernst & Young LLP whose
report, along with the fund's financial statements, is included in the annual
report, which is available upon request (see back cover).
To Be Updated
9
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Investment Manager
The fund retains the investment management firm of Scudder Kemper Investments,
Inc., Two International Place, Boston, MA, to manage its daily investment and
business affairs subject to the policies established by the fund's Board.
Scudder Kemper Investments, Inc. actively manages the fund's investments.
Professional management can be an important advantage for investors who do not
have the time or expertise to invest directly in individual securities. Scudder
Kemper Investments, Inc. is one of the largest and most experienced investment
management organizations worldwide. It is one of the ten largest mutual fund
companies in the U.S., managing more than $230 billion in assets globally for
mutual fund investors, retirement and pension plans, institutional and corporate
clients, and private family and individual accounts.
Scudder Kemper Investments is paid a monthly investment management fee on a
graduated basis of 1/12 of the following annual fee: 0.22% of the first $500
million of average daily net assets, 0.20% of the next $500 million, 0.175% of
the next $1 billion, 0.16% of the next $1 billion and 0.15% of average daily net
assets over $3 billion.
Portfolio management
The fund is managed by a team of investment professionals who each play an
important role in the fund's management process. Team members work together to
develop investment strategies and select securities for the fund's portfolio.
They are supported by the investment manager's large staff of economists,
research analysts, traders and other investment specialists who work in the
investment manager's offices across the United States and abroad. The investment
manager believes its team approach benefits fund investors by bringing together
many disciplines and leveraging its extensive resources.
The following investment professionals are associated with the fund as
indicated:
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Frank J. Rachwalski Joined Scudder Kemper Investments in
1973. He began his investment career
in ___.
Jerri I. Cohen Joined Scudder Kemper Investments in
1981. She began her investment career
in ___.
10
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Year 2000 readiness
Like other mutual funds and financial and business organizations worldwide, the
fund could be adversely affected if computer systems on which it relies, which
primarily include those used by the investment manager, its affiliates or other
service providers, are unable to correctly process date-related information on
and after January 1, 2000. This risk is commonly called the Year 2000 Issue.
Failure to successfully address the Year 2000 Issue could result in
interruptions to and other material adverse effects on the fund's business and
operations. The investment manager has commenced a review of the Year 2000 Issue
as it may affect the fund and is taking steps it believes are reasonably
designed to address the Year 2000 Issue, although there can be no assurances
that these steps will be sufficient. In addition, there can be no assurances
that the Year 2000 Issue will not have an adverse effect on the companies whose
securities are held by the fund or on global markets or economies generally.
ABOUT YOUR INVESTMENT
Buying shares
Fund shares are sold at their net asset value next determined after an order and
payment are received in the form described under "Purchase of Shares." The net
asset value of a Fund share is calculated by dividing the total assets of the
Fund less its liabilities by the total number of shares outstanding. The net
asset value per share of the Fund is determined on each day the New York Stock
Exchange is open for trading, at 11:00 a.m., 3:00 p.m. and 8:00 p.m. Chicago
time, and on each other day on which there is a sufficient degree of trading in
the Fund's investments that its net asset value might be affected, except that
the net asset value will not be computed on a day on which no orders to purchase
shares were received and no shares were tendered for redemption. Orders received
by dealers or other financial services firms prior to the 8:00 p.m.
determination of net asset value for the Fund and received by Kemper
Distributors, Inc. ("KDI"), the primary administrator, distributor and principal
underwriter for the Funds, prior to the close of its business day can be
confirmed at the 8:00 p.m. determination of net asset value for that day. Such
transactions are settled by payment of Federal Funds in accordance with
procedures established by KDI. Redemption orders received in connection with the
administration of checkwriting programs by certain dealers or other financial
services firms prior to the determination of the Fund's net asset value may also
11
<PAGE>
be processed on a confirmed basis in accordance with procedures established by
KDI. The Fund seeks to maintain a net asset value of $1.00 per share.
If payment is wired in Federal Funds, the payment should be directed to State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110,
the sub-custodian for the fund. If payment is to be wired, call the firm from
which you received this prospectus for proper instructions.
Selling and exchanging shares
Upon receipt by the Shareholder Service Agent of a request in the form described
below, shares will be redeemed by the fund at the next determined net asset
value. If processed at 3:00 p.m. or 8:00 p.m. Chicago time, the shareholder will
receive that day's dividend. A shareholder may use either the regular or
expedited redemption procedures. Shareholders who redeem all their shares of the
fund will receive the net asset value of such shares and all declared but unpaid
dividends on such shares.
General
Shareholders should contact the firm through which shares were purchased for
redemption instructions. Any shareholder may require the fund to redeem his or
her shares. When shares are held for the account of a shareholder by the fund's
transfer agent, the shareholder may redeem them by sending a written request
with signatures guaranteed to Kemper Mutual Funds, Attention: Redemption
Department, P.O. Box 419557, Kansas City, Missouri 64141-6557.
Redemption requests and a stock power must be endorsed by the account holder
with signatures guaranteed. The redemption request and stock power must be
signed exactly as the account is registered including any special capacity of
the registered owner. Additional documentation may be requested, and a signature
guarantee is normally required, from institutional and fiduciary account
holders, such as corporations, custodians (e.g., under the Uniform Transfers to
Minors Act), executors, administrators, trustees or guardians.
Share certificates
Share certificates are issued only on request to the fund and may not be
available for certain types of accounts. To redeem shares issued in certificated
form, they must be mailed to or deposited with the Shareholder Service Agent,
along with a duly endorsed stock power and accompanied by a written request for
redemption.
12
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Repurchases (confirmed redemptions)
A request for repurchase may be communicated by a shareholder through a
securities dealer or other financial services firm to Kemper Distributors, which
the fund has authorized to act as its agent. There is no charge by Kemper
Distributors with respect to repurchases; however, dealers or other firms may
charge customary commissions for their services. The offer to repurchase may be
suspended at any time. Requirements as to stock powers, certificates, payments
and delay of payments are the same as for redemptions.
Distributions and taxes
Dividends and capital gains distributions
The fund declares daily dividends from net investment income. Net investment
income consists of all interest income earned on portfolio assets less all fund
expenses. Income dividends are distributed monthly and dividends of net realized
capital gains are distributed annually.
Reinvest Dividends at net asset value into additional shares of the fund.
Dividends are normally reinvested on the 15th day of each month if a business
day, otherwise on the next business day. Dividends will be reinvested unless the
shareholder elects to receive them in cash.
Receive Dividends in Cash if so requested. Checks will be mailed monthly to the
shareholder or any person designated by the shareholder. The fund will reinvest
dividend checks (and future dividends) in shares of the fund if checks are
returned as undeliverable. Dividends and other distributions in the aggregate
amount of $10 or less are automatically reinvested in shares of the fund unless
you request that such policy not be applied to your account.
Taxes
13
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Generally, income dividends which represent interest received from municipal
securities are not taxable to shareholders. Dividends representing taxable net
investment income, if any, and net short-term capital gains, if any, are taxable
to shareholders as ordinary income. Long-term capital gains distributions, if
any, are taxable to shareholders as long-term capital gains, regardless of the
length of time shareholders have owned shares. Net interest from portfolio
holdings in "private activity bonds" may be subject to taxes. The tax exemption
of fund dividends for federal and California state income tax purposes does not
necessarily result in exemption under the income or other tax laws of any other
state or local taxing authority. Shareholders are advised to consult their own
tax advisers as to the status of their accounts under state and local tax laws.
The fund may not be an appropriate investment for qualified retirement plans and
Individual Retirement Accounts.
Any dividends or capital gains distributions declared in October, November or
December with a record date in such month and paid during the following January
are taxable as if paid on December 31 of the calendar year in which they were
declared.
The exchange of fund shares will be treated as a sale, and any gain on fund
shares when sold may be subject to federal income tax.
A capital gains distribution received shortly after the purchase of shares
reduces the net asset value of the shares by the amount of the distribution and,
although in effect a return of capital, will be taxable to the shareholder. The
fund sends you detailed tax information about the amount and type of
distributions by January 31 of the following year.
Transaction information
Share price
Scudder Fund Accounting Corporation determines the net asset value per share of
the fund on each day the NYSE is open for trading, at 11:00 a.m., 3:00 p.m. and
8:00 p.m. Chicago time, and on each other day on which there is a sufficient
degree of trading in the fund's investments that its net asset value might be
affected, except that the net asset value will not be computed on a day on which
no orders to purchase shares were received and no shares were tendered for
redemption.
The fund seeks to maintain a net asset value of $1.00 per share and values its
portfolio instruments at amortized cost. Calculations are made to compare the
value of the fund's investments, valued at amortized cost, with market-based
values. In order to value its investments at amortized cost, the fund purchases
only securities with a maturity of 397 days or less and maintains a
dollar-weighted average portfolio maturity of 90 days or less. In addition, the
fund limits its portfolio investments to securities that meet the quality and
diversification requirements of Rule 2a-7.
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The net asset value per share is the value of one share and is determined by
dividing the value of the fund's net assets by the number of shares outstanding.
Processing time
All requests to buy and sell shares that are received in good order by the
fund's transfer agent by the close of regular trading on the NYSE are executed
at the net asset value per share calculated at the close of trading that day
(subject to any applicable sales load or contingent deferred sales charge).
Orders received by dealers or other financial services firms prior to the
determination of net asset value and received by the fund's transfer agent prior
to the close of its business day will be confirmed at a price based on the net
asset value effective on that day. If an order is accompanied by a check drawn
on a foreign bank, funds must normally be collected before shares will be
purchased.
Signature guarantees
A signature guarantee is required when you sell more than $100,000 worth of
shares. You can obtain one from most brokerage houses and financial
institutions, although not from a notary public. The fund will normally send you
the proceeds within one business day following your request, but may take up to
seven business days (or longer in the case of shares recently purchased by
check).
Purchase restrictions
Purchases and sales should be made for long-term investment purposes only. The
fund and its transfer agent each reserves the right to reject purchases of fund
shares (including exchanges) for any reason including when there is evidence of
a pattern of frequent purchases and sales made in response to short-term
fluctuations in the fund's share price.
The fund reserves the right to withdraw all or any part of the offering made by
this prospectus and to reject purchase orders. Also, from time to time, the fund
may temporarily suspend the offering of its shares to new investors. During the
period of such suspension, persons who are already shareholders normally are
permitted to continue to purchase additional shares and to have dividends
reinvested.
15
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Minimum balances
The minimum initial investment is $1,000 and the minimum subsequent investment
is $100. Under an automatic investment plan, the minimum initial and subsequent
investment is $50. These minimum amounts may be changed at any time in
management's discretion. Firms offering fund shares may set higher minimums for
accounts they service and may change such minimums at their discretion.
Because of the high cost of maintaining small accounts, the fund reserves the
right to redeem an account that falls below the minimum investment level,
currently $1,000. A shareholder will be notified in writing and will be allowed
60 days to make additional purchases to bring the account value up to the
minimum investment level before the fund redeems the shareholder account.
Third party transactions
If you buy and sell shares of the fund through a member of the National
Association of Securities Dealers, Inc. (other than Kemper Distributors), that
member may charge a fee for that service. This prospectus should be read in
connection with such firms' material regarding their fees and services.
Rule 12b-1 plan
The fund has adopted a plan under Rule 12b-1 that provides for fees payable as
an expense of the fund that are used by the transfer agent to pay for
distribution and services. Because 12b-1 fees are paid out of fund assets on an
ongoing basis, they will, over time, increase the cost of investment and may
cost more than other types of sales charges.
16
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Additional information about the fund may be found in the Statement of
Additional Information, the Shareholder Service Guide and in shareholder
reports. The Statement of Additional Information contains more detailed
information on fund investments and operations. The Shareholder Service Guide
contains more detailed information about purchases and sales of fund shares. The
semiannual and annual shareholder reports contain a discussion of the market
conditions and the investment strategies that significantly affected the fund's
performance during the last fiscal year, as well as a listing of portfolio
holdings and financial statements. These and other fund documents may be
obtained without charge from the following sources:
==========================================================================
By Phone: In Person:
- --------------------------------------------------------------------------
Call Kemper at: Public Reference Room
1-800-621-1048 Securities and Exchange Commission,
Washington, D.C.
(Call 1-800-SEC-0330
for more information).
- --------------------------------------------------------------------------
By Mail: By Internet:
- --------------------------------------------------------------------------
Kemper Distributors, Inc. http://www.sec.gov
222 South Riverside Plaza http://www.kemper.com
Chicago, IL 60606-5808
or
Public Reference Section,
Securities and Exchange Commission,
Washington, D.C. 20549-6009
(a duplication fee is charged)
==========================================================================
The Statement of Additional Information is incorporated by reference into this
prospectus (is legally a part of this prospectus).
Investment Company Act file numbers:
Tax-Exempt California Money Market Fund 811-5706
Printed with SOYINK Printed on recycled paper xx-xx-xx (codes)
17
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STATEMENT OF ADDITIONAL INFORMATION
February 1, 1999
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-231-8568
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the prospectus of Tax-Exempt California Money Market
Fund (the "Fund") dated February 1, 1999. The prospectus may be obtained without
charge from the Fund.
TABLE OF CONTENTS
MUNICIPAL SECURITIES.......................................................2
INVESTMENT RESTRICTIONS....................................................5
INVESTMENT MANAGER AND SHAREHOLDER SERVICES................................6
PORTFOLIO TRANSACTIONS....................................................11
PURCHASE AND REDEMPTION OF SHARES.........................................12
DIVIDENDS, NET ASSET VALUE AND TAXES......................................13
PERFORMANCE...............................................................15
OFFICERS AND TRUSTEES.....................................................19
SPECIAL FEATURES..........................................................21
SHAREHOLDER RIGHTS........................................................22
APPENDIX -- RATINGS OF INVESTMENTS........................................24
The financial statements appearing in the Fund's 1998 Annual Report to
Shareholders are incorporated herein by reference. The Fund's Annual Report to
Shareholders accompanies this Statement of Additional Information.
TEC-13 2/98 Printed on recycled paper
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MUNICIPAL SECURITIES
The two principal classifications of Municipal Securities consist of "general
obligation" and "revenue" issues. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source such as the
user of the facility being financed. Industrial development bonds held by the
Fund are in most cases revenue bonds and are not payable from the unrestricted
revenues of the issuer. Among other types of instruments, the Fund may purchase
tax-exempt commercial paper, warrants and short-term municipal notes such as tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
construction loan notes and other forms of short-term loans. Such notes are
issued with a short-term maturity in anticipation of the receipt of tax
payments, the proceeds of bond placements or other revenues.
The Fund may purchase securities which provide for the right to resell them to
an issuer, bank or dealer at an agreed upon price or yield within a specified
period prior to the maturity date of such securities. Such a right to resell is
referred to as a "Standby Commitment." Securities may cost more with Standby
Commitments than without them. Standby Commitments will be entered into solely
to facilitate portfolio liquidity. A Standby Commitment may be exercised before
the maturity date of the related Municipal Security if the Fund's investment
manager revises its evaluation of the creditworthiness of the underlying
security or of the entity issuing the Standby Commitment. The Fund's policy is
to enter into Standby Commitments only with issuers, banks or dealers which are
determined by the Fund's investment manager to present minimal credit risks. If
an issuer, bank or dealer should default on its obligation to repurchase an
underlying security, the Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere. For purposes of
valuing the Fund's securities at amortized cost, the maturity of Municipal
Securities will not be considered shortened by any Standby Commitment to which
such security is subject.
The Fund may invest in certain Municipal Securities having rates of interest
that are adjusted periodically or that "float" continuously according to
formulae intended to minimize fluctuations in values of the instruments
("Variable Rate Notes"). The interest rate on Variable Rate Notes ordinarily is
determined by reference to or is a percentage of a bank's prime rate, the 90 day
U.S. Treasury bill rate, the rate of return on commercial paper or bank
certificates of deposit, or some similar objective standard. Generally, the
changes in the interest rate on Variable Rate Notes reduce the fluctuation in
the market value of such notes. Accordingly, as interest rates decrease or
increase, the potential for capital appreciation or capital depreciation is less
than for fixed rate obligations. Variable Rate Loan Participations are similar
to Variable Rate Notes except they are made available through a commercial bank
which arranges the tax-exempt loan. Variable Rate Notes and Variable Rate Loan
Participations typically are bought and sold among institutional investors. The
Fund currently intends to invest a substantial portion of its assets in Variable
Rate Notes and Variable Rate Loan Participations. Variable Rate Demand Notes
have a demand feature which entitles the purchaser to resell the securities at
par value. The rate of return on Variable Rate Demand Notes also varies
according to some objective standard, such as an index of short-term tax-exempt
rates. Variable rate instruments with a demand feature enable the Fund to
purchase instruments with a stated maturity in excess of one year. The Fund
determines the maturity of variable rate instruments in accordance with Rule
2a-7, which allows the Fund to consider certain of such instruments as having
maturities shorter than the maturity date on the face of the instrument.
