<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:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
KEMPER INTERNATIONAL BOND FUND
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
October 1997
Kemper
Important News
for Kemper International Bond Fund Shareholders
WHILE WE ENCOURAGE YOU TO READ THE FULL TEXT OF THE ENCLOSED PROXY STATEMENT,
HERE IS A BRIEF OVERVIEW OF MAJOR MATTERS TO BE VOTED UPON.
================================================================================
Q&A
QUESTIONS AND ANSWERS
Q WHAT IS HAPPENING?
A Zurich Insurance Company, the parent of your Fund's investment manager (Zurich
Kemper Investments, Inc. or "ZKI") has entered into an agreement with Scudder,
Stevens & Clark, Inc. ("Scudder") whereby Zurich will acquire approximately 70%
of Scudder. Upon completion of the transaction, Scudder will change its name to
Scudder Kemper Investments, Inc. ("SKI") and ZKI will be combined with SKI.
Because of the transaction, it is necessary for your Fund to approve a new
investment management agreement.
The following pages elaborate on Scudder, the proposed new investment management
agreement and the Fund Board's evaluation of Zurich and Scudder. A vote is also
being sought upon the election of Board members, the selection of independent
auditors, and a change in investment policies to permit a master/feeder fund
structure in the future.
Q WHAT IS SCUDDER?
A Scudder is one of America's oldest and largest investment management firms. It
manages assets invested in equities, fixed income and money market instruments
in both developed and emerging markets. Scudder provides investment services for
open-end and closed-end funds, and private and institutional clients.
Q WHY AM I BEING ASKED TO VOTE ON THE PROPOSED NEW INVESTMENT MANAGEMENT
AGREEMENT?
A The Investment Company Act of 1940 requires a vote whenever there is a change
in control of an investment manager. The Zurich/Scudder transaction is such a
change of control and requires a fund shareholder vote upon a new investment
management agreement.
Q HOW WILL THE ZURICH/SCUDDER TRANSACTION AFFECT ME AS A FUND SHAREHOLDER?
A Your Fund and your Fund investment will not change. You will still own the
same shares in the same Fund. If the new investment
KEMPER LOGO
<PAGE> 3
management agreement is approved, your Fund shares will not change and the
advisory fee rates for your Fund will not change.
Zurich and Scudder have committed to provide all resources necessary to provide
your Fund with top quality investment management and shareholder services.
Q WILL THE INVESTMENT ADVISORY FEE RATES BE THE SAME?
A Yes, the investment advisory fee rates for your Fund will remain the
same.
Q WILL THE BRAND IDENTITY OF THE KEMPER FUNDS SURVIVE?
A Zurich and Scudder intend to maintain the distinct brand identity of the
Kemper Funds. They are also committed to strengthening and enhancing the Kemper
Funds brand and distribution channels, while maintaining its separate brand
identity.
Q WHAT IS A MASTER/FEEDER FUND?
A Rather than investing directly in a portfolio of securities, a feeder fund is
authorized to pool its assets with other mutual funds for investment in a master
fund. A purpose of a master/feeder fund structure is to achieve operational
efficiencies.
Q HOW DO THE BOARD MEMBERS OF MY FUND SUGGEST THAT I VOTE?
A After careful consideration, the board members of your Fund, including all of
the independent members, recommend that you vote "For" all the items on the
enclosed proxy card.
Q WHO IS PAYING THE COST OF THE SHAREHOLDER MEETING AND THIS PROXY SOLICITATION?
A ZKI--not your Fund--is paying all costs of the Funds' shareholder meeting and
proxy solicitation.
Q WHOM DO I CALL FOR MORE INFORMATION?
A Please call Shareholder Services at (800) 537-1988.
ABOUT THE PROXY CARD
[PROXY CARD SAMPLE] Because the Fund must vote separately, you are being sent
a proxy card for the 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 trustees),
mark-- For All, Withhold All or For All Except. If you mark an X in the For
All Except box, you should print the number(s) relating to the individual(s)
for whom you wish to withhold authority. On all other Items, mark--For,
Against or Abstain. Then sign, date and return each of your proxy cards in the
accompanying postage-paid envelope. All registered owners of an account, as
shown in the address on the proxy card, must sign the proxy card. If you are
signing for a corporation, trust or estate, please indicate your title or
position.
We appreciate your continuing support and look forward to serving your future
investment needs.
THANK YOU FOR MAILING YOUR
PROXY CARD PROMPTLY!
<PAGE> 4
KEMPER INTERNATIONAL BOND FUND
222 South Riverside Plaza Chicago, Illinois 60606
Telephone 1-800-621-1048
, 1997
Dear Kemper International Bond Fund Shareholder:
As you read in the Questions and Answers (Q & A) on the outside cover, Zurich
Insurance Company ("Zurich") has entered into an agreement with Scudder, Stevens
& Clark, Inc. ("Scudder") pursuant to which Zurich will acquire approximately
70% of Scudder. Upon completion of the transaction, Scudder will change its name
to Scudder Kemper Investments, Inc. ("SKI"), and your Fund's investment manager
(Zurich Kemper Investments, Inc. or "ZKI") will be combined with SKI. Because of
the transaction, it is necessary for your Fund to approve a new investment
management agreement.
If the new investment management agreement is approved, YOUR FUND SHARES WILL
NOT CHANGE AND THE ADVISORY FEE RATES FOR YOUR FUND WILL NOT CHANGE. FURTHER,
YOU SHOULD CONTINUE TO RECEIVE THE HIGH QUALITY INVESTMENT MANAGEMENT AND
SHAREHOLDER SERVICES THAT YOU HAVE COME TO EXPECT OVER THE YEARS.
Your Fund Board has unanimously approved the proposals and recommends them for
your approval. I encourage you to vote in favor of the proposals.
As always, we thank you for your confidence and support.
Sincerely,
/s/ Stephen B. Timbers
Stephen B. Timbers
President KEMPER LOGO
<PAGE> 5
KEMPER INTERNATIONAL BOND FUND
222 South Riverside Plaza Chicago, Illinois 60606
Telephone 1-800-621-1048
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 3, 1997 AND PROXY STATEMENT
, 1997
To the Shareholders:
You are invited to attend a special meeting of shareholders of Kemper
International Bond Fund (the "Fund"). The meeting will be held in the
Presentation Room on the 32nd Floor at the offices of the Fund, 222 South
Riverside Plaza, Chicago, Illinois on Wednesday, December 3, 1997 at 2:30 p.m.,
Chicago time, for the following purposes and to transact such other business as
may properly come before the meeting or any adjournment of the meeting:
1. To elect eight (8) Trustees to the Board of Trustees.
2. To ratify or reject the selection of Ernst & Young LLP as independent
auditors for the current fiscal year.
3. To approve or disapprove a new investment management agreement with Scudder
Kemper Investments, Inc. ("SKI") (or with Zurich Kemper Investments, Inc.
("ZKI") transferable to SKI).
4. To approve or disapprove a new sub-advisory agreement with Zurich Investment
Management Limited ("ZIML") (including approval of a subsequent assignment).
5. To approve or disapprove changes in the Fund's fundamental investment
policies to permit a master/feeder fund structure.
The Board of Trustees of the Fund has selected the close of business on
September 22, 1997 as the record date for the determination of shareholders of
the Fund entitled to notice of and to vote at the meeting. Shareholders are
entitled to one vote for each share held.
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PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD. SIGN, DATE
AND RETURN IT IN THE ENVELOPE PROVIDED. TO SAVE THE COST OF ADDITIONAL
SOLICITATIONS, PLEASE MAIL YOUR PROXY PROMPTLY.
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<PAGE> 6
The accompanying proxy is solicited by the Board of Trustees (the "Board") of
the Fund for voting at the special meeting of shareholders of the Fund to be
held on Wednesday, December 3, 1997, and at any and all adjournments thereof
(the "Meeting"). This proxy statement was first mailed to shareholders on or
about , 1997.
The shareholders of the Fund are being asked to vote on five items: Item 1
(election of trustees); Item 2 (ratification of selection of auditors); Item 3
(approval of the new investment management agreement); Item 4 (approval of new
sub-advisory agreement with ZIML); and Item 5 (approval of changes in
fundamental investment policies to permit master/feeder fund structure). The
Board recommends an affirmative vote on all items. The vote required to approve
each item is described under the section of this proxy statement entitled
"Miscellaneous."
The Board of the Fund has fixed the close of business on September 22, 1997 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 22, 1997, the Fund had
shares outstanding.
INTRODUCTION
On June 26, 1997, Zurich Insurance Company ("Zurich"), ZKI Holding Corp.
("ZKIH"), Zurich Kemper Investments, Inc. ("ZKI"), Scudder, Stevens & Clark,
Inc. ("Scudder") and the representatives of the beneficial owners of the capital
stock of Scudder ("Scudder Representatives") entered into a transaction
agreement ("Transaction Agreement") pursuant to which Zurich will become the
majority stockholder in Scudder with an approximately 70% interest, and ZKI will
become a wholly-owned subsidiary of, or be combined with, Scudder
("Transaction"). Upon completion of the Transaction, Scudder will change its
name to Scudder Kemper Investments, Inc. ("SKI"). Scudder, a New York-based
investment adviser and the investment manager for the Scudder and AARP Funds,
has approximately $125 billion under management. ZKI, a Chicago-based investment
adviser and the investment manager for the Kemper Funds, and its affiliates have
approximately $85 billion under management. The headquarters of SKI will be in
New York. Edmond D. Villani, Scudder's Chief Executive Officer, will continue as
Chief Executive Officer of SKI and will become a member of Zurich's Corporate
Executive Board. Some of the terms of the Transaction are also set forth in a
form of second amended and restated Security Holders Agreement ("New SHA") to be
entered into among the beneficial owners of the capital stock of Scudder, the
Scudder Representatives, Scudder, Zurich, ZKIH and the Scudder Kemper
Investments, Inc. Executive Defined Contribution Plan Trust.
2
<PAGE> 7
Consummation of the Transaction would constitute an "assignment," as that term
is defined in the Investment Company Act of 1940 ("1940 Act"), of the Fund's
current investment management agreement with ZKI. As required by the 1940 Act,
each current investment management agreement provides for its automatic
termination in the event of its assignment. Accordingly, as discussed further
below, a new investment management agreement between the Fund and SKI is being
proposed for approval by shareholders of the Fund.
DESCRIPTION OF THE TRANSACTION.
Under the Transaction Agreement, Zurich will pay $866.7 million in cash to
acquire two-thirds of Scudder's outstanding shares and will contribute ZKI to
Scudder for additional shares, following which Zurich will have a 79.1% fully
diluted equity interest in the combined business. Zurich will then transfer a
9.6% fully diluted equity interest in SKI to a defined contribution plan for the
benefit of Scudder and ZKI employees, as well as cash and warrants on Zurich
shares for award to Scudder employees, in each case subject to five-year vesting
schedules. After giving effect to the Transaction, current Scudder stockholders
will have a 29.6% fully diluted equity interest in SKI and Zurich will have a
69.5% fully diluted interest in SKI. Scudder's name will be changed to Scudder
Kemper Investments, Inc.
The purchase price for Scudder or for ZKI in the Transaction is subject to
adjustment based on the effect on revenues of non-consenting clients, and will
be reduced if the annualized investment management fee revenues (excluding the
effect of market changes, but taking into account new assets under management)
from clients at the time of closing, as a percentage of such revenues as of June
30, 1997 (the "Revenue Run Rate Percentage"), is less than 90%.
At the closing, Zurich and the other stockholders of SKI will enter into the New
SHA. Under the New SHA, Scudder stockholders will be entitled to designate three
of the seven members of the SKI board and two of the four members of an
Executive Committee, which will be the primary management-level committee of
SKI. Zurich will be entitled to designate the other four members of the SKI
board and the other two members of the Executive Committee.
The names, addresses and principal occupations of the initial Scudder-designated
directors of SKI are as follows: LYNN S. BIRDSONG, 345 Park Avenue, New York,
New York, Managing Director of Scudder; CORNELIA M. SMALL, 345 Park Avenue, New
York, New York, Managing Director of Scudder; and EDMOND D. VILLANI, 345 Park
Avenue, New York, New York, President, Chief Executive Officer and Managing
Director of Scudder.
3
<PAGE> 8
The names, addresses and principal occupations of the initial Zurich-designated
directors of SKI are as follows: LAWRENCE W. CHENG, Mythenquai 2, Zurich,
Switzerland, Chief Investment Officer for Investments and Institutional Asset
Management and the corporate functions of Securities and Real Estate for Zurich
and a member of the Corporate Executive Board of Zurich; STEVEN M. GLUCKSTERN,
Mythenquai 2, Zurich, Switzerland, responsible for Reinsurance, Structured
Finance, Capital Market Products and Strategic Investments, and a member of the
Corporate Executive Board of Zurich; ROLF HUEPPI, Mythenquai 2, Zurich,
Switzerland, Chairman of the Board and Chief Executive Officer of Zurich; and
MARKUS ROHRBASSER, Mythenquai 2, Zurich, Switzerland, Chief Financial Officer
and a member of the Corporate Executive Board of Zurich.
