KEMPER STRATEGIC MUNICIPAL INCOME TRUST, DEFS14A, 1997-10-24

KEMPER STRATEGIC MUNICIPAL INCOME TRUST
DEFS14A, 1997-10-24

Previous: ARMOR HOLDINGS INC, S-4, 1997-10-24

Next: KEMPER STRATEGIC MUNICIPAL INCOME TRUST, DEFA14A, 1997-10-24

<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

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:

[ ] 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 Rule 14a-11(c) or Rule 14a-12

KEMPER STRATEGIC MUNICIPAL INCOME TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the 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)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(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):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] 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:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
<PAGE> 2

**IMPORTANT NOTICE**

Please note that there is an error on the page entitled "Notice of Joint
Special Meeting of Shareholders December 3, 1997 and Proxy Statement." The
acronyms listed for two of the Kemper Closed-End Funds on the Notice page were
reversed. The correct acronyms for the two funds are as follows:

KEMPER MUNICIPAL INCOME TRUST ("KTF")
KEMPER MULTI-MARKET INCOME TRUST ("KMM")

All usage of the acronyms within the text of the proxy statement are
correct. We apologize for this error.

Sincerely,

Kemper Closed-End Funds

<PAGE> 3

<PAGE> 1

October 1997

Kemper

Important News

for Kemper Closed-End Fund Shareholders

WHILE WE ENCOURAGE YOU TO READ THE FULL TEXT OF THE ENCLOSED PROXY STATEMENT,
HERE IS A BRIEF OVERVIEW OF MAJOR MATTERS TO BE VOTED UPON.

================================================================================

Q&A
QUESTIONS AND ANSWERS

Q WHAT IS HAPPENING?

A Zurich Insurance Company, the parent of your Fund's investment manager (Zurich
Kemper Investments, Inc. or "ZKI") has entered into an agreement with Scudder,
Stevens & Clark, Inc. ("Scudder") whereby Zurich will acquire approximately 70%
of Scudder. Upon completion of the transaction, Scudder will change its name to
Scudder Kemper Investments, Inc. ("SKI") and ZKI will be combined with SKI.
Because of the transaction, it is necessary for your Fund to approve a new
investment management agreement.

The following pages elaborate on Scudder, the proposed new investment management
agreement and the Fund Board's evaluation of Zurich and Scudder. A vote is also
being sought on the election of board members and the selection of independent
auditors.

Q WHAT IS SCUDDER?

A Scudder is one of America's oldest and largest investment management firms. It
manages assets invested in equities, fixed income and money market instruments
in both developed and emerging markets. Scudder provides investment services for
open-end and closed-end funds, and private and institutional clients.

Q HOW WILL THE ZURICH/SCUDDER TRANSACTION AFFECT ME AS A FUND SHAREHOLDER?

A Your Fund and your Fund investment will not change. You will still own the
same shares in the same Fund. If the new investment management agreement is
approved, your Fund shares will not change and the advisory fee rates for your
Fund will not change.

Zurich and Scudder have committed to provide all resources necessary to provide
your Fund with top quality investment management and shareholder services.

Q WILL THE INVESTMENT ADVISORY FEE RATES BE THE SAME?

A Yes, the investment advisory fee rates for your Fund will remain the same.

[KEMPER LOGO]
<PAGE> 2

Q HOW DO THE BOARD MEMBERS OF MY FUND SUGGEST THAT I VOTE?

A After careful consideration, the board members of your Fund, including
all of the independent members, recommend that you vote "For" all the items on
the enclosed proxy card.

Q WHO IS PAYING THE COST OF THE SHAREHOLDER MEETING AND THIS PROXY SOLICITATION?

A ZKI--not your Fund--is paying all costs of the Funds' shareholder meeting and
proxy solicitation.

Q WHOM DO I CALL FOR MORE INFORMATION?

A Please call Shareholder Services at (800) 294-4366.

ABOUT THE PROXY CARD

[PROXY CARD SAMPLE] Because each Fund must vote separately, you are being sent a
proxy card for each Fund account that you have.
Please vote all issues shown on each proxy card that you receive.

Please vote on each issue using blue or black ink to mark an X in one of the
three boxes provided on each proxy card. On Item 1 (election of board
members), mark--For All, Withhold All or For All Except. If you mark an X in
the For All Except box, you should print the name(s) or number(s) relating to
the individual(s) for whom you wish to withhold authority. On all other Items,
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!

<PAGE> 3

KEMPER CLOSED-END FUNDS
222 South Riverside Plaza Chicago, Illinois 60606

Telephone (800) 294-4366

October 10, 1997

Dear Kemper Fund Shareholder:

As you read in the Questions and Answers (Q & A) on the outside cover, Zurich
Insurance Company ("Zurich") has entered into an agreement with Scudder, Stevens
& Clark, Inc. ("Scudder") pursuant to which Zurich will acquire approximately
70% of Scudder. Upon completion of the transaction, Scudder will change its name
to Scudder Kemper Investments, Inc. ("SKI"), and your Fund's investment manager,
Zurich Kemper Investments, Inc. ("ZKI") will be combined with SKI. Because of
the transaction, it is necessary for your Fund to approve a new investment
management agreement.

If the new investment management agreement is approved, YOUR FUND SHARES WILL
NOT CHANGE AND THE ADVISORY FEE RATES FOR YOUR FUND WILL NOT CHANGE. FURTHER,
YOU SHOULD CONTINUE TO RECEIVE THE HIGH QUALITY INVESTMENT MANAGEMENT AND
SHAREHOLDER SERVICES THAT YOU HAVE COME TO EXPECT OVER THE YEARS.

Your Fund Board has unanimously approved the proposals and recommends them for
your approval. I encourage you to vote in favor of the proposals.

As always, we thank you for your confidence and support.

Sincerely,

/s/ Stephen B. Timbers
Stephen B. Timbers
President [KEMPER LOGO]
<PAGE> 4

KEMPER CLOSED-END FUNDS
222 South Riverside Plaza Chicago, Illinois 60606

Telephone (800) 294-4366

NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 3, 1997 AND PROXY STATEMENT

October 10, 1997

To the Shareholders:

You are invited to attend a joint special meeting of shareholders of the
following Kemper Closed-End Funds (each a "Fund" and collectively the "Funds"):
KEMPER HIGH INCOME TRUST ("KHI")
KEMPER INTERMEDIATE GOVERNMENT TRUST ("KGT")
KEMPER MUNICIPAL INCOME TRUST ("KMM")
KEMPER MULTI-MARKET INCOME TRUST ("KTF")
KEMPER STRATEGIC MUNICIPAL INCOME TRUST ("KSM")
THE GROWTH FUND OF SPAIN, INC. ("GSP")
KEMPER STRATEGIC INCOME FUND ("KST")

The meeting will be held in the Presentation Room on the 32nd Floor at the
offices of the Funds, 222 South Riverside Plaza, Chicago, Illinois on Wednesday,
December 3, 1997 at 2:30 p.m., Chicago time, for the following purposes and to
transact such other business as may properly come before the meeting or any
adjournment of the meeting:

1. To elect two (2) additional Members to the Board of each Fund.

2. To ratify or reject the selection of Ernst & Young LLP as independent
auditors for the current fiscal year.

3A. To approve or disapprove a new investment management agreement with Scudder
Kemper Investments, Inc. ("SKI") (or with Zurich Kemper Investments, Inc.
("ZKI") transferable to SKI).

3B. [For GSP only] To approve or disapprove a new sub-advisory agreement with
BSN Gestion de Patrimonios, S.A., S.G.C. ("BSN").

Approval of Item 3B is conditional upon approval of Item 3A for GSP.
<PAGE> 5

The Board of each Fund has selected the close of business on September 22, 1997
as the record date for the determination of shareholders of each Fund entitled
to notice of and to vote at the meeting. Shareholders are entitled to one vote
for each share held.

- ------------------------------------------------------------------------------

PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD. SIGN, DATE
AND RETURN IT IN THE ENVELOPE PROVIDED. TO SAVE THE COST OF ADDITIONAL
SOLICITATIONS, PLEASE MAIL YOUR PROXY PROMPTLY.
- ------------------------------------------------------------------------------
<PAGE> 6

The accompanying proxy is solicited by the Boards of Trustees, or Directors in
the case of GSP, (the "Boards") of the Funds for voting at the joint special
meeting of shareholders of the Funds to be held on Wednesday, December 3, 1997,
and at any and all adjournments thereof (the "Meeting"). This proxy statement
was first mailed to shareholders on or about October 10, 1997.

The shareholders of each Fund are being asked to vote on three items. The Board
of each Fund recommends an affirmative vote on all items. The vote required to
approve each item is described under the section of this proxy statement
entitled "Miscellaneous."

The following table indicates which shareholders are solicited with respect to
each Item:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
ITEM KHI KGT KMM KTF KSM GSP KST
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
1. Elect Board members X X X X X X X
- -----------------------------------------------------------------------------
2. Ratify selection of X X X X X X X
auditors
- -----------------------------------------------------------------------------
3A. Approval of New Investment X X X X X X X
Management Agreement with
Scudder Kemper Investments,
Inc.
- -----------------------------------------------------------------------------
3B. Approval of New X
Sub-advisory Agreement with
BSN Gestion de Patrimonios,
S.A., SGC
- -----------------------------------------------------------------------------
</TABLE>

The Board of each Fund has fixed the close of business on September 22, 1997 as
the record date for the determination of shareholders of each Fund entitled to
notice of and to vote at the Meeting. As of September 22, 1997, shares of the
Funds were issued and outstanding as follows:

<TABLE>
<CAPTION>
FUND SHARES
- ---- ----------
<S> <C>
KHI................................. 23,543,739
KGT................................. 33,996,172
KTF
Common............................ 38,124,497
Preferred......................... 43,000
KMM................................. 20,079,577
KSM................................. 10,626,725
GSP................................. 16,544,593
KST................................. 3,451,532
</TABLE>

2
<PAGE> 7

KTF ONLY. Pursuant to the Agreement and Declaration of Trust of KTF, the Board
may authorize separate classes of shares of beneficial interest. The Board has
authorized and KTF has issued common shares of beneficial interest (the "Common
Shares") and preferred shares of beneficial interest, Series A through D (the
"Preferred Shares"). The Common Shares and the Preferred Shares have different
powers, rights, preferences and privileges, qualifications, limitations and
restrictions with respect to, among other things, dividends, liquidation,
redemption and voting as more fully set forth in the Certificate of Designation
for Preferred Shares that established the Preferred Shares. The Common Shares
were first issued on October 20, 1988 and the Preferred Shares were first issued
on July 24, 1989.

INTRODUCTION

On June 26, 1997, Zurich Insurance Company ("Zurich"), ZKI Holding Corp.
("ZKIH"), Zurich Kemper Investments, Inc. ("ZKI"), Scudder, Stevens & Clark,
Inc. ("Scudder") and the representatives of the beneficial owners of the capital
stock of Scudder ("Scudder Representatives") entered into a transaction
agreement ("Transaction Agreement") pursuant to which Zurich will become the
majority stockholder in Scudder with an approximately 70% interest, and ZKI will
become a wholly-owned subsidiary of, or be combined with, Scudder
("Transaction"). Upon completion of the Transaction, Scudder will change its
name to Scudder Kemper Investments, Inc. ("SKI"). Scudder, a New York-based
investment adviser and the investment manager for the Scudder and AARP Funds,
has approximately $125 billion under management. ZKI, a Chicago-based investment
adviser and the investment manager for the Kemper Funds, and its affiliates have
approximately $85 billion under management. The headquarters of SKI will be in
New York. Edmond D. Villani, Scudder's Chief Executive Officer, will continue as
Chief Executive Officer of SKI and will become a member of Zurich's Corporate
Executive Board. Some of the terms of the Transaction are also set forth in a
form of second amended and restated Security Holders Agreement ("New SHA") to be
entered into among the beneficial owners of the capital stock of Scudder, the
Scudder Representatives, Scudder, Zurich, ZKIH and the Scudder Kemper
Investments, Inc. Executive Defined Contribution Plan Trust.

Consummation of the Transaction would constitute an "assignment," as that term
is defined in the Investment Company Act of 1940 ("1940 Act"), of each Fund's
current investment management agreement with ZKI. As required by the 1940 Act,
each current investment management agreement provides for its automatic
termination in the event of its assignment. Accordingly, as discussed further
below, a new investment

3
<PAGE> 8

management agreement between each Fund and SKI is being proposed for approval by
shareholders of each Fund.

DESCRIPTION OF THE TRANSACTION.

Under the Transaction Agreement, Zurich will pay $866.7 million in cash to
acquire two-thirds of Scudder's outstanding shares and will contribute ZKI to
Scudder for additional shares, following which Zurich will have a 79.1% fully
diluted equity interest in the combined business. Zurich will then transfer a
9.6% fully diluted equity interest in SKI to a defined contribution plan for the
benefit of Scudder and ZKI employees, as well as cash and warrants on Zurich
shares for award to Scudder employees, in each case subject to five-year vesting
schedules. After giving effect to the Transaction, current Scudder stockholders
will have a 29.6% fully diluted equity interest in SKI and Zurich will have a
69.5% fully diluted interest in SKI. Scudder's name will be changed to Scudder
Kemper Investments, Inc.

The purchase price for Scudder or for ZKI in the Transaction is subject to
adjustment based on the effect on revenues of non-consenting clients, and will
be reduced if the annualized investment management fee revenues (excluding the
effect of market changes, but taking into account new assets under management)
from clients at the time of closing, as a percentage of such revenues as of June
30, 1997 (the "Revenue Run Rate Percentage"), is less than 90%.

At the closing, Zurich and the other stockholders of SKI will enter into the New
SHA. Under the New SHA, Scudder stockholders will be entitled to designate three
of the seven members of the SKI board and two of the four members of an
Executive Committee, which will be the primary management-level committee of
SKI. Zurich will be entitled to designate the other four members of the SKI
board and the other two members of the Executive Committee.

The names, addresses and principal occupations of the initial Scudder-designated
directors of SKI are as follows: LYNN S. BIRDSONG, 345 Park Avenue, New York,
New York, Managing Director of Scudder; CORNELIA M. SMALL, 345 Park Avenue, New
York, New York, Managing Director of Scudder; and EDMOND D. VILLANI, 345 Park
Avenue, New York, New York, President, Chief Executive Officer and Managing
Director of Scudder.

The names, addresses and principal occupations of the initial Zurich-designated
directors of SKI are as follows: LAWRENCE W. CHENG, Mythenquai 2, Zurich,
Switzerland, Chief Investment Officer for Investments and Institutional Asset
Management and the corporate functions of Securities and Real Estate for Zurich
and a member of the Corporate Executive Board of Zurich; STEVEN M. GLUCKSTERN,
Mythenquai 2, Zurich, Switzerland, responsible for Reinsurance, Structured
Finance, Capital

4
<PAGE> 9

Market Products and Strategic Investments, and a member of the Corporate
Executive Board of Zurich; ROLF HUEPPI, Mythenquai 2, Zurich, Switzerland,
Chairman of the Board and Chief Executive Officer of Zurich; and MARKUS
ROHRBASSER, Mythenquai 2, Zurich, Switzerland, Chief Financial Officer and a
member of the Corporate Executive Board of Zurich.