The Fund may purchase high quality Certificates of Participation in trusts that
hold Municipal Securities. A Certificate of Participation gives the Fund an
undivided interest in the Municipal Security in the proportion that the Fund's
interest bears to the total principal amount of the Municipal Security. These
Certificates of Participation may be variable rate or fixed rate with remaining
maturities of one year or less. A Certificate of Participation may be backed by
an irrevocable letter of credit or guarantee of a financial institution that
satisfies rating agencies as to the credit quality of the Municipal Security
supporting the payment of principal and interest on the Certificate of
Participation. Payments of principal and interest would be dependent upon the
underlying Municipal Security and may be guaranteed under a letter of credit to
the extent of such credit. The quality rating by a rating service of an issue of
Certificates of Participation is based primarily upon the rating of the
Municipal Security held by the trust and the credit rating of the issuer of any
letter of credit and of any other guarantor providing credit support to the
issue. The Fund's investment manager considers these factors as well as others,
such as any quality ratings issued by the rating services identified above, in
reviewing the credit risk presented by a Certificate of Participation and in
determining whether the Certificate of Participation is appropriate for
investment by the Fund. The Fund's investment manager anticipates that, for most
publicly offered Certificates of Participation, there will be a liquid secondary
market or there may be demand features enabling the Fund to readily sell its
Certificates of Participation prior to
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maturity to the issuer or a third party. As to those instruments with demand
features, the Fund intends to exercise its right to demand payment from the
issuer of the demand feature only upon a default under the terms of the
Municipal Security, as needed to provide liquidity to meet redemptions, or to
maintain a high quality investment portfolio.
The Fund may purchase and sell Municipal Securities on a when-issued or delayed
delivery basis. A when-issued or delayed delivery transaction arises when
securities are bought or sold for future payment and delivery to secure what is
considered to be an advantageous price and yield to the Fund at the time it
enters into the transaction. In determining the maturity of portfolio securities
purchased on a when-issued or delayed delivery basis, the Fund will consider
them purchased on the date when it commits itself to the purchase.
A security purchased on a when-issued basis, like all securities held in the
Fund's portfolio, is subject to changes in market value based upon changes in
the level of interest rates and investors' perceptions of the creditworthiness
of the issuer. Generally such securities will appreciate in value when interest
rates decline and depreciate in value when interest rates rise. Therefore if, in
order to achieve higher interest income, the Fund remains substantially fully
invested at the same time that it has purchased securities on a when-issued
basis, there will be a greater possibility that the net asset value of the
Fund's shares will vary from $1.00 per share, since the value of a when-issued
security is subject to market fluctuation and no interest accrues to the
purchaser prior to settlement of the transaction. See "Net Asset Value."
The Fund will only make commitments to purchase Municipal Securities on a
when-issued or delayed delivery basis with the intention of actually acquiring
the securities, but the Fund reserves the right to sell these securities before
the settlement date if deemed advisable. The sale of securities may result in
the realization of gains that are not exempt from federal or State of California
income tax.
Yields on Municipal Securities are dependent on a variety of factors, including
the general conditions of the money market and the municipal bond market, and
the size, maturity and rating of the particular offering. The ratings of Moody's
and S&P represent their opinions as to the quality of the Municipal Securities
which they undertake to rate. It should be emphasized, however, that ratings are
general and are not absolute standards of quality. Consequently, Municipal
Securities with the same maturity, coupon and rating may have different yields.
In seeking to achieve its investment objective, the Fund may invest all or any
part of its assets in Municipal Securities that are industrial development
bonds. Moreover, although the Fund does not currently intend to do so on a
regular basis, it may invest more than 25% of its assets in Municipal Securities
which are repayable out of revenue streams generated from economically related
projects or facilities, if such investment is deemed necessary or appropriate by
the Fund's investment manager. To the extent that the Fund's assets are
concentrated in Municipal Securities payable from revenues on economically
related projects and facilities, the Fund will be subject to the peculiar risks
presented by such projects to a greater extent than it would be if the Fund's
assets were not so concentrated.
Municipal Securities that the Fund may purchase include, without limitation,
debt obligations issued to obtain funds for various public purposes, including
the construction of a wide range of public facilities such as airports, bridges,
highways, housing, hospitals, mass transportation, public utilities, schools,
streets, and water and sewer works. Other public purposes for which Municipal
Securities may be issued include refunding outstanding obligations, obtaining
funds for general operating expenses and obtaining funds to loan to other public
institutions and facilities.
Municipal Securities, such as industrial development bonds, are issued by or on
behalf of public authorities to obtain funds for purposes including privately
operated airports, housing, conventions, trade shows, ports, sports, parking or
pollution control facilities or for facilities for water, gas, electricity or
sewage and solid waste disposal. Such obligations, which may include lease
arrangements, are included within the term Municipal Securities if the interest
paid thereon qualifies as exempt from federal income tax. Other types of
industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Municipal Securities, although the
current federal tax laws place substantial limitations on the size of such
issues.
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Examples of Municipal Securities which are issued with original maturities of
one year or less are short-term tax anticipation notes, bond anticipation notes,
revenue anticipation notes, construction loan notes, pre-refunded municipal
bonds, warrants and tax-free commercial paper.
Tax anticipation notes typically are sold to finance working capital needs of
municipalities in anticipation of receiving property taxes on a future date.
Bond anticipation notes are sold on an interim basis in anticipation of a
municipality issuing a longer term bond in the future. Revenue anticipation
notes are issued in expectation of receipt of other types of revenue such as
those available under the Federal Revenue Sharing Program. Construction loan
notes are instruments insured by the Federal Housing Administration with
permanent financing by "Fannie Mae" (the Federal National Mortgage Association)
or "Ginnie Mae" (the Government National Mortgage Association) at the end of the
project construction period. Pre-refunded municipal bonds are bonds that are not
yet refundable, but for which securities have been placed in escrow to refund an
original municipal bond issue when it becomes refundable. Tax-free commercial
paper is an unsecured promissory obligation issued or guaranteed by a municipal
issuer. The Fund may purchase other Municipal Securities similar to the
foregoing that are or may become available, including securities issued to
pre-refund other outstanding obligations of municipal issuers.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material and adverse changes in
the rights of holders of obligations issued by such subdivisions or authorities.
Litigation challenging the validity under state constitutions of present systems
of financing public education has been initiated or adjudicated in a number of
states, and legislation has been introduced to effect changes in public school
finances in some states. In other instances there has been litigation
challenging the issuance of pollution control revenue bonds or the validity of
their issuance under state or federal law, which litigation ultimately could
affect the validity of those Municipal Securities or the tax-free nature of the
interest thereon.
The following information as to certain California risk factors is given to
investors because the Fund concentrates its investments in California state and
local municipal securities. Such information constitutes only a summary, does
not purport to be a complete description and is based upon information from
official statements relating to securities offerings of California issuers.
In recent years, California voters have approved a number of changes to the
State constitution that have limited the ability of State and local issuers to
raise revenues and adjust appropriations.
In 1978, California voters approved Proposition 13 which added Article XIII A to
the California Constitution. Article XIII A changed the definition of assessed
property value and placed restrictions on a taxing entity's ability to increase
real property taxes. In 1979, voters also approved Proposition 4, the so-called
Gann Initiative, which added Article XIII B to the California Constitution. The
purpose of Article XIII B was to limit the annual appropriations of the State
and any local government unit to the level of appropriations for the prior year,
as adjusted for changes in cost of living, population and services required.
Article XIII B also specified that debt service obligations incurred prior to
January 1, 1979 were excluded from the appropriations limits.
In the general elections of 1986, 1988, 1990 and 1996, California voters
approved various measures that amended Article XIII A and XIII B. Propositions
58 and 60 clarified the definitions of "purchased property" and "change of
ownership" found in Article XIII A and added Article XIII C and XIII D to the
state constitution. Propositions 58 and 60 clarified the definitions of
"purchased property" and "change of ownership" found in Article XIII A.
Proposition 98, in addition to guaranteeing a percent of State funding for
public schools, modified Article XIII B to permit excess State revenues to be
transferred to public schools and community colleges rather than returned to
taxpayers. Proposition 111 amended Article XIII B to ease restrictions on
certain expenditure categories in calculating the annual appropriation ceiling.
Article XIII C and XIII D place additional requirements on revenue raising
abilities of local government units. Finally, on November 5, 1996, California
voters approved Proposition 218, called the "Right to Vote on Taxes Act." This
constitutional amendment restricts local governments' ability to raise or extend
taxes without voter consent, places restrictions on the ability to charge
certain fees and assessments, and makes it easier for voters to use the
initiative process to reduce or repeal existing taxes.
Future voter initiatives, if proposed and adopted, could further modify Articles
XIII A, XIII B, XIII C and XIII D and place increased pressures on the ability
of State and local entities to raise revenue and increase appropriations.
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California's economy is the largest among the 50 states and one of the largest
in the world. This diversified economy has major components in agriculture,
manufacturing, high technology, trade, entertainment, tourism, construction and
services. Total State gross domestic product of about $1.0 trillion in 1996 was
larger than all but six nations in the world.
After suffering a severe recession in the early 1990s, California's economy has
experienced a steady recovery since 1994. This expansion has helped create a
larger number of jobs that now exceed the number lost during the recession. The
strongest growth has been in export-related industries, business services,
electronics, entertainment and tourism. Current employment and personal income
growth rates exceed the national average. A recent economic forecast by the UCLA
Business Forecasting Project predicts that California's employment growth rate
will continue to outpace the nation through the year 2000.
The strengthening economy has had a generally positive impact on State finances.
The State has achieved five consecutive years of operating surplus. The State's
improved cash position allowed it to repay the $4.0 billion Revenue Anticipation
Warrants on April 25, 1996, and restore the State to a normal cash flow
borrowing cycle. The State's estimated ending General Fund balance for FY96-97
is $859 million (modified accrual basis).
California's economic and financial improvement prompted the three major rating
agencies to raise the State's general obligation bond rating in 1996. In October
1997, Fitch Investors Service raised the State's rating to AA-. The current
ratings are A1/A+/A-.
Recent State budgets have included large cuts in local government transfer
payments. These reductions may cause deterioration in local issuer financial
performance and result in reduced bond ratings for some local government
issuers.
On December 6, 1994, Orange County, California filed for bankruptcy protection
under Chapter 9 of the United States Bankruptcy Code. A Plan of Adjustment was
confirmed and successfully implemented in June 1996.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions which cannot be changed
without approval by holders of a majority of its outstanding voting shares. As
defined in the Investment Company Act of 1940 (the "1940 Act"), this means the
lesser of the vote of (a) 67% of the Fund's shares present at a meeting where
more than 50% of the outstanding shares are present in person or by proxy; or
(b) more than 50% of the Fund's shares.
The Fund has elected to be classified as a diversified series of an open-end
investment company, but will not be subject to additional requirements that are
more restrictive than the 1940 Act.
In addition, as a matter of fundamental policy, the Fund may not:
1. With respect to 75% of the value of its total assets, invest more than 5%
of the value of its total assets in the securities of any one issuer (other
than obligations of, or guranteed by, the United States Government, its
agencies or instrumentalities), except that all or substantially all of
the assets of the Fund may be invested in another registered investment
company having the same investment objective and substantially similar
investment policies as the Fund.
2. Borrow money, except as permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
3. Issue senior securities, except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
4. Concentrate its investments in a particular industry, as that term is used
in the Investment Company Act of 1940, as amended, and as interpreted of
modified by regulatory authority having jurisdiction from time to time,
except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same
investment objective and substantially similar investment policies as the
Fund.
5. Engage in the business of underwriting securities issued by others, except
to the extent that a fund may be deemed to be an underwriter in connection
with the disposition of portfolio securities.
6. Purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities.
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7. Purchase physical commodities or contracts relating to physical
commodities.
8. Make loans except as permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
Non-fundamental policies may be changed by the Trustees of the Fund and without
shareholder approval. As a matter of non-fundamental policy, the Fund does not
currently intend to:
9. Purchase securities or make investments other than in accordance with its
investment objective and policies, except that all or substantially all of
the assets of the Fund may be invested in another registered investment
company having the same investment objective and substantially similar
investment policies as the Fund..
10. Make short sales of securities or purchase securities on margin, except to
obtain such short-term credits as may be necessary for the clearance of
transactions.
11. Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Fund or its investment adviser owns
beneficially more than 1/2 of 1% of the securities of such issuer, and
together own more than 5% of the securities of such issuer.
12. Pledge, mortgage or hypothecate assets in an amount exceeding 10% of the
Fund's assets, except in order to secure borrowings.
13. Invest more than 10% of its total assets in illiquid securities, including
repurchase agreements maturing in more than seven days, except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
14. Write, purchase or sell puts, calls or combinations thereof, although the
Fund may purchase Municipal Securities subject to Standby Commitments,
Variable Rate Demand Notes or Repurchase Agreements in accordance with its
investment objective and policies.
15. Invest for the purpose of exercising control or management of another
issuer.
16. Invest in interests in oil, gas or other mineral exploration or development
programs, although it may invest in Municipal Securities of issuers which
invest in or sponsor such programs.
17. Invest more than 5% of its total assets in securities of issuers which,
with their predecessors, have a record of less than three years of
continuous operation
18. Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund may
invest more than 25% of its total assets in industrial development bonds. The
Fund did not borrow money as permitted by investment restriction number 7 during
its latest fiscal year, and it has no present intention of borrowing during the
current year.
INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS
The investment objective of the Fund is maximum current income that is exempt
from federal and State of California income taxes to the extent consistent with
stability of capital. The Fund pursues its objective primarily through a
professionally managed, diversified portfolio of short-term high quality
municipal obligations, the income from which is exempt from federal and State of
California income taxes. The Fund is a money market mutual fund that has been
designed to provide investors with professional management of short-term
investment dollars. The Fund pools individual and institutional investors' money
which it uses to buy tax-exempt money market instruments. Because the Fund
combines its shareholders' money, it can buy and sell large blocks of
securities, which reduces transaction costs and maximizes yields. The Fund is
managed by investment professionals who analyze market trends to take advantage
of changing conditions. Its investments are subject to price fluctuations
resulting from rising or declining interest rates and are subject to the ability
of the issuers of such investments to make payment at maturity. Because of their
short maturities, liquidity and high quality, money market
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instruments, such as those in which the Fund invests, are generally considered
to be among the safest available. There can be no assurance that the Fund will
achieve its objective or that it will maintain a net asset value of $1.00 per
share.
Under normal market conditions, the Fund attempts to invest 100%, and will
invest at least 80%, of its total assets in tax-exempt debt obligations issued
by or on behalf of the State of California and other states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities ("Municipal Securities")
and will invest at least 65% of its total assets in tax-exempt obligations of
the State of California and its political subdivisions ("California Municipal
Securities"). In compliance with the position of the staff of the Securities and
Exchange Commission, the Fund does not consider "private activity" bonds as
described in "Dividends, Net Asset Value and Taxes" as Municipal Securities for
purposes of the 80% limitation. This is a fundamental policy so long as the
staff maintains its position, after which it would become non-fundamental.
Dividends to the extent of interest income received on California Municipal
Securities will be exempt from both federal and State of California income tax
provided at least 50% of the Fund's total assets are invested in California
Municipal Securities. Such dividend income may be subject to local taxes. See
"Dividends, Net Asset Value and Taxes." The Fund's assets will consist of
Municipal Securities, temporary investments, as described below, and cash.
The Fund will invest only in Municipal Securities that at the time of purchase:
(a) are rated within the two highest ratings of municipal securities (Aaa or Aa)
assigned by Moody's Investors Service, Inc. ("Moody's") or (AAA or AA) assigned
by Standard & Poor's Corporation ("S&P"); (b) are guaranteed or insured by the
U.S. Government as to the payment of principal and interest; (c) are fully
collateralized by an escrow of U.S. Government securities; (d) have at the time
of purchase Moody's short-term municipal securities rating of MIG-2 or higher or
a municipal commercial paper rating of P-2 or higher, or S&P's municipal
commercial paper rating of A-2 or higher; (e) are unrated, if longer term
municipal securities of that issuer are rated within the two highest rating
categories by Moody's or S&P; or (f) are determined by the investment manager to
be at least equal in quality to one or more of the above ratings. In addition,
the Fund limits its investment to securities that meet the quality and
diversification requirements of Rule 2a-7 under the Investment Company Act of
1940 ("1940 Act"). See "Net Asset Value."
Except as otherwise indicated, the investment objective of the Fund and the
investment policies set forth in the three preceding paragraphs are not
fundamental and may be changed without the affirmative vote of a majority of the
outstanding shares of the Fund, as defined below.
From time to time, a significant portion of the Fund's securities is supported
by credit and liquidity enhancements from third party banks and other financial
institutions, and as a result, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
From time to time, as a defensive measure or when acceptable short-term
Municipal Securities are not available, the Fund may invest in taxable
"temporary investments" that include: obligations of the U.S. Government, its
agencies or instrumentalities; debt securities rated within the two highest
grades by Moody's or S&P; commercial paper rated in the two highest grades by
either of such rating services; certificates of deposit of domestic banks with
assets of $1 billion or more; and any of the foregoing temporary investments
subject to repurchase agreements. Under a repurchase agreement the Fund acquires
ownership of a security from a broker-dealer or bank that agrees to repurchase
the security at a mutually agreed upon time and price (which price is higher
than the purchase price), thereby determining the yield during the Fund's
holding period. Repurchase agreements with broker-dealer firms will be limited
to obligations of the U.S. Government, its agencies or instrumentalities.
Maturity of the securities subject to repurchase may exceed one year. Interest
income from temporary investments is taxable to shareholders as ordinary income.
