<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
The Growth Fund of Spain, Inc.
- --------------------------------------------------------------------------------
(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.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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
October 2, 1998
Kemper
Important News
for The Growth Fund of Spain, Inc. Shareholders
WHILE WE ENCOURAGE YOU TO READ THE FULL TEXT OF THE ENCLOSED NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS AND PROXY STATEMENT, HERE IS A BRIEF OVERVIEW OF MAJOR
MATTERS TO BE VOTED UPON.
- --------------------------------------------------------------------------------
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Q&A
QUESTIONS AND ANSWERS
Q WHAT IS HAPPENING?
A As a shareholder of The Growth Fund of Spain, Inc. (the "Fund"), you are being
asked to vote on a management proposal to convert the Fund from a closed-end
investment company to an open-end investment company. If the proposal is
approved by the shareholders, the Fund will be reorganized and become a new
series of Kemper Global/International Series, Inc. (the "New Fund").
Q WHAT IS THE DIFFERENCE BETWEEN A CLOSED-END AND AN OPEN-END INVESTMENT
COMPANY?
A Closed-end investment companies, such as the Fund, generally do not redeem
their outstanding shares or engage in the continuous sale of new securities.
Thus, persons wishing to buy or sell closed-end fund shares generally must do so
through a broker-dealer and pay or receive the market price. This price may be
more (a premium) or less (a discount) than the net asset value per share of the
closed-end fund's shares.
Open-end investment companies issue shares that can be redeemed or sold back to
the fund at the fund's net asset value per share. Moreover, open-end investment
companies generally issue new shares at the fund's net asset value per share.
Since they must be ready to redeem their shares on a daily basis, open-end funds
may not be able to be as fully invested as closed-end funds and may also have
higher operating expenses, both of which may affect performance.
Q WHY CONVERT THE FUND TO AN OPEN-END INVESTMENT COMPANY?
A The Fund was organized in 1990 in a closed-end format to offer investors
access to the then newly-liberalized securities markets of Spain without the
administrative burden associated with purchasing or selling Spanish securities
on an individual basis. The Fund's investment objective is long-term capital
appreciation and the Fund has delivered an average annual total return (based on
market price) of 8.93% since inception through August 31, 1998. The Fund
believes that it has realized its long-term objective. Despite this impressive
performance record, shares have traded consistently at a discount from their net
asset value. Open-ending the Fund will eliminate this discount.
KEMPER
LOGO
<PAGE> 3
Fund Management believes that a number of shareholders of the Fund support the
conversion of the Fund to open-end status as a means of permitting shareholders
to realize the net asset value of their investment in the Fund.
Q HOW MANY VOTES ARE NEEDED FOR THIS CONVERSION AND REORGANIZATION?
A The Fund's Articles of Incorporation currently require the affirmative vote of
three-quarters (3/4) of the Fund's outstanding shares of common stock to approve
any open-ending proposal. However, as part of this proposal the Articles will be
amended to lower the required vote for open-ending from three-quarters (3/4) to
two-thirds (2/3).
Q WILL CONVERSION AFFECT MY ABILITY TO DISPOSE OF SHARES?
A Once Fund shares are exchanged for New Fund shares in connection with the
reorganization, you will be able to redeem shares of the New Fund at net asset
value rather than have to sell them at the market price through a broker-dealer.
It will be the policy of the New Fund, with respect to any one shareholder
during any 90-day period, to pay redemption proceeds in cash up to the lesser of
$250,000 or one percent (1%) of the net assets of the New Fund at the beginning
of the period. Redemptions in excess of such amount will be paid in-kind by
distributing portfolio securities with a value equal to the net asset value of
the shares redeemed. Shareholders who receive redemptions in-kind will also be
subject to transaction costs associated with the establishment of securities
accounts to hold such securities (and transfer of securities to such accounts)
and/or the liquidation of their in-kind redemption proceeds.
The New Fund will also impose a two percent (2%) redemption fee on all
redemptions (including redemptions paid in-kind) of shares held for less than
one year. The one year includes the time period shares of the Fund are held
prior to the open-end conversion.
Q WHY ARE THESE CONDITIONS OR LIMITATIONS NECESSARY?
A The in-kind redemptions policy is intended to help minimize adverse tax
consequences to the New Fund and non-redeeming shareholders that could occur due
to large redemptions. Likewise, imposition of the two percent (2%) redemption
fee is designed to protect the long-term shareholders from administrative and
transactional expenses that could be imposed on the Fund by redeeming short-
term shareholders.
Q ARE THE SHAREHOLDERS BEING ASKED TO VOTE ON ANY OTHER MATTERS AT THE MEETING?
A Yes, shareholders are also being asked to elect two directors to the Board of
Directors, to ratify the selection of Ernst & Young LLP as independent auditors,
to approve a new investment management agreement with Scudder Kemper
Investments, Inc. and a new sub-advisory agreement with BSN Gestion de
Patrimonios, S.A., S.G.C. (which will not be continued if the conversion and
reorganization proposal is adopted), and to approve changing the Fund's
classification from a diversified fund to a non-diversified fund.
Q HOW DO THE MEMBERS OF THE BOARD OF DIRECTORS OF THE FUND SUGGEST THAT I VOTE?
A After careful consideration, as well as extensive deliberation and
consultation with Scudder Kemper, the board members, all of whom are independent
members, recommend that you vote "For" all the items on the enclosed proxy card.
<PAGE> 4
THE GROWTH FUND OF SPAIN, INC.
222 South Riverside Plaza Chicago, Illinois 60606
Telephone 1-800-733-8481 (Extension 438)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 28, 1998 AND PROXY STATEMENT
October 2, 1998
To the Shareholders:
You are invited to attend the annual meeting of the shareholders of The Growth
Fund of Spain, Inc. (the "Fund" or "GSP"). The meeting will be held at the
offices of the Scudder Kemper Investments, Inc., 345 Park Avenue, 25th Floor,
New York, New York on Wednesday, October 28, 1998 at 3:30 p.m., New York time,
for the following purposes and to transact such other business, if any, as may
properly come before the meeting:
1. To elect two directors to the Board of Directors.
2. To ratify the selection of Ernst & Young LLP as independent auditors for
the current fiscal year.
3A. To approve a new investment management agreement with Scudder Kemper
Investments, Inc.
3B. To approve a new sub-advisory agreement with BSN Gestion de Patrimonios,
S.A., S.G.C. (Approval of Item 3B is conditional upon approval of Item 3A.)
4. To approve the change in the Fund's classification from a diversified to a
non-diversified fund.
5. To approve a proposal to convert the Fund from a closed-end investment
company to an open-end investment company, which proposal includes the
following:
(a) Approving changes to the Fund's Articles of Incorporation to:
(i) Permit the conversion to an open-end investment company and the
Reorganization (as defined below) to be approved by the
affirmative vote of two-thirds of the Fund's outstanding shares
of common stock and to provide that the Fund will no longer be
governed by the
<PAGE> 5
business combination provisions of the Maryland General
Corporation Law; and
(ii) Reflect the Fund's status as an open-end investment company;
(b) Changing the Fund's subclassification from a closed-end investment
company to an open-end investment company;
(c) Approving changes to the Fund's fundamental investment policies; and
(d) Adopting an Agreement and Plan of Reorganization pursuant to which
the Fund would become a series of Kemper Global/ International
Series, Inc. (the "Reorganization").
The Board of Directors of the Fund has fixed the close of business on September
4, 1998 as the record date for determining the shareholders of the Fund entitled
to notice of and to vote at the meeting. Shareholders are entitled to one vote
for each share held.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL ITEMS.
- ------------------------------------------------------------------------------
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, AND SIGN,
DATE AND RETURN IT IN THE ENVELOPE PROVIDED. TO SAVE THE COST OF ADDITIONAL
SOLICITATIONS, PLEASE MAIL YOUR PROXY PROMPTLY.
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<PAGE> 6
The accompanying proxy is solicited by the Board of Directors for voting at the
annual meeting of shareholders to be held on Wednesday, October 28, 1998 and at
any and all adjournments thereof (the "Meeting"). This proxy statement was first
mailed to shareholders on or about October 2, 1998.
The Board of Directors recommends that shareholders vote FOR ALL ITEMS.
THE VOTE REQUIRED TO APPROVE EACH ITEM IS DESCRIBED UNDER "MISCELLANEOUS."
The Board of Directors has fixed the close of business on September 4, 1998 as
the record date for the determination of shareholders of the Fund entitled to
notice of and to vote at the Meeting. As of September 4, 1998, there were
16,530,292.806 shares of the Fund issued and outstanding.
ITEM 1. ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEES
NAMED BELOW.
Pursuant to the Fund's Articles of Incorporation, 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 Directors expires. Pursuant
to the Fund's Articles of Incorporation, the number of Directors is apportioned
among the classes so as to maintain the classes as nearly equal in number as
possible.
It is intended that the proxies will be voted for the election as Directors of
the nominees described below. The nominees listed below have consented to serve
as Directors, if elected. In case any nominee shall be unable or shall fail to
act as a Director 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. Each Class I Director so elected will
serve as a Director of the Fund until the 2001 annual meeting of shareholders
and, in each case, until the election and qualification of a successor or until
such Director sooner dies, resigns or is removed as provided in the Fund's
Articles of Incorporation and By-laws.
Mr. Kelsey was last elected to the Board at the 1995 annual meeting of
shareholders. Mr. Renwick was first elected to the Board at the September 19,
1995 special meeting of shareholders. Messrs. Melville and Sell were first
elected to the Board at the December 3, 1997 special meeting of shareholders.
Messrs. Akins and Tingleff were last elected to the Board at the 1997 annual
meeting of shareholders. Messrs. Gottschalk and Weithers were last elected to
the Board at the 1996 annual meeting of shareholders.
2
<PAGE> 7
As noted below, if Item 5 is approved, the Fund will be reorganized as a series
of Kemper Global/International Series, Inc. ("KGIS"). The composition of the
Board of Directors of KGIS, however, is different from that of the Fund. Also,
the directors of KGIS are not elected in staggered terms of three years, but are
elected to serve until the next meeting of shareholders, if any, called for the
purpose of electing directors and until the election and qualification of a
successor or until such director sooner dies, resigns or is removed as provided
in KGIS's Articles of Incorporation and By-laws.
NOMINEES FOR DIRECTOR--CLASS I
<TABLE>
<CAPTION>
YEAR FIRST SHARES BENEFICIALLY
NAME (DATE OF BIRTH), PRINCIPAL YEAR TERM BECAME A OWNED AS OF
OCCUPATION AND AFFILIATIONS EXPIRES DIRECTOR AUGUST 31, 1998*
- ------------------------------- --------- ---------- -------------------
<S> <C> <C> <C>
Frederick T. Kelsey (4/25/27) 2001 1989 1,000
Retired; formerly, consultant
to Goldman, Sachs & Co.;
formerly, President,
Treasurer and Trustee of
Institutional Liquid Assets
and its affiliated mutual
funds; Trustee of the
Northern Institutional Funds;
formerly, Trustee of the
Pilot Funds
Fred B. Renwick (2/1/30) 2001 1995 0
Professor of Finance, New
York University, Stern School
of Business; Director, TIFF
Investment Program, Inc.;
Director, the Wartburg
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>
3
<PAGE> 8
CONTINUING DIRECTORS--CLASS II
<TABLE>
<CAPTION>
YEAR FIRST SHARES BENEFICIALLY
NAME (DATE OF BIRTH), PRINCIPAL YEAR TERM BECAME A OWNED AS OF
OCCUPATION AND AFFILIATIONS EXPIRES DIRECTOR AUGUST 31, 1998*
- ------------------------------- --------- ---------- -------------------
<S> <C> <C> <C>
Arthur R. Gottschalk (2/13/25) 1999 1989 1,000
Retired; formerly, President,
Illinois Manufacturers
Association; Trustee,
Illinois Masonic Medical
Center; formerly, Illinois
State Senator; formerly, Vice
President, The Reuben H.
Donnelley Corp.; formerly,
attorney
Moritz A. Sell (10/12/67) 1999 1997 0
Market Strategist,
Bankgesellschaft Berlin AG;
Analyst, Barclays de Zoete
Wedd (investment bank),
October 1995 until May 1996;
prior thereto, Derivatives
Trader, Canadian Imperial
Bank of Commerce
John G. Weithers (8/8/33) 1999 1993 300
Retired; formerly, Chairman
of the Board and Chief
Executive Officer, Chicago
Stock Exchange; Director,
Federal Life Insurance
Company; President of the
Members of the Corporation
and Trustee, DePaul
University
</TABLE>
4
<PAGE> 9
CONTINUING DIRECTORS--CLASS III
<TABLE>
<CAPTION>
YEAR FIRST SHARES BENEFICIALLY
NAME (DATE OF BIRTH), PRINCIPAL YEAR TERM BECAME A OWNED AS OF
OCCUPATION AND AFFILIATIONS EXPIRES DIRECTOR AUGUST 31, 1998*
- ------------------------------- --------- ---------- -------------------
<S> <C> <C> <C>
James E. Akins (10/15/26) 2000 1995 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
Gregory L. Melville (7/22/56) 2000 1997 0
Assistant Director,
Bankgesellschaft Berlin AG;
Vice President, Salomon
Brothers Inc., 1990 until
June 1995
John B. Tingleff (5/4/35) 2000 1991 1,006
Retired; formerly, President,
Tingleff & Associates
(management consulting firm);
formerly, Senior Vice
President, Continental
Illinois National Bank &
Trust Company
</TABLE>
- ---------------
* From time to time, the Directors have been, and may in the future be,
restricted from buying and/or selling shares of the Fund.
All of the Directors, except Messrs. Melville and Sell, serve as board members
of 15 investment companies, with 50 portfolios, managed by the Scudder Kemper
Investments, Inc. (the "Adviser").
The Board has an audit and governance committee that is composed of Messrs.
Akins, Gottschalk, Kelsey, Tingleff, Renwick and Weithers. The committee met
four times during the fiscal year ended November 30, 1997. The committee makes
recommendations regarding the selection of independent auditors for the Fund,
confers with the independent auditors regarding the 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 Board assigns. The committee
also proposes the nominees for election as directors by the shareholders.
Shareholders wishing to submit the name of a candidate for consideration by the
5
<PAGE> 10
committee should submit their recommendations to the secretary of the Fund.
The Fund pays Directors who are not "interested persons" of the Fund an annual
retainer fee plus expenses, and an attendance fee for each Board meeting and
committee meeting. As reflected above, certain of the Directors currently serve
as board members of various other investment companies for which the Adviser
serves as investment manager. Directors or officers who are "interested persons"
receive no compensation from the Fund. The Board met ten times during the fiscal
year ended November 30, 1997. Each then current Director 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, 1997,
except Messrs. Melville and Sell who were not directors during such fiscal year.
The table below shows, for each Director entitled to receive compensation from
the Fund, the aggregate compensation paid or accrued during the Fund's fiscal
year ended November 30, 1997 and the aggregate compensation from Kemper funds
paid or accrued during calendar year 1997.
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION
AGGREGATE COMPENSATION FROM FUND AND
NAME OF DIRECTOR FROM FUND FUND COMPLEX**
- ---------------- ---------------------- ----------------------
<S> <C> <C>
James E. Akins......... $4,000 $106,300
Arthur R.
Gottschalk*.......... 4,100 121,100
Frederick T. Kelsey.... 4,100 111,300
Gregory L. Melville.... *** ***
Fred B. Renwick........ 4,000 106,300
Moritz A. Sell......... *** ***
John B. Tingleff....... 4,000 106,300
John G. Weithers....... 4,000 106,300
</TABLE>
- ---------------
* Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with certain investment companies. 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 at
the fiscal year ended November 30, 1997 with respect to the Fund was
$108,700 for Mr. Gottschalk.
** Includes compensation for service on the Boards of 13 funds, with 39
portfolios, managed by the Adviser and its affiliates during calendar year
1997. Each Director, with the exception of Messrs. Melville and Sell,
currently serves as a board member of 15 funds, with 50 portfolios, managed
by the Adviser. Aggregate compensation does not reflect amounts paid by the
Adviser to the Directors for meetings in connection with the combination of
6
<PAGE> 11
Scudder, Stevens & Clark, Inc. and Zurich Kemper Investments, Inc. (the
"Zurich/Scudder alliance"). Such amounts totaled $42,800, $40,100, $39,000,
$42,900, $42,900, and $42,900 for Messrs. Akins, Gottschalk, Kelsey,
Renwick, Tingleff and Weithers, respectively.
*** Messrs. Melville and Sell were first elected to the Board at the December 3,
1997 special shareholders meeting, effective December 31, 1997.
FUND OFFICERS. Information about the executive officers of the Fund, with their
respective dates of birth and terms as Fund officers indicated, is set forth
below.
Mark S. Casady (9/21/60) has been a vice president of the Fund since 1/21/98.
Mr. Casady is a managing director of the Adviser, formerly, Institutional Sales
Manager of an unaffiliated mutual fund distributor.
Philip J. Collora (11/15/45) has been a vice president of the Fund since 2/1/90
and secretary of the Fund since 3/2/95. Mr. Collora is senior vice president of
the Adviser.
Joan R. Gregory (8/4/45) has been vice president of the Fund since 3/18/98. Ms.
Gregory is a vice president of the Adviser.
Jerard K. Hartman (3/1/33) has been vice president of the Fund since 1/21/98.
Mr. Hartman is a managing director of the Adviser.
John R. Hebble (6/27/58) has been treasurer of the Fund since 5/20/98. Mr.
Hebble is a senior vice president of the Adviser.
Maureen E. Kane (2/14/62) has been an assistant secretary of the Fund since
1/21/98. Ms. Kane is a vice president of the Adviser, formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
Thomas W. Littauer (4/26/55) has been vice president of the Fund since 1/21/98.
Mr. Littauer is a managing director of the Adviser, formerly Head of Broker
Dealer Division of Putnam Investment Management during 1996-1997; prior thereto,
President of Client Management Services for Fidelity Investments from 1990 to
1996.
Brenda Lyons (2/21/63) has been assistant treasurer of the Fund since 9/22/98.
Ms. Lyons is a vice president of the Adviser.
Ann M. McCreary (11/6/56) has been vice president of the Fund since 1/21/98. Ms.
McCreary is a managing director of the Adviser.
Caroline Pearson (4/1/62) has been an assistant secretary of the Fund since
1/21/98. Ms. Pearson is a senior vice president of the Adviser, formerly,
Associate, Dechert Price & Rhoads (law firm) 1989 to 1997.
7
<PAGE> 12
Daniel Pierce (3/18/34) has been president of the Fund since 1/21/98. Mr. Pierce
is a managing director of the Adviser.
Kathryn L. Quirk (12/3/52) has been vice president of the Fund since 1/21/98.
Ms. Quirk is a managing director of the Adviser.
Steven H. Reynolds (9/11/43) has been vice president of the Fund since 1/21/98.
Mr. Reynolds is a managing director of the Adviser.
Elizabeth C. Werth (10/1/47) has been an assistant secretary of the Fund since
1/21/98. Ms. Werth is a vice president of the Adviser and vice president of
Kemper Distributions Inc.
Linda J. Wondrack (9/12/64) has been vice president of the Fund since 1/21/98.
Ms. Wondrack is a senior vice president of the Adviser.
The officers of the Fund are elected by the Board of Directors on an annual
basis to serve until their successors are elected and qualified.
SHAREHOLDINGS
As of June 30, 1998, the Directors and officers of the Fund as a group owned
beneficially 3,306 shares of the Fund, which is less than 1% of the outstanding
shares. As of September 3, 1998, according to filings made with the Securities
and Exchange Commission, 1,378,000 shares, representing 8.30% of the outstanding
shares of the Fund, were beneficially owned by Cargill Financial Markets PLC,
Knowle Hill Park, Fairmile Lane, Cobham, Surrey KT11 2PD, United Kingdom. As of
May 12, 1998, according to filings made with the Securities and Exchange
Commission, 1,877,800 shares, representing 11.30% of the outstanding shares of
the Fund, were beneficially owned by Bankgesellschaft Berlin AG, Alexanderplatz,
2 D-10178, Berlin, Germany. As of February 10, 1998, according to filings made
with the Securities and Exchange Commission, 960,600 shares, representing 5.31%
of the outstanding shares of the Fund, were beneficially owned by FMR
Corporation, 82 Devonshire Street, Boston, Massachusetts. According to a
Schedule 13D filed with the Securities and Exchange Commission by Stichting Azko
Pensioenfonds ("Stichting") in March 1992, Stichting is the beneficial owner of
965,000 shares of the Fund. Stichting has not subsequently publicly filed an
amendment to its Schedule 13D.
SECTION 16 REPORTING COMPLIANCE
Section 30(f) of the Investment Company Act of 1940 (the "1940 Act") and Section
16(a) of the Securities Exchange Act of 1934 require the Fund's officers and
Directors, the Adviser, affiliated persons of the Adviser and persons who own
more than ten percent of a registered class of the Fund's equity securities to
file forms reporting their affiliation with the Fund and reports of ownership
and changes in ownership of the Fund's
8
<PAGE> 13
shares with the Securities and Exchange Commission (the "SEC") and the New York
Stock Exchange (the "NYSE"). 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 as furnished to the Fund, the Fund believes
that, during the fiscal year ended November 30, 1997, there was compliance with
all Section 16(a) filing requirements applicable to the Fund's officers and
Directors, the Adviser and affiliated persons of the Adviser.
ITEM 2. SELECTION OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEM 2.
A majority of the Directors who are "non-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 year. This firm has served the Fund in this
capacity since the Fund was organized and has no direct or indirect financial
interest in the Fund except as independent auditors. The selection of Ernst &
Young LLP as independent auditor of the 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.
ITEMS 3A AND 3B. APPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENT AND NEW
SUB-ADVISORY AGREEMENT
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEM 3.
INTRODUCTION
Scudder Kemper Investments, Inc. acts as the investment adviser and manager for
the Fund (the "Adviser") pursuant to an investment management agreement in
effect between the Adviser and the Fund. The investment management agreement in
effect between the Fund and the Adviser prior to the consummation of the
transaction between Zurich Insurance Company ("Zurich") and B.A.T Industries plc
("B.A.T") (the "Zurich-B.A.T Transaction" or the "Transaction"), which is
described below, is referred to in this Proxy Statement as the "Former
Investment Management Agreement." The investment management agreement currently
in effect between the Fund and the Adviser was executed as of the consummation
of the Zurich-B.A.T Transaction and is referred to in this Proxy Statement as
the "New Investment Management Agreement," collectively, the "New Investment
Management Agreement" and,
9
<PAGE> 14
together with the Former Investment Management Agreement, the "Investment
Management Agreement."
On June 26, 1997, the Adviser's predecessor, Scudder, Stevens & Clark, Inc.
("Scudder"), entered into an agreement with Zurich pursuant to which Scudder and
Zurich agreed to form an alliance. On December 31, 1997, Zurich acquired a
majority interest in Scudder, and Zurich Kemper Investments, Inc. ("Kemper"), a
Zurich subsidiary and investment manager of the Fund, became part of Scudder.
Scudder's name was changed to Scudder Kemper Investments, Inc. The transaction
between Scudder and Zurich (the "Scudder-Zurich Transaction") resulted in the
termination of the Fund's investment management agreement with Kemper. However,
the Former Investment Management Agreement between the Fund and Scudder Kemper
was approved by the Board and by the Fund's shareholders.
THE ZURICH-B.A.T TRANSACTION
On December 22, 1997, Zurich and B.A.T entered into a definitive agreement (the
"Merger Agreement") pursuant to which businesses of Zurich (including Zurich's
almost 70% ownership interest in the Adviser) were to be combined with the
financial services businesses of B.A.T. On October 12, 1997, Zurich and B.A.T
had confirmed that they were engaged in discussions concerning a possible
business combination; on October 16, 1997, Zurich and B.A.T announced that they
had entered into an Agreement in principle, dated as of October 15, 1997 (the
"Agreement in Principle") to merge B.A.T's financial services businesses with
Zurich's businesses. The Merger Agreement superseded the Agreement in Principle.