The initial Scudder-designated Executive Committee members will be Messrs.
Birdsong and Villani (Chairman). The initial Zurich-designated Executive
Committee Members will be Messrs. Cheng and Rohrbasser.

The New SHA requires the approval of a majority of the Scudder-designated
directors for certain decisions, including changing the name of the SKI,
effecting a public offering before April 15, 2005, causing SKI to engage
substantially in non-investment management and related business, making material
acquisitions or divestitures, making changes in SKI's capital structure,
dissolving or liquidating SKI, or entering into certain affiliated transactions
with Zurich. The New SHA also provides for various put and call rights with
respect to SKI stock held by current Scudder employees, limitations on Zurich's
ability to purchase other asset management companies outside of SKI, rights of
Zurich to repurchase SKI stock upon termination of employment of SKI personnel,
and registration rights for stock held by continuing Scudder stockholders.

The Transaction is subject to a number of conditions, including approval by
Scudder stockholders; the Revenue Run Rate Percentages of Scudder and ZKI being
at least 75%; Scudder and ZKI having obtained director and stockholder approvals
from U.S.-registered funds representing 90% of the assets of such funds under
management as of June 30, 1997; the absence of any restraining order or
injunction preventing the Transaction, or any litigation challenging the
Transaction that is reasonably likely to result in an injunction or invalidation
of the Transaction; and the continued accuracy of the representations and
warranties contained in the Transaction Agreement. The Transaction is expected
to close during the fourth quarter of 1997.

Subsequent to the execution of the Transaction Agreement, Zurich agreed to cause
ownership of Zurich Investment Management Limited ("ZIML") to be transferred by
Zurich (or a direct or indirect wholly-owned subsidiary of Zurich) to SKI (or a
direct or indirect wholly-owned subsidiary of SKI). ZIML is a sub-adviser for
certain of the Funds. While the amount of consideration payable to Zurich for
ZIML has not yet been finally agreed upon, it is expected that such
consideration would in no event exceed $50 million, payable in cash or shares of
SKI stock or some combination thereof at the closing of the Transaction or over
some period of time after the closing of the Transaction. Following the
transfer, which is expected to take place at the same time as the closing of the

5
<PAGE> 10

Transaction, ZIML's board of directors would comprise representatives of Scudder
and Zurich. The capital stock of ZIML initially may be transferred to one or
more wholly-owned subsidiaries of Zurich, but ultimately will be transferred to
SKI or one of its wholly-owned subsidiaries (the "ZIML Transaction"). The ZIML
Transaction will result in an assignment of the sub-advisory agreement under the
1940 Act.

ITEM 1. ELECTION OF BOARD MEMBERS

At the Meeting, two (2) Board members are to be elected to the Board of each
Fund. One to fill a vacancy and the other to replace Mr. Stephen Timbers, who
intends to resign from the Boards upon the consummation of the Transaction.

It is intended that the proxies will be voted for the election as Board members
of the nominees described below. The nominees, if elected, will take office upon
consummation of the Transaction and their election and qualification is
contingent upon consummation of the Transaction. The term of each person elected
as a Board member will be from the date of the consummation of the Transaction
until the next meeting of shareholders, if any, called for the purpose of
electing Board members (for GSP, of the class of which such person is a Member)
and until the election and qualification of a successor or until such Board
member sooner dies, resigns or is removed as provided in the organizational
documents of each Fund. If the Transaction is not consummated, the current Board
members of each Fund will continue to serve as that Fund's Board (which are
those identified as such below, along with Mr. Stephen B. Timbers, the president
and chief executive officer of ZKI).

KTF ONLY. Holders of the Preferred Shares are entitled to elect two of the
Board members. Messrs. Kelsey and Timbers were elected by the holders of the
Preferred Shares. The five other current Board members (Messrs. Akins,
Gottschalk, Renwick, Tingleff and Weithers) were elected by holders of the
Common Shares and the Preferred Shares, voting together as a single class. Mr.
Pierce is to be elected by the holders of the Preferred Shares. Mr. Villani is
to be elected by holders of the Common Shares and the Preferred Shares, voting
together as a single class.

GSP ONLY. Pursuant to the organizational documents of GSP, the Board is divided
into three classes, each class having a term of three years. At the annual
meeting of shareholders in each year, the term of one class of Board members
expires. Accordingly, only those Board members in one class may be changed in
any one year, and it would require two years to change a majority of the Board.
This system of electing Board members may have the effect of maintaining the
continuity of management and,

6
<PAGE> 11

thus, make it more difficult for the Fund's shareholders to change the majority
of Board members. Pursuant to the Fund's organizational documents, the number of
Board members shall be apportioned among the classes so as to maintain the
classes as nearly equal in number as possible. Mr. Villani has been nominated as
a Class III Board member for a term to expire at the 2000 annual meeting and Mr.
Pierce has been nominated as a Class II Board member for a term to expire at the
1999 annual meeting. The others listed below are not nominees and will continue
as Board members of GSP. Messrs. Kelsey and Renwick are Class I Board members,
whose terms expire in 1998. Messrs. Gottschalk and Weithers are Class II Board
members, whose terms expire in 1999. Messrs. Akins and Tingleff are Class III
Board members, whose terms expire in 2000.

Both the nominees listed below have consented to serve as board members of the
respective Funds, if elected. In case any nominee shall be unable or shall fail
to act as a board member by virtue of an unexpected occurrence, the proxies may
be voted for such other person(s) as shall be determined by the persons acting
under the proxies in their discretion.

BOARD MEMBER NOMINEES FOR EACH FUND

<TABLE>
<CAPTION>
NAME (DATE OF BIRTH), PRINCIPAL SHARES BENEFICIALLY OWNED
OCCUPATION AND AFFILIATIONS AS OF AUGUST 26, 1997
------------------------------- -------------------------
<S> <C>
*Daniel Pierce (03/18/84) 0
Chairman of the Board and Managing
Director, Scudder; Director,
Fiduciary Trust Company; Director,
Fiduciary Company Incorporated; Board
member of 14 investment companies
advised by Scudder.
*Edmond D. Villani (03/04/47) 0
President, Chief Executive Officer
and Managing Director, Scudder.
</TABLE>

7
<PAGE> 12

CONTINUING BOARD MEMBERS OF EACH FUND

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NAME (DATE OF BIRTH), PRINCIPAL YEAR FIRST BECAME OWNED AS OF
OCCUPATION AND AFFILIATIONS A BOARD MEMBER AUGUST 26, 1997
------------------------------- ----------------- -------------------
<S> <C> <C>
James B. Akins (10/15/26) 1995 -- All. 0
Consultant on International,
Political and Economic Affairs;
formerly, a career United States
Foreign Service Officer; Energy
Adviser for the White House; United
States Ambassador
to Saudi Arabia.
Arthur R. Gottschalk (02/13/25) 1988 -- KGT, KTF; KHI--1,000
Retired; formerly, President, 1989 -- KHI, KMM, KGT--1,000
Illinois Manufacturers Association; KSM, GSP; KMM-- 800
Trustee, Illinois Masonic Medical 1994 -- KST. KTF-- 800
Center; formerly, Illinois State KSM--1,000
Senator; formerly, Vice President, GSP--1,000
The Reuben H. Donnelly Corp. KST-- 800
Frederick T. Kelsey (04/25/27) 1988 -- KTF; KHI-- 500
Retired; formerly, consultant to 1989 -- KHI, KGT, KGT--2,500
Goldman, Sachs & Co.; formerly, KMM, KSM, GSP; KMM--1,000
President, Treasurer and Trustee of 1994 -- KST. KTF-- 500
Institutional Liquid Assets and its GSP--1,000
affiliated mutual funds; Trustee of
the Benchmark Funds; Trustee of the
Pilot Funds (through 1997).
Fred B. Renwick (02/02/30) 1995 -- All. 0
Professor of Finance, New York
University, Stern School of Business;
Director, TIFF Investment Program,
Inc., Director, the Wartburg Home
Foundation; Chairman, Investment
Committee of Morehouse College Board
of Trustees; Chairman, American Bible
Society Investment Committee;
formerly, member of the Investment
Committee of Atlanta University Board
of Trustees; formerly, Director of
Board of Pensions Evangelical
Lutheran Church of America.
</TABLE>

8
<PAGE> 13

- ---------------
* Interested persons of Scudder as defined in the Investment Company Act of
1940.

All the Board members serve as board members of 13 Kemper Funds. Mr. Pierce and
Mr. Villani have each been nominated to serve as a board member of 39 Kemper
Funds. A "Kemper Fund" is an investment company for which ZKI or its affiliates
serve as investment manager.

Each Board has an audit and governance committee that is composed of Messrs.
Akins, Gottschalk, Kelsey, Renwick, Tingleff and Weithers. The committee of each
Fund met three times during the fiscal year ended November 30, 1996. In 1996,
KGT changed fiscal years from November 30 to December 31. The information
included in this proxy statement is for KGT's fiscal year ended November 30,
1996 and does not include information for its short fiscal period (one-month)
ended December 31, 1996. The committee makes recommendations regarding the
selection of independent auditors for each Fund, confers with the independent
auditors regarding each Fund's financial statements, the results of audits and
related matters, seeks and reviews nominees for Board membership and performs
such other tasks as the respective Board assigns. The committee also proposes
the nominees for election by the shareholders. Shareholders wishing to submit
the name of a candidate for consideration by the committee should submit their
recommendations to the secretary of the applicable Fund.

Each Fund pays Board members who are not "interested persons" of such Fund an
annual retainer fee, plus expenses, and an attendance fee for each

9
<PAGE> 14

Fund Board meeting and committee meeting attended. As reflected above, the Board
members currently serve as Board members of various investment companies for
which ZKI or its affiliates serve as investment manager. Board members or
officers who are "interested persons" receive no compensation from such Fund.
The Board of each Fund met seven times during the fiscal year ended November 30,
1996, except for KGT which met six times during the fiscal year ended December
31, 1996. Each then current Board member attended 75% or more of the respective
meetings of the Board and the audit and governance committee (if then a member
thereof) held during the fiscal year ended November 30, 1996.

The table below shows, for each Board member entitled to receive compensation
from the Funds, the aggregate compensation paid or accrued during each Fund's
fiscal year ended November 30, 1996 and the total compensation that the Kemper
Funds paid or accrued during calendar year 1996.

<TABLE>
<CAPTION>
Total
Compensation
Kemper Funds
Paid to Board
Name of Board Member KHI KGT KTF KMM KSM GSP KST Members(2)
-------------------- ------ ------ ------ ------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James E. Akins............. $3,700 $4,400 $7,400 $3,800 $3,200 $3,900 $2,500 $ 94,300
Arthur R. Gottschalk(1).... 4,700 5,300 8,400 4,700 4,100 4,200 2,600 102,700
Frederick T. Kelsey(1)..... 4,100 4,700 7,900 4,200 3,500 3,900 2,600 106,800
Fred B. Renwick............ 3,700 4,400 7,400 3,800 3,200 3,900 2,500 94,300
John B. Tingleff........... 3,700 4,400 7,400 3,800 3,200 3,900 2,500 94,300
John G. Weithers........... 3,700 4,400 7,400 3,800 3,200 3,900 2,500 94,300
</TABLE>

- ---------------
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with certain Kemper funds. Deferred amounts accrue
interest monthly at a rate equal to the yield of Zurich Money
Funds -- Zurich Money Market Fund. Total deferred fees and interest accrued
for the latest and all prior fiscal years are $10,500, $10,600, $12,200,
$10,400, $10,000 and $4,200 for Mr. Gottschalk and $15,200 $15,600, $18,800,
$15,100, $14,400 and $7,500 for Mr. Kelsey from KHI, KGT, KTF, KMM, KSM and
KST, respectively. In addition, for GSP, total deferred fees and interest
accrued are $10,400 for Mr. Gottschalk.

(2) Includes compensation for service on the boards of 13 Kemper funds with 36
fund portfolios. Each Board member currently serves as a board member of 13
Kemper funds with 39 fund portfolios.

FUND OFFICERS. Information about the executive officers of the Funds, with their
respective dates of birth and terms of office indicated, is set forth below.

J. Patrick Beimford, Jr. (05/25/50), vice president of KMM since 02/17/93 and
KST since 04/14/94, is executive vice president of ZKI.

10
<PAGE> 15

Dale R. Burrow (10/16/56), vice president of KSM since 05/05/93, is first vice
president of ZKI.

Elizabeth A. Byrnes (02/08/57), vice president of KGT since 09/08/94, is first
vice president of ZKI.

Robert S. Cessine (01/05/50), vice president of KMM since 05/04/95, is senior
vice president of ZKI since January 1993; prior thereto, senior corporate bond
analyst at an investment management company.

Philip J. Collora (11/15/45) has been vice president of each Fund except KST
since 02/01/90 and vice president of KST since 03/02/90, and secretary of each
Fund since 03/25/95. Mr. Collora is senior vice president and assistant
secretary of ZKI.

Jerome L. Duffy (06/29/36), treasurer of KHI and KGT since 05/28/87, KMM, KTF
and KSM since 08/03/88, GSP since 12/18/89 and KST since 03/02/90, is senior
vice president of ZKI.

Charles R. Manzoni, Jr. (01/23/47), vice president of each Fund since 09/04/96,
is executive vice president, secretary and general counsel of ZKI; secretary,
ZKI Holding Corp.; secretary, ZKI Agency, Inc.; and formerly, Partner, Gardner,
Carton & Douglas.

Michael A. McNamara (12/28/44), vice president of KHI since 02/21/91 and KMM and
KST since 05/04/95, is senior vice president of ZKI.

Christopher J. Mier (08/11/56), vice president of KTF and KSM since 02/21/91, is
senior vice president of ZKI.

John E. Neal (03/09/50), vice president of each Fund since 01/17/96, is
president of Kemper Funds Group, a unit of ZKI, and director of ZKI, Zurich
Kemper Value Advisors, Inc. ("ZKVA") and Zurich Kemper Distributors, Inc.
("ZKDI"); prior thereto, senior vice president of Kemper Real Estate Management
Company.

Harry E. Resis, Jr. (11/24/45), vice president of KHI since 02/17/93 and KMM and
KST since 05/04/95, is senior vice president of ZKI.

Stephen B. Timbers (08/08/44), president of each Fund since 03/11/95, is
president, chief executive officer, chief investment officer and director of ZKI
and director of ZKDI, ZKVA and LTV Corporation; formerly, president and chief
operating officer of Kemper Corporation. Mr. Timbers is also a Board member of
each of the Funds.

Jonathan W. Trutter (11/29/57), vice president of KMM and KST since 05/04/95, is
first vice president of ZKI.

11
<PAGE> 16

Richard L. Vandenberg (11/16/49), vice president of KGT, KMM and KST since
03/06/96, is senior vice president of ZKI; prior thereto, senior vice president
and portfolio manager of an investment management firm.

The officers of each Fund are elected by the Board of the Fund on an annual
basis to serve until their successors are elected and qualified. It is
anticipated that, after consummation of the Transaction, the Boards of the Funds
will elect new officers who are expected to include persons currently affiliated
with Scudder.