Although the Fund is permitted to invest in taxable securities, it is the Fund's
primary intention to generate income dividends that are not subject to federal
or State of California income taxes. See "Dividends, Net Asset Value and Taxes."
The Fund may also engage in "reverse repurchase agreements," that are repurchase
agreements in which the Fund, as the seller of securities, agrees to repurchase
them at an agreed upon time and price. Reverse repurchase agreements will only
be used by the Fund to raise cash on a temporary basis to meet redemptions when
it would like to retain the Municipal Securities in its portfolio and it expects
to be able to repurchase them in a short time with funds from maturing
investments and from net sales of Fund shares. Use of reverse repurchase
agreements, because of the lower transaction costs involved, is often preferable
to a regular sale and later repurchase of the securities.
The Fund may borrow money, including through reverse repurchase agreements, for
temporary purposes, but not for the purpose of purchase of investments, in an
amount up to one-third of the value of the Fund's total assets and may pledge up
to 10% of the Fund's net assets to secure borrowings. The Fund will not purchase
illiquid securities, including repurchase
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agreements maturing in more than seven days, if, as a result thereof, more than
10% of the Fund's total assets valued at the time of the transaction would be
invested in such securities. Up to 25% of the total assets of the Fund may be
invested at any time in debt obligations of a single issuer or of issuers in a
single industry, although the Fund may invest without limitation in Municipal
Securities the income on which may be derived from projects of a single type.
The Fund must meet the diversification requirements of Rule 2a-7 under the 1940
Act. Rule 2a-7 provides that a single state money fund shall not, as to 75% of
its assets, invest more than 5% of its assets in the securities of an individual
issuer, provided that the fund may not invest more than 5% of its assets in the
securities of an individual issuer unless the securities are First Tier
Securities (as defined in Rule 2a-7). This allows the Fund, as to 25% of its
assets, to invest more than 5% of its assets in the securities of an individual
issuer. Since the Fund is concentrated in securities issued by the state of
California or entities within the state and may invest a significant percentage
of its assets in the securities of a single issuer, an investment in the Fund
may be subject to more risk than an investment in other types of money market
funds.
The Fund has adopted certain fundamental investment restrictions which cannot be
changed without approval by holders of a majority of its outstanding voting
shares. As defined in the 1940 Act, this means the lesser of the vote of (a) 67%
of the shares of the Fund present at a meeting where more than 50% of the
outstanding shares are present in person or by proxy; or (b) more than 50% of
the outstanding shares of the Fund.
Master/Feeder Fund Structure. The Board of Trustees has the discretion to retain
the current distribution arrangements for the Fund while investing in a master
fund in a master/feeder fund structure as described below.
A master/feeder fund structure is one in which a fund (a "feeder fund"), instead
of investing directly in a portfolio of securities, invests most or all of its
investment assets in a separate registered investment company (the "master
fund") with substantially the same investment objective and policies as the
feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.
INVESTMENT MANAGER AND SHAREHOLDER SERVICES
Investment Manager. Scudder Kemper Investments, Inc. ("Scudder Kemper" or the
"Adviser"), 345 Park Avenue, New York, New York, is the Fund's investment
manager. Scudder Kemper is approximately 70% owned by Zurich Financial Services,
Inc., a newly formed global insurance and financial services company. The
balance of the Adviser is owned by its officers and employees. Pursuant to an
investment management agreement, Scudder Kemper acts as the Fund's investment
adviser, manages its investments, administers its business affairs, furnishes
office facilities and equipment, provides clerical, and administrative services
and permits any of its officers or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions. The Fund pays the
expenses of its operations, including the fees and expenses of independent
auditors, counsel, custodian and transfer agent and the cost of share
certificates, reports and notices to shareholders, costs of calculating net
asset value and maintaining all accounting records thereto, brokerage
commissions or transaction costs, taxes, registration fees, the fees and
expenses of qualifying the Fund and its shares for distribution under federal
and state securities laws and membership dues in the Investment Company
Institute or any similar organization.
The agreement provides that the Adviser shall not be liable for any error of
judgment or of law, or for any loss suffered by the Fund in connection with the
matters to which the agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under the agreement.
The investment management agreement continues in effect from year to year so
long as its continuation is approved at least annually by a majority vote of the
trustees who are not parties to such agreement or interested persons of any such
party except in their capacity as trustees of the Fund, cast in person at a
meeting called for such purpose, and by the shareholders
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or the Board of Trustees. It may be terminated at any time upon 60 days notice
by either party, or by a majority vote of the outstanding shares, and will
terminate automatically upon assignment.
At December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder") and Zurich Insurance Company ("Zurich") formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc., a
former subsidiary of Zurich and the former investment manager to each Fund, and
Scudder changed its name to Scudder Kemper Investments, Inc. As a result of the
transaction, Zurich owned approximately 70% of the Adviser, with the balance
owned by the Adviser's officers and employees.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in Scudder Kemper) and the financial services businesses of B.A.T Industries
p.l.c. ("B.A.T") were combined to form a new global insurance and financial
services company known as Zurich Financial Services, Inc. By way of a dual
holding company structure, former Zurich shareholders initially owned
approximately 57% of Zurich Financial Services, Inc., with the balance initially
owned by former B.A.T shareholders.
Upon consummation of this transaction, each Fund's existing investment
management agreement with Scudder Kemper was deemed to have been assigned and,
therefore, terminated. The Board has approved a new investment management
agreement with Scudder Kemper, which is substantially identical to the current
investment management agreement, except for the date of execution and
termination. This agreement became effective upon the termination of the then
current investment management agreement and will be submitted for shareholder
approval at a special meeting currently scheduled to conclude in December 1998.
Because the transaction between Scudder and Zurich resulted in the assignment of
the Fund's investment management agreement with ZKI, the agreement was deemed to
be automatically terminated upon consummation of the transaction. In
anticipation of the transaction, however, a new investment management agreement
between the Fund and Scudder Kemper was approved by the Fund's Board of Trustees
and shareholders. The new investment management agreement was effective as of
December 31, 1997 and will be in effect for an initial term ending on the same
date as would the previous investment management agreement with ZKI.
The Fund's investment management agreement is on substantially similar terms as
the investment management agreement terminated by the transaction, except that
Scudder Kemper is the new investment adviser to the Fund.
For the services and facilities furnished, the Fund pays a monthly investment
management fee on a graduated basis of 1/12 of the following annual fee: .22% of
the first $500 million of average daily net assets, .20% of the next $500
million, .175% of the next $1 billion, .16% of the next $1 billion and .15% of
average daily net assets over $3 billion. Pursuant to the investment management
agreement, the Fund paid ZKI, the former investment manager, fees of $127,000,
$232,000 and $217,000 for the fiscal years ended September 30, 1997, 1996 and
1995, respectively.
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of Scudder Kemper, is responsible for determining the daily net asset
value per share of the Fund and maintaining all accounting records related
hereto. Currently, SFAC receives no fee for its services to the Fund, however,
subject to Board approval, at some time in the future, SFAC may seek payment for
its services under this agreement.
Distributor. Pursuant to a distribution services agreement ("distribution
agreement"), Kemper Distributors, Inc. ("KDI"), an affiliate of the Adviser,
serves as distributor, administrator and principal underwriter to the Fund to
provide information and services for existing and potential shareholders. The
distribution agreement provides that KDI shall act as agent for the Fund in the
sale of its shares and shall appoint various firms to provide a cash management
service for their customers or clients through the Fund. The firms are to
provide such office space and equipment, telephone facilities, personnel and
sales literature distribution as is necessary or appropriate for providing
information and services to the firms' clients and prospective clients. The Fund
has adopted a plan in accordance with Rule 12b-1 of the Investment Company Act
of 1940 (the "12b-1 Plan). The rule regulates the manner in which an investment
company may, directly or indirectly, bear the expenses of distributing its
shares. The Fund pays for the prospectus and shareholder reports to be set in
type and printed for existing shareholders, and KDI pays for the printing and
distribution of copies thereof used in connection with the
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<PAGE>
offering of shares to prospective investors. KDI pays for supplementary sales
literature and advertising. For its services as distributor, and pursuant to the
12b-1 Plan, the Fund pays KDI an annual distribution services fee, payable
monthly, of .33% of average daily net assets of the Fund. The distribution
agreement and the 12b-1 Plan continue in effect from year to year so long as its
continuation is approved at least annually by a majority of the trustees who are
not parties to such agreement or interested persons of the Fund and who have no
direct or indirect financial interest in the agreement or in any agreement
related thereto. The distribution agreement automatically terminates in the
event of its assignment and may be terminated at any time without penalty by the
Fund or by KDI upon 60 days' written notice. Termination by the Fund may be by
vote of a majority of the Board of Trustees, or a majority of the Trustees who
are not interested persons of the Fund and who have no direct or indirect
financial interest in the agreement, or a majority vote of the outstanding
shares. The fee payable pursuant to the 12b-1 Plan may not be increased without
shareholder approval and all material amendments must in any event be approved
by the Board of Trustees in the manner described above with respect to the
continuation of the 12b-1 Plan. If additional Portfolios are authorized by the
Board of Trustees, the provisions concerning the continuation, amendment and
termination of the distribution services agreement and the 12b-1 Plan will be on
a Portfolio by Portfolio basis.
KDI has related administration services and selling group agreements with
various broker-dealer firms to provide cash management and other services for
the Fund shareholders. Such services and assistance may include, but are not
limited to, establishing and maintaining shareholder accounts and records,
processing purchase and redemption transactions, providing automatic investment
in Fund shares of client account balances, answering routine inquiries regarding
the Fund, assisting clients in changing account options, designations and
addresses, and such other services as may be agreed upon from time to time and
as may be permitted by applicable statute, rule or regulation. KDI also has
services agreements with banking firms to provide the above listed services,
except for certain distribution services which the banks may be prohibited from
providing, for their clients who wish to invest in the Fund. KDI also may
provide some of the above services for the Fund. KDI normally pays the firms at
an annual rate ranging from .15% to .33% of average net assets of those accounts
that they maintain and service. KDI may elect to keep a portion of the total
administration fee to compensate itself for functions performed for the Fund or
to pay for sales materials or other promotional activities.
[To Be Updated]
For the fiscal year ended September 30, 1998, the Fund incurred distribution
fees of $_____. Of such amount, KDI remitted $_____ to various firms pursuant to
the related services agreements. For the fiscal year ended September 30, 1998,
KDI incurred underwriting, distribution and administrative expenses in the
approximate amounts noted: service fees to firms $_____; advertising and
literature $__; and marketing and sales expenses ; for a total of $_____. A
portion of the aforesaid marketing, sales and operating expenses could be
considered overhead expense; however, KDI has made no attempt to differentiate
between expenses that are overhead and those that are not.
Certain trustees or officers of the Fund are also directors or officers of the
Adviser and KDI as indicated under "Officers and Trustees."
[To Be Updated]
Custodian, Transfer Agent and Shareholder Service Agent. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of the Fund. They attend to the collection of principal and income, and payment
for and collection of proceeds of securities bought and sold by the Fund. IFTC
is the transfer agent of the Fund (see "Purchase of Shares" in the prospectus).
Pursuant to a services agreement with IFTC, Kemper Service Company ("KSvC"), an
affiliate of the Adviser, serves as "Shareholder Service Agent" of the Fund and,
as such, performs all of IFTC's duties as transfer agent and dividend paying
agents. IFTC receives, as transfer agent, and pays to KSvC annual account fees
of a maximum of $13 per account plus out-of-pocket expense reimbursement. For
the fiscal year ended September 30, 1998, IFTC remitted fees in the amount of
$_____ to KSvC as Shareholder Service Agent.
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<PAGE>
Independent Auditors and Reports to Shareholders. The Fund's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Fund's annual financial statements, review certain
regulatory reports and the Fund's federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Fund. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
Legal Counsel. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel to the Fund.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to pursue the Fund's
investment objective in relation to movements in the general level of interest
rates, to invest money obtained from the sale of Fund shares, to reinvest
proceeds from maturing portfolio securities and to meet redemptions of Fund
shares. These transactions may increase or decrease the yield of the Fund
depending upon management's ability to correctly time and execute such
transactions. Since the Fund's assets will be invested in short-term Municipal
Securities, its portfolio will turn over several times a year. However, since
securities with maturities of less than one year are excluded from required
portfolio turnover rate calculations, the Fund's turnover rate for reporting
purposes will be zero.
The primary objective of the Adviser in placing orders for the purchase and sale
of securities for the Fund is to obtain the most favorable net results taking
into account such factors as price, commission where applicable, size of order,
difficulty of execution and skill required of the executing broker/dealer. The
Adviser seeks to evaluate the overall reasonableness of brokerage commissions
paid (to the extent applicable) through its familiarity with commissions charged
on comparable transactions, as well as by comparing commissions paid by a Fund
to reported commissions paid by others. The Adviser reviews on a routine basis
commission rates, execution and settlement services performed, making internal
and external comparisons.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Adviser's practice to place such orders with
broker/dealers who supply research, market and statistical information to the
Fund. The term "research, market and statistical information" includes advice as
to the value of securities; the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is authorized when placing portfolio transactions for the Fund to
pay a brokerage commission in excess of that which another broker might charge
for executing the same transaction solely on account of the receipt of research,
market or statistical information. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the security
being traded unless, after exercising care, it appears that more favorable
results are available elsewhere.
In selecting among firms believed to meet the criteria for handling a particular
transaction, the Adviser may give consideration to those firms that have sold or
are selling shares of a Fund managed by the Adviser.
To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through Scudder Investor Services, Inc.,
("SIS"), a corporation registered as a broker-dealer and a subsidiary of the
Adviser. SIS will place orders on behalf of the Fund with issuers, underwriters
or other brokers and dealers. SIS will not receive any commission, fee or other
remuneration from the Fund for this service.
Although certain research, market and statistical information from
broker/dealers may be useful to the Fund and to the Adviser, it is the opinion
of the Adviser that such information only supplements its own research effort
since the information must still be analyzed, weighed and reviewed by the
Adviser's staff. Such information may be useful to the Adviser in providing
services to clients other than the Fund and not all such information is used by
the Adviser in connection with the Fund. Conversely, such information
11
<PAGE>
provided to the Adviser by broker/dealers through whom other clients of the
Adviser effect securities transactions may be useful to the Adviser in providing
services to the Fund.
The Trustees for the Fund review from time to time whether the recapture for the
benefit of the Fund of some portion of the brokerage commissions or similar fees
paid by the Fund on portfolio transactions is legally permissible and advisable.
Money market instruments are normally purchased in principal transactions
directly from the issuer or from an underwriter or market maker. There usually
are no brokerage commissions paid by the Fund for such purchases and none have
been paid during the Fund's last three fiscal years. Purchases from underwriters
will include a commission or concession paid by the issuer to the underwriter,
and purchases from dealers serving as market makers will include the spread
between the bid and asked prices.
PURCHASE AND REDEMPTION OF SHARES
Fund shares are sold at their net asset value next determined after an order and
payment are received in the form described in the Fund's prospectus. The minimum
initial investment is $1,000 and the minimum subsequent investment is $100 but
such minimum amounts may be changed at any time. See the prospectus for certain
exceptions to these minimums. The Fund may waive the minimum for purchases by
trustees, directors, officers or employees of the Fund or Kemperthe Adviser and
its affiliates. An investor wishing to open an account should use the Account
Information Form available from the Fund or financial services firms. Orders for
the purchase of shares that are accompanied by a check drawn on a foreign bank
(other than a check drawn on a Canadian bank in U.S. Dollars) will not be
considered in proper form and will not be processed unless and until the Fund
determines that it has received payment of the proceeds of the check. The time
required for such a determination will vary and cannot be determined in advance.
Upon receipt by the Fund's Shareholder Service Agent (see "Purchase of Shares"
in the prospectus) of a request for redemption in proper form, shares will be
redeemed by the Fund at the applicable net asset value as described in the
Fund's prospectus. A shareholder may elect to use either the regular or
expedited redemption procedures.
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange ("Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of the Fund's investments is
not reasonably practicable or (ii) it is not reasonably practicable for the Fund
to determine the value of its net assets, or (c) for such other periods as the
Securities and Exchange Commission may by order permit for protection of the
Fund's shareholders.
Although it is the Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Fund will pay
the redemption price in whole or in part by a distribution of portfolio
securities in lieu of cash, in conformity with the applicable rules of the
Securities and Exchange Commission, taking such securities at the same value
used to determine net asset value, and selecting the securities in such manner
as the Board of Trustees may deem fair and equitable. If such a distribution
occurs, shareholders receiving securities and selling them could receive less
than the redemption value of such securities and in addition would incur certain
transaction costs. Such a redemption would not be so liquid as a redemption
entirely in cash. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940 pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets of
the Fund during any 90-day period for any one shareholder of record.
Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor and guardian account holders
(excluding custodial accounts for gifts and transfers to minors), provided the
trustee, executor or guardian is named in the account registration. Other
institutional account holders and guardian account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders, and subject to the limitations on liability described under "General"
above, provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Shares purchased by check
or through certain ACH transactions may not be redeemed under this privilege of
redeeming shares by telephone request until such shares have been owned for at
least 10 days. This privilege of redeeming shares by telephone request or by
written request without a signature
12
<PAGE>
guarantee may not be used to redeem shares held in certificated form and may not
be used if the shareholder's account has had an address change within 30 days of
the redemption request. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use the telephone
redemption privilege although investors can still redeem by mail. The Fund
reserves the right to terminate or modify this privilege at any time.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of the Fund can be redeemed and proceeds sent by a federal
wire transfer to a single previously designated account. Requests received by
the Shareholder Service Agent prior to 11:00 a.m. Chicago time will result in
shares being redeemed that day and normally the proceeds will be sent to the
designated account that day. Once authorization is on file, the Shareholder
Service Agent will honor requests by telephone at 1-800-231-8568 or in writing,
subject to the limitations on liability described under "General" above. The
Fund is not responsible for the efficiency of the federal wire system or the
account holder's financial services firm or bank. The Fund currently does not
charge the account holder for wire transfers. The account holder is responsible
for any charges imposed by the account holder's firm or bank. There is a $1,000
wire redemption minimum. To change the designated account to receive wire
redemption proceeds, send a written request to the Shareholder Service Agent
with signatures guaranteed as described above, or contact the firm through which
shares of the Fund were purchased. Shares purchased by check or through certain
ACH transactions may not be redeemed by wire transfer until the shares have been
owned for at least 10 days. Account holders may not use this privilege to redeem
shares held in certificated form. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
expedited wire transfer redemption privilege. The Fund reserves the right to
terminate or modify this privilege at any time.
Expedited Redemptions by Draft. Upon request, shareholders will be provided with
drafts to be drawn on the Fund ("Redemption Checks"). These Redemption Checks
may be made payable to the order of any person for not more than $5 million.
Shareholders should not write Redemption Checks in an amount less than $250
since a $10 service fee will be charged as described below. When a Redemption
Check is presented for payment, a sufficient number of full and fractional
shares in the shareholder's account will be redeemed as of the next determined
net asset value to cover the amount of the Redemption Check. This will enable
the shareholder to continue earning dividends until the Fund receives the
Redemption Check. A shareholder wishing to use this method of redemption must
complete and file an Account Information Form which is available from the Fund
or firms through which shares were purchased. Redemption Checks should not be
used to close an account since the account normally includes accrued but unpaid
dividends. The Fund reserves the right to terminate or modify this privilege at
any time. This privilege may not be available through some firms that distribute
shares of the Fund. In addition, firms may impose minimum balance requirements
in order to obtain this feature. Firms may also impose fees to investors for
this privilege or establish variations of minimum check amounts if approved by
the Fund.
Unless one signer is authorized on the Account Information Form, Redemption
Checks must be signed by all account owners. Any change in the signature
authorization must be made by written notice to the Shareholder Service Agent.
Shares purchased by check or through certain ACH transactions may not be
redeemed by Redemption Check until the shares have been owned for at least 10
days. Shareholders may not use this procedure to redeem shares held in
certificated form. The Fund reserves the right to terminate or modify this
privilege at any time.
The Fund may refuse to honor Redemption Checks whenever the right of redemption
has been suspended or postponed, or whenever the account is otherwise impaired.
A $10 service fee will be charged when a Redemption Check is presented to redeem
Fund shares in excess of the value of a Fund account or in an amount less than
$250; when a Redemption Check is presented that would require redemption of
shares that were purchased by check or certain ACH transactions within 10 days;
or when "stop payment" of a Redemption Check is requested. Firms may charge
different service fees.
DIVIDENDS, NET ASSET VALUE AND TAXES
Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will be reinvested monthly in shares of the Fund normally on the
fifteenth day of each month, if a business day, otherwise on the next business
day. The Fund will pay shareholders who redeem their entire accounts all unpaid
dividends at the time of redemption not later than the next dividend payment
date. Upon written request to the Shareholder Service Agent, a shareholder may
elect to have Fund dividends invested without sales charge in shares of another
Kemper Fund offering this privilege at the net asset value of such other fund.
See "Special Features --Exchange Privilege" for a list of such other Kemper
Funds. To use this privilege of investing Fund dividends in shares of another
Kemper Fund, shareholders must maintain a minimum account value of $1,000 in
this Fund.
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<PAGE>
The Fund calculates its dividends based on its daily net investment income. For
this purpose, net investment income consists of (a) accrued interest income plus
or minus amortized original issue discount or premium, (b) plus or minus all
short-term realized gains and losses on investments and (c) minus accrued
expenses. Expenses of the Fund are accrued each day. Since the Fund's
investments are valued at amortized cost, there will be no unrealized gains or
losses on such investments. However, should the net asset value so computed
deviate significantly from market value, the Board of Trustees could decide to
value the investments at market value and then unrealized gains and losses would
be included in net investment income above.
Net Asset Value. Fund shares are sold at their net asset value next determined
after an order and payment are received in the form described under "Purchase of
Shares." The net asset value of a Fund share is calculated by dividing the total
assets of the Fund less its liabilities by the total number of shares
outstanding. The net asset value per share of the Fund is determined on each day
the New York Stock Exchange is open for trading, at 11:00 a.m., 3:00 p.m. and
8:00 p.m. Chicago time, and on each other day on which there is a sufficient
degree of trading in the Fund's investments that its net asset value might be
affected, except that the net asset value will not be computed on a day on which
no orders to purchase shares were received and no shares were tendered for
redemption. Orders received by dealers or other financial services firms prior
to the 8:00 p.m. determination of net asset value for the Fund and received by
Kemper Distributors, Inc. ("KDI"), the primary administrator, distributor and
principal underwriter for the Funds, prior to the close of its business day can
be confirmed at the 8:00 p.m. determination of net assets value for that day.
Such transactions are settled by payment of Federal Funds in accordance with
procedures established by KDI. The Fund seeks to maintain a net asset value of
$1.00 per share.
The Fund values its portfolio instruments at amortized cost, which does not take
into account unrealized capital gains or losses. This involves initially valuing
an instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the effect of fluctuating
interest rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Fund would
receive if it sold the instrument. Calculations are made to compare the value of
the Fund's investments valued at amortized cost with market-based values.
Market-based valuations are obtained by using actual quotations provided by
market makers, estimates of market value, or values obtained from yield data
relating to classes of money market instruments published by reputable sources
at the mean between the bid and asked prices for the instruments. If a deviation
of 1/2 of 1% or more were to occur between the net asset value per share
calculated by reference to market-based values and the Fund's $1.00 per share
net asset value, or if there were any other deviation that the Board of Trustees
of the Fund believed would result in a material dilution to shareholders or
purchasers, the Board of Trustees would promptly consider what action, if any,
should be initiated. If the Fund's net asset value per share (computed using
market-based values) declined, or were expected to decline, below $1.00
(computed using amortized cost), the Board of Trustees of the Fund might
temporarily reduce or suspend dividend payments in an effort to maintain the net
asset value at $1.00 per share. As a result of such reduction or suspension of
dividends or other action by the Board of Trustees, an investor would receive
less income during a given period than if such a reduction or suspension had not
taken place. Such action could result in investors receiving no dividend for the
period during which they hold their shares and receiving, upon redemption, a
price per share lower than that which they paid. On the other hand, if the
Fund's net asset value per share (computed using market-based values) were to
increase, or were anticipated to increase above $1.00 (computed using amortized
cost), the Board of Trustees of the Fund might supplement dividends in an effort
to maintain the net asset value at $1.00 per share.
Taxes. Interest on indebtedness that is incurred to purchase or carry shares of
a mutual fund which distributes exempt-interest dividends during the year is not
deductible for federal income tax purposes. Further, the Fund may not be an
appropriate investment for persons who are "substantial users" of facilities
financed by industrial development bonds held by the Fund or are "related
persons" to such users; such persons should consult their tax advisers before
investing in the Fund.
The "Superfund Act of 1986" (the "Superfund Act") imposes a separate tax on
corporations at a rate of 0.12 percent of the excess of such corporation's
"modified alternative minimum taxable income" over $2 million. A portion of
tax-exempt interest, including exempt-interest dividends from the Fund, may be
includible in modified alternative minimum taxable income. Corporate
shareholders are advised to consult with their tax advisers with respect to the
consequences of the Superfund Act.
To the extent that dividends are derived from earnings on California state and
local government issues, such dividends will be exempt from California income
taxes provided the Fund has complied with the requirement that at least 50% of
its assets at the close of each quarter in the taxable year be invested in
Municipal Securities of California state and local issuers.
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<PAGE>
Net interest on certain "private activity bonds" issued on or after August 8,
1986 is treated as an item of tax preference and may, therefore, be subject to
both the individual and corporate alternative minimum tax. To the extent
provided by regulations to be issued by the Secretary of the Treasury,
exempt-interest dividends from the Fund are to be treated as interest on private
activity bonds in proportion to the interest the Fund receives from private
activity bonds, reduced by allowable deductions. For the 1997 calendar year, 3%
of the net interest income of the Fund was derived from "private activity
bonds."
Exempt-interest dividends, except to the extent of interest from "private
activity bonds," are not treated as a tax preference item. For a corporate
shareholder, however, such dividends will be included in determining such
corporate shareholder's "adjusted current earnings." Seventy-five percent of the
excess, if any, of "adjusted current earnings" over the corporate shareholder's
other alternative minimum taxable income with certain adjustments will be a tax
preference item. Corporate shareholders are advised to consult their tax
advisers with respect to alternative minimum tax consequences.
Shareholders will be required to disclose on their federal income tax returns
the amount of tax-exempt interest earned during the year, including
exempt-interest dividends received from the Fund.
Individuals whose modified income exceeds a base amount will be subject to
federal income tax on up to 85% of their Social Security benefits. Modified
income includes adjusted gross income, tax-exempt interest, including
exempt-interest dividends from the Fund, and 50% of Social Security benefits.
Individuals are advised to consult their tax advisers with respect to the
taxation of Social Security benefits.
Dividends to the extent of interest income received on California state and
local government issues, will be exempt from State of California income taxes
provided at least 50% of the Fund's total assets are invested in such issues at
the close of each quarter in the taxable year. The tax exemption for federal and
California income tax purposes of dividends from the Fund does not necessarily
result in exemptions under the income or other tax laws of any state or local
taxing authority. The laws of the several states and local taxing authorities
vary with respect to the taxation of such income, and shareholders of the Fund
are advised to consult their own tax advisers in that regard and as to the
status of their accounts under state and local tax laws.
The Fund is required by law to withhold 31% of taxable dividends paid to certain
shareholders who do not furnish a correct taxpayer identification number (in the
case of individuals, a social security number) and in certain other
circumstances.
Shareholders normally will receive monthly confirmations of dividends and of
purchase and redemption transactions. Tax information will be provided annually.
Shareholders are encouraged to retain copies of their account confirmation
statements or year-end statements for tax reporting purposes. However, those who
have incomplete records may obtain historical account transaction information at
a reasonable fee.
PERFORMANCE
[To Be Updated]
As reflected in the prospectus, the historical performance calculation for the
Fund may be shown in the form of "yield," "effective yield," and "tax-equivalent
yield." These various measures of performance are described below.
The Fund's yield is computed in accordance with a standardized method prescribed
by rules of the Securities and Exchange Commission. Under that method, the yield
quotation is based on a seven-day period and is computed as follows. The first
calculation is net investment income per share, which is accrued interest on
portfolio securities, plus or minus amortized original issue discount or
premium, less accrued expenses. This number is then divided by the price per
share (expected to remain constant at $1.00) at the beginning of the period
("base period return"). The result is then divided by 7 and multiplied by 365
and the resulting yield figure is carried to the nearest one-hundredth of one
percent. Realized capital gains or losses and unrealized appreciation or
depreciation of investments are not included in the calculation. For the
seven-day period ended September 30, 1998, the Fund's yield was ___%.
The Fund's effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of assumed compounding.
The formula for the effective yield is: (base period return
+1)[LI-3]365/7[LI+3]-1. For the seven-day period ended September 30, 1998, the
Fund's effective yield was 3.22%.
The tax-equivalent yield of the Fund is computed by dividing that portion of the
Fund's yield (computed as described above) which is tax-exempt by (one minus the
stated combined State of California and federal income tax rate) and adding the
result
15
<PAGE>
to that portion, if any, of the yield of the Fund that is not tax- exempt. Based
upon an assumed combined State of California and federal income tax rate of
42.9% and the Fund's yield as computed as described above for the seven day
period ended September 30, 1998, the Fund's tax-equivalent yield was ____%.
Based upon an assumed federal income tax rate of 37.1% and the Fund's yield
computed as described above for the seven-day period ended September 30, 1998,
the Fund's tax-equivalent yield was ___%. For additional information concerning
tax-exempt yields, see "Tax-Exempt versus Taxable Yield" below.
The Fund's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in the Fund will
actually yield for any given future period. Actual yields will depend not only
on changes in interest rates on money market instruments during the period in
which the investment in the Fund is held, but also on such matters as Fund
expenses.
Investors have an extensive choice of money market funds and money market
deposit accounts and the information below may be useful to investors who wish
to compare the past performance of the Fund with that of its competitors. Past
performance is not a guarantee of future results.
As indicated in the prospectus (see "Performance"), the Fund's performance may
be compared to that of other mutual funds tracked by Lipper Analytical Services,
Inc. ("Lipper"). Lipper performance calculations include the reinvestment of all
capital gain and income dividends for the periods covered by the calculations.
The Fund's performance also may be compared to other money market funds as
reported by IBC Financial Data, Inc.'s ("IBC") or Money Market Insight(R)
reporting services on money market funds. As reported by IBC, all investment
results represent yield (annualized results for the period net of management
fees and other expenses) and one-year investment results are effective annual
yields assuming reinvestment of dividends.
The following investment comparisons are based upon information reported by
Lipper and IBC. In the comparison of the Fund's performance versus IBC average
yield for All Taxable Money Market Funds and Lipper performance of Money Market
Instrument Funds, the performance of the Fund has been adjusted on a taxable
equivalent basis assuming a combined California and federal tax rate of 42.9%
(see "Tax-Exempt versus Taxable Yield" below for more information concerning
taxable equivalent performance).
[To Be Updated]
<TABLE>
<CAPTION>
IBC Lipper Analytical Services, Inc.
IBC Average Lipper
Tax-Exempt Yield Tax-Exempt California Tax-
California California California Exempt Money
Money Tax-Free Money Money Market Funds
Period Market Fund Market Funds Period Market Fund Average
- ------ ----------- ------------ ------ ----------- -------
<S> <C> <C> <C> <C> <C>
7 Days Ended 9/29/98 3.15% % 1 Month Ended 9/30/98 % %
1 Month Ended 9/30/98 2.91 11 Months Ended 9/30/98
1 Year Ended 9/30/98 2.91 1 Year Ended 9/30/98
<CAPTION>
Tax-Exempt Tax-Exempt
California California Lipper Money
Money Market IBC Average Money Market Market
Fund Taxable Yield All Fund Taxable Instrument
Equivalent Taxable Money Equivalent Funds
Period Basis* Market Funds Period Basis* Average
- ------ ------ ------------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
7 Days Ended 9/29/98 5.42% % 1 Month Ended 9/30/98 % %
1 Month Ended 9/30/98 5.10 9/30/98
1 Year Ended 9/30/98 5.10 1 Year Ended 9/30/98
</TABLE>
* Source: Scudder Kemper Investments, Inc. (not reported in IBC or Lipper).
The Fund's performance also may be compared on an after-tax basis to various
bank products, including the average rate of bank and thrift institution money
market deposit accounts or interest bearing checking accounts as reported in the
BANK
16
<PAGE>
RATE MONITOR National Index(TM) of 100 leading bank and thrift institutions as
published by the BANK RATE MONITOR(TM), N. Palm Beach, Florida 33408. The rates
published by the BANK RATE MONITOR National Index(TM) are averages of the
personal account rates offered on the Wednesday prior to the date of publication
by 100 large banks and thrifts in the top ten Consolidated Standard Metropolitan
Statistical Areas. Account minimums range upward from $2,500 in each institution
and compounding methods vary. Interest bearing checking accounts generally offer
unlimited check writing while money market deposit accounts generally restrict
the number of checks that may be written. If more than one rate is offered, the
lowest rate is used. Rates are determined by the financial institution and are
subject to change at any time specified by the institution. Bank products
represent a taxable alternative income producing product. Bank and thrift
institution deposit accounts may be insured. Shareholder accounts in the Fund
are not insured. Bank passbook savings accounts share some liquidity features
with money market mutual fund accounts but they may not offer all the features
available from a money market mutual fund, such as check writing. Bank passbook
savings accounts normally offer a fixed rate of interest while the yield of the
Fund fluctuates. Bank checking accounts normally do not pay interest but share
some liquidity features with money market mutual fund accounts (e.g., the
ability to write checks against the account). Bank certificates of deposit may
offer fixed or variable rates for a set term. (Normally, a variety of terms are
available.) Withdrawal of these deposits prior to maturity normally will be
subject to a penalty. In contrast, shares of the Fund are redeemable at the net
asset value (normally $1.00 per share) next determined after a request is
received, without charge.
Investors also may want to compare the Fund's performance on an after-tax basis
to that of U.S. Treasury bills or notes because such instruments represent
alternative income producing products. Treasury obligations are issued in
selected denominations. Rates of U.S. Treasury obligations are fixed at the time
of issuance and payment of principal and interest is backed by the full faith
and credit of the U.S. Treasury. The market value of such instruments generally
will fluctuate inversely with interest rates prior to maturity and will equal
par value at maturity. Generally, the value of obligations with shorter
maturities will fluctuate less than those with longer maturities. The Fund's
yield will fluctuate. Also, while the Fund seeks to maintain a net asset value
per share of $1.00, there is no assurance that it will be able to do so.