The initial Scudder-designated Executive Committee members will be Messrs.
Birdsong and Villani (Chairman). The initial Zurich-designated Executive
Committee members will be Messrs. Cheng and Rohrbasser.
The New SHA requires the approval of a majority of the Scudder-designated
directors for certain decisions, including changing the name of SKI, effecting a
public offering before April 15, 2005, causing SKI to engage substantially in
non-investment management and related business, making material acquisitions or
divestitures, making changes in SKI's capital structure, dissolving or
liquidating SKI, or entering into certain affiliated transactions with Zurich.
The New SHA also provides for various put and call rights with respect to SKI
stock held by current Scudder employees, limitations on Zurich's ability to
purchase other asset management companies outside of SKI, rights of Zurich to
repurchase SKI stock upon termination of employment of SKI personnel, and
registration rights for stock held by continuing Scudder stockholders.
The Transaction is subject to a number of conditions, including approval by
Scudder stockholders; the Revenue Run Rate Percentages of Scudder and ZKI being
at least 75% ; Scudder and ZKI having obtained director and stockholder
approvals from U.S.-registered funds representing 90% of the assets of such
funds under management as of June 30, 1997; the absence of any restraining order
or injunction preventing the Transaction, or any litigation challenging the
Transaction that is reasonably likely to result in an injunction or invalidation
of the Transaction; and the continued accuracy of the representations and
warranties contained in the Transaction Agreement. The Transaction is expected
to close during the fourth quarter of 1997.
Subsequent to the execution of the Transaction Agreement, Zurich agreed to cause
ownership of Zurich Investment Management Limited ("ZIML") to be transferred by
Zurich (or a direct or indirect wholly-owned subsidiary of Zurich) to SKI (or a
direct or indirect wholly-owned subsidiary of SKI). ZIML is a sub-adviser for
the Fund. While the amount
4
<PAGE> 9
of consideration payable to Zurich for ZIML has not yet been finally agreed
upon, it is expected that such consideration would in no event exceed $50
million, payable in cash or shares of SKI stock or some combination thereof at
the closing of the Transaction or over some period of time after the closing of
the Transaction. Following the transfer, which is expected to take place at the
same time as the closing of the Transaction, ZIML's board of directors would
comprise representatives of Scudder and Zurich. The capital stock of ZIML
initially may be transferred to one or more wholly-owned subsidiaries of Zurich,
but ultimately will be transferred to SKI or one of its wholly-owned
subsidiaries (the "ZIML Transaction"). The ZIML Transaction will result in an
assignment of the sub-advisory agreement under the 1940 Act.
ITEM 1. ELECTION OF TRUSTEES
At the Meeting, eight (8) trustees are to be elected to constitute the Board of
the Fund. All the nominees, except Messrs. Daniel Pierce and Edmond Villani,
were elected to the Board of the Fund at a special meeting of shareholders held
on September 19, 1995.
It is intended that the proxies will be voted for the election of the nominees
described below. The nominees, if elected, will take office upon consummation of
the Transaction and their election and qualification is contingent upon
consummation of the Transaction. The term of each person elected as a trustee
will be from the date of the consummation of the Transaction until the next
meeting of shareholders, if any, called for the purpose of electing trustees and
until the election and qualification of a successor or until such trustee sooner
dies, resigns or is removed as provided in the Agreement and Declaration of
Trust of the Fund ("Declaration of Trust"). If the Transaction is not
consummated, the current trustees of the Fund will continue to serve as the
Fund's Board (which are those identified as such below, along with Mr. Stephen
B. Timbers, the president and chief executive officer of ZKI). Since the Fund
does not hold annual meetings, trustees will hold office for an indeterminate
period.
All the nominees listed below have consented to serve as trustees of the Fund,
if elected. In case any nominee shall be unable or shall fail to act as a
trustee by virtue of an unexpected occurrence, the proxies may be voted
5
<PAGE> 10
for such other person(s) as shall be determined by the persons acting under the
proxies in their discretion.
<TABLE>
<CAPTION>
NAME (DATE OF BIRTH), PRINCIPAL YEAR FIRST BECAME
OCCUPATION AND AFFILIATIONS A BOARD MEMBER
------------------------------- -----------------
<S> <C>
James B. Akins (10/15/26) 1995
Consultant on International, Political and
Economic Affairs; formerly, a career United
States Foreign Service Officer; Energy Adviser
for the White House; United States Ambassador to
Saudi Arabia.
Arthur R. Gottschalk (02/13/25) 1994
Retired; formerly, President, Illinois
Manufacturers Association; Trustee, Illinois
Masonic Medical Center; Member, Board of
Governors, Heartland Institute/ Illinois;
formerly, Illinois State Senator; formerly, Vice
President, The Reuben H. Donnelly Corp.
Frederick T. Kelsey (04/25/27) 1994
Retired; formerly, consultant to Goldman, Sachs
& Co.; formerly, President, Treasurer and
Trustee of Institutional Liquid Assets and its
affiliated mutual funds; Trustee of the
Benchmark Funds and the Pilot Funds.
*Daniel Pierce (03/18/34) Nominee
Chairman of the Board and Managing Director,
Scudder; Director, Fiduciary Trust Company;
Director, Fiduciary Company Incorporated; Board
member of 14 investment companies advised by
Scudder.
Fred B. Renwick (02/01/30) 1995
Professor of Finance, New York University, Stern
School of Business; Director, TIFF Investment
Program, Inc.; Director, the Wartburg Home
Foundation; Chairman, Investment Committee of
Morehouse College Board of Trustees; Chairman,
American Bible Society Investment Committee;
formerly, member of the Investment Committee of
Atlanta University Board of Trustees; formerly,
Director of Board of Pensions Evangelical
Lutheran Church of America.
John B. Tingleff (05/04/35) 1994
Retired; formerly, President, Tingleff &
Associates (management consulting firm);
formerly, Senior Vice President, Continental
Illinois National Bank & Trust Company.
</TABLE>
6
<PAGE> 11
<TABLE>
<CAPTION>
NAME (DATE OF BIRTH), PRINCIPAL YEAR FIRST BECAME
OCCUPATION AND AFFILIATIONS A BOARD MEMBER
------------------------------- -----------------
<S> <C>
*Edmond D. Villani (03/04/47) Nominee
President, Chief Executive Officer and Managing
Director, Scudder.
John G. Weithers (08/08/33) 1994
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; Director, Systems
Imagineering, Inc.
</TABLE>
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* Interested persons of Scudder as defined in the Investment Company Act of
1940.
All the nominees, except Messrs. Pierce and Villani, serve as board members of
13 Kemper Funds. Mr. Pierce and Mr. Villani have each been nominated to serve as
a board member of 39 Kemper Funds. A "Kemper Fund" is an investment company for
which ZKI or its affiliates serve as investment manager.
Each Board has an audit and nominating committee that is composed of Messrs.
Akins, Gottschalk, Kelsey, Renwick, Tingleff and Weithers. The committee met
times during the fiscal year ended December 31, 1996. 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
proposed the nominees for election by the shareholders. Shareholders wishing to
submit the name of a candidate for consideration by the committee should submit
their recommendations to the secretary of the Fund.
The Fund pays Board members who are not "interested persons" of the Fund an
annual retainer fee, plus expenses, and an attendance fee for each Fund Board
meeting and committee meeting attended. As reflected above, the Board members
currently serve as board members of various investment companies for which ZKI
or an affiliate serves as investment manager. Board members or officers who are
"interested persons" receive no compensation from the Fund. The Board met
times during the fiscal year ended December 31, 1996. Each then current Board
member attended 75% or more of the respective meetings of the Board and the
audit and nominating committee (if then a member thereof) held during the fiscal
year ended December 31, 1996.
The table below shows, for each trustee entitled to receive compensation from
the Fund, the aggregate compensation paid or accrued during the
7
<PAGE> 12
Fund's fiscal year ended December 31, 1996 and the total compensation that the
Kemper Funds paid or accrued during calendar year 1996.
<TABLE>
<CAPTION>
Aggregate
Compensation Total Compensation
from the Kemper Funds
Name of Trustee Fund Paid to Trustees(2)
--------------- ------------ -------------------
<S> <C> <C>
James E. Akins.................... $2,000 $ 94,300
Arthur R. Gottschalk(1)........... 2,100 102,700
Frederick T. Kelsey(1)............ 2,200 106,800
Fred B. Renwick................... 2,000 94,300
John B. Tingleff.................. 2,000 94,300
John G. Weithers.................. 2,000 94,300
</TABLE>
- ---------------
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Funds. Deferred amounts accrue interest
monthly at a rate equal to the yield of Zurich Money Funds -- Zurich Money
Market Fund.
(2) Includes compensation for service on the boards of 13 Kemper Funds with 36
fund portfolios. Each trustee currently serves as trustee of 13 Kemper Funds
with [46] fund portfolios.
FUND OFFICERS. Information about the executive officers of the Fund, with their
respective dates of birth and terms of office indicated, is set forth below.
Philip J. Collora (11/15/45) vice president of the Fund since 03/02/90, and
secretary of the Fund since 03/02/95, is senior vice president and assistant
secretary of ZKI.
Jerome L. Duffy (06/29/36), treasurer of Fund since 03/02/90, is senior vice
president of ZKI.
Charles R. Manzoni, Jr. (01/23/47), vice president of the Fund since 09/04/96,
executive vice president, secretary and general counsel of ZKI; secretary, ZKI
Holding Corp.; secretary, ZKI Agency, Inc., and formerly, Partner, Gardner,
Carton & Douglas.
John E. Neal (03/09/50), vice president of the Fund since , is
president of Kemper Funds Group, a unit of ZKI, and director of ZKI, Zurich
Kemper Value Advisors, Inc. ("ZKVA") and Zurich Kemper Distributors, Inc.
("ZKDI").
Robert C. Peck, Jr. (10/01/46), vice president of the Fund since ,
is executive vice president, chief investment officer-fixed income of ZKI and
formerly, executive vice president and chief investment officer of an
unaffiliated investment management firm.
8
<PAGE> 13
Stephen B. Timbers (08/08/44), president of the Fund since 03/02/95, is
president, chief executive officer, chief investment officer and director of ZKI
and director of ZKDI, ZKVA and LTV Corporation. Mr. Timbers is also a trustee of
the Fund.
Elizabeth C. Werth (10/01/47), assistant secretary of the Fund since 09/08/94,
is vice president and director of state registrations of ZKI.
The officers of the Fund are elected by the Board of the Fund on an annual basis
to serve until their successors are elected and qualified. It is anticipated
that, after consummation of the Transaction, the Board of the Fund will elect
new officers who are expected to include persons currently affiliated with
Scudder.
SHAREHOLDINGS
As of , 1997, none of the trustees, nominees or officers of the Fund
owned beneficially any shares of the Fund. As of , 1997,
owned beneficially shares ( %) of the Fund.
ITEM 2. SELECTION OF INDEPENDENT AUDITORS
A majority of the members of each Board who are not "interested" persons of the
Fund has selected Ernst & Young LLP, independent auditors, to audit the books
and records of the Fund for the current fiscal year. This firm has served in
this capacity for the Fund 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 auditors 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.
BOARD RECOMMENDATION
The Board of the Fund recommends that shareholders vote FOR the ratification of
the selection of independent auditors.
ITEM 3. NEW INVESTMENT MANAGEMENT AGREEMENT
INTRODUCTION
Zurich Kemper Investments, Inc. ("ZKI") is the investment adviser and manager
for KIBF. ZKI and its indirect parent, Zurich Insurance Company ("Zurich"),
entered into a transaction agreement with Scudder, Stevens & Clark, Inc.
("Scudder") whereby Zurich will acquire approximately 70% of Scudder. Upon
completion of the Transaction, Scudder
9
<PAGE> 14
will change its name to Scudder Kemper Investments, Inc. ("SKI") and ZKI will be
integrated into SKI.
As discussed above, consummation of the Transaction would constitute an
"assignment," as that term is defined in the Investment Company Act of 1940 (the
"1940 Act"), of the Fund's current investment management agreement with ZKI. As
required by the 1940 Act, each current investment management agreement provides
for its automatic termination in the event of its assignment. In anticipation of
the Transaction, a new investment management agreement ("management agreement")
between the Fund and SKI is being proposed for approval by shareholders of the
Fund. (Depending on the timing of integrating the Scudder and ZKI organizations,
the new investment management agreement may initially be between the Fund and
ZKI for some period following the Transaction and then be transferred to SKI
without further action on the part of shareholders of the Fund. Accordingly,
approval of the new agreement with SKI would also include approval of any
interim agreement with ZKI following the assignment of the current agreement.