SHAREHOLDINGS

As of August 26, 1997, the Board members and officers of the Funds as a group
owned beneficially 4,088 shares of KHI, 19,033 shares of KGT, 13,519 shares of
KMM, 2,200 shares of KTF, 6,300 shares of KSM, 3,306 shares of GSP and 1,830
shares of KST, which, in each case, is less than 5% of the outstanding shares of
each Fund. As of August 26, 1997, no person is known to any Fund to have owned
beneficially more than five percent of the shares of such Fund, except that GSP
believes that Bankgesellschaft Berlin AG, Alexanderplatz 2, D-10178 Berlin,
Germany, owned 1,514,300 shares of GSP, which constituted approximately 9.1% of
the Fund's outstanding shares as of October 7, 1997. As of August 26, 1997,
Stephen B. Timbers, a Board member of each Fund, owned 14,000 shares of KGT,
10,000 shares of KMM and 4,500 shares of KSM.

SECTION 16 REPORTING COMPLIANCE

Section 30(f) of the 1940 Act and Section 16(a) of the Securities Exchange Act
of 1934 require each Fund's officers and Board members, investment manager,
affiliated persons of the investment manager and persons who own more than ten
percent of a registered class of the Funds' equity securities to file forms
reporting their affiliation with that Fund and reports of ownership and changes
in ownership of that Fund's shares with the Securities and Exchange Commission
(the "SEC") and the New York Stock Exchange. These persons and entities are
required by SEC regulation to furnish the Fund with copies of all Section 16(a)
forms they file. Based upon a review of these forms furnished to each Fund, each
Fund believes that, during the fiscal year ended November 30, 1996 (and the
fiscal period ended December 31, 1996 for KGT), there was compliance with all
Section 16(a) filing requirements applicable to that Fund's officers and Board
members, the investment manager and affiliated persons of the investment
manager.

ITEM 2. SELECTION OF INDEPENDENT AUDITORS

A majority of the members of each Board who are not "interested" persons of the
Fund has selected Ernst & Young LLP, independent auditors, to audit the books
and records of the Fund for the current fiscal

12
<PAGE> 17

year. This firm has served in this capacity for each Fund since the Fund was
organized and has no direct or indirect financial interest in a Fund except as
independent auditors. The selection of Ernst & Young LLP as independent auditors
of each Fund is being submitted to the shareholders for ratification. A
representative of Ernst & Young LLP is expected to be present at the Meeting and
will be available to respond to any appropriate questions raised at the Meeting
and may make a statement.

BOARD RECOMMENDATION

The Board of each Fund recommends that shareholders vote FOR the ratification of
the selection of independent auditors.

ITEMS 3A. AND 3B. NEW INVESTMENT MANAGEMENT AGREEMENT AND, FOR GSP ONLY, NEW
SUB-ADVISORY AGREEMENT

INTRODUCTION

Zurich Kemper Investments, Inc. ("ZKI") is the investment adviser and manager
for each Fund. ZKI and its indirect parent, Zurich Insurance Company ("Zurich"),
entered into a transaction agreement with Scudder, Stevens & Clark, Inc.
("Scudder") whereby Zurich will acquire approximately 70% of Scudder. Upon
completion of the Transaction, Scudder will change its name to Scudder Kemper
Investments, Inc. ("SKI") and ZKI will be combined with SKI.

As discussed above, consummation of the Transaction would constitute an
"assignment," as that term is defined in the Investment Company Act of 1940 (the
"1940 Act"), of each Fund's current investment management agreement with ZKI. As
required by the 1940 Act, each current investment management agreement provides
for its automatic termination in the event of its assignment. In anticipation of
the Transaction, a new investment management agreement ("management agreement")
between each Fund and SKI is being proposed for approval by shareholders of each
Fund. (Depending on the timing of the combination of the Scudder and ZKI
organizations, the new investment management agreement may initially be between
the Fund and ZKI for some period following the Transaction and then be
transferred to SKI without further action on the part of shareholders of the
Fund. Accordingly, approval of the new agreement with SKI would also include
approval of any interim agreement with ZKI following the assignment of the
current agreement. SKI or ZKI, as party to the new investment management
agreement, is sometimes referred to in this proxy statement as the "investment
manager.") A copy of the form of the new management agreement is attached hereto
as Exhibit A.

13
<PAGE> 18

BOARD RECOMMENDATION

The Board of each Fund met on July 8, 1997, July 15, 1997, August 18-19, 1997
and September 19-20, 1997 to consider the Transaction and its anticipated
effects upon ZKI and the investment management and other services provided to
the Funds by ZKI and its affiliates. In addition, the Independent Board members
also met separately with counsel on a number of occasions to discuss the
Transaction. On September 20, 1997 the Board of each Fund, including a majority
of the Board members who are not parties to such agreement or interested persons
of any such party, voted unanimously to approve the new management agreement and
to recommend it to shareholders for their approval.

For information about each Board's deliberations and the reasons for its
recommendation, please see "Board Evaluation" near the end of this Item 3.

The Board of each Fund recommends that shareholders vote FOR approval of the new
management agreement.

THE CURRENT INVESTMENT MANAGEMENT AGREEMENT

Each current management agreement provides that the Fund's investment manager
acts as investment adviser, manages the Fund's investments, administers the
Fund's business affairs, furnishes offices, necessary facilities and equipment,
provides clerical, bookkeeping and administrative services, provides shareholder
and information services and permits any of its officers or employees to serve
without compensation as trustees or officers of the Fund if duly elected to such
positions. Under the current management agreement, the Fund agrees to assume and
pay the charges and expenses of its operations including, by way of example, the
compensation of the trustees other than those affiliated with the investment
manager, charges and expenses of independent auditors, of legal counsel, of any
transfer or dividend disbursing agent, of any registrar of the Fund and of the
custodian (including fees for safekeeping of securities), costs of calculating
net asset value, all costs of acquiring and disposing of portfolio securities,
interest, if any, on obligations incurred by the Fund, costs of share
certificates, membership dues in the Investment Company Institute or any similar
organization, reports and notices to shareholders, other like miscellaneous
expenses and all taxes and fees to federal, state or other governmental
agencies.

For the services and facilities furnished, each Fund pays an investment
management fee, payable monthly, at the respective annual rate shown below,
based upon average weekly net assets. The management fees for KHI, KGT, KMM, GSP
and KST are higher than those charged by most other investment companies.
Exhibit E reflects the management fees paid by each Fund to ZKI for the most
recently completed fiscal year.

14
<PAGE> 19

<TABLE>
<CAPTION>
FUND MANAGEMENT FEE
---- --------------
<S> <C>
KHI.............................. 0.85 of 1%
KGT.............................. 0.80 of 1%
KTF.............................. 0.55 of 1%
KMM.............................. 0.85 of 1%
KSM.............................. 0.60 of 1%
GSP.............................. 1.00 of 1%
KST.............................. 0.85 of 1%
</TABLE>

Each management agreement provides that the Fund's investment manager shall not
be liable for any error of judgment or of law, or for any loss suffered by the
Fund in connection with the matters to which the management agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of the Fund's investment manager in the performance of its
obligations and duties or by reason of its reckless disregard of its obligations
and duties under the management agreement.

Each management agreement may be terminated for such Fund without penalty upon
sixty (60) days written notice by either party, or by a majority vote of the
outstanding shares of the Fund or series thereof, and automatically terminates
in the event of its assignment.

ZKI has acted as investment adviser and manager for each Fund since it commenced
public offering of its shares as shown below. Also shown is the date of each
current management agreement, the date when the current management agreement was
last approved by the Board and the shareholders of each Fund, and the date to
which the current management agreement continues. For each Fund, the current
management agreement was last submitted to shareholders for approval in
connection with the Zurich/Kemper merger.

<TABLE>
<CAPTION>
APPROVAL OF CURRENT CURRENT
COMMENCEMENT DATE OF AGREEMENT BY AGREEMENT
OF INVESTMENT CURRENT ----------------------- CONTINUED BY
FUND OPERATIONS AGREEMENT BOARD SHAREHOLDERS BOARD
---- ------------- --------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
KHI.................. 04/21/88 01/04/96 03/11/97 09/19/95 04/01/98
KGT.................. 07/21/88 01/04/96 03/11/97 09/19/95 04/01/98
KTF.................. 10/20/88 01/04/96 03/11/97 09/19/95 04/01/98
KMM.................. 01/23/89 01/04/96 03/11/97 09/19/95 04/01/98
KSM.................. 03/22/89 01/04/96 03/11/97 09/19/95 04/01/98
GSP.................. 02/14/90 01/04/96 03/11/97 09/19/95 04/01/98
KST.................. 04/29/94 01/04/96 03/11/97 09/19/95 04/01/98
</TABLE>

SUB-ADVISER -- BSN (GSP ONLY)

ZKI uses the investment management services of BSN Gestion de Patrimonios, S.A.,
S.G.C. ("BSN") with respect to investments in Spanish

15
<PAGE> 20

securities pursuant to the sub-advisory agreement between ZKI and BSN described
below. The current sub-advisory agreement is dated January 4, 1996, was last
approved by shareholders on September 19, 1995, was last approved for
continuation by the Board on March 11, 1997, and will continue, unless replaced
or otherwise terminated, until April 1, 1998. The current sub-advisory agreement
was last submitted to shareholders for approval in connection with the
Zurich/Kemper merger.

BSN is a wholly-owned subsidiary of Banco Santander de Negocios, which is wholly
owned by Banco Santander. Banco Santander, together with its subsidiaries and
associated companies, is engaged principally in commercial and retail banking
operations in Spain and other countries.

Under the terms of the sub-advisory agreement between ZKI and BSN with respect
to GSP, BSN will provide such investment advice, research and assistance as ZKI
may request with respect to investments by GSP in Spanish securities. For its
services, BSN receives from ZKI a monthly fee at the annual rate of .35% of the
Fund's average weekly net assets. BSN has agreed to pay the fees and expenses of
any officer, Board member or employee of the Fund affiliated with BSN, except
that the Fund shall bear the travel expenses of directors, officers or employees
of BSN or any of its affiliates to the extent that such expenses relate to
attendance as a Board member at meetings of the Board. During the fiscal year
ended November 30, 1996, ZKI incurred fees of $830,989 to BSN.

BSN has an advisory committee, comprised of representatives from BSN. The
advisory committee meets periodically to advise ZKI regarding investments in
Spanish securities and the Spanish securities markets and reports directly to
ZKI. Currently, the advisory committee is composed of Messrs. Prosper Lamothe,
Ernesto Gallardo and John Siska of BSN.

The sub-advisory agreement provides that BSN shall not be liable for any error
of judgment or of law or for any loss suffered by the Fund in connection with
the matters to which the sub-advisory agreement relates, except loss resulting
from willful misfeasance, bad faith or gross negligence on the part of BSN in
the performance of its obligations and duties or by reason of its reckless
disregard of its obligations and duties under the sub-advisory agreement.

The sub-advisory agreement may be terminated without penalty upon sixty (60)
days written notice by either party. The sub-advisory agreement will
automatically terminate in the event of the termination of the management
agreement or in the event of its assignment.

The new sub-advisory agreement will be dated as of the date of the consummation
of the Transaction and will be in effect for an initial term

16
<PAGE> 21

ending on the same date as would the current sub-advisory agreement but for the
Transaction and may continue thereafter from year to year if such continuance is
specifically approved at least annually by vote of a "majority of the
outstanding voting securities" of GSP, as defined under the 1940 Act, or the
Board, including, in either event, the vote of a majority of Board members who
are not parties to the agreement or interested persons of any such party, cast
in person at a meeting called for such purpose. A copy of the form of new
sub-advisory agreement is attached hereto as Exhibit B.

SUB-ADVISER -- ZIML

KHI, KGT, KMM, KST and GSP each use the investment management services of Zurich
Investment Management Limited ("ZIML"), 1 Fleet Place, London, UK, ECM4 7RQ, an
indirect subsidiary of Zurich and an affiliate of ZKI, with respect to
investments in foreign securities pursuant to the sub-advisory agreements
between ZKI and ZIML described below. The current sub-advisory agreements are
dated December 1, 1996, were last approved for continuation by the Board on
March 11, 1997, and will continue, unless replaced or otherwise terminated,
until April 1, 1998.

As with the investment management agreements, the sub-advisory agreements with
ZIML will terminate upon consummation of the Transaction. New sub-advisory
agreements, however, are not being proposed; rather, it is expected that the
investment manager would assume responsibility for the portion of those Fund's
assets invested in foreign securities.

Under the terms of the Sub-Advisory Agreement for a Fund, ZIML renders
investment advisory and management services with regard to that portion of the
Fund's portfolio as may be allocated to ZIML by ZKI from time to time for
management of foreign securities, including foreign currency transactions and
related investments. For its services, ZIML receives from ZKI (not from the
Funds) a monthly fee at the following annual rates on the portion of the average
daily net assets allocated by ZKI to ZIML for management:

Each Sub-Advisory Agreement provides that ZIML will 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 the Sub-Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
ZIML in the performance of its duties or from reckless disregard by ZIML of its
obligations and duties under the Sub-Advisory Agreement.

17
<PAGE> 22

Each Sub-Advisory Agreement continues in effect from year to year so long as its
continuation is approved at least annually (a) by a majority of the Board
members who are not parties to such agreement or interested persons of any such
party except in their capacity as Board members of the Fund and (b) by the
shareholders or the Board. Each Sub-Advisory Agreement may be terminated at any
time for a Fund upon 60 days notice by ZKI, ZIML or the Board or by a majority
vote of the outstanding shares of the Fund, and will terminate automatically
upon assignment or upon the termination of the Fund's investment management
agreement. No sub-advisory fees were paid by ZKI to ZIML for each Fund's 1996
fiscal year, although in prior fiscal years ZKI has paid ZIML for its services
to ZKI with respect to foreign securities investments of certain Funds.

NEW INVESTMENT MANAGEMENT AGREEMENT

The new investment management agreement for each Fund is substantially similar
to the current investment management agreement. While the form of the agreement
is different (i.e., a form generally used by Scudder), there is no material
difference in the substance of the obligations of the investment manager under
the agreement except that, under a separate agreement with Scudder Fund
Accounting Corporation ("SFAC"), a subsidiary of Scudder, SFAC, rather than the
Fund's investment manager, will compute the net asset value for each Fund. SFAC
will not charge the Funds for this service and has no current intention to do
so; however, subject to Board approval, at some time in the future, SFAC may
seek payment for its services under the agreement. In addition, the management
fee under the new agreement is paid at the end of each month and is computed as
1/12 of the applicable annual rate based upon the average daily net assets for
such month; whereas, under the current agreement, the management fee is paid at
the end of each month and is computed at the annual rate based upon the average
daily net assets. While the annual rates are the same under the current and new
agreements, depending upon the level of net assets at any time, the fees paid
may differ.

The new management agreement for each Fund will be dated as of the date of the
consummation of the Transaction, which is expected to occur in the fourth
quarter of 1997, but in no event later than February 28, 1998. The new
management agreement will be for an initial term ending on the same date as
would the current management agreement but for the Transaction, and may continue
thereafter from year to year if specifically approved at least annually by the
vote of "a majority of the outstanding voting securities" of such Fund, as
defined under the 1940 Act, or by the Board and, in either event, the vote of a
majority of the Board members who are not parties to the agreement or interested
persons of any such party, cast in person at a meeting called for such purpose.