In order to effect this combination, Zurich and B.A.T first reorganized their
operations. Zurich became a subsidiary of a new Swiss holding company, Zurich
Allied AG, and Zurich shareholders became Zurich Allied AG shareholders. At the
same time, B.A.T separated its financial services business from its
tobacco-related businesses by spinning off to its shareholders a new British
company, Allied Zurich p.l.c., which now holds B.A.T's financial services
businesses.
Zurich Allied AG then contributed its interest in Zurich, and Allied Zurich
p.l.c. contributed the B.A.T financial services businesses, to a jointly owned
company, Zurich Financial Services ("Zurich Financial Services"), in each case
in exchange for shares of Zurich Financial Services. As a result, upon the
completion of the Transaction, the former Zurich shareholders became the owners
(through Zurich Allied AG) of 57% of the voting stock of Zurich Financial
Services, and former B.A.T shareholders now own (through Allied Zurich p.l.c.)
43% of the voting stock of Zurich Financial Services. Zurich Financial Services
now owns Zurich and the financial services businesses previously owned by B.A.T.
10
<PAGE> 15
CORPORATE GOVERNANCE
At the closing of the Zurich-B.A.T Transaction, the parties entered into a
governing agreement that establishes the corporate governance structure for
Zurich Allied AG, Allied Zurich p.l.c. and Zurich Financial Services (the
"Governing Agreement").
The Board of Directors of Zurich Financial Services consists of ten members,
five of whom were initially selected by Zurich and five by B.A.T. Mr. Rolf
Hueppi, Zurich's Chairman and Chief Executive Officer, became Chairman and Chief
Executive Officer of Zurich Financial Services. In addition to his vote by
virtue of his position on the Board of Directors, as Chairman Mr. Hueppi will
have a tie-breaking vote on all matters except recommendations of the Audit
Committee, recommendations of the Remuneration Committee in respect of the
remuneration of the Chairman and the CEO, appointment and removal of the
Chairman and CEO, appointments to the Nominations, Audit and Remuneration
Committees and nominations to the Board of Directors not made through the
Nominations Committee.
The Group Management Board of Zurich Financial Services has been given
responsibility by the Board of Directors for the executive management of Zurich
Financial Services and has wide authority for such purpose. Of the 11 initial
members of the Group Management Board, eight were members of the Corporate
Executive Board of Zurich (including Mr. Edmond D. Villani, CEO of the Adviser,
who is responsible for Global Asset Management for Zurich Financial Services),
and three are current B.A.T executives.
The Board of Directors of Zurich Allied AG initially consists of 11 members,
eight of whom were Zurich directors and three of whom were proposed by B.A.T.
The Board of Directors of Allied Zurich p.l.c. also initially consists of 11
members, eight of whom were B.A.T directors and three of whom were proposed by
Zurich. The parties have agreed that, as soon as possible, the Board of
Directors of Zurich Financial Services, Zurich Allied AG and Allied Zurich
p.l.c. will have identical membership.
Shareholder resolutions of Zurich Financial Services in general require approval
by at least 58% of all shares outstanding.
The Governing Agreement also contains provisions relating to dividend
equalization and provisions intended to ensure equal treatment of Zurich Allied
AG and Allied Zurich p.l.c. shareholders in the event of a takeover bid for
either company.
The B.A.T financial services businesses, which, since the closing of the
Transaction, are owned by Zurich Financial Services, include: the Farmers Group
of Insurance companies; the Eagle Star insurance business, primarily in the
U.K.; Allied-Dunbar, one of the leading U.K. unit-linked life
11
<PAGE> 16
insurance and pensions companies; and Threadneedle Asset Management, which was
formed initially to manage the investment assets of Eagle Star and
Allied-Dunbar, and which, at December 31, 1997, had $58.8 billion under
management. Overall, at year-end 1997, the financial services businesses of
B.A.T had $79 billion in assets under management, including $18 billion in third
party assets.
Zurich has informed the Fund that the financial services businesses of B.A.T do
not include any of B.A.T's tobacco businesses and that, after careful review,
Zurich has concluded that the tobacco-related liabilities connected with B.A.T's
tobacco business should not adversely affect Zurich or the present Zurich
subsidiaries, including the Adviser.
Governance arrangements that were put in place at the time of the acquisition of
Zurich's 70% interest in the Adviser (which are discussed below under "The
Adviser") remain unaffected by the Zurich-B.A.T Transaction. These arrangements
preclude the making of certain major decisions affecting the Adviser without
approval of directors of the Adviser elected by the non-Zurich shareholders of
the Adviser.
Consummation of the Zurich-B.A.T Transaction may be deemed to have constituted
an "assignment," as that term is defined in the 1940 Act, of the Fund's Former
Investment Management Agreement with the Adviser. As required by the 1940 Act,
the Former Investment Management Agreement provided for its automatic
termination in the event of its assignment. Accordingly, the New Investment
Management Agreement between the Fund and the Adviser was approved by the Board
members of the Fund and is now being proposed for approval by shareholders of
the Fund. The Adviser has received an exemptive order from the Securities and
Exchange Commission (the "SEC" or the "Commission"), permitting it to implement,
without prior shareholder approval, the New Investment Management Agreement for
a period of up to 150 days after the consummation of the Transaction. A copy of
the New Investment Management Agreement is attached hereto as Exhibit A. In
accordance with the exemptive order, the advisory fees paid by the Fund to the
Adviser under the New Investment Management Agreement have been held in an
interest-bearing escrow account, and the Fund will continue to deposit such fees
in escrow until shareholder approval of the New Investment Management Agreement.
If the agreement is not approved, the fees shall be returned to the Fund. THE
NEW INVESTMENT MANAGEMENT AGREEMENT IS SUBSTANTIALLY IDENTICAL TO THE FORMER
INVESTMENT MANAGEMENT AGREEMENT, EXCEPT FOR THE DATES OF EXECUTION AND
TERMINATION. The material terms of the Former Investment Management Agreement is
described under "Description of the Investment Management Agreement" below.
12
<PAGE> 17
BOARD RECOMMENDATION
The Board of the Fund met on July 16, 1998, to consider the Transaction and its
anticipated effects upon the Adviser and the investment management and other
services provided to the Fund by the Adviser and its affiliates. On July 16,
1998, the Board members of the Fund, none of whom are 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 the Board's deliberations and the reasons for its
recommendation, please see "Board Evaluation" near the end of this Item 3.
DESCRIPTION OF THE INVESTMENT MANAGEMENT AGREEMENT
Under the Investment Management Agreement, the Adviser provides the Fund with
continuing investment management services. The Adviser also determines which
securities should be purchased, held, or sold, and what portion of the Fund's
assets should be held uninvested, subject to the Articles of Incorporation,
By-Laws, investment objectives, policies and restrictions, the provisions of the
1940 Act, and such policies and instructions as the Directors may have
determined.
The Investment Management Agreement provides that the Adviser will provide
continuing management of the assets of the Fund in accordance with the Fund's
investment objectives, policies and restrictions, furnish at its expense office
space and facilities to the Fund and render administrative services on behalf of
the Fund necessary for the Fund's operations and not provided by persons not
parties to the agreement including, but not limited to, preparing reports to and
meeting materials for the Board and reports and notices to Fund shareholders;
supervising, negotiating contractual arrangements with, to the extent
appropriate, and monitoring the performance of various third-party and
affiliated service providers to the Fund (such as the Fund's accounting agents,
custodians, depositories, transfer agents and pricing agents, accountants,
attorneys, printers, underwriters, brokers and dealers, insurers and others) and
other persons in any capacity deemed necessary or desirable to Fund operations;
preparing and making filings with the SEC and other regulatory and
self-regulatory organizations, including but not limited to, preliminary and
definitive proxy materials, post-effective amendments to the registration
statement, semi-annual reports on Form N-SAR; overseeing the tabulation of
proxies by 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 returns pursuant to Section 4982 of the Internal Revenue Code
of 1986, as amended; providing assistance with investor and public relations
matters; monitoring the valuation of portfolio
13
<PAGE> 18
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
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
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 other agents as necessary
in connection therewith; establishing and monitoring the Fund's operating
expense budgets; reviewing the Fund's bills; processing the payment of bills
that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Fund in the conduct of its business, subject to the
direction and control of the Board.
The Fund is responsible for other expenses, including organizational expenses
(including out-of-pocket expenses, but not including the Adviser's overhead or
employee costs); brokers' commissions or other costs of acquiring or disposing
of any portfolio securities of the Fund; legal, auditing and accounting
expenses; payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; taxes and governmental fees;
the fees and expenses of the Fund's transfer agent; expenses of preparing share
certificates and any other expenses, including clerical expenses, of issuance,
offering, distribution, sale, redemption or repurchase of shares; the expenses
of and fees for registering securities for sale; the fees and expenses of
Independent Board members; the costs of printing and distributing reports,
notices and dividends to current shareholders; and the fees and expenses of the
Fund's custodians, subcustodians, accounting agents, dividend disbursing agents
and registrars. The Fund may arrange to have third parties assume all or part of
the expenses of sale, underwriting and distribution of shares of the Fund. The
Fund is also responsible for expenses of shareholders' and other meetings, and
its expenses incurred in connection with litigation and the legal obligation it
may have to indemnify officers and Directors with respect thereto. The Fund is
also responsible for the maintenance of books and records which are required to
be maintained by the Fund's custodian or other agents; telephone, telex,
facsimile, postage and other communications expenses; any fees, dues and
expenses incurred by the Fund in connection with membership in investment
company trade organizations; expenses of printing and mailing prospectuses and
14
<PAGE> 19
statements of additional information of the Fund and supplements thereto to
current shareholders; costs of stationery; fees payable to the Adviser; expenses
relating to investor and public relations; interest charges, bond premiums and
other insurance expense; freight, insurance and other charges in connection with
the shipment of the Fund's portfolio securities; and other expenses.
The Adviser is responsible for the payment of the compensation and expenses of
all Directors, officers and executive employees of the Fund (including the
Fund's share of payroll taxes) affiliated with the Adviser and making available,
without expense to the Fund, the services of such Directors, officers and
employees as may duly be elected officers of the Fund, subject to their
individual consent to serve and to any limitations imposed by law. The Fund is
responsible for the fees and expenses (specifically including travel expenses
relating to Fund business) of Directors not affiliated with the Adviser. Under
the Investment Management Agreement, the Adviser also pays the Fund's share of
payroll taxes, as well as expenses, such as travel expenses (or an appropriate
portion thereof), of Directors and officers of the Fund who are directors,
officers or employees of the Adviser.
For the services and facilities furnished, the Fund pays a monthly investment
management fee of 1/12 of 1.00% of the value of the Fund's average weekly net
assets. During the fiscal year ended November 30, 1997, the Fund paid $2,846,000
to Kemper, the Fund's former investment manager.
The Investment Management Agreement further provides that the Adviser shall not
be liable for any error of judgement or mistake of law suffered by the Fund or
for any loss suffered by the Fund, other than liability resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its duties under such agreement or from reckless disregard by the
Adviser of its obligations and duties thereunder. The Investment Management
Agreement also provides that purchase and sale opportunities, which are suitable
for more than one client of the Adviser, will be allocated by the Adviser in an
equitable manner.
The Investment Management Agreement may be terminated without penalty upon sixty
(60) days' written notice by either party. The Fund may agree to terminate its
Investment Management Agreement either by a vote of a majority of the
outstanding voting securities of the Fund, or by a vote of the Board. The
Investment Management Agreement may also be terminated at any time without
penalty by the vote of a majority of the outstanding voting securities of the
Fund or by a vote of the Board if a court establishes that the Adviser or any of
its officers or directors has taken any action resulting in a breach of the
Adviser's covenants under
15
<PAGE> 20
the Investment Management Agreement. As stated above, the Investment Management
Agreement automatically terminates in the event of its assignment.
The Adviser has acted as investment adviser and manager for the Fund since
December 31, 1997. The Former Investment Management Agreement is dated December
31, 1997, and was last approved for continuance by the Board on March 18, 1998.
The shareholders of the Fund approved the Former Investment Management Agreement
on December 11, 1997. The Former Investment Management Agreement would have
continued until April 1, 1999. The Former Investment Management Agreement was
last submitted to shareholders for approval in connection with the
Scudder-Zurich Transaction.
NEW INVESTMENT MANAGEMENT AGREEMENT
The New Investment Management Agreement for the Fund is dated as of the
consummation of the Transaction, which occurred on September 7, 1998. The New
Investment Management Agreement will be in effect for an initial term ending on
April 1, 1999, and may continue thereafter from year to year only if
specifically approved at least annually by the vote of "a majority of the
outstanding voting securities" of the Fund, or by the Board and, in either
event, the vote of a majority of the Independent Board members, cast in person
at a meeting called for such purpose. In the event that shareholders of the Fund
do not approve the New Investment Management Agreement, it will terminate. In
such event, the Board of the Fund will take such action as it deems to be in the
best interests of the Fund and its shareholders.
DIFFERENCES BETWEEN THE FORMER AND NEW INVESTMENT MANAGEMENT AGREEMENT
The New Investment Management Agreement is substantially identical to the Former
Investment Management Agreement, except for the dates of execution and
termination.
THE ADVISER
Scudder Kemper Investments, Inc. (the "Adviser"), 345 Park Avenue, New York, New
York 10154, which resulted from the combination of the businesses of Scudder and
Kemper is one of the largest and most experienced investment counsel firms in
the United States. It was established in 1919 as a partnership and was
restructured as a Delaware corporation in 1985. Scudder launched its first fund
in 1928. Kemper launched is first fund in 1948. Since December 31, 1997, the
Adviser has served as investment adviser to both Scudder and Kemper funds. As of
July 31, 1998, the Adviser has more than $230 billion in assets under
16
<PAGE> 21
management. The principal source of the Adviser's income is professional fees
received from providing continuing investment advise. The Adviser provides
investment counsel for many individuals and institutions, including insurance
companies, endowments, industrial corporations and financial and banking
organizations.
Founded in 1872, Zurich is a multinational, public corporation organized under
the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world. Zurich owns approximately 70% of the Adviser, with the balance owed
by the Adviser's officers and employees.
The comparable investment companies to which the Adviser renders investment
management services, and the related fees, are identified in Exhibit C.
As stated above, the Adviser is a Delaware corporation. The names, addresses and
principal occupations of the Directors of the Adviser are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
Lynn S. Birdsong Managing Director of the
345 Park Avenue Adviser
New York, New York
Laurence Cheng Senior Partner of Capital Z
345 Park Avenue Partners
New York, New York
Cornelia M. Small Managing Director of the
345 Park Avenue Adviser
New York, New York
Edmond D. Villani President and Chief Executive
345 Park Avenue Officer of the Adviser
New York, New York
Rolf Hueppi Chairman of the Board and Chief
Mythenquai 2 Executive Officer of Zurich
Zurich, Switzerland
Markus Rohrbasser Chief Financial Officer and
Mythenquai 2 member of the Corporate
Zurich, Switzerland Executive Board of Zurich
</TABLE>
17
<PAGE> 22
The outstanding voting securities of the Adviser are held of record 36.63% by
Zurich Holding Company of America ("ZHCA"), a subsidiary of Zurich; 32.85% by
ZKI Holding Corp. ("ZKIH"), a subsidiary of Zurich; 20.86% by Stephen R.
Beckwith, Lynn S. Birdsong, Kathryn L. Quirk, Cornelia M. Small and Edmond D.
Villani, in their capacity as representatives (the "Management Representatives")
of the Adviser's management holders and retiree holders pursuant to a Second
Amended and Restated Security Holders Agreement (the "Security Holders
Agreement") among the Adviser, Zurich, ZHCA, ZKIH, the Management
Representatives, the management holders, the retiree holders and Edmond D.
Villani, as trustee of Scudder Kemper Investments, Inc. Executive Defined
Contribution Plan Trust (the "Plan Trust"); and 9.66% by the Plan Trust. There
are no outstanding non-voting securities of the Adviser.
Pursuant to the Security Holders Agreement (which was entered into in connection
with the Scudder-Zurich Transaction), the Board of Directors of the Adviser
consists of four directors designated by ZHCA and ZKIH and three directors
designated by Management Representatives.
The Security Holders Agreement requires the approval of a majority of the
Scudder-designated directors for certain decisions, including changing the name
of the Adviser, effecting an initial public offering before April 15, 2005,
causing the Adviser to engage substantially in non-investment management and
related business, making material acquisitions or divestitures, making material
changes in the Adviser's capital structure, dissolving or liquidating the
Adviser, or entering into certain affiliated transactions with Zurich. The
Security Holders Agreement also provides for various put and call rights with
respect to Adviser's stock held by persons who were employees of the Adviser at
the time of the Scudder-Zurich Transaction, limitations on Zurich's ability to
purchase other asset management companies outside of the Adviser, rights of
Zurich to repurchase the Adviser's stock upon termination of employment of the
Adviser's personnel, and registration rights for stock held by stockholders of
Scudder continuing after the Scudder-Zurich Transaction.
Directors, officers and employees of the Adviser from time to time may enter
into transactions with various banks, including each Fund's custodian bank. It
is the Adviser's opinion that the terms and conditions of those transactions
will not be influenced by existing or potential custodial or other Fund
relationships.
The Executive Committee members are Messrs. Birdsong, Rohrbasser and Villani
(Chairman). Since October 31, 1996, no nominee for election as a director of the
Fund purchased or sold securities constituting more than 1% of the outstanding
shares of the Adviser. With respect to the Board of KGIS, however, in connection
with the Zurich-Scudder Transaction
18
<PAGE> 23
Mr. Pierce sold 85.4% of his holdings in Scudder to Zurich for cash. (See Item 5
- -- "Conversion to an Open-End Investment Company.")
SUB-ADVISER--BSN. The Adviser uses the investment management services of BSN
Gestion de Patrimonios, S.A., S.G.C. ("BSN") with respect to investments in
Spanish securities pursuant to the sub-advisory agreement between the Adviser
and BSN described below (the "Sub-Advisory Agreement"). BSN has acted as
sub-adviser for the Fund since the Fund commenced operations in 1990. The
current sub-advisory agreement is dated December 31, 1997, was last approved by
shareholders on December 11, 1997, was last approved for continuation by the
Board on March 18, 1998 and will continue, unless replaced or otherwise
terminated, until April 1, 1999. The current sub-advisory agreement was last
submitted to shareholders for approval in connection with the Scudder-Zurich
Transaction. As with the investment management agreement, the sub-advisory
agreement with BSN will terminate upon consummation of the Transaction.
Under the terms of the sub-advisory agreement between the Adviser and BSN, BSN
provides such investment advice, research and assistance as the Adviser may
request with respect to investments by the Fund in Spanish securities. For its
services, BSN receives from the Adviser 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, 1997, the Fund's former investment manager,
Kemper, incurred fees of $996,000 to be paid to BSN.
The sub-advisory agreement provides that BSN shall not be liable for any error
of judgment 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 is dated as of the consummation of the
Transaction, which occurred on September 7, 1998, and is in effect for an
initial term ending on April 1, 1999 and may continue thereafter from year to
year if such continuance is specifically approved at least annually
19
<PAGE> 24
by vote of a "majority of the outstanding voting securities" of the Fund, 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. (As discussed below, however, if Item 5 is approved, BSN will not
serve as sub-adviser to the Fund after the reorganization.) A copy of the new
sub-advisory agreement is attached hereto as Exhibit B. The Adviser has received
an exemptive order from the SEC permitting it to implement, without prior
shareholder approval, the new sub-advisory agreement for a period of up to 150
days after the consummation of the Transaction. The advisory fees paid by the
Adviser to BSN under the new sub-advisory agreement have been held in an
interest-bearing escrow account, and the Adviser will continue to deposit such
fees in escrow until shareholder approval of the new sub-advisory agreement.
BOARD EVALUATION
The Board met on July 16, 1998 to consider the Transaction and its effects on
the Fund. The Board met with senior management personnel of the Adviser. The
Board had the assistance of legal counsel, who prepared, among other things, an
analysis of the Board's fiduciary obligations. As a result of its review and
consideration of the Transaction and the proposed new investment management
agreement, the Board voted unanimously to approve the new investment management
agreement and to recommend it to the shareholders of the Fund for their
approval.
In connection with its review, the Adviser represented to the Board that: the
Transaction will have no effect on the operational management of the Fund; the
Transaction will not result in any change in the management or operations of the
Adviser; there will not be any increase in the advisory fee or any change in any
other provision, other than the term, of the investment management agreement as
a result of the Transaction; the Transaction will not adversely affect the
Adviser's financial condition; and the Transaction should expand the Adviser's
global asset management capabilities and enhance the Adviser's research
capabilities, particularly with respect to the United Kingdom and Europe.
In connection with its deliberations, the Board obtained certain assurances from
Zurich, including the following:
- - Zurich has provided to the Board such information as is reasonably necessary
to evaluate the new investment management and other agreements.
- - Zurich looks upon the Adviser as the core of Zurich's global asset management
strategy. With that focus, Zurich will devote to the Adviser and its affairs
all attention and resources that are necessary to
20
<PAGE> 25
provide for the Fund top quality investment management, shareholder,
administrative and product distribution services.
- - The Transaction will not result in any change in the Fund's investment
objectives or policies.
- - The Transaction will not result in any change in the management or operations
of the Adviser or its subsidiaries.
- - The Transaction is not expected to result in any adverse change in the
investment management or operations of the Fund; and Zurich neither plans nor
proposes, for the foreseeable future, to make any material change in the
manner in which investment advisory services or other services are rendered to
the Fund which has the potential to have a material adverse affect upon the
Fund.
- - Zurich is committed to the continuance, without interruption, of services to
the Fund of the type and quality currently provided by the Adviser and its
subsidiaries, or superior thereto.
- - Zurich plans to maintain or enhance the Adviser facilities and organization.
- - In order to retain and attract key personnel, Zurich intends for the Adviser
to maintain overall compensation policies and practices at market levels or
better.
- - Zurich intends to maintain the distinct brand identity of the Kemper and
Scudder Funds and is committed to strengthening and enhancing both brands and
the distribution channels for both families of Funds, while maintaining their
separate brand identity.
- - Zurich will promptly advise the Board of decisions materially affecting the
Adviser organization as they relate to the Fund. Neither this, nor any of the
other above commitments will be altered by Zurich without the Board's prior
consideration.
Zurich assured the Board that it intends 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 the Fund, currently and as proposed, and of KGIS
would be in compliance with this provision of Section 15(f). (See Item
1 -- "Election of Directors" and Item 5 -- "Conversion to an Open-end Investment
Company"). Second, an "unfair burden" must not be imposed upon the investment
company as a result of such transaction or any express or implied terms,
conditions or
21
<PAGE> 26
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 informed the Board
that it is not aware of any express or implied term, condition, arrangement or
understanding that would impose an "unfair burden" on the Fund as a result of
the Transaction. Zurich has agreed that it, and its affiliates, will take no
action that would have the effect of imposing an "unfair burden" on the Fund as
a result of the Transaction. In furtherance thereof, Zurich has undertaken to
pay the costs of preparing and distributing proxy materials to and of holding
the meeting of the Fund's shareholders as well as other fees and expenses in
connection with the Transaction, including the fees and expenses of legal
counsel to the Fund and the Independent Board members.
The Board considered whether tobacco-related liability connected with B.A.T's
tobacco business could adversely affect the Adviser and the services provided to
the Fund. (See "Corporate Governance" above.)
In evaluating the new investment management agreement, the Board took into
account that the fees and expenses payable by the Fund under the new investment
management agreement are the same as under the Former Investment Management
Agreement, that the services provided to the Fund are the same and that the
other terms, except for the dates of execution and termination, are
substantially similar. The Board also took into consideration that the portfolio
managers and research personnel would continue their functions with the Adviser
after the Transaction. The Board noted that, in previously approving the Former
Investment Management Agreement, the Board had considered a number of factors,
including: the nature and quality of services provided by the Adviser;
investment performance, both of the Fund itself and relative to that of
competitive investment companies; investment management fees and expense ratios
of the Fund and competitive investment companies; the Adviser profitability from
managing the Fund; fall-out benefits to the Adviser from its relationship to the
Fund, including revenues derived from services provided to the Fund by
affiliates of the Adviser; and the potential benefits to the Adviser and to the
Fund and its shareholders of receiving research services from broker/dealer
firms in connection with the allocation of portfolio transactions to such firms.
