<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
Kemper High Income Trust, Kemper Intermediate Government Trust,
Kemper Multi-Market Income Trust, Kemper Municipal Income Trust,
Kemper Strategic Income Fund, Kemper Strategic Municipal Income Trust
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
October 28, 1998
Kemper
Important News
Important News
for Kemper Closed-End Fund Shareholders
While we encourage you to read the full text of the enclosed Proxy Statement,
here's a brief overview of some matters affecting your Fund that will be the
subject of a shareholder vote.
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Q&A
QUESTIONS AND ANSWERS
Q WHAT IS HAPPENING?
A Zurich Insurance Company ("Zurich"), which is the majority owner of your
Fund's investment manager, Scudder Kemper Investments, Inc. ("Scudder Kemper"),
has combined its businesses with the financial services businesses of B.A.T
Industries p.l.c. ("B.A.T"). The resulting company, Zurich Financial Services
("Zurich Financial Services"), has become Zurich's parent company. Although this
transaction will have virtually no effect on the operations of Scudder Kemper or
your Fund, we are asking the Fund's shareholders to approve a new investment
management agreement to assure that there is no interruption in the services
Scudder Kemper provides to your Fund. The following pages give you additional
information about Zurich Financial Services, the new investment management
agreement and certain other matters. THE BOARD MEMBERS OF YOUR FUND, INCLUDING
THOSE WHO ARE NOT AFFILIATED WITH THE FUND, SCUDDER KEMPER OR ZURICH, RECOMMEND
THAT YOU VOTE FOR APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENT.
Q WHY AM I BEING ASKED TO VOTE ON THE NEW INVESTMENT MANAGEMENT AGREEMENT?
A As a result of the Zurich-B.A.T transaction, the former shareholders of B.A.T
indirectly own a 43% interest in Zurich through a new holding company, Allied
Zurich p.l.c. This change in ownership of Zurich may be deemed to have caused a
"change in control" of Scudder Kemper, even though Scudder Kemper's operations
will not change as a result. The Investment Company Act of 1940, which regulates
investment companies such as your Fund, requires that fund shareholders approve
a new investment management agreement whenever there is a change in control of a
fund's investment manager (even in the most technical sense). Pursuant to an
exemptive order issued by the Securities and Exchange Commission, your Fund
entered into a new investment management agreement, subject to receipt of
shareholder approval within 150 days. Accordingly, we are
[KEMPER LOGO] KEMPER FUNDS
<PAGE> 3
seeking shareholder approval of the new investment management agreement with
your Fund.
Q HOW WILL THE ZURICH-B.A.T TRANSACTION AFFECT ME AS A FUND SHAREHOLDER?
A We do not expect the transaction to affect you as a Fund shareholder. Your
Fund and your Fund's investment objectives will not change as a result of the
transaction. You will still own the same shares in the same Fund. The new
investment management agreement is substantially identical to the former
investment management agreement, except for the dates of execution and
termination. Similarly, the other service arrangements between your Fund and
Scudder Kemper or affiliates of Scudder Kemper will not be affected by the
transaction. If shareholders do not approve the new investment management
agreement,
the agreement will terminate and the Board Members of your Fund will take such
action as they deem to be in the best interests of your Fund and its
shareholders.
Q WILL THE INVESTMENT MANAGEMENT FEES INCREASE?
A No, the investment management fee rates paid by your Fund will remain the
same.
Q HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND THAT I VOTE?
A After careful consideration, the Board Members of your Fund, including those
who are not affiliated with the Fund, Scudder Kemper or Zurich, recommend that
you vote FOR the Proposal on the enclosed proxy card(s).
Q WILL THE FUND PAY FOR THIS PROXY SOLICITATION?
A No, Zurich or its affiliates will bear these costs.
Q WHOM DO I CALL FOR MORE INFORMATION?
A Please call Shareholder Services
at (800) 294-4366.
ABOUT THE PROXY CARD
Because each Fund must vote separately, you are being
sent a proxy card for each Fund account that you have.
Please vote the issue
shown on each proxy card that you receive.
Please vote on the issue using blue or black ink to mark an X in one of the
three boxes provided on each proxy card. On the Item, mark--For, Against or
Abstain. Then sign, date and return each of your proxy cards in the
accompanying postage-paid envelope. All registered owners of an account, as
shown in the address on the proxy card, must sign the proxy card. If you are
signing for a corporation, trust or estate, please indicate your title or
position.
We appreciate your continuing support and look forward to serving your future
investment needs.
THANK YOU FOR MAILING YOUR
PROXY CARD PROMPTLY!
PROXY CARD SAMPLE
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KEMPER HIGH INCOME TRUST
KEMPER INTERMEDIATE GOVERNMENT TRUST
KEMPER MULTI-MARKET INCOME TRUST
KEMPER MUNICIPAL INCOME TRUST
KEMPER STRATEGIC INCOME FUND
KEMPER STRATEGIC MUNICIPAL INCOME TRUST
222 South Riverside Plaza
Chicago, Illinois 60606
October 28, 1998
Dear Shareholders:
Zurich Insurance Company, the majority owner of Scudder Kemper Investments,
Inc., has combined its businesses with the financial services businesses of
B.A.T Industries p.l.c. The resulting company, Zurich Financial Services, has
become the parent company of Zurich and the majority owner of Scudder Kemper. As
a result of this transaction, we are asking the shareholders of each of the
funds for which Scudder Kemper acts as investment manager, including your Fund,
to approve a new investment management agreement with Scudder Kemper.
The Zurich-B.A.T transaction should not affect you as a Fund shareholder.
Your Fund shares will not change, the advisory fee rates and expenses paid by
your Fund will not increase and the investment objectives of your Fund will
remain the same.
AFTER CAREFUL REVIEW, THE MEMBERS OF YOUR FUND'S BOARD HAVE APPROVED THE
NEW INVESTMENT MANAGEMENT AGREEMENT. THE BOARD MEMBERS OF YOUR FUND BELIEVE THAT
THE PROPOSAL SET FORTH IN THE NOTICE OF MEETINGS FOR YOUR FUND IS IMPORTANT AND
RECOMMEND THAT YOU READ THE ENCLOSED MATERIALS CAREFULLY AND THEN VOTE FOR THE
PROPOSAL.
Because all of the funds for which Scudder Kemper acts as investment
manager are holding shareholder meetings, if you own shares of more than one
fund, you will receive more than one proxy card. Please sign and return each
proxy card you receive.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your executed proxy card(s) after a reasonable amount of time, you
<PAGE> 5
may receive a telephone call from our proxy solicitor, Shareholder
Communications Corporation, reminding you to vote.
Respectfully,
LOGO
Daniel Pierce
Chairman
WE URGE YOU TO SIGN AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT REGARDLESS OF
THE NUMBER OF SHARES YOU OWN.
<PAGE> 6
KEMPER HIGH INCOME TRUST
KEMPER INTERMEDIATE GOVERNMENT TRUST
KEMPER MULTI-MARKET INCOME TRUST
KEMPER MUNICIPAL INCOME TRUST
KEMPER STRATEGIC INCOME FUND
KEMPER STRATEGIC MUNICIPAL INCOME TRUST
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
Please take notice that Special Meetings of Shareholders (each a "Special
Meeting") of each Kemper Trust listed above (each a "Fund" and, collectively,
the "Funds") will be held jointly at the offices of Scudder Kemper Investments,
Inc., 13th Floor, Two International Place, Boston, Massachusetts 02110, on
December 17, 1998, at 9:00 a.m., Eastern time, for the following purpose:
PROPOSAL: To approve a new investment management agreement for each
Fund with Scudder Kemper Investments, Inc.
The appointed proxies will vote in their discretion on any other business
as may properly come before a Special Meeting or any adjournments thereof.
Holders of record of shares of each Fund at the close of business on
September 29, 1998 are entitled to vote at the Special Meeting and at any
adjournments thereof.
In the event that the necessary quorum to transact business or the vote
required to approve the Proposal is not obtained at the Special Meeting with
respect to one or more Funds, the persons named as proxies may propose one or
more adjournments of the Special Meeting in accordance with applicable law, to
permit further solicitation of proxies. Any such adjournment as to a matter will
require the affirmative vote of the holders of a majority of the concerned
Fund's shares present in person or by proxy at the Special Meeting. The persons
named as proxies will vote in favor of such adjournment those proxies which they
are
<PAGE> 7
entitled to vote in favor of the Proposal and will vote against any such
adjournment those proxies to be voted against the Proposal.
By Order of the Boards of Trustees,
/s/ Philip J. Collora
Philip J. Collora
Secretary
October 28, 1998
IMPORTANT--WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN IT
IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS INTENDED FOR
YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S) MAY SAVE THE
NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM AT THE SPECIAL
MEETINGS. IF YOU CAN ATTEND THE SPECIAL MEETINGS AND WISH TO VOTE YOUR SHARES IN
PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE> 8
KEMPER HIGH INCOME TRUST
KEMPER INTERMEDIATE GOVERNMENT TRUST
KEMPER MULTI-MARKET INCOME TRUST
KEMPER MUNICIPAL INCOME TRUST
KEMPER STRATEGIC INCOME FUND
KEMPER STRATEGIC MUNICIPAL INCOME TRUST
222 South Riverside Plaza
Chicago, Illinois 60606
JOINT PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees (the "Board") of each of the Kemper Trusts
listed above (each a "Fund" and, collectively, the "Funds") for use at the
Special Meeting of Shareholders of each Fund to be held jointly at the offices
of Scudder Kemper Investments, Inc. ("Scudder Kemper"), 13th Floor, Two
International Place, Boston, Massachusetts 02110, on December 17, 1998 at 9:00
a.m., Eastern time, and at any and all adjournments thereof (the "Special
Meeting").
In the description of the Proposal below, the Funds are referred to by the
acronyms listed in Appendix 1. The word "fund" is sometimes used to mean
investment companies or series thereof in general, and not the Funds whose proxy
statement this is.
This Proxy Statement, the Notice of Special Meetings and the proxy cards
are first being mailed to shareholders on or about October 28, 1998 or as soon
as practicable thereafter. Any shareholder giving a proxy has the power to
revoke it by mail (addressed to the Secretary at the principal executive office
of the Funds, c/o Scudder Kemper Investments, Inc., at 222 South Riverside
Plaza, Chicago, Illinois 60606) or in person at the Special Meeting, by
executing a superseding proxy or by submitting a notice of revocation to the
Fund. All properly executed proxies received in time for the Special Meeting
will be voted as specified in the proxy or, if no specification is made, in
favor of the Proposal referred to in the Proxy Statement.