SKI or ZKI as party to the new investment management agreement, is sometimes
referred to in this proxy statement as the "investment manager.") A copy of the
form of the new management agreement is attached hereto as Exhibit A.
BOARD RECOMMENDATION
The Board of the Fund met on July 8, 1997, July 15, 1997, August 18-19, 1997 and
September 19-20, 1997 to consider the Transaction and its anticipated effects
upon ZKI and the investment management and other services provided to the Funds
by ZKI and its affiliates. In addition, the Independent Trustees also met
separately with counsel on a number of occasions to discuss the Transaction. On
September 20, 1997 the Board of the Fund, including a majority of the trustees
who are not parties to such agreement or interested persons of any such party,
voted unanimously to approve the new management agreement and to recommend it to
shareholders for their approval.
For information about the Board's deliberations and the reasons for its
recommendation, please see "Board of Trustees Evaluation" near the end of this
Item 3.
The Board of the Fund recommends that shareholders vote FOR approval of the new
management agreement.
THE CURRENT INVESTMENT MANAGEMENT AGREEMENT
The current management agreement provides that the Fund's investment manager
acts as investment adviser, manages the Fund's investments, administers the
Fund's business affairs, furnishes offices, necessary facilities and equipment,
provides clerical, bookkeeping and administrative
10
<PAGE> 15
services, provides shareholder and information services and permits any of its
officers or employees to serve without compensation as trustees or officers of
the Fund if duly elected to such positions. Under the current management
agreement, the Fund agrees to assume and pay the charges and expenses of its
operations including, by way of example, the compensation of the trustees other
than those affiliated with the investment manager, charges and expenses of
independent auditors, of legal counsel, of any transfer or dividend disbursing
agent, of any registrar of the Fund and of the custodian (including fees for
safekeeping of securities), costs of calculating net asset value, all costs of
acquiring and disposing of portfolio securities, interest, if any, on
obligations incurred by the Fund, costs of share certificates, membership dues
in the Investment Company Institute or any similar organization, reports and
notices to shareholders, other like miscellaneous expenses and all taxes and
fees to federal, state or other governmental agencies.
For services and facilities furnished, the Fund pays an investment management
fee as a percentage of average daily assets, payable monthly at the annual rates
shown below. Exhibit F shows the management fees paid by the Fund to ZKI for the
Fund's most recently completed fiscal year.
<TABLE>
<CAPTION>
APPLICABLE ASSETS ($000) ANNUAL RATE
------------------------ -----------
<S> <C>
$0 - $250,000....................................... .75%
$250,000 - $1,000,000............................... .72
$1,000,000 - $2,500,000............................. .70
$2,500,000 - $5,000,000............................. .68
$5,000,000 - $7,500,000............................. .65
$7,500,000 - $10,000,000............................ .64
$10,000,000 - $12,500,000........................... .63
Over $12,500,000.................................... .62
</TABLE>
The management agreement provides that the Fund's investment manager will
reimburse the Fund should the operating expenses of the Fund, including the
investment management fee, but excluding taxes, interest, distribution fees (if
any), extraordinary expenses, brokerage commissions or transaction costs and any
other property excludable expenses, exceed on an annual basis applicable state
expense limitations. Currently, there are no state expense limitations in
effect.
The management agreement provides that the Fund's investment manager shall not
be liable for any error of judgment or of law, or for any loss suffered by the
Fund in connection with the matters to which the management agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of the Fund's investment manager in the performance of its
obligations and duties or by
11
<PAGE> 16
reason of its reckless disregard of its obligations and duties under the
management agreement.
The management agreement may be terminated without penalty upon sixty (60) days
written notice by either party, or by a majority vote of the outstanding shares
of the Fund, and automatically terminates in the event of its assignment.
ZKI has acted as investment adviser and manager for the Fund since it commenced
public offering of its shares on February 1, 1995. The current management
agreement, dated January 4, 1996, was approved by the Board on ,
199 , and by shareholders for approval in connection with the Zurich/Kemper
merger on September 19, 1995. The current management agreement continues to
April 1, 1998.
SUB-ADVISER--ZIML
The Fund uses the investment management services of Zurich Investment Management
Limited ("ZIML"), 1 Fleet Place, London, UK, ECM4, 7RQ, an indirect subsidiary
of Zurich and an affiliate of ZKI, with respect to investments in foreign
securities pursuant to the sub-advisory agreements between ZKI and ZIML
described below. The current sub-advisory agreement is dated December 1, 1996,
and will continue, unless replaced or otherwise terminated, until ,
199 .
As with the investment management agreement, the sub-advisory agreement with
ZIML will terminate upon consummation of the Transaction. As discussed below,
new sub-advisory agreements are proposed for the Fund. (See "Item 4. New
Sub-Advisory Agreement with Zurich Investment Management Limited.") In addition,
as described above, it is expected that ownership of ZIML will be transferred to
SKI or to a direct or indirect wholly-owned subsidiary of SKI upon consummation
of the Transaction.
Under the terms of the sub-advisory agreement for the Fund, ZIML renders
investment advisory and management services with regard to that portion of the
Fund's portfolio as may be allocated to ZIML by ZKI from time to time for
management, including services related to foreign securities, foreign currency
transactions and related investments. For its services, ZIML receives from ZKI
(not from the Fund) a monthly fee at the annual rate of .30% on the portion of
the average daily net assets allocated by ZKI to ZIML for management.
The sub-advisory agreement provides that ZIML will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with matters to which the sub-advisory agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
ZIML in the performance of its duties or from
12
<PAGE> 17
reckless disregard by ZIML of its obligations and duties under the sub-advisory
agreement.
The sub-advisory agreement continues in effect from year to year so long as its
continuation is approved at least annually (a) by a majority of the trustees who
are not parties to such agreement or interested persons of any such party except
in their capacity as trustees of the Fund and (b) by the shareholders or the
Board of Trustees. The sub-advisory agreement may be terminated at any time for
the Fund upon 60 days notice by ZKI, ZIML or the Board of Trustees, or by a
majority vote of the outstanding shares of the Fund, and will terminate
automatically upon assignment or upon the termination of the Fund's investment
management agreement. For the period from December 1, 1996 through December 31,
1996, ZKI paid ZIML sub-adviser fees of $6,000. For prior periods, ZKI paid ZIML
for its services to ZKI under a separate arrangement.
NEW INVESTMENT MANAGEMENT AGREEMENT
The new investment management agreement for the Fund is substantially similar to
the current investment management agreement. While the form of the agreement is
different (i.e., a form generally used by Scudder), there is no material
difference in the substance of the obligations of the investment manager under
the agreement except that, under a separate agreement with Scudder Fund
Accounting Corporation ("SFAC"), a subsidiary of Scudder, SFAC, rather than the
Fund's investment manager, will compute the net asset value for the Fund. SFAC
will not charge the Fund for this service and has no current intention to do so;
however, subject to Board approval, at some time in the future, SFAC may seek
payment for its services under the agreement. In addition, the management fee
under the new agreement is paid at the end of each month and is computed as 1/12
of the applicable annual rate based upon the average daily net assets for such
month; whereas, under the current agreement, the management fee is paid at the
end of each month and is computed at the annual rate based upon the average
daily net assets. While the annual rates are the same under the current and new
agreements, depending upon the level of net assets of any time, the fees paid
may differ. Also, the expense limitation has been deleted because there are no
longer any state expense limitations in effect.
The new management agreement for the Fund will be dated as of the date of the
consummation of the Transaction, which is expected to occur in the fourth
quarter of 1997, but in no event later than February 28, 1998. The new
management agreement will be for an initial term ending on the same date as
would the current management agreement but for the Transaction, and may continue
thereafter from year to year if specifically approved at least annually by the
vote of "a majority of the outstanding voting securities" of the Fund, as
defined under the 1940 Act, or by the
13
<PAGE> 18
Board and, in either event, the vote of a majority of the Board members who are
not parties to the agreement or interested persons of any such party, cast in
person at a meeting called for such purpose.
BOARD OF TRUSTEES EVALUATION
On June 27, 1997, the Board of the Fund was informed of the Transaction.
Thereafter, the Board was given extensive information about the Transaction and
Scudder. The Board met with senior management personnel of Zurich and Scudder
and had extended discussions regarding Zurich's and Scudder's plans for ZKI,
ZKVA, SKI and the Fund. Throughout the process, the Independent Trustees of the
Board had the assistance of legal counsel, who prepared, among other things, an
analysis of the Board's fiduciary obligations. The Board met on July 8, 1997,
July 15, 1997, August 18-19, 1997 and September 19-20, 1997 to consider the
Transaction and its effects on the Funds. The Independent Trustees also met
separately with counsel on a number of occasions to discuss the Transaction. As
a result of its review and consideration of the Transaction and the proposed new
management agreements, at its meeting on September 20, 1997, the Board of the
Fund voted unanimously to approve the new management agreement and to recommend
it to the shareholders of the Fund for their approval.
In connection with its review, the Board obtained substantial information
regarding: the management, financial position and business of Scudder; the
history of Scudder's business and operations; the investment performance of the
investment companies and private accounts advised by Scudder; the anticipated
effect of the Transaction on the Fund and its shareholders; and future plans of
Zurich and Scudder with respect to ZKI, SKI and the Fund. The Board also
received information regarding the terms of the Transaction and comprehensive
financial information, including: employment agreements with senior Scudder
executives; incentive stock compensation to be given to key ZKI personnel; and
anticipated SKI management and board of directors.
In connection with their deliberations, the Board of the Fund obtained certain
assurances from Zurich and Scudder, including the following:
- - Zurich and Scudder have provided to the Board such information as is
reasonably necessary to evaluate the new management and other agreements.
- - Zurich looks upon SKI as the core of Zurich's global asset management
strategy. With that focus, Zurich will devote to SKI and its affairs all
attention and resources that are necessary to provide for the Fund top quality
investment management, shareholder, administrative and product distribution
services.
14
<PAGE> 19
- - Scudder looks upon the Kemper Funds as a core part of Scudder's global asset
management strategy. With that focus, Scudder will devote to the Kemper Funds
and their affairs all attention and resources that are necessary to provide
for the Fund top quality investment management, shareholder, administrative
and product distribution services.
- - The Transaction will not result in any change in any Fund's investment
objectives or policies.
- - The Transaction is not expected to result in any adverse change in the
investment management or operations of the Fund; and neither Zurich nor
Scudder plans to make any material change in the manner in which investment
advisory services or other services are rendered to the Fund which has the
potential to have a material adverse effect upon the Fund.
- - Zurich and Scudder are committed to the continuance, without interruption, of
services to the Fund of the type and quality currently provided by ZKI and its
subsidiaries, or superior thereto.
- - Zurich and Scudder plan to maintain or enhance the SKI facilities and
organization.
- - In order to retain and attract key personnel, Zurich and Scudder intend for
SKI to maintain overall compensation policies and practices at market levels
or better.
- - Zurich and Scudder intend to maintain the distinct brand identity of the
Kemper and Scudder Funds and are committed to strengthening and enhancing both
brands and the distribution channels for both families of Funds, while
maintaining their separate brand identity.
- - Scudder has in place a detailed and comprehensive plan of action to
effectively deal with the year 2000 issue for all SKI operations. The Kemper
Funds will not be transferred from their current systems unless certain
conditions are met.
- - Zurich and Scudder will promptly advise the Board of decisions materially
affecting the SKI organization as they relate to the Fund. Neither this, nor
any of the other above commitments, will be altered by Zurich or Scudder
without the Board's prior consideration.
Zurich and Scudder assured the Board that they intend to comply with Section
15(f) of the 1940 Act. Section 15(f) provides a non-exclusive safe harbor for an
investment adviser to an investment company or any of its affiliated persons to
receive any amount or benefit in connection with a change in control of the
investment adviser so long as two conditions are met. First, for a period of
three years after the Transaction, at least 75% of the board members of the
investment company must not be "interested persons" of such investment adviser.
The composition of the Board of the Fund, currently and as proposed, would be in
compliance with this
15
<PAGE> 20
provision of Section 15(f). (See Item 1--"Election of Trustees.") Second, an
"unfair burden" must not be imposed upon the investment company as a result of
such transaction or any express or implied terms, conditions or understandings
applicable thereto. The term "unfair burden" is defined in Section 15(f) to
include any arrangement during the two-year period after the Transaction whereby
the investment adviser, or any interested person of any such adviser, receives
or is entitled to receive any compensation, directly or indirectly, from the
investment company or its shareholders (other than fees for bona fide investment
advisory or other services) or from any person in connection with the purchase
or sale of securities or other property to, from or on behalf of the investment
company (other than bona fide ordinary compensation as principal underwriter for
such investment company). Zurich and Scudder are 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 and Scudder
have agreed that they, and their 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, ZKI has undertaken to pay the costs of
preparing and distributing proxy materials to and of holding the meetings 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 Trustees, and Zurich has agreed to indemnify the Fund and the
Independent Trustees for and against any liability and expenses based upon any
action or omission by the Independent Trustees in connection with their
consideration of and action with respect to the Transaction. In addition,
Scudder has agreed to indemnify the Fund and the Independent Trustees for and
against any liability and expenses based upon any misstatements or omissions by
Scudder to the Independent Trustees in connection with their consideration of
the Transaction.