22
<PAGE> 27
The Board discussed the Transaction with the senior management of the Adviser
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 the Adviser as are necessary to provide
the Fund with top quality services.
As a result of its review and consideration of the Transaction and the New
Investment Management Agreement, at its meeting on July 16, 1998, the Board of
the Fund voted unanimously to approve the New Investment Management Agreement
and to recommend it to the shareholders of the Fund for their approval.
BSN. BSN, Paseo de la Castellana, 32-Planta 6, 28046, Madrid, Spain, is the
sub-adviser for GSP. 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.
The names, addresses and principal occupations of the principal executive
officer and the directors of 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>
FUND ACCOUNTING AGENT. Scudder Fund Accounting Corporation is responsible for
determining the net asset value per share and maintaining the portfolio and
general accounting records of the Fund. Scudder Fund Accounting Corporation
currently provides such services at no fee. (See, however, Item 5 -- "Conversion
to an Open-End Investment Company.")
23
<PAGE> 28
TRANSFER AGENT, SHAREHOLDER SERVICE AGENT AND CUSTODIAN. Investors Fiduciary
Trust Company ("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, is
also the Fund's transfer agent and divided-paying agent. Pursuant to a Services
Agreement with IFTC, Kemper Service Company ("KSVC"), a subsidiary of the
Adviser, serves as "Shareholder Service Agent." IFTC currently receives from the
Fund as transfer agent and pays to KSVC annual account maintenance fees at a
maximum rate of $7.50 per account plus transaction charges and out-of-pocket
expense reimbursement. KSVC received a fee of $24,000 for such services for the
Fund's fiscal year ended November 30, 1997. KSVC will continue to provide
transfer agent services after consummation of the Transaction.
The Chase Manhattan Bank, Chase Metro Tech Center, Brooklyn, New York, 11245,
serves as foreign custodian for the Fund. Prior to January 31, 1998, Banco
Santander ("Spanish Custodian"), Central Contable Electronica, Carretera de
Barcelona Km. 11,700, P.O. Box 50760, 28022 Madrid, served as foreign custodian
for the Fund. The Spanish Custodian owns a controlling interest in Banco
Santander de Negocios, which wholly owns BSN. For its services as custodian for
the Fund for the fiscal year ended November 30, 1997, the Spanish Custodian
earned $254,000. IFTC serves as domestic custodian for the Fund.
PORTFOLIO TRANSACTIONS. To the maximum extent feasible, the Adviser and BSN
place orders for portfolio transactions through Scudder Investor Services, Inc.,
Two International Place, Boston, Massachusetts 02110 ("SIS"), which in turn
places orders on behalf of the Fund with issuers, underwriters or other brokers
and dealers. SIS is a corporation registered as a broker/dealer and a subsidiary
of the Adviser. In selecting brokers or dealers with which to place portfolio
transactions for the Fund, the Adviser and BSN may consider sales of shares of
the Fund and of other Kemper funds. When it can be done consistently with a
policy of obtaining the most favorable net results, the Adviser or BSN may place
such orders with brokers and dealers who supply research, market and statistical
information to the Fund or to the Adviser. SIS will not receive any commission,
fee or other remuneration from the Fund for this service. Allocation of
portfolio transactions is supervised by the Adviser.
Subject to the Fund's policy of obtaining the most favorable net results, the
Fund may execute portfolio transactions through direct or indirect affiliates of
BSN in accordance with procedures adopted by the Fund's Board pursuant to Rule
17e-1 of the 1940 Act. Of the brokerage commissions paid by the Fund during the
fiscal year ended November 30, 1997, $94,000 was paid to BSN Sociedad de Valores
y Bolsa, an affiliate of BSN ("Affiliated Broker"). The Affiliated Broker was
paid approximately 24.1% of the total brokerage commissions paid during the
period noted above and approximately 21.56% of the aggregate dollar amount of
portfolio transactions for the period were effected through the Affiliated
Broker.
24
<PAGE> 29
The total brokerage commissions paid by the Fund during the fiscal year ended
November 30, 1997 as well as the percentage of such amounts that was allocated
to broker-dealer firms on the basis of research information, was $437,000 and
73%.
ITEM 4. CHANGE FROM A DIVERSIFIED TO A NON-
DIVERSIFIED FUND
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEM 4.
The 1940 Act divides management investment companies into two types:
"diversified" and "non-diversified." A "diversified company is a management
company which meets the following requirements: At least 75% of the value of its
total assets is represented by cash and cash items (including receivables),
Government securities, securities of other investment companies, and other
securities for the purposes of this calculation limited in respect of any one
issuer to an amount not greater in value than 5% of the value of the total
assets of such management company and to not more than 10% of the outstanding
voting securities of such issuer." A "non-diversified company" is any management
company other than a diversified company. The Fund is currently "diversified."
The Adviser believes that the requirements under the 1940 Act for diversified
funds may, at times, hinder the Fund's ability to invest in attractive
securities that are suitable for it, particularly given its size and its
investment focus in Spanish companies. Accordingly, the Adviser has recommended,
and the Board has approved and recommends, that shareholders of the Fund vote to
change the Fund from a "diversified" to a "non-diversified" fund. In connection
with and as part of this change, the Board also recommends that shareholders
eliminate the Fund's fundamental investment policy with respect to investing
more than a specified percentage of its assets in the securities of any one
issuer. That policy is as follows:
"The Fund will not with respect to 75% of the Fund's total assets,
purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or
instrumentalities) if, as a result, more than 5% of the total value
of the Fund's assets would be invested in securities of a single
issuer or the Fund would hold more than 10% of the outstanding
voting securities of any one issuer."
Being "non-diversified," the Fund would be able to invest its assets in the
securities of an issuer, subject only to the diversification requirements of
Subchapter M of the Internal Revenue Code. This would allow the Fund, as to 50%
of its total assets, to invest more than 5%, but not more than 25%, in the
securities of an individual issuer. Since the Fund would be
25
<PAGE> 30
able to invest a relatively higher percentage of its assets in the obligations
of a limited number of issuers, it may be more susceptible to any single
economic, political or regulatory occurrence than it currently is as a
diversified fund.
ITEM 5. CONVERSION TO AN OPEN-END INVESTMENT COMPANY
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEM 5.
INTRODUCTION
The Board, at a meeting held on August 20, 1998, approved the conversion of the
Fund from a closed-end investment company to an open-end investment company. As
a part of the conversion, the Board also approved an Agreement and Plan of
Reorganization pursuant to which the Fund would become a series of Kemper
Global/International Series, Inc. ("KGIS"). (The Fund, after giving effect to
this reorganization, is referred to herein either as the "Fund" or as "New
GSP.") New GSP, as an open-end Fund, would allow shareholders to redeem their
shares at net asset value. However, in an attempt to minimize adverse income tax
consequences for non-redeeming shareholders, New GSP would pay the proceeds of
"large" redemptions in-kind (i.e., with respect to any one shareholder during
any 90-day period, the Fund will redeem solely in cash up to the lesser of
$250,000 or 1% of net assets of the Fund at the beginning of the period). New
GSP would also impose a 2% redemption fee on all redemptions (including
redemptions paid in-kind) of shares held for less than one year (which would
include the holding period for shares of the Fund prior to the open-end
conversion contingent upon shareholder proof of ownership).
This proposal is a modified form of a proposal which is intended to comply with
an undertaking contained in the Fund's prospectus to submit an open-ending vote
to shareholders upon the occurrence of certain events. Specifically, the Fund's
prospectus dated February 14, 1990 provides that:
Commencing with the fiscal year which begins on December 1, 1994,
and in each fiscal year thereafter, if (i) shares of the Fund's
common stock (the "Common Stock") traded on the principal securities
exchange where listed at an average discount from net asset value of
more than 10%, determined on the basis of the discount as of the end
of the last trading day in each week during the period of 12
calendar weeks preceding December 31 in such year, and (ii) during
such year the Fund received written requests from the holders of 10%
or
26
<PAGE> 31
more of the outstanding shares of Common Stock that a proposal, as
described below, be submitted to the Fund's shareholders, the Fund
will submit to its shareholders at the next succeeding annual
meeting of shareholders a proposal, to the extent consistent with
the 1940 Act, to amend the Fund's Articles of Incorporation.
Under the Fund's Articles of Incorporation, the affirmative vote of three-
fourths (3/4) of the Fund's outstanding shares of common stock is necessary to
approve any open-ending proposal, although this provision can be amended by the
affirmative vote of two-thirds of the outstanding shares of common stock of the
Fund. As discussed further below, as part of this Item, the Board has taken
action to lower the required vote for this open-ending proposal to two-thirds
(2/3), rather than three-fourths (3/4), of the Fund's outstanding shares.
In addition, this proposal is designed to be responsive to the desires of
shareholders who have, through letters to the Board and by the election of
directors nominated by certain shareholders, requested the opportunity to
recognize net asset value.
BACKGROUND
The Fund commenced operations in 1990. It was organized to offer investors
access to the then newly-liberalized securities markets of Spain without the
administrative burden associated with purchasing and selling Spanish securities
on an individual basis. The Fund was organized as a closed-end management
investment company particularly in light of the less liquid and thinly traded
nature of the Spanish equity markets prevailing at that time. A closed-end
structure, among other things, permits investment in less liquid securities
without regard to daily redemption activity and further permits a portfolio to
be fully invested. At the same time, however, shares of closed-end investment
companies frequently trade at a discount from their net asset value.
Shares of the Fund have traded consistently at a discount, beginning shortly
after inception of the Fund. The discount has grown to as large as 25.13% (as of
May 26, 1995). As of August 31, 1998, the Fund's shares were trading at $18.125
per share and the net asset value was $20.78 per share, resulting in a discount
of 12.78%. Notwithstanding this discount, however, the Fund's average annual
return since inception through August 31, 1998 (based on market value) has been
8.93%.
The Fund's Board of Directors has monitored the Fund's discount from net asset
value for many years. At the Fund's annual meeting of shareholders in 1996, a
proposal to convert the Fund to open-end status was presented pursuant to the
prospectus policy on open-ending (specified above). At that meeting,
approximately 30.6% of the Fund's outstanding
27
<PAGE> 32
shares voted in favor of converting to open-end status and, therefore, the
proposal was not approved by the required vote of 75% of the Fund's outstanding
shares.
In December 1995, the Fund received by facsimile a letter from a shareholder
requesting that the Fund include a proposal in its proxy statement in connection
with its 1996 meeting of stockholders. As finally revised, the proposal was to
approve a resolution recommending that the Board approve, and submit for
stockholder approval, a fundamental policy requiring the Fund to make offers to
repurchase its shares at three month intervals pursuant to Rule 23c-3 under the
1940 Act (the "Interval Fund Proposal"). Investment companies that make such
periodic repurchases are commonly referred to as "interval funds."
At its January 17, 1996 meeting, the Board reviewed the Interval Fund Proposal
and determined to seek "no-action" relief under the proxy rules to permit the
Fund to omit the Interval Fund Proposal from its proxy statement. The no-action
letter was granted; however, the shareholder was permitted to revise its
proposal in such a manner that the Fund was required to include it in its proxy
statement. At the March 6, 1996 Board meeting, the Board decided to recommend
that shareholders vote against the Interval Fund Proposal.
The Fund's proxy statement included the Board's recommendation against the
Interval Fund Proposal and an explanation of the Board's reasons for such
recommendation. As noted above, the proxy statement also included a Board
proposal to open-end the Fund in accordance with a provision in the Fund's
prospectus. At the meeting of shareholders, the Interval Fund Proposal was
approved by the requisite number of shares (which was a majority of the shares
casting votes on the proposal), although only approximately 27.4% of the
outstanding shares voted in favor of the proposal. Accordingly, the Board was
obligated to consider whether to approve (and then to submit to shareholders for
their approval) a formal proposal to adopt the interval fund structure in the
form recommended by the Interval Fund Proposal. At its July 24, 1996 meeting,
the Board determined that operation of the Fund as an interval fund would not be
in the best interest of the Fund, and the Fund issued a press release to that
effect.
On October 10, 1997, the Fund received a letter dated October 7, 1997 from
Bankgesellschaft Berlin requesting that the Fund's Audit and Governance
Committee nominate Gregory L. Melville and Moritz A. Sell as candidates for the
Board in connection with the December 3, 1997 special meeting which included a
proposal to elect two directors -- one to fill a vacancy in the Board and the
other to replace a director who intended to resign. Bankgesellschaft Berlin
stated that it believed that its nominees would be more committed than
management's nominees to reducing or
28
<PAGE> 33
eliminating the discount from net asset valve of the Fund's shares of common
stock. On October 14, 1997 the Secretary of the Fund sent a letter to
Bankgesellschaft Berlin stating that the Bank's proposed nominees will be
presented to the Audit and Governance Committee of the Fund for consideration at
its next regularly scheduled meeting.
On November 3, 1997, Bankgesellschaft Berlin filed with the Commission a
preliminary proxy statement in opposition to the Fund to solicit support for
electing its nominees to the Board. On November 18, 1997, Bankgesellschaft
Berlin filed a definitive proxy statement with the Commission. On November 24,
1997, the Board filed additional proxy solicitation material urging stockholders
to vote for management's nominees.
On December 2, 1997 the Board met and approved a press release announcing that
the Board has asked Scudder to "recommend various proposals to enable the
shareholders to elect to receive net asset value of the Fund's holding" and that
the Board will review the proposals and "intends to take action that it
determines is in the best interest of the Fund and its shareholders." In
addition, the press release (which was issued on December 3, 1997) announced
that the Board would submit for shareholder consideration at the Fund's 1998
annual meeting a proposal to convert the Fund to an open-end fund pursuant to
the prospectus policy discussed above. On December 3, 1997, the special meeting
was adjourned to December 11, 1997 to count votes with respect to the contested
election of directors and to solicit further proxies with respect to the
proposal to approve the new investment management and sub-advisory agreements
with the Adviser. On December 8, 1997, the Board met again and issued a press
release announcing that preliminary votes indicated that Bankgesellschaft
Berlin's nominees (Messrs. Gregory L. Melville and Moritz A. Sell) received a
sufficient number of votes to elect them to the Board and that the Board "is
committed to work diligently with the Bank's nominees in reducing or eliminating
the discount from net asset value, consistent with their platform and the
interests of the Fund and its shareholders." At the shareholders' meeting held
on December 11, 1997. Messrs. Melville and Sell were elected by the affirmative
vote of 52.4% of the outstanding shares of the Fund.
During December 1997 and January 1998, the Adviser developed a proposal designed
to enhance the opportunities available for those shareholders of the Fund who
desired to remain invested in a closed-end vehicle while providing the remaining
shareholders of the Fund with the opportunity to elect to realize the net asset
value of their investment in the Fund, subject to certain contingencies.
Pursuant to this proposal, the Fund would engage in a tax-free merger with
Scudder Spain and Portugal Fund ("Spain and Portugal Fund") and, subsequent to
their merger, permit shareholders of the combined fund the opportunity to tender
their
29
<PAGE> 34
shares for in-kind redemption at net asset value. The merger and the ability of
the combined fund to effect the in-kind redemption was subject to receipt of
certain regulatory approvals, including a private letter ruling from the
Internal Revenue Service (which has been obtained). This transaction was
designed to prevent the actions of the redeeming shareholders from having
adverse tax consequences for those shareholders who would choose to remain
invested in the closed-end fund. The Board of Directors agreed in concept on
January 28, 1998 to a plan for a tax-free merger of the Fund and the Spain and
Portugal Fund, subject to approval of a final merger agreement of the Board of
Directors of each fund, approval of the shareholders of each fund, and
contingent upon regulatory approvals as well as the effectiveness of a
registration statement relating to the securities offered in the merger.
On April 14, 1998, the Board of the Growth Fund of Spain approved the merger
with the Spain and Portugal Fund by a vote of 6 to 2, with Messrs. Melville and
Sell voting against the merger. Subsequent to announcing the merger, the Adviser
determined that it was unlikely that a sufficient percentage of the shareholders
of the Fund would vote to approve the merger and, accordingly, recommended that
the Board of the Fund terminate the merger with the Spain and Portugal Fund. In
place of the merger proposal, the Adviser recommended to the Board that it adopt
an open-ending plan in substantially the form that is being presented to
shareholders.
At a meeting held on August 20, 1998, the Board of Directors considered the
Adviser's proposal to convert the Fund to open-end status. The Board reviewed
information and representations presented to it by the Adviser, including
information concerning the differences between closed-end and open-end
investment companies, the Fund's operations and performance to date, and the
possible effects of conversion on the Fund. The Board also considered letters
and other information from shareholders, including Mr. Howard Clark. Mr. Clark
has spent a great deal of time in discussions with the Adviser in connection
with the proposal to open-end the Fund and the Adviser has been appreciative of
his views and assistance during its development of the current proposal. At the
August 20, 1998 meeting, the Adviser recommended that the Fund be converted to
an open-end investment company. The Adviser advised the Board that the benefits
of elimination of the Fund's discount, together with the right of redemption for
shareholders, could be expected to outweigh the potential drawbacks resulting
from open-ending the Fund. The Board was informed that, following a conversion,
shareholders would be able to redeem their shares at net asset value, less any
applicable redemption fees and subject to the ability of the Fund to pay "large"
redemptions in-kind, rather than sell their shares in the secondary market
through broker-dealers at a discount to net asset value. Shareholders who
receive redemptions in-kind will also be subject to transaction costs associated
30
<PAGE> 35
with the establishment of securities accounts and/or the liquidation of their
in-kind redemption proceeds. The Board was also informed that, while conversion
to open-end form was expected to immediately result in a reduction in size of
the Fund resulting from redemption requests, conversion would create the
opportunity, which the Fund does not currently enjoy, to achieve the investment
benefits associated with greater asset size through sales of Fund shares.
After taking into consideration the potential drawbacks of conversion of the
Fund to open-end form, the Board of Directors determined that the right of
redemption of the Fund's shares provided to shareholders and the elimination of
the Fund's discount as a result of such a conversion were sufficient to outweigh
such drawbacks, and that conversion to open-end form and the subsequent
Reorganization would be in the best interests of the Fund. The Board also
determined that the anticipated increase in expenses for the Fund's
shareholders, as described below, is an acceptable increase, given the higher
operating costs of an open-end fund, the additional services provided to
shareholders of such funds generally and the opportunity for shareholders to
recognize net asset value. As a result, the Board unanimously approved the
recommendation of the Adviser to submit to shareholders a proposal to convert
the Fund from a closed-end investment company to an open-end investment company
and to reorganize the Fund as a series of KGIS.
Shareholders of the Fund are being asked to consider the conversion of the Fund
from a closed-end to an open-end investment company and the subsequent
Reorganization and certain related matters in connection with the conversion. If
Item 5 is approved by the shareholders, first, the Fund's Articles of
Incorporation will be amended to permit the conversion to an open-end investment
company and the subsequent Reorganization to be approved by the affirmative vote
of two-thirds of the Fund's outstanding shares of common stock and to provide
that the Fund will no longer be governed by the business combination provisions
of the Maryland General Corporate Law ("MGCL"). Second, the Fund's Articles of
Incorporation will be amended to reflect the Fund's status as an open-end
investment company and the Fund's sub-classification will be changed from a
closed-end investment company to an open-end investment company. Also, the
Fund's fundamental investment policies will be changed to reflect the conversion
to an open-end investment company. Finally, the Fund will become a series of
KGIS pursuant to an Agreement and Plan of Reorganization. Shares of New GSP will
be continually offered, subject to a registration statement under the Securities
Act of 1933, as amended, and the 1940 Act becoming effective. If Item 5 is not
approved, the Fund will remain a closed-end investment company.
31
<PAGE> 36
The factors considered by the Board in making its recommendation to convert the
Fund from a closed-end fund to an open-end fund are discussed in greater detail
below.
This proxy statement contains certain statements that may be deemed to be
"forward-looking statements" including, but not limited to, projected expenses
and expense ratios. Actual results could differ materially from those projected
in the forward-looking statements as a result of actual expenses varying from
estimates, changes in assumptions made, and other factors.
COMPARISON BETWEEN CLOSED-END AND OPEN-END INVESTMENT COMPANIES
Generally, closed-end funds, such as the Fund, neither redeem their outstanding
stock nor generally engage in the continuous sale of new securities; therefore,
a closed-end fund operates with a relatively fixed capitalization. Shareholders
who wish to buy or sell shares generally must do so through a broker-dealer, and
pay or receive whatever price the market may bear. This price may be more or
less than the net asset value per share of the closed-end fund's shares. In
contrast, open-end funds issue redeemable securities entitling shareholders to
surrender those securities to the fund and receive in return their proportionate
share of the value of the fund's net assets (less any redemption fee charged by
the fund and any "sales load" if purchased through a broker-dealer). Also,
open-end funds generally issue new shares at the fund's net asset value.
In addition to these structural distinctions between the two types of funds,
several other distinctions exist. These distinctions can give rise to advantages
and disadvantages to the Fund if, on the one hand, it remains a closed-end fund
or if, on the other hand, it converts to open-end. Based upon information
provided by the Adviser, the Board of Directors has considered the advantages
and disadvantages to the Fund and its shareholders associated with remaining
closed-end or converting to open-end. The most significant advantages and
disadvantages are discussed below.
ADVANTAGES OF CONVERTING TO AN OPEN-END INVESTMENT COMPANY
1. ELIMINATION OF DISCOUNT; REDEEMABILITY OF SHARES. If the Fund converts to
open-end status, shareholders will be able to realize the value of their shares
by redeeming their shares at the then current net asset value of the shares less
any applicable redemption fee, rather than at a discount from net asset value
(less any brokerage costs) of the type that has characterized the Fund's shares
since shortly after inception. Since shortly after the commencement of the
operations of the Fund, its shares have traded in the market at a discount to
net asset value. The Fund's average
32
<PAGE> 37
annual discount by year computed as of the end of each month is as follows:
<TABLE>
<CAPTION>
YEAR DISCOUNT
---- --------
<S> <C>
1990 (February 28-December 31)..... -16.1%
1991............................... -12.9%
1992............................... -14.2%
1993............................... -9.0%
1994............................... -15.8%
1995............................... -20.0%
1996............................... -18.2%
1997............................... -17.8%
1998 (January 1-August 31)......... -8.6%
</TABLE>
From February 14, 1990 to August 31, 1998, the Fund's shares have traded on the
NYSE at prices ranging from 1.91% to 25.13% below net asset value. On August 31,
1998 the closing price of a Fund share on the NYSE was 12.78% below its net
asset value.
Conversion to an open-end investment company will eliminate any discount and
will allow shareholders of the Fund to realize promptly the full net asset value
of the Fund's shares (subject to any redemption fee and the costs and potential
time delays associated with disposing of securities received in-kind). However,
it will also eliminate any possibility that the Fund's shares will trade at a
premium over net asset value.
Shareholders should note that if the proposal to convert the Fund to an open-end
investment company is approved by the shareholders, or even upon notice of the
Board's approval of conversion, the discount may be reduced prior to the date of
conversion to the extent investors may purchase shares in the open market in
anticipation of the prospect of the Fund becoming an open-end investment
company.
2. ABILITY TO RAISE NEW CAPITAL THROUGH THE CONTINUOUS OFFERING OF COMMON
STOCK. A closed-end fund is prohibited by the 1940 Act from issuing shares at a
discount to net asset value. Therefore, as long as the Fund is trading at a
discount to net asset value, it is not possible to raise new capital, except by
means of a rights offering, and to the extent the rights are exercised at less
than net asset value, as is usually the case, it would have a dilutive effect on
the interests of non-participating shareholders. As an open-end investment
company, the Fund would be able to sell shares to the public at net asset value
(plus, if applicable, a sales load). Kemper Distributions, Inc. ("KDI"), a
subsidiary of the Adviser, has advised the Board that it believes that, given
the Fund's strong performance record and other factors, shares of the Fund could
be successfully marketed in an open-end format, although no assurance can be
given as to such results. The ability to raise new capital may give the
33
<PAGE> 38
Fund additional flexibility to invest assets in furtherance of its investment
objective, since with net new cash flow the manager is able to reposition the
portfolio or take advantage of new opportunities without having to sell other
securities.