18
<PAGE> 23

BOARD EVALUATION

On June 27, 1997, the Board of each Fund was informed of the Transaction.
Thereafter, each Board was given extensive information about the Transaction and
Scudder. The Boards met with senior management personnel of Zurich and Scudder
and had extended discussions regarding Zurich's and Scudder's plans for ZKI, SKI
and the Funds. Throughout the process, the Independent Trustees of each Board
had the assistance of legal counsel, who prepared, among other things, an
analysis of the Board's fiduciary obligations. The Boards met on July 8, 1997,
July 15, 1997, August 18-19, 1997 and September 19-20, 1997 to consider the
Transaction and its effects on the Funds. The Independent Board members also met
separately with counsel on a number of occasions to discuss the Transaction. As
a result of its review and consideration of the Transaction and the proposed new
management agreements, at its meeting on September 20, 1997, the Board of each
Fund voted unanimously to approve the new management agreement and to recommend
it to the shareholders of each Fund for their approval.

In connection with its review, each Board obtained substantial information
regarding: the management, financial position and business of Scudder; the
history of Scudder's business and operations; the investment performance of the
investment companies and private accounts advised by Scudder; the anticipated
effect of the Transaction on the Funds and their shareholders; and future plans
of Zurich and Scudder with respect to ZKI, SKI and the Funds. Each Board also
received information regarding the terms of the Transaction and comprehensive
financial information, including: employment agreements with senior Scudder
executives; incentive stock compensation to be given to key ZKI personnel; and
anticipated SKI management and board of directors.

In connection with their deliberations, the Boards of the Funds obtained certain
assurances from Zurich and Scudder, including the following:

- - Zurich and Scudder have provided to the Boards such information as is
reasonably necessary to evaluate the new management and other agreements.

- - Zurich looks upon SKI as the core of Zurich's global asset management
strategy. With that focus, Zurich will devote to SKI and its affairs all
attention and resources that are necessary to provide for each Fund top
quality investment management, shareholder, administrative and product
distribution services.

- - Scudder looks upon the Kemper Funds as a core part of Scudder's global asset
management strategy. With that focus, Scudder will devote to the Kemper Funds
and their affairs all attention and resources that

19
<PAGE> 24

are necessary to provide for each Fund 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 is not expected to result in any adverse change in the
investment management or operations of the Funds; and neither Zurich nor
Scudder plans to make any material change in the manner in which investment
advisory services or other services are rendered to each Fund which has the
potential to have a material adverse effect upon any Fund.

- - Zurich and Scudder are committed to the continuance, without interruption, of
services to the Funds of the type and quality currently provided by ZKI and
its subsidiaries, or superior thereto.

- - Zurich and Scudder plan to maintain or enhance the SKI facilities and
organization.

- - In order to retain and attract key personnel, Zurich and Scudder intend for
SKI to maintain overall compensation policies and practices at market levels
or better.

- - Zurich and Scudder intend to maintain the distinct brand identity of the
Kemper and Scudder Funds and are committed to strengthening and enhancing both
brands and the distribution channels for both families of Funds, while
maintaining their separate brand identity.

- - Scudder has in place a detailed and comprehensive plan of action to
effectively deal with the year 2000 issue for all SKI operations. The Kemper
Funds will not be transferred from their current systems unless certain
conditions are met.

- - Zurich and Scudder will promptly advise the Boards of decisions materially
affecting the SKI organization as they relate to the Funds. Neither this, nor
any of the other above commitments will be altered by Zurich or Scudder
without the Board's prior consideration.

Zurich and Scudder assured each Board that they intend to comply with Section
15(f) of the 1940 Act. Section 15(f) provides a non-exclusive safe harbor for an
investment adviser to an investment company or any of its affiliated persons 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 such investment adviser.
The composition of the Board of each Fund, currently and as proposed, would be
in compliance with this provision of Section 15(f). (See Item 1 -- "Election of
Board Members.") Second, an "unfair burden" must not be imposed upon the

20
<PAGE> 25

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 and
Scudder are not aware of any express or implied term, condition, arrangement or
understanding that would impose an "unfair burden" on any Fund as a result of
the Transaction. Zurich and Scudder have agreed that they, and their affiliates,
will take no action that would have the effect of imposing an "unfair burden" on
any Fund as a result of the Transaction. In furtherance thereof, ZKI has
undertaken to pay the costs of preparing and distributing proxy materials to and
of holding the 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 Independent Board members, and Zurich has
agreed to indemnify each Fund and the Independent Board members for and against
any liability and expenses based upon any action or omission by the Independent
Board members in connection with their consideration of and action with respect
to the Transaction. In addition, Scudder has agreed to indemnify each Fund and
the Independent Board members for and against any liability and expenses based
upon any misstatements or omissions by Scudder to the Independent Board members
in connection with their consideration of the Transaction.

In evaluating each new management agreement, each Board took into account that
the fees and expenses payable by each Fund under the new management agreement
are the same as under the current management agreement, that the services
provided to the Fund are the same (except for services to be provided under a
separate Fund Accounting Agreement as described above) and that the other terms
are substantially similar. Each Board also took into consideration the extent to
which portfolio managers and research personnel would continue their functions
with SKI. Each Board also considered Scudder's representation that the Funds'
shareholder service providers and the terms of the shareholder service
agreements were not being proposed to be changed. Each Board noted that, in
previously approving the continuation of the current management agreements, the
Board had considered a number of factors, including the nature and quality of
services provided by ZKI; investment performance, both of the Fund itself and
relative to that of competitive investment companies; investment management fees
and expense ratios of the Fund

21
<PAGE> 26

and competitive investment companies; ZKI profitability from managing the Funds;
fall-out benefits to ZKI from its relationship to the Funds, including revenues
derived from services provided to the Funds by affiliates of ZKI; and the
potential benefits to ZKI and to the Funds and their shareholders of receiving
research services from broker/dealer firms in connection with the allocation of
portfolio transactions to such firms. The Board also considered that while
Scudder is authorized to pay a commission that is higher than the lowest
available in order to receive research assistance, Scudder does not negotiate
arrangements pursuant to which Scudder receives specific research products or
services in exchange for the expectation that Scudder will direct a specified
amount of brokerage commissions to particular broker-dealers.

The Board discussed the Transaction with the senior management of ZKI, Scudder
and Zurich and among themselves. The Board considered that Zurich is a large,
well-established company with substantial resources, and, as noted above, has
undertaken to devote such resources to SKI as are necessary to provide each Fund
with top quality services. The Board also considered that Scudder is a large,
well-established investment advisory firm with a substantial number of highly
rated funds.

As a result of their review and consideration of the Transaction and the new
management agreements, at its meeting on September 20, 1997, the Board of each
Fund voted unanimously to approve the new management agreement and to recommend
it to the shareholders of the Fund for their approval.

The Board of each Fund recommends that shareholders vote FOR approval of the new
management agreement.

OTHER INFORMATION

ZKI. Zurich Kemper Investments, Inc. ("ZKI"), 222 South Riverside Plaza,
Chicago, Illinois 60606, is the investment manager of each Fund and provides
each Fund with continuous professional investment supervision. ZKI is one of the
largest investment managers in the country and has been engaged in the
management of investment funds for more than forty-nine years. ZKI and its
affiliates provide investment advice and manage investment portfolios for the
Kemper Funds, affiliated insurance companies and other corporate, pension,
profit-sharing and individual accounts representing approximately $85 billion
under management. ZKI acts as investment manager or principal underwriter for 32
open-end and seven closed-end investment companies, with 86 separate investment
portfolios, representing more than 2.5 million shareholder accounts. ZKI is an
indirect subsidiary of Zurich Insurance Company, a leading internationally
recognized provider of insurance and financial services in

22
<PAGE> 27

property/casualty and life insurance, reinsurance and structured financial
solutions as well as asset management ("Zurich").

The investment companies to which ZKI and its affiliates render investment
management services, and the related management fees, are identified in Exhibit
C.

The names, addresses and principal occupations of the principal executive
officer and the directors of ZKI are as follows:

<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
Stephen B. Timbers, Chief President, Chief Executive
Executive Officer and Director Officer and Chief Investment
222 South Riverside Plaza Officer, ZKI
Chicago, Illinois 60606
John E. Neal, Director President, Kemper Funds Group
222 South Riverside Plaza
Chicago, Illinois 60606
William E. Chapman II, Director President, Kemper Retirement
222 South Riverside Plaza Plans Group
Chicago, Illinois 60606
</TABLE>

ZIML. Zurich Investment Management Limited ("ZIML"), 1 Fleet Place, London,
U.K. EC4M 7RQ, is an indirect subsidiary of Zurich. The names, addresses and
principal occupations of the principal executive officer and the directors of
ZIML are as follows:

<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
Dennis H. Ferro, Chief Chief Executive Officer and
Executive Officer and Director Managing Director -- Equities,
1 Fleet Place ZIML
London, U.K. EC4M 7RQ
Gordon K. Johns, Director Managing Director, ZIML
1 Fleet Place
London, U.K. EC4M 7RQ
Laurence W. Cheng, Director Member of Corporate Executive
1 Fleet Place Board and Chief Investment
London, U.K. EC4M 7RQ Officer for Investments and
International Asset Management,
Zurich
Richard D. W. Hass, Director Finance Director, Compliance
1 Fleet Place Officer and Joint Secretary,
London, U.K. EC4M 7RQ ZIML
</TABLE>

BSN. BSN Gestion de Patrimonios, S.A., S.G.C. ("BSN"), PASEO de la Castellana
32-Planta 6, 28046, Madrid, Spain, is the sub-advisor for GSP.

23
<PAGE> 28

The names, addresses and principal occupations of the principal executive
officer and the directors of the BSN are as follows:

<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
Eduardo Suarez Alvarez-Novoa, Managing Director, BSN
Chairman of the Board and
Director
PASEO de la Castellana 32-
Planta 6
28046, Madrid, Spain
Javier de Mazarredo, Director Spanish Equities Chief
PASEO de la Castellana 32- Investment Officer, BSN
Planta 6
28046, Madrid, Spain
Santiago Rubio, Director Fixed Income Chief Investment
PASEO de la Castellana 32- Officer, BSN
Planta 6
28046, Madrid, Spain
</TABLE>

TRANSFER AGENT, SHAREHOLDER SERVICE AGENT AND CUSTODIAN. Investors Fiduciary
Trust Company ("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, is
also each Fund's transfer agent and divided-paying agent. Pursuant to a Services
Agreement with IFTC, Zurich Kemper Service Company ("ZKSC"), an affiliate of
ZKI, serves as "Shareholder Service Agent." IFTC currently receives from each
Fund as transfer agent and pays to ZKSC annual account maintenance fees at a
maximum rate of $7.50 per account plus transaction charges and out-of-pocket
expense reimbursement. Set forth in Exhibit E are the shareholder service fees
IFTC remitted to ZKSC during each Fund's last fiscal year. It is anticipated
that ZKSC will continue to provide transfer agent services after consummation of
the Transaction.

GSP ONLY. Banco Santander ("Spanish Custodian"), Central Contable Electronica,
Carretera de Barcelona Km. 11,700, P.O. Box 50760, 28022 Madrid, as custodian,
has custody of all securities and cash of GSP held in Spain. The Spanish
Custodian owns a controlling interest in Banco Santander de Negocios, which
wholly owns BSN. The Spanish Custodian currently receives an annual fee as
custodian for GSP, payable quarterly, at a rate of .12 of 1% of the market value
of the securities of the Fund held in custody by the Spanish Custodian plus
certain transaction costs and out-of-pocket expense reimbursement. For its
services as custodian for the Fund for the fiscal year ended November 30, 1996,
the Spanish Custodian earned $261,000.

24
<PAGE> 29

PORTFOLIO TRANSACTIONS. ZKI is the investment manager for the Funds and ZKI and
its affiliates furnish investment management services for the Kemper Funds and
other clients including affiliated insurance companies. Zurich Investment
Management Limited ("ZIML") is the sub-adviser for KHI, KGT, KMM, KST and GSP.
ZKI and its affiliates share some common research and trading facilities. ZIML
is the sub-adviser for other Kemper Funds as well. BSN is the sub-adviser for
GSP. (Each of ZKI, ZIML and BSN are referred to as an "Adviser.") At times
investment decisions may be made to purchase or sell the same investment
securities for a Fund and for one or more of the other clients managed by an
Adviser or its affiliates. When two or more of such clients are simultaneously
engaged in the purchase or sale of the same security, through the same trading
facility, the transactions are allocated as to amount and price in a manner
considered equitable to each.

The Advisers, in effecting purchases and sales of portfolio securities for the
account of a Fund, will implement the Fund's policy of seeking best execution of
orders. The Advisers may be permitted to pay higher brokerage commissions for
research services as described below. Consistent with this policy, orders for
portfolio transactions are placed with broker-dealer firms giving consideration
to the quality, quantity and nature of each firm's professional services, which
include execution, financial responsibility, responsiveness, clearance
procedures, wire service quotations and statistical and other research
information provided to a Fund and the Advisers and their affiliates. Subject to
seeking best execution of an order, brokerage is allocated on the basis of all
services provided. Any research benefits derived are available for all clients
of the Advisers and their affiliates. In selecting among firms believed to meet
the criteria for handling a particular transaction, the Advisers may give
consideration to those firms that have sold or are selling shares of the Funds
and of other funds managed by the Advisers and their affiliates, as well as to
those firms that provide market, statistical and other research information to a
Fund and the Advisers and their affiliates, although the Advisers are not
authorized to pay higher commissions to firms that provide such services, except
as described below.

ALL FUNDS, EXCEPT GSP. The Advisers may in certain instances be permitted to
pay higher brokerage commissions solely for receipt of market, statistical and
other research services as defined in Section 28(e) of the Securities Exchange
Act of 1934 and interpretations thereunder. Such services may include, among
other things: economic, industry or company research reports or investment
recommendations; computerized databases; quotation and execution equipment and
software; and research or analytical computer software and services. Where
products or services have a "mixed use," a good faith effort is made to make a
reasonable allocation of the cost of the products or services in accordance with
the

25
<PAGE> 30

anticipated research and non-research uses, and the cost attributable to
non-research use is paid by the Adviser or one of its affiliates in cash.
Subject to Section 28(e) and procedures adopted by the Board of each Fund, a
Fund could pay a firm that provides research services commissions for effecting
a securities transaction for the Fund in excess of the amount other firms would
have charged for the Transaction if an Adviser determines in good faith that the
greater commission is reasonable in relation to the value of the brokerage and
research services provided by the executing firm viewed in terms either of a
particular transaction or the Adviser's overall responsibilities to the Fund and
other clients. Not all such research services may be useful or of value in
advising a particular Fund. Research benefits will be available for all clients
of the Advisers and their affiliates. The investment management fee paid by a
Fund to an Adviser is not reduced because these research services are received.