In evaluating each new management agreement, the Board took into account that
the fees and expenses payable by the Fund under the new management agreement are
the same as under the current management agreement, that the services provided
to the Fund are the same (except for services to be provided under a separate
Fund Accounting Agreement as described above) and that the other terms are
substantially similar. The Board also took into consideration the extent to
which portfolio managers and research personnel would continue their functions
with SKI. The Board also considered Scudder's representation that the Fund's
shareholder service providers and the terms of the shareholder service
agreements were not being proposed to be changed. The Board noted that, in
previously approving the continuation of the current management agreements, the
Board had considered a number of factors, including the nature and quality of
services provided by ZKI and ZKVA; investment performance, both of the Fund
itself and relative to that of competitive
16
<PAGE> 21
investment companies; investment management fees and expense ratios of the Fund
and competitive investment companies; ZKI profitability from managing the Fund;
fall-out benefits to ZKI from its relationship to the Fund, including revenues
derived from services provided to the Fund by affiliates of ZKI; and the
potential benefits to ZKI 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. The Board also considered that while
Scudder is authorized to pay a commission that is higher than the lowest
available in order to receive research assistance, Scudder does not negotiate
arrangements pursuant to which Scudder receives specific research products or
services in exchange for the expectation that Scudder will direct a specified
amount of brokerage commissions to particular broker-dealers.
The Board discussed the Transaction with the senior management of ZKI, Scudder
and Zurich and among themselves. The Board considered that Zurich is a large,
well-established company with substantial resources, and, as noted above, has
undertaken to devote such resources to SKI as are necessary to provide the Fund
with top quality services. The Board also considered that Scudder is a large,
well-established investment advisory firm with a substantial number of highly
rated funds.
As a result of their review and consideration of the Transaction and the new
management agreements, at its meeting on September 20, 1997, the Board of the
Fund voted unanimously to approve the new management agreement and to recommend
it to the shareholders of the Fund for their approval.
The Board of the Fund recommends that shareholders vote FOR approval of the new
management agreement.
ITEM 4. NEW SUB-ADVISORY AGREEMENT WITH
ZURICH INVESTMENT MANAGEMENT LIMITED
Zurich Investment Management Limited ("ZIML") is the sub-adviser for KIBF. As
noted above, the consummation of the Transaction and the ZIML Transaction each
would constitute an "assignment," as defined in the 1940 Act, of the Fund's
current sub-advisory agreement with ZIML. As required by the 1940 Act, the
current sub-advisory agreement provides for its automatic termination in the
event of its assignment. In anticipation of the Transaction and the ZIML
Transaction, a new sub-advisory agreement with ZIML is being proposed for
approval by the shareholders of the Fund. The new subadvisory agreement with
ZIML is on the same terms as the current sub-advisory agreement. A vote in favor
of Item 4 will approve both the new sub-advisory agreement with ZIML to be
effective at the time of the Transaction as well as the subadvisory agreement
with ZIML to be effective at the time of the ZIML
17
<PAGE> 22
Transaction. A copy of the new sub-advisory agreement is attached hereto as
Exhibit B.
A new sub-advisory agreement will be dated as of the date of the consummation of
the Transaction or the ZIML Transaction and will be in effect for an initial
term ending on the same date as would the current sub-advisory agreement but for
the Transaction (or ZIML Transaction), and may continue thereafter from year to
year if such continuance is specifically approved at least annually by the 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 the trustees who are not parties to the agreement or interested
persons of any such party, cast in person at a meeting called for such a
purpose.
BOARD RECOMMENDATION
The Board of the Fund recommends that shareholders vote FOR approval of the new
sub-advisory agreement with ZIML.
ITEM 5. CHANGES TO THE FUND'S FUNDAMENTAL
INVESTMENT POLICIES TO PERMIT A MASTER FUND/
FEEDER FUND STRUCTURE
For greater investment flexibility, ZKI has recommended that the Fund make
certain changes to its fundamental investment policies to permit the Fund to
invest all or substantially all of its investable assets, except to the extent
required to remain uninvested to satisfy near-term cash requirements, in an
open-end management investment company having the same investment objectives and
substantially similar policies and restrictions as the Fund (a "Master Fund").
The proposed fundamental investment policies are set forth in Exhibit C.
The proposed changes to the Fund's fundamental investment policies would permit
the Fund to adopt a "Master Fund/Feeder Fund Structure." Rather than investing
directly in a portfolio of securities, a Fund would be authorized to pool its
assets with other mutual funds for investment in a Master Fund, making it a
"Feeder Fund." A purpose of such an arrangement is to achieve operational
efficiencies, assuming that the assets of the Master Fund are greater than the
assets of any individual Feeder Fund. While the Board has not determined that
the Fund should convert to a Master Fund/Feeder Fund Structure at this time, the
Board believes it could be in the best interests of the Fund at some future
date, and in that case the Board could do so without further approval by
shareholders.
If the proposed changes in the investment policies are approved by shareholders
of the Fund, the Fund's Board could vote at some time in the future to convert
the Fund into a Feeder Fund under which all or substantially all of the
investment assets of the Fund would be invested in
18
<PAGE> 23
a Master Fund. The Feeder Fund would transfer its assets to a Master Fund in
exchange for an interest in the Master Fund having the same net asset value as
the value of the assets transferred. (The ownership interests of the Fund's
shareholders will not be altered by this change.)
Under the Fund's Declaration of Trust, the affirmative vote of the shareholders
entitled to vote more than fifty percent of the votes entitled to be cast on the
matter is required to sell or transfer substantially all of the assets of the
Fund. One way to convert a Fund to a Master Fund/ Feeder Fund Structure is
through a sale or transfer of assets. Thus, approval to convert the Fund into a
Master/Feeder Fund Structure through a sale or transfer of assets requires,
under a conservative interpretation of the Fund's Declaration of Trust, the
affirmative vote of a majority of the shares of the Fund (or the affected series
of the Fund, if applicable). Approval of Item 5 by shareholders is also,
therefore, deemed to constitute approval of the Board's discretionary authority
to convert the Fund into a Master Fund/Feeder Fund Structure through a sale or
transfer of assets.
Any Master Fund in which a Feeder Fund would invest would be required to have
the same investment objective and substantially similar policies and
restrictions as the Feeder Fund. Accordingly, by investing in a Master Fund, a
Feeder Fund would continue to pursue its present investment objectives and
policies in substantially the same manner as it does currently, except that it
would do so through its investment in the Master Fund rather than through direct
investments in the types of securities dictated by its investment objectives and
policies. The Master Fund, whose shares could be offered to institutional
investors in addition to a Feeder Fund, would invest in the same type of
securities in which the Fund would have invested directly, providing
substantially the same investment results to the Feeder Fund's shareholders.
However, the expense ratios, the yields, and the total returns of other
investors in the Master Fund may be different from those of the Feeder Fund due
to differences in Feeder Fund expenses.
By investing substantially all of its assets in a Master Fund, a Feeder Fund may
be in a position to realize directly or indirectly certain economies of scale,
in that a larger investment portfolio resulting from multiple Feeder Funds is
expected to achieve a lower ratio of operating expenses to net assets. A Master
Fund may be offered to an undetermined number of institutional investors.
However, there can be no assurance that any such additional investments in a
Master Fund by other Feeder Funds will take place or that economics of scale may
be realized.
If a Fund invests substantially all of its assets in a Master Fund, the Fund may
no longer require active portfolio management services. In this event, if the
shareholders of the Fund approve the proposed policy changes and
19
<PAGE> 24
the Board converts the Fund into a Feeder Fund, then the existing investment
management agreement may be terminated or no fee would be charged; in such case,
the Fund's Board would likely enter into an administration agreement for the
provision of certain administrative services to the Fund, likely including those
currently provided under the existing investment management agreement, with
compensation at such rates as may be approved by the trustees.
MASTER FUNDS. The investment objective of any Master Fund would be the same as
the investment objective of the applicable Feeder Fund that would invest in it.
If the Fund's Board votes to convert a Fund into a Feeder Fund, the Fund's
assets will no longer be directly invested in the securities of multiple
issuers, but rather will be invested in the securities of a single issuer, i.e.,
the Master Fund, which would be registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"). A
Master Fund may have a different Board than the Feeder Fund.
A Feeder Fund may withdraw its investment in a Master Fund at any time if the
Board determines that it is in the best interest of the shareholders of the
Feeder Fund to do so or if the investment policies or restrictions of the Master
Fund were changed so that they were inconsistent with the policies and
restrictions of the Feeder Fund. Upon any such withdrawal, the Board of the
Feeder Fund would consider what action might be taken, including the investment
of all the assets of the Feeder Fund in another pooled investment entity having
substantially the same investment objective as the Feeder Fund or the retaining
of an investment adviser to directly invest the Fund's assets in accordance with
its investment objective and policies. If another pooled investment vehicle with
substantially the same investment objective could not be found, it might have a
significant impact on the investment of shareholders in the Feeder Fund.
Whenever a Feeder Fund is asked to vote on a proposal by the Master Fund, the
Feeder Fund will hold a meeting of shareholders if required by applicable law or
its policies, and cast its vote with respect to the Master Fund in the same
proportion as its shareholders vote on the proposal.
Once its assets are invested in a Master Fund, a Feeder Fund will value its
holdings (i.e., shares issued by the Master Fund) at their fair value, which
will be based upon the daily net asset value of the Master Fund. The net income
of the Feeder Fund will be determined at the same time and on the same days as
the net income of the Master Fund is determined, which are the same time and
days that the Feeder Fund uses for this purpose.
TAX CONSIDERATIONS. The implementation of the proposed new Master Fund/Feeder
Fund structure is not expected to have any adverse tax effects on the Fund or
its shareholders.
20
<PAGE> 25
Each Feeder Fund would be expected to intend to continue to qualify and elect to
be treated as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). To so qualify, a Feeder
Fund must meet certain income, distribution, and diversification requirements.
It is expected that any Feeder Fund's investment in a Master Fund will satisfy
these requirements. Provided each Feeder Fund meets these requirements and
distributes all of its net investment income and realized capital gains to its
shareholders in accordance with the timing requirements imposed by the Code, the
Feeder Fund will not pay any Federal income or excise taxes.
BOARD RECOMMENDATION
As a result of its consideration of the foregoing facts, the Board of the Fund
voted unanimously to approve the change in fundamental investment policies to
permit a Master/Feeder fund structure conversion at the Board's discretion and
to submit them to the shareholders for their approval.
The Board of the Fund recommends that shareholders vote FOR approval of the new
fundamental investment policies permitting conversion, at the Board's
discretion, into a Master Fund/Feeder Fund structure.
OTHER INFORMATION
ZKI. Zurich Kemper Investments, Inc. ("ZKI"), 222 South Riverside Plaza,
Chicago, Illinois 60606, is the investment manager of the Fund and provides the
Fund with continuous professional investment supervision. ZKI is one of the
largest investment managers in the country and has been engaged in the
management of investment funds for more than forty-nine years. ZKI and its
affiliates provide investment advice and manage investment portfolios for the
Kemper Funds, affiliated insurance companies and other corporate, pension,
profit-sharing and individual accounts representing approximately $85 billion
under management. ZKI acts as investment manager or principal underwriter for 32
open-end and seven closed-end investment companies, with 86 separate investment
portfolios, representing more than 2.5 million shareholder accounts. ZKI is an
indirect subsidiary of Zurich Insurance Company, a leading internationally
recognized provider of insurance and financial services in property/casualty and
life insurance, reinsurance and structured financial solutions as well as asset
management ("Zurich").
The investment companies to which ZKI and its affiliates render investment
management services, and the related management fees, are identified in Exhibit
D.
21
<PAGE> 26
The names, addresses and principal occupations of the principal executive
officer and the directors of ZKI are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
Stephen B. Timbers, Chief President, Chief Executive
Executive Office and Director Officer and Chief Investment
222 South Riverside Plaza Officer, ZKI
Chicago, Illinois 60606
John E. Neal, Director President, Kemper Funds Group
222 South Riverside Plaza
Chicago, Illinois 60606
William E. Chapman II, President, Kemper Retirement
Director Plans Group
222 South Riverside Plaza
Chicago, Illinois 60606
</TABLE>
ZIML. Zurich Investment Management Limited ("ZIML"), 1 Fleet Place, London, U.K.