3. VOTING RIGHTS. If the Fund converts to open-end form, the Fund will not
ordinarily hold annual shareholder meetings. The shares of the Fund currently
are listed on the New York Stock Exchange ("NYSE"). Exchange rules generally
provide for annual meetings of the shareholders of listed companies for the
election of directors. If the proposal to convert the Fund to an open-end
investment company is approved and the Reorganization is consummated, the Fund's
shares will be delisted and voting for the election of Directors will be
determined solely by reference to the 1940 Act and to the MGCL. The effect is
that the Fund will not be required to hold an annual meeting in any year in
which the election of Directors is not required to be acted upon under the 1940
Act. By not holding annual shareholder meetings, the Fund will save the cost of
preparing proxy materials and soliciting shareholders' votes on the usual
proposals contained therein. Based on the number of outstanding shares and
shareholders as of the Record Date, such costs could aggregate in the range of
approximately $25,000 to $50,000 per year.
Under the 1940 Act, the Fund would be required to hold a shareholders meeting if
the number of Directors elected by the shareholders were less than a majority of
the total number of Directors, if a change were sought in the fundamental
investment policies of the Fund, if a material change were sought in the
investment management agreement or in a distribution plan adopted pursuant to
Rule 12b-1 under the 1940 Act, or for certain other matters.
The holders of shares of the Fund will continue to have one vote for each share
held on each matter submitted to a vote of shareholders if the Fund converts to
an open-end investment company, except that each class of shares will have
exclusive voting rights on any matter submitted to shareholders that relates
solely to its distribution arrangement and separate voting rights on any matter
submitted to shareholders in which the interests of one class differ from the
interests of any other class.
4. SHAREHOLDER SERVICES. If Item 5 is approved and the Fund becomes an open-end
investment company, shareholders will have access to additional services.
Details of these services will be more fully disclosed in New GSP's Prospectus
and Statement of Additional Information. In addition to the exchange privilege
discussed below, these services include:
- Direct Deposit Plans. Shareholders will be able to establish a pre-
authorized investment plan to purchase shares with automatic bank account
debiting. Shareholders may automatically invest in
34
<PAGE> 39
shares all or a portion of a shareholders' net pay or government check
each payment period.
- Systematic Exchange Privilege. The owner of $1,000 or more of any class
of shares of the Fund may authorize the automatic exchange of a specified
amount ($100 minimum) of such shares for shares of the same class of
another Kemper Mutual Fund or Money Market Fund (subject to any
redemption fee for the Fund).
- Systematic Withdrawal Plan. Shareholders will be able to elect to have
monthly, quarterly, semi-annual or annual payments in any fixed amount in
excess of $100 made to the shareholder, or to anyone else the shareholder
properly designates, as long as the account has a current value of at
least $5,000 (subject to any redemption fee for the Fund).
- Retirement Plans. The Fund will have available prototype qualified
retirement plans for both corporations and for self-employed individuals.
It will also have available prototype IRA and SIMPLE IRA plans (for both
individuals and employers), Simplified Employee Pension Plans, Pension
and Profit Sharing Plans and Tax Sheltered Retirement Plans for employees
of public educational institutions and certain non-profit, tax-exempt
organizations.
5. NEW YORK STOCK EXCHANGE LISTING FEES. If the Fund were to become an open-end
fund, it would no longer be listed on the NYSE. Delisting from the NYSE would
save the Fund listing fees. Currently, these fees amount to approximately
$24,000 per year.
6. EXCHANGE PRIVILEGE. If the Fund converts to an open-end format, shareholders
will be allowed to participate in an exchange privilege that allows shareholders
of the Fund to exchange their shares for shares of any other open-end Kemper
Mutual Fund at net asset value without payment of any additional sales charge.
However, a 2.0% redemption fee will apply to any exchange of New GSP shares held
less than one year. In addition, exchanges will not be permitted if the amount
exchanged would exceed the lesser of $250,000 or 1% of net assets of the Fund
during any 90-day period for any one shareholder. In addition, owners of shares
of other open-end Kemper Mutual Funds will also be able to exchange their shares
for shares of the same class of the Fund at net asset value. Exchanges of Fund
shares for shares of other funds will be a taxable transaction for federal
income tax purposes. Details of the exchange privilege will be more fully
disclosed in New GSP's Prospectus and Statement of Additional Information.
35
<PAGE> 40
ADVANTAGES OF REMAINING A CLOSED-END INVESTMENT COMPANY.
1. PORTFOLIO MANAGEMENT. Because they do not have to be concerned about
maintaining cash to be able to pay redemptions, and because they do not have
inflows of new capital from offering new shares, closed-end funds generally may
be more fully invested than open-end funds. In contrast, many open-end funds
maintain a buffer of cash and highly liquid assets to meet net redemptions, and
must consider cash flow needs when making investment decisions. Open-end funds
face the possibility of having to liquidate portfolio securities to meet
redemption demands at a time when the portfolio manager believes that the market
price is low or otherwise wishes to retain the security. Closed-end funds,
therefore, may invest with less emphasis on liquidity, and this consideration
may contribute to disparities in investment performance between managed open-end
and closed-end funds.
The larger reserves of cash or cash equivalents required to operate as an
open-end investment company when net redemptions are anticipated could reduce
the Fund's investment flexibility and the scope of its investment opportunities.
The Fund's portfolio might have to be restructured by selling portfolio
securities to accommodate the need for larger reserves of cash or cash
equivalents than would otherwise be maintained. In connection with any such
restructuring, there may be an increase in transactional costs and portfolio
turnover and an adverse effect on investment return.
The Adviser has advised the Fund's Board that it does not expect significant
changes in the Fund's investment strategies as a result of open-ending, and that
the Fund's investment strategies do not rely exclusively on the closed-end
format. However, the Adviser believes that certain investment opportunities in
smaller capitalization and less liquid securities that the Fund may currently
invest in may not be available to the Fund after conversion to open-end format.
This may have a negative impact on the Fund's total return performance. The
Adviser has further informed the Board that the Fund could still be
substantially invested in equity securities of Spanish companies in furtherance
of its objective and consistent with its investment policies, although the
Adviser intends to invest up to 35% of the Fund's assets outside of Spain and,
in particular, in Portugal. The open-end format would require management of cash
flow for incoming and outgoing cash. It is likely that this difference also may
cause a sacrifice in total return performance. However, the Adviser handles cash
flow management for other open-end funds, and while cash flow adds a complexity
to fund management, the Adviser has advised the Board that it normally should
not interrupt portfolio strategy.
2. LIQUIDITY. An open-end investment company is subject to federal regulatory
requirements that no more than 15% of its net assets may be
36
<PAGE> 41
invested in securities that are illiquid. In its closed-end format, the Fund
currently operates subject to a self-imposed limit under which it may invest up
to 25% of its assets in unlisted securities and securities that are not readily
marketable. If the Fund is converted to an open-end fund, it will be restricted
from investing more than 15% of its net assets in illiquid securities. While the
Fund would be subject to this liquidity requirement, the Adviser believes that
the improved liquidity of the Spanish market generally and the Fund's portfolio
specifically should enable the Fund to operate in the open-end format.
3. EXPENSES; POTENTIAL NET REDEMPTIONS. Conversion of the Fund to open-end form
would result in an immediate increase in the Fund's expenses as a percentage of
average net assets ("expense ratio"). While the investment management fee would
be decreased from 1.00% to a graduated fee starting at 0.75% of average daily
net assets, the Fund would bear certain expenses that it currently does not
bear, including an administrative service fee of .25% of average daily net
assets, a fund accounting fee, higher transfer agency expenses, increased
portfolio transaction expenses, and shareholder communications expenses. If the
Fund is converted to an open-end investment company, shares of the Fund
currently held by its shareholders will be classified as Class A shares. After
conversion, the Fund's expense ratio, currently 1.21% (as of May 31, 1998),
would increase for Class A shares to approximately 1.85%, assuming no reduction
in net assets. These figures do not include extraordinary expenses associated
with efforts to restructure the Fund (see note #1 to the table on page 43).
In addition, conversion to an open-end investment company could result in
immediate redemptions of Fund shares, which could be substantial, and,
consequently, a marked reduction in the size of the Fund. Conversion to an
open-end investment company may create an incentive for shareholders to
capitalize on the elimination of the Fund's historical discount by redeeming
their shares. In addition, market professionals and other investors who view
closed-end funds as arbitrage opportunities could have taken or could take
sizable positions in shares of the Fund prior to conversion for the purpose of
profiting through redemption immediately following an open-ending. This
arbitrage phenomenon could serve to increase the percentage of Fund shares
subject to redemption requests. Other closed-end funds that have converted to
open-end format have experienced redemptions that exceed sales after conversion,
and, in some instances, net redemptions have been substantial. The Fund bears
this risk. A decrease in net assets could result in less diversification or in
smaller portfolio positions in its investments, which could adversely affect
total return performance. In addition, as a result of any decrease in size
resulting from redemptions, the Fund could experience a further increase in its
expense ratio. It is estimated that if the Fund's net assets decrease
37
<PAGE> 42
from the present size of $350,000,000 as of May 31, 1998 to $175,000,000 due to
redemption requests, for example, the Fund's expense ratio would increase to
approximately 1.96% for Class A shares. A higher expense ratio hurts the Fund's
total return performance.
The Adviser, and its subsidiary KDI, have advised the Board that, while no
assurances can be given, they believe that the Fund can be successfully marketed
as an open-end fund to attract new assets. As a result, to the extent the Fund
is subject to net redemptions in connection with the conversion to open-end
format, the Adviser and KDI believe that the Fund ultimately may be able to
increase its net assets.
To mitigate the attendant costs of redemptions, New GSP will impose a redemption
fee of 2% on redemption of shares not held for at least one year (which would
include the holding period for shares of the Fund prior to the open-end
conversion contingent upon proof of ownership by shareholders). The purpose of
the redemption fee is to discourage short-term trading in New GSP and to ensure
that shareholders are not adversely affected by the transaction costs associated
with such trading. To minimize the tax burden on remaining shareholders from
redemptions (see discussion below), New GSP will also pay proceeds of
redemptions in-kind for "large" redemptions (i.e., with respect to any one
shareholder during any 90-day period, the Fund will redeem solely in cash up to
the lesser of $250,000 or 1% of net assets of the Fund at the beginning of the
period). In-kind redemptions will result in the recognition by the redeeming
shareholder of gain or loss for federal income tax purposes based upon the
difference between the fair market value of the securities received and the
basis of the shares redeemed.
Significant net redemptions could cause the Fund to become too small to be
considered economically viable. In such circumstances, the Board of Directors
would consider alternatives to continuing the Fund's operations, but has no
plans to pursue such alternatives at this time.
4. POTENTIAL TAX CONSEQUENCES. If the Fund experiences net redemptions after
converting to an open-end format, the Fund would be required to sell portfolio
securities. Many of the Fund's portfolio securities have appreciated in value
since purchased and, if sold, would result in realization of capital gains. As
of August 31, 1998, the unrealized appreciation of the Fund's portfolio
securities was $129,000,000. The portfolio activity that may be necessitated by
redemption requests following conversion could result in the realization of
significant capital gains by the Fund, in addition to those historically
incurred in the ordinary course of the Fund's investment activity, which would
be for federal income tax purposes distributed to shareholders. Such
distributions would be taxable to the shareholders who receive them. As of
August 31, 1998, based on a share's net asset value of $20.78, the Fund had net
undistributed realized short-term capital gains of $0.11 per share and net
undistributed realized
38
<PAGE> 43
mid-term and/or long-term capital gains of $1.61 per share. The Fund estimates
that if it were required to sell 25% of each of its August 31, 1998 portfolio
positions (at their August 31, 1998 valuations) to meet potential redemption
requests, net undistributed realized short-term capital gains would be an
additional $0.05 per share and net undistributed realized mid-term and long-term
capital gains would be an additional $1.91 per share. Distributed net short-term
capital gains are taxable to recipient shareholders as ordinary income and
mid-term and long-term capital gains are taxable as capital gains at the
applicable rates. Accordingly, the actions of redeeming shareholders may have
adverse tax consequences for the Fund and its remaining shareholders. However,
as noted above, New GSP will, with respect to any one shareholder during any
90-day period, redeem solely in cash up to the lesser of $250,000 or 1% of net
assets of the Fund at the beginning of the period at which point it will pay the
proceeds of redemptions in-kind in an attempt to minimize the adverse tax
consequences resulting from such redemptions for non-redeeming stockholders. By
redeeming such large redemptions in-kind, the Fund may avoid having to sell
appreciated portfolio securities and realizing capital gains. Therefore, the
Fund may avoid distributing capital gains to remaining shareholders of the Fund
in connection with such large redemptions.
Even in the absence of conversion, unrealized capital appreciation may be
realized in the future. However, if there are redemptions due to conversion, the
gains will be realized sooner than they would have been under the closed-end
format.
5. DIVIDENDS. The Fund intends to continue to provide the opportunity for
shareholders to reinvest dividends and capital gains distributions into
additional shares of the Fund. Effective upon conversion to an open-end
investment company, such reinvestment in shares would be made at net asset
value, rather than, as is currently the case, at the lesser of market value plus
commissions or net asset value. As a result, shareholders would no longer be
able to reinvest distributions into additional shares of the Fund at a discount
to net asset value.
6. NEW YORK STOCK EXCHANGE LISTING. The Fund is currently listed on the NYSE.
Conversion to an open-end fund would result in delisting of the Fund's shares,
an event that may be perceived by some as disadvantageous because some investors
may consider a listing on the NYSE to be important.
7. BLUE SKY COSTS. Because the Fund is listed on the NYSE, the offering of its
shares is not required to be registered under the securities laws of most
states. As an open-end investment company, the Fund would incur expenses in
connection with providing notification of its offering in the
39
<PAGE> 44
states; however, KDI, pursuant to the proposed underwriting agreement for New
GSP, would pay these costs.
8. LEVERAGE. The ability to borrow is more restricted in the case of open-end
funds than it is in the case of closed-end funds. Closed-end funds can also
issue preferred stock, while open-end funds cannot. However, the Fund has never
engaged in such activities.
PRIOR RECOMMENDATION.
At the Fund's 1996 annual shareholders' meeting, the Fund submitted to
shareholders a proposal to convert the Fund to an open-end investment company.
The proposal was submitted pursuant to a provision in the Fund's prospectus. At
that time, Zurich Kemper Investments, Inc. ("Kemper"), the Fund's former
investment manager, recommended to the Board, and the Board recommended to
shareholders, that shareholders vote to have the Fund remain closed-end. The
Proposal was not approved by the required number of the Fund's outstanding
shares.
In the proxy statement for the 1996 annual shareholders' meeting, Kemper stated
that as of November 30, 1995 nearly 40% of the Fund's net assets were securities
that were illiquid or marginally liquid. As a result, Kemper advised that
conversion to an open-end fund would require the Fund to sell its less-liquid
securities, and that conforming to the open-end limit of 15% on illiquid
securities could limit the Fund's future investment flexibility and its
potential opportunity to achieve higher returns through investment in less
liquid securities.
The Board recommended that the Fund remain a closed-end fund partly based upon
the view that conversion to an open-end fund could have a detrimental effect on
the long-term investment goals of the Fund by requiring the Fund to change its
investment strategies to decrease its holdings in less liquid securities and to
sell securities for the purposes of meeting redemptions. The Board also based
its recommendation on the representations of Kemper that its affiliate, KDI,
could not generate sufficient sales of shares to offset anticipated redemptions,
particularly in the initial months following a conversion.
During December 1997 and January 1998, the Adviser developed a proposal designed
to enhance the opportunities available for those shareholders of the Fund who
desired to remain invested in a closed-end vehicle while providing the remaining
shareholders of the Fund with the opportunity to elect to realize the net asset
value of their investment in the Fund, subject to certain contingencies.
Pursuant to this proposal, the Fund would engage in a tax-free merger with the
Spain and Portugal Fund and, subsequent to their merger, permit shareholders of
the combined fund opportunity to tender their shares for in-kind redemption at
net asset value. The merger and the ability of the Spain and Portugal Fund to
effect the in-kind
40
<PAGE> 45
redemption was subject to receipt of certain regulatory approvals. This
transaction was designed to prevent the actions of the redeeming shareholders
from having adverse tax consequences for those shareholders who would choose to
remain invested in the closed-end fund.
On April 14, 1998, the Board of the Fund approved a Merger Agreement and Plan of
Reorganization whereby the Fund would merge with and into the Spain and Portugal
Fund. Following the consummation of the merger, it was anticipated that
stockholders of the surviving Spain and Portugal Fund (including those who had
been stockholders of the Fund prior to the merger) would have been offered a
one-time right to demand redemption of their shares in-kind at net asset value
in exchange for portfolio securities of the Spain and Portugal Fund, subject to
certain limitations. Under the redemption proposal, unless a shareholder elected
otherwise, the redemption proceeds would have automatically been invested in an
open-end fund to be established and managed by the Adviser. Shares of the new
open-end fund would have been redeemable at net asset value subject to a
redemption fee of up to 2% on redemptions of shares made within one year of
investment. The Adviser recommended, and the Board approved the merger, based
upon a desire to retain a viable closed-end fund, while also giving shareholders
the option to choose an open-end alternative. Subsequent to announcing the
proposed merger, the Adviser determined that it was unlikely that a sufficient
percentage of shareholders of the Fund would vote to approve the merger.
Accordingly, upon the recommendation of the Adviser, the Board subsequently
terminated the Merger Agreement and Plan of Reorganization with the Spain and
Portugal Fund, and instead the Adviser recommended to the Board the proposal to
convert the Fund to an open-end investment company.
At an August 20, 1998 meeting, the Adviser told the Board that, although the
closed-end format would continue to be appropriate for the Fund, it believes
that the investment objective of the Fund can be sought and the Fund can be
effectively managed within the constraints on portfolio liquidity imposed by an
open-end structure. As described above, the Adviser reported that some
restructuring of the portfolio may be necessary in connection with the
conversion, but that the Fund's portfolio is now significantly more liquid than
it was in 1996. Further, the Adviser reported that it believes there are
sufficient attractive investment opportunities in liquid securities to permit
the Fund to pursue effectively its investment objective and policies in an
open-end format.
Further, the Adviser reported to the Board KDI's belief that the Fund can now be
successfully marketed so that to the extent it is subject to net redemptions,
new sales ultimately may help the Fund increase its net assets. Of course, there
can be no assurance that the Fund can be successfully marketed and that net
redemptions will not occur.
41
<PAGE> 46
COMPARATIVE EXPENSE INFORMATION.
The expenses of the Fund and New GSP will differ. Specifically, the expenses of
New GSP are expected to be higher.
1. FEE TABLE. Set forth below is a comparison of the Fund's shareholder
transaction expenses and annual operating expenses as of November 30, 1997 as a
closed-end fund and those expenses that would apply to current shareholders on a
pro forma (estimated) basis holding Class A shares of New GSP.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
GSP NEW GSP
(CLOSED-END) (OPEN-END)
------------ ----------
<S> <C> <C>
Maximum Sales Load Imposed on
Purchases (as a percentage
of offering price).......... (1) (2)
Maximum Sales Load Imposed on
Reinvested Dividends........ (1) None
Redemption Fees............... (1) 2% (during first year)
Exchange Fee.................. N/A None(3)
</TABLE>
- ---------------
(1) The maximum sales load imposed on purchases made during the initial offering
period in 1990 was approximately 7%. Purchases and sales made thereafter on
the NYSE or otherwise through broker-dealers were subject to customary
brokerage commissions which vary. With respect to shares issued in
connection with the Fund's dividend reinvestment plan, to the extent the
plan agent is required to purchase shares on the NYSE, shareholders may also
incur brokerage commissions.
(2) No sales load will be imposed in connection with the conversion of the Fund
from a closed-end to an open-end investment company. However, to the extent
current shareholders make additional purchases of Class A shares after the
conversion, such purchases will be subject to a maximum sales load of 5.75%.
The maximum sales load is reduced for purchases of $50,000 and over. If the
conversion is approved, the Fund also intends to offer Class B shares and
Class C shares, which will be described in the New GSP's prospectus.
(3) Class A shares acquired in the conversion and exchanged for other shares of
Kemper funds pursuant to the Exchange Privilege, as described above, will be
subject to the 2% redemption fee at the time of the exchange if held for
less than one year.
42
<PAGE> 47
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
FUND NEW GSP
(CLOSED-END) (OPEN-END) (1)
------------ --------------
<S> <C> <C>
Management Fees(2)................... 1.00% 0.75%
12b-1 Fees........................... None None
Other Expenses....................... 0.22% 0.95%
----- -----
Total Fund Operating Expenses........ 1.22% 1.70%
===== =====
</TABLE>
- ---------------
(1) Estimated based on expenses expected to have been incurred if the Fund
operated as an open-end fund during the entire fiscal year ended November
30, 1997. "Other Expenses" do not include extraordinary expenses associated
with efforts to restructure the Fund. If such expenses had been included,
"Other Expenses" would have been increased to 1.39% and 1.87%, respectively.
Also, as reflected on page 37 under "Expenses; Potential Net Reductions,"
significant redemptions from the Fund would result in an increase of
expenses.
(2) As a closed-end fund, the Fund pays the Adviser a fee at an annual rate of
1.00% of the average weekly net assets of the Fund. If Item 5 is approved,
the management fee will be calculated on the basis of New GSP's average
daily net assets instead of weekly net assets.
Set forth below are examples which show the expenses that an investor in the
Fund would pay on a $1,000 investment if the Fund remained closed-end compared
to those expenses which an investor would incur if the Fund were converted to an
open-end format, based upon the expense ratios set forth above but without
regard to any applicable sales charges or redemption fees.
<TABLE>
<CAPTION>
EXAMPLES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment,
assuming 5% annual return:
GSP (Closed-End)............. 12 39 67 148
New GSP (Open-End)........... 17 54 92 201
</TABLE>
The examples are not an illustration of past or future investment results and
should not be considered a representation of past or future expenses. Actual
expenses may be greater or less than those shown.
2. MANAGEMENT FEES. Currently, the Adviser serves as investment manager and
receives a monthly investment management fee from the Fund of 1/12 of 1.00%. As
proposed, New GSP would pay the Adviser a monthly
43
<PAGE> 48
investment management fee of 1/12 of the applicable annual rate based upon the
average daily net assets for such month as follows:
<TABLE>
<CAPTION>
ANNUAL MANAGEMENT FEE RATES
AVERAGE DAILY NET ASSETS NEW GSP
------------------------ ---------------------------
<S> <C>
$0 -- $250 million........... 75%
$250 million -- $1 billion... .72
$1 billion -- $2.5 billion... .70
$2.5 billion -- $5 billion... .68
$5 billion -- $7.5 billion... .65
$7.5 billion -- $10
billion.................... .64
$10 billion -- $12.5
billion.................... .63
Over $12.5 billion........... .62
</TABLE>
3. ADMINISTRATIVE SERVICE FEES. Currently, the Fund does not pay any
administrative service fees. As proposed, New GSP would pay KDI an
administrative service fee of up to .25% of average daily net assets of each of
Class A, B and C shares of New GSP.
4. FUND ACCOUNTING FEES. Currently, Scudder Fund Accounting Corporation
("SFAC") computes the net asset value for the Fund pursuant to a Fund Accounting
Agreement at no expense to the Fund. As proposed, New GSP would pay SFAC a fee
at an annual rate of .065% of average daily net assets up to $150 million,
declining to .04% of average daily net assets of $150 million to $1 billion and
.02% of average daily net assets in excess of $1 billion, plus transaction fees
and out-of-pocket expenses. The estimated fund accounting fees if the Fund had
operated as an open-end during the entire fiscal year ended November 30, 1997
are 163,000 or 0.06%.