GSP ONLY. Subject to GSP's policy of seeking best execution of orders, GSP may
execute portfolio transactions through direct or indirect affiliates of BSN in
accordance with procedures adopted by GSP's Board pursuant to Rule 17e-1 of the
1940 Act. Of the brokerage commissions paid by GSP during the fiscal year ended
November 30, 1996, $251,000 was paid to BSN Sociedad de Valores y Bolsa, an
affiliate of BSN ("Affiliated Broker"). The Affiliated Broker was paid
approximately 39% of the total brokerage commissions paid during the period
noted above and approximately 33% of the aggregate dollar amount of portfolio
transactions for the period were effected through the Affiliated Broker.

SKI. It is expected that SKI (including ZKI under SKI's ownership) will
implement portfolio transaction policies that are substantially similar to those
currently used by the Advisers. In addition, to the maximum extent feasible, it
is expected that SKI will place orders for portfolio transactions through
Scudder Investor Services, Inc., Two International Place, Boston, Massachusetts
02110 ("SIS") (a corporation registered as a broker/dealer and a subsidiary of
Scudder), which will in turn place orders on behalf of the Funds with issuers,
underwriters or other brokers and dealers. SIS will not receive any commission,
fee or other remuneration from a Fund for this service.

Set forth in Exhibit E are the total brokerage commissions paid by each Fund for
its most recently completed fiscal year, as well as the percentage of such
amounts that was allocated to broker-dealer firms on the basis of research
information.

SCUDDER. Scudder, Stevens & Clark, Inc. ("Scudder"), 345 Park Avenue, New York,
New York 10154, is one of America's oldest and largest investment management
firms. It manages approximately $125 billion in assets globally, about $50
billion of which are invested in equities and the balance in fixed income and
money market investments. Scudder manages

26
<PAGE> 31

approximately $45 billion in a variety of open-end and closed-end funds for
nearly two million shareholder accounts. The firm also provides investment
services for private and institutional clients, such as trusts, endowments, and
corporate employee benefit plans. Scudder manages more than $25 billion
internationally in both developed and emerging markets. The firm is one of the
world's largest managers of pension fund assets invested overseas.

Scudder manages two families of pure no-load mutual funds. The Scudder Family of
Funds (approximately $23 billion) comprises 53 money market, bond and equity
mutual funds. The AARP Investment Program from Scudder, a family of 15 funds
(approximately $14 billion), is designed to address the needs of the more than
33 million members of the American Association of Retired Persons. The balance
of the funds under management (approximately $5 billion) comprises offshore,
variable life insurance and other kinds of funds.

The investment companies to which Scudder renders investment management
services, and the related fees, are identified in Exhibit D.

The names, addresses and principal occupations of the principal executive
officer and the directors of Scudder are as follows:

<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
Daniel Pierce, Director Chairman of the Board and
Two International Place Managing Director, Scudder
Boston, Massachusetts 02110
Edmond D. Villani, Chief President, Chief Executive
Executive Officer and Director Officer and Managing Director,
345 Park Avenue Scudder
New York, New York 10154
Stephen R. Beckwith, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Lynn S. Birdsong, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Nicholas Bratt, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
E. Michael Brown, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
</TABLE>

27
<PAGE> 32

<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
Managing Director, Scudder
Mark S. Casady, Director
Two International Place
Boston, Massachusetts 02110
Linda C. Coughlin, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
Margaret D. Hadzima, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Jerard K. Hartman, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Richard A. Holt, Director Managing Director, Scudder
Two Prudential Plaza
180 North Stetson, Suite 5400
Chicago, Illinois 60601
John T. Packard, Director Managing Director, Scudder
101 California Street
San Francisco, California 94111
Kathryn L. Quirk, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Cornelia M. Small, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Stephen A. Wohler, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
</TABLE>

After consummation of the Transaction, it is anticipated that the principal
executive officer and directors of SKI will be as follows:

<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
Lynn Birdsong, Director Senior Executive Officer --
345 Park Avenue International Operations, SKI
New York, New York 10154
</TABLE>

28
<PAGE> 33

<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
Member of Corporate Executive
Lawrence Cheng, Director Board and Chief Investment
Mythenquai 2 Officer for Investments and
8002 Zurich, Switzerland International Asset Management,
Zurich
Steven Gluckstern, Director Member of Corporate Executive
Mythenquai 2 Board and responsible for
8002 Zurich, Switzerland Reinsurance, Structured
Finance, Capital Market
Products and Strategic
Investments, Zurich
Rolf Hueppi, Director Chairman and Chief Executive
Mythenquai 2 Officer, Zurich; Chairman of
8002, Zurich, Switzerland Board of Directors, SKI
Markus Rohrbasser, Director Chief Financial Officer and
Mythenquai 2 Member of Corporate Executive
8002, Zurich, Switzerland Board, Zurich
Cornelia Small, Director Senior Executive Officer --
345 Park Avenue Investment Management, SKI
New York, New York 10154
Edmond Villani, Chief Executive Officer, SKI
Chief Executive Officer
and Director
345 Park Avenue
New York, New York 10154
</TABLE>

MISCELLANEOUS

GENERAL

The cost of preparing, printing and mailing the enclosed proxy, accompanying
notice and proxy statement and all other costs in connection with solicitation
of proxies will be paid by ZKI, including any additional solicitation made by
letter, telephone or telegraph. In addition to solicitation by mail, certain
officers and representatives of the Funds, officers and employees of ZKI 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. In addition, ZKI has retained First Data Corp. to
solicit proxies on behalf of each Fund's Board and the boards of the other
Kemper Funds, the fee for which will be borne by ZKI. A COPY OF YOUR FUND'S
ANNUAL REPORT AND ANY MORE RECENT SEMI-ANNUAL REPORT ARE AVAILABLE WITHOUT
CHARGE UPON REQUEST BY WRITING TO THE FUND, 222 SOUTH RIVERSIDE PLAZA, CHICAGO,
ILLINOIS 60606 OR BY CALLING 1-800-621-1048.

29
<PAGE> 34

PROPOSALS OF SHAREHOLDERS. Any shareholder proposal that may properly be
included in the proxy solicitation material for a Fund's next annual shareholder
meeting, if any, must be received by such Fund no later than December 12, 1997.

OTHER MATTERS TO COME BEFORE THE MEETING. The Boards are not aware of any
matters that will be presented for action at the Meeting other than those set
forth herein. Should any other matters requiring a vote of shareholders arise,
the proxy in the accompanying 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 the Fund.

VOTING, QUORUM

Each share of a Fund is entitled to one vote on each matter submitted to a vote
of the shareholders of that Fund at the Meeting; no shares have cumulative
voting rights.

Each valid proxy will be voted in accordance with the instructions on the proxy
and as the persons named in the proxy determine on such other business as may
come before the Meeting. If no instructions are given, the proxy will be voted
FOR the election of the persons who have been nominated as additional Board
Members for such Fund and FOR Items 2 and 3. Shareholders who execute proxies
may revoke them at any time before they are voted, either by writing to the Fund
or in person at the time of the Meeting. Proxies given by telephone or
electronically transmitted instruments may be counted if obtained pursuant to
procedures designed to verify that such instructions have been authorized.

Item 1 (election of Board Members) requires a plurality vote of the shares of
each Fund. This means that the two nominees receiving the largest number of
votes will be elected. Item 2 (ratification of selection of independent
auditors) requires the affirmative vote of a majority of the shares voting on
the matter. Items 3A and 3B (approval of new investment management agreement
and, for GSP only, approval of new sub-advisory agreement) require the
affirmative vote of a "majority of the outstanding voting securities" of the
applicable Fund. The term "majority of the outstanding voting securities" as
defined in the 1940 Act means: the affirmative vote of the lesser of (1) 67% of
the voting securities of the Fund present at the meeting if more than 50% of the
outstanding shares of the Fund are present in person or by proxy or (2) more
than 50% of the outstanding shares of the Fund. Approval of Item 3B is
conditional upon approval of Item 3A for GSP. As noted previously, the holders
of the Common Shares and the Preferred Shares of KTF will vote together as a

30
<PAGE> 35

single class on all items. If an Item is not approved, the Board would consider
appropriate action.

At least 50% of the shares of a Fund must be present, in person or by proxy, in
order to constitute a quorum for that Fund. Thus, the meeting for a particular
Fund could not take place on its scheduled date if less than 50% of the shares
of that Fund were represented. If, by the time scheduled for the meeting, a
quorum of shareholders of a Fund is not present or if a quorum is present but
sufficient votes in favor of any of the items are not received, the persons
named as proxies may propose one or more adjournments of the meeting for that
Fund to permit further soliciting of proxies from its shareholders. Any such
adjournment will require the affirmative vote of a majority of the shares of the
Fund as to which the meeting is being adjourned, present (in person or by proxy)
at the session of the meeting to be adjourned. The persons named as proxies will
vote in favor of any such adjournment if they determine that such adjournment
and additional solicitation are reasonable and in the interest of the respective
Fund's shareholders.

In tallying shareholder votes, abstentions and "broker non-votes" (i.e., shares
held by brokers or nominees as to which (i) instructions have not been received
from the beneficial owners or persons entitled to vote and (ii) the broker or
nominee does not have discretionary voting power on a particular matter) will be
counted for purposes of determining whether a quorum is present for purposes of
convening the Meeting. On Item 1, abstentions and broker non-votes will have no
effect; the two nominees receiving the largest number of votes will be elected.
On Item 2, abstentions and broker non-votes will not be counted as "votes cast"
and will have no effect on the result of the vote. On Items 3A and 3B
abstentions and broker non-votes will be considered to be both present at the
Meeting and issued and outstanding and, as a result, will have the effect of
being counted as voted against the Items.

The Board of each Fund recommends an affirmative vote on all items.

PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.

By order of the Boards,
Philip J. Collora
Secretary

31
<PAGE> 36

EXHIBIT INDEX

<TABLE>
<S> <C>
Form of Investment Management Agreement.............. Exhibit A
Form of Sub-Advisory Agreement (GSP only)............ Exhibit B
Kemper Funds Net Assets and Management Fees.......... Exhibit C
Investment Objectives and Advisory Fees for Funds
Advised by Scudder, Stevens & Clark, Inc........... Exhibit D
Fees and Expenses.................................... Exhibit E
</TABLE>

32
<PAGE> 37

EXHIBIT A

FORM OF
INVESTMENT MANAGEMENT AGREEMENT*

[NAME OF TRUST]
222 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606

, 199

Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154

INVESTMENT MANAGEMENT AGREEMENT
[NAME OF SERIES]

Ladies and Gentlemen:

[Name of Trust] (the "Trust") has been established as a Massachusetts business
Trust to engage in the business of an investment company. Pursuant to the
Trust's Declaration of Trust, as amended from time-to-time (the "Declaration"),
the Board of Trustees is authorized to issue the Trust's shares of beneficial
interest, par value $ per share, (the "Shares") in separate series, or
funds. The Board of Trustees has authorized [name of series] (the "Fund").
Series may be abolished and dissolved, and additional series established, from
time to time by action of the Trustees.

The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:

1. DELIVERY OF DOCUMENTS. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the

- ---------------

*For GSP, any reference to a Trust, Trustees, Declaration of Trust or similar
phrases related to a Massachusetts business trust will be deemed a reference to
a Corporation, Directors, Articles of Incorporation or similar phrases related
to a Maryland corporation. In addition, while this form of investment
management agreement contemplates that there may be multiple series of shares,
none of the Funds have been divided into more than one series. Accordingly,
such references, to the extent appropriate, will be modified.

A-1
<PAGE> 38

currently effective Prospectus (the "Prospectus") and Statement of Additional
Information (the "SAI") relating to the Fund included in the Trust's
Registration Statement on Form N-1A, as amended from time to time, (the
"Registration Statement") filed by the Trust under the Investment Company Act of
1940, as amended, (the "1940 Act") and the Securities Act of 1933, as amended.
Copies of the documents referred to in the preceding sentence have been
furnished to you by the Trust. The Trust has also furnished you with copies
properly certified or authenticated of each of the following additional
documents related to the Trust and the Fund:

(a) The Declaration dated , 19 , as amended to date.

(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").

(c) Resolutions of the Trustees of the Trust and the shareholders of the Fund
selecting you as investment manager and approving the form of this
Agreement.

(d) Establishment and Designation of Series of Shares of Beneficial Interest
dated , 19 relating to the Fund.

The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.

2. PORTFOLIO MANAGEMENT SERVICES. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust. You shall
also make available to the Trust promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Trust in complying
with the requirements of the

A-2
<PAGE> 39

1940 Act and other applicable laws. To the extent required by law, you shall
furnish to regulatory authorities having the requisite authority any information
or reports in connection with the services provided pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the Trust
are being conducted in a manner consistent with applicable laws and regulations.

You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.

You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.

3. ADMINISTRATIVE SERVICES. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;

A-3
<PAGE> 40

monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of dividends and distributions
available to be paid by the Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting the Trust as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Trust's Board of Trustees. Nothing in this Agreement shall be
deemed to shift to you or to diminish the obligations of any agent of the Fund
or any other person not a party to this Agreement which is obligated to provide
services to the Fund.

4. ALLOCATION OF CHARGES AND EXPENSES. Except as otherwise specifically
provided in this section 4, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including the Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 2 hereof and the administrative services described in section 3 hereof.

You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and

A-4
<PAGE> 41

accounting expenses; maintenance of books and records which are required to be
maintained by the Fund's custodian or other agents of the Trust; telephone,
telex, facsimile, postage and other communications expenses; taxes and
governmental fees; fees, dues and expenses incurred by the Fund in connection
with membership in investment company trade organizations; fees and expenses of
the Fund's accounting agent for which the Trust is responsible pursuant to the
terms of the Fund Accounting Services Agreement, custodians, subcustodians,
transfer agents, dividend disbursing agents and registrars; payment for
portfolio pricing or valuation services to pricing agents, accountants, bankers
and other specialists, if any; expenses of preparing share certificates and,
except as provided below in this section 4, other expenses in connection with
the issuance, offering, distribution, sale, redemption or repurchase of
securities issued by the Fund; expenses relating to investor and public
relations; expenses and fees of registering or qualifying Shares of the Fund for
sale; interest charges, bond premiums and other insurance expense; freight,
insurance and other charges in connection with the shipment of the Fund's
portfolio securities; the compensation and all expenses (specifically including
travel expenses relating to Trust business) of Trustees, officers and employees
of the Trust who are not affiliated persons of you; brokerage commissions or
other costs of acquiring or disposing of any portfolio securities of the Fund;
expenses of printing and distributing reports, notices and dividends to
shareholders; expenses of printing and mailing Prospectuses and SAIs of the Fund
and supplements thereto; costs of stationery; any litigation expenses;
indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.

You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.

5. MANAGEMENT FEE. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of
of 1 percent of the average weekly net assets as defined below of the
Fund for such month. [SEE PAGE 15 OF

A-5
<PAGE> 42

PROXY STATEMENT FOR EACH FUND'S MANAGEMENT FEE] over (b) any compensation waived
by you from time to time (as more fully described below). You shall be entitled
to receive during any month such interim payments of your fee hereunder as you
shall request, provided that no such payment shall exceed 75 percent of the
amount of your fee then accrued on the books of the Fund and unpaid.