Any such comparisons may be useful to investors who wish to compare the Fund's
past performance with that of its competitors. Of course, past performance
cannot be a guarantee of future results.
The Fund's performance also may be compared to the Consumer Price Index, as
published by the U.S. Bureau of Labor Statistics, which is an established
measure of change over time in the prices of goods and services in major
expenditure groups.
Tax-Exempt versus Taxable Yield. You may want to determine which investment --
tax-exempt or taxable -- will provide you with a higher after-tax return. To
determine the taxable equivalent yield, simply divide the yield from the
tax-exempt investment by [1 minus your marginal tax rate]. The tables below are
provided for your convenience in making this calculation for selected tax-exempt
yields and taxable income levels. These yields are presented for purposes of
illustration only and are not representative of any yield that the Fund may
generate. Both tables are based upon current law as to the 1998 Federal and 1997
State tax rate schedules.
[To Be Updated]
Taxable Equivalent Yield Table for Persons Whose Adjusted Gross Income is Under
$124,500
<TABLE>
<CAPTION>
Your Marginal
Taxable Income Federal Tax Rate A Tax-Exempt Yield of:
----------------
4% 5% 6% 7% 8% 9%
Single Joint Is Equivalent to a Taxable Yield of:
------ ----- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$25,350-$61,400 $42,350-$102,300 28.0% 5.56 6.94 8.33 9.72 11.11 12.50
Over $61,400 Over $102,300 31.0 5.80 7.25 8.70 10.14 11.59 13.04
<CAPTION>
Combined A Tax-Exempt Yield of:
California and 4% 5% 6% 7% 8% 9%
Taxable Income Federal Tax Rate
----------------
Single Joint Is Equivalent to a Taxable Yield of:
------ ----- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$25,350-$26,045 $42,350- $52,090 32.3% 5.91 7.39 8.86 10.34 11.82 13.29
$26,045-$32,916 $52,090- $65,832 33.8 6.04 7.55 9.06 10.57 12.08 13.60
$32,916-$61,400 $65,832-$102,300 34.7 6.13 7.66 9.19 10.72 12.25 13.78
Over $61,400 Over $102,300 37.4 6.39 7.99 9.58 11.18 12.78 14.38
</TABLE>
17
<PAGE>
Taxable Equivalent Yield Table for Persons Whose Adjusted Gross Income is Over
$124,500
<TABLE>
<CAPTION>
Your Marginal
Taxable Income Federal Tax Rate A Tax-Exempt Yield of:
----------------
4% 5% 6% 7% 8% 9%
Single Joint Is Equivalent to a Taxable Yield of:
------ ----- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 61,400-$128,100 $102,300-$155,950 31.9% 5.87 7.34 8.81 10.28 11.75 13.22
$128,100- $278,450 $155,950-$278,450 37.1 6.36 7.95 9.54 11.13 12.72 14.31
Over $278,450 Over $278,450 40.8 6.76 8.45 10.14 11.82 13.51 15.20
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Combined
California and
Taxable Income Federal Tax Rate A Tax-Exempt Yield of:
---------------- 4% 5% 6% 7% 8% 9%
Single Joint Is Equivalent to a Taxable Yield of:
------ ----- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 61,400-$128,100 $102,300-$155,950 38.2 6.47 8.09 9.71 11.33 12.94 14.56
$ 128,100-$278,450 $155,950-$278,450 42.9 7.01 8.76 10.51 12.26 14.01 15.76
Over $278,450 Over $278,450 46.3 7.59 9.49 11.39 13.28 15.18 17.08
</TABLE>
* This table assumes a decrease of $3.00 of itemized deductions for each $100
of adjusted gross income over $124,500. For a married couple with adjusted
gross income between $186,800 and $309,300 (single between $124,500 and
$247,000), add 0.7% to the above Marginal Federal Tax Rate for each
personal and dependency exemption. The taxable equivalent yield is the
tax-exempt yield divided by: 100% minus the adjusted tax rate. For example,
if the table tax rate is 37.1% and you are married with no dependents, the
adjusted tax rate is 38.5% (37.1% + 0.7% + 0.7%). For a tax-exempt yield of
6%, the taxable equivalent yield is about 9.8% (6% / (100%-38.5%)).
OFFICERS AND TRUSTEES
The officers and trustees of the Fund, their birthdates, their principal
occupations and their affiliations, if any, with the Adviser and KDI are listed
below. All persons named as trustees also serve in similar capacities for other
funds advised by the Adviser.
DAVID W. BELIN (6/20/28), Trustee, 2000 Financial Center, 7th and Walnut, Des
Moines, Iowa; Member, Belin Lamson McCormick Zumbach Flynn, P.C. (attorneys).
LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Partner, Business Resources Group; formerly, Executive Vice President, Anchor
Glass Container Corporation.
DONALD L. DUNAWAY (3/8/37), Trustee, 7515 Pelican Bay Boulevard, Naples,
Florida; Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 800 North Lindbergh Boulevard, St. Louis,
Missouri; Vice Chairman and Chief Financial Officer, Monsanto Company
(agricultural, pharmaceutical and nutritional/food products); prior thereto,
Vice President and Head of International Operations, FMC Corporation
(manufacturer of machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College, Maryland; prior thereto, Partner, Steptoe & Johnson
(attorneys); prior thereto, Commissioner of Internal Revenue Service; prior
thereto, Assistant Attorney General, U.S. Department of Justice; Director,
Bethlehem Steel Corp.
DANIEL PIERCE (3/18/34), Trustee, 345 Park Avenue, New York, New York; Chairman
of the Board and Managing Director, Adviser; Director, Fiduciary Trust Company
and Fiduciary Company Incorporated.
WILLIAM P. SOMMERS (7/22/33), Trustee, 333 Ravenswood Avenue, Menlo Park,
California; President and Chief Executive Officer, SRI International (research
and development); prior thereto, Executive Vice President, Iameter (medical
information and educational service provider); prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton, Inc. (management consulting
firm) (retired); Director, Rohr, Inc., Therapeutic Discovery Corp. and Litton
Industries.
EDMOND D. VILLANI (3/4/47), President and Trustee*, 345 Park Avenue, New York,
New York; President, Chief Executive Officer and Managing Director, Adviser.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser.
JERALD K. HARTMAN (3/1/33), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.
THOMAS W. LITTAUER (4/26/55), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser; formerly, Head of Broker Dealer
Division of an unaffiliated investment management firm during
19
<PAGE>
1997; prior thereto, President of Client Management Services for an unaffiliated
investment management firm from 1991 to 1996.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Senior Vice President, Adviser.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
PHILIP J. COLLORA (11/15/45), Vice President, Treasurer and Secretary*, 222
South Riverside Plaza, Chicago, Illinois; Attorney, Senior Vice President and
Assistant Secretary, Adviser.
JOHN R. HEBBLE (6/27/58), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Adviser.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Adviser.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Senior Vice President, Adviser.
ROBERT C. PECK, JR. (10/1/46), Vice President, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 1997.
ELIZABETH C. WERTH (10/1/47), Assistant Secretary*, (30), 222 South Riverside
Plaza, Chicago, Illinois; Scudder Kemper; and Vice President and Director of
State Registrations, KDI.
* Interested persons as defined in the Investment Company Act of 1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Fund. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Fund's 1998 fiscal year except that the information in the last column is for
calendar year 1997.
[To Be Updated]
Aggregate Compensation Total Compensation Kemper
Name of Trustee From Fund Funds Paid to Trustees**
- --------------- --------- ----------------------
David W. Belin*
Lewis A. Burnham
Donald L. Dunaway*
Robert B. Hoffman
Donald R. Jones
Shirley D. Peterson
William P. Sommers
* Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Kemper Funds. Deferred amounts accrue
interest monthly at a rate equal to the yield of Zurich Money Funds --
Zurich Money Market Fund. Total deferred fees and interest accrued for
latest and prior fiscal years for this Fund are $_____ for Mr. Belin and
$_____ for Mr. Dunaway.
** Includes compensation for services as trustee on 25 fund boards with 41
portfolios. Each trustee currently serves as a trustee of 26 Kemper Funds
and 46 fund portfolios. Total compensation does not reflect amounts paid by
Scudder Kemper to the trustees for meeting regarding the combination of
Scudder and ZKI. Such amounts totaled $_____, $_____, $_____, $_____,
$_____, $_____ and $_____ for Messrs. _____, _____, _____, _____, _____,
_____and _____, respectively.
20
<PAGE>
[To Be Updated]
As of January 15, 1999, the trustees and officers as a group owned less than 1%
of the then outstanding shares of the Fund, and no person owned of record 5% or
more of the outstanding shares of the Fund.
SPECIAL FEATURES
Exchange Privilege. Subject to the limitations described below, Class A shares
(or the equivalent) of the following Kemper Mutual Funds may be exchanged for
each other at their relative net asset values: Kemper Technology Fund, Kemper
Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization Equity Fund,
Kemper Income and Capital Preservation Fund, Kemper Municipal Bond Fund, Kemper
Diversified Income Fund, Kemper High Yield Series, Kemper U.S. Government
Securities Fund, Kemper International Fund, Kemper State Tax-Free Income Series,
Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip Fund, Kemper
Global Income Fund, Kemper Target Equity Fund (series are subject to a limited
offering period), Kemper Intermediate Municipal Bond Fund, Kemper Cash Reserves
Fund, Kemper U.S. Mortgage Fund, Kemper Short-Intermediate Government Fund,
Kemper Value Series, Inc., Kemper Value Plus Growth Fund, Kemper Horizon Fund,
Kemper Quantitative Equity Fund, Kemper Europe Fund, Kemper Asian Growth Fund,
Kemper Aggressive Growth Fund, Kemper Global/International Series, Inc., Kemper
Securities Trust and Kemper Equity Trust ("Kemper Mutual Funds") and certain
"Money Market Funds" (Zurich Money Funds, Zurich Yieldwise Money Fund, Cash
Equivalent Fund, Tax-Exempt California Money Market Fund, Cash Account Trust,
Investors Municipal Cash Fund and Investors Cash Trust). Shares of Money Market
Funds and Kemper Cash Reserves Fund that were acquired by purchase (not
including shares acquired by dividend reinvestment) are subject to the
applicable sales charge on exchange. In addition, shares of a Kemper Mutual Fund
in excess of $1,000,000 (except Zurich Yieldwise Money Fund and Kemper Cash
Reserves Fund), acquired by exchange from another Fund, may not be exchanged
thereafter until they have been owned for 15 days (the "15-Day Hold Policy").
For purposes of determining whether the 15-Day Hold Policy applies to a
particular exchange, the value of the shares to be exchanged shall be computed
by aggregating the value of shares being exchanged for all accounts under common
control, discretion or advice, including without limitation accounts
administered by a financial services firm offering market timing, asset
allocation or similar services. Series of Kemper Target Equity Fund are
available on exchange only during the Offering Period for such series as
described in the prospectus for such series. Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Cash Account Trust, Investors Municipal Cash Fund
and Investors Cash Trust are available on exchange but only through a financial
services firm having a services agreement with KDI with respect to such funds.
Exchanges may only be made for funds that are available for sale in the
shareholder's state of residence. Currently, Tax-Exempt California Money Market
Fund is available for sale only in California and the portfolios of Investors
Municipal Cash Fund are available for sale only in certain states.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the Kemper fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, financial services
firms may charge for their services in expediting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis. Shareholders interested in exercising the
exchange privilege may obtain an exchange form and prospectuses of the other
funds from firms or KDI. Exchanges also may be authorized by telephone if the
account holder has given authorization. Once the authorization is on file, the
Shareholder Service Agent will honor requests by telephone at 1-800-231-8568,
subject to the limitations on liability described under "Redemption of Shares"
in the prospectus. Any share certificates must be deposited prior to any
exchange of such shares. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to implement the
telephone exchange privilege. The exchange privilege is not a right and may be
suspended, terminated or modified at any time. Except as otherwise permitted by
applicable regulation, 60 days' prior written notice of any termination or
material change will be provided.
Systematic Exchange Privilege. The owner of $1,000 or more of the shares of a
Kemper Mutual Fund or Money Market Fund may authorize the automatic exchange of
a specified amount ($100 minimum) of such shares for shares of another such
Kemper Fund. Shareholders interested in the systematic exchange privilege may
obtain the appropriate forms and prospectuses of the other funds from firms or
the Shareholder Service Agent. If selected, exchanges will be made automatically
until the privilege is terminated by the shareholder or the other Kemper Fund.
Exchanges are subject to the terms and conditions described above under
"Exchange Privilege", except that the $1,000 minimum investment requirement
21
<PAGE>
for the Kemper Fund acquired on exchange is not applicable. This privilege may
not be used for the exchange of shares held in certificated form.
Systematic Withdrawal Program. The owner of $5,000 or more of the Fund's shares
may provide for the payment from the owner's account of any requested dollar
amount up to $50,000 to be paid to the owner or a designated payee monthly,
quarterly, semi-annually or annually. The minimum periodic payment is $100.
Shares are redeemed so that the payee will receive payment approximately the
first of the month. Dividend distributions will be automatically reinvested at
net asset value. A sufficient number of full and fractional shares will be
redeemed to make the designated payment. Depending upon the size of the payments
requested, redemptions for the purpose of making such payments may reduce or
even exhaust the account. The right is reserved to amend the systematic
withdrawal program on thirty days notice. The program may be terminated at any
time by the shareholder or the Fund. Firms provide varying arrangements for
their clients to redeem Fund shares on a periodic basis. Such firms may
independently establish minimums for such services.
Electronic Funds Transfer Programs. For your convenience, the Fund has
established several investment and redemption programs using electronic funds
transfer via the Automated Clearing House (ACH). There is currently no charge by
the Fund for these ACH transactions. To use these features, your financial
institution (your employer's financial institution in the case of payroll
deposit) must be affiliated with an Automated Clearing House (ACH). This ACH
affiliation permits the Shareholder Service Agent to rely upon telephone
instructions from any person to electronically transfer money between your bank
account, or employer's payroll bank in the case of Direct Deposit, and your Fund
account, subject to the limitations on liability under "Redemption of Shares" in
the prospectus. Your bank's crediting policies of these transferred funds may
vary. These features may be amended or terminated at any time by the Fund.
Shareholders should contact the Kemper Service Company at 1-800-621-1048 or the
firm through which their account was established for more information. These
programs may not be available through some firms that distribute shares of the
Fund.
SHAREHOLDER RIGHTS
The Fund is an open-end diversified management investment company, organized as
a business trust under the laws of Massachusetts on February 25, 1987. The Fund
may issue an unlimited number of shares of beneficial interest in one or more
series or "Portfolios," all having no par value. While only shares of a single
Portfolio are presently being offered, the Board of Trustees may authorize the
issuance of additional Portfolios if deemed desirable, each with its own
investment objective, policies and restrictions. Since the Fund may offer
multiple Portfolios, it is known as a "series company." Shares of a Portfolio
have equal noncumulative voting rights and equal rights with respect to
dividends, assets and liquidation of such Portfolio. Shares are fully paid and
nonassessable when issued, are transferable without restriction and have no
preemptive or conversion rights. The Fund is not required to hold annual
shareholders' meetings and does not intend to do so. However, it will hold
special meetings as required or deemed desirable for such purposes as electing
trustees, changing fundamental policies or approving an investment management
agreement. Subject to the Agreement and Declaration of Trust of the Fund,
shareholders may remove trustees. If shares of more than one Portfolio are
outstanding, shareholders will vote by Portfolio and not in the aggregate except
when voting in the aggregate is required under the 1940 Act, such as for the
election of trustees.
The Fund generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Fund ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees if a meeting is called for such
purpose; (b) the adoption of any contract for which shareholder approval is
required by the Investment Company Act of 1940 ("1940 Act"); (c) any termination
of the Fund to the extent and as provided in the Declaration of Trust; (d) any
amendment of the Declaration of Trust (other than amendments changing the name
of the Fund or any Portfolio, establishing a Portfolio, supplying any omission,
curing any ambiguity or curing, correcting or supplementing any defective or
inconsistent provision thereof); (e) as to whether a court action, proceeding or
claim should or should not be brought or maintained derivatively or as a class
action on behalf of the Fund or the shareholders, to the same extent as the
stockholders of a Massachusetts business corporation; and (f) such additional
matters as may be required by law, the Declaration of Trust, the By-laws of the
Fund, or any registration of the Fund with the Securities and Exchange
Commission or any state, or as the trustees may consider necessary or desirable.
The shareholders also would vote upon changes in fundamental investment
objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Fund
22
<PAGE>
will hold a shareholder meeting for the election of trustees at such time as
less than a majority of the trustees have been elected by shareholders, and (b)
if, as a result of a vacancy on the Board of Trustees, less than two-thirds of
the trustees have been elected by the shareholders, that vacancy will be filled
only by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Fund stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Fund has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Fund could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such as
the election of trustees and ratification of the selection of auditors. Some
matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of the Fund and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Fund (or any Portfolio) by notice to the shareholders without
shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Fund or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund and the Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by Scudder Kemper remote
and not material, since it is limited to circumstances in which a disclaimer is
inoperative and the Fund itself is unable to meet its obligations.