5. OTHER OPERATING FEES. As a closed-end fund, the Fund does not generally
incur the types and levels of expenses that an open-end fund does. As proposed,
New GSP would incur transfer agency costs, brokerage expenses and SEC
registration fees, along with other costs typically incurred by open-end funds.
6. REDEMPTION FEES. New GSP will impose a redemption fee of 2.0%, payable to
the Fund, on redemptions of all shares that have been held for less than one
year (tacking the holding period of shares for former Fund shareholders
contingent upon proof of ownership by shareholders). The purpose of this fee is
to discourage short-term trading and to restrict the ability of short-term
traders to cause the Fund and its non-redeeming shareholders to bear undue
transaction and other expenses forced by the redemptions of others. Shareholders
will be required to prove their history of share ownership by providing a
brokerage statement at the time of the redemption request. The redemption fee is
waived for shares purchased through certain retirement plans, including 401(k),
403(b) or
44
<PAGE> 49
457 plans, Keogh accounts and other pension, profit-sharing and employee benefit
plans but excluding IRA and SEP-IRA accounts. This waiver might not apply to
shares purchased through a broker, financial institution or recordkeeper
maintaining an omnibus account for the shares.
7. REDEMPTIONS IN-KIND. New GSP has adopted a policy to pay all "large
redemptions" in-kind. A large redemption is defined with respect to any one
shareholder during any 90-day period as a redemption greater than the lesser of
$250,000 or 1% of the net assets of the Fund at the beginning of the period. A
redemption in-kind will be effected in whole or in part by a distribution of
portfolio securities in lieu of cash. New GSP will value such securities at the
same value used to determine net asset value and will select the securities to
be distributed in such manner as the Board of Directors may deem fair and
equitable. Such in-kind redemptions will result in the redeeming shareholder
recognizing gain or loss for federal income tax purposes. Shareholders receiving
securities and selling them could receive less than the redemption value of such
securities and will further incur certain transaction costs related to transfer
and delivery of the securities to the shareholders from the Fund (generally,
certain custody and transfer-related expenses), which will be deducted from the
redemption proceeds. Such shareholders will also incur transaction costs upon
the disposition of the securities redeemed. Such a redemption would not be as
liquid as a redemption entirely in cash. KGIS has filed an application with the
SEC for exemptive relief to permit shareholders who are affiliates of New GSP by
virtue of ownership of 5% or more of the outstanding shares ("affiliated
shareholders") to redeem in-kind. KGIS expects that it will obtain such relief,
although there can be no assurances that it will. If KGIS does not obtain such
relief, New GSP may elect to pay the redemption proceeds to such affiliated
shareholders in cash, which could adversely affect the Fund's ability to
minimize adverse tax consequences for non-redeeming shareholders. Shares of the
Fund held by shareholders who can clearly establish that they originally
purchased them in the Fund's initial public offering are not subject to being
redeemed in-kind.
New GSP will require, in the case of any redemption effected in-kind, that the
redeeming shareholder provide information concerning the arrangements that the
shareholder has made to accept the delivery of portfolio securities. Such
arrangements as well as others related to such arrangements are the
responsibility of a redeeming shareholder. In the alternative, a shareholder may
appoint a liquidating agent for purposes of effecting the liquidation of such
securities. Any liquidation of securities will be at the expense and risk of the
shareholder, who bears the market risk of holding the securities pending
liquidation and further will be responsible for the costs and expenses of
liquidation, which will be deducted from the
45
<PAGE> 50
liquidation proceeds. The liquidating agent will not be able to assure that the
liquidation is effected at any given time or price.
CONVERSION TO AN OPEN-END INVESTMENT COMPANY
The conversion of the Fund to an open-end investment company will be
accomplished, subject to shareholder approval, by: (i) filing Amended and
Restated Articles of Incorporation for the Fund with the State Department of
Assessments and Taxation of Maryland and (ii) changing the Fund's
subclassification under the 1940 Act from a closed-end investment company to an
open-end investment company. In addition, since shares of an open-end investment
company are offered to the public on a continuous basis, New GSP will enter into
an Underwriting Agreement with Kemper Distributions, Inc. ("KDI" or the
"Distributor") in a form approved by the Board, including a majority of the
Independent Board members, of KGIS. A registration statement under the
Securities Act of 1933, as amended, for New GSP covering the offering of the
shares of the Fund has been filed and appropriate state securities law
qualifications and notices will be filed.
Certain costs, many of which will be nonrecurring, will be incurred in
connection with the change from a closed-end to an open-end investment company,
including costs associated with the seeking of necessary government clearances,
the preparation of a registration statement and prospectus as required by
federal securities laws (including printing and mailing costs), the costs of
preparing this Proxy Statement, transfer agent fees relating to the conversion,
and legal fees and accounting fees related to the foregoing. Fund Management
estimates that these additional costs, which will be paid by the Fund, will be
approximately $275,000. Management anticipates that substantially all of these
costs will be incurred by the Fund prior to the effective date of the
conversion.
The Fund believes that neither the Fund nor its shareholders will realize any
gain or loss for federal income tax purposes as a result of the Fund's
conversion. However, shareholders will recognize a gain or loss if they later
redeem their shares to the extent that redemption proceeds (including the fair
market value of any proceeds received in-kind) are greater or less than the
respective adjusted tax bases of their redeemed shares. Payment for any such
redemption (less the 2.0% redemption fee, if applicable) normally will be made
within three days after receipt of a proper request for redemption, in
accordance with redemption procedures that will be specified in the New GSP's
Prospectus. Fund Management may suspend the right of redemption under certain
extraordinary circumstances in accordance with the rules of the Securities and
Exchange Commission (the "SEC"). New GSP also will pay proceeds of redemptions
in-kind for "large" redemptions (i.e., with respect to any one shareholder
during any 90-day in excess of the lesser of $250,000 or 1%
46
<PAGE> 51
of net assets of the Fund at the beginning of the period) as described above.
AMENDMENT OF THE FUND'S ARTICLES OF INCORPORATION
Approval of Item 5 first includes an amendment to the Fund's Articles of
Incorporation to remove the Fund's election to be governed by the business
combinations provision of the MGCL and to lower the necessary stockholder vote
to approve a conversion to an open-end investment company and the Reorganization
to the affirmative vote of two-thirds of the outstanding shares of common stock
of the Fund entitled to be cast on the matter. In its Articles of Incorporation,
the Fund has elected to be governed by the business combination provisions of
the MGCL, which presents significant impediments to "business combinations" with
"interested stockholders," as those terms are defined in the MGCL. In relevant
part, the business combination provisions prohibit a corporation from engaging
in a "business combination" with an "interested stockholder" (or any affiliate
of an "interested stockholder"), which could include the transaction to be voted
upon at the Meeting, for a period of five years following the most recent date
on which the "interested stockholder" became an "interested stockholder." After
the five-year period, any "business combination" must be approved by the
affirmative vote of at least: (1) 80 percent of all the votes entitled to be
cast by outstanding shares of voting stock of the corporation, voting together
as a single group; and (2) two-thirds of the votes entitled to be cast by
holders of voting stock other than the voting stock held by the interested
stockholder who will (or whose affiliate will) be a party to the business
combination or by an affiliate or associate of the interested stockholder,
voting together as a single voting group. In addition to the requirements of the
business combination provisions of the MGCL, the charter requires the
affirmative vote of three-fourths of the Fund's outstanding shares for any
merger or consolidation into another corporation or entity or conversion of the
Fund from a closed-end to an open-end investment company. Consequently, the
proposal to amend the charter of the Fund will provide that the Fund will no
longer be governed by the business combination provisions of the MGCL and will
reduce from three-fourths to two-thirds the number of outstanding shares
necessary to approve the conversion to an open-end investment company and to
approve the Reorganization. Approval of these amendments to the Articles of
Incorporation requires the affirmative vote of two-thirds of all the votes
entitled to be cast by holders of the Fund's outstanding shares of common stock.
If two-thirds of all of the outstanding shares of common stock of the Fund are
voted in favor of this Item 5, Articles of Amendment will immediately be filed
with the Department while the Meeting is in progress so that the amendment will
be effective with respect to the Fund before the Merger is considered and voted
upon. Thus, approval of this Item 5 will allow the approval or
47
<PAGE> 52
conversion of the Fund from a closed-end to an open-end investment company by
the affirmative vote of two-thirds, rather than three-fourths, of the
outstanding shares of the Fund. The proposed amendment to the Fund's Articles of
Incorporation in order to permit the conversion of the Fund from a closed-end to
an open-end investment company to be approved by the affirmative vote of
two-thirds of the outstanding shares of common stock of the Fund is as follows:
That Article VII(a) of the Articles of Incorporation of the Fund should be
amended to delete the existing section (a) and to insert the following new
section (a):
(a) Notwithstanding any other provision of these Articles of
Incorporation, the types of transactions described in Paragraph (b) of
this Article shall require the affirmative vote or consent of the
holders of two-thirds of the outstanding shares of each class of stock
of the corporation normally entitled to vote in elections of Directors
voting for the purposes of this Article as separate classes. Such
affirmative vote or consent shall be in place of the vote or consent
of the stockholders of the corporation otherwise required by the MGCL,
or by the terms of any class or series of preferred stock, whether now
or hereafter authorized, or any agreement between the corporation and
any national securities exchange;
And that Article IX of the Articles of Incorporation of the Fund should be
amended by striking out Article IX, in its entirety.
If Item 5 is approved, the Fund will also file an amendment to the Articles of
Incorporation, in the form approved by the Board of Directors at its meeting on
August 20, 1998, to reflect the conversion of the Fund to an open-end investment
company. A copy of the amendment to the Articles of Incorporation is attached
hereto as Exhibit D. The Fund's Articles of Incorporation would be amended to
authorize the issuance of redeemable securities net asset value (as defined),
and to provide that its outstanding shares would be redeemable at the option of
the shareholders. In addition, certain other changes could be made consistent
with the operation of an open-end investment company. Certain technical and
non-material changes would also be made. The text of the amended and restated
Articles of Incorporation is attached as Exhibit D. The Board would also make
conforming changes to the Fund's By-Laws.
The proposed amendments to the Articles of Incorporation are expected to be
filed with the State of Maryland to become effective simultaneously with the
conversion of the Fund to an open-end investment company.
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<PAGE> 53
AMENDMENT OF THE FUND'S FUNDAMENTAL INVESTMENT POLICIES
If the shareholders vote to approve the conversion of the Fund to an open-end
investment company, the Fund's fundamental investment policy on borrowing will
be amended. A fundamental investment policy may not be changed without the
approval of a "majority of the outstanding voting securities" of the Fund. This
amendment makes the Fund's restriction consistent with that of open-end
investment companies under the 1940 Act. It is not anticipated that this
amendment would have a material effect on the Fund. The Fund's fundamental
investment policies would be amended as follows (deletions are stricken and
additions are underlined):
The Fund will not:
borrow money or issue senior securities, except (i) to finance the
repurchase of and/or tender for its shares if, after such borrowing or
issuance there is asset coverage of at least 300% as defined in the 1940
Act and (ii) the Fund may borrow for temporary purposes in an additional
amount not exceeding 5% of the value of the total assets of the Fund (for
the purpose of this restriction, collateral arrangements with respect to
options, futures contracts and opinions on futures contracts and collateral
arrangements meeting applicable SEC requirements with respect to initial
and variation margin are not deemed to be the issuance of a senior
security)as permitted under the 1940 Act and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;
In addition, the Fund's nonfundamental policies would be amended by adding the
following:
The Fund will not:
borrow money in an amount greater than 5% of its total assets, except (i)
for temporary or emergency purposes and (ii) by engaging in reverse
repurchase agreements or other investments or transactions described in the
Fund's registration statement which may be deemed to be borrowings.
THE REORGANIZATION
The Board of Directors unanimously approved an Agreement and Plan of
Reorganization (the "Reorganization Agreement") in the form of Exhibit E. The
Reorganization Agreement provides for the Reorganization of the Fund into a new
series of KGIS.
The Reorganization contemplates that (i) the Fund will transfer all of its
assets to New GSP, a newly created series of KGIS in exchange for Class A shares
of the New GSP and the assumption by the New GSP of certain of the liabilities
of the Fund; (ii) distribution by the Fund to each shareholder of the Fund of a
number of the New GSP Class A shares
49
<PAGE> 54
(including any fractional shares) equal in value and number to such
shareholder's Fund shares; and (iii) the subsequent termination of the Fund and
cancellation of the outstanding shares of the Fund.
The purpose of the Reorganization is to assimilate the Fund as an open-end
investment company into the Kemper family of mutual funds in a structure that
provides for a uniform Board Composition, set of charter documents, shareholder
purchase options and shareholder account privileges. The Adviser believes that
standardization of Board Members, documents and operational policies with the
Kemper family of mutual funds will help to promote operational efficiencies, to
alleviate overflows and to allow for future change, which should benefit the
Fund. The Board of Directors has considered the benefits and costs of the
Reorganization and determined that the Reorganization is in the best interests
of the Fund and that the interests of existing shareholders will not be diluted
as a result of the Reorganization.
1. KGIS. KGIS is an open-end management investment company registered under the
1940 Act. KGIS was organized as a corporation under the laws of Maryland on
October 2, 1997. KGIS may issue an indefinite amount of shares of capital stock,
all having $.001 par value, which may be divided by its Board of Directors into
classes of shares. Initially, 100,000,000 shares have been classified for each
of KGIS' five series: Kemper Global Blue Chip Fund; Kemper International Growth
and Income Fund; Kemper Emerging Market Income Fund; Kemper Emerging Market
Growth Fund; and Kemper Latin America Fund. Currently, each series fund of KGIS
offers three classes of shares. These are Class A, Class B and Class C shares.
The Board of Directors of KGIS may authorize the issuance of additional classes
and additional series or funds if deemed desirable, each with its own investment
objectives, policies and restrictions. Since KGIS may offer multiple funds, it
is known as a "series company." Shares of series have equal noncumulative voting
rights except that Class B and Class C shares have separate and exclusive voting
rights with respect to each such class' Rule 12b-1 Plan. Shares of each class
also have equal rights with respect to dividends, assets and liquidation of the
funds subject to any preferences (such as resulting from different Rule 12b-1
distribution fees), rights or privileges of any classes of shares of the fund.
Shares of each fund are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive or conversion rights.
Each fund's activities are supervised by KGIS' Board of Directors. KGIS is not
required to hold and has no current intention of holding annual shareholder
meetings, although special meetings may be called for purposes such as electing
or removing Directors, changing fundamental investment policies or approving an
investment management contract. Shareholders will be assisted in communicating
with other shareholders in connection with removing a Director as if Section
16(c) of the 1940 Act were applicable.
50
<PAGE> 55
2. DIRECTORS AND OFFICERS. The directors and officers of the Fund and KGIS
differ. The Board of Directors of KGIS is the same as the Fund except that
Messrs. Melville and Sell do not serve on the Board of KGIS, and Daniel Pierce
and Kathryn L. Quirk serve on the Board of KGIS. Currently, Mr. Pierce serves as
President of KGIS and Ms. Quirk serves as Vice President of KGIS.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME (DATE OF BIRTH) EMPLOYMENT AND DIRECTORSHIP
-------------------- ---------------------------
<S> <C>
Daniel Pierce (3/18/34) Managing Director, Adviser;
Director, Fiduciary Trust
Company (bank and trust company)
and Fiduciary Company
Incorporated (bank and trust
company). Mr. Pierce serves on
the boards of various funds with
portfolios managed by the
Adviser.
Kathryn L. Quirk (12/31/52) Managing Director, Adviser; Ms.
Quirk serves on the boards of
various funds with portfolios
managed by the Adviser.
</TABLE>
The following officers of KGIS, their birth dates, their principal occupations
and their affiliations, if any, with the Adviser, the investment manager, and
KDI, the principal underwriter, are as follows:
Mark Casady, President, 345 Park Avenue, New York, New York; Managing Director,
Adviser.
Philip J. Collora (11/15/45) Vice President, and Secretary, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President, Adviser.
Joyce E. Cornell (3/26/44) Vice President, 345 Park Avenue, New York, New York;
Managing Director, Adviser.
Diego Espinosa (6/30/62) Vice President, 345 Park Avenue, New York, New York;
Senior Vice President, Adviser.
Joan R. Gregory (8/4/45) Vice President, Two International Place, Boston,
Massachusetts; Vice President, Adviser.
Jerald K. Hartman (3/1/33) Vice President, 345 Park Avenue, New York, New York;
Managing Director, Adviser.
John R. Hebble (6/27/58), Treasurer, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
51
<PAGE> 56
Maureen E. Kane (2/14/62) Assistant Secretary, Two International Place, Boston,
Massachusetts; Vice President, Adviser.
Tara C. Kenney (10/7/60) Vice President, Two International Place, Boston,
Massachusetts; Vice President, Adviser.
Thomas W. Littauer (4/26/55) Vice President, Two International Place, Boston,
Massachusetts; Managing Director, Adviser; formerly Head of Broker Dealer
Division of Putnam Investment Management during 1996-1997; prior thereto,
President of Client Management Services for Fidelity Investments from 1990 to
1996.
Brenda Lyons (3/21/63) Assistant Treasurer, Two International Place, Boston,
Massachusetts; Vice President, Adviser.
Ann M. McCreary (11/6/56) Vice President, 345 Park Avenue, New York, New York;
Managing Director, Adviser.
Caroline Pearson (4/1/62) Assistant Secretary, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
Sheridan P. Reilly (2/27/52) Vice President, 345 Park Avenue, New York, New
York; Vice President, Adviser.
M. Isabel Saltzman (12/22/54) Vice President, Two International Place, Boston,
Massachusetts; Managing Director, Adviser.
Linda J. Wondrack (9/12/64) Vice President, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
Elizabeth C. Werth (10/1/47) Assistant Secretary, 222 South Riverside Plaza,
Chicago, Illinois; Vice President, Adviser.
3. PROCEDURES FOR REORGANIZATION. In connection with the Reorganization, after
the close of business on the date of effectiveness of the Reorganization (the
"Effective Date") but prior to its completion, one Class A share of New GSP will
be issued to the Fund. The Fund, as the sole shareholder of New GSP, will then
take the following actions:
(1) approve an investment management agreement for New GSP on substantially
the same terms as the existing agreement with the Fund;
(2) ratify the selection of Ernst & Young LLP as auditors for New GSP; and
(3) ratify the board members of KGIS.
Thereafter, on the Effective Date, the Fund will transfer all its assets to New
GSP in exchange for shares of New GSP and the assumption by New GSP of all the
liabilities of the Fund, the Fund will distribute to each shareholder of the
Fund Class A shares of New GSP in a number equal to
52
<PAGE> 57
the number of shares (including any fractional share) of the Fund then owned by
such shareholder and having the same net asset value per share as the net asset
value of the shares of the Fund on the Effective Date, the shares of the Fund
owned by the shareholder will be canceled and the Fund will then terminate. A
shareholder of the Fund will therefore acquire the same pro rata interest in the
New GSP as of the effective time of the Reorganization as the shareholder had in
the Fund immediately prior to the Reorganization. New GSP will then operate in
the same manner and with the same investment objectives and policies of the
Fund, giving effect to the results of the shareholder votes on the other items,
including (if approved by shareholders) the change in the Fund's classification
from a diversified to a non-diversified fund.
It will not be necessary for a shareholder holding certificates of the Fund to
exchange those certificates for new certificates representing shares of New GSP
following consummation of the Reorganization. Certificates for shares of the
Fund issued prior to the Reorganization will represent shares of the same class
of New GSP after the Reorganization.
If approved by shareholders of the Fund, it is expected that the Reorganization
will be made effective on December 11, 1998, but it may be effective at a
different time.
4. FEDERAL INCOME TAX CONSEQUENCES. The following is a general discussion of
the material federal income tax consequences of the Reorganization to
shareholders of the Fund. The discussion set forth below is for general
information only and may not apply to a shareholder subject to special treatment
under the Internal Revenue Code of 1986, as amended (the "Code"), such as a
holder that is a bank, an insurance company, a dealer in securities, a
tax-exempt organization, a foreign person or that acquired its shares of the
Fund pursuant to the exercise of employee stock options or otherwise as
compensation. It is based upon the Code, legislative history, Treasury
Regulations, judicial authorities, published positions of the Internal Revenue
Service (the "Service") and other relevant authorities, all as in effect on the
date hereof and all of which are subject to change or different interpretations
(possibly on a retroactive basis). This summary is limited to shareholders who
hold their Fund shares as capital assets. No advance rulings have been or will
be sought from the Service regarding any matter discussed in this Proxy
Statement. Accordingly no assurances can be given that the Service could not
successfully challenge the intended federal income tax treatment described
below. Shareholders should consult their own tax advisers to determine the
specific federal income tax consequences of all transactions relating to the
Reorganization, as well as the effects of state, local and foreign tax laws and
possible changes to the tax laws.
The Reorganization is intended to qualify as a "reorganization" within the
meaning of Section 368(a)(1) of the Code. As a condition to closing, the
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<PAGE> 58
Fund will receive an opinion of Vedder, Price, Kaufman & Kammholz that under the
Code the reorganization of the Fund into New GSP pursuant to the Reorganization
will not give rise to the recognition of gain or loss for federal income tax
purposes to the Fund, New GSP, or the shareholders of the Fund. A shareholder's
adjusted basis for federal income tax purposes in shares of New GSP after the
Reorganization will be the same as his or her adjusted basis for tax purposes in
the shares of the Fund immediately before the Reorganization. The holding period
of the shares of New GSP received by the shareholders of the Fund will include
the holding period of shares of the Fund exchanged therefor, provided that at
the time of the exchange the shares of the Fund were held as capital assets.
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 the Fund, including any additional solicitation made
by letter, telephone or telegraph except that the incremental and/or specific
costs associated with Item 3A and 3B will be paid by Zurich. In addition to
solicitation by mail, certain officers and representatives of the Fund, officers
and employees of the Adviser 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, the Adviser
may retain a firm to solicit proxies on behalf of the Board, the fee for which
will be borne by the Fund except for solicitation related to Item 3A and 3B,
which will be paid by Zurich. A COPY OF THE FUND'S ANNUAL REPORT IS AVAILABLE
WITHOUT CHARGE UPON REQUEST BY WRITING TO THE FUND, 222 S. RIVERSIDE PLAZA,
CHICAGO, ILLINOIS 60606 OR BY CALLING 1-800-733-8481 (EXTENSION 438).
PROPOSALS OF SHAREHOLDERS. The Fund delayed its 1998 annual meeting of
shareholders from May to October. It is currently anticipated that the 1999
annual meeting of shareholder, if Item 5 is not approved, will be held in May. A
shareholder wishing to submit a proposal for inclusion in the Fund's proxy
statement for the 1999 annual meeting of shareholders pursuant to Rule 14a-8
under the Securities Exchange Act of 1934 should send such written proposal to
the Secretary of the Fund within a reasonable time before the solicitation of
proxies for such meeting. The Fund will treat any such proposal received no
later than December 12, 1998 as timely. The timely submission of a proposal,
however, does not guarantee its inclusion. A shareholder wishing to provide
notice in the manner prescribed by Rule 14a-4(c)(1) to the Fund of a proposal
submitted outside of the process of Rule 14a-8 must submit such written notice
to the Secretary of the Fund within a reasonable time before the
54
<PAGE> 59
solicitation of proxies for such meeting. The Fund will treat any such notice
received no later than February 25, 1999 as timely.
If item 5 is approved by shareholders, as noted above, New GSP will not be
required to hold annual shareholder meetings, but will hold special meetings as
required or deemed desirable. Since New GSP will not hold regular meetings of
shareholders, the anticipated date of the next special shareholders meeting of
New GSP cannot be provided. Any shareholder proposal submitted pursuant to Rule
14a-8 or outside of the process of Rule 14a-8, must be received by New GSP a
reasonable time before it begins to print and mail its proxy materials in
connection with a special meeting to be considered timely under Rule
14a-4(c)(1).