The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.

You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.

6. AVOIDANCE OF INCONSISTENT POSITION; SERVICES NOT EXCLUSIVE. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.

Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent

A-6
<PAGE> 43

of the Trust. Whenever the Fund and one or more other accounts or investment
companies advised by you have available funds for investment, investments
suitable and appropriate for each shall be allocated in accordance with
procedures believed by you to be equitable to each entity. Similarly,
opportunities to sell securities shall be allocated in a manner believed by you
to be equitable. The Fund recognizes that in some cases this procedure may
adversely affect the size of the position that may be acquired or disposed of
for the Fund.

7. LIMITATION OF LIABILITY OF MANAGER. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.

8. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall remain in
force until , 19 , and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder and any applicable SEC exemptive order therefrom.

This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.

This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.

A-7
<PAGE> 44

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. [Not applicable for GSP.] 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 Trust]" refers to the Trustees under the Declaration
collectively as Trustees and not as individuals or personally, and that no
shareholder of the Fund, or Trustee, officer, employee or agent of the Trust,
shall be subject to claims against or obligations of the Trust or of the Fund to
any extent whatsoever, but that the Trust estate only shall be liable.

You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.

11. MISCELLANEOUS. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

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.

A-8
<PAGE> 45

This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.

If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.

Yours very truly,

[Name of Trust]

By:

-----------------------------------------------------------------------------
President

The foregoing Agreement is hereby accepted as of the date hereof.

SCUDDER KEMPER INVESTMENTS, INC.

By:

-----------------------------------------------------------------------------
President

A-9
<PAGE> 46

EXHIBIT B

FORM OF SUB-ADVISORY AGREEMENT (GSP ONLY)

AGREEMENT made this day of , 199 , by and between SCUDDER KEMPER
INVESTMENTS, INC., a Delaware corporation (the "Adviser") and BSN GESTION DE
PATRIMONIOS, S.A., S.G.C. a corporation organized under the laws of Spain (the
"Sub-Adviser").

WHEREAS, THE GROWTH FUND OF SPAIN, INC., a Maryland corporation (the "Fund") is
an closed-end, diversified management investment company registered under the
United States Investment Company Act of 1940, as amended (the "Investment
Company Act of 1940") the shares of common stock (the "Shares") of which are
registered under the Securities Act of 1933;

WHEREAS, the Fund has retained the Adviser to render to it investment advisory
and management services pursuant to an Investment Management Agreement, dated
, 199 (the "Management Agreement"); and

WHEREAS, the Adviser desires to retain the Sub-Adviser to render investment
advisory and management services with respect to that portion of the Fund's
portfolio invested in Spanish securities and the Sub-Adviser is willing to
render such services;

NOW THEREFORE, in consideration of the mutual covenants hereinafter contained,
it is hereby agreed by and between the parties hereto as follows:

1. APPOINTMENT OF SUB-ADVISER. The Adviser hereby employs the Sub-Adviser to
manage the investment and reinvestment of the assets of the Fund to be invested
in Spanish securities in accordance with the Fund's investment objectives and
policies and limitations, subject to the supervision of the Adviser and the
Board of Directors of the Fund, for the period and upon the terms herein set
forth. The investment of funds hereunder shall be subject to all applicable
restrictions of the Articles of Incorporation and By-Laws of the Fund as may
from time to time be in force.

The Sub-Adviser accepts such employment and agrees during such period to render
such investment management services, to furnish related office facilities and
equipment and clerical, bookkeeping and administrative services for the Fund,
and to assume the obligations herein set forth for the compensation herein
provided. The Sub-Adviser shall for all purposes herein provided be deemed to be
an independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Fund or the
Adviser in any way or otherwise be deemed an agent of the Fund or the Adviser.
It is understood and agreed

B-1
<PAGE> 47

that the Sub-Adviser, by separate agreements with the Fund, may also serve the
Fund in other capacities.

2. COMPENSATION. For the services and facilities described in Section 1, the
Adviser will pay to the Sub-Adviser at the end of each calendar month, an
investment management fee computed at an annual rate of .35% of the Fund's
average weekly net assets. For the month and year in which this Agreement
becomes effective or terminates, there shall be an appropriate proration on the
basis of the number of days that the Agreement is in effect during the month and
year, respectively.

3. NON-EXCLUSIVITY OF SERVICES. The services of the Sub-Adviser under this
Agreement are not to be deemed exclusive, and the Sub-Adviser shall be free to
render similar services or other services to others so long as its services
hereunder are not impaired thereby.

4. NET ASSET VALUE. The net asset value of the Fund shall be calculated in
accordance with the provisions of the Fund's prospectus or at such other time or
times as the Fund's Directors may determine in accordance with the provisions of
the Investment Company Act of 1940. On each day when net asset value is not
calculated, the net asset value of the Shares as of the close of business on the
last day on which such calculation was made for the purpose of the foregoing
computations.

5. POTENTIAL CONFLICTS OF INTEREST. Subject to applicable statutes and
regulations, it is understood that directors, officers or agents of the Fund are
or may be interested in the Sub-Adviser as officers, directors, agents,
shareholders or otherwise, and that the officers, directors, shareholders and
agents of the Sub-Adviser may be interested in the Fund otherwise than as a
director, officer or agent.

6. STANDARD OF CARE. The Sub-Adviser shall not be liable for any error of
judgment or of law or for any loss suffered by the Fund or the Adviser in
connection with the matters to which this Agreement relates, except loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Sub-Adviser in the performance of its obligations and duties or by reason of
its reckless disregard of its obligations and duties under this Agreement.

7. DURATION AND TERMINATION. This Agreement shall become effective on the date
specified in Section 10 hereof and shall remain in full force until ,
199 , unless sooner terminated as hereinafter provided. This Agreement shall
continue in force from year to year thereafter, but only as long as such
continuance is specifically approved at least annually in the manner required by
the Investment Company Act of 1940 and the rules and regulations thereunder;
provided, however, that if the continuation of this Agreement is not approved,
the Sub-Adviser may continue to serve in

B-2
<PAGE> 48

such capacity in the manner and to the extent permitted by the Investment
Company Act of 1940 and the rules and regulations thereunder.

This Agreement shall automatically terminate in the event of its assignment or
in the event of the termination of the Management Agreement and may be
terminated at any time without the payment of any penalty by the Adviser or by
the Sub-Adviser on sixty (60) days' written notice to the other party.

The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act of
1940 and the rules and regulations thereunder.

Termination of this Agreement shall not affect the right of the Sub-Adviser to
receive payments on any unpaid balance of there compensation described in
Section 2 earned prior to such termination.

8. SURVIVAL. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.

9. NOTICES. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.

10. REPRESENTATIONS AND WARRANTIES.

(a) The Sub-Adviser represents and warrants that it has applied for
registration as an investment adviser under the United States Investment
Advisers Act of 1940, as amended (the "Advisers Act").

(b) The Sub-Adviser agrees to use its best efforts to become registered
under the Advisers Act and maintain such registration in effect during the
term of this Agreement.

(c) This Agreement shall become effective on the date that such
registration under the Advisers Act becomes effective with the United
States Securities and Exchange Commission.

(d) The Sub-Adviser further represents and warrants that it is fully
qualified under the laws of Spain to perform its duties hereunder and
agrees to comply with any and all other applicable laws and regulations in
performing its obligations hereunder.

11. GOVERNING LAW. This Agreement shall be construed in accordance with
applicable United States federal law and the laws of the Commonwealth of
Massachusetts.

B-3
<PAGE> 49

12. MISCELLANEOUS.

(a) The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.

(b) Terms not defined herein shall have the meaning set forth in the Fund's
prospectus.

(c) 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 WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this Agreement
to be executed as of the day and year first above written.

SCUDDER KEMPER INVESTMENTS, INC.

By:
---------------------------

ATTEST:

- -------------------------------

BSN GESTION de PATRIMONIOS, S.A., S.G.C.

By:
----------------------
Managing Director

ATTEST:

- -------------------------------

B-4
<PAGE> 50

EXHIBIT C

KEMPER FUNDS NET ASSETS AND MANAGEMENT FEES

<TABLE>
<CAPTION>
TOTAL NET ASSETS* MANAGEMENT
FUND (MILLIONS) FEE**
---- ----------------- ----------
<S> <C> <C>
Kemper Technology Fund.................. $1,063 A
Kemper Total Return Fund................ 3,021 A
Kemper Growth Fund...................... 2,738 A
Kemper Small Capitalization Equity
Fund.................................. 934 F
Kemper Income and Capital Preservation
Fund.................................. 573 B
Kemper National Tax-Free Income Series
1. Kemper Municipal Bond Fund......... 3,322 C
2. Kemper Intermediate Municipal Bond
Fund............................... 22 B
Kemper Diversified Income Fund.......... 779 A
Kemper High Yield Series
1. Kemper High Yield Fund............. 4,097 A
2. Kemper High Yield Opportunity
Fund............................... -- L
Kemper U.S. Government Securities
Fund.................................. 4,163 C
Kemper International Fund............... 472 D
Kemper International Bond Fund.......... 26 D
Kemper State Tax-Free Income Series
1. Kemper California Tax-Free Income
Fund............................... 1,008 B
2. Kemper New York Tax-Free Income
Fund............................... 286 B
3. Kemper Florida Tax-Free Income
Fund............................... 104 B
4. Kemper Texas Tax-Free Income
Fund............................... 12 B
5. Kemper Ohio Tax-Free Income Fund... 39 B
6. Kemper Michigan Tax-Free Income
Fund............................... 3 B
7. Kemper New Jersey Tax-Free Income
Fund............................... 5 B
8. Kemper Pennsylvania Tax-Free Income
Fund............................... 6 B
</TABLE>

C-1
<PAGE> 51

<TABLE>
<CAPTION>
TOTAL NET ASSETS* MANAGEMENT
FUND (MILLIONS) FEE**
---- ----------------- ----------
<S> <C> <C>
Kemper Portfolios
1. Kemper Cash Reserves Fund.......... $ 208 E
2. Kemper U.S. Mortgage Fund.......... 2,960 B
3. Kemper Short-Intermediate
Government Fund.................... 204 B
Kemper Value Fund, Inc.
1. Kemper Contrarian Fund............. 78 D
2. Kemper-Dreman High Return Equity
Fund............................... 738 D
3. Kemper Small Cap Value Fund........ 273 D
Kemper Adjustable Rate U.S. Government
Fund.................................. 82 B
Kemper Blue Chip Fund................... 256 A
Kemper Global Income Fund............... 132 D
Kemper Value+Growth Fund................ 39 I
Kemper Quantitative Equity Fund......... 5 A
Kemper Asian Growth Fund................ 2 J
Kemper Europe Fund...................... 4 D
Kemper Aggressive Growth Fund........... -- F
Zurich Money Funds
1. Zurich Money Market Fund........... 4,362 G
2. Zurich Government Money Fund....... 671 G
3. Zurich Tax-Free Money Fund......... 771 G
Zurich YieldWise Money Fund............. 245 G
Cash Equivalent Fund
1. Money Market Portfolio............. 971 H
2. Government Securities Portfolio.... 404 H
3. Tax-Exempt Portfolio............... 445 H
Tax-Exempt California Money Market
Fund.................................. 119 H
Cash Account Trust
1. Money Market Portfolio............. 585 H
2. Government Securities Portfolio.... 545 H
3. Tax-Exempt Portfolio............... 221 H
Investors Cash Trust
1. Government Securities Portfolio.... 169 K
2. Treasury Portfolio................. 63 K
</TABLE>

C-2
<PAGE> 52

<TABLE>
<CAPTION>
TOTAL NET ASSETS* MANAGEMENT
FUND (MILLIONS) FEE**
---- ----------------- ----------
<S> <C> <C>
Investors Municipal Cash Fund
1. Investors Florida Municipal Cash
Fund.............................. -- H
2. Investors New Jersey Municipal
Cash Fund......................... -- H
3. Investors Pennsylvania Municipal
Cash Fund......................... -- H
4. Tax-Exempt New York Money Market
Fund.............................. 61 H
Kemper High Income Trust................ 215 0.85%
Kemper Intermediate Government Trust.... 269 0.80%
Kemper Municipal Income Trust........... 466 0.55%
Kemper Multi-Market Income Trust........ 220 0.85%
Kemper Strategic Municipal Income
Trust................................. 128 0.60%
The Growth Fund of Spain, Inc........... 264 1.00%
Kemper Strategic Income Fund............ 53 0.85%
Kemper Horizon Fund
1. Kemper Horizon 20+ Portfolio...... 63 A
2. Kemper Horizon 10+ Portfolio...... 63 A
3. Kemper Horizon 5 Portfolio........ 31 A
Investors Fund Series
1. Kemper Money Market Portfolio..... 71 0.50%
2. Kemper Total Return Portfolio..... 697 0.55%
3. Kemper High Yield Portfolio....... 289 0.60%
4. Kemper Growth Portfolio........... 487 0.60%
5. Kemper Government Securities
Portfolio......................... 84 0.55%
6. Kemper International Portfolio.... 163 0.75%
7. Kemper Small Cap Growth
Portfolio......................... 69 0.65%
8. Kemper Investment Grade Bond
Portfolio......................... 2 0.60%
9. Kemper Value Portfolio............ 21 0.75%
10. Kemper Small Cap Value
Portfolio.......................... 13 0.75%
11. Kemper Value+Growth Portfolio..... 10 0.75%
12. Kemper Horizon 20+ Portfolio...... 4 0.60%
13. Kemper Horizon 10+ Portfolio...... 6 0.60%
14. Kemper Horizon 5 Portfolio........ 3 0.60%
15. Kemper Blue Chip Portfolio........ -- 0.65%
16. Kemper Global Income Portfolio.... -- 0.75%
</TABLE>

C-3
<PAGE> 53

<TABLE>
<CAPTION>
TOTAL NET ASSETS* MANAGEMENT
FUND (MILLIONS) FEE**
---- ----------------- ----------
<S> <C> <C>
Kemper Target Equity Fund
1. Kemper Retirement Fund Series I... 117 0.50%
2. Kemper Retirement Fund Series
II................................. 173 0.50%
3. Kemper Retirement Fund Series
III................................ 127 0.50%
4. Kemper Retirement Fund Series
IV................................. 136 0.50%
5. Kemper Retirement Fund Series V... 137 0.50%
6. Kemper Retirement Fund Series
VI................................. 73 0.50%
7. Kemper Retirement Fund Series
VII................................ 5 0.50%
8. Kemper Worldwide 2004 Fund........ 36 0.60%
</TABLE>

- ---------------

* Total Net Assets, in millions, as of the most recent fiscal year end.

** Scheduled annual management fees payable to ZKI or its affiliates as a
percentage of average daily net assets.

(A) .58 of 1% of the first $250 million, .55 of 1% of the next $750 million, .53
of 1% of the next $1.5 billion, .51 of 1% of the next $2.5 billion, .48 of
1% of the next $2.5 billion, .46 of 1% of the next $2.5 billion, .44 of 1%
of the next $2.5 billion and .42 of 1% thereafter.