The presence at any shareholders' meeting, in person or by proxy, of the
holders of 50% of the shares of a Fund entitled to be cast shall be necessary
and sufficient to constitute a quorum for the transaction of business. In the
event that the necessary quorum to transact business or the vote required to
approve the Proposal is not obtained at the Special Meeting with respect to one
or more Funds, the persons named as proxies may propose one or more adjournments
of the Special Meeting in accordance with applicable law to permit further
solicitation of proxies with respect to the Proposal that did not receive the
vote
<PAGE> 9
necessary for its passage or to obtain a quorum. Any such adjournment as to a
matter will require the affirmative vote of the holders of a majority of the
concerned Fund's shares present in person or by proxy at the Special Meeting.
The persons named as proxies will vote in favor of such adjournment those
proxies which they are entitled to vote in favor of the Proposal and will vote
against any such adjournment those proxies to be voted against the Proposal. For
purposes of determining the presence of a quorum for transacting business at a
Special Meeting, abstentions and broker "non-votes" will be treated as shares
that are present but which have not been voted. Broker non-votes are proxies
received by a Fund from brokers or nominees when the broker or nominee has
neither received instructions from the beneficial owner or other persons
entitled to vote nor has discretionary power to vote on a particular matter.
Accordingly, shareholders are urged to forward their voting instructions
promptly.
The Proposal requires the affirmative vote of a "majority of the
outstanding voting securities" of a Fund. The term "majority of the outstanding
voting securities," as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), and as used in this Proxy Statement, means: the affirmative
vote of the lesser of (1) 67% of the voting securities of each Fund present at
the meeting if more than 50% of the outstanding voting securities of the Fund
are present in person or by proxy or (2) more than 50% of the outstanding voting
securities of each Fund.
Abstentions will have the effect of a "no" vote on the Proposal. Broker
non-votes will have the effect of a "no" vote on the Proposal, which requires
the approval of a specified percentage of the outstanding shares of each Fund,
if such vote is determined on the basis of obtaining the affirmative vote of
more than 50% of the outstanding voting securities of the Fund. Broker non-votes
will not constitute "yes" or "no" votes, and will be disregarded in determining
the voting securities "present" if such vote is determined on the basis of the
affirmative vote of 67% of the voting securities of the Fund present at the
Special Meeting with respect to the Proposal.
Shareholders of each Fund will vote separately with respect to the
Proposal.
Holders of record of the shares of each Fund at the close of business on
September 29, 1998 (the "Record Date"), as to any matter on which they are
entitled to vote, will be entitled to one vote per share on all business of the
Special Meeting. The table provided in Appendix 2 hereto sets forth the number
of shares outstanding for each Fund as of June 30, 1998.
To the best of each Fund's knowledge, as of June 30, 1998, no person owned
beneficially more than 5% of any Fund's outstanding shares.
Appendix 3 hereto sets forth the number of shares of each Fund owned
directly or beneficially by the Trustees of the relevant Board.
2
<PAGE> 10
Each Fund provides periodic reports to all of its shareholders which
highlight relevant information, including investment results and a review of
portfolio changes. You may receive an additional copy of the most recent annual
report for each Fund and a copy of any more recent semi-annual report, without
charge, by calling 800-621-1048 or writing the Fund, c/o Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606.
PROPOSAL: APPROVAL OF NEW
INVESTMENT MANAGEMENT AGREEMENT
INTRODUCTION
Scudder Kemper acts as the investment manager to each Fund pursuant to an
investment management agreement entered into by each Fund and Scudder Kemper.
The investment management agreement in effect between each Fund and Scudder
Kemper prior to the consummation of the transaction between Zurich Insurance
Company ("Zurich") and B.A.T Industries p.l.c. ("B.A.T") (the "Zurich-B.A.T
Transaction" or the "Transaction"), which is described below, is referred to in
this Proxy Statement as a "Former Investment Management Agreement,"
collectively, the "Former Investment Management Agreements." The investment
management agreement currently in effect between each Fund and Scudder Kemper,
which is also described below, was executed as of the consummation of the
Zurich-B.A.T Transaction and is referred to in this Proxy Statement as a "New
Investment Management Agreement," collectively, the "New Investment Management
Agreements" and, together with the Former Investment Management Agreements, the
"Investment Management Agreements." (Scudder Kemper is sometimes referred to in
this Proxy Statement as the "Investment Manager.")
The information set forth in this Proxy Statement and the accompanying
materials concerning the Transaction, Scudder Kemper, Zurich, B.A.T and their
respective affiliates has been provided to the Funds by Scudder Kemper based
upon information that Scudder Kemper received from Zurich and its affiliates.
On June 26, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") entered into
an agreement with Zurich pursuant to which Scudder and Zurich agreed to form an
alliance. On December 31, 1997, Zurich acquired a majority interest in Scudder,
and Zurich Kemper Investments, Inc. ("Kemper"), a Zurich subsidiary, became part
of Scudder. Scudder's name was changed to Scudder Kemper Investments, Inc. The
transaction between Scudder and Zurich (the "Scudder-Zurich Transaction")
resulted in the termination of each Fund's investment management agreement with
Kemper. Consequently, the Former Investment Management Agreement between each
Fund and Scudder Kemper was approved by each Fund's Board and by each Fund's
shareholders.
3
<PAGE> 11
The Zurich-B.A.T Transaction. On December 22, 1997, Zurich and B.A.T
entered into a definitive agreement (the "Merger Agreement") pursuant to which
businesses of Zurich (including Zurich's almost 70% ownership interest in
Scudder Kemper) were to be combined with the financial services businesses of
B.A.T. On October 12, 1997, Zurich and B.A.T had confirmed that they were
engaged in discussions concerning a possible business combination; on October
16, 1997, Zurich and B.A.T announced that they had entered into an Agreement in
Principle, dated as of October 15, 1997 (the "Agreement in Principle"), to merge
B.A.T's financial services businesses with Zurich's businesses. The Merger
Agreement superseded the Agreement in Principle.
In order to effect this combination, Zurich and B.A.T first reorganized
their respective operations. Zurich became a subsidiary of a new Swiss holding
company, Zurich Allied AG, and Zurich shareholders became Zurich Allied AG
shareholders. At the same time, B.A.T separated its financial services business
from its tobacco-related businesses by spinning off to its shareholders a new
British company, Allied Zurich p.l.c., 22 Arlington Street, London, England SW1A
1RW, United Kingdom, which held B.A.T's financial services businesses.
Zurich Allied AG then contributed its interest in Zurich, and Allied Zurich
p.l.c. contributed the B.A.T financial services businesses, to a jointly owned
company, Zurich Financial Services ("Zurich Financial Services"), in each case
in exchange for shares of Zurich Financial Services. These transactions were
completed on September 7, 1998. As a result, upon the completion of the
Transaction, the former Zurich shareholders became the owners (through Zurich
Allied AG) of 57% of the voting stock of Zurich Financial Services, and former
B.A.T shareholders initially became the owners (through Allied Zurich p.l.c.) of
43% of the voting stock of Zurich Financial Services. Zurich Financial Services
now owns Zurich and the financial services businesses previously owned by B.A.T.
4
<PAGE> 12
Zurich's Chairman and Chief Executive Officer, became Chairman and Chief
Executive Officer of Zurich Financial Services. In addition to his vote by
virtue of
7
<PAGE> 13
his position on the Board of Directors, as Chairman, Mr. Huppi will have a tie-
breaking vote on all matters except recommendations of the Audit Committee,
recommendations of the Remuneration Committee in respect of the remuneration of
the Chairman and the CEO, appointment and removal of the Chairman and CEO,
appointments to the Nominations, Audit and Remuneration Committees and
nominations to the Board of Directors not made through the Nominations
Committee.
The Group Management Board of Zurich Financial Services has been given
responsibility by the Board of Directors for the executive management of Zurich
Financial Services and has wide authority for such purpose. Of the 11 initial
members of the Group Management Board, eight were members of the Corporate
Executive Board of Zurich (including Mr. Edmond D. Villani, CEO of Scudder
Kemper, who is responsible for Global Asset Management for Zurich Financial
Services), and three were B.A.T executives.
The Board of Directors of Zurich Allied AG initially consists of 11
members, eight of whom were Zurich directors and three of whom were proposed by
B.A.T. The Board of Directors of Allied Zurich p.l.c. also initially consists of
11 members, eight of whom were B.A.T directors and three of whom were proposed
by Zurich. The parties have agreed that, as soon as possible, the Boards of
Directors of Zurich Financial Services, Zurich Allied AG and Allied Zurich
p.l.c. will have identical membership.
Shareholder resolutions of Zurich Financial Services in general require
approval by at least 58% of all shares outstanding.
The Governing Agreement also contains provisions relating to dividend
equalization and provisions intended to ensure equal treatment of Zurich Allied
AG and Allied Zurich p.l.c. shareholders in the event of a takeover bid for
either company.
The B.A.T financial services businesses, which, since the closing of the
Transaction, are owned by Zurich Financial Services, include: the Farmers Group
of Insurance companies; Eagle Star Reinsurance Company Ltd., UK ("Eagle Star")
(which Zurich Financial Services has agreed to sell to GE Capital); Allied-
Dunbar, one of the leading U.K. unit-linked life insurance and pensions
companies; and Threadneedle Asset Management, which was formed initially to
manage the investment assets of Eagle Star and Allied-Dunbar, and which, at
December 31, 1997, had $58.8 billion under management. Overall, at year-end
1997, the financial services businesses of B.A.T had $79 billion in assets under
management, including $18 billion in third party assets.
Zurich has informed the Funds that the financial services businesses of
B.A.T do not include any of B.A.T's tobacco businesses and that, after careful
review, Zurich has concluded that the tobacco-related liabilities connected with
B.A.T's tobacco business should not adversely affect Zurich or the present
Zurich subsidiaries, including Scudder Kemper.
8
<PAGE> 14
Governance arrangements that were put in place at the time of the
acquisition of Zurich's 70% interest in Scudder Kemper (which are discussed
below under "Investment Manager") remain unaffected by the Transaction. These
arrangements preclude the making of certain major decisions affecting Scudder
Kemper without the approval of Scudder Kemper directors elected by the
non-Zurich shareholders of Scudder Kemper.
Consummation of the Zurich-B.A.T Transaction may be deemed to have
constituted an "assignment," as that term is defined in the 1940 Act, of each
Fund's Former Investment Management Agreement with Scudder Kemper. As required
by the 1940 Act, each of the Former Investment Management Agreements provided
for its automatic termination in the event of its assignment. Accordingly, a New
Investment Management Agreement between each Fund and Scudder Kemper was
approved by the Board members of each Fund and is now being proposed for
approval by shareholders of each Fund. Scudder Kemper has received an exemptive
order from the Securities and Exchange Commission (the "SEC" or the
"Commission") permitting each Fund to obtain shareholder approval of its New
Investment Management Agreement within 150 days after the consummation of the
Transaction, which occurred on September 7, 1998 (and, consequently, within 150
days after the termination of its Former Investment Management Agreement),
instead of before the consummation of the Transaction. Pursuant to the exemptive
order, each Fund's investment management fees are being held in escrow until the
earlier of shareholder approval of the Fund's New Investment Management
Agreement or the expiration of the 150 day period. A copy of the master form of
New Investment Management Agreement is attached hereto as Exhibit A. THE NEW
INVESTMENT MANAGEMENT AGREEMENT FOR EACH FUND IS SUBSTANTIALLY IDENTICAL TO THE
CORRESPONDING FORMER INVESTMENT MANAGEMENT AGREEMENT, EXCEPT FOR THE DATES OF
EXECUTION AND TERMINATION. In addition, the portfolio managers for each Fund
will not change as a result of the Transaction. The material terms of the
Investment Management Agreements are described under "Description of the
Investment Management Agreements" below.