OTHER MATTERS TO COME BEFORE THE MEETING. The Board is 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 persons or persons entitled
to vote the shares represented by such proxy the discretionary authority to vote
the shares with respect to any such other matters in accordance with their best
judgment in the interest of the Fund.
VOTING, QUORUM. 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 as Directors of the persons who
have been nominated and as recommended by the Board on each other item.
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 Directors, requires a plurality vote of the shares of the
Fund. Item 2, ratification of the selection of independent auditors, requires
the affirmative vote of a majority of the shares casting votes on the matter.
Items 3A and 3B, approval of the new investment management agreement and the new
sub-advisory agreement, and Item 4, changing the Fund's classification from a
diversified to a non-diversified fund, each require the affirmative vote of a
"majority of the outstanding voting securities" of the Fund. The term "majority
of the outstanding voting securities" as defined in the 1940 Act, and as used in
this Proxy Statement, means: the affirmative vote of the lesser of (1) 67% of
the voting securities of the Fund present at the meeting if more than 50% of the
outstanding voting securities of the Fund are present in person or by proxy or
(2) more than 50% of the outstanding voting securities of the
55
<PAGE> 60
Fund. Item 5, conversion of the Fund to an open-end investment company, requires
the affirmative vote of two-thirds of the outstanding shares of the Fund.
Approval of Item 3B is conditional upon approval of Item 3A.
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 determining whether a quorum is present for purposes of convening
the Meeting and will be considered present at the Meeting. On Item 1,
abstentions and broker non-votes will have no effect; the persons 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, 3B and 4 abstentions will have the effect of a
"no" vote on each item. Broker non-votes will have the effect of a "no" vote on
each of these items if such vote is determined on the basis of obtaining the
affirmative vote of more than 50% of the outstanding voting securities. Broker
non-votes will not constitute "yes" or "no" votes, and will be disregarded in
determining the voting securities "present" on each of these items if such vote
is determined on the basis of the affirmative vote of 67% of the voting
securities of the Fund present at the Meeting. On Item 5 abstentions and broker
non-votes will have the effect of a "no" vote.
At least 50% of the shares of the Fund must be present, in person or by proxy,
in order to constitute a quorum. Thus the Meeting could not take place on its
scheduled date if less than 50% of the shares of the Fund were presented. If, by
the time scheduled for the meeting, a quorum of shareholders of the 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 currently intend to propose
one or more adjournments of the meeting for the Fund to permit further
soliciting of proxies from shareholders. Any such adjournment will require the
affirmative vote of a majority of the shares of the Fund present (in person or
by proxy). 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 Fund's shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR 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 Board of Directors,
Philip J. Collora
Secretary
56
<PAGE> 61
EXHIBIT INDEX
<TABLE>
<S> <C>
New Investment Management Agreement.................. Exhibit A
New Sub-Advisory Agreement........................... Exhibit B
Comparable Investment Companies and Related
Management Fees.................................... Exhibit C
Amendment to the Fund's Articles of Incorporation to
Open-End the Fund.................................. Exhibit D
Agreement and Plan of Reorganization................. Exhibit E
</TABLE>
57
<PAGE> 62
EXHIBIT A
INVESTMENT MANAGEMENT AGREEMENT
THE GROWTH FUND OF SPAIN, INC.
222 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
September 7, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
INVESTMENT MANAGEMENT AGREEMENT
Ladies and Gentlemen:
The Growth Fund of Spain, Inc. (the "Fund") has been established as a Maryland
corporation to engage in the business of an investment company. The Fund has
issued shares of common stock (the "Shares").
The Fund has selected you to act as the investment manager of the Fund and to
provide certain other services, as more fully set forth below, and you have
indicated that you are willing to act as such investment manager and to perform
such services under the terms and conditions hereinafter set forth. Accordingly,
the Fund agrees with you as follows:
1. DELIVERY OF DOCUMENTS. The Fund engages in the business of investing and
reinvesting its assets in the manner and in accordance with its investment
objectives, policies and restrictions. The Fund has furnished you with copies
properly certified or authenticated of each of the following documents related
to the Fund:
(a) The Articles of Incorporation ("Articles"), as amended to date.
(b) By-Laws of the Fund as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Directors of the Fund and the shareholders of the Fund
selecting you as investment manager and approving the form of this
Agreement.
The Fund will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing.
2. PORTFOLIO MANAGEMENT SERVICES. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with its investment objectives, policies and restrictions; the
applicable provisions of the Investment Company Act of 1940 (the "1940 Act") and
the Internal Revenue Code of 1986, as
A-1
<PAGE> 63
amended, (the "Code") relating to regulated investment companies and all rules
and regulations thereunder; and all other applicable federal and state laws and
regulations of which you have knowledge; subject always to policies and
instructions adopted by the Fund's Board of Directors. In connection therewith,
you shall use reasonable efforts to manage the Fund so that it will qualify as a
regulated investment company under Subchapter M of the Code and regulations
issued thereunder. The Fund shall have the benefit of the investment analysis
and research, the review of current economic conditions and trends and the
consideration of long-range investment policy generally available to your
investment advisory clients. In managing the Fund in accordance with the
requirements set forth in this section 2, you shall be entitled to receive and
act upon advice of counsel to the Fund. You shall also make available to the
Fund promptly upon request all of the Fund's investment records and ledgers as
are necessary to assist the Fund in complying with the requirements of the 1940
Act and other applicable laws. To the extent required by law, you shall furnish
to regulatory authorities having the requisite authority any information or
reports in connection with the services provided pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the Fund
are being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies.
You shall determine what portion of the Fund's portfolio shall be invested in
securities and other assets and what portion, if any, should be held uninvested.
You shall furnish to the Fund's Board of Directors periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Fund's officers or Board of Directors shall reasonably
request.
3. ADMINISTRATIVE SERVICES. In addition to the portfolio management services
specified above in Section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Fund administrative services on behalf of
the Fund necessary for operating as a closed-end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Fund's Board of Directors and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements
A-2
<PAGE> 64
with, to the extent appropriate, and monitoring the performance of, accounting
agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Fund's Registration Statement, and semi-annual
reports on Form N-SAR; overseeing the tabulation of proxies by the Fund's
transfer agent; assisting in the preparation and filing of the Fund's federal,
state and local tax returns; preparing and filing the Fund's federal excise tax
return pursuant to Section 4982 of the Code; providing assistance with investor
and public relations matters; monitoring the valuation of portfolio securities
and the calculation of net asset value; monitoring the registration of Shares of
the Fund under applicable federal and state securities laws; maintaining or
causing to be maintained for the Fund all books, records and reports and any
other information required under the 1940 Act, to the extent that such books,
records and reports and other information are not maintained by the Fund's
custodian or other agents of the Fund; assisting in establishing the accounting
policies of the Fund; assisting in the resolution of accounting issues that may
arise with respect to the Fund's operations and consulting with the Fund's
independent accountants, legal counsel and the Fund's other agents as necessary
in connection therewith; establishing and monitoring the Fund's operating
expense budgets; reviewing the Fund's bills; processing the payment of bills
that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Fund as it may reasonably request in the conduct of
the Fund's business, subject to the direction and control of the Fund's Board of
Directors. 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
Directors, officers and executive employees of the Fund (including the Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Fund, subject to
their individual consent to serve and to any
A-3
<PAGE> 65
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 Directors and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Fund; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Fund is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this Section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Fund business) of Directors, officers and
employees of the Fund who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
statements of additional information of the Fund and supplements thereto; costs
of stationery; any litigation expenses; indemnification of Directors and
officers of the Fund; and costs of shareholders' and other meetings.
5. MANAGEMENT FEE. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in Sections 2, 3, and 4 hereof, the Fund
shall pay you in United States Dollars on the last day of each month the unpaid
balance of a fee equal to the excess of (a) 1/12 of 1 percent of the average
weekly net assets of the Fund for such month;
A-4
<PAGE> 66
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 net asset value of the Fund shall be calculated at such time or times as the
Directors may determine in accordance with the provisions of the 1940 Act. On
each day when net asset value is not calculated, the net asset value shall be
deemed to be the net asset value as of the close of business on the last day on
which such calculation was made for the purpose of the foregoing computations.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. AVOIDANCE OF INCONSISTENT POSITION; SERVICES NOT EXCLUSIVE. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies. If any
occasion should arise in which you give any advice to clients of yours
concerning the Shares of the Fund, you shall act solely as investment counsel
for such clients and not in any way on behalf of the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Fund. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. LIMITATION OF LIABILITY OF MANAGER. As an inducement to your undertaking to
render services pursuant to this Agreement, the Fund agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in
A-5
<PAGE> 67
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect you
against any liability to the Fund or its shareholders to which you would
otherwise be 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 April 1, 1999, and continue in force from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of the Directors 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
Directors of the Fund, or by the vote of a majority of the outstanding voting
securities of the Fund. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the 1940 Act and the rules and regulations thereunder and
any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Fund's Board of Directors on 60 days' written
notice to you, or by you on 60 days' written notice to the Fund. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Directors or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. 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.
A-6
<PAGE> 68
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Fund, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
THE GROWTH FUND OF SPAIN, INC.
By: /s/ DANIEL PIERCE
-----------------------------------------------------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/ STEPHEN BECKWITH
-----------------------------------------------------------------------------
Name
Treasurer
-----------------------------------------------------------------------------
Title
A-7
<PAGE> 69
EXHIBIT B
SUB-ADVISORY AGREEMENT
AGREEMENT made this 7th day of September, 1998, 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
a 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
September 7, 1998 (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> 70
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 April 1,
1999, 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> 71
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> 72
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: /s/ STEPHEN BECKWITH
-----------------------------------------------------------------------------
Treasurer
BSN GESTION de PATRIMONIOS, S.A., S.G.C.
By: /s/ EDUARDO SUAREZ
-----------------------------------------------------------------------------
Managing Director
B-4
<PAGE> 73
EXHIBIT C
COMPARABLE INVESTMENT COMPANIES AND
RELATED MANAGEMENT FEES FOR FUNDS NOT INCLUDED
IN THIS PROXY STATEMENT AND ADVISED BY
SCUDDER KEMPER INVESTMENTS, INC.
SCUDDER FUNDS+
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
GLOBAL GROWTH FUNDS
Global Discovery Fund Above-average capital 1.100% of net assets $ 349,121,954
appreciation over the
long term by investing
primarily in the equity
securities of small
companies located
throughout the world.
Scudder Emerging Long term growth of 1.25% of net assets++ $ 219,624,481
Markets Growth Fund capital primarily
through equity
investment in emerging
markets around the
globe.
Scudder Global Fund Long term growth of 1.000% to $500 million $1,766,207,742
capital through a 0.950% next $500 million
diversified portfolio of 0.900% next $500 million
marketable securities, 0.850% over $1.5 billion
primarily equity
securities, including
common stock, preferred
stocks and debt
securities convertible
into common stocks.
Scudder Gold Fund Maximum return 1.000% of net assets $ 132,131,545
(principal change and
income) consistent with
investing in a portfolio
of gold-related equity
securities and gold.
Scudder Greater Europe Long term growth of 1.00% to $1 billion $ 195,514,335
Growth Fund capital through 0.90% thereafter*
investments primarily in
the equity securities of
European companies.
Scudder International Long term growth of 0.900% to $500 million $2,884,919,345
Fund capital primarily from 0.850% next $500 million
foreign equity 0.800% next $1 billion
securities. 0.750% next $1 billion
0.700% thereafter
Scudder International Long term growth of 1.000% of net assets++ $ 48,880,164
Growth and Income capital and current
Fund income primarily from
foreign equity
securities.
</TABLE>
C-1
<PAGE> 74
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
Scudder International Long term capital 1.000% of net assets N/A**
Growth Fund appreciation through
investment primarily in
the equity securities of
foreign companies with
high growth potential.
Scudder International Long term capital 1.000% of net assets N/A**
Value Fund appreciation through
investment primarily in
undervalued foreign
equity securities.
Scudder Latin America Long term capital 1.250% to $1 billion $ 882,555,049
Fund appreciation through 1.150% thereafter
investment primarily in
the securities of Latin
American issuers.
Scudder Pacific Long term growth of 1.100% of net assets $ 147,276,692
Opportunities Fund capital primarily
through investment in
the equity securities of
Pacific Basin companies,
excluding Japan.
The Japan Fund, Inc. Long term capital 0.850% to $100 million $ 265,181,931
appreciation through 0.750% next $200 million
investment primarily in 0.700% next $300 million
equity securities, 0.650% thereafter
(including American
Depository Receipts of
Japanese companies).
CLOSED-END FUNDS
The Argentina Fund, Long term capital Adviser: $ 135,327,320
Inc. appreciation through 1.100% of net assets
investment primarily in Sub-Adviser:
equity securities of Paid by Adviser. 0.100%
Argentine issuers. of net assets
The Brazil Fund, Inc. Long term capital 1.200% to $150 million $ 429,429,751
appreciation through 1.050% next $150 million
investment primarily in 1.000% next $200 million
equity securities of 0.900% thereafter
Brazilian issuers. Administrator: Receives
an annual fee of $50,000
</TABLE>
C-2
<PAGE> 75
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
The Korea Fund, Inc. Long term capital Adviser: $ 406,244,000
appreciation through 1.150% to $50 million
investment primarily in 1.100% next $50 million
equity securities of 1.000% next $250 million
Korean companies. 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
Scudder New Asia Fund, Long term capital 1.250% to $75 million $ 98,866,168
Inc. appreciation through 1.150% next $125 million
investment primarily in 1.100% thereafter
equity securities of
Asian companies.
Scudder New Europe Long term capital 1.250% to $75 million $ 320,293,393
Fund, Inc. appreciation through 1.150% next $125 million
investment primarily in 1.100% thereafter
equity securities of
companies traded on
smaller or emerging
European markets and
companies Inc. that are
viewed as likely to
benefit from changes and
developments throughout
Europe.
Scudder Spain and Long term capital Adviser: $ 112,909,567
Portugal Fund, Inc. appreciation through 1.000% of net assets
investment primarily in Administrator:
equity securities of 0.200% of net assets
Spanish & Portuguese
issuers.
Scudder Variable Life Above-average capital 0.975% of net assets++ $ 20,115,141
Investment Fund appreciation over the
Global Discovery long term by investing
Portfolio primarily in the equity
securities of small
companies located
throughout the world.
Scudder Variable Life Long term growth of 0.875% to $500 million $ 427,237,880
Investment Fund capital principally from 0.725% thereafter
International a diversified portfolio
Portfolio of foreign equity
securities.
</TABLE>
C-3
<PAGE> 76
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
AARP Global Growth Fund Long term capital 0.350% to $2 billion $ 148,029,373
growth, consistent with 0.330% next $2 billion
a share price more 0.300% next $2 billion
stable than other global 0.280% next $2 billion
funds, through 0.260% next $3 billion
investment primarily in 0.250% next $3 billion
common stocks of 0.240% thereafter
established corporations INDIVIDUAL FUND FEE
in a wide variety of 0.550% of net assets
developed countries.
AARP International Long term capital 0.350% to $2 billion $ 20,259,062
Growth and Income growth, consistent with 0.330% next $2 billion
Fund a share price more 0.300% next $2 billion
stable than other 0.280% next $2 billion
international mutual 0.260% next $3 billion
funds, through 0.250% next $3 billion
investment primarily in 0.240% thereafter++
a diversified portfolio INDIVIDUAL FUND FEE
of foreign common stocks 0.600% of net assets
with above-average
dividend yields and
foreign securities
convertible into common
stocks.
</TABLE>
- ------------------------------
+ The information provided below is shown as of the end of each Fund's last
fiscal year, unless otherwise noted.
++ Subject to waivers and/or expense limitations.
* The addition of this breakpoint is effective 9/30/98.
** Fee information is not available for Scudder International Growth Fund and
Scudder International Value Fund, each of which commenced operations on
September 1, 1998.
@ Net asset information is provided for the semi-annual period ended May 31,
1998.
C-4
<PAGE> 77
KEMPER FUNDS+
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
Kemper Asian Growth Long-term capital growth 0.850% to $250 million $ 6,398,000
Fund by investing in a 0.820% next $750 million
diversified portfolio of 0.800% next $1.5 billion
Asian equity securities. 0.780% next $2.5 billion
0.750% next $2.5 billion
0.740% next $2.5 billion
0.730% next $2.5 billion
0.720% thereafter**
Kemper Emerging Markets Long-term growth of 1.250% of net assets** $ 1,147,000@
Growth Fund capital primarily
through equity
investment in emerging
markets around the
globe.
Kemper Europe Fund Long-term capital growth 0.750% to $250 million $ 23,910,000
by investing in a 0.720% next $750 million
diversified portfolio of 0.700% next $1.5 billion
European equity 0.680% next $2.5 billion
securities. 0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper Global Blue Chip Long-term growth of 1.000% to $250 million $ 3,663,000@
Fund capital through a 0.950% next $750 million
diversified worldwide 0.900% thereafter**
portfolio of marketable
securities, primarily
equity securities.
Kemper International Total return, a 0.750% to $250 million $ 588,069,000
Fund combination of capital 0.720% next $750 million
growth and income, 0.700% next $1.5 billion
principally through an 0.680% next $2.5 billion
internationally 0.650% next $2.5 billion
diversified portfolio of 0.640% next $2.5 billion
equity securities. 0.630% next $2.5 billion
0.620% thereafter
Kemper International Long-term growth of 1.000% of net assets** $ 1,556,000@
Growth and Income capital and income,
Fund primarily from foreign
equity securities.
Kemper Latin America Long-term capital 1.250% to $250 million $ 1,441,000@
Fund appreciation through 1.200% next $750 million
investment primarily in 1.150% thereafter**
the securities of Latin
American issuers.
Kemper Global Discovery Above-average capital
Fund appreciation over the
long term by investing
primarily in the equity
securities of small
companies located
throughout the world.
</TABLE>
C-5
<PAGE> 78
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
Kemper Worldwide 2004 Total return with 0.600% of net assets $ 33,070,000
Fund guaranteed return of
investment on the
maturity date to
investors who reinvest
all their dividends and
hold their shares to the
maturity date
(11/15/2004).
The Growth Fund of Long-term capital 1.000% of net assets $ 315,059,000
Spain, Inc. appreciation by
investing primarily in
equity securities of
Spanish companies.
Kemper Global Blue Chip Long-term growth of 1.000% to $250 million N/A*
Portfolio capital through 0.950% next $750 million
diversified worldwide 0.900% thereafter
portfolio of marketable
securities, primarily
equity securities.
Kemper International Long-term growth of 1.000% of net assets N/A*
Growth and Income capital and current
Portfolio income, primarily from
foreign equity
securities.
Kemper International Total return, a 0.750% of net assets $ 200,046,000
Portfolio combination of capital
growth and income,
principally through an
internationally
diversified portfolio of
equity securities.
</TABLE>
- ------------------------------
+ The information provided below is shown as of the end of each Fund's last
fiscal year, unless otherwise noted.
* Fee information is not available for Kemper Global Blue Chip Portfolio and
Kemper International Growth and Income Portfolio, each of which commenced
operations on May 5, 1998.
** Subject to waivers and/or reimbursements.
@ Net asset information is provided for the semi-annual period ended March 31,
1998.
C-6
<PAGE> 79
EXHIBIT D
AMENDMENT TO THE FUND'S
ARTICLES OF INCORPORATION
TO OPEN-END THE FUND
Marked to show additions and deletions from
the Articles of Incorporation
as amended and restated by proposed interim amendments.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
THE GROWTH FUND OF SPAIN, INC.
ARTICLE I
The name of the corporation is The Growth Fund of Spain, Inc. (hereinafter
called the "corporation").
ARTICLE II
The nature of the business and the objects and purposes to be transacted,
promoted or carried on are to engage in the business of an open-end, management
investment company of the management type under the Investment Company Act of
1940, as amended, holding, investing and reinvesting its assets. The general
nature of its business shall be to buy, hold, sell, exchange, pledge and
otherwise deal in notes, stocks, bonds, options or other securities of
whatsoever nature; to do any and all acts and things necessary or incidental
thereto to the extent permitted business corporations under the provisions of
the laws of the State of Maryland as from time to time amended; to borrow money
or otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the corporation; and to sell,
hold, purchase, redeem and reissue the shares of its own capital stock. The
corporation shall have the power to conduct and carry on its business or any
part thereof, and to have one or more offices, and to exercise any or all of its
corporate powers and rights in the State of Maryland, in other states,
territories, districts, colonies and dependencies of the United States, and in
any or all foreign countries.
ARTICLE III
The post office address of the place at which the principal office of the
corporation in this state will be located is 1123 North Eutaw Street, Baltimore,
Maryland 21201. The resident agent of the corporation is The Prentice-Hall
Corporation System, Maryland, a corporation of this state,
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the post office address of which is 1123 North Eutaw Street, Baltimore, Maryland
21201.
ARTICLE IV
The initial number of directors of the corporation shall be six (6) eight (8),
which number may be increased or decreased pursuant to the by-laws of the
corporation but shall never be less than three (3). The election of directors
need not be by ballot. Beginning with the firstThe directors shall hold office
until the next annual meeting of stockholders held after the initial public
offering of the shares of the corporation (the "initial annual meeting"), the
board of directors shall be divided into three classes: class I, class II and
class III. The terms of office of the classes of directors elected at the
initial annual meeting shall expire at the times of the annual meetings of the
stockholders as follows -- class I, at the first such succeeding meeting, class
II, at the second such succeeding meeting and class III at the third such
succeeding meeting -- or thereafter in each case when their respective and until
their successors are elected and qualified. At each subsequent annual election,
the directors chosen to succeed those whose terms are expiring shall be
identified as being of the same class as the directors whom they succeed, and
shall be elected for a term expiring at the time of the third succeeding annual
meeting of stockholders, or thereafter in each case when their respective
successors are elected and qualified. The number of directorships shall be
apportioned among the classes so as to maintain the classes as nearly equal in
number as possible. The The number of directors in office at the time of
adoption of these Amended and Restated Articles of Incorporation is eight and
the names of the directors who shall act as such until their successors are duly
elected and qualified are as follows:
Thomas R. Anderson
Orville V. Bergen
Thomas T. Glidden James E. Akins
Arthur R. Gottschalk
Frederick T. Kelsey
Gregory L. Melville
Fred B. Renwick
Moritz A. Sell
John B. Tingleff
John G. Weithers Charles M. Kierscht
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ARTICLE V
The total capital stock to be authorized is as follows:
<TABLE>
<CAPTION>
CLASS OF STOCK PAR VALUE NUMBER OF SHARES AGGREGATE PAR VALUE
-------------- --------- ---------------- -------------------
<S> <C> <C> <C>
Common $.01 50,000,000 $500,000
</TABLE>
(a) The board of directors shall have authority by resolution to classify and
reclassify any authorized but unissued shares of capital stock from time to time
by setting or changing in any one or more respects the preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of the capital stock.
(b) The following is a description of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the common stock
of the corporation.
(1) Each share of common stock shall have one vote. Unless otherwise
provided in these Articles of Incorporation, on any matter submitted
to a vote of stockholders, all shares of all classes and series shall
vote together as a single class; provided, however, that (i) as to any
matter with respect to which a separate vote of any class or series is
required by the Investment Company Act of 1940, as amended and in
effect from time to time, or any rules, regulations or orders issued
thereunder, or by the laws of the State of Maryland, such requirement
as to a separate vote by that class or series shall apply in lieu of a
general vote of all classes and series as described above; and (ii) as
to any matter which in the judgment of the board of directors (which
shall be conclusive) does not affect the interest of a particular
class or series, such class or series shall not be entitled to any
vote and only the holders of shares of the one or more affected
classes and series shall be entitled to vote.
(2) Subject to the provisions of law and any preferences of any class
of stock hereafter classified or reclassified, dividends may be paid
on the common stock of the corporation at such time and in such
amounts as the board of directors may deem advisable.