23
<PAGE>
APPENDIX -- RATINGS OF INVESTMENTS
The two highest ratings of Moody's Investors Service, Inc. ("Moody's") for
Municipal Securities are Aaa and Aa. Municipal Securities rated Aaa are judged
to be of the "best quality." The rating of Aa is assigned to Municipal
Securities which are of "high quality by all standards," but as to which margins
of protection or other elements make long-term risks appear somewhat larger than
Aaa rated Municipal Securities. The Aaa and Aa rated Municipal Securities
comprise what are generally known as "high grade."
The two highest ratings of Standard & Poor's Corporation ("S&P") for Municipal
Securities are AAA (Prime) and AA (High Grade). Municipal Securities rated AAA
are "obligations of the highest quality." The rating of AA is accorded issues
with investment characteristics "only slightly less marked than those of the
prime quality issues."
Moody's ratings for state and municipal notes and other short-term loans will be
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Loans designated MIG-1 are of the
best quality, enjoying strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the market for
refinancing, or both. Loans designated MIG-2 are of high quality, with margins
of protection ample although not so large as in the preceding group.
An S&P municipal and corporate commercial paper rating is a current assessment
of the likelihood of timely payment of debt having an original maturity of no
more than 365 days. Ratings are graded into four categories, ranging from "A"
for the highest quality obligations to "D" for the lowest. Issues assigned this
highest rating are regarded as having the greatest capacity for timely payment.
The designation A-1 indicates that the degree of safety regarding timely payment
is very strong. The designation A-2 indicates the capacity for timely payment is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated "A-1."
The "other debt securities" included in the definition of temporary investments
are corporate (as opposed to municipal) debt obligations rated AAA or AA by S&P
or Aaa or Aa by Moody's. Corporate debt obligations rated AAA by S&P are
"highest grade obligations." Obligations bearing the rating of AA also qualify
as "high grade obligations" and "in the majority of instances differ from AAA
issues only in small degree." The Moody's corporate debt ratings of Aaa and Aa
do not differ materially from those set forth above for Municipal Securities.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's. Among the factors considered by them in assigning ratings
are the following: (a) evaluation of the management of the issuer; (b) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (c) evaluation of
the issuer's products in relation to competition and customer acceptance; (d)
liquidity; (e) amount and quality of long-term debt; (f) trend of earnings over
a period of ten years; (g) financial strength of a parent company and the
relationships which exist with the issuer; and (h) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. Relative strength or
weakness of the above factors determines whether the issuer's commercial paper
is rated Prime-1, 2 or 3.
After its purchase by the Fund, an issue of Municipal Securities or a temporary
investment may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Fund. Neither event requires the elimination of
such obligation from the Fund's portfolio, but the Fund's investment adviser
will consider such an event in its determination of whether the Fund should
continue to hold such obligation in its portfolio. To the extent that the
ratings accorded by S&P or Moody's for Municipal Securities or temporary
investments may change as a result of changes in such organizations, or changes
in their rating systems, the Fund will attempt to use comparable ratings as
standards for its investments in Municipal Securities or temporary investments
in accordance with the investment policies contained herein.
24
<PAGE>
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits.
-------- ---------
<S> <C> <C>
(a) Articles of Incorporation/Declaration of Trust*
(b) By-laws*
(c) Text of Share Certificate*
(d)(1) Investment Management Agreement dated December 31, 1997
(d)(2) Investment Management Agreement dated September 8, 1998
(e)(1)(a) Administration, Shareholder Services and Distribution Agreement dated
December 31, 1997
(e)(1)(b) Administration, Shareholder Services and Distribution Agreement dated
September 7, 1998
(f) Inapplicable
(g) Custody Agreement*
(h)(1)(a) Agency Agreement*
(h)(1)(b) Supplement to Agency Agreement**
(h)(2) Fund Accounting Services Agreement dated December 31, 1997
(i) Inapplicable
(j) Report and Consent of Auditors to be filed by amendment
(k) Inapplicable
(l) Inapplicable
(m) Amended and Restated Rule 12b-1 Plan dated August 1, 1998
(n) Financial Data Schedule to be filed by amendment
(o) Inapplicable
</TABLE>
*Incorporated herein by reference to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A filed on
January 2, 1996.
**Incorporated herein by reference to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A filed on
January 2, 1997.
Item 24. Persons Controlled by or under Common Control with Fund.
- -------- --------------------------------------------------------
None
Item 25. Indemnification.
- -------- ----------------
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer,
Part C - Page 1
<PAGE>
or controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such trustee, officer, or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question as to
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
On June 26, 1997, Zurich Insurance Company ("Zurich"), ZKI Holding
Corp. ("ZKIH"), Zurich Kemper Investments, Inc. ("ZKI"), Scudder, Stevens &
Clark, Inc. ("Scudder") and the representatives of the beneficial owners of the
capital stock of Scudder ("Scudder Representatives") entered into a transaction
agreement ("Transaction Agreement") pursuant to which Zurich became the majority
stockholder in Scudder with an approximately 70% interest, and ZKI was combined
with Scudder ("Transaction"). In connection with the trustees' evaluation of the
Transaction, Zurich agreed to indemnify the Registrant and the trustees who were
not interested persons of ZKI or Scudder (the "Independent Trustees") for and
against any liability and expenses based upon any action or omission by the
Independent Trustees in connection with their consideration of and action with
respect to the Transaction. In addition, Scudder has agreed to indemnify the
Registrant and the Independent Trustees for and against any liability and
expenses based upon any misstatements or omissions by Scudder to the Independent
Trustees in connection with their consideration of the Transaction.
Item 26. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
Scudder Kemper Investments, Inc. has stockholders and
employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not
considered officers for the purpose of this Item 26.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
William H. Bolinder Director, Scudder Kemper Investments, Inc.**
Member, Group Executive Board, Zurich Financial Services, Inc. ##
Chairman, Zurich-American Insurance Compan o
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Gunther Gose Director, Scudder Kemper Investments, Inc.**
CFO and Member, Group Executive Board, Zurich Financial Services, Inc. ##
CEO/Branch Offices, Zurich Life Insurance Company ##
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Part C - Page 2
<PAGE>
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President and Secretary, Scudder Brokerage Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Cornelia M. Small Director and Vice President, Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
</TABLE>
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C.
Luxembourg B 34.564
*** Toronto, Ontario, Canada
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman,
British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
Item 27. Principal Underwriters.
- -------- -----------------------
Part C - Page 3
<PAGE>
(a)
Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper
Funds.
(b)
Information on the officers and directors of Kemper Distributors, Inc.,
principal underwriter for the Registrant is set forth below. The
principal business address is 222 South Riverside Plaza, Chicago,
Illinois 60606.
<TABLE>
(1) (2) (3)
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C>
James L. Greenawalt President
Thomas W. Littauer Director, Chief Executive Officer
Kathryn L. Quirk Director, Secretary, Chief Legal
Officer and Vice President
James J. McGovern Chief Financial Officer and Vice
President
Linda J. Wondrack Vice President and Chief Compliance
Officer
Paula Gaccione Vice President
Michael E. Harrington Vice President
Robert A. Rudell Vice President
William M. Thomas Vice President
Elizabeth C. Werth Vice President
Todd N. Gierke Assistant Treasurer
Philip J. Collora Assistant Secretary
Paul J. Elmlinger Assistant Secretary
Diane E. Ratekin Assistant Secretary
Daniel Pierce Director, Chairman
Mark S. Casady Director, Vice Chairman
Stephen R. Beckwith Director
(c) Not applicable
</TABLE>
Part C - Page 4
<PAGE>
Item 28. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of Registrant's investment adviser, Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's principal underwriter, Kemper Distributors, Inc.,
222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records
concerning custodial functions, at the offices of the custodian, Investors
Fiduciary Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri
64105 or, in the case of records concerning transfer agency functions, at the
offices of IFTC and of the shareholder service agent, Kemper Service Company,
811 Main Street, Kansas City, Missouri 64105.
Item 29. Management Services.
- -------- --------------------
Inapplicable.
Item 30. Undertakings.
- -------- -------------
Inapplicable.
Part C - Page 5
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago and State of Illinois, on the
27th day of November, 1998.
TAX-EXEMPT CALIFORNIA MONEY
MARKET FUND
By /s/Mark S. Casady
-----------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below on November 27,
1998 on behalf of the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/Daniel Pierce November 27, 1998
- --------------------------------------
Daniel Pierce* Chairman and Trustee
/s/David W. Belin November 27, 1998
- --------------------------------------
David W. Belin* Trustee
/s/Lewis A. Burnham November 27, 1998
- --------------------------------------
Lewis A. Burnham* Trustee
/s/Donald L. Dunaway November 27, 1998
- --------------------------------------
Donald L. Dunaway* Trustee
/s/Robert B. Hoffman November 27, 1998
- --------------------------------------
Robert B. Hoffman* Trustee
/s/Donald R. Jones November 27, 1998
- --------------------------------------
Donald R. Jones* Trustee
/s/ Shirley D. Peterson November 27, 1998
- --------------------------------------
Shirley D. Peterson* Trustee
/s/ William P. Sommers November 27, 1998
- --------------------------------------
William P. Sommers* Trustee
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Edmond D. Villani November 27, 1998
- --------------------------------------
Edmond D. Villani* Trustee
/s/John R. Hebble November 27, 1998
- --------------------------------------
John R. Hebble Treasurer (Principal Financial and
Accounting Officer)
</TABLE>
*By: /s/Philip J. Collora
--------------------
Philip J. Collora**
** Philip J. Collora signs this document
pursuant to powers of attorney
contained in Post-Effective Amendment
No. 11 to the Registration Statement,
filed January 27, 1998.
2
<PAGE>
File No. 33-12938
File No. 811-5076
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 12
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 13
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
<PAGE>
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
EXHIBIT INDEX
Exhibit (d)(1)
Exhibit (d)(2)
Exhibit (e)(1)(a)
Exhibit (e)(1)(b)
Exhibit (h)(2)
Exhibit (m)
Exhibit 23(d)(1)
INVESTMENT MANAGEMENT AGREEMENT
Tax-Exempt California Money Market Fund
222 South Riverside Plaza
Chicago, Illinois 60606
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Tax-Exempt California Money Market Fund
Ladies and Gentlemen:
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND (the "Trust") has been established as a
Massachusetts business Trust to engage in the business of an investment company.
Pursuant to the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized Tax-Exempt California Money Market Fund (the "Fund").
Series may be abolished and dissolved, and additional series established, from
time to time by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(1) The Declaration, as amended to date.
(2) By-Laws of the Trust as in effect on the date hereof (the "By- Laws").
(3) Resolutions of the Trustees of the Trust and the shareholders of the
Fund selecting you as investment manager and approving the form of
this Agreement.
(4) Establishment and Designation of Series of Shares of Beneficial
Interest relating to the Fund, as applicable.
<PAGE>
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust. You shall
also make available to the Trust promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Trust in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials
<PAGE>
for the Trust's Board of Trustees and reports and notices to Fund shareholders;
supervising, negotiating contractual arrangements with, to the extent
appropriate, and monitoring the performance of, accounting agents, custodians,
depositories, transfer agents and pricing agents, accountants, attorneys,
printers, underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable to Fund operations; preparing and
making filings with the Securities and Exchange Commission (the "SEC") and other
regulatory and self-regulatory organizations, including, but not limited to,
preliminary and definitive proxy materials, post-effective amendments to the
Registration Statement, semi-annual reports on Form N-SAR and notices pursuant
to Rule 24f-2 under the 1940 Act; overseeing the tabulation of proxies by the
Fund's transfer agent; assisting in the preparation and filing of the Fund's
federal, state and local tax returns; preparing and filing the Fund's federal
excise tax return pursuant to Section 4982 of the Code; providing assistance
with investor and public relations matters; monitoring the valuation of
portfolio securities and the calculation of net asset value; monitoring the
registration of Shares of the Fund under applicable federal and state securities
laws; maintaining or causing to be maintained for the Fund all books, records
and reports and any other information required under the 1940 Act, to the extent
that such books, records and reports and other information are not maintained by
the Fund's custodian or other agents of the Fund; assisting in establishing the
accounting policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting with
the Fund's independent accountants, legal counsel and the Fund's other agents as
necessary in connection therewith; establishing and monitoring the Fund's
operating expense budgets; reviewing the Fund's bills; processing the payment of
bills that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Trust as it may reasonably request in the conduct of
the Fund's business, subject to the direction and control of the Trust's Board
of Trustees. Nothing in this Agreement shall be deemed to shift to you or to
diminish the obligations of any agent of the Fund or any other person not a
party to this Agreement which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are
3
<PAGE>
required to be maintained by the Fund's custodian or other agents of the Trust;
telephone, telex, facsimile, postage and other communications expenses; taxes
and governmental fees; fees, dues and expenses incurred by the Fund in
connection with membership in investment company trade organizations; fees and
expenses of the Fund's accounting agent for which the Trust is responsible
pursuant to the terms of the Fund Accounting Services Agreement, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 4, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a)1/12 of .22 of
1 percent of the average daily net assets as defined below of the Fund for such
month; provided that, for any calendar month during which the average of such
values exceeds $500,000,000, the fee payable for that month based on the portion
of the average of such values in excess of $500,000,000 shall be 1/12 of .20 of
1 percent of such portion; provided that, for any calendar month during which
the average of such values exceeds $1,000,000,000, the fee payable for that
month based on the portion of the average of such values in excess of
$1,000,000,000 shall be 1/12 of .175 of 1 percent of such portion; provided
that, for any calendar month during which the average of such values exceeds
$2,000,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $2,000,000,000 shall be 1/12 of .16 of 1
percent of such portion; and provided that, for any calendar month during which
the average of such values exceeds $3,000,000,000, the fee payable for that
month based on the portion of the average of such values in excess of
$3,000,000,000 shall be 1/12 of .15 of 1 percent of such portion; over (b) any
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the Fund and
unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
4
<PAGE>
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until December 1, 1998, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid
5
<PAGE>
requirement that continuance of this Agreement be "specifically approved at
least annually" shall be construed in a manner consistent with the 1940 Act and
the rules and regulations thereunder and any applicable SEC exemptive order
therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Tax-Exempt
California Money Market Fund" refers to the Trustees under the Declaration
collectively as Trustees and not as individuals or personally, and that no
shareholder of the Fund, or Trustee, officer, employee or agent of the Trust,
shall be subject to claims against or obligations of the Trust or of the Fund to
any extent whatsoever, but that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
6
<PAGE>
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND,
on behalf of
Tax-Exempt California Money Market Fund
By: /s/Jack E. Neal
---------------------------
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/Lynn S. Birdsong
---------------------------
President
7
INVESTMENT MANAGEMENT AGREEMENT
Tax-Exempt California Money Market Fund
222 South Riverside Plaza
Chicago, Illinois 60606
September 7, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Tax-Exempt California Money Market Fund
Ladies and Gentlemen:
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND (the "Trust") has been established as a
Massachusetts business Trust to engage in the business of an investment company.
Pursuant to the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized Tax-Exempt California Money Market Fund (the "Fund").
Series may be abolished and dissolved, and additional series established, from
time to time by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By- Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the
Fund selecting you as investment manager and approving the form of
this Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial
Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
<PAGE>
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust. You shall
also make available to the Trust promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Trust in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith;
<PAGE>
establishing and monitoring the Fund's operating expense budgets; reviewing the
Fund's bills; processing the payment of bills that have been approved by an
authorized person; assisting the Fund in determining the amount of dividends and
distributions available to be paid by the Fund to its shareholders, preparing
and arranging for the printing of dividend notices to shareholders, and
providing the transfer and dividend paying agent, the custodian, and the
accounting agent with such information as is required for such parties to effect
the payment of dividends and distributions; and otherwise assisting the Trust as
it may reasonably request in the conduct of the Fund's business, subject to the
direction and control of the Trust's Board of Trustees. Nothing in this
Agreement shall be deemed to shift to you or to diminish the obligations of any
agent of the Fund or any other person not a party to this Agreement which is
obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
3
<PAGE>
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a)1/12 of .22 of
1 percent of the average daily net assets as defined below of the Fund for such
month; provided that, for any calendar month during which the average of such
values exceeds $500,000,000, the fee payable for that month based on the portion
of the average of such values in excess of $500,000,000 shall be 1/12 of .20 of
1 percent of such portion; provided that, for any calendar month during which
the average of such values exceeds $1,000,000,000, the fee payable for that
month based on the portion of the average of such values in excess of
$1,000,000,000 shall be 1/12 of .175 of 1 percent of such portion; provided
that, for any calendar month during which the average of such values exceeds
$2,000,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $2,000,000,000 shall be 1/12 of .16 of 1
percent of such portion; and provided that, for any calendar month during which
the average of such values exceeds $3,000,000,000, the fee payable for that
month based on the portion of the average of such values in excess of
$3,000,000,000 shall be 1/12 of .15 of 1 percent of such portion; over (b) any
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the Fund and
unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
4
<PAGE>
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until December 1, 1998, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Tax-Exempt
California Money Market Fund" refers to the Trustees under the Declaration
collectively as Trustees and not as individuals or personally, and that no
shareholder of the Fund, or Trustee, officer, employee or agent of the Trust,
shall be subject to claims against or obligations of the Trust or of the Fund to
any extent whatsoever, but that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
5
<PAGE>
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND,
on behalf of
Tax-Exempt California Money Market Fund
By: /s/Mark S. Casady
---------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/S R Beckwith
-------------------
Treasurer
6
Exhibit 23 (e)(1)(a)
ADMINISTRATION, SHAREHOLDER SERVICES AND
DISTRIBUTION AGREEMENT
AGREEMENT made this 31st day of December, 1997, by and between TAX-EXEMPT
CALIFORNIA MONEY MARKET FUND, a Massachusetts business trust (the "Fund"), and
KEMPER DISTRIBUTORS, INC., a Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to act as administrator, distributor and
principal underwriter for the distribution of shares of beneficial interest
(hereinafter called "shares") of the Fund in jurisdictions wherein shares of the
Fund may legally be offered for sale; provided, however, that the Fund in its
absolute discretion may (a) issue or sell shares directly to holders of shares
of the Fund upon such terms and conditions and for such consideration, if any,
as it may determine, whether in connection with the distribution of subscription
or purchase rights, the payment or reinvestment of dividends or distributions,
or otherwise; or (b) issue or sell shares at net asset value to the shareholders
of any other investment company, for which KDI shall act as exclusive
distributor, who wish to exchange all or a portion of their investment in shares
of such other investment company for shares of the Fund.