BOARD'S RECOMMENDATION
On July 17, 1998, the Board of each Fund met and the Board members of each
Fund, including the Board members who are not parties to such agreement or
"interested persons" (as defined in the 1940 Act) (the "Non-Interested Trustees"
or "Non-Interested Board members") of any such party, voted to approve the New
Investment Management Agreements and to recommend approval to the shareholders
of each applicable Fund.
For information about the Boards' deliberations and the reasons for their
recommendation, please see "Board's Evaluation" below.
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<PAGE> 15
BOARD'S EVALUATION
Each Board met on July 17, 1998 to consider the Transaction and its effects
on the Funds. Each Board met with senior management personnel of Scudder Kemper.
Each Board had the assistance of legal counsel, who prepared among other things,
an analysis of the Board's fiduciary obligations. As a result of its review and
consideration of the Transaction and the proposed new investment management
agreement, each Board voted unanimously to approve the applicable New Investment
Management Agreement and to recommend it to the shareholders of the respective
Fund for their approval.
In connection with its review, Scudder Kemper represented to each Board
that: the Transaction will have no effect on the operational management of any
Fund; the Transaction will not result in any change in the management or
operations of Scudder Kemper; there will not be any increase in the advisory fee
or any change in any other provision, other than the term, of any Investment
Management Agreement as a result of the Transaction; the Transaction will not
adversely affect Scudder Kemper's financial condition; and the Transaction
should expand Scudder Kemper's global asset management capabilities and enhance
Scudder Kemper's research capabilities, particularly with respect to the United
Kingdom and Europe.
In connection with its deliberations, each Board obtained certain
assurances from Zurich, including the following:
- Zurich has provided to the Board such information as is reasonably
necessary to evaluate the New Investment Management and other agreements.
- Zurich looks upon Scudder Kemper as the core of Zurich's global asset
management strategy. With that focus, Zurich will devote to Scudder
Kemper and its affairs all attention and resources that are necessary to
provide for the Funds top quality investment management, shareholder,
administrative and product distribution services.
- The Transaction will not result in any change in any Fund's investment
objectives or policies.
- The Transaction will not result in any change in the management or
operations of Scudder Kemper or its subsidiaries.
- The Transaction is not expected to result in any adverse change in the
investment management or operations of any Fund; and Zurich neither plans
nor proposes, for the foreseeable future, to make any material change in
the manner in which investment advisory services or other services are
rendered to any Fund which has the potential to have a material adverse
effect upon the Fund.
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<PAGE> 16
- Zurich is committed to the continuance, without interruption, of services
to the Funds of the type and quality currently provided by Scudder Kemper
and its subsidiaries, or superior thereto.
- Zurich plans to maintain or enhance Scudder Kemper's facilities and
organization.
- In order to retain and attract key personnel, Zurich intends for Scudder
Kemper to maintain overall compensation policies and practices at market
levels or better.
- Zurich intends to maintain the distinct brand identity of the Kemper and
Scudder Funds and is committed to strengthening and enhancing both brands
and the distribution channels for both families of funds, while
maintaining their separate brand identity.
- Zurich will promptly advise the Boards of decisions materially affecting
the Scudder Kemper organization as they relate to a Fund. Neither this,
nor any of the other above commitments will be altered by Zurich without
the applicable Board's prior consideration.
Zurich assured the Boards that it intends to comply with Section 15(f) of
the 1940 Act, which provides a non-exclusive safe harbor for an investment
adviser to an investment company or any of the investment adviser's affiliated
persons (as defined in the 1940 Act) to receive any amount or benefit in
connection with a change in control of the investment adviser so long as two
conditions are met. First, for a period of three years after the transaction, at
least 75% of the board members of the investment company must not be "interested
persons" of the investment company's investment adviser or its predecessor
adviser. On or prior to the consummation of the Transaction, each of the Boards
was in compliance with this provision of Section 15(f). Second, an "unfair
burden" must not be imposed upon the investment company as a result of such
transaction or any express or implied terms, conditions or understandings
applicable thereto. The term "unfair burden" is defined in Section 15(f) to
include any arrangement during the two-year period after the transaction whereby
the investment adviser, or any interested person of any such adviser, receives
or is entitled to receive any compensation, directly or indirectly, from the
investment company or its shareholders (other than fees for bona fide investment
advisory or other services) or from any person in connection with the purchase
or sale of securities or other property to, from or on behalf of the investment
company (other than bona fide ordinary compensation as principal underwriter for
such investment company). Zurich has advised the Boards that it is not aware of
any express or implied term, condition, arrangement or understanding that would
impose an "unfair burden" on the Funds as a result of the Transaction. Zurich
has agreed that it, and its affiliates, will take no action that would have the
effect of imposing an "unfair burden" on the Funds as a result of the
Transaction. In furtherance thereof, Zurich has undertaken to pay the costs of
preparing and distributing proxy materials to and of holding the
9
<PAGE> 17
meetings of the Funds' shareholders as well as other fees and expenses in
connection with the Transaction, including the fees and expenses of legal
counsel to the Funds and the Non-Interested Board members.
The Board also considered whether tobacco-related liability connected with
B.A.T's tobacco business could adversely affect the Adviser and the services
provided to the Fund. (See "Corporate Governance" in the "Introduction" above.)
In evaluating the New Investment Management Agreements, each Board took
into account that the fees and expenses payable by each Fund under its New
Investment Management Agreement are the same as under its Former Investment
Management Agreement, that the services provided to each Fund are the same and
that the other terms are, except for the dates of execution and termination,
substantially similar. The Boards also took into consideration that the
portfolio managers and research personnel would continue their functions with
Scudder Kemper after the Transaction. The Boards noted that, in previously
approving the Former Investment Management Agreements, the Boards had considered
a number of factors, including the nature and quality of services provided by
Scudder Kemper; investment performance, both that of each Fund itself and
relative to that of competitive investment companies; investment management fees
and expense ratios of each Fund and competitive investment companies; Scudder
Kemper's profitability from managing each Fund; fall-out benefits to Scudder
Kemper from its relationship to each Fund, including revenues derived from
services provided to the Fund by affiliates of Scudder Kemper; and the potential
benefits to Scudder Kemper and to each Fund and its shareholders of receiving
research services from broker/dealer firms in connection with the allocation of
portfolio transactions to such firms.
The Boards discussed the Transaction with the senior management of Scudder
Kemper and Zurich and among themselves. The Boards considered that Zurich is a
large, well-established company with substantial resources, and, as noted above,
has undertaken to devote such resources to Scudder Kemper as are necessary to
provide the Funds with top quality services.
As a result of their review and consideration of the Transaction and the
New Investment Management Agreements, at their meetings the Boards of each Fund
voted to approve the New Investment Management Agreements and to recommend their
approval to the shareholders of each Fund.
DESCRIPTION OF THE INVESTMENT MANAGEMENT AGREEMENTS
Except as disclosed below, all Former and New Investment Management
Agreements are substantially identical. Under the Investment Management
Agreements, Scudder Kemper provides each Fund with continuing investment
management services. The Investment Manager also determines which securities
should be purchased, held, or sold, and what portion of each Fund's assets
should be held uninvested, subject to each Fund's Charter, By-Laws, investment
10
<PAGE> 18
policies and restrictions, the provisions of the 1940 Act, and such policies and
instructions as the Trustees may have determined.
Each Investment Management Agreement provides that the Investment Manager
will provide portfolio management services, place portfolio transactions in
accordance with policies expressed in each Fund's registration statement, pay
each Fund's office rent, and render significant administrative services on
behalf of each Fund (not otherwise provided by third parties) necessary for each
Fund's operating as a closed-end investment company, including, but not limited
to, preparing reports to and meeting materials for each Fund's Board and reports
and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of
various third-party and affiliated service providers to each Fund (such as each
Fund's transfer and pricing agents, fund accounting agent, custodian,
accountants and others) and other persons in any capacity deemed necessary or
desirable to Fund operations; preparing and making filings with 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; overseeing the
tabulation of proxies by each Fund's transfer agent; assisting in the
preparation and filing of each Fund's federal, state and local tax returns;
preparing and filing each Fund's federal excise tax returns pursuant to Section
4982 of the Internal Revenue Code of 1986, as amended; 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 each Fund under applicable federal and state securities laws;
maintaining or causing to be maintained for each Fund all books, records and
reports and any other information required under the 1940 Act, to the extent
such books, records and reports and other information are not maintained by each
Fund's custodian or other agents of each Fund; assisting in establishing
accounting policies of each Fund; assisting in the resolution of accounting
issues that may arise with respect to each Fund's operations and consulting with
each Fund's independent accountants, legal counsel and other agents as necessary
in connection therewith; establishing and monitoring each Fund's operating
expense budgets; reviewing each Fund's bills; processing the payment of bills
that have been approved by an authorized person; assisting each Fund in
determining the amount of dividends and distributions available to be paid by
each 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 each Fund in the conduct of its business, subject to the
direction and control of each Fund's Board.
Under each Investment Management Agreement, each Fund is responsible for
other expenses, including organizational expenses (including out-of-pocket
expenses, but not including the Investment Manager's overhead or employee
costs); brokers' commissions or other costs of acquiring or disposing of any
11
<PAGE> 19
portfolio securities of each Fund; legal, auditing and accounting expenses;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; taxes and governmental fees;
the fees and expenses of each Fund's transfer agent; expenses of preparing share
certificates and any other expenses, including clerical expenses, of issuance,
offering, distribution, sale, redemption or repurchase of shares; the expenses
of and fees for registering or qualifying securities for sale; the fees and
expenses of Non-Interested Trustees; the cost of printing and distributing
reports, notices and dividends to current shareholders; and the fees and
expenses of each Fund's custodians, subcustodians, accounting agent, dividend
disbursing agents and registrars. Each Fund may arrange to have third parties
assume all or part of the expenses of sale, underwriting and distribution of
shares of each Fund. Each Fund is also responsible for expenses of shareholders'
and other meetings and its expenses incurred in connection with litigation and
the legal obligation it may have to indemnify officers and Trustees of each Fund
with respect thereto. Each Fund is also responsible for the maintenance of books
and records which are required to be maintained by each Fund's custodian or
other agents of each Fund; telephone, telex, facsimile, postage and other
communications expenses; any fees, dues and expenses incurred by each Fund in
connection with membership in investment company trade organizations; expenses
of printing and mailing prospectuses and statements of additional information of
each Fund and supplements thereto to current shareholders; costs of stationery;
fees payable to the Investment Manager and to any other Fund advisors or
consultants; expenses relating to investor and public relations; interest
charges, bond premiums and other insurance expense; freight, insurance and other
charges in connection with the shipment of each Fund's portfolio securities; and
other expenses.