(3) In the event of any liquidation, dissolution or winding up of the
corporation, whether voluntary or involuntary, the holders of the
common stock shall be entitled, together with the holders of any other
class of stock hereafter classified or reclassified not having a
preference on distributions in the liquidation, dissolution or winding
up of the corporation, after payment or
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provision for payment of the debts and other liabilities of the
corporation and the amount to which the holders of any class of stock
hereafter classified or reclassified having a preference on
distributions in the liquidation, dissolution or winding up of the
corporation, to share ratably in the remaining net assets of the
corporation.
(4) Each holder of shares of capital stock shall be entitled to
require the corporation to redeem all or any part of the shares of
capital stock standing in the name of such holder on the books of the
corporation, and all shares of capital stock issued by the corporation
shall be subject to redemption by the corporation, at the net asset
value thereof, less such redemption fee or other charge, if any, as
may be fixed by the board of directors, subject to the right of the
board of directors to suspend the right of redemption of shares of
capital stock or postpone the date of payment of such redemption price
in accordance with provisions of applicable law. Payment of the
redemption price shall be made in cash or in-kind, or both, by the
corporation at such time and in such manner as may be determined from
time to time by the board of directors.
(c) The board of directors may from time to time issue and sell or
authorize the issuance and sale of the authorized but unissued shares of
the corporation. All shares of stock of the corporation sold shall be sold
for cash in such amounts, and on such terms and conditions, and for such
purposes, and for such amount or kind of consideration as may now or
hereafter be permitted by the laws of the State of Maryland and by these
Articles of Incorporation, as the board of directors may determine;
provided, however, that the value of the consideration per share to be
received by the corporation upon the sale of any shares of its capital
stock shall not be less than the net asset value per share of such capital
stock outstanding at the time of such sale, except as otherwise provided in
this Article, which shall in each case be paid prior to the delivery of any
certificate of the corporation for such shares.
(d) The corporation may issue and sell fractions of shares having pro rata
all the rights of full shares, including without limitation, the right to
vote and receive dividends; and wherever the words "share" or "shares" are
used in these Articles of Incorporation or in the by-laws, they shall be
deemed to include fractions of shares where the context does not clearly
indicate that only full shares are intended.
(e) No shares need be offered to existing stockholders before being offered
to others. In connection with the acquisition of all or substantially all
the assets of another entity, the board of directors
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may issue or cause to be issued shares of the corporation and accept in
payment thereof in lieu of cash such assets of such entity at market value,
provided such assets are of the character in which the board of directors
are authorized to invest the funds of the corporation. No shares shall be
sold by the corporation during any period when the determination of net
asset value is suspended.
ARTICLE VI
(a) The net asset value of each share of the corporation outstanding shall be
determined by the board of directors from time to time in accordance with the
provisions of applicable law and in accordance with the corporation's current
prospectus.
(b) The board of directors may suspend the determination of net asset value for
all or any part of any period during which the New York Stock Exchange is
normally closed, or during which trading on the New York Stock Exchange or in
the markets normally utilized by the corporation is restricted by governmental
order, or during which an emergency exists such as would make disposal by the
corporation of securities owned by the corporation unreasonable or
impracticable, or would make determination of the net asset value of the assets
of the corporation impracticable. The determination of whether trading on the
New York Stock Exchange or in the markets normally utilized by the corporation
is restricted or whether such an emergency, as herein provided, exists shall be
by applicable rules and regulations of the Securities and Exchange Commission or
other governmental authority. The suspension shall become effective at such time
as the board of directors shall specify in their declaration or resolution, but
not later than the close of business on the next succeeding business day
following the declaration or resolution. After such suspension becomes
effective, there shall be no determination of net asset value until the board of
directors shall declare the suspension terminated. The suspension shall
terminate in any event on the first day on which the New York Stock Exchange is
open, the restricted trading on the New York Stock Exchange or in the markets
utilized by the corporation has ended or the emergency shall have expired in
accordance with the official ruling of the Securities and Exchange Commission or
other governmental authority or, in the absence of such ruling, upon the
determination of the board of directors.
(c) The board of directors may delegate any of its powers and duties under this
Article with respect to appraisal of assets and liabilities and determination of
net asset value or with respect to suspension of the determination of net asset
value to an officer or officers or agent or agents of the corporation designated
from time to time by the board of directors.
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ARTICLE VII
(a) Notwithstanding any other provision of these Articles of Incorporation, the
types of transactions described in Paragraph (b) of this Article shall require
the affirmative vote or consent of the holders of two-thirds of the outstanding
shares of each class of stock of the corporation normally entitled to vote in
elections of directors voting for the purposes of this Article as separate
classes. Such affirmative vote or consent shall be in place of the vote or
consent of the stockholders of the corporation otherwise required by the MGCL,
or by the terms of any class or series of preferred stock, whether now or
hereafter authorized, or any agreement between the corporation and any national
securities exchange.
(b) This Article shall apply to the following transactions:
(1) a merger or consolidation of the corporation with or into another
corporation or entity,
(2) a sale, lease, exchange or other disposition to or with any entity or person
of all or any substantial part of the assets of the corporation (except assets
having an aggregate fair market value of less than $1,000,000 or such sale,
lease or exchange in the context of the ordinary course of the corporation's
investment activities),
(3) issuance or transfer of any securities of the corporation to any person or
entity for cash, securities or other property (or combination thereof) having an
aggregate fair market value of $1,000,000 or more, excluding sales of securities
in connection with a public offering and securities issued pursuant to a
dividend reinvestment plan adopted by the corporation or upon the exercise of
any stock subscription rights distributed by the corporation,
(4) a liquidation or dissolution of the corporation, or
(5) the conversion of the corporation from closed-end to open-end status under
the Investment Company Act of 1940.
ARTICLE VIII
No officer or director shall be personally liable to the corporation or its
stockholders for money damages by reason of any breach of fiduciary duty to the
corporation or otherwise. Notwithstanding the foregoing sentence, a director or
officer shall be liable to the extent provided by applicable law (i) for any
transaction for which it is proved that the director or officer actually
received an improper benefit or profit in money, property, or services, for the
amount of the benefit or profit in money, property, or services actually
received, or (ii) pursuant to a judgment or other final adjudication adverse to
the director or officer, entered in a proceeding based on a finding in the
proceeding that the
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director's or officer's action, or failure to act, was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated in the
proceeding; provided, however, that nothing shall protect any director or
officer against any liability to the corporation or its stockholders to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
ARTICLE IX VIII
The corporation may enter into any contract with any corporation, firm,
partnership, trust or association, although one or more of the board of
directors or officers of the corporation may be an officer, director, partner,
trustee, shareholder or member of, or have an interest in, such other party to
the contract, and no such contract shall be invalidated or rendered voidable by
reason of the existence of any such relationship or interest, nor shall any
person holding such relationship be liable merely by reason of such relationship
or interest for any loss or expense to the corporation under or by reason of
said contract or accountable for any profit realized directly or indirectly
therefrom, provided that the contract when entered into was reasonable and fair
to the corporation. Any contract entered into pursuant to the terms of this
Article shall be consistent with and subject to the requirements of the
Investment Company Act of 1940, including any amendment thereto or other
applicable act of Congress hereafter enacted, with respect to its duration,
termination, authorization, approval, assignment, amendment or renewal.
ARTICLE IX X
(a) The corporation reserves the right from time to time to make any amendment
to these Articles of Incorporation, now or hereafter authorized by law,
including any amendment that alters the contract rights of any outstanding stock
as expressly set forth in these Articles of Incorporation. The corporation
reserves the right from time to time to make any amendment to these Articles of
Incorporation, now or hereafter authorized by law, including any amendment that
alters the contract rights of any outstanding stock as expressly set forth in
these Articles of Incorporation. As used herein the term "Articles of
Incorporation" includes any amendments or supplements hereto.
(b) Notwithstanding Paragraph (a) of this Article or any other provision of
these Articles of Incorporation, any amendment, alteration or repeal of Articles
IV, VII or X shall require the affirmative vote or consent of seventy-five
percent (75%) of the outstanding shares of each class of stock of the
corporation normally entitled to vote in elections of directors, voting for the
purposes of this Article as separate classes, unless
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such amendment, alteration or repeal has previously been approved, adopted or
authorized by the affirmative vote of seventy five percent (75%) of the total
number of the directors then in office. Such affirmative vote or consent shall
be in place of the vote or consent of the stockholders of the corporation
otherwise required by law or by the terms of any class or series of preferred
stock, whether now or hereafter authorized, or any agreement between the
corporation and any national securities exchange.
ARTICLE X
The duration of the corporation shall be perpetual.
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EXHIBIT E
AGREEMENT
AND
PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of this
11th day of September, 1998, by and between Kemper Global/International Series,
Inc. (the "Kemper Fund"), a Maryland corporation, with its principal place of
business at 222 South Riverside Plaza, Chicago, Illinois 60606 on behalf of its
Growth Fund of Spain series (the "Acquiring Fund") and The Growth Fund of Spain,
Inc., a Maryland corporation, with its principal place of business at 222 South
Riverside Plaza, Chicago, Illinois 60606 (the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of reorganization and
liquidation within the meaning of Section 368(a)(1)(F) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all of the assets of the
Acquired Fund to the Acquiring Fund in exchange solely for shares of the
Acquiring Fund (the "Acquiring Fund Shares"), the assumption by the Acquiring
Fund of all liabilities of the Acquired Fund, and the distribution of the
Acquiring Fund Shares to the shareholders of the Acquired Fund in termination of
the Acquired Fund as provided herein, all upon the terms and conditions
hereinafter set forth in this Agreement.
WHEREAS, the Kemper Fund is a registered open-end, management investment company
and the Acquired Fund is currently a registered closed-end management investment
company and the Acquired Fund owns securities that generally are assets of the
character in which the Acquiring Fund is permitted to invest;
WHEREAS, the Board of Directors of the Acquired Fund has recommended to its
shareholders that the Acquired Fund be converted to an open-end management
investment company, and intends to present a proposal for such conversion at a
meeting of the shareholders of the Acquired Fund scheduled for October 28, 1998
and to solicit approval of such proposal;
WHEREAS, the parties hereto intend that the Acquired Fund shall have changed its
sub-classification from closed-end to open-end prior to the time of the
Reorganization;
WHEREAS, the Kemper Fund is authorized to issue its shares of beneficial
interest in separate series, including the Acquiring Fund, each of which
maintains a separate and distinct portfolio of assets;
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WHEREAS, the shares of beneficial interest of the Kemper Fund with respect to
the Acquiring Fund are authorized to be issued in multiple classes, including
classes designated "Class A shares," "Class B shares" and "Class C shares;"
WHEREAS, the Board of Directors of the Kemper Fund, on behalf of the Acquiring
Fund, has determined that the exchange of all of the assets of the Acquired Fund
for Acquiring Fund Shares and the assumption of all liabilities of the Acquired
Fund by the Acquiring Fund is in the best interests of the Acquiring Fund and
that the interests of the existing shareholders of the Acquiring Fund would not
be diluted as a result of this transaction; and
WHEREAS, the Board of Directors of the Acquired Fund has determined that the
exchange of all of the assets of the Acquired Fund for Acquiring Fund Shares and
the assumption of all liabilities of the Acquired Fund by the Acquiring Fund is
in the best interests of the Acquired Fund and that the interests of the
existing shareholders of the Acquired Fund would not be diluted as a result of
this transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE FOR
THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND LIABILITIES
AND THE TERMINATION OF THE ACQUIRED FUND
1.1 Subject to the terms and conditions herein set forth and on the basis of the
representations and warranties contained herein, the Acquired Fund agrees to
transfer all its assets as set forth in paragraph 1.2 to the Acquiring Fund, and
the Kemper Fund on behalf of the Acquiring Fund agrees in exchange therefor --
(a) to deliver to the Acquired Fund the number of full and fractional Class
A Acquiring Fund shares ("Acquiring Fund Shares") equal in number to the
number of Acquired Fund full and fractional shares then outstanding.
(b) to assume all liabilities of the Acquired Fund, as set forth in
paragraph 1.3. Such transactions shall take place at the closing provided
for in paragraph 3.1 (the "Closing").
1.2 The assets of the Acquired Fund to be acquired by the Acquiring Fund shall
consist of all property, including, without limitation, all cash, securities,
commodities and futures interests, claims (whether absolute or contingent, known
or unknown, accrued or unaccrued) and dividends or
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interest receivable which are owned by the Acquired Fund and any deferred
expenses shown as an asset on the books of the Acquired Fund (the "Acquired Fund
Assets") on the Valuation Date provided in paragraph 2.1.
1.3 The Acquiring Fund shall assume all liabilities of the Acquired Fund.
1.4 Immediately after the transfer of assets provided for in paragraph 1.1, the
Acquired Fund will distribute pro rata to the Acquired Fund's shareholders of
record, determined as of the close of business on the Valuation Date (the
"Acquired Fund Shareholders"), the Acquiring Fund Shares received by the
Acquired Fund pursuant to paragraph 1.1 and will terminate. Such distribution
will be accomplished by the transfer of the Acquiring Fund Shares then credited
to the account of the Acquired Fund on the books of the Acquiring Fund to open
accounts on the share records of the Acquiring Fund in the names of the Acquired
Fund Shareholders and representing the respective pro rata number of the
Acquiring Fund Shares due such shareholders. All issued and outstanding shares
of the Acquired Fund will simultaneously be canceled on the books of the
Acquired Fund, although share certificates representing interests in the
Acquired Fund will represent a number of Acquiring Fund Shares after the Closing
Date as determined in accordance with Section 1.1. The Acquiring Fund shall not
issue certificates representing the Acquiring Fund Shares in connection with
such exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent.
2. [RESERVED]
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be December 11, 1998, or such other date as the
parties may agree to in writing. The time of the Closing shall be 5:00 p.m. New
York time on the Closing Date. All acts taking place at the Closing shall be
deemed to take place simultaneously as of 5:00 p.m. New York time. The Closing
shall be held at the offices of the Acquiring Fund, or at such other place as
the parties may agree.
3.2 Chase Manhattan Bank and Investors Fiduciary Trust Company, as custodians
for the Acquiring Fund (each, a "Custodian", collectively, the "Custodians"),
shall deliver at the Closing a certificate of an authorized officer stating
that: (a) the Acquired Fund's portfolio securities, cash, and any other assets
have been delivered in proper form to the Acquiring Fund on the Closing Date;
and (b) all necessary taxes, including all applicable federal and state stock
transfer stamps, if any, have been paid, or provision for payment has been made,
in conjunction with the delivery of portfolio securities. The Acquiring Fund may
waive compliance with this paragraph 3.2 if in its sole discretion it determines
to do so.
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3.3 In the event that on the Valuation Date (a) the New York Stock Exchange or
another primary trading market for portfolio securities of the Acquiring Fund or
the Acquired Fund shall be closed to trading or trading thereon shall be
restricted, or (b) trading or the reporting of trading on said Exchange or
elsewhere shall be disrupted so that accurate appraisal of the value of the net
assets of the Acquiring Fund or the Acquired Fund is impracticable, the
Valuation Date shall be postponed until the first business day after the day
when trading shall have been fully resumed and reporting shall have been
restored.
3.4 Kemper Service Company ("KSC"), on behalf of the Acquiring Fund, shall
deliver at the Closing a certificate of an authorized officer stating that KSC's
records contain the names and addresses of the Acquired Fund Shareholders and
the number and percentage ownership of outstanding shares owned by each such
shareholder by class immediately prior to the Closing. The Acquiring Fund shall
issue and deliver a confirmation evidencing the Acquiring Fund Shares to be
credited on the Closing Date to the Secretary of the Acquired Fund or provide
evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares have
been credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing each party shall deliver to the other such bills of sale, checks,
assignments, share certificates, if any, receipts or other documents as such
other party or its counsel may reasonably request.
3.5 Prior to Closing, the Kemper Fund shall have authorized the issuance of and
the Kemper Fund shall have issued one Acquiring Fund Share to the Acquired Fund
in consideration of the payment of $1.00 for the purpose of enabling the
Acquired Fund to vote to (a) approve the investment management agreement between
the Kemper Fund, on behalf of the Acquiring Fund, and Scudder Kemper
Investments, Inc.; (b) ratify the election of Ernst & Young LLP as auditors for
the Acquiring Fund, and (c) ratify the election of directors of the Kemper Fund.
At the effective time of the Closing, the Acquiring Fund Share issued pursuant
to this paragraph 3.5 shall be redeemed by the Kemper Fund for $1.00.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as follows:
(a) The Acquired Fund is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland.
(b) The Acquired Fund is a registered closed-end management investment
company, and its shares are registered with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
("1933 Act").
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(c) The Acquired Fund is not, and the execution, delivery and performance
of this Agreement will not result, in a material violation of the Acquired
Fund's Articles of Incorporation or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund
is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other material
commitments (other than this Agreement) which will be terminated with
liability to it prior to the Closing Date.
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or to its
knowledge threatened against the Acquired Fund or any of its properties or
assets which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business. The Acquired
Fund knows of no facts which might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which
materially and adversely affects its business or its ability to consummate
the transactions herein contemplated.
(f) The statements of assets, liabilities and capital and a schedule of
investments of the Acquired Fund at November 30, 1996 and 1997 (copies of
which have been delivered by the Acquired Fund to the Acquiring Fund) have
been audited by Ernst & Young LLP, independent certified public
accountants, and are in accordance with generally accepted accounting
principles consistently applied ("GAAP"), and such statements fairly
reflect the financial condition of the Acquired Fund as of such dates, and
there are no known contingent liabilities of the Acquired Fund as of such
dates not disclosed therein.
(g) The Acquiring Fund has been furnished with an unaudited statement of
assets, liabilities and capital and a schedule of investments of the
Acquired Fund, each as of March 31, 1998. These statements are in
accordance with GAAP and present fairly, in all material respects, the
financial position of the Acquired Fund as of such date in accordance with
GAAP, and there are no known contingent liabilities of the Acquired Fund as
of such date not disclosed therein.
(h) Since March 31, 1998, there has not been any material adverse change in
the Acquired Fund's financial condition, assets, liabilities or business
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed
to and accepted by the
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Acquiring Fund. For the purposes of this subparagraph (h), a decline
in net asset value per share of the Acquired Fund shall not constitute a
material adverse change.
(i) The Acquired Fund has valued, and will continue to value, its portfolio
securities and other assets in accordance with applicable legal
requirements.
(j) All Federal and other tax returns and reports (including information
returns) of the Acquired Fund required by law to be filed shall have been
filed, and all Federal and other taxes shall have been paid so far as due,
or provision shall have been made for the payment thereof, and to the best
of the Acquired Fund's knowledge no such return is currently under audit
and no assessment has been asserted with respect to such returns.
(k) For each taxable year of its operation the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company and has elected to be treated as such and
will have distributed all of its investment company taxable income and net
realized capital gain in accordance with Subchapter M.
(l) All issued and outstanding shares of the Acquired Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable by the Acquired Fund. All of the issued and outstanding
shares of the Acquired Fund will, at the time of Closing, be held of record
by the persons and in the amounts set forth in the records of KSC, the
shareholder service agent to the Acquired Fund. The Acquired Fund does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares (other than pursuant to the
Acquired Fund's dividend reinvestment plan), nor is there outstanding any
security convertible into any of the Acquired Fund's shares.
(m) All of the issued and outstanding shares of the Acquired Fund shall
have been offered for sale and sold in conformity with all applicable state
securities or blue sky laws (including any applicable exemptions therefrom)
and, to the extent that any audit of the records of the Acquired Fund or
its transfer agent by the Kemper Fund or its agents shall have revealed
otherwise, either (i) the Acquired Fund shall have taken all actions that
in the opinion of the Kemper Fund or its counsel are necessary to remedy
any prior failure on the part of the Acquired Fund to have offered for sale
and sold such shares in conformity with such laws or (ii) the Acquired Fund
shall have furnished (or caused to be furnished) surety, or deposited (or
caused to be deposited) assets in escrow, for the benefit of the
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Kemper Fund, to indemnify the Kemper Fund against any expense, loss, claim,
damage or liability whatsoever that may be asserted to threatened by reason
of such failure on the part of the Acquired Fund to have offered and sold
such shares in conformity with such laws.
(n) At the Closing Date, the Acquired Fund will have good and marketable
title to the Acquired Fund's assets to be transferred to the Acquiring Fund
pursuant to paragraph 1.2 and full right, power, and authority to sell,
assign, transfer and deliver such assets hereunder, and upon delivery and
payment for such assets, the Acquiring Fund will acquire good and
marketable title thereto, subject to no restrictions on the full transfer
thereof, including such restrictions as might arise under the 1933 Act
other than as disclosed to the Acquiring Fund.
(o) The Acquired Fund has full power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement will have been duly authorized prior to the
Closing Date by all necessary action on the part of the Board of Directors
of the Acquired Fund, and, subject to such approval and the approval of the
Acquired Fund shareholders, this Agreement constitutes a valid and binding
obligation of the Acquired Fund, enforceable in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles.
(p) The Acquired Fund has the power to own all of its properties and assets
and, subject to the approval of Acquired Fund shareholders, to carry out
and consummate the transactions contemplated herein, and has all necessary
federal, state and local authorizations to carry on its business as now
being conducted and to consummate the transactions contemplated by this
Agreement.
(q) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Acquired
Fund of the transaction contemplated by this Agreement, except such as may
be required under the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the 1940 Act, the rules and regulations under
those Acts, or state securities laws, all of which shall have been received
prior to the Closing Date, except for such consents, approvals,
authorizations or orders as may be required subsequent to the Closing Date.
(r) Insofar as the following relate to it, the proxy materials of the
Acquired Fund prepared in connection with the Meeting and filed with the
SEC pursuant to Section 14(a) of the 1934 Act and
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Section 20(a) of the 1940 Act with respect to the transactions contemplated
by this Agreement, and any supplement or amendment thereto or the documents
appended thereto (the "Reorganization Proxy Materials"), from their
effective and clearance dates with the Commission, through the time of the
Meeting and at the Closing Date: (i) shall comply in all material respects
with the provisions of the 1934 Act and the 1940 Act, the rules and
regulations thereunder, and applicable state securities laws, and (ii)
shall not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading; PROVIDED, that the representations and
warranties in this subsection shall not apply to statements in or omissions
from the Reorganization Proxy Materials made in reliance upon and in
conformity with information furnished by or on behalf of the Kemper Fund or
the Acquiring Fund if furnished by its investment adviser, administrator,
custodian or transfer agent, acting in their capacity as such.
(s) The Acquired Fund shall not sell or otherwise dispose of any shares of
the Acquiring Fund to be received in the transactions contemplated herein,
except in distribution to its shareholders as contemplated herein.
(t) The Acquired Fund shall provide a list of all portfolio securities held
by it to the Acquiring Fund at least fifteen days before the Closing Date
and shall immediately notify the Acquiring Fund's investment adviser of any
portfolio security thereafter acquired or sold by the Acquired Fund.
(u) The Acquired Fund shall, as soon as practicable after satisfaction of
all conditions of the Reorganization: (i) file or cause to be filed, an
application pursuant to Section 8(f) of the 1940 Act for an order declaring
that the Acquired Fund has ceased to be a registered investment company;
and (ii) delist the Acquired Fund's shares on the New York Stock Exchange
and the Chicago Stock Exchange.
4.2 The Kemper Fund on behalf of the Acquiring Fund represents and warrants to
the Acquired Fund as follows:
(a) The Kemper Fund is a corporation duly organized, validly existing and
in good standing under the laws of Maryland.
(b) The Kemper Fund is a registered open-end management investment company
and its registration with the Commission as an investment company with
respect to each series of shares it offers, including those of the
Acquiring Fund, under the 1933 Act and the 1940 Act, is in full force and
effect.
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(c) Before the effective time of the Closing, the Acquiring Fund will be a
duly established and designated series of the Kemper Fund, with fundamental
investment policies and restrictions that are substantially identical to
those of the Acquired Fund.
(d) The Acquiring Fund has not commenced operations and will not commence
operations until after the Closing.
(e) Prior to the effective time of the Closing, there will be no issued and
outstanding shares of the Acquiring Fund or any other securities issued by
the Acquiring Fund, except as provided in paragraph 3.5.