KDI shall appoint various broker-dealers and other financial services firms
("Firms") to provide a cash management service for their clients through the
Fund. The Firms shall provide such office space and equipment, telephone
facilities, personnel, literature distribution, advertising and promotion as is
necessary or beneficial for providing information and services to potential and
existing shareholders of the Fund and to assist the Fund's shareholder service
agent in servicing accounts of the Firm's clients who own Fund shares
("clients"). Such services and assistance may include, but are not limited to,
establishment and maintenance of shareholder accounts and records, processing
purchase and redemption transactions, automatic investment in Fund shares of
client account cash balances, answering routine client inquiries regarding the
Fund, assistance to clients in changing dividend options, account designations
and addresses, and such other services as the Fund or KDI may reasonably
request. KDI may also provide some of the above services for the Fund directly.
<PAGE>
KDI accepts such appointment and agrees during the term hereof to render such
services and to assume the obligations herein set forth for the compensation
herein provided. KDI shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Fund in any way or otherwise
be deemed an agent of the Fund. It is understood and agreed that KDI, by
separate agreement with the Fund, may also serve the Fund in other capacities.
The services of KDI to the Fund under this Agreement are not to be deemed
exclusive, and KDI shall be free to render similar services or other services to
others.
In carrying out its duties and responsibilities hereunder, KDI will, pursuant to
separate administration services and selling group agreements ("services
agreements"), appoint various Firms to provide administrative, distribution and
other services contemplated hereunder directly to or for the benefit of existing
and potential shareholders who may be clients of such Firms. Such Firms shall at
all times be deemed to be independent contractors retained by KDI and not the
Fund. KDI and not the Fund will be responsible for the payment of compensation
to such Firms for such services.
KDI will use its best efforts with reasonable promptness to sell such part of
the authorized shares of the Fund remaining unissued as from time to time shall
be effectively registered under the Securities Act of 1933 ("Securities Act"),
at prices determined as hereinafter provided and on terms hereinafter set forth,
all subject to applicable Federal and state laws and regulations and to the
Agreement and Declaration of Trust of the Fund. The price the Fund shall receive
for all shares purchased from the Fund shall be the net asset value used in
determining the public offering price applicable to the sale of such shares.
2. KDI shall sell shares of the Fund to or through qualified Firms in such
manner, not inconsistent with the provisions hereof and the then effective
registration statement of the Fund under the Securities Act (and related
prospectus), as KDI may determine from time to time, provided that no Firm or
other person shall be appointed or authorized to act as agent of the Fund
without the prior consent of the Fund. In addition to sales made by it as agent
of the Fund, KDI may, in its discretion, also sell shares of the Fund as
principal to persons with whom it does not have services agreements.
Shares of the Fund offered for sale or sold by KDI shall be so offered or sold
at a price per share determined in accordance
2
<PAGE>
with the then current prospectus relating to the sale of such shares except as
departure from such prices shall be permitted by the rules and regulations of
the Securities and Exchange Commission; provided, however, that any public
offering price for shares of the Fund shall be the net asset value per share.
The net asset value per share of the Fund shall be determined in the manner and
at the times set forth in the then current prospectus of the Fund relating to
such shares.
KDI will require each Firm to conform to the provisions hereof and the
Registration Statement (and related prospectus) at the time in effect under the
Securities Act with respect to the public offering price of the Fund's shares,
and neither KDI nor any such Firms shall withhold the placing of purchase orders
so as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively registered under the
Securities Act for sale as herein contemplated such shares as KDI shall
reasonably request and as the Securities and Exchange Commission shall permit to
be so registered. Notwithstanding any other provision hereof, the Fund may
terminate, suspend or withdraw the offering of shares whenever, in its sole
discretion, it deems such action to be desirable.
4. The Fund will execute any and all documents and furnish any and all
information which may be reasonably necessary in connection with the
qualification of its shares for sale (including the qualification of the Fund as
a dealer where necessary or advisable) in such states as KDI may reasonably
request (it being understood that the Fund shall not be required without its
consent to comply with any requirement which in its opinion is unduly
burdensome). The Fund will furnish to KDI from time to time such information
with respect to the Fund and its shares as KDI may reasonably request for use in
connection with the sale of shares of the Fund.
5. KDI shall issue and deliver or shall arrange for various Firms to issue and
deliver on behalf of the Fund such confirmations of sales made by it as agent
pursuant to this Agreement as may be required. At or prior to the time of
issuance of shares, KDI will pay or cause to be paid to the Fund the amount due
the Fund for the sale of such shares. Certificates shall be issued or shares
registered on the transfer books of the Fund in such names and denominations as
KDI may specify.
6. KDI shall order shares of the Fund from the Fund only to the extent that it
shall have received purchase orders therefor. KDI
3
<PAGE>
will not make, or authorize any Firms or others to make, any short sales of
shares of the Fund. KDI, as agent of and for the account of the Fund, may
repurchase the shares of the Fund at such prices and upon such terms and
conditions as shall be specified in the current prospectus of the Fund. In
selling or reacquiring shares of the Fund for the account of the Fund, KDI will
in all respects conform to the requirements of all state and Federal laws and
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc., relating to such sale or reacquisition, as the case may be, and will
indemnify and save harmless the Fund from any damage or expense on account of
any wrongful act by KDI or any employee, representative or agent of KDI. KDI
will observe and be bound by all the provisions of the Agreement and Declaration
of Trust of the Fund (and of any fundamental policies adopted by the Fund
pursuant to the Investment Company Act of 1940, notice of which shall have been
given to KDI) which at the time in any way require, limit, restrict or prohibit
or otherwise regulate any action on the part of KDI.
7. The Fund shall assume and pay all charges and expenses of its operations not
specifically assumed or otherwise to be provided by KDI under this Agreement.
The Fund will pay or cause to be paid expenses (including the fees and
disbursements of its own counsel) and all taxes and fees payable to the Federal,
state or other governmental agencies on account of the registration or
qualification of securities issued by the Fund or otherwise. The Fund will also
pay or cause to be paid expenses incident to the issuance of shares of
beneficial interest, such as the cost of share certificates, issue taxes, and
fees of the transfer agent. KDI will pay all expenses (other than expenses which
one or more Firms may bear pursuant to any agreement with KDI) incident to the
sale and distribution of the shares issued or sold hereunder including, without
limiting the generality of the foregoing, all expenses of printing and
distributing any prospectus and of preparing, printing and distributing or
disseminating any other literature, advertising and selling aids in connection
with the offering of the shares for sale (except that such expenses need not
include expenses incurred by the Fund in connection with the preparation,
typesetting, printing and distribution of any registration statement, prospectus
or report or other communication to shareholders in their capacity as such) and
expenses of advertising in connection with such offering.
8. For the services and facilities described herein, the Fund will pay to KDI at
the end of each calendar month a distribution services fee computed at an annual
rate of .33% of the average daily net assets of the Fund.
4
<PAGE>
For the month and year in which this Agreement becomes effective or terminates,
there shall be an appropriate proration on the basis of the number of days that
the Agreement is in effect during the month and year, respectively.
The net asset value of each series of shares of the Fund ("Portfolio") shall be
calculated in accordance with the provisions of the Fund's current prospectus.
On each day when net asset value is not calculated, the net asset value of a
share of any Portfolio shall be deemed to be the net asset value of such a share
as of the close of business on the last day on which such calculation was made
for the purpose of the foregoing computations.
9. KDI shall prepare reports for the Board of Trustees of the Fund on a
quarterly basis showing amounts paid to the various Firms, the basis for any
discretionary payments made to such Firms and such other information as from
time to time shall be reasonably requested by the Board of Trustees.
This Agreement shall become effective on the date hereof and shall continue
until December 1, 1998 and shall continue from year to year thereafter with
respect to each Portfolio, but only so long as such continuance is specifically
approved for each Portfolio at least annually by a vote of the Board of Trustees
of the Fund including the trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in this Agreement or in
any agreement related to this Agreement.
This Agreement may not be amended to increase the amount to be paid to KDI for
services hereunder without the vote of a majority of the outstanding voting
securities of each Portfolio of the Fund. All material amendments to this
Agreement must in any event be approved by a vote of the Board of Trustees of
the Fund including the trustees who are not interested persons of the Fund and
who have no direct or indirect financial interest in this Agreement or in any
agreement related to this Agreement, cast in person at a meeting called for such
purpose.
10. This Agreement shall automatically terminate in the event of its assignment
and may be terminated at any time without the payment of any penalty by the Fund
or by KDI on sixty (60) days written notice to the other party. The Fund may
effect termination with respect to any Portfolio by a vote of (i) a majority of
the Board of Trustees, (ii) a majority of the trustees who are not interested
persons of the Fund and who have no direct or indirect financial interest in
this Agreement or in
5
<PAGE>
any agreement related to this Agreement, or (iii) a majority of the outstanding
voting securities of a Portfolio.
The terms "assignment", "interested" and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth in the Investment Company
Act of 1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of KDI to receive
payments on any unpaid balance of the compensation described in Section 8 earned
prior to such termination.
11. KDI will not use or distribute or authorize the use, distribution or
dissemination by Firms or others in connection with the sale of the shares any
statements, other than those contained in the Fund's current prospectus, except
such supplemental literature or advertising as shall be lawful under Federal and
state securities laws and regulations, and will furnish the Fund with copies of
all such material. 12. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall not
be thereby affected.
13. Any notice under this Agreement shall be in writing, addressed and delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate for the receipt of such notice.
14. All parties hereto are expressly put on notice of the Fund's Agreement and
Declaration of Trust and all amendments thereto, all of which are on file with
the Secretary of The Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability contained therein. This Agreement has been
executed by and on behalf of the Fund by its representatives as such
representatives and not individually, and the obligations of the Fund hereunder
are not binding upon any of the trustees, officers or shareholders of the Fund
individually but are binding upon only the assets and property of the Fund. With
respect to any claim by KDI for recovery of that portion of the distribution
services fees (or any other liability of the Fund arising hereunder) allocated
to a particular Portfolio, whether in accordance with the express terms hereof
or otherwise, KDI shall have recourse solely against the assets of that
Portfolio to satisfy such claim and shall have no recourse against the assets of
any other Portfolio for such purpose.
6
<PAGE>
15. This Agreement shall be construed in accordance with applicable federal law
and the laws of The Commonwealth of Massachusetts.
7
<PAGE>
16. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be executed
as of the day and year first above written.
TAX-EXEMPT CALIFORNIA
MONEY MARKET FUND
By: /s/John E. Neal
-------------------------
Title: Vice President
---------------------
ATTEST:
/s/Philip J. Collora
- --------------------
Title: Secretary
----------------
KEMPER DISTRIBUTORS, INC.
By: /s/James L. Greenawalt
----------------------
Title: President
----------------
ATTEST:
/s/Charles R. Manzoni
- ---------------------
Title: Secretary
----------------
8
Exhibit 23 (e)(1)(b)
ADMINISTRATION, SHAREHOLDER SERVICES AND
DISTRIBUTION AGREEMENT
AGREEMENT made this 7th day of September, 1998, by and between TAX-EXEMPT
CALIFORNIA MONEY MARKET FUND, a Massachusetts business trust (the "Fund"), and
KEMPER DISTRIBUTORS, INC., a Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to act as administrator,
distributor and principal underwriter for the distribution of shares of
beneficial interest (hereinafter called "shares") of the Fund in
jurisdictions wherein shares of the Fund may legally be offered for
sale; provided, however, that the Fund in its absolute discretion may
(a) issue or sell shares directly to holders of shares of the Fund upon
such terms and conditions and for such consideration, if any, as it may
determine, whether in connection with the distribution of subscription
or purchase rights, the payment or reinvestment of dividends or
distributions, or otherwise; or (b) issue or sell shares at net asset
value to the shareholders of any other investment company, for which
KDI shall act as exclusive distributor, who wish to exchange all or a
portion of their investment in shares of such other investment company
for shares of the Fund.
KDI shall appoint various broker-dealers and other financial
services firms ("Firms") to provide a cash management service for their
clients through the Fund. The Firms shall provide such office space and
equipment, telephone facilities, personnel, literature distribution,
advertising and promotion as is necessary or beneficial for providing
information and services to potential and existing shareholders of the
Fund and to assist the Fund's shareholder service agent in servicing
accounts of the Firm's clients who own Fund shares ("clients"). Such
services and assistance may include, but are not limited to,
establishment and maintenance of shareholder accounts and records,
processing purchase and redemption transactions, automatic investment
in Fund shares of client account cash balances, answering routine
client inquiries regarding the Fund, assistance to clients in changing
dividend options, account designations and addresses, and such other
services as the Fund or KDI may reasonably request. KDI may also
provide some of the above services for the Fund directly.
KDI accepts such appointment and agrees during the term hereof
to render such services and to assume the obligations herein set forth
for the compensation herein provided. KDI shall for all purposes herein
provided be deemed to be an independent contractor and, unless
otherwise expressly provided or authorized, shall have no authority to
act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund. It is understood and agreed that KDI, by separate
agreement with the Fund, may also serve the Fund in other capacities.
The services of KDI to the Fund under this Agreement are not to be
deemed exclusive, and KDI shall be free to render similar services or
other services to others so long as its services hereunder are not
impaired thereby.
<PAGE>
In carrying out its duties and responsibilities hereunder, KDI
will, pursuant to separate administration services and selling group
agreements ("services agreements"), appoint various Firms to provide
administrative, distribution and other services contemplated hereunder
directly to or for the benefit of existing and potential shareholders
who may be clients of such Firms. Such Finns shall at all times be
deemed to be independent contractors retained by KDI and not the Fund.
KDI and not the Fund will be responsible for the payment of
compensation to such Firms for such services.
KDI will use its best efforts with reasonable promptness to
sell such part of the authorized shares of the Fund remaining unissued
as from time to time shall be effectively registered under the
Securities Act of 1933 ("Securities Act"), at prices determined as
hereinafter provided and on terms hereinafter set forth, all subject to
applicable federal and state laws and regulations and to the Fund's
Agreement and Declaration of Trust. The price the Fund shall receive
for all shares purchased from the Fund shall be the net asset value
used in determining the public offering price applicable to the sale of
such shares.
2. KDI shall sell shares of the Fund to or through qualified
Firms in such manner, not inconsistent with the provisions hereof and
the then effective registration statement of the Fund under the
Securities Act (and related prospectus), as KDI may determine from time
to time, provided that no Firm or other person shall be appointed and
authorized to act as agent of the Fund without the prior consent of the
Fund. In addition to sales made by it as agent of the Fund, KDI may, in
its discretion, also sell shares of the Fund as principal to persons
with whom it does not have services agreements.
Shares of any series of the Fund offered for sale or sold by
KDI shall be so offered or sold at a price per share determined in
accordance with the then current prospectus relating to the sale of
such shares except as departure from such prices shall be permitted by
the rules and regulations of the Securities and Exchange Commission;
provided, however, that any public offering price for shares of the
Fund shall be the net asset value per share. The net asset value per
share of the Fund shall be determined in the manner and at the times
set forth in the then current prospectus of the Fund relating to such
shares.
KDI will require each Firm to conform to the provisions hereof
and the Registration Statement (and related prospectus) at the time in
effect under the Securities Act with respect to the public offering
price of the Fund's shares, and neither KDI nor any such Firms shall
withhold the placing of purchase orders so as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively
registered under the Securities Act for sale as herein contemplated
such shares as KDI shall reasonably request and as the Securities and
Exchange Commission shall permit to be so registered. Notwithstanding
any other provision hereof, the Fund may terminate, suspend or withdraw
the offering of shares whenever, in its sole discretion, it deems such
action to be desirable.
2
<PAGE>
4. The Fund will execute any and all documents and furnish any
and all information that may be reasonably necessary in connection with
the qualification of its shares for sale (including the qualification
of the Fund as a dealer where necessary or advisable) in such states as
KDI may reasonably request (it being understood that the Fund shall not
be required without its consent to comply with any requirement which in
its opinion is unduly burdensome). The Fund will furnish to KDI from
time to time such information with respect to the Fund and its shares
as KDI may reasonably request for use in connection with the sale of
shares of the Fund.