The Investment Manager is responsible for the payment of the compensation
and expenses of all Trustees, officers and executive employees of each Fund
(including each Fund's share of payroll taxes) affiliated with the Investment
Manager and making available, without expense to each Fund, the services of such
Trustees, officers and employees as may duly be elected officers of each Fund,
subject to their individual consent to serve and to any limitations imposed by
law. Each Fund is responsible for the fees and expenses (specifically including
travel expenses relating to Fund business) of Trustees not affiliated with the
Investment Manager. Under each Investment Management Agreement, the Investment
Manager also pays each Fund's share of payroll taxes. During each Fund's most
recent fiscal year, no compensation, direct or otherwise (other than through
fees paid to the Investment Manager), was paid or became payable by each Fund to
any of its officers or Trustees who were affiliated with the Investment Manager.
In return for the services provided by the Investment Manager as investment
manager and the expenses it assumes under each Investment Management Agreement,
each Fund pays the Investment Manager a management fee which is payable monthly.
The management fee rate for each Fund under the Investment
12
<PAGE> 20
Management Agreements is set forth in Appendix 4 hereto. As of the end of
each Fund's last fiscal year, each Fund had net assets and paid an aggregate
management fee to the Investment Manager during such period as also set forth in
Appendix 4 hereto. The investment management fee for each Fund is computed based
upon the average weekly net assets of the Fund.
Each Investment Management Agreement further provides that the Investment
Manager shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Fund in connection with matters to which such agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Investment Manager in the performance of its
duties or from reckless disregard by the Investment Manager of its obligations
and duties under such agreement. Each Investment Management Agreement also
provides that purchase and sale opportunities, which are suitable for more than
one client of the Investment Manager, will be allocated by the Investment
Manager in an equitable manner. Lastly, each Investment Management Agreement
contains a provision stating that it supersedes all prior agreements.
Each Investment Management Agreement may be terminated without penalty upon
sixty (60) days' written notice by either party. Each Fund may agree to
terminate its Investment Management Agreement either by the vote of a majority
of the outstanding voting securities of the Fund, or by a vote of the Board.
Each Investment Management Agreement may also be terminated at any time without
penalty by the vote of a majority of the outstanding voting securities of the
Fund or by a vote of the Board if a court establishes that the Investment
Manager or any of its officers or directors has taken any action resulting in a
breach of the Investment Manager's covenants under the Investment Management
Agreement. As stated above, each Investment Management Agreement automatically
terminates in the event of its assignment.
Scudder Kemper or one of its predecessors has acted as the Investment
Manager for each Fund as of the date set forth in the table in Appendix 5
hereto. Also shown in Appendix 5 is the date of each Former Investment
Management Agreement, the date when each Former Investment Management Agreement
was last approved by the shareholders of each Fund, the date when each New
Investment Management Agreement was last approved by the Trustees of each Fund
and the date to which each New Investment Management Agreement was last
continued. Each Former Investment Management Agreement was last submitted to
shareholders prior to its becoming effective, as required by the 1940 Act, in
connection with the Scudder-Zurich Transaction.
THE NEW INVESTMENT MANAGEMENT AGREEMENTS
The New Investment Management Agreement for each Fund, which is currently
in effect, is dated the date of the consummation of the Transaction, which
occurred on September 7, 1998. Each New Investment Management Agreement was to
be in effect for an initial term ending on April 1, 1999 and to
13
<PAGE> 21
be continued thereafter from year to year only if specifically approved at least
annually by the vote of "a majority of the outstanding voting securities" of
each Fund, or by the Board and, in either event, the vote of a majority of the
Non-Interested Trustees, cast in person at a meeting called for such purpose. At
meetings held on September 22, 1998, the Board of each Fund, including a
majority of the Non-Interested Trustees, approved the continuance of each New
Investment Management Agreement through September 30, 1999. In the event that
shareholders of a Fund do not approve the New Investment Management Agreement,
it will terminate. In such event, each Board will take such action as it deems
to be in the best interests of the Fund and its shareholders.
DIFFERENCES BETWEEN THE FORMER AND NEW INVESTMENT MANAGEMENT AGREEMENTS
The New Investment Management Agreements are substantially identical to the
Former Investment Management Agreements, except for the dates of execution and
termination.
INVESTMENT MANAGER
Scudder Kemper, an indirect subsidiary of Zurich which resulted from the
combination of the businesses of Scudder and Kemper in connection with the
Scudder-Zurich Transaction, is one of the largest and most experienced
investment counsel firms in the United States. Scudder was established in 1919
as a partnership and was restructured as a Delaware corporation in 1985. Scudder
launched its first fund in 1928. Kemper launched its first fund in 1948. Since
December 31, 1997, Scudder Kemper has served as investment adviser to both
Scudder and Kemper funds. As of August 31, 1998, Scudder Kemper has more than
$241.1 billion in assets under management. The principal source of Scudder
Kemper's income is professional fees received from providing continuing
investment advice. Scudder Kemper provides investment counsel for many
individuals and institutions, including insurance companies, endowments,
industrial corporations and financial and banking organizations.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office (and the home offices of Zurich
Financial Services and Zurich Allied AG) is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world. Zurich owns approximately 70% of the Investment Manager, with the
balance owned by the Investment Manager's officers and employees.
14
<PAGE> 22
As stated above, Scudder Kemper is a Delaware corporation. Rolf Huppi* is
the Chairman of the Board and Director, Edmond D. Villani(#) is the President,
Chief Executive Officer and Director, Stephen R. Beckwith(#) is the Treasurer
and Chief Financial Officer, Kathryn L. Quirk(#) is the General Counsel, Chief
Compliance Officer and Secretary, Lynn S. Birdsong(#) is a Corporate Vice
President and Director, Cornelia M. Small(#) is a Corporate Vice President and
Director, Laurence Cheng* is a Director, and, effective November 1, 1998, each
of Gunther Gose(*) and William H. Bolinder(+) is a Director of the Investment
Manager. The principal occupation of each of Edmond D. Villani, Stephen R.
Beckwith, Kathryn L. Quirk, Lynn S. Birdsong and Cornelia M. Small is serving as
a Managing Director of the Investment Manager; the principal occupation of Rolf
Huppi is serving as an officer of Zurich; the principal occupation of Laurence
Cheng is serving as a senior partner of Capital Z Partners, an investment fund;
the principal occupation of Gunther Gose is serving as the Chief Financial
Officer of Zurich Financial Services; the principal occupation of William H.
Bolinder is serving as a member of the Group Executive Board of Zurich Financial
Services. Appendix 6 includes information regarding each Trustee and officer of
each Fund who is associated with Scudder Kemper.
The outstanding voting securities of the Investment Manager are held of
record 36.63% by Zurich Holding Company of America ("ZHCA"), a subsidiary of
Zurich; 32.85% by ZKI Holding Corp. ("ZKIH"), a subsidiary of Zurich; 20.86% by
Stephen R. Beckwith, Lynn S. Birdsong, Kathryn L. Quirk, Cornelia M. Small and
Edmond D. Villani, in their capacity as representatives (the "Management
Representatives") of the Investment Manager's management holders and retiree
holders pursuant to a Second Amended and Restated Security Holders Agreement
(the "Security Holders Agreement") among the Investment Manager, Zurich, ZHCA,
ZKIH, the Management Representatives, the management holders, the retiree
holders and Edmond D. Villani, as trustee of Scudder Kemper Investments, Inc.
Executive Defined Contribution Plan Trust (the "Plan Trust"); and 9.66% by the
Plan Trust. There are no outstanding non-voting securities of the Investment
Manager.
In connection with the Scudder-Zurich Transaction (described above),
pursuant to which Zurich acquired a two-thirds interest in Scudder for $866.7
million in cash in December, 1997, Daniel Pierce, a Trustee of each Fund, sold
85.4% of his holdings in Scudder to Zurich for cash.
Pursuant to the Security Holders Agreement (which was entered into in
connection with the Scudder-Zurich Transaction), the Board of Directors of the
Investment Manager consists of four directors designated by ZHCA and ZKIH and
three directors designated by Management Representatives.
- ------------------------------
* Mythenquai 2, Zurich, Switzerland
(#) 345 Park Avenue, New York, New York
(+) 1400 American Lane, Schaumburg, Illinois
15
<PAGE> 23
The Security Holders Agreement requires the approval of a majority of the
Scudder-designated directors for certain decisions, including changing the name
of Scudder Kemper, effecting an initial public offering before April 15, 2005,
causing Scudder Kemper to engage substantially in non-investment management and
related business, making material acquisitions or divestitures, making material
changes in Scudder Kemper's capital structure, dissolving or liquidating Scudder
Kemper, or entering into certain affiliated transactions with Zurich. The
Security Holders Agreement also provides for various put and call rights with
respect to Scudder Kemper stock held by persons who were employees of Scudder at
the time of the Scudder-Zurich Transaction, limitations on Zurich's ability to
purchase other asset management companies outside of Scudder Kemper, rights of
Zurich to repurchase Scudder Kemper stock upon termination of employment of
Scudder Kemper personnel, and registration rights for stock held by stockholders
of Scudder continuing after the Scudder-Zurich Transaction.
Directors, officers and employees of Scudder Kemper from time to time may
enter into transactions with various banks, including each Fund's custodian
bank. It is Scudder Kemper's opinion that the terms and conditions of those
transactions will not be influenced by existing or potential custodial or other
Fund relationships.
Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street, Kansas
City, Missouri 64105, is each Fund's transfer agent and dividend-paying agent.
Pursuant to a services agreement with IFTC, Kemper Service Company ("KSC"), an
affiliate of Scudder Kemper, serves as Shareholder Service Agent of each Fund
for which IFTC serves as transfer and dividend-paying agent and, as such,
performs all of IFTC's duties as transfer agent and dividend-paying agent. IFTC
receives as transfer agent, and pays to KSC, annual account maintenance fees
plus transaction charges and out-of-pocket expense reimbursement. Scudder Fund
Accounting Corporation ("SFAC"), a subsidiary of Scudder Kemper, computes net
asset value for each Fund. Currently, SFAC receives no fee for its services to
each Fund; however, subject to Board approval, at some time in the future, SFAC
may seek payment for its services to the Funds. The table provided in Appendix 7
sets forth for each Fund, the fees paid to KSC (fees received from each Fund by
IFTC and remitted to KSC) during the last fiscal year of each Fund.