(B) .55 of 1% of the first $250 million, .52 of 1% of the next $750 million,
.50 of 1% of the next $1.5 billion, .48 of 1% of the next $2.5 billion, .45
of 1% of the next $2.5 billion, .43 of 1% of the next $2.5 billion, .41 of
1% of the next $2.5 billion and .40 of 1% thereafter. ZKI has agreed to
temporarily reduce its management fee and reimburse or pay certain
operating expenses of the Intermediate Municipal, Michigan, New Jersey and
Pennsylvania Funds.

(C) .45 of 1% of the first $250 million, .43 of 1% of the next $750 million, .41
of 1% of the next $1.5 billion, .40 of 1% of the next $2.5 billion, .38 of
1% of the next $2.5 billion, .36 of 1% of the next $2.5 billion, .34 of 1%
of the next $2.5 billion and .32 of 1% thereafter.

(D) .75 of 1% of the first $250 million, .72 of 1% of the next $750 million, .70
of 1% of the next $1.5 billion, .68 of 1% of the next $2.5 billion, .65 of
1% of the next $2.5 billion, .64 of 1% of the next $2.5 billion, .63 of 1%
of the next $2.5 billion and .62 of 1% thereafter.

(E) .40 of 1% of the first $250 million, .38 of 1% of the next $750 million,
.35 of 1% of the next $1.5 billion, .32 of 1% of the next $2.5 billion, .30
of 1% of the next $2.5 billion, .28 of 1% of the next $2.5 billion, .26 of
1% of the next $2.5 billion and .25 of 1% thereafter.

C-4
<PAGE> 54

(F) Base investment management fee of .65 of 1% of average daily net assets
plus or minus an incentive fee based upon the investment performance of the
fund as compared with the performance of the Standard & Poor's 500 Stock
Index, which may result in a total fee ranging from .35 of 1% to .95 of 1%
for the Small Capitalization Equity Fund, or .45 of 1% to .85 of 1% for the
Aggressive Growth Fund.

(G) .50% of the first $215 million; .375% of the next $335 million; .30% of the
next $250 million; .25% thereafter (on all of the series of Zurich Money
Funds in the aggregate). ZKI has agreed to temporarily reduce its management
fee to 0% for the Zurich YieldWise Money Fund and reimburse or pay 100% of
the Fund's other operating expenses for a period of at least six months from
April 17, 1997.

(H) .22% of the first $500 million; .20% of the next $500 million; .175% of the
next $1 billion; .16% of the next $1 billion; .15% thereafter (in the case
of Cash Equivalent Fund, on the Money Market and Government Securities
Portfolios in the aggregate and on the Tax-Exempt Portfolio individually,
and, in the case of Cash Account Trust, on all of the series in the
aggregate). ZKI has agreed to temporarily absorb operating expenses of the
Cash Account Trust portfolios to the extent, if any, that such expenses
exceed the following percentages of average daily net assets: Money Market
Portfolio (1.00%), Government Securities Portfolio (1.00%) and Tax-Exempt
Portfolio (0.95%). In addition, from time to time, ZKI may voluntarily
absorb certain additional expenses of the Cash Account Trust portfolios.
Also, ZKI has agreed to temporarily waive its management fee and reimburse
or pay operating expenses for the current fiscal year to the extent, if any,
that total operating expenses exceed .80% of average daily net assets of the
New York Fund and .90% of each of the Florida, New Jersey and Pennsylvania
Funds.

(I) .72 of 1% of the first $250 million, .69 of 1% of the next $750 million,
.66 of 1% of the next $1.5 billion, .64 of 1% of the next $2.5 billion, .60
of 1% of the next $2.5 billion, .58 of 1% of the next $2.5 billion, .56 of
1% of the next $2.5 billion, and .54 of 1% thereafter.

(J) .85 of 1% of the first $250 million, .82 of 1% of the next $750 million,
.80 of 1% of the next $1.5 billion, .78 of 1% of the next $2.5 billion, .75
of 1% of the next $2.5 billion, .74 of 1% of the next $2.5 billion, .73 of
1% of the next $2.5 billion, and .72 of 1% thereafter. ZKI has agreed to a
reduction of its management fee by .25% until the earlier of May 1, 1997 or
the date the Fund's net assets reach $100 million.

C-5
<PAGE> 55

(K) .15% of average daily net assets. ZKI has agreed to temporarily waive its
management fee and reimburse or pay operating expenses of each portfolio to
the extent that such expense exceeds .25% of average daily net assets of the
portfolio.

(L) .65 of 1% of the first $250 million, .62 of 1% of the next $750 million, .60
of 1% of the next $1.5 billion, .58 of 1% of the next $2.5 billion, .55 of
1% of the next $2.5 billion, .53 of 1% of the next $2.5 billion, .51 of 1%
of the next $2.5 billion and .49 of 1% thereafter.

C-6
<PAGE> 56

EXHIBIT D

INVESTMENT OBJECTIVES AND ADVISORY FEES
FOR FUNDS ADVISED BY SCUDDER, STEVENS & CLARK, INC.

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
MONEY MARKET
Scudder U.S. Treasury Safety, liquidity, and 0.500% of $ 398,597,054
Money Fund stability of capital net assets+
and, consistent
therewith, current
income.
Scudder Cash Investment Stability of capital 0.500% to $1,430,623,516
Trust while maintaining $250 million
liquidity of capital 0.450% next
and providing current $250 million
income from money 0.400% next
market securities. $500 million
0.350%
thereafter+
Scudder Money Market High level of current 0.250% of $ 384,509,425**
Series income consistent with net assets
preservation of
capital and liquidity
by investing in a
broad range of
short-term money
market instruments.
Scudder Government Money High level of current 0.250% of $ 36,794,563**
Market Series income consistent with net assets
preservation of
capital and liquidity
by investing
exclusively in
obligations issued or
guaranteed by the U.S.
Government or its
agencies or
instrumentalities and
in certain repurchase
agreements.
TAX FREE MONEY MARKET
Scudder Tax Free Money Income exempt from 0.500% to $ 220,245,241
Fund regular federal income $500 million
taxes and stability of 0.480%
principal through thereafter+
investments in
municipal securities.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
** Program assets as of 7/31/97.
+ Subject to waivers and/or expense limitations.
</TABLE>

D-1
<PAGE> 57

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
High level of current 0.250% of $ 79,695,218**
Scudder Tax Free Money income, consistent net assets
Market Series with preservation of
capital and liquidity,
exempt from federal
income tax by
investing primarily in
high quality municipal
obligations.
Scudder California Tax Stability of capital 0.500% of $ 68,695,680
Free Money Fund and the maintenance of net assets+
a constant net asset
value of $1.00 per
share while providing
California tax payers
income exempt from
both California state
personal and regular
federal income tax
through investment in
high quality, short-
term tax-exempt
California municipal
securities.
Scudder New York Tax Stability of capital 0.500% of $ 59,538,652
Free Money Fund and income exempt from net assets+
New York state and New
York City personal
income taxes and
regular federal income
tax through investment
in high quality,
short-term municipal
securities in New
York.
TAX FREE
Scudder Limited Term Tax High level of income 0.600% of $ 123,660,431
Free Fund exempt from regular net assets+
federal income tax
consistent with a high
degree of principal
stability.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
** Program asset as of 7/31/97.
+ Subject to waivers and/or expense limitations.
</TABLE>

D-2
<PAGE> 58

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
High level of income 0.600% to $ 650,504,081
Scudder Medium Term Tax exempt from regular $500 million
Free Fund federal income tax and 0.500% thereafter
limited principal
fluctuation through
investment primarily
in high grade
intermediate term
municipal securities.
Scudder Managed Income exempt from 0.550% to $ 737,422,861
Municipal Bonds regular federal income $200 million
tax primarily through 0.500% next
investments in high- $500 million
grade long-term 0.475% thereafter
municipal securities.
Scudder High Yield Tax High level of income, 0.650% to $ 293,101,021
Free Fund exempt from regular $300 million
federal income tax, 0.600% thereafter
from an actively
managed portfolio
consisting primarily
of investment grade
municipal securities.
Scudder California Tax Income exempt from 0.625% to $ 288,576,041
Free Fund both California state $200 million
personal income tax 0.600% thereafter
and regular federal
income tax primarily
through investment
grade municipal
securities.
Scudder Massachusetts A high level of income 0.600% of $ 65,505,088
Limited Term Tax Free exempt from both net assets+
Fund Massachusetts personal
income tax and regular
federal income tax as
is consistent with a
high degree of price
stability.
Scudder Massachusetts A high level of income 0.600% of $ 329,842,169
Tax Free Fund exempt from both net assets
Massachusetts personal
income tax and regular
federal income tax
through investment
primarily in long-term
investment-grade
municipal securities
in Massachusetts.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>

D-3
<PAGE> 59

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Income exempt from New 0.625% to $ 180,647,157
Scudder New York Tax York state and New $200 million
Free Fund York City personal 0.600% thereafter
income taxes and
regular federal income
tax through investment
primarily in long-term
investment-grade
municipal securities
in New York.
Scudder Ohio Tax Free Income exempt from 0.600% of $ 84,109,009
Fund Ohio personal income net assets+
tax and regular
federal income tax
through investment
primarily in
investment-grade
municipal securities
in Ohio.
Scudder Pennsylvania Tax Income exempt from 0.600% of $ 74,177,997
Free Fund Pennsylvania personal net assets+
income tax and regular
federal income tax
through investment
primarily in
investment-grade
municipal securities
in Pennsylvania.
U.S. INCOME
Scudder Short Term Bond High level of income 0.600% to $1,468,170,885
Fund consistent with a high $500 million
degree of principal 0.500% next
stability through $500 million
investments primarily 0.450% next
in high quality $500 million
short-term bonds. 0.400% next
$500 million
0.375% next
$1 billion
0.350% thereafter
Scudder Zero Coupon 2000 High investment 0.600% of $ 25,440,414
Fund returns over a net assets+
selected period as is
consistent with
investment in U.S.
Government securities
and the minimization
of reinvestment risk.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>

D-4
<PAGE> 60

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
High current income 0.650% to $ 383,008,164
Scudder GNMA Fund and safety of $200 million
principal primarily 0.600% next
from investment in $300 million
U.S. Government 0.550% thereafter
guaranteed
mortgage-backed GNMA
securities.
Scudder Income Fund A high level of 0.650% to $ 578,519,502
income, consistent $200 million
with the prudent 0.600% next
investment of capital, $300 million
through a flexible 0.550% thereafter
investment program
emphasizing high-grade
bonds.
Scudder High Yield Bond A high level of 0.700% of $ 73,523,094
Fund current income and net assets
capital appreciation
through investment
primarily in below
investment-grade
domestic debt
securities.
GLOBAL INCOME
Scudder Global Bond Fund Total return with an 0.750% to $ 217,403,907
emphasis on current $1 billion
income by investing 0.700%
primarily in thereafter+
high-grade bonds
denominated in foreign
currencies and the
U.S. dollar.
Scudder International Income primarily by 0.850% to $ 235,993,183
Bond Fund investing in $1 billion
high-grade 0.800% thereafter
international bonds
and protection and
possible enhancement
of principal value by
actively managing
currency, bond market
and maturity exposure
and by security
selection.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>

D-5
<PAGE> 61

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
High current income 1.000% of $ 304,607,984
Scudder Emerging Markets and, secondarily, net assets
Income Fund long-term capital
appreciation by
investing primarily in
high-yielding debt
securities issued in
emerging markets.
ASSET ALLOCATION
Scudder Pathway Current income and, There will be no $ 13,928,759***
Conservative Portfolio secondarily, long-term fee as the Manager
growth of capital by will receive a fee
investing from the
substantially in underlying funds.
Scudder bond mutual
funds, but will have
some exposure to
Scudder equity mutual
funds.
Scudder Pathway Balanced Balance of growth and There will be no $ 167,721,722***
Portfolio income by investing in fee as the Manager
a mix of Scudder money will receive a fee
market, bond and from the
equity mutual funds. underlying funds.
Scudder Pathway Growth Long-term growth of There will be no $ 42,234,535***
Portfolio capital by investing fee as the Manager
predominantly in will receive a fee
Scudder equity mutual from the
funds designed to underlying funds.
provide long-term
growth.
Scudder Pathway Maximize total return There will be no $ 8,983,598***
International by investing in a fee as the Manager
Portfolio select mix of will receive a fee
established from the
international and underlying funds.
global Scudder Funds.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
*** Program assets as of 6/30/97.
</TABLE>

D-6
<PAGE> 62

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
U.S. GROWTH AND INCOME
Scudder Balanced Fund A balance of growth 0.700% of $ 109,541,542
and income from a net assets+
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 Growth and Long-term growth of 0.600% to $4,186,481,205
Income Fund capital, current $500 million
income and growth of 0.550% next
income primarily from $500 million
common stocks, 0.500% next
preferred stocks and $500 million
securities convertible 0.475% next
into common stocks. $500 million
0.450% next
$1 billion
0.425% next
$1.5 billion
0.405% thereafter
U.S. GROWTH
Scudder Large Company Maximize long-term 0.750% to $1,651,459,797
Value Fund (formerly capital appreciation $500 million
Scudder Capital Growth through a value driven 0.650% next
Fund) investment program $500 million
emphasizing common 0.600% next
stocks and preferred $500 million
stocks. 0.550% thereafter
Scudder Value Fund Long-term growth of 0.700% of $ 88,874,292
capital through net assets
investment in
undervalued equity
securities.
Scudder Small Company Long-term growth of 0.750% of $ 41,187,186
Value Fund capital by investing net assets+
primarily in
undervalued equity
securities of small
U.S. companies.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>

D-7
<PAGE> 63

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term growth of 0.750% of $ 72,048,339***
Scudder Micro Cap Fund capital by investing net assets+
primarily in a
diversified portfolio
of U.S. micro-cap
common stocks.
Scudder Classic Growth Long-term growth of 0.700% of $ 33,867,066
Fund capital while keeping net assets+
the value of its
shares more stable
than other growth
mutual funds.
Scudder Large Company Long-term growth of 0.700% of $ 221,253,633
Growth Fund (formerly capital through net assets
Scudder Quality Growth investment primarily
Fund) in the equity
securities of
seasoned, financially
strong U.S. growth
companies.
Scudder Development Fund Long-term growth of 1.000% to $ 861,564,138
capital by investing $500 million
primarily in equity 0.950% next
securities of emerging $500 million
growth companies. 0.900% thereafter
Scudder 21st Century Long-term growth of 1.000% of $ 20,942,531***
Growth Fund capital by investing net assets+
primarily in the
securities of emerging
growth companies
poised to be leaders
in the 21st century.
GLOBAL GROWTH
Scudder Global Fund Long-term growth of 1.000% to $1,604,465,769
capital through $500 million
investment in a 0.950% next
diversified portfolio $500 million
of marketable foreign 0.900% thereafter
and domestic
securities, primarily
equity securities.
Institutional Long-term growth of 0.900% of $ 17,897,508
International Equity capital primarily net assets+
Portfolio through a diversified
portfolio of
marketable foreign
equity securities.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
*** Program assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>