(f) The Acquiring Fund is not, and the execution, delivery and performance
of this Agreement will not result, in a material violation of the Kemper
Fund's Articles of Incorporation or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquiring
Fund or the Kemper Fund is a party or by which it is bound.
(g) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or threatened
against the Acquiring Fund or any of its properties or assets. The
Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions contemplated herein.
(h) The Kemper Fund shall file a post-effective amendment (the "N-1A
Post-Effective Amendment") to its registration statement on Form N-1A with
the Commission and with appropriate state securities commissions, as
promptly as practicable so that the Acquiring Fund and its shares are
registered under the 1933 Act, the 1940 Act and applicable state securities
laws.
(i) The prospectus and statement of additional information of the Acquiring
Fund will conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations of the
Commission thereunder and will not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not materially misleading.
(j) The Acquiring Fund intends to qualify as a regulated investment company
under Part I of Subchapter M of the Code.
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(k) All issued and outstanding Acquiring Fund Shares are, and at the
Closing Date all issued and outstanding Acquiring Fund shares will be, duly
and validly issued and outstanding, fully paid and non-assessable by the
Acquiring Fund. The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any Acquiring Fund
Shares (other than pursuant to the Acquiring Fund's dividend reinvestment
plan), nor is there outstanding any security convertible into any Acquiring
Fund Shares.
(l) The Kemper Fund, on behalf of the Acquiring Fund, has full power and
authority to enter into and perform its obligations under this Agreement.
The execution, delivery and performance of this Agreement will have been
duly authorized prior to the Closing Date by all necessary action on the
part of the Directors of the Kemper Fund, and, subject to such approval,
this Agreement constitutes a valid and binding obligation of the Acquiring
Fund enforceable in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors' rights and to general equity principles.
(m) The Acquiring Fund has the power to own all of its properties and
assets and to consummate the transaction contemplated herein, and has all
necessary federal, state and local authorizations to carry on its business
as now being conducted and to consummate the transaction contemplated by
this Agreement.
(n) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Acquiring
Fund of the transactions contemplated by this Agreement, except such as may
be required under the 1933 Act, the 1934 Act, the 1940 Act, the rules and
regulations under those Acts, or state securities laws, all of which shall
have been received prior to the Closing Date, except for such consents,
approvals, authorizations or orders as may be required subsequent to the
Closing Date.
(o) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund, for the account of the Acquired Fund Shareholders, pursuant to the
terms of this Agreement will at the Closing Date have been duly authorized
and, when so issued and delivered, will be duly and validly issued shares
of the Acquiring Fund, and will be fully paid and non-assessable by the
Acquiring Fund.
(p) The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and
applicable state securities laws in order to continue its operations after
the Closing Date.
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5. COVENANTS OF THE ACQUIRED FUND AND THE KEMPER FUND ON BEHALF OF THE ACQUIRING
FUND
5.1 The Acquired Fund will be operated in the ordinary course of business
between the date hereof and the Closing Date, it being understood that such
ordinary course of business will include customary dividends and distributions,
as well as such other distributions as may be deemed advisable.
5.2 The Acquired Fund covenants that the Acquiring Fund Shares to be issued
hereunder to the Acquired Fund are not being acquired for the purpose of making
any distribution thereof other than in accordance with the terms of this
Agreement.
5.3 The Acquired Fund will assist the Kemper Fund in obtaining such information
as the Kemper Fund reasonably requests concerning the beneficial ownership of
the Acquired Fund Shares.
5.4 Each of the Acquired Fund and the Kemper Fund on behalf of the Acquiring
Fund agrees to make such representations and warranties and take such actions as
may be necessary to assure that the Reorganization shall constitute a tax-free
reorganization.
5.5 The Kemper Fund, on behalf of the Acquiring Fund, agrees that it has no plan
or intention to sell or otherwise dispose of the assets of the Acquired Fund to
be acquired in the Reorganization, except for sales and dispositions made in the
ordinary course of its business of investing and reinvesting assets.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions provided for
herein shall be subject, at its election, to the performance by the Kemper Fund,
on behalf of the Acquiring Fund of all the obligations to be performed by it
hereunder on or before the Closing Date, and, in addition thereto, the following
further conditions:
6.1 All representations and warranties of the Kemper Fund on behalf of the
Acquiring Fund contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date.
6.2 The Kemper Fund shall have delivered to the Acquired Fund a certificate
executed in its name by its President or Vice President and its Treasurer or
Assistant Treasurer, in a form reasonably satisfactory to the Acquired Fund and
dated as of the Closing Date, to the effect that the
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representations and warranties of the Kemper Fund made in this Agreement are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement and as to such other matters
as the Acquired Fund shall reasonably request.
6.3 The Kemper Fund shall have performed and complied in all material respects
with each of its agreements and covenants required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
6.4 The Acquired Fund shall have received on the Closing Date the opinion of
Dechert Price & Rhoads, counsel to the Kemper Fund, dated as of the Closing
Date, covering the following points:
(a) The Kemper Fund is a corporation duly organized, validly existing and
in good standing under the laws of the state of Maryland and has the power
to own all of its properties and assets, including those of the Acquiring
Fund, and to carry on its business, including that of the Acquiring Fund,
as presently conducted.
(b) The Agreement has been duly authorized, executed and delivered by the
Kemper Fund on behalf of the Acquiring Fund and, assuming that the
Reorganization Proxy Materials comply with the 1933 Act, the 1934 Act and
the 1940 act and the rules and regulations thereunder and, assuming due
authorization, execution and delivery of the Agreement by the Acquired
Fund, is a valid and binding obligation of the Kemper Fund on behalf of the
Acquiring Fund enforceable against the Kemper Fund in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights
generally and to general equity principles.
(c) The Acquiring Fund Shares to be issued to the Acquired Fund
Shareholders as provided by this Agreement are duly authorized, upon such
delivery will be validly issued and outstanding, and are fully paid and
non-assessable by the Acquiring Fund, and no shareholder of the Acquiring
Fund has any preemptive rights to subscription or purchase in respect
thereof.
(d) The execution and delivery of the Agreement did not, and the
consummation of the transactions contemplated hereby will not, result in a
material violation of the Kemper Fund's Articles of Incorporation or
By-Laws or any provision of any agreement (known to such counsel) to which
the Kemper Fund is a party or by which it is bound or, to the knowledge of
such counsel, result in the acceleration of any obligation or the
imposition of any penalty under any agreement, judgment, or decree to which
the Kemper Fund is a party or by which it is bound.
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(e) To the knowledge of such counsel, no consent, approval, authorization
or order of any court or governmental authority of the United States or the
State of Maryland is required for the consummation by the Acquiring Fund of
the transactions contemplated herein, except such as have been obtained
under the 1933 Act, the 1934 Act and the 1940 Act, and such as may be
required under state securities laws.
(f) The Kemper Fund is registered as a management investment company with
respect to each series of shares it offers, including those of the
Acquiring Fund, under the 1940 Act, and its registration with the
Commission as a management investment company under the 1940 Act is in full
force and effect.
(g) Shares of the Kemper Fund, including those of the Acquiring Fund, are
registered under the 1933 Act, and such registration is in full force and
effect.
(h) To the knowledge of such counsel, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or threatened as to the Kemper Fund or the Acquiring Fund
or any of their respective properties or assets and neither the Kemper Fund
nor the Acquiring Fund is a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which
materially and adversely affects its business.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE KEMPER FUND, ON BEHALF OF THE
ACQUIRING FUND
The obligations of the Kemper Fund, on behalf of the Acquiring Fund, to complete
the transaction provided for herein shall be subject, at its election, to the
performance by the Acquired Fund of all of the obligations to be performed by it
hereunder on or before the Closing Date and, in addition thereto, the following
further conditions:
7.1 All representations and warranties of the Acquired Fund contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
7.2 The Acquired Fund shall have delivered to the Kemper Fund a statement of
assets liabilities, and capital of the Acquired Fund, together with a list of
the portfolio securities of the Acquired Fund showing the tax costs of such
securities by lot and the holding periods of such securities, as of the Closing
Date, certified by the President or Vice President and Treasurer or Assistant
Treasurer of the Acquired Fund as
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having been prepared in accordance with GAAP, and certifying that there has been
no material adverse change in its financial position since March 31, 1998, other
than changes in its portfolio securities since that date or changes in the
market value of its portfolio securities.
7.3 The Acquired Fund shall have duly executed and delivered to the Kemper Fund
such bills of sale, assignments, certificates and other instruments of transfer
("Transfer Documents") as the Kemper Fund may deem necessary or desirable to
transfer all of the Acquired Fund's right, title and interest in and to the
Acquired Fund's assets. The Acquired Fund's assets shall be accompanied by all
necessary state stock transfer stamps or cash for the appropriate purchase price
therefor.
7.4 The Acquired Fund shall have delivered to the Kemper Fund on the Closing
Date a certificate executed in its name by its President or Vice President and
its Treasurer or Assistant Treasurer, in form and substance satisfactory to the
Kemper Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquired Fund made in this Agreement are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other matters
as the Kemper Fund shall reasonably request.
7.5 The Acquired Fund shall have performed and complied in all material respects
with each of its agreements and covenants required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
7.6 The Kemper Fund shall have received on the Closing Date the opinion of
Vedder, Price, Kaufman & Kammholz, counsel to the Acquired Fund, covering the
following points:
(a) The Acquired Fund is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland and has the power
to own all of its properties and assets, and to carry on its business, as
presently conducted.
(b) The Agreement has been duly authorized, executed and delivered by the
Acquired Fund, and, assuming due authorization, execution and delivery of
the Agreement by the Kemper Fund, is a valid and binding obligation of the
Acquired Fund enforceable against the Acquired Fund in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights
generally and to general equity principles.
(c) The execution and delivery of the Agreement did not, and the
consummation of the transactions contemplated hereby will not, result in a
material violation of the Acquired Fund's Articles of
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Incorporation or By-Laws or any provision of any agreement (known to such
counsel) to which the Acquired Fund is a party or by which it is bound or,
to the knowledge of such counsel, result in the acceleration of any
obligation or the imposition of any penalty under any agreement, judgment,
or decree to which the Acquired Fund is a party or by which it is bound.
(d) To the knowledge of such counsel, no consent, approval, authorization
or order of any court or governmental authority of the United States or the
State of Maryland is required for the consummation by the Acquired Fund of
the transaction contemplated herein, except such as have been obtained
under the 1933 Act, the 1934 Act and the 1940 Act, and such as may be
required under state securities laws.
(e) The descriptions in the Reorganization Proxy Materials of the Acquired
Fund and, only insofar as they relate to the Acquired Fund, of statutes,
legal and governmental proceedings and contracts and other documents, if
any, are accurate and fairly present the information required to be shown.
(f) The Acquired Fund is registered as a management investment company
under the 1940 Act and its registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(g) The Acquired Fund is subclassified as an open-end company under the
1940 Act, all necessary board of directors and shareholder approvals
relating to such subclassification have been obtained, and all necessary
regulatory filings, including amendments to the Acquired Fund's Articles of
Incorporation and registration with the Commission, have been duly made and
are effective.
(h) To the knowledge of such counsel, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or threatened as to the Acquired Fund or any of its
properties or assets, and the Acquired Fund is not a party to or subject to
the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business.
Such counsel shall also state that they have participated in conferences with
officers and other representatives of the Acquired Fund at which the contents of
the Reorganization Proxy Materials and related matters were discussed and,
although they are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Reorganization Proxy Materials (except to the extent indicated in paragraph (e)
of their opinion), on the basis of the foregoing
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(relying as to materiality to a large extent upon the opinions of officers and
other representatives of the Acquired Fund), no facts have come to their
attention that lead them to believe that the Reorganization Proxy Materials as
of their respective dates, as of the date of the Shareholders Meeting, and as of
the Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein regarding the Acquired Fund
or necessary to make the statements therein regarding the Acquired Fund, in
light of the circumstances under which they were made, not misleading. Such
opinion may state that such counsel does not express any opinion or belief as to
the information relating to the Kemper Fund or the Acquiring Fund, contained in
Reorganization Proxy Materials and that such opinion is solely for the benefit
of the Acquiring Fund, its Directors and its officers. Such opinion shall also
include such other matters incident to the transaction contemplated hereby as
the Kemper Fund may reasonably request.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE KEMPER FUND AND THE
ACQUIRED FUND
If any of the conditions set forth below do not exist on or before the Closing
Date, either party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Acquired Fund in accordance with the provisions of the Acquired Fund's Articles
of Incorporation and certified copies of the results of such vote evidencing
such approval shall have been delivered to the Kemper Fund.
8.2 On the Closing Date no action, suit or other proceeding shall be threatened
or pending before any court or governmental agency which seeks to restrain or
prohibit, or obtain damages or other relief in connection with, this Agreement
or the transaction contemplated herein.
8.3 All consents of other parties and all other consents, orders and permits of
Federal, state and local regulatory authorities deemed necessary by the Kemper
Fund or the Acquired Fund to permit consummation, in all material respects, of
the transaction contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve a risk of
a material adverse effect on the assets or properties of the Acquiring Fund or
the Acquired Fund.
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8.4 The Kemper Fund shall have received the opinion of Dechert Price & Rhoads
addressed to the Kemper Fund substantially to the effect that for federal income
tax purposes:
(a) The transfer by the Acquired Fund of all of its assets to the Acquiring
Fund in exchange for Acquiring Fund Shares, and the distribution of such
shares to the Acquired Fund Shareholders, as provided in this Agreement,
will constitute a reorganization within the meaning of Section 368 of the
Code.
(b) In accordance with Sections 361(a), 361(c)(1) and 357(a) of the Code,
no gain or loss will be recognized by the Acquired Fund as a result of such
transactions.
(c) In accordance with Section 1032(a) of the Code, no gain or loss will be
recognized by the Acquiring Fund as a result of such transactions.
(d) In accordance with Section 354(a)(1) of the Code, no gain or loss will
be recognized by the shareholders of the Acquired Fund on the distribution
to them by the Acquired Fund of the Acquiring Fund Shares in exchange for
their shares of the Acquired Fund.
(e) In accordance with Section 358(a)(1) of the Code, the basis of the
Acquiring Fund Shares received by each shareholder of the Acquired Fund
will be the same as the basis of the shareholder's Acquired Fund shares
immediately prior to such transactions.
(f) In accordance with Section 362(b) of the Code, the basis of the
Acquired Fund Assets received by the Acquiring Fund will be the same as the
basis of such assets in the hands of the Acquired Fund immediately prior
the transactions.
(g) In accordance with Section 1223(1) of the Code, a shareholder's holding
period for the Acquiring Fund Shares will be determined by including the
period for which the shareholder held the shares of the Acquired Fund
exchanged therefor, provided that the shareholder held such shares of the
Acquired Fund as a capital asset.
(h) In accordance with Section 1223(2) of the Code, the holding period of
the Acquiring Fund with respect to the Acquired Fund Assets will include
the period for which such Assets were held by the Acquired Fund provided
that the Acquired Fund held such Assets as capital assets.
(i) In accordance with Section 381(a) of the Code, the Acquiring Fund will
succeed to the tax attributes of the Acquired Fund described in Section
381(c) of the Code.
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The delivery of such opinion shall be conditioned upon the receipt by Dechert
Price & Rhoads of such representations as it shall reasonably request of the
parties hereto.
8.5 The Acquired Fund shall have received the opinion of Vedder, Price, Kaufman
& Kammholz addressed to the Acquired Fund substantially to the effect that for
federal income tax purposes:
(j) The transfer by the Acquired Fund of all of its assets to the Acquiring
Fund in exchange for Acquiring Fund Shares, and the distribution of such
shares to the Acquired Fund Shareholders, as provided in this Agreement,
will constitute a reorganization within the meaning of Section 368 of the
Code.
(k) In accordance with Sections 361(a), 361(c)(1) and 357(a) of the Code,
no gain or loss will be recognized by the Acquired Fund as a result of such
transactions.
(l) In accordance with Section 1032(a) of the Code, no gain or loss will be
recognized by the Acquiring Fund as a result of such transactions.
(m) In accordance with Section 354(a)(1) of the Code, no gain or loss will
be recognized by the shareholders of the Acquired Fund on the distribution
to them by the Acquired Fund of the Acquiring Fund Shares in exchange for
their shares of the Acquired Fund.
(n) In accordance with Section 358(a)(1) of the Code, the basis of the
Acquiring Fund Shares received by each shareholder of the Acquired Fund
will be the same as the basis of the shareholder's Acquired Fund shares
immediately prior to such transactions.
(o) In accordance with Section 362(b) of the Code, the basis of the
Acquired Fund Assets received by the Acquiring Fund will be the same as the
basis of such assets in the hands of the Acquired Fund immediately prior
the transactions.
(p) In accordance with Section 1223(1) of the Code, a shareholder's holding
period for the Acquiring Fund Shares will be determined by including the
period for which the shareholder held the shares of the Acquired Fund
exchanged therefor, provided that the shareholder held such shares of the
Acquired Fund as a capital asset.
(q) In accordance with Section 1223(2) of the Code, the holding period of
the Acquiring Fund with respect to the Acquired Fund Assets will include
the period for which such Assets were held by the Acquired Fund provided
that the Acquired Fund held such Assets as capital assets.
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(r) In accordance with Section 381(a) of the Code, the Acquiring Fund will
succeed to the tax attributes of the Acquired Fund described in Section
381(c) of the Code.
The delivery of such opinion shall be conditioned upon the receipt by Vedder,
Price, Kaufman & Kammholz of such representations as it shall reasonably request
of the parties hereto.
8.6 No action, suit or other proceeding shall be threatened or pending before
any court or governmental agency in which it is sought to restrain or prohibit
or obtain damages or other relief in connection with this Agreement or the
transactions contemplated herein.
8.7 The Commission shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin
consummation of the transactions contemplated by this Agreement under Section
25(c) of the 1940 Act.
8.8 Either party, at its option, may waive compliance by the other party with
any condition contained in this Section 8, other than the conditions contained
in Section 8.1.
9. BROKERAGE FEES
The Kemper Fund on behalf of the Acquiring Fund and the Acquired Fund each
represents and warrants to the other that there are no brokers or finders
entitled to receive any payments in connection with the transactions provided
for herein.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Kemper Fund and the Acquired Fund agree that neither party has made any
representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereunder.
11. FURTHER ASSURANCES
Subject to the terms and conditions herein provided, each of the parties hereto
shall use its best efforts to take, or cause to be taken, such action, to
execute and deliver, or cause to be executed and delivered, such additional
documents and instruments and to do, or cause to be done, all things necessary,
proper or advisable under the provisions of this Agreement and under applicable
law to consummate and make effective the
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transactions contemplated by this Agreement, including without limitation
delivering and/or causing to be delivered to the other party hereto each of the
items required under this Agreement as a condition to such party's obligations
hereunder. In addition, the Acquired Fund shall deliver or cause to be delivered
to the Kemper Fund or its designees each account, book, record or other document
of the Acquired Fund required to be maintained by Section 31(a) of the 1940 Act
and Rules 31a-1 to 31a-3 thereunder (regardless of whose possession they are
in).
12. TERMINATION
This Agreement may be terminated by a party at or, in the case of Subsection
12(c) below, at any time prior to, the Closing Date by a vote of a majority of
its Board of Directors as provided below:
(a) By the Acquired Fund if the conditions set forth in Section 6 or 8 are
not satisfied as specified in said Section;
(b) By the Kemper Fund on behalf of the Acquiring Fund if the conditions
set forth in Section 7 or 8 are not satisfied as specified in said Section;
(c) By mutual consent.
13. AMENDMENTS
This agreement may be amended, modified or supplemented in such manner as may be
mutually agreed upon in writing by the authorized officers of the Acquired Fund
and the Kemper Fund; provided, however, that following the meeting of the
Acquired Fund Shareholders called by the Acquired Fund, no such amendment may
have the effect of changing the provisions for determining the number of the
Acquiring Fund Shares to be issued to the Acquired Fund Shareholders under this
Agreement to the detriment of such shareholders without their further approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any provisions
of this Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed to the Kemper Fund, 222 South Riverside
Plaza, Chicago, Illinois 60606, Attention: Secretary, with a copy to Dechert
Price & Rhoads, 1775 Eye Street, N.W., Washington, DC 20006, Attention: Robert
W. Helm, or to the Acquired Fund, 222 South Riverside Plaza, Chicago, Illinois
60606, Attention: Secretary, with a copy to Vedder, Price, Kaufman & Kammholz,
222 North LaSalle Street, Chicago, IL 60601, Attention: David A. Sturms.
E-20
<PAGE> 107
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
15.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance with the
laws of the State of Maryland, without regard to its principles of conflicts of
laws.
15.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder shall be made by any party
without the written consent of the other party. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its President or Vice President.
KEMPER GLOBAL/INTERNATIONAL SERIES, INC.
on behalf of the
GROWTH FUND OF SPAIN
SERIES
By: /s/ MARK CASADY
-----------------------------------------------------------------------------
President
THE GROWTH FUND OF SPAIN, INC.
By: /s/ DANIEL PIERCE
-----------------------------------------------------------------------------
President
E-21
<PAGE> 108
ABOUT THE PROXY CARD
Because each Fund must vote separately, you are being sent a
proxy card for each Fund account that you have.
Please vote 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 Both, Withhold Both or Except. If you mark an X in the
Except box, you should print the name or number relating to the individual 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!
======
PROXY CARD SAMPLE
<PAGE> 109
THE GROWTH FUND OF SPAIN, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Thank you
Thank you
for mailing your proxy card promptly!
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WE APPRECIATE YOUR
CONTINUING SUPPORT AND
LOOK FORWARD TO SERVING
YOUR FUTURE INVESTMENT NEEDS.
(LOGO)Printed on recycled paper.
<PAGE> 110
PROXY PROXY
THE GROWTH FUND OF SPAIN, INC.
FOR THE ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 28, 1998
PLEASE VOTE PROMPTLY!
Your vote is needed! Please vote below and sign in the space provided and return
it in the envelope provided. You may receive additional proxies for your other
accounts with Kemper. 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.
The signers of this proxy hereby appoint Arthur R. Gottschalk and Daniel Pierce,
and each of them, attorneys and proxies, with power of substitution in each, to
vote all shares for the signers at the Annual Meeting of Shareholders to be held
October 28, 1998, and at any adjournments thereof, as specified herein, and in
accordance with their best judgment, on any other business that may properly
come before this meeting. If no specification is made herein, all shares will be
voted as recommended by the Board on each item set forth on this proxy.
THE PROXY IS SOLICITED BY THE BOARD OF THE FUND WHICH RECOMMENDS A VOTE "FOR"
ALL ITEMS.
<TABLE>
<CAPTION>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: :
<S> <C> <C> <C> <C>
For Withhold Except To withhold authority to
1. Election of two directors to the Board of Both Both vote, mark the "Except"
directors box and write the
[ ] [ ] [ ] nominee's number on the
01) Frederick T. Kelsey, 02) Fred B. Renwick line provided below.
-------------------------
2. Ratification of the selection of Ernst & Young For Against Abstain
LLP as the Fund's independent auditors for the current
fiscal year. [ ] [ ] [ ]
3A. Approve a new investment management agreement For Against Abstain
with Scudder Kemper Investments, Inc.
[ ] [ ] [ ]
3B. Approve a new sub-advisory agreement with BSN For Against Abstain
Gestion de Patrimonios, S.A., S.G.C. (Approval of Item
3B is conditioned upon approval of Item 3A.) [ ] [ ] [ ]
4. Approve the change in the Fund's classification from For Against Abstain
a diversified to a non-diversified fund.
[ ] [ ] [ ]
5. Approve the proposal to convert the Fund from For Against Abstain
a closed-end investment company to an open-end investment
company. [ ] [ ] [ ]
Note: All registered owners of accounts shown above must sign. Please sign exactly as your name appears on this
Proxy. If signing for a corporation, estate or trust, please indicate your capacity or title.
---------------------------------- -------------------- ------------------------------ -------------
Signature Date Signature (Joint) Date
</TABLE>