KSC and SFAC will continue to provide transfer agency and fund accounting
services, respectively, to the Funds, as described above, under the current
arrangements if the New Investment Management Agreements are approved.
Exhibit B sets forth (as of each Fund's last fiscal year end, unless
otherwise noted) the fees and other information regarding investment companies
advised by Scudder Kemper that have similar investment objectives to any of the
Funds. (See Appendix 4 for information regarding the management fee rate, net
assets and aggregate management fee paid for each Fund.)
16
<PAGE> 24
BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS
To the maximum extent feasible, Scudder Kemper, places orders for portfolio
transactions through Scudder Investor Services, Inc. ("SIS"), Two International
Place, Boston, Massachusetts 02110, which in turn places orders on behalf of the
Funds with issuers, underwriters or other brokers and dealers. SIS is a
corporation registered as a broker/dealer and a subsidiary of Scudder Kemper.
SIS does not receive any commissions, fees or other remuneration from the Funds
for this service. In selecting brokers and dealers with which to place portfolio
transactions for a Fund, Scudder Kemper may consider sales of shares of the
Funds and of other Kemper funds. When it can be done consistently with the
policy of obtaining the most favorable net results, Scudder Kemper may place
such orders with brokers and dealers who supply research, market and statistical
information to a Fund or to Scudder Kemper. Scudder Kemper is authorized when
placing portfolio transactions for a Fund to pay a brokerage commission (to the
extent applicable) in excess of that which another broker might charge for
executing the same transaction on account of the receipt of research, market or
statistical information. Allocation of portfolio transactions is supervised by
Scudder Kemper.
THE BOARD MEMBERS OF EACH FUND RECOMMEND THAT THE SHAREHOLDERS OF THE FUND VOTE
IN FAVOR OF THIS PROPOSAL.
ADDITIONAL INFORMATION
GENERAL
The cost of preparing, printing and mailing the enclosed proxy card and
Proxy Statement and all other costs incurred in connection with the solicitation
of proxies, including any additional solicitation made by letter, telephone or
telegraph, will be paid by Zurich or its affiliates. In addition to solicitation
by mail, certain officers and representatives of each Fund, officers and
employees of Scudder Kemper and certain financial services firms and their
representatives, who will receive no extra compensation for their services, may
solicit proxies by telephone, telegram or personally.
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies. As the Special Meeting date approaches, certain
shareholders of each Fund may receive a telephone call from a representative of
SCC if their votes have not yet been received. Authorization to permit SCC to
execute proxies may be obtained by telephonic or electronically transmitted
instructions from shareholders of each Fund. Proxies that are obtained
telephonically will be recorded in accordance with the procedures set forth
below. The Trustees believe that these procedures are reasonably designed to
ensure that the identity of the shareholder casting the vote is accurately
determined and that the voting instructions of the shareholder are accurately
determined.
17
<PAGE> 25
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each shareholder's full name, address, social security or
employer identification number, title (if the shareholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned,
and to confirm that the shareholder has received the proxy materials in the
mail. If the information solicited agrees with the information provided to SCC,
then the SCC representative has the responsibility to explain the process, read
the Proposals on the proxy card, and ask for the shareholder's instructions on
the Proposals. The SCC representative, although he or she is permitted to answer
questions about the process, is not permitted to recommend to the shareholder
how to vote, other than to read any recommendation set forth in the Proxy
Statement. SCC will record the shareholder's instructions on the card. Within 72
hours, the shareholder will be sent a letter or mailgram to confirm his or her
vote and asking the shareholder to call SCC immediately if his or her
instructions are not correctly reflected in the confirmation.
If a shareholder wishes to participate in the Special Meeting, but does not
wish to give a proxy by telephone, the shareholder may still submit the proxy
card originally sent with the Proxy Statement or attend in person. Should
shareholders require additional information regarding the proxy or replacement
proxy cards, they may contact Shareholder Services toll-free at 1-800-294-4366.
Any proxy given by a shareholder, whether in writing or by telephone, is
revocable until voted at the Special Meeting.
PROPOSALS OF SHAREHOLDERS
Each of the Funds delayed its 1998 annual meeting of shareholders from May
to October. It is currently anticipated that the 1999 annual meeting of
shareholders will be held in May. A shareholder wishing to submit a proposal for
inclusion in a Fund's proxy statement for the 1999 annual meeting of
shareholders pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
as amended, should send such written proposal to the Secretary of the Fund, at
222 South Riverside Plaza, Chicago, Illinois 60606, within a reasonable time
before the solicitation of proxies for such meeting. A Fund will treat any such
proposal received no later than December 12, 1998 as timely. The timely
submission of a proposal, however, does not guarantee its inclusion. A
shareholder wishing to provide notice in the manner prescribed by Rule
14a-4(c)(1) to a Fund of a proposal submitted outside of the process of Rule
14a-8 must submit such written notice to the Secretary of the Fund within a
reasonable time before the solicitation of proxies for such meeting. A Fund will
treat any such notice received no later than February 25, 1999 as timely.
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
No Board member is aware of any matters that will be presented for action
at a Special Meeting other than the matters set forth herein. Should any other
matters requiring a vote of shareholders arise, the proxy in the accompanying
18
<PAGE> 26
form will confer upon the person or persons entitled to vote the shares
represented by such proxy the discretionary authority to vote the shares as to
any such other matters in accordance with their best judgment in the interest of
each Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) PROMPTLY. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Boards of Trustees,
/s/ Philip J. Collora
Philip J. Collora
Secretary
19
<PAGE> 27
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<PAGE> 28
EXHIBIT A
FORM OF NEW
INVESTMENT MANAGEMENT AGREEMENT
[NAME OF 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
Ladies and Gentlemen:
[Name of Fund] (the "Fund") has been established as a Massachusetts
business trust to engage in the business of an investment company. The Fund has
issued shares of beneficial interest (the "Shares").
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 Fund agrees with you as follows:
1. Delivery of Documents. The Fund engages in the business of
investing and reinvesting its assets in the manner and in accordance with
its investment objectives, policies and restrictions. The Fund has
furnished you with copies properly certified or authenticated of each of
the following documents related to the Fund:
(a) The Declaration of Trust ("Declaration"), as amended to date.
(b) By-Laws of the Fund as in effect on the date hereof (the "By-
Laws").
(c) Resolutions of the Trustees of the Fund and the shareholders of
the Fund selecting you as investment manager and approving the form of
this Agreement.
The Fund will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to
the foregoing.
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 its investment objectives, policies and
restric-
A-1
<PAGE> 29
tions; the applicable provisions of the Investment Company Act of 1940 (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 Fund'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 Fund. You shall also make
available to the Fund promptly upon request all of the Fund's investment
records and ledgers as are necessary to assist the Fund 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 Fund 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. 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 Fund'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 Fund'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 Fund
administrative services on behalf of the Fund necessary for operating as a
closed-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 Fund's Board of Trustees and reports and notices
to Fund
A-2
<PAGE> 30
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 Fund's
Registration Statement, and semi-annual reports on Form N-SAR; 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 Fund as it may reasonably request in the conduct of
the Fund's business, subject to the direction and control of the Fund'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 Fund
(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 Fund, subject to their individual consent to serve
and
A-3
<PAGE> 31
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 Fund;
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 Fund 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 Fund business) of Trustees, officers and employees of the Fund
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 statements
of additional information of the Fund and supplements thereto; costs of
stationery; any litigation expenses; indemnification of Trustees and
officers of the Fund; and costs of shareholders' and other meetings.
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 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
___ of 1 percent of the average weekly net assets of the Fund for such
month; over (b) any compensation waived by you from time to time (as more
fully described below). You shall be entitled to receive during any
A-4
<PAGE> 32
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 net asset value of the Fund shall be calculated at such time or
times as the Trustees may determine in accordance with the provisions of
the 1940 Act. On each day when net asset value is not calculated, the net
asset value shall be deemed to be the net asset value as of the close of
business on the last day on which such calculation was made for the purpose
of the foregoing computations.
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. 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 Fund.
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 Fund 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 Fund or its shareholders to which you would otherwise be
A-5
<PAGE> 33
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 September 30, 1999, 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 Fund, 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 Fund's Board of
Trustees on 60 days' written notice to you, or by you on 60 days' written
notice to the Fund. 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
"[name of 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 Fund, shall be
subject to claims against or obligations of the Fund to any extent
whatsoever, but that the Fund estate only shall be liable.
A-6
<PAGE> 34
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 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 from
any Trustee, officer, employee or agent of the Fund.
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.
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 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 Fund, whereupon this letter shall become a binding
contract effective as of the date of this Agreement.
Yours very truly,
[Name of Fund]
By:
------------------------------------------------------------
Vice President
A-7
<PAGE> 35
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
------------------------------------------------------------
Name
----------------------------------------------------------------
Title
A-8
<PAGE> 36
EXHIBIT B
INVESTMENT OBJECTIVES AND ADVISORY FEES
FOR FUNDS NOT INCLUDED IN THIS PROXY STATEMENT AND
ADVISED BY SCUDDER KEMPER INVESTMENTS, INC.
SCUDDER FUNDS(+)
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
TAX FREE FUNDS
Scudder California Tax Free To provide California 0.625% to $200 million $ 324,448,844
Fund taxpayers with income exempt 0.600% thereafter
from both California personal
income tax and regular federal
income tax primarily through
investment in California
municipal securities.
Scudder High Yield Tax Free High level of income, exempt 0.650% to $300 million $ 336,690,734
Fund from regular federal income 0.600% thereafter
tax, from an actively managed
portfolio consisting primarily
of investment-grade municipal
securities.
Scudder Limited Term Tax Free As high a level of income 0.600% of net assets++ $ 116,876,371
Fund exempt from regular federal
income tax as is consistent
with a high degree of
principal stability.
Scudder Managed Municipal Income exempt from regular 0.550% to $200 million $ 728,308,005
Bonds federal income tax primarily 0.500% next $500 million
through investments in high- 0.475% thereafter
grade, long term municipal
securities.
Scudder Massachusetts Limited As high a level of income 0.600% of net assets++ $ 79,526,656
Term Tax Free Fund exempt from Massachusetts
state personal income tax and
regular federal income tax as
is consistent with a high
degree of price stability
through investments primarily
in investment-grade municipal
securities.
Scudder Massachusetts Tax To provide Massachusetts 0.600% to $400 million $ 373,905,826
Free Fund taxpayers income exempt from 0.525% thereafter*
both Massachusetts personal
income tax and regular federal
income tax through investment
primarily in investment-grade
municipal securities with long
term maturities.
Scudder Medium Term Tax Free High level of income free from 0.600% to $500 million $ 656,951,039
Fund regular federal income taxes 0.500% thereafter
and limited principal
fluctuation through investment
primarily in high-grade,
intermediate term municipal
bonds.