EC4M 7RQ, is an indirect subsidiary of Zurich. The names, addresses and
principal occupations of the principal executive officer and the directors of
ZIML are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
[insert]
</TABLE>
TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary Trust Company
("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105 is the Fund's
transfer agent and dividend-paying agent. Pursuant to a services agreement with
IFTC, Zurich Kemper Service Company ("ZKSC"), an affiliate of ZKI, serves as
"Shareholder Service Agent," and as such, performs all of IFTC's duties as
transfer agent and dividend-paying agent. IFTC receives as transfer agent, and
pays to ZKSC, annual account fees of $6 per account plus account set up,
transaction, maintenance and out-of-pocket expense reimbursement. For the fiscal
year ended December 31, 1996, IFTC remitted shareholder service fees in the
amount of $100 to ZKSC as Shareholder Service Agent for the Fund. It is
anticipated that ZKSC will continue to provide transfer agent services after
consummation of the Transaction.
UNDERWRITER. Pursuant to an underwriting agreement ("underwriting agreement")
with the Fund, Zurich Kemper Distributors, Inc. ("ZKDI") is the principal
underwriter of the Fund's shares and acts as agent of the
22
<PAGE> 27
Fund in the sale of its shares. ZKDI bears all its expenses of providing
services pursuant to the underwriting agreement. ZKDI provides for the
preparation of advertising or sales literature and bears the cost of printing
and mailing prospectuses to persons other than shareholders. ZKDI bears the cost
of qualifying and maintaining the qualification of the Fund shares for sale
under the securities laws of the various states and the Fund bears the expense
of registering its shares with the Securities and Exchange Commission. ZKDI may
enter into related agreements with various financial firms, including affiliates
of ZKDI, that provide distribution services to investors. ZKDI also may provide
some of the distribution services. ZKDI receives no compensation from the Fund
as principal underwriter for the Fund and pays all expenses of distribution of
the Fund's shares under the underwriting agreement not otherwise paid by dealers
or other financial services firms. It is expected that ZKDI will continue to
serve as the Fund's Underwriter after consummation of the Transaction.
PORTFOLIO TRANSACTIONS. ZKI and its affiliates furnish investment management
services for the Kemper Funds and other clients including affiliated insurance
companies. As previously noted, Zurich Investment Management Limited ("ZIML") is
the sub-adviser for KIBF and other Kemper Funds as well. ZKI and its affiliates
share some common research and trading facilities. (ZKI and ZIML are each
referred to as an "Adviser.") At times investment decisions may be made to
purchase or sell the same investment securities for the Fund and for one or more
of the other clients managed by an Adviser or its affiliates. When two or more
of such clients are simultaneously engaged in the purchase or sale of the same
security through the same trading facility, the transactions are allocated as to
amount and price in a manner considered equitable to each and so that each
receives, to the extent practicable, the average price of such transactions.
The Advisers, in effecting purchases and sales of portfolio securities for the
account of the Fund, implement the Fund's policy of seeking best execution of
orders which includes best net prices, except to the extent that the Advisers
may be permitted to pay higher brokerage commissions for research services as
described below. Consistent with this policy, orders for portfolio transactions
are placed with broker-dealer firms giving consideration to the quality,
quantity and nature of each firm's professional services, which include
execution, financial responsibility responsiveness, clearance procedures, wire
service quotations and statistical and other research information provided to
the Fund and the Advisers and their affiliates. Subject to seeking best
execution of an order, brokerage is allocated on the basis of all services
provided. Any research benefits derived are available for all clients of the
Advisers and their affiliates including clients of affiliated companies. [Since
statistical and other
23
<PAGE> 28
research information is only supplementary to research efforts of the Advisers
and still must be analyzed and reviewed by its staff, the receipt of research
information is not expected to materially reduce its expenses.] In selecting
among firms believed to meet the criteria for handling a particular transaction,
the Advisers may give consideration to those firms that have sold or are selling
shares of the Fund and of other funds managed by the Advisers and their
affiliates, as well as to those firms that provide market, statistical and other
research information to the Fund and the Advisers and their affiliates, although
the Advisers are not authorized to pay higher commissions [or in the case of
principal trades, higher prices] to firms that provide such services, except as
described below. [Money market instruments are normally purchased in principal
transactions directly from the issuer or from an underwriter or market maker.
There are normally no brokerage commissions paid for such purchases. Purchases
from underwriters include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers include the
spread between the bid and ask prices.]
The Advisers may in certain instances be permitted to pay higher brokerage
commissions solely for receipt of market, statistical and other research
services as defined in Section 28(e) of the Securities Exchange Act of 1934 and
interpretations thereunder. Such services may include, among other things:
economic, industry or company research reports or investment recommendations;
computerized databases; quotation and execution equipment and software; and
research or analytical computer software and services. Where products or
services have a "mixed use," a good faith effort is made to make a reasonable
allocation of the cost of the products or services in accordance with the
anticipated research and non-research uses, and the cost attributable to
non-research use is paid by an Adviser or one of its affiliates in cash. Subject
to Section 28(e) of the Securities Exchange Act of 1934 and procedures adopted
by the Board, the Fund could pay a firm that provides research services to the
Advisers commissions for effecting a securities transaction for the Fund in
excess of the amount other firms would have charged for the transaction. A Fund
could do this if an Adviser determines in good faith that the greater commission
is reasonable in relation to the value of the brokerage and research services
provided by the executing firm viewed in terms either of a particular
transaction or the Adviser's overall responsibilities to the Fund and other
clients. Not all such research services may be useful or of value in advising
the Fund. Research benefits will be available for all clients of the Advisers
and their affiliates. In addition, the investment management fee paid by the
Fund to ZKI is not reduced because the Adviser receives these research services.
SKI. It is expected that SKI (including ZKI under SKI's ownership) will
implement portfolio transaction policies that are substantially similar to
24
<PAGE> 29
those currently used by the Advisers. In addition, to the maximum extent
feasible, it is expected that SKI will place orders for portfolio transactions
through Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110 ("SIS") (a corporation registered as a broker/dealer and a
subsidiary of Scudder), which will in turn place orders on behalf of the Fund
with issuers, underwriters or other brokers and dealers. SIS will not receive
any commission, fee or other remuneration from the Fund for this service.
Set forth in Exhibit F are the total brokerage commissions paid by the Fund for
its most recently completed fiscal year, as well as the percentage of such
amounts that was allocated to broker-dealer firms on the basis of research
information.
SCUDDER. Scudder, Stevens & Clark, Inc. ("Scudder"), 345 Park Avenue, New York,
New York 10154, is one of America's oldest and largest investment management
firms. It manages approximately $125 billion in assets globally, about $50
billion of which are invested in equities and the balance in fixed income and
money market investments. Scudder manages approximately $45 billion in a variety
of open-end and closed-end funds for nearly two million shareholder accounts.
The firm also provides investment services for private and institutional
clients, such as trusts, endowments, and corporate employee benefit plans.
Scudder manages more than $22 billion internationally in both developed and
emerging markets. The firm is one of the world's largest managers of pension
fund assets invested overseas.
Scudder manages two families of pure no-load mutual funds. The Scudder Family of
Funds (approximately $23 billion) comprises 46 money market, bond and equity
mutual funds. The AARP Investment Program from Scudder, a family of 15 funds
(approximately $14 billion), is designed to address the needs of the more than
33 million members of the American Association of Retired Persons. The balance
of the funds under management (approximately $7 billion) comprises closed-end,
offshore, variable life insurance and other kinds of funds.
The investment companies to which Scudder renders investment management
services, and the related fees, are identified in Exhibit E.
25
<PAGE> 30
The names, addresses and principal occupations of the principal executive
officer and the directors of Scudder are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
Daniel Pierce, Director Chairman of the Board and
Two International Place Managing Director, Scudder
Boston, Massachusetts 02110
Edmond D. Villani, Chief Executive President, Chief Executive
Officer and Director Officer and Managing Director,
345 Park Avenue Scudder
New York, New York 10154
Stephen R. Beckwith, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Lynn S. Birdsong, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Nicholas Bratt, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
E. Michael Brown, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
Mark S. Casady, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
Linda C. Coughlin, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
Margaret D. Hadzima, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Jerard K. Hartman, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Richard A. Holt, Director Managing Director, Scudder
Two Prudential Plaza
180 North Stetson, Suite 5400
Chicago, Illinois 60601
</TABLE>
26
<PAGE> 31
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
John T. Packard, Director Managing Director, Scudder
101 California Street
San Francisco, California 94111
Kathryn L. Quirk, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Cornelia M. Small, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Stephen A. Wohler, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
</TABLE>
After consummation of the Transaction, it is anticipated that the principal
executive officer and directors of SKI will be as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
Lynn Birdsong, Director Senior Executive Officer --
345 Park Avenue International Operations, SKI
New York, New York 10154
Lawrence Cheng, Director Member of Corporate Executive
Mythenquai 2 Board and Chief Investment
8002 Zurich, Switzerland Officer for Investments and
International Asset Management,
Zurich
Steven Gluckstern, Director Member of Corporate Executive
Mythenquai 2 Board and responsible for
8002 Zurich, Switzerland Reinsurance, Structured Finance,
Capital Market Products and
Strategic Investments, Zurich
Rolf Hueppi, Director Chairman and Chief Executive
Mythenquai 2 Officer, Zurich; Chairman of
8002 Zurich, Switzerland Board of Directors, SKI
Markus Rohrbasser, Director Chief Financial Officer and
Mythenquai 2 Member of Corporate Executive
8002 Zurich, Switzerland Board, Zurich
Cornelia Small, Director Senior Executive Officer --
345 Park Avenue Investment Management, SKI
New York, New York 10154
</TABLE>
27
<PAGE> 32
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
Edmond Villani, Director Chief Executive Officer, SKI
345 Park Avenue
New York, New York 10154
</TABLE>
MISCELLANEOUS
GENERAL
The cost of preparing, printing and mailing the enclosed proxy, accompanying
notice and proxy statement and all other costs in connection with solicitation
of proxies will be paid by ZKI, including any additional solicitation made by
letter, telephone or telegraph. In addition to solicitation by mail, certain
officers and representatives of the Fund, officers and employees of ZKI and
certain financial services firms and their representatives, who will receive no
extra compensation for their services, may solicit proxies by telephone,
telegram or personally. In addition, ZKI has retained First Data Corp. to
solicit proxies on behalf of the Fund's Board and the boards of the other Kemper
Funds, the fee for which will be borne by ZKI. A COPY OF YOUR FUND'S ANNUAL
REPORT AND ANY MORE RECENT SEMI-ANNUAL REPORT ARE AVAILABLE WITHOUT CHARGE UPON
REQUEST BY WRITING TO THE FUND, 222 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS
60606 OR BY CALLING 1-800-621-1048.
PROPOSALS OF SHAREHOLDERS
As a Massachusetts business trust, the Fund is not required to hold annual
shareholder meetings, but it will hold special meetings as required or deemed
desirable. Since the Fund does not hold regular meetings of shareholders, the
anticipated date of the next special shareholders meeting cannot be provided.
Any shareholder proposal that may properly be included in the proxy solicitation
material for a special shareholder meeting must be received by the Fund no later
than four months prior to the date when proxy statements are mailed to
shareholders.
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 the matters set forth herein. Should any other matters
requiring a vote of shareholders arise, the proxy in the accompanying form will
confer upon the person or persons entitled to vote the shares represented by
such proxy the discretionary authority to vote the shares as to any such other
matters in accordance with their best judgment in the interest of the Fund.
28
<PAGE> 33
VOTING, QUORUM
Each share of the Fund is entitled to one vote on each matter submitted to a
vote of the shareholders at the Meeting; no shares have cumulative voting
rights.
Each valid proxy will be voted in accordance with the instructions on the proxy
and as the persons named in the proxy determine on such other business as may
come before the Meeting. If no instructions are given, the proxy will be voted
FOR the election of the persons who have been nominated as trustees and FOR
Items 2, 3, 4 and 5. 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 trustees) requires a plurality vote of the shares of the
Fund. This means that the eight nominees receiving the largest number of votes
will be elected. Item 2 (ratification of selection of independent auditors)
requires the affirmative vote of a majority of the shares voting on the matter.
Item 3 (approval of new investment management agreement) and Item 4 (approval of
new sub-advisory agreement with ZIML) 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 means: the
affirmative vote of the lesser of (1) 67% of the voting securities of the Fund
present at the meeting if more than 50% of the outstanding shares of the Fund
are present in person or by proxy, or (2) more than 50% of the outstanding
shares of the Fund. Item 5 (approval of change in fundamental investment
policies to permit Master Fund/Feeder Fund structure) requires the affirmative
vote of more than 50% of the shares of the Fund. If an Item is not approved, the
Board would consider appropriate action.
The Declaration of Trust of the Fund provides that the presence at a shareholder
meeting in person or by proxy of at least 30% of the shares of the Fund
constitutes a quorum. Thus, the meeting could not take place on its scheduled
date if less than 30% of the shares of the Fund were represented. 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 may propose one or more
adjournments of the meeting for the Fund to permit further soliciting of proxies
from its shareholders. Any such adjournment will require the affirmative vote of
a majority of the shares of the Fund present (in person or represented by proxy)
at the session of the meeting to be adjourned. The persons named as proxies will
vote in favor of any such adjournment if they determine that such
29
<PAGE> 34
adjournment and additional solicitation are reasonable and in the interest of
the Fund's shareholders.