D-8
<PAGE> 64

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term growth of 1.000% of $ 25,631,898***
Scudder International capital and current net assets+
Growth and Income Fund income primarily from
foreign equity
securities
Scudder International Long-term growth of 0.900% to $2,583,030,686
Fund capital primarily $500 million
through a diversified 0.850% next
portfolio of $500 million
marketable foreign 0.800% next
equity securities. $1 billion
0.750% next
$1 billion
0.700% thereafter
Scudder Global Discovery Above-average capital 1.100% of $ 350,829,980
Fund appreciation over the net assets
long-term by investing
primarily in the
equity securities of
small companies
located throughout the
world.
Scudder Emerging Markets Long-term growth of 1.25% of $ 75,793,693
Growth Fund capital primarily net assets+
through equity
investments in
emerging markets
around the globe.
Scudder Gold Fund Maximum return 1.000% of $ 163,932,814
consistent with net assets
investing in a
portfolio of gold-
related equity
securities and gold.
Scudder Greater Europe Long-term growth of 1.000% of $ 120,300,058
Growth Fund capital through net assets
investment primarily
in the equity
securities of European
companies.
Scudder Pacific Long-term growth of 1.100% of $ 329,391,540
Opportunities Fund capital primarily net assets
through investment in
the equity securities
of Pacific Basin
companies, excluding
Japan.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
*** Program assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>

D-9
<PAGE> 65

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term capital Effective 9/11/97: $ 621,914,690
Scudder Latin America appreciation through 1.250% to
Fund investment primarily $1 billion
in the securities of 1.150% thereafter
Latin American
issuers.
The Japan Fund, Inc. Long-term capital 0.850% to $ 385,963,962
appreciation through $100 million
investment primarily 0.750% next
in equity securities $200 million
of Japanese companies. 0.700% next
$300 million
0.650% thereafter
CLOSED-END FUNDS
The Argentina Fund, Inc. Long-term capital Adviser: $ 117,596,046
appreciation through Effective 11/1/97:
investment primarily 1.100% of
in equity securities net assets
of Argentine issuers. Sub-Adviser:
Paid by Adviser.
0.160% of
net assets
The Brazil Fund, Inc. Long-term capital 1.200% to $ 417,981,869
appreciation through $150 million
investment primarily 1.050% next
in equity securities $150 million
of Brazilian issuers. 1.000% thereafter
Effective
10/29/97:
1.200% to
$150 million
1.050% next
$150 million
1.000% next
$200 million
0.900% thereafter
Administrator:
Receives an annual
fee of $50,000
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
</TABLE>

D-10
<PAGE> 66

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term capital Advisor: $ 661,690,073
The Korea Fund, Inc. appreciation through 1.150% to
investment primarily $50 million
in equity securities 1.100% next
of Korean companies. $50 million
1.000% next
$250 million
0.950% next
$400 million
0.900% thereafter
Sub-Adviser -
Daewoo:
Paid by Adviser.
0.2875% to
$50 million
0.275% next
$50 million
0.250% next
$250 million
0.2375% next
$400 million
0.225% thereafter
The Latin America Dollar High level of current 1.200% of $ 94,748,606
Income Fund, Inc. income and, net assets
secondarily, capital
appreciation through
investment principally
in dollar-denominated
Latin American debt
instruments.
Montgomery Street Income High level of current 0.500% to $ 198,465,822
Securities, Inc. income consistent with $150 million
prudent investment 0.450% next
risks through a $50 million
diversified portfolio 0.400% thereafter
primarily of debt
securities.
Scudder New Asia Fund, Long-term capital 1.250% to $ 133,363,686
Inc. appreciation through $75 million
investment primarily 1.150% next
in equity securities $125 million
of Asian companies. 1.100% thereafter
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
</TABLE>

D-11
<PAGE> 67

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term capital 1.250% to $ 266,418,730
Scudder New Europe Fund, appreciation through $75 million
Inc. investment primarily 1.150% next
in equity securities $125 million
of companies traded on 1.100% thereafter
smaller or emerging
European markets and
companies that are
viewed as likely to
benefit from changes
and developments
throughout Europe.
Scudder Spain and Long-term capital Adviser: $ 75,127,194
Portugal Fund, Inc. appreciation through 1.000% of
investment primarily net assets
in equity securities Administrator:
of Spanish & 0.200% of
Portuguese issuers. net assets
Scudder World Income High income and, 1.200% of $ 54,488,637
Opportunities Fund, consistent therewith, net assets
Inc. capital appreciation.
INSURANCE PRODUCTS
Balanced Portfolio Balance of growth and 0.475% of $ 88,342,837
income consistent with net assets
long-term preservation
of capital through a
diversified portfolio
of equity and fixed
income securities.
Bond Portfolio High level of income 0.475% of $ 65,769,421
consistent with a high net assets
quality portfolio of
debt securities.
Capital Growth Portfolio Long-term capital 0.475% to $ 440,481,308
growth from a $500 million
portfolio consisting 0.450% thereafter
primarily of equity
securities.
Global Discovery Above-average capital 0.975% of $ 16,757,264
Portfolio appreciation over the net assets+
long-term by investing
primarily in the
equity securities of
small companies
located throughout the
world.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>

D-12
<PAGE> 68

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term growth of 0.475% of $ 91,091,547
Growth and Income capital, current net assets
Portfolio income and growth of
income.
International Portfolio Long-term growth of 0.875% to $ 726,038,527
capital primarily $500 million
through diversified 0.775% thereafter
holdings of marketable
foreign equity
investments.
Money Market Portfolio Stability of capital 0.370% of $ 97,785,626
and current income net assets
from a portfolio of
money market
instruments.
AARP FUNDS
AARP High Quality Money Current income and 0.350% to $ 412,126,193
Fund liquidity, consistent $2 billion
with maintaining 0.330% next
stability and safety $2 billion
of principal, through 0.300% next
investment in high $2 billion
quality securities. 0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.100% of
net assets
AARP Balanced Stock and Long-term growth of 0.350% to $ 403,179,939
Bond Fund capital and income, $2 billion
consistent with a 0.330% next
stable share price, $2 billion
through investment in 0.300% next
a combination of $2 billion
stocks, bonds and cash 0.280% next
reserves. $2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.190% of
net assets
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
</TABLE>

D-13
<PAGE> 69

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term capital 0.350% to $ 826,136,713
AARP Capital Growth Fund growth, consistent $2 billion
with a share price 0.330% next
more stable than other $2 billion
capital growth funds, 0.300% next
through investment $2 billion
primarily in common 0.280% next
stocks and securities $2 billion
convertible into 0.260% next
common stocks. $3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.320% of
net assets
AARP Global Growth Fund Long-term growth of 0.350% to $ 77,651,978
capital, consistent $2 billion
with a share price 0.330% next
more stable than other $2 billion
global equity funds, 0.300% next
through investment $2 billion
primarily in a 0.280% next
diversified portfolio $2 billion
of equity securities 0.260% next
of corporations $3 billion
worldwide. 0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND
FEE
0.550% of
net assets
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>

D-14
<PAGE> 70

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term growth of 0.350% to $4,218,983,398
AARP Growth and Income capital and income, $2 billion
Fund consistent with a 0.330% next
stable share price, $2 billion
through investment 0.300% next
primarily in common $2 billion
stocks and securities 0.280% next
convertible into $2 billion
common stocks. 0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.190% of
net assets
AARP International Stock Long-term growth of 0.350% to $ 12,699,109***
Fund capital, consistent $2 billion
with a share price 0.330% next
more stable than other $2 billion
international equity 0.300% next
funds, through $2 billion
investment primarily 0.280% next
in a diversified $2 billion
portfolio of foreign 0.260% next
equity securities. $3 billion
0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND
FEE
0.600% of
net assets
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>

D-15
<PAGE> 71

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term growth of 0.350% to $ 25,425,137***
AARP Small Company Stock capital, consistent $2 billion
Fund with a share price 0.330% next
more stable than other $2 billion
small company stock 0.300% next
funds, through $2 billion
investment primarily 0.280% next
in stocks of small $2 billion
U.S. companies. 0.260% next
$3 billion
0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND
FEE
0.550% of
net assets
AARP U.S. Stock Index Long-term capital 0.350% to $ 23,917,674***
Fund growth and income, $2 billion
consistent with 0.330% next
greater share price $2 billion
stability than a S&P 0.300% next
500 index fund, by $2 billion
taking an indexing 0.280% next
approach to investing $2 billion
in common stocks, 0.260% next
emphasizing higher $3 billion
dividend stocks while 0.250% next
maintaining investment $3 billion
characteristics 0.240%
otherwise similar to thereafter+
the S&P 500 index. INDIVIDUAL FUND
FEE
0.000% of
net assets
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
*** Program assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>

D-16
<PAGE> 72

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
High level of current 0.350% to $ 34,951,973***
AARP Bond Fund for income, consistent $2 billion
Income with greater share 0.330% next
price stability than a $2 billion
long term bond, 0.300% next
through investment $2 billion
primarily in 0.280% next
investment-grade debt $2 billion
securities. 0.260% next
$3 billion
0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND
FEE
0.280% of
net assets
AARP GNMA and U.S. High level of current 0.350% to $4,904,439,844
Treasury Fund income, consistent $2 billion
with greater share 0.330% next
price stability than a $2 billion
long-term bond, 0.300% next
through investment $2 billion
principally in U.S. 0.280% next
Government-guaranteed $2 billion
GNMA securities and 0.260% next
U.S. Treasury $3 billion
obligations. 0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.120% of
net assets
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
*** Program assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>

D-17
<PAGE> 73

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
High level of income, 0.350% to $ 511,905,166
AARP High Quality Bond consistent with $2 billion
Fund greater share price 0.330% next
stability than a $2 billion
long-term bond, 0.300% next
through investment $2 billion
primarily in a 0.280% next
portfolio of high $2 billion
quality securities 0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.190% of
net assets
AARP Diversified Growth Long-term growth of There will be no $ 36,411,938***
Portfolio capital through fee as the manager
investment primarily will receive a fee
in AARP stock mutual from the
funds. underlying funds.
AARP Diversified Income Current income with There will be no $ 34,230,023***
Portfolio modest long-term fee as the manager
appreciation through will receive a fee
investment primarily from the
in AARP bond mutual underlying funds.
funds.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
*** Program assets as of 6/30/97.
</TABLE>

D-18
<PAGE> 74

<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Current income free 0.350% to $ 111,264,728
AARP High Quality Tax from federal income $2 billion
Free Money Fund taxes and liquidity, 0.330% next
consistent with $2 billion
maintaining stability 0.300% next
and safety of $2 billion
principal, through 0.280% next
investment in $2 billion
high-quality municipal 0.260% next
securities. $3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.100% of
net assets
AARP Insured Tax Free High level of income 0.350% to $1,755,412,222
General Bond Fund free from federal $2 billion
income taxes, 0.330% next
consistent with $2 billion
greater share price 0.300% next
stability than a long- $2 billion
term municipal bond, 0.280% next
through investment $2 billion
primarily in municipal 0.260% next
securities covered by $3 billion
insurance. 0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.190% of
net assets
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
</TABLE>

D-19
<PAGE> 75

EXHIBIT E

FEES AND EXPENSES

<TABLE>
<CAPTION>
KHI KGT KTF KMM KSM GSP KST
---------- --------- --------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Fiscal Year End...... 11/30/96 11/30/96 11/30/96 11/30/96 11/30/96 11/30/96 11/30/96
Management Fees Paid
to ZKI.............. $1,756,000 2,187,000 3,699,000 1,828,000 759,000 2,374,000 414,000
Effective Management
Fee Rate............ .85% .80 .55 .85 .60 1.00 .85
Shareholder Service
Fees Paid by IFTC to
ZKSC................ $ 49,000 41,000 71,000 31,000 24,000 24,000 24,000
Brokerage Commissions
Paid by Fund........ $1,820,000 109,000 306,000 997,000 72,000 642,000 40,000
Percent of Brokerage
Commissions Paid by
Fund Allocated on
Basis of Research... 0% 0 0 11 0 10 0
</TABLE>

E-1
<PAGE> 76

Thank you

for mailing your proxy card promptly!

================================================================================

WE APPRECIATE YOUR
CONTINUING SUPPORT AND
LOOK FORWARD TO SERVING
YOUR FUTURE INVESTMENT NEEDS.

<PAGE> 77

KEMPER CLOSED-END FUNDS
================================================================================

KEMPER CLOSED-END
FUNDS

- - Kemper High Income Trust
- - Kemper Intermediate Government Trust
- - Kemper Municipal Income Trust
- - Kemper Multi-Market Income Trust
- - Kemper Strategic Municipal Income Trust
- - The Growth Fund of Spain, Inc.
- - Kemper Strategic Income Fund

Group F

(LOGO)Printed on recycled paper.

<PAGE> 4
[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.

-PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.-

KEMPER STRATEGIC MUNICIPAL INCOME TRUST FOR THE JOINT SPECIAL
MEETING OF SHAREHOLDERS
DECEMBER 3, 1997

THE SIGNERS OF THIS PROXY HEREBY APPOINT ARTHUR R. GOTTSCHALK AND STEPHEN B.
TIMBERS AND EACH OF THEM, ATTORNEYS AND PROXIES, WITH POWER OF SUBSTITUTION IN
EACH, TO VOTE ALL SHARES FOR THE SIGNERS AT THE JOINT SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD DECEMBER 3, 1997, AND AT ANY ADJOURNMENTS THEREOF, AS
SPECIFIED HEREIN, AND IN ACCORDANCE WITH THEIR BEST JUDGEMENT, ON ANY OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THIS MEETING.

Dated_________________________, 1997

Signature(s) (All registered owners
of accounts shown to the left
must sign. If signing for a
corporation, estate or trust, please
indicate your capacity or title.)

------------------------------------

------------------------------------
Signature(s)
GROUP F

- --------------------------------------------------------------------------------

PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE PROXY CARD BELOW. SIGN, DATE
AND RETURN IT IN THE ENVELOPE PROVIDED. TO SAVE THE COST OF ADDITIONAL
SOLICITATIONS, PLEASE MAIL YOUR PROXY PROMPTLY.

- PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. -

IF NO SPECIFICATION IS MADE HEREIN, ALL SHARES WILL BE VOTED "FOR" THE
PROPOSALS SET FORTH ON THIS PROXY.

THE PROXY IS SOLICITED BY THE BOARD OF THE FUND WHICH RECOMMENDS A VOTE "FOR"
ALL ITEMS.

TO VOTE, MARK BOXES BELOW IN BLUE OR BLACK INK AS FOLLOWS: /X/

<TABLE>
<S><C>
1. To elect the following as Board members: For Withhold For All
All All Except
/ / / / / /

01) Daniel Pierce, 02) Edmond D. Villani

----------------------------------------------------------------------------------------------------
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), PLEASE WRITE THAT NOMINEE'S NAME OR
NUMBER ON THE LINE ABOVE.

2. To ratify the selection of Ernst & Young LLP
as independent auditors for the For Against Abstain
current fiscal year. / / / / / /

3A. To approve a new investment management
agreement with Scudder Kemper Investments,
Inc. ("SKI") (or with Zurich Kemper
Investments, Inc., transferable to SKI). For Against Abstain
/ / / / / /

THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" ALL ITEMS.
</TABLE>

- -------------------------------------------------------------------------------