5. KDI shall issue and deliver or shall arrange for various Firms
to issue and deliver on behalf of the Fund such confirmations of sales
made by it pursuant to this Agreement as may be required. At or prior
to the time of issuance of shares, KDI will pay or cause to be paid to
the Fund the amount due the Fund for the sale of such shares.
Certificates shall be issued or shares registered on the transfer books
of the Fund in such names and denominations as KDI may specify.
6. KDI shall order shares of the Fund from the Fund only to the
extent that it shall have received purchase orders therefor. KDI will
not make, or authorize Firms or others to make, any short sales of
shares of the Fund. KDI, as agent of and for the account of the Fund,
may repurchase the shares of the Fund at such prices and upon such
terms and conditions as shall be specified in the current prospectus of
the Fund. In selling or reacquiring shares of the Fund for the account
of the Fund, KDI will in all respects conform to the requirements of
all state and federal laws and the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., relating to such sale
or reacquisition, as the case may be, and will indemnify and save
harmless the Fund from any damage or expense on account of any wrongful
act by KDI or any employee, representative or agent of KDI. KDI will
observe and be bound by all the provisions of the Fund's Agreement and
Declaration of Trust (and of any fundamental policies adopted by the
Fund pursuant to the Investment Company Act of 1940 (the "Investment
Company Act"), notice of which shall have been given to KDI) which at
the time in any way require, limit, restrict prohibit or otherwise
regulate any action on the part of KDI hereunder.
7. The Fund shall assume and pay all charges and expenses of its
operations not specifically assumed or otherwise to be provided by KDI
under this Agreement or the Fund's Amended and Restated 12b-1 Plan (the
"Plan"). The Fund will pay or cause to be paid expenses (including the
fees and disbursements of its own counsel) and all taxes and fees
payable to the federal, state or other governmental agencies on account
of the registration or qualification of securities issued by the Fund
or otherwise. The Fund will also pay or cause to be paid expenses
incident to the issuance of shares of beneficial interest, such as the
cost of share certificates, issue taxes, and fees of the transfer
agent. KDI will pay all expenses (other than expenses which one or more
Firms may bear pursuant to any agreement with KDI) incident to the sale
and distribution of the shares issued or sold hereunder including,
without limiting the generality of the foregoing, all expenses of
printing and distributing any prospectus and of preparing, printing and
distributing or disseminating any other literature, advertising and
selling aids in connection with the offering of the shares for sale
(except that such expenses need not include expenses incurred by the
Fund in connection with the preparation, typesetting, printing and
3
<PAGE>
distribution of any registration statement, prospectus or report or
other communication to shareholders in their capacity as such) and
expenses of advertising in connection with such offering.
8. This Agreement shall become effective on the date hereof and
shall continue until December 1, 1998, and shall continue from year to
year thereafter only so long as such continuance is approved in the
manner required by the Investment Company Act.
This Agreement shall automatically terminate in the event of
its assignment and may be terminated at any time without the payment of
any penalty by the Fund or by KDI on (60) days' written notice to the
other party. The Fund may effect termination by a vote of (i) a
majority of the trustees who are not interested persons of the Fund and
who have no direct or indirect financial interest in the operation of
the Plan, this Agreement or in any other agreement related to the Plan,
or (ii) a majority of the outstanding voting securities of the Fund.
All material amendments to this Agreement must be approved by
a vote of a majority of the Board of Trustees of the Fund, including
the trustees who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan,
this Agreement or in any other agreement related to the Plan, cast in
person at a meeting called for such purpose.
The terms "assignment," "interested person" and "vote of a
majority of the outstanding voting securities" shall have the meanings
set forth in the Investment Company Act and the rules and regulations
thereunder.
KDI shall receive such compensation for its distribution
services as set forth in the Plan. Termination of this Agreement shall
not affect the right of KDI to receive payments on any unpaid balance
of the compensation earned prior to such termination, as set forth in
the Plan.
9. KDI will not use or distribute or authorize the use,
distribution or dissemination by Firms or others in connection with the
sale of Fund shares any statements, other than those contained in the
Fund's current prospectus, except such supplemental literature or
advertising as shall be lawful under federal and state securities laws
and regulations. KDI will furnish the Fund with copies of all such
material.
10. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
shall not be thereby affected.
11. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party
at such address as such other party may designate for the receipt of
such notice.
12. All parties hereto are expressly put on notice of the Fund's
Agreement and Declaration of Trust and all amendments thereto, all of
which are on file with the Secretary of The Commonwealth of
Massachusetts, and the limitation of shareholder and trustee liability
4
<PAGE>
contained therein. This Agreement has been executed by and on behalf of
the Fund by its representatives as such representatives and not
individually, and the obligations of the Fund hereunder are not binding
upon any of the trustees, officers or shareholders of the Fund
individually but are binding upon only the assets and property of the
Fund. With respect to any claim by KDI for recovery of any liability of
the Fund arising hereunder allocated to a particular series, whether in
accordance with the express terms hereof or otherwise, KDI shall have
no recourse against the assets of any other series for such purpose.
13. This Agreement shall be construed in accordance with
applicable federal law and with the laws of The Commonwealth of
Massachusetts.
14. This Agreement is the entire contract between the parties
relating to the subject matter hereof and supersedes all prior
agreements between the parties relating to the subject matter hereof.
[SIGNATURES APPEAR ON NEXT PAGE]
5
<PAGE>
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be executed
as of the day and year first above written.
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
By: /s/Mark S. Casady
---------------------------
Title: President
----------------------
ATTEST:
By: /s/Maureen Kane
---------------------------
Title: Assistant Secretary
-------------------------
KEMPER DISTRIBUTORS, INC.
By: /s/James L. Greenawalt
---------------------------
Title: President
----------------------
ATTEST:
By: /s/Joan V. Pearson
---------------------------
Title: Executive Assistant
------------------------
6
Exhibit 23(h)(2)
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 31st day of December, 1997 between Tax-Exempt
California Money Market Fund (the "Fund"), on behalf of the Initial Portfolio
(hereinafter called the "Portfolio"), a registered open-end management
investment company with its principal place of business in 222 South Riverside
Plaza, Chicago, Illinois 60606 and Scudder Fund Accounting Corporation, with its
principal place of business in Boston, Massachusetts (hereinafter called "FUND
ACCOUNTING").
WHEREAS, the Portfolio has need to determine its net asset value which service
FUND ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund and
FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this Agreement
to calculate the net asset value of the Portfolio as provided in the
prospectus of the Portfolio and in connection therewith shall:
a. Maintain and preserve all accounts, books, financial records
and other documents as are required of the Fund under Section
31 of the Investment Company Act of 1940 (the "1940 Act") and
Rules 31a-1, 31a-2 and 31a-3 thereunder, applicable federal
and state laws and any other law or administrative rules or
procedures which may be applicable to the Fund on behalf of
the Portfolio, other than those accounts, books and financial
records required to be maintained by the Fund's investment
adviser, custodian or transfer agent and/or books and records
maintained by all other service providers necessary for the
Fund to conduct its business as a registered open-end
management investment company. All such books and records
shall be the property of the Fund and shall at all times
during regular business hours be open for inspection by, and
shall be surrendered promptly upon request of, duly authorized
officers of the Fund. All such books and records shall at all
times during regular business hours be open for inspection,
upon request of duly authorized officers of the Fund, by
employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission.
b. Record the current day's trading activity and such other
proper bookkeeping entries as are necessary for determining
that day's net asset value and net income.
<PAGE>
c. Render statements or copies of records as from time to time
are reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent public
accountants or by any other auditors employed or engaged by
the Fund or by any regulatory body with jurisdiction over the
Fund.
e. Compute the Portfolio's public offering price and/or its daily
dividend rates and money market yields, if applicable, in
accordance with Section 3 of the Agreement and notify the Fund
and such other persons as the Fund may reasonably request of
the net asset value per share, the public offering price
and/or its daily dividend rates and money market yields.
f. Perform a mark-to-market appraisal in accordance with
procedures by the Board of Trustees pursuant to Rule 2a-7
under the 1940 Act.
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's
Registration Statement, as amended or supplemented from time to time
(hereinafter referred to as the "Registration Statement"); (b) the
resolutions of the Board of Trustees of the Fund at the time in force
and applicable, as they may from time to time be delivered to FUND
ACCOUNTING, and (c) Proper Instructions from such officers of the Fund
or other persons as are from time to time authorized by the Board of
Trustees of the Fund to give instructions with respect to computation
and determination of the net asset value. FUND ACCOUNTING may use one
or more external pricing services, including broker-dealers, provided
that an appropriate officer of the Fund shall have approved such use in
advance.
Section 3. Computation of Net Asset Value, Public Offering Price, Daily
Dividend Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset value,
including net income, in a manner consistent with the specific
provisions of the Registration Statement. Such computation shall be
made as of the time or times specified in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and money market
yields, if applicable, in accordance with the methodology set forth in
the Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
2
<PAGE>
In maintaining the Portfolio's books of account and making the
necessary computations FUND ACCOUNTING shall be entitled to receive,
and may rely upon, information furnished it by means of Proper
Instructions, including but not limited to:
a. The manner and amount of accrual of expenses to be recorded on
the books of the Portfolio;
b. The source of quotations to be used for such securities as may
not be available through FUND
ACCOUNTING's normal pricing services;
c. The value to be assigned to any asset for which no price
quotations are readily available;
d. If applicable, the manner of computation of the public
offering price and such other computations as may be necessary;
e. Transactions in portfolio securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be entitled to
rely upon, as conclusive proof of any fact or matter required to be
ascertained by it hereunder, a certificate, letter or other instrument
signed by an authorized officer of the Fund or any other person
authorized by the Fund's Board of Trustees.
FUND ACCOUNTING shall be entitled to receive and act upon advice of
Counsel for the Fund at the reasonable expense of the Portfolio and
shall be without liability for any action taken or thing done in good
faith in reliance upon such advice.
FUND ACCOUNTING shall be entitled to receive, and may rely upon,
information received from the Transfer Agent.
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate, letter or
other instrument or telephone call reasonably believed by FUND
ACCOUNTING to be genuine and to have been properly made or signed by
any authorized officer of the Fund or person certified to FUND
ACCOUNTING as being authorized by the Board of Trustees. The Fund, on
behalf of the Portfolio, shall cause oral instructions to be confirmed
in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices as from time
to time agreed to by an authorized officer of the Fund and FUND
ACCOUNTING.
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The Fund, on behalf of the Portfolio, agrees to furnish to the
appropriate person(s) within FUND ACCOUNTING a copy of the Registration
Statement as in effect from time to time. FUND ACCOUNTING may
conclusively rely on the Fund's most recently delivered Registration
Statement for all purposes under this Agreement and shall not be liable
to the Portfolio or the Fund in acting in reliance thereon.
Section 6. Standard of Care
FUND ACCOUNTING shall exercise reasonable care and diligence in the
performance of its duties hereunder. The Fund agrees that FUND
ACCOUNTING shall not be liable under this Agreement for any error of
judgment or mistake of law made in good faith and consistent with the
foregoing standard of care, provided that nothing in this Agreement
shall be deemed to protect or purport to protect FUND ACCOUNTING
against any liability to the Fund, the Portfolio or its shareholders to
which FUND ACCOUNTING would otherwise be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties
hereunder.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed
upon in writing by the two parties. FUND ACCOUNTING shall be entitled,
if agreed to by the Fund on behalf of the Portfolio, to recover its
reasonable telephone, courier or delivery service, and all other
reasonable out-of-pocket, expenses as incurred, including, without
limitation, reasonable attorneys' fees and reasonable fees for pricing
services.
Section 8. Amendment and Termination
This Agreement shall continue in full force and effect until terminated
as hereinafter provided, may be amended at any time by mutual agreement
of the parties hereto and may be terminated by an instrument in writing
delivered or mailed to the other party. Such termination shall take
effect not sooner than sixty (60) days after the date of delivery or
mailing of such notice of termination. Any termination date is to be no
earlier than four months from the effective date hereof. Upon
termination, FUND ACCOUNTING will turn over to the Fund or its designee
and cease to retain in FUND ACCOUNTING files, records of the
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calculations of net asset value and all other records pertaining to its
services hereunder; provided, however, FUND ACCOUNTING in its
discretion may make and retain copies of any and all such records and
documents which it determines appropriate or for its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are not to be
deemed to be exclusive, and it is understood that FUND ACCOUNTING may
perform fund accounting services for others. In acting under this
Agreement, FUND ACCOUNTING shall be an independent contractor and not
an agent of the Fund or the Portfolio.
Section 10. Limitation of Liability for Claims
The Fund's Amended and Restated Declaration of Trust, as amended to
date (the "Declaration"), a copy of which, together with all amendments
thereto, is on file in the Office of the Secretary of State of the
Commonwealth of Massachusetts, provides that the name "Tax-Exempt
California Money Market Fund" refers to the Trustees under the
Declaration collectively as trustees and not as individuals or
personally, and that no shareholder of the Fund or the Portfolio, or
Trustee, officer, employee or agent of the Fund shall be subject to
claims against or obligations of the Trust or of the Portfolio to any
extent whatsoever, but that the Trust estate only shall be liable.
FUND ACCOUNTING is expressly put on notice of the limitation of
liability as set forth in the Declaration and FUND ACCOUNTING agrees
that the obligations assumed by the Fund and/or the Portfolio under
this Agreement shall be limited in all cases to the Portfolio and its
assets, and FUND ACCOUNTING shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or the
Portfolio or any other series of the Fund, or from any Trustee,
officer, employee or agent of the Fund. FUND ACCOUNTING understands
that the rights and obligations of the Portfolio under the Declaration
are separate and distinct from those of any and all other series of the
Fund.
Section 11. Notices
Any notice shall be sufficiently given when delivered or mailed to the
other party at the address of such party set forth below or to such
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other person or at such other address as such party may from time to
time specify in writing to the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn: Vice President
If to the Fund - Portfolio: Tax-Exempt California Money Market Fund
222 South Riverside Plaza
Chicago, Illinois 60606
Attn: President, Secretary
or Treasurer
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Section 12. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING without the
consent of the Fund as authorized or approved by resolution of its
Board of Trustees.
In connection with the operation of this Agreement, the Fund and FUND
ACCOUNTING may agree from time to time on such provisions interpretive
of or in addition to the provisions of this Agreement as in their joint
opinions may be consistent with this Agreement. Any such interpretive
or additional provisions shall be in writing, signed by both parties
and annexed hereto, but no such provisions shall be deemed to be an
amendment of this Agreement.
This Agreement shall be governed and construed in accordance with the
laws of the Commonwealth of Massachusetts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes any and all prior
understandings.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized and its seal to be
hereunder affixed as of the date first written above.
[SEAL] TAX-EXEMPT CALIFORNIA MONEY
MARKET FUND
on behalf of the Initial Portfolio
By: /s/Mark S. Casady
----------------------------------
President
[SEAL] SCUDDER FUND ACCOUNTING CORPORATION
By: /s/John R. Hebble
----------------------------------
Treasurer
8
Exhibit 23(m)
Fund: Tax-Exempt California Money Market Fund (the "Fund")
---------------------------------------
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has
been adopted for the Fund (as noted and defined above) by a majority of the
members of the Fund's Board of Trustees, including a majority of the trustees
who are not "interested persons" of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
the Plan (the "Qualified Trustees") at a meeting called for the purpose of
voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI")
at the end of each calendar month a distribution services fee computed at the
annual rate .33% of the Fund's average daily net assets. KDI may compensate
various financial services firms appointed by KDI ("Firms") in accordance with
the provisions of the Fund's Administration, Shareholder Services and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee levels provided in the Fund's prospectus from time to time. KDI may pay
other commissions, fees or concessions to Firms, and may pay them to others in
its discretion, in such amounts as KDI may determine from time to time. The
distribution services fee for the Fund shall be based upon the average daily net
assets of the Fund, and such fee shall be charged only to the Fund. For the
month and year in which this Plan becomes effective or terminates, there shall
be an appropriate proration of the distribution services fee set forth herein on
the basis of the number of days that the Plan, the Distribution Agreement, and
any other agreement related to the Plan, is in effect during the month and year,
respectively.
2. Periodic Reporting. KDI shall prepare reports for the Board of
Trustees of the Fund on a quarterly basis showing amounts paid to the various
Firms and such other information as from time to time shall be reasonably
requested by the Board of Trustees.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the trustees, and of the Qualified Trustees, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Fund.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Fund by vote of a majority of the Qualified Trustees or by
vote of the majority of the outstanding voting securities of the Fund.
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services without the vote
of a majority of the outstanding voting securities of the Fund. All material
amendments to this Plan must in any event be approved by a vote of a majority of
the trustees, and of the Qualified Trustees, cast in person at a meeting called
for such purpose.
<PAGE>
6. Selection of Non-Interested Trustees. So long as this Plan is in
effect, the selection and nomination of those trustees who are not interested
persons of the Fund will be committed to the discretion of the trustees who are
not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Fund and shall not be binding on any
trustee, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the trustees or shareholders of the Fund nor the
adoption of the Plan on behalf of the Fund shall impose any liability upon any
trustee or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Fund as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