In tallying shareholder votes, abstentions and "broker non-votes" (i.e., shares
held by brokers or nominees as to which (i) instructions have not been received
from the beneficial owners or persons entitled to vote and (ii) the broker or
nominee does not have discretionary voting power on a particular matter) will be
counted for purposes of determining whether a quorum is present for purposes of
convening the Meeting. On Item 1, abstentions and broker non-votes will have no
effect; the eight nominees receiving the largest number of votes will be
elected. On Item 2, abstentions and broker non-votes will not be counted as
"votes cast" and will have no effect on the result of the vote. On Items 3, 4
and 5, abstentions and broker non-votes will be considered to be both present at
the Meeting and issued and outstanding and, as a result, will have the effect of
being counted as voted against the Items.
The Board of Trustees of the Fund recommends an affirmative vote on all items.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Trustees
Philip J. Collora
Secretary
30
<PAGE> 35
EXHIBIT INDEX
<TABLE>
<S> <C>
Form of Investment Management Agreement............. Exhibit A
Form of Sub-Advisory Agreement with Zurich
Investment Management Limited..................... Exhibit B
Proposed Fundamental Investment Policies............ Exhibit C
Kemper Funds and Management Fees.................... Exhibit D
Investment Objectives and Advisory Fees for Funds
Advised by Scudder, Stevens & Clark, Inc.......... Exhibit E
Fees and Expenses................................... Exhibit F
</TABLE>
<PAGE> 36
EXHIBIT A
FORM OF
INVESTMENT MANAGEMENT AGREEMENT
KEMPER INTERNATIONAL BOND FUND
222 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
,199
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
INVESTMENT MANAGEMENT AGREEMENT
Ladies and Gentlemen:
Kemper International Bond Fund (the "Trust") has been established as a
Massachusetts business Trust to engage in the business of an investment company.
Pursuant to the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest, par value $ per share, (the "Shares") in separate
series, or funds. The Board of Trustees has authorized an initial series (the
"Fund"). Series may be abolished and dissolved, and additional series
established, from time to time by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. DELIVERY OF DOCUMENTS. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also
A-1
<PAGE> 37
furnished you with copies properly certified or authenticated of each of the
following additional documents related to the Trust and the Fund:
(a) The Declaration dated , 19 , as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the Fund
selecting you as investment manager and approving the form of this Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial Interest
dated , 19 relating to the Fund.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. PORTFOLIO MANAGEMENT SERVICES. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust. You shall
also make available to the Trust promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Trust in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
A-2
<PAGE> 38
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. ADMINISTRATIVE SERVICES. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that
A-3
<PAGE> 39
may arise with respect to the Fund's operations and consulting with the Fund's
independent accountants, legal counsel and the Fund's other agents as necessary
in connection therewith; establishing and monitoring the Fund's operating
expense budgets; reviewing the Fund's bills; processing the payment of bills
that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Trust as it may reasonably request in the conduct of
the Fund's business, subject to the direction and control of the Trust's Board
of Trustees. Nothing in this Agreement shall be deemed to shift to you or to
diminish the obligations of any agent of the Fund or any other person not a
party to this Agreement which is obligated to provide services to the Fund.
4. ALLOCATION OF CHARGES AND EXPENSES. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend
A-4
<PAGE> 40
disbursing agents and registrars; payment for portfolio pricing or valuation
services to pricing agents, accountants, bankers and other specialists, if any;
expenses of preparing share certificates and, except as provided below in this
section 4, other expenses in connection with the issuance, offering,
distribution, sale, redemption or repurchase of securities issued by the Fund;
expenses relating to investor and public relations; expenses and fees of
registering or qualifying Shares of the Fund for sale; interest charges, bond
premiums and other insurance expense; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; the
compensation and all expenses (specifically including travel expenses relating
to Trust business) of Trustees, officers and employees of the Trust who are not
affiliated persons of you; brokerage commissions or other costs of acquiring or
disposing of any portfolio securities of the Fund; expenses of printing and
distributing reports, notices and dividends to shareholders; expenses of
printing and mailing Prospectuses and SAIs of the Fund and supplements thereto;
costs of stationery; any litigation expenses; indemnification of Trustees and
officers of the Trust; and costs of shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
5. MANAGEMENT FEE. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .75 of
1 percent of the average daily net assets as defined below of the Fund for such
month; provided that, for any calendar month during which the average of such
values exceeds $250,000,000, the fee payable for that month based on the portion
of the average of such values in excess of $250,000,000 shall be 1/12 of .72 of
1 percent of such portion; provided that, for any calendar month during which
the average of such values exceeds $1 billion, the fee payable for that month
based on the portion of the average of such values in excess of $1 billion shall
be 1/12 of .70 of 1 percent of such portion; provided that, for any calendar
month during which the average of such values exceeds
A-5
<PAGE> 41
$2.5 billion, the fee payable for that month based on the portion of the average
of such values in excess of $2.5 billion shall be 1/12 of .68 of 1 percent of
such portion; provided that, for any calendar month during which the average of
such values exceeds $5 billion, the fee payable for that month based on the
portion of the average of such values in excess of $5 billion shall be 1/12 of
.65 of 1 percent of such portion; provided that, for any calendar month during
which the average of such values exceeds $7.5 billion, the fee payable for that
month based on the portion of the average of such values in excess of $7.5
billion shall be 1/12 of .64 of 1 percent of such portion; provided that, for
any calendar month during which the average of such values exceeds $10 billion,
the fee payable for that month based on the portion of the average of such
values in excess of $10 billion shall be 1/12 of .63 of 1 percent of such
portion; and provided that, for any calendar month during which the average of
such values exceeds $12.5 billion, the fee payable for that month based on the
portion of the average of such values in excess of $12.5 billion shall be 1/12
of .62 of 1 percent of such portion; over any compensation waived by you from
time to time (as more fully described below). You shall be entitled to receive
during any month such interim payments of your fee hereunder as you shall
request, provided that no such payment shall exceed 75 percent of the amount of
your fee then accrued on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
A-6
<PAGE> 42
6. AVOIDANCE OF INCONSISTENT POSITION; SERVICES NOT EXCLUSIVE. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by the Manager have
available funds for investment, investments suitable and appropriate for each
shall be allocated in accordance with procedures believed by the Manager to be
equitable to each entity. Similarly, opportunities to sell securities shall be
allocated in a manner believed by the Manager to be equitable. The Fund
recognizes that in some cases this procedure may adversely affect the size of
the position that may be acquired or disposed of for the Fund.
7. LIMITATION OF LIABILITY OF MANAGER. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall remain in
force until , 19 , and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with
A-7
<PAGE> 43
the 1940 Act and the rules and regulations thereunder and any applicable SEC
exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. LIMITATION OF LIABILITY FOR CLAIMS. [Not applicable for KVF.] The
Declaration, a copy of which, together with all amendments thereto, is on file
in the Office of the Secretary of the Commonwealth of Massachusetts, provides
that the name "[Name of Trust]" refers to the Trustees under the Declaration
collectively as Trustees and not as individuals or personally, and that no
shareholder of the Fund, or Trustee, officer, employee or agent of the Trust,
shall be subject to claims against or obligations of the Trust or of the Fund to
any extent whatsoever, but that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of the Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. MISCELLANEOUS. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This
A-8
<PAGE> 44
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
KEMPER INTERNATIONAL BOND FUND
By:
--------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
--------------------------------
President
A-9
<PAGE> 45
EXHIBIT B
FORM OF SUB-ADVISORY AGREEMENT
WITH ZURICH INVESTMENT MANAGEMENT LIMITED
AGREEMENT made this day of , 199 , by and between SCUDDER KEMPER
INVESTMENTS, INC., a Delaware corporation (the "Adviser") and ZURICH INVESTMENT
MANAGEMENT LIMITED, an English corporation (the "Sub-Adviser").
WHEREAS, Kemper International Bond Fund, a Massachusetts business trust (the
"Fund") is a management investment company registered under the Investment
Company Act of 1940;
WHEREAS, the Fund has retained the Adviser to render to it investment advisory
and management services with regard to the Fund's sole series (the "initial
series") pursuant to an Investment Management Agreement (the "Management
Agreement"); and
WHEREAS, the Adviser desires at this time to retain the Sub-Adviser to render
investment advisory and management services with respect to that portion of the
portfolio of the Fund's initial series allocated to the Sub-Adviser by the
Adviser for management, including services related to foreign securities,
foreign currency transactions and related investments, 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. The Adviser hereby employs the Sub-Adviser to manage the investment and
reinvestment of the assets of the initial series of the Fund allocated by the
Adviser in its sole discretion to the Sub-Adviser for management, including
services related to foreign securities, foreign currency transactions and
related investments, in accordance with the applicable investment objectives,
policies and limitations and subject to the supervision of the Adviser and the
Board of Trustees of the Fund for the period and upon the terms herein set
forth, and to place orders for the purchase or sale of portfolio securities for
the Fund's account with brokers or dealers selected by the Sub-Adviser; and, in
connection therewith, the Sub-Adviser is authorized as the agent of the Fund to
give instructions to the Custodian of the Fund as to the deliveries of
securities and payments of cash for the account of the Fund. In connection with
the selection of such brokers or dealers and the placing of such orders, the
Sub-Adviser is directed to seek for the Fund best execution of orders. Subject
to such policies as the Board of Trustees of the Fund determines and subject to
satisfying the requirements of Section 28(e) of the Securities Exchange Act of
1934, the Sub-Adviser shall not be deemed to
B-1
<PAGE> 46
have acted unlawfully or to have breached any duty, created by this Agreement or
otherwise, solely by reason of its having caused the Fund to pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Sub-Adviser determined in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the clients of the Sub-Adviser as to which the
Sub-Adviser exercises investment discretion. The Adviser recognizes that all
research services and research that the Sub-Adviser receives are available for
all clients of the Sub-Adviser, and that the Fund and other clients of the
Sub-Adviser may benefit thereby. The investment of funds shall be subject to all
applicable restrictions of the Agreement and Declaration of Trust 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, to
permit any of its officers or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions 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 that the Sub-Adviser, by separate agreements with the Fund, may also
serve the Fund in other capacities.
The Sub-Adviser will keep the Fund and the Adviser informed of developments
materially affecting the Fund and shall, on the Sub-Adviser's own initiative and
as reasonably requested by the Adviser or the Fund, furnish to the Fund and the
Adviser from time to time whatever information the Adviser reasonably believes
appropriate for this purpose.
The Sub-Adviser agrees that, in the performance of the duties required of it by
this Agreement, it will comply with the Investment Advisers Act of 1940 and the
Investment Company Act of 1940, and all rules and regulations thereunder, and
all applicable laws and regulations and with any applicable procedures adopted
by the Fund's Board of Trustees and identified in writing to the Sub-Adviser.
The Sub-Adviser shall provide the Adviser with such investment portfolio
accounting and shall maintain and provide such detailed records and reports as
the Adviser may from time to time reasonably request, includ-
B-2
<PAGE> 47
ing without limitation, daily processing of investment transactions and cash
positions, periodic valuations of investment portfolio positions as required by
the Adviser, monthly reports of the investment portfolio and all investment
transactions and the preparation of such reports and compilation of such data as
may be required by the Adviser to comply with the obligations imposed upon it
under Management Agreement.
The Sub-Adviser shall provide adequate security with respect to all materials,
records, documents and data relating to any of its responsibilities pursuant to
this Agreement including any means for the effecting of securities transactions.
The Sub-Adviser agrees that it will make available to the Adviser and the Fund
promptly upon their request copies of all of its investment records and ledgers
with respect to the Fund to assist the Adviser and the Fund in monitoring
compliance with the Investment Company Act of 1940 and the Investment Advisers
Act of 1940, as well as other applicable laws. The Sub-Adviser will furnish the
Fund's Board of Trustees such periodic and special reports with respect to the
Fund's portfolio as the Adviser or the Board of Trustees may reasonably request.
In compliance with the requirements of Rule 31a-3 under the Investment Company
Act of 1940, the Sub-Adviser hereby agrees that any records that it maintains
for the Fund are the property of the Fund and further agrees to surrender
promptly to the Fund copies of any such records upon the Fund's request. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the Investment Company Act of 1940 any records with respect to the
Sub-Adviser's duties hereunder required to be maintained by Rule 31a-1 under
such Act to the extent that the Sub-Adviser prepares and maintains such records
pursuant to this Agreement and to preserve the records required by Rule 204-2
under the Investment Advisers Act of 1940 for the period specified in that Rule.
The Sub-Adviser agrees that it will immediately notify the Adviser and the Fund
in the event that the Sub-Adviser: (i) becomes subject to a statutory
disqualification that prevents the Sub-Adviser from serving as an investment
adviser pursuant to this Agreement; or (ii) is or expects to become the subject
of an administrative proceeding or enforcement action by the United States
Securities and Exchange Commission, the Investment Management Regulatory
Organization ("IMRO") or other regulatory authority.