</TABLE>
B-1
<PAGE> 37
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
Scudder New York Tax Free To provide New York taxpayers 0.625% to $200 million $ 195,731,396
Fund income exempt from New York 0.600% thereafter
state and New York City
personal income taxes and
regular federal income tax
through investment primarily
in New York municipal
securities.
Scudder Ohio Tax Free Fund To provide Ohio taxpayers 0.600% of net assets++ $ 94,450,782
income exempt from both Ohio
personal income tax and
regular federal income tax
through investment primarily
in investment-grade municipal
securities.
Scudder Pennsylvania Tax Free To provide Pennsylvania 0.600% of net assets++ $ 78,695,405
Fund taxpayers income exempt from
both Pennsylvania personal
income tax and regular federal
income tax through investment
primarily in investment-grade
municipal securities.
U.S. INCOME FUNDS
Scudder Corporate Bond Fund A high level of current income 0.650% of net assets N/A**
through investment primarily
in investment-grade corporate
debt securities.
Scudder GNMA Fund High current income primarily 0.650% to $200 million $ 392,444,820
from U.S. Government 0.600% next $300 million
guaranteed mortgage-backed 0.550% thereafter
Ginnie Mae securities.
Scudder High Yield Bond Fund A high level of current income 0.700% of net assets++ $ 176,221,237
and, secondarily, capital
appreciation through
investment primarily in below
investment-grade domestic debt
securities.
Scudder Income Fund A high level of income, 0.650% to $200 million $ 695,255,717
consistent with the prudent 0.600% next $300 million
investment of capital, through 0.550% thereafter
a flexible investment program
emphasizing high-grade bonds.
Scudder Short Term Bond Fund High level of income 0.600% to $500 million $1,165,531,162
consistent with a high degree 0.500% next $500 million
of principal stability by 0.450% next $500 million
investing primarily in high 0.400% next $500 million
quality short-term bonds 0.375% next $1 billion
0.350% thereafter
Scudder Zero Coupon 2000 Fund As high an investment return 0.600% of net assets++ $ 20,453,972
over a selected period as is
consistent with investment in
U.S. Government securities and
the minimization of
reinvestment risk.
</TABLE>
B-2
<PAGE> 38
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
GLOBAL INCOME FUNDS
Scudder Emerging Markets High current income and, 1.000% of net assets $ 323,628,082
Income Fund secondarily, long term capital
appreciation by investing
primarily in high-yielding
debt securities issued by
governments and corporations
in emerging markets.
Scudder Global Bond Fund Total return with an emphasis 0.750% to $1 billion $ 135,113,465
on current income by investing 0.700% thereafter++
primarily in high-grade bonds
denominated in foreign
currencies and the U.S.
dollar. As a secondary
objective, the Fund will seek
capital appreciation.
Scudder International Bond Income primarily by investing 0.850% to $1 billion $ 145,818,767
Fund in a managed portfolio of 0.800% thereafter++
high-grade international bonds
and, secondarily, protection
and possible enhancement of
principal value by actively
managing currency, bond market
and maturity exposure and by
security selection.
ASSET ALLOCATION FUNDS
Scudder Pathway Balanced Balance of growth and income There will be no fee as $ 192,145,173
Portfolio by investing in a mix of the Manager will receive
Scudder money market, bond and a fee from the
equity mutual funds. underlying funds.
Scudder Pathway Conservative Current income and, There will be no fee as $ 16,971,681
Portfolio secondarily, long term growth the Manager will receive
of capital by investing a fee from the
substantially in Scudder bond underlying funds.
mutual funds, but will have
some exposure to Scudder
equity mutual funds.
Scudder Pathway International Maximize total return, There will be no fee as $ 11,728,045
Portfolio consisting of capital the Manager will receive
appreciation plus dividend a fee from the
income and interest by underlying funds.
investing in a select mix of
established international and
global Scudder Funds.
U.S. GROWTH AND INCOME FUNDS
Scudder Balanced Fund A balance of growth and income 0.700% of net assets++ $ 158,711,908
from a diversified portfolio
of equity and fixed-income
securities and long term
preservation of capital
through a quality-oriented
investment approach designed
to reduce risk.
Scudder Dividend & Growth High current income and long 0.750% of net assets N/A**
Fund term growth of capital through
investment in income paying
equity securities.
</TABLE>
B-3
<PAGE> 39
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
Scudder Growth and Income Long term growth of capital, 0.600% to $500 million $6,833,584,122
Fund current income and growth of 0.550% next $500 million
income. 0.500% next $500 million
0.475% next $500 million
0.450% next $1 billion
0.425% next $1.5 billion
0.405% next 1.5 billion
0.3875% next $4 billion
0.370% over $10 billion*
CLOSED-END FUNDS
Montgomery Street Income High level of current income 0.500% to $150 million $ 207,315,702
Securities, Inc. consistent with prudent 0.450% next $50 million
investment risks through a 0.400% thereafter
diversified portfolio
primarily of debt securities.
Scudder Global High Income High level of current income 1.200% of net assets $ 80,721,844
Fund, Inc. (formerly The and, secondarily, capital
Latin America Dollar Income appreciation through
Fund, Inc.) investment principally in
dollar-denominated Latin
American debt instruments.
INSURANCE PRODUCTS
Scudder Variable Life Balance of growth and income, 0.475% of net assets $ 118,373,215
Investment Fund Balanced as well as long term
Portfolio preservation of capital, from
a diversified portfolio of
equity and fixed income
securities.
Scudder Variable Life High level of income from a 0.475% of net assets $ 81,387,032
Investment Fund Bond high quality portfolio of
Portfolio bonds.
Scudder Variable Life Long term growth of capital, 0.475% of net assets $ 163,603,606
Investment Fund Growth and current income and growth of
Income Portfolio income from a portfolio
consisting primarily of common
stocks and securities
convertible into common
stocks.
AARP FUNDS
AARP Balanced Stock and Bond Long term capital growth and 0.350% to $2 billion $ 638,356,257
Fund income, consistent with a 0.330% next $2 billion
share price more stable than 0.300% next $2 billion
other balanced mutual funds, 0.280% next $2 billion
through investment in a 0.260% next $3 billion
combination of stocks, bonds 0.250% next $3 billion
and cash reserves. 0.240% thereafter
INDIVIDUAL FUND FEE
0.190% of net assets
AARP Bond Fund for Income High level of current income, 0.350% to $2 billion $ 58,324,146
consistent with greater share 0.330% next $2 billion
price stability than other 0.300% next $2 billion
long term bond mutual funds, 0.280% next $2 billion
through investment primarily 0.260% next $3 billion
in investment-grade debt 0.250% next $3 billion
securities. 0.240% thereafter++
INDIVIDUAL FUND FEE
0.280% of net assets
</TABLE>
B-4
<PAGE> 40
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
AARP Diversified Income with Current income with modest There will be no fee as $ 43,446,418
Growth Portfolio long term appreciation through the manager will receive
investment primarily in AARP a fee from the
bond mutual funds. underlying funds
AARP GNMA and U.S. Treasury High level of current income, 0.350% to $2 billion $4,583,980,460
Fund consistent with greater share 0.330% next $2 billion
price stability than other 0.300% next $2 billion
GNMA mutual funds, through 0.280% next $2 billion
investment primarily in high 0.260% next $3 billion
quality U.S. Government- 0.250% next $3 billion
guaranteed GNMA securities and 0.240% thereafter
U.S. Treasury obligations. INDIVIDUAL FUND FEE
0.120% of net assets
AARP Growth and Income Fund Long term capital growth and 0.350% to $2 billion $6,606,012,897
income, consistent with a 0.330% next $2 billion
share price more stable than 0.300% next $2 billion
other growth and income mutual 0.280% next $2 billion
funds, through investment 0.260% next $3 billion
primarily in common stocks 0.250% next $3 billion
with above-average dividend 0.240% thereafter
yields and securities INDIVIDUAL FUND FEE
convertible into common 0.190% of net assets
stocks.
AARP High Quality Short Term High level of current income, 0.350% to $2 billion $ 454,869,518
Bond Fund consistent with greater share 0.330% next $2 billion
price stability than other 0.300% next $2 billion
short-term bond mutual funds, 0.280% next $2 billion
through investment primarily 0.260% next $3 billion
in a portfolio of high 0.250% next $3 billion
quality, short-term 0.240% thereafter
securities. INDIVIDUAL FUND FEE
0.190% of net assets
AARP Insured Tax Free General High level of current income 0.350% to $2 billion $1,712,008,168
Bond Fund free from federal income 0.330% next $2 billion
taxes, consistent with greater 0.300% next $2 billion
share price stability than 0.280% next $2 billion
other insured tax-free general 0.260% next $3 billion
bond mutual funds, through 0.250% next $3 billion
investment primarily in high 0.240% thereafter
quality municipal securities INDIVIDUAL FUND FEE
covered by insurance. 0.190% of net assets
AARP International Growth and Long term capital growth, 0.350% to $2 billion $ 20,259,062
Income Fund consistent with a share price 0.330% next $2 billion
more stable than other 0.300% next $2 billion
international mutual funds, 0.280% next $2 billion
through investment primarily 0.260% next $3 billion
in a diversified portfolio of 0.250% next $3 billion
foreign common stocks with 0.240% thereafter++
above-average dividend yields INDIVIDUAL FUND FEE
and foreign securities 0.600% of net assets
convertible into common
stocks.
</TABLE>
- ------------------------------
+ The information provided below is shown as of the end of each Fund's last
fiscal year, unless otherwise noted.
++ Subject to waivers and/or expense limitations.
* The addition of this breakpoint is effective October 1, 1998.
** Net asset information is not available for Scudder Dividend & Growth Fund,
which commenced operations on June 1, 1998; or Scudder Corporate Bond Fund,
which commenced operations on August 31, 1998.
B-5
<PAGE> 41
KEMPER FUNDS(+)
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
GLOBAL AND INTERNATIONAL FUNDS
Kemper Emerging Markets High current income and, 1.000% of net assets** $ 5,616,000@
Income Fund secondarily, long-term
capital appreciation.
Kemper Global Income Fund High current income 0.750% to $250 million $ 99,054,000
consistent with prudent total 0.720% next $750 million
return asset management by 0.700% next $1.5 billion
investing in a portfolio of 0.680% next $2.5 billion
investment grade foreign and 0.650% next $2.5 billion
domestic fixed income 0.640% next $2.5 billion
securities. 0.630% next $2.5 billion
0.620% thereafter
Kemper International Fund Total return, a combination 0.750% to $250 million $ 588,069,000
of capital growth and income, 0.720% next $750 million
principally through an 0.700% next $1.5 billion
internationally diversified 0.680% next $2.5 billion
portfolio of equity 0.650% next $2.5 billion
securities. 0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper International Growth Long-term growth of capital 1.000% of net assets** $ 1,556,000@
and Income Fund and income, primarily from
foreign equity securities.