The Sub-Adviser represents that it is an investment adviser registered under the
Investment Advisers Act of 1940 and other applicable laws and it is regulated by
IMRO and will treat the Fund as a Non-Private Customer as defined by IMRO. The
Sub-Adviser agrees to maintain the completeness and accuracy of its registration
on Form ADV in accordance with all legal requirements relating to that Form. The
Sub-Adviser
B-3
<PAGE> 48
acknowledges that it is an "investment adviser" to the Fund within the meaning
of the Investment Company Act of 1940 and the Investment Advisers Act of 1940.
The Sub-Adviser shall be responsible for maintaining an appropriate compliance
program to ensure that the services provided by it under this Agreement are
performed in a manner consistent with applicable laws and the terms of this
Agreement. Furthermore, the Sub-Adviser shall maintain and enforce a Code of
Ethics that is in form and substance satisfactory to the Adviser. Sub-Adviser
agrees to provide such reports and certifications regarding its compliance
program as the Adviser or the Fund shall reasonably request from time to time.
2. In the event that there are, from time to time, one or more additional series
of the Fund with respect to which the Adviser desires to retain the Sub-Adviser
to render investment advisory and management services hereunder, the Adviser
shall notify the Sub-Adviser in writing. If the Sub-Adviser is willing to render
such services, it shall notify the Adviser in writing whereupon such additional
series shall become subject to this Agreement.
3. For the services and facilities described in Section 1, the Adviser will pay
to the Sub-Adviser, at the end of each calendar month, a sub-advisory fee
computed at an annual rate of .30% of that portion of the average daily net
assets of the initial series of the Fund that is allocated by the Adviser to the
Sub-Adviser for management.
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.
4. 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.
5. The Sub-Adviser shall arrange, if desired by the Fund, for officers or
employees of the Sub-Adviser to serve, without compensation from the Fund, as
trustees, officers or agents of the Fund if duly elected or appointed to such
positions and subject to their individual consent and to any limitations imposed
by law.
6. The net asset value for each series of the Fund subject to this Agreement
shall be calculated as the Board of Trustees of the Fund may determine from time
to time 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 a
series shall be deemed to be the net asset value of such series as of the close
of business on the last day on
B-4
<PAGE> 49
which such calculation was made for the purpose of the foregoing computations.
7. Subject to applicable statutes and regulations, it is understood that certain
trustees, 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 trustee, officer or agent.
8. 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.
9. This Agreement shall become effective with respect to the initial series of
the Fund on the date hereof and shall remain in full force until ,
199 , unless sooner terminated as hereinafter provided. This Agreement shall
continue in force from year to year thereafter with respect to each such series,
but only as long as such continuance is specifically approved for each series 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 for a series, the Sub-Adviser may
continue to serve in such capacity for such series 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 with respect to any series subject to this Agreement
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 Fund may effect termination
with respect to any such series without payment of any penalty by action of the
Board of Trustees or by vote of a majority of the outstanding voting securities
of such series on sixty (60) days written notice to the Adviser and the
Sub-Adviser.
This Agreement may be terminated with respect to any series at any time without
the payment of any penalty by the Board of Trustees of the Fund, by vote of a
majority of the outstanding voting securities of such series or by the Adviser
in the event that it shall have been established by a court of competent
jurisdiction that the Sub-Adviser or any officer or director of the Sub-Adviser
has taken any action which results in a breach of the covenants of the
Sub-Adviser set forth herein.
B-5
<PAGE> 50
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 the compensation described in Section
3 earned prior to such termination.
10. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
11. Any notice under this Agreement shall be in writing, addressed and delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate for the receipt of such notice.
12. This Agreement shall be construed in accordance with applicable federal law
and the laws of the Commonwealth of Massachusetts.
13. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
IN WITNESS WHEREOF, the 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:
--------------------------------------------------
Title:
--------------------------------------------------
ZURICH INVESTMENT MANAGEMENT
LIMITED
By:
--------------------------------------------------
Title:
--------------------------------------------------
B-6
<PAGE> 51
EXHIBIT C
PROPOSED FUNDAMENTAL INVESTMENT POLICIES
The following policies are proposed to be changed with respect to the Fund. The
proposed additions are underlined.
The Fund may not:
KIBF:
"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 that issuer except that, with respect to 50% of the Fund's total assets, the
Fund may invest up to 25% of its total assets in securities of any one issuer,
and except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same investment
objective and substantially similar investment objective and substantially
similar investment policies as the Fund."
"Purchase more than 10% of any class of voting securities of any issuer, except
that all or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment objective and
substantially similar investment policies as the Fund."
"Purchase securities (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if as a result of such purchase
25% or more of the Fund's total assets would be invested in any one industry,
except that all or substantially all of the assets of the Fund may be invested
in another registered investment company having the same investment objective
and substantially similar policies as the Fund."
"Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund."
C-1
<PAGE> 52
EXHIBIT D
KEMPER FUNDS AND MANAGEMENT FEES
D-1
<PAGE> 53
EXHIBIT E
INVESTMENT OBJECTIVES AND ADVISORY FEES
FOR FUNDS ADVISED BY SCUDDER, STEVENS & CLARK, INC.
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
MONEY MARKET
Scudder U.S. Treasury Safety, liquidity, and 0.500% of $ 398,597,054
Money Fund stability of capital net assets+
and, consistent
therewith, current
income.
Scudder Cash Investment Stability of capital 0.500% to $1,430,623,516
Trust while maintaining $250 million
liquidity of capital 0.450% next
and providing current $250 million
income from money 0.400% next
market securities. $500 million
0.350%
thereafter+
Scudder Money Market High level of current 0.250% of $ 384,509,425**
Series income consistent with net assets
preservation of
capital and liquidity
by investing in a
broad range of
short-term money
market instruments.
Scudder Government Money High level of current 0.250% of $ 36,794,563**
Market Series income consistent with net assets
preservation of
capital and liquidity
by investing
exclusively in
obligations issued or
guaranteed by the U.S.
Government or its
agencies or
instrumentalities and
in certain repurchase
agreements.
TAX FREE MONEY MARKET
Scudder Tax Free Money Income exempt from 0.500% to $ 220,245,241
Fund regular federal income $500 million
taxes and stability of 0.480%
principal through thereafter+
investments in
municipal securities.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
** Program assets as of 7/31/97.
+ Subject to waivers and/or expense limitations.
</TABLE>
E-1
<PAGE> 54
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
High level of current 0.250% of $ 79,695,218**
Scudder Tax Free Money income, consistent net assets
Market Series with preservation of
capital and liquidity,
exempt from federal
income tax by
investing primarily in
high quality municipal
obligations.
Scudder California Tax Stability of capital 0.500% of $ 68,695,680
Free Money Fund and the maintenance of net assets+
a constant net asset
value of $1.00 per
share while providing
California tax payers
income exempt from
both California state
personal and regular
federal income tax
through investment in
high quality, short-
term tax-exempt
California municipal
securities.
Scudder New York Tax Stability of capital 0.500% of $ 59,538,652
Free Money Fund and income exempt from net assets+
New York state and New
York City personal
income taxes and
regular federal income
tax through investment
in high quality,
short-term municipal
securities in New
York.
TAX FREE
Scudder Limited Term Tax High level of income 0.600% of $ 123,660,431
Free Fund exempt from regular net assets+
federal income tax
consistent with a high
degree of principal
stability.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
** Program asset as of 7/31/97.
+ Subject to waivers and/or expense limitations.
</TABLE>
E-2
<PAGE> 55
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
High level of income 0.600% to $ 650,504,081
Scudder Medium Term Tax exempt from regular $500 million
Free Fund federal income tax and 0.500% thereafter
limited principal
fluctuation through
investment primarily
in high grade
intermediate term
municipal securities.
Scudder Managed Income exempt from 0.550% to $ 737,422,861
Municipal Bonds regular federal income $200 million
tax primarily through 0.500% next
investments in high- $500 million
grade long-term 0.475% thereafter
municipal securities.
Scudder High Yield Tax High level of income, 0.650% to $ 293,101,021
Free Fund exempt from regular $300 million
federal income tax, 0.600% thereafter
from an actively
managed portfolio
consisting primarily
of investment grade
municipal securities.
Scudder California Tax Income exempt from 0.625% to $ 288,576,041
Free Fund both California state $200 million
personal income tax 0.600% thereafter
and regular federal
income tax primarily
through investment
grade municipal
securities.
Scudder Massachusetts A high level of income 0.600% of $ 65,505,088
Limited Term Tax Free exempt from both net assets+
Fund Massachusetts personal
income tax and regular
federal income tax as
is consistent with a
high degree of price
stability.
Scudder Massachusetts A high level of income 0.600% of $ 329,842,169
Tax Free Fund exempt from both net assets
Massachusetts personal
income tax and regular
federal income tax
through investment
primarily in long-term
investment-grade
municipal securities
in Massachusetts.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>
E-3
<PAGE> 56
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Income exempt from New 0.625% to $ 180,647,157
Scudder New York Tax York state and New $200 million
Free Fund York City personal 0.600% thereafter
income taxes and
regular federal income
tax through investment
primarily in long-term
investment-grade
municipal securities
in New York.
Scudder Ohio Tax Free Income exempt from 0.600% of $ 84,109,009
Fund Ohio personal income net assets+
tax and regular
federal income tax
through investment
primarily in
investment-grade
municipal securities
in Ohio.
Scudder Pennsylvania Tax Income exempt from 0.600% of $ 74,177,997
Free Fund Pennsylvania personal net assets+
income tax and regular
federal income tax
through investment
primarily in
investment-grade
municipal securities
in Pennsylvania.
U.S. INCOME
Scudder Short Term Bond High level of income 0.600% to $1,468,170,885
Fund consistent with a high $500 million
degree of principal 0.500% next
stability through $500 million
investments primarily 0.450% next
in high quality $500 million
short-term bonds. 0.400% next
$500 million
0.375% next
$1 billion
0.350% thereafter
Scudder Zero Coupon 2000 High investment 0.600% of $ 25,440,414
Fund returns over a net assets+
selected period as is
consistent with
investment in U.S.
Government securities
and the minimization
of reinvestment risk.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>
E-4
<PAGE> 57
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
High current income 0.650% to $ 383,008,164
Scudder GNMA Fund and safety of $200 million
principal primarily 0.600% next
from investment in $300 million
U.S. Government 0.550% thereafter
guaranteed
mortgage-backed GNMA
securities.
Scudder Income Fund A high level of 0.650% to $ 578,519,502
income, consistent $200 million
with the prudent 0.600% next
investment of capital, $300 million
through a flexible 0.550% thereafter
investment program
emphasizing high-grade
bonds.
Scudder High Yield Bond A high level of 0.700% of $ 73,523,094
Fund current income and net assets
capital appreciation
through investment
primarily in below
investment-grade
domestic debt
securities.
GLOBAL INCOME
Scudder Global Bond Fund Total return with an 0.750% to $ 217,403,907
emphasis on current $1 billion
income by investing 0.700%
primarily in thereafter+
high-grade bonds
denominated in foreign
currencies and the
U.S. dollar.
Scudder International Income primarily by 0.850% to $ 235,993,183
Bond Fund investing in $1 billion
high-grade 0.800% thereafter
international bonds
and protection and
possible enhancement
of principal value by
actively managing
currency, bond market
and maturity exposure
and by security
selection.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>
E-5
<PAGE> 58
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
High current income 1.000% of $ 304,607,984
Scudder Emerging Markets and, secondarily, net assets
Income Fund long-term capital
appreciation by
investing primarily in
high-yielding debt
securities issued in
emerging markets.
ASSET ALLOCATION
Scudder Pathway Current income and, There will be no $ 13,928,759***
Conservative Portfolio secondarily, long-term fee as the Manager
growth of capital by will receive a fee
investing from the
substantially in underlying funds.
Scudder bond mutual
funds, but will have
some exposure to
Scudder equity mutual
funds.
Scudder Pathway Balanced Balance of growth and There will be no $ 167,721,722***
Portfolio income by investing in fee as the Manager
a mix of Scudder money will receive a fee
market, bond and from the
equity mutual funds. underlying funds.
Scudder Pathway Growth Long-term growth of There will be no $ 42,234,535***
Portfolio capital by investing fee as the Manager
predominantly in will receive a fee
Scudder equity mutual from the
funds designed to underlying funds.
provide long-term
growth.
Scudder Pathway Maximize total return There will be no $ 8,983,598***
International by investing in a fee as the Manager
Portfolio select mix of will receive a fee
established from the
international and underlying funds.
global Scudder Funds.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
*** Program assets as of 6/30/97.
</TABLE>
E-6
<PAGE> 59
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
U.S. GROWTH AND INCOME
Scudder Balanced Fund A balance of growth 0.700% of $ 109,541,542
and income from a net assets+
diversified portfolio
of equity and fixed
income securities and
long-term preservation
of capital through a
quality oriented
investment approach
designed to reduce
risk.