ASSET ALLOCATION FUNDS
Kemper Horizon 10+ Portfolio A balance between growth of 0.580% to $250 million $ 106,339,000
capital and income, 0.550% next $750 million
consistent with moderate 0.530% next $1.5 billion
risk. 0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Horizon 20+ Portfolio Growth of capital and, 0.580% to $250 million $ 110,076,000
secondarily, income. 0.550% next $750 million
0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Horizon 5 Portfolio Income consistent with 0.580% to $250 million $ 55,335,000
preservation of capital and, 0.550% next $750 million
secondarily, growth of 0.530% next $1.5 billion
capital. 0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
</TABLE>
B-6
<PAGE> 42
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
INCOME FUNDS
Kemper Adjustable Rate U.S. High current income 0.550% to $250 million $ 81,967,000
Government Fund consistent with low 0.520% next $750 million
volatility of principal. 0.500% next $1.5 billion
0.480% next $2.5 billion
0.450% next $2.5 billion
0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% thereafter
Kemper Diversified Income High current return. 0.580% to $250 million $ 861,543,000
Fund 0.550% next $750 million
0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper High Yield Fund The highest level of current 0.580% to $250 million $4,939,302,000
income from a professionally 0.550% next $750 million
managed, diversified 0.530% next $1.5 billion
portfolio of fixed income 0.510% next $2.5 billion
securities consistent with 0.480% next $2.5 billion
reasonable risk. 0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper High Yield Total return through high 0.650% to $250 million $ 16,188,000
Opportunity Fund current income and capital 0.620% next $750 million
appreciation. 0.600% next $1.5 billion
0.580% next $2.5 billion
0.550% next $2.5 billion
0.530% next $2.5 billion
0.510% next $2.5 billion
0.490% thereafter
Kemper Income and Capital As high a level of current 0.550% to $250 million $ 613,470,000
Preservation Fund income as is consistent with 0.520% next $750 million
preservation of capital. 0.500% next $1.5 billion
0.480% next $2.5 billion
0.450% next $2.5 billion
0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% thereafter
Kemper Short-Intermediate High current income and 0.550% to $250 million $ 171,400,000
Government Fund preservation of capital, with 0.520% next $750 million
equal emphasis, from a 0.500% next $1.5 billion
portfolio primarily 0.480% next $2.5 billion
consisting of short-and 0.450% next $2.5 billion
intermediate-term U.S. 0.430% next $2.5 billion
Government securities. 0.410% next $2.5 billion
0.400% thereafter
Kemper U.S. Government High current income, 0.450% to $250 million $3,642,027,000
Securities Fund liquidity and security of 0.430% next $750 million
principal. 0.410% next $1.5 billion
0.400% next $2.5 billion
0.380% next $2.5 billion
0.360% next $2.5 billion
0.340% next $2.5 billion
0.320% thereafter
</TABLE>
B-7
<PAGE> 43
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
Kemper U.S. Mortgage Fund Maximum current return from 0.550% to $250 million $2,497,825,000
U.S. Government securities. 0.520% next $750 million
0.500% next $1.5 billion
0.480% next $2.5 billion
0.450% next $2.5 billion
0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% thereafter
TAX-FREE INCOME FUNDS
Kemper California Tax-Free High level of current income 0.550% to $250 million $1,007,907,000
Income Fund exempt from federal and 0.520% next $750 million
California income taxes 0.500% next $1.5 billion
through a portfolio of 0.480% next $2.5 billion
municipal securities. 0.450% next $2.5 billion
0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% thereafter
Kemper Florida Tax-Free High level of current income 0.550% to $250 million $ 103,845,000
Income Fund that is exempt from income 0.520% next $750 million
taxes through a diversified 0.500% next $1.5 billion
portfolio of municipal 0.480% next $2.5 billion
securities. 0.450% next $2.5 billion
0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% thereafter
Kemper Intermediate As high a level of current 0.550% to $250 million $ 21,889,000
Municipal Bond Fund income, exempt from federal 0.520% next $750 million
income taxes, as is 0.500% next $1.5 billion
consistent with preservation 0.480% next $2.5 billion
of capital through a 0.450% next $2.5 billion
diversified portfolio of 0.430% next $2.5 billion
municipal securities. 0.410% next $2.5 billion
0.400% thereafter**
Kemper Michigan Tax-Free High level of current income 0.550% to $250 million $ 3,091,000
Income Fund exempt from federal and 0.520% next $750 million
Michigan income taxes through 0.500% next $1.5 billion
a non-diversified portfolio 0.480% next $2.5 billion
of municipal securities. 0.450% next $2.5 billion
0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% thereafter**
Kemper Municipal Bond Fund As high a level of current 0.450% to $250 million $3,216,221,000
income, exempt from federal 0.430% next $750 million
income taxes, as is 0.410% next $1.5 billion
consistent with preservation 0.400% next $2.5 billion
of capital though a 0.380% next $2.5 billion
professionally managed 0.360% next $2.5 billion
portfolio of municipal 0.340% next $2.5 billion
securities. 0.320% thereafter
Kemper New Jersey Tax-Free High level of current income 0.550% to $250 million $ 5,304,000
Income Fund exempt from federal and New 0.520% next $750 million
Jersey income taxes through a 0.500% next $1.5 billion
professionally managed non- 0.480% next $2.5 billion
diversified portfolio of 0.450% next $2.5 billion
municipal securities. 0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% thereafter**
</TABLE>
B-8
<PAGE> 44
<TABLE>
<CAPTION>
TRUST OBJECTIVE FEE RATE NET ASSETS
----- --------- -------- ----------
<S> <C> <C> <C>
Kemper New York Tax-Free High level of current income 0.550% to $250 million $ 285,934,000
Income Fund that is exempt from federal, 0.520% next $750 million
New York and New York city 0.500% next $1.5 billion
income taxes through a 0.480% next $2.5 billion
professionally managed non- 0.450% next $2.5 billion
diversified portfolio of 0.430% next $2.5 billion
municipal securities. 0.410% next $2.5 billion
0.400% thereafter
Kemper Ohio Tax-Free Income High level of current 0.550% to $250 million $ 39,468,000
Fund interest income exempt from 0.520% next $750 million
federal and state of Ohio 0.500% next $1.5 billion
income taxes through a 0.480% next $2.5 billion
professionally managed 0.450% next $2.5 billion
non-diversified portfolio of 0.430% next $2.5 billion
municipal securities. 0.410% next $2.5 billion
0.400% thereafter
Kemper Pennsylvania Tax- High level of current income 0.550% to $250 million $ 6,304,000
Free Income Fund exempt from federal and state 0.520% next $750 million
of Pennsylvania income taxes 0.500% next $1.5 billion
through a professionally 0.480% next $2.5 billion
managed non-diversified 0.450% next $2.5 billion
portfolio of municipal 0.430% next $2.5 billion
securities. 0.410% next $2.5 billion
0.400% thereafter**
Kemper Texas Tax-Free Income A high level of current 0.550% to $250 million $ 12,469,000
Fund interest income exempt from 0.520% next $750 million
federal income taxes through 0.500% next $1.5 billion
a professionally managed non- 0.480% next $2.5 billion
diversified portfolio of 0.450% next $2.5 billion
municipal securities. 0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% thereafter
ANNUITY PRODUCTS
Kemper Blue Chip Portfolio Growth of capital and income. 0.650% of net assets $ 18,421,000
Kemper Contrarian Value High rate of return. 0.750% of net assets $ 162,380,000
Portfolio
Kemper Global Income High current income 0.750% of net assets $ 2,145,000
Portfolio consistent with prudent total
return asset management.
Kemper Government Securities High current income 0.550% of net assets $ 86,682,000
Portfolio consistent with preservation
of capital from a portfolio
consisting primarily of U.S.
Government securities.
Kemper High Yield Portfolio High level of current income 0.600% of net assets $ 391,664,000
by investing in fixed income
securities.
Kemper Horizon 10+ Portfolio A balance between growth of 0.600% of net assets $ 22,553,000
capital and income consistent
with moderate risk.
Kemper Horizon 20+ Portfolio Growth of capital and, 0.600% of net assets $ 16,659,000
secondarily, income.
Kemper Horizon 5 Portfolio Income consistent with 0.600% of net assets $ 14,258,000
preservation of capital, and
secondarily, growth.
</TABLE>
B-9
<PAGE> 45
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
Kemper International Growth Long-term growth of capital 1.000% of net assets N/A*
and Income Portfolio and current income, primarily
from foreign equity
securities.
Kemper International Total return, a combination 0.750% of net assets $ 200,046,000
Portfolio of capital growth and income,
principally through an
internationally diversified
portfolio of equity
securities.
Kemper Investment Grade Bond High current income by 0.600% of net assets $ 15,504,000
Portfolio investing primarily in a
diversified portfolio of
investment grade debt
securities.
Kemper Money Market Maximum current income to the 0.500% of net assets $ 100,143,000
Portfolio extent consistent with
stability of principal from a
portfolio of high quality
money market instruments.
Kemper Total Return High total return through a 0.550% of net assets $ 786,996,000
Portfolio combination of income and
capital appreciation.
Kemper Value+Growth Growth of capital through 0.750% of net assets $ 69,094,000
Portfolio professional management of a
portfolio of growth and value
stocks.
Kemper-Dreman High Return High rate of total return. 0.750% to $250 million N/A*
Equity Portfolio 0.720% next $750 million
0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
</TABLE>
- ------------------------------
(+) The information provided below is shown as of the end of each Fund's last
fiscal year, unless otherwise noted.
* Net asset information is not available for Kemper-Dreman High Return Equity
Portfolio, which commenced operations on May 1, 1998; or Kemper
International Growth and Income Portfolio, which commenced operations on May
5, 1998.
** Subject to waivers and/or reimbursements.
@ Net asset information is provided for the semi-annual period ended March 31,
1998.
B-10
<PAGE> 46
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<PAGE> 47
APPENDIX 1
KEMPER FUNDS
KEMPER HIGH INCOME TRUST ("KHI")
KEMPER INTERMEDIATE GOVERNMENT TRUST ("KGT")
KEMPER MULTI-MARKET INCOME TRUST ("KMM")
KEMPER MUNICIPAL INCOME TRUST ("KTF")
KEMPER STRATEGIC INCOME FUND ("KST")
KEMPER STRATEGIC MUNICIPAL INCOME TRUST ("KSM")
<PAGE> 48
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<PAGE> 49
APPENDIX 2
FUND SHARES OUTSTANDING
Holders of record of the shares of each Fund at the close of business on
September 22, 1998 (the "Record Date"), as to any matter on which they are
entitled to vote, will be entitled to one vote per share on all business of the
Special Meeting. The table below sets forth the number of shares outstanding for
each Fund as of June 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OUTSTANDING
FUND AS OF JUNE 30, 1998
---- -------------------
<S> <C>
Kemper High Income Trust 23,776,414.314
Kemper Intermediate Government Trust 33,996,171.123
Kemper Multi-Market Income Trust 20,090,611.718
Kemper Municipal Income Trust 38,407,925.289
Kemper Strategic Income Fund 3,456,531.357
Kemper Strategic Municipal Income Trust 10,677,030.028
</TABLE>
<PAGE> 50
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<PAGE> 51
APPENDIX 3
FUND SHARES OWNED BY TRUSTEES
<TABLE>
<CAPTION>
FUND(1) AKINS CASADY GOTTSCHALK KELSEY LITTAUER PIERCE RENWICK
- ------- ----- ------ ---------- ------ -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
KHI 0 0 1,000 500 0 0 0
KGT 0 0 1,000 2,500 0 0 0
KTF 0 0 800 500 0 0 0
KMM 0 0 800 1,000 0 0 0
KSM 0 0 1,000 0 0 0 0
KST 0 0 800 0 0 0 0
<CAPTION>
TRUSTEES AND
OFFICERS
FUND(1) TINGLEFF WEITHERS AS A GROUP
- ------- -------- -------- ------------
<S> <C> <C> <C>
KHI 1,788 1,600(2) 4,888(3)
KGT 533 1,200(4) 5,233(5)
KTF 500 400(6) 2,200(7)
KMM 1,019 1,000(8) 13,819(9)
KSM 500 300(10) 1,800(11)
KST 330 900(12) 2,030(13)
</TABLE>
- ---------------
(1) Unless otherwise noted, beneficial ownership is based on sole voting and
investment power. Each Trustee's individual shareholdings of any Fund
constitute less than 1% of the shares outstanding of such Fund. As a group,
unless otherwise noted, on June 30, 1998, the Trustees and officers own
less than 1% of the shares of each Fund.
(2) Mr. Weither's total in KHI includes 200 shares held with shared investment
and voting power and 500 shares held in a fiduciary capacity as to which he
shares investment and voting power.
(3) As a group, on June 30, 1998, the Trustees and Officers of KHI held 4,188
shares with sole investment and voting power and 700 shares with shared
investment and voting power.
(4) Mr. Weither's total in KGT includes 500 shares held with shared investment
and voting power.
(5) As a group, on June 30, 1998, the Trustees and Officers of KGT held 4,733
shares with sole investment and voting power and 500 shares with shared
investment and voting power.
(6) Mr. Weither's total in KTF includes 400 shares held with shared investment
and voting power.
(7) As a group, on June 30, 1998, the Trustees and Officers of KTF held 1,800
shares with sole investment and voting power and 400 shares with shared
investment and voting power.
(8) Mr. Weither's total in KMM includes 200 shares held with shared investment
and voting power.
(9) As a group, on June 30, 1998, the Trustees and Officers of KMM held 13,619
shares with sole investment and voting power and 200 shares with shared
investment and voting power.
(10) Mr. Weither's total in KSM includes 300 shares held with shared investment
and voting power.
(11) As a group, on June 30, 1998, the Trustees and Officers of KSM held 1,500
shares with sole investment and voting power and 300 shares with shared
investment and voting power.
(12) Mr. Weither's total in KST includes 300 shares held with shared investment
and voting power.
(13) As a group, on June 30, 1998, the Trustees and Officers of KST held 1,730
shares with sole investment and voting power and 300 shares with shared
investment and voting power.
<PAGE> 52
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<PAGE> 53
APPENDIX 4
FUND MANAGEMENT FEE RATES, NET ASSETS
AND AGGREGATE MANAGEMENT FEES
<TABLE>
<CAPTION>
AGGREGATE
MANAGEMENT MANAGEMENT
FUND FISCAL YEAR NET ASSETS FEE RATE+ FEE PAID*++
---- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Kemper High Income Trust 11/30/97 $222,919,000 0.850% of average $1,862,000
weekly net assets
Kemper Intermediate Government Trust 12/31/97 $267,218,000 0.800% of average $2,134,000
weekly net assets
Kemper Multi-Market Income Trust 11/30/97 $217,508,000 0.850% of average $1,840,000
weekly net assets
Kemper Municipal Income Trust 11/30/97 $686,179,000 0.550% of average $3,638,000
weekly net assets
Kemper Strategic Income Fund 11/30/97 $ 53,129,000 0.850% of average $ 459,000
weekly net assets
Kemper Strategic Municipal Income 11/30/97 $130,895,000 0.60% of average $ 772,000
Trust weekly net assets
</TABLE>
- ------------------------------
+The management fee rates shown are for each Fund's most recently completed
fiscal year.
++Aggregate management fees disclosed in this table may include fees paid to
successors and affiliates of Scudder Kemper Investments, Inc.
*After waivers and/or expense limitations.
<PAGE> 54
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<PAGE> 55
APPENDIX 5
DATES RELATING TO
INVESTMENT MANAGEMENT AGREEMENTS
<TABLE>
<CAPTION>
TERMINATION
FORMER DATE
INVESTMENT NEW (UNLESS
DATE OF MANAGEMENT INVESTMENT CONTINUED)
FORMER AGREEMENT MANAGEMENT FOR NEW
COMMENCEMENT INVESTMENT LAST AGREEMENT INVESTMENT
OF MANAGEMENT APPROVED BY LAST APPROVED MANAGEMENT
FUND OPERATIONS AGREEMENT SHAREHOLDERS BY TRUSTEES AGREEMENT
---- ------------ ---------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Kemper High Income Trust 4/21/88 12/31/97 12/3/97 9/22/98 9/30/99
Kemper Intermediate 7/21/88 12/31/97 12/3/97 9/22/98 9/30/99
Government Trust
Kemper Multi-Market Income 10/20/88 12/31/97 12/3/97 9/22/98 9/30/99
Trust
Kemper Municipal Income Trust 1/23/89 12/31/97 12/3/97 9/22/98 9/30/99
Kemper Strategic Income Fund 4/29/94 12/31/97 12/3/97 9/22/98 9/30/99
Kemper Strategic Municipal 3/22/89 12/31/97 12/3/97 9/22/98 9/30/99
Income Trust
</TABLE>
<PAGE> 56
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<PAGE> 57
APPENDIX 6
TRUSTEES AND OFFICERS ASSOCIATED
WITH SCUDDER KEMPER
<TABLE>
<CAPTION>
NAME POSITION WITH TRUSTS ASSOCIATION WITH SCUDDER KEMPER
---- -------------------- -------------------------------
<S> <C> <C>
Daniel Pierce Trustee and Chairman of the Board Managing Director
Edmond D. Villani Trustee Chief Executive Officer and Managing Director
Mark S. Casady President Managing Director
J. Patrick Beimford, Vice President of KMM and KST only Managing Director
Jr.
Dale R. Burrow Vice President of KSM only Senior Vice President
Robert S. Cessine Vice President of KMM only Managing Director
Philip J. Collora Vice President and Secretary Senior Vice President
Thomas W. Littauer Vice President Managing Director
Ann M. McCreary Vice President Managing Director
Michael A. McNamara Vice President of KHI, KMM and KST Managing Director
only
Christopher J. Mier Vice President of KTF and KSM only Managing Director
Robert C. Peck, Jr. Vice President Managing Director
Kathryn L. Quirk Vice President Managing Director
Harry E. Resis, Jr. Vice President of KHI, KMM and KST Managing Director
only
Richard L. Vandenberg Vice President of KGT, KMM and KST Managing Director
Linda J. Wondrack Vice President Senior Vice President
John R. Hebble Treasurer Senior Vice President
Brenda Lyons Assistant Treasurer Senior Vice President
Caroline Pearson Assistant Secretary Senior Vice President
Maureen E. Kane Assistant Secretary Vice President
Elizabeth C. Werth Assistant Secretary Vice President
</TABLE>
<PAGE> 58
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<PAGE> 59
APPENDIX 7
FEES PAID TO KSC
<TABLE>
<CAPTION>
AGGREGATE FEE
PAID TO KSC
(REMITTED BY
IFTC, WHERE
FUND FISCAL YEAR APPLICABLE)
---- ----------- -------------
<S> <C> <C>
Kemper High Income Trust 11/30/97 $43,000
Kemper Intermediate Government Trust 12/31/97 $35,000
Kemper Multi-Market Income Trust 11/30/97 $27,000
Kemper Municipal Income Trust 11/30/97 $62,000
Kemper Strategic Income Fund 11/30/97 $24,000
Kemper Strategic Municipal Income Trust 11/30/97 $24,000
</TABLE>
<PAGE> 60
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<PAGE> 61
Thank you
Thank you
for mailing your proxy card promptly!
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We appreciate your
continuing support and
look forward to serving
your future investment needs.
<PAGE> 62
KEMPER FUNDS
- --------------------------------------------------------------------------------
KEMPER FUNDS
- - Kemper High Income Trust
- - Kemper Intermediate Government Trust
- - Kemper Multi-Market Income Trust
- - Kemper Municipal Income Trust
- - Kemper Strategic Income Fund
- - Kemper Strategic Municipal Income Trust
KP Closed
(LOGO)Printed on recycled paper.
<PAGE> 63
[KEMPER FUNDS LOGO]
PLEASE VOTE PROMPTLY!
Your vote is needed! Please vote on the reverse side of this form and sign in
the space provided below. Return your completed proxy in the enclosed envelope
today.
You may receive additional proxies for your other accounts. These are not
duplicates; you should sign and return each proxy card in order for your votes
to be counted. Please return them as soon as possible to help save the cost of
additional mailings.
[NAME OF FUND]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF YOUR FUND
SPECIAL MEETING OF SHAREHOLDERS -- DECEMBER 17, 1998
The undersigned hereby appoints Bruce H. Goldfarb, Kathryn L. Quirk, Thomas
F. McDonough and Daniel Pierce and each of them, the proxies of the undersigned,
with the power of substitution to each of them, to vote all shares of the Fund
which the undersigned is entitled to vote at the Special Meeting of Shareholders
of the Fund to be held at the offices of Scudder Kemper Investments, Inc., Two
International Place, Boston, Massachusetts 02110, on Thursday, December 17, 1998
at 9:00 a.m., Eastern time, and at any adjournments thereof.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S VOTE
WILL BE CAST FOR THE ITEM LISTED BELOW.
The Board members of your Fund, including those who are not affiliated with
the Fund or Scudder Kemper Investments, Inc., recommend that you vote FOR the
item.
Please vote by filling in the boxes below.
To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments thereof.
Dated _______ , 1998
Please sign exactly as your name or
names appear. When signing as
attorney, executor, administrator,
trustee or guardian, please give
your full title as such.
-----------------------------------
Signature(s)