Scudder Growth and Long-term growth of 0.600% to $4,186,481,205
Income Fund capital, current $500 million
income and growth of 0.550% next
income primarily from $500 million
common stocks, 0.500% next
preferred stocks and $500 million
securities convertible 0.475% next
into common stocks. $500 million
0.450% next
$1 billion
0.425% next
$1.5 billion
0.405% thereafter
U.S. GROWTH
Scudder Large Company Maximize long-term 0.750% to $1,651,459,797
Value Fund (formerly capital appreciation $500 million
Scudder Capital Growth through a value driven 0.650% next
Fund) investment program $500 million
emphasizing common 0.600% next
stocks and preferred $500 million
stocks. 0.550% thereafter
Scudder Value Fund Long-term growth of 0.700% of $ 88,874,292
capital through net assets
investment in
undervalued equity
securities.
Scudder Small Company Long-term growth of 0.750% of $ 41,187,186
Value Fund capital by investing net assets+
primarily in
undervalued equity
securities of small
U.S. companies.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>
E-7
<PAGE> 60
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term growth of 0.750% of $ 72,048,339***
Scudder Micro Cap Fund capital by investing net assets+
primarily in a
diversified portfolio
of U.S. micro-cap
common stocks.
Scudder Classic Growth Long-term growth of 0.700% of $ 33,867,066
Fund capital while keeping net assets+
the value of its
shares more stable
than other growth
mutual funds.
Scudder Large Company Long-term growth of 0.700% of $ 221,253,633
Growth Fund (formerly capital through net assets
Scudder Quality Growth investment primarily
Fund) in the equity
securities of
seasoned, financially
strong U.S. growth
companies.
Scudder Development Fund Long-term growth of 1.000% to $ 861,564,138
capital by investing $500 million
primarily in equity 0.950% next
securities of emerging $500 million
growth companies. 0.900% thereafter
Scudder 21st Century Long-term growth of 1.000% of $ 20,942,531***
Growth Fund capital by investing net assets+
primarily in the
securities of emerging
growth companies
poised to be leaders
in the 21st century.
GLOBAL GROWTH
Scudder Global Fund Long-term growth of 1.000% to $1,604,465,769
capital through $500 million
investment in a 0.950% next
diversified portfolio $500 million
of marketable foreign 0.900% thereafter
and domestic
securities, primarily
equity securities.
Institutional Long-term growth of 0.900% of $ 17,897,508
International Equity capital primarily net assets+
Portfolio through a diversified
portfolio of
marketable foreign
equity securities.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
*** Program assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>
E-8
<PAGE> 61
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term growth of 1.000% of $ 25,631,898***
Scudder International capital and current net assets+
Growth and Income Fund income primarily from
foreign equity
securities
Scudder International Long-term growth of 0.900% to $2,583,030,686
Fund capital primarily $500 million
through a diversified 0.850% next
portfolio of $500 million
marketable foreign 0.800% next
equity securities. $1 billion
0.750% next
$1 billion
0.700% thereafter
Scudder Global Discovery Above-average capital 1.100% of $ 350,829,980
Fund appreciation over the net assets
long-term by investing
primarily in the
equity securities of
small companies
located throughout the
world.
Scudder Emerging Markets Long-term growth of 1.25% of $ 75,793,693
Growth Fund capital primarily net assets+
through equity
investments in
emerging markets
around the globe.
Scudder Gold Fund Maximum return 1.000% of $ 163,932,814
consistent with net assets
investing in a
portfolio of gold-
related equity
securities and gold.
Scudder Greater Europe Long-term growth of 1.000% of $ 120,300,058
Growth Fund capital through net assets
investment primarily
in the equity
securities of European
companies.
Scudder Pacific Long-term growth of 1.100% of $ 329,391,540
Opportunities Fund capital primarily net assets
through investment in
the equity securities
of Pacific Basin
companies, excluding
Japan.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
*** Program assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>
E-9
<PAGE> 62
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term capital Effective 9/11/97: $ 621,914,690
Scudder Latin America appreciation through 1.250% to
Fund investment primarily $1 billion
in the securities of 1.150% thereafter
Latin American
issuers.
The Japan Fund, Inc. Long-term capital 0.850% to $ 385,963,962
appreciation through $100 million
investment primarily 0.750% next
in equity securities $200 million
of Japanese companies. 0.700% next
$300 million
0.650% thereafter
CLOSED-END FUNDS
The Argentina Fund, Inc. Long-term capital Adviser: $ 117,596,046
appreciation through Effective 11/1/97:
investment primarily 1.100% of
in equity securities net assets
of Argentine issuers. Sub-Adviser:
Paid by Adviser.
0.160% of
net assets
The Brazil Fund, Inc. Long-term capital 1.200% to $ 417,981,869
appreciation through $150 million
investment primarily 1.050% next
in equity securities $150 million
of Brazilian issuers. 1.000% thereafter
Effective
10/29/97:
1.200% to
$150 million
1.050% next
$150 million
1.000% next
$200 million
0.900% thereafter
Administrator:
Receives an annual
fee of $50,000
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
</TABLE>
E-10
<PAGE> 63
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term capital Advisor: $ 661,690,073
The Korea Fund, Inc. appreciation through 1.150% to
investment primarily $50 million
in equity securities 1.100% next
of Korean companies. $50 million
1.000% next
$250 million
0.950% next
$400 million
0.900% thereafter
Sub-Adviser -
Daewoo:
Paid by Adviser.
0.2875% to
$50 million
0.275% next
$50 million
0.250% next
$250 million
0.2375% next
$400 million
0.225% thereafter
The Latin America Dollar High level of current 1.200% of $ 94,748,606
Income Fund, Inc. income and, net assets
secondarily, capital
appreciation through
investment principally
in dollar-denominated
Latin American debt
instruments.
Montgomery Street Income High level of current 0.500% to $ 198,465,822
Securities, Inc. income consistent with $150 million
prudent investment 0.450% next
risks through a $50 million
diversified portfolio 0.400% thereafter
primarily of debt
securities.
Scudder New Asia Fund, Long-term capital 1.250% to $ 133,363,686
Inc. appreciation through $75 million
investment primarily 1.150% next
in equity securities $125 million
of Asian companies. 1.100% thereafter
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
</TABLE>
E-11
<PAGE> 64
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term capital 1.250% to $ 266,418,730
Scudder New Europe Fund, appreciation through $75 million
Inc. investment primarily 1.150% next
in equity securities $125 million
of companies traded on 1.100% thereafter
smaller or emerging
European markets and
companies that are
viewed as likely to
benefit from changes
and developments
throughout Europe.
Scudder Spain and Long-term capital Adviser: $ 75,127,194
Portugal Fund, Inc. appreciation through 1.000% of
investment primarily net assets
in equity securities Administrator:
of Spanish & 0.200% of
Portuguese issuers. net assets
Scudder World Income High income and, 1.200% of $ 54,488,637
Opportunities Fund, consistent therewith, net assets
Inc. capital appreciation.
INSURANCE PRODUCTS
Balanced Portfolio Balance of growth and 0.475% of $ 88,342,837
income consistent with net assets
long-term preservation
of capital through a
diversified portfolio
of equity and fixed
income securities.
Bond Portfolio High level of income 0.475% of $ 65,769,421
consistent with a high net assets
quality portfolio of
debt securities.
Capital Growth Portfolio Long-term capital 0.475% to $ 440,481,308
growth from a $500 million
portfolio consisting 0.450% thereafter
primarily of equity
securities.
Global Discovery Above-average capital 0.975% of $ 16,757,264
Portfolio appreciation over the net assets+
long-term by investing
primarily in the
equity securities of
small companies
located throughout the
world.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>
E-12
<PAGE> 65
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term growth of 0.475% of $ 91,091,547
Growth and Income capital, current net assets
Portfolio income and growth of
income.
International Portfolio Long-term growth of 0.875% to $ 726,038,527
capital primarily $500 million
through diversified 0.775% thereafter
holdings of marketable
foreign equity
investments.
Money Market Portfolio Stability of capital 0.370% of $ 97,785,626
and current income net assets
from a portfolio of
money market
instruments.
AARP FUNDS
AARP High Quality Money Current income and 0.350% to $ 412,126,193
Fund liquidity, consistent $2 billion
with maintaining 0.330% next
stability and safety $2 billion
of principal, through 0.300% next
investment in high $2 billion
quality securities. 0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.100% of
net assets
AARP Balanced Stock and Long-term growth of 0.350% to $ 403,179,939
Bond Fund capital and income, $2 billion
consistent with a 0.330% next
stable share price, $2 billion
through investment in 0.300% next
a combination of $2 billion
stocks, bonds and cash 0.280% next
reserves. $2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.190% of
net assets
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
</TABLE>
E-13
<PAGE> 66
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term capital 0.350% to $ 826,136,713
AARP Capital Growth Fund growth, consistent $2 billion
with a share price 0.330% next
more stable than other $2 billion
capital growth funds, 0.300% next
through investment $2 billion
primarily in common 0.280% next
stocks and securities $2 billion
convertible into 0.260% next
common stocks. $3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.320% of
net assets
AARP Global Growth Fund Long-term growth of 0.350% to $ 77,651,978
capital, consistent $2 billion
with a share price 0.330% next
more stable than other $2 billion
global equity funds, 0.300% next
through investment $2 billion
primarily in a 0.280% next
diversified portfolio $2 billion
of equity securities 0.260% next
of corporations $3 billion
worldwide. 0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND
FEE
0.550% of
net assets
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
+ Subject to waivers and/or expense limitations.
</TABLE>
E-14
<PAGE> 67
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term growth of 0.350% to $4,218,983,398
AARP Growth and Income capital and income, $2 billion
Fund consistent with a 0.330% next
stable share price, $2 billion
through investment 0.300% next
primarily in common $2 billion
stocks and securities 0.280% next
convertible into $2 billion
common stocks. 0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.190% of
net assets
AARP International Stock Long-term growth of 0.350% to $ 12,699,109***
Fund capital, consistent $2 billion
with a share price 0.330% next
more stable than other $2 billion
international equity 0.300% next
funds, through $2 billion
investment primarily 0.280% next
in a diversified $2 billion
portfolio of foreign 0.260% next
equity securities. $3 billion
0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND
FEE
0.600% of
net assets
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
*** Program assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>
E-15
<PAGE> 68
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Long-term growth of 0.350% to $ 25,425,137***
AARP Small Company Stock capital, consistent $2 billion
Fund with a share price 0.330% next
more stable than other $2 billion
small company stock 0.300% next
funds, through $2 billion
investment primarily 0.280% next
in stocks of small $2 billion
U.S. companies. 0.260% next
$3 billion
0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND
FEE
0.550% of
net assets
AARP U.S. Stock Index Long-term capital 0.350% to $ 23,917,674***
Fund growth and income, $2 billion
consistent with 0.330% next
greater share price $2 billion
stability than a S&P 0.300% next
500 index fund, by $2 billion
taking an indexing 0.280% next
approach to investing $2 billion
in common stocks, 0.260% next
emphasizing higher $3 billion
dividend stocks while 0.250% next
maintaining investment $3 billion
characteristics 0.240%
otherwise similar to thereafter+
the S&P 500 index. INDIVIDUAL FUND
FEE
0.000% of
net assets
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
*** Program assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>
E-16
<PAGE> 69
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
High level of current 0.350% to $ 34,951,973***
AARP Bond Fund for income, consistent $2 billion
Income with greater share 0.330% next
price stability than a $2 billion
long term bond, 0.300% next
through investment $2 billion
primarily in 0.280% next
investment-grade debt $2 billion
securities. 0.260% next
$3 billion
0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND
FEE
0.280% of
net assets
AARP GNMA and U.S. High level of current 0.350% to $4,904,439,844
Treasury Fund income, consistent $2 billion
with greater share 0.330% next
price stability than a $2 billion
long-term bond, 0.300% next
through investment $2 billion
principally in U.S. 0.280% next
Government-guaranteed $2 billion
GNMA securities and 0.260% next
U.S. Treasury $3 billion
obligations. 0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.120% of
net assets
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
*** Program assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>
E-17
<PAGE> 70
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
High level of income, 0.350% to $ 511,905,166
AARP High Quality Bond consistent with $2 billion
Fund greater share price 0.330% next
stability than a $2 billion
long-term bond, 0.300% next
through investment $2 billion
primarily in a 0.280% next
portfolio of high $2 billion
quality securities 0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.190% of
net assets
AARP Diversified Growth Long-term growth of There will be no $ 36,411,938***
Portfolio capital through fee as the manager
investment primarily will receive a fee
in AARP stock mutual from the
funds. underlying funds.
AARP Diversified Income Current income with There will be no $ 34,230,023***
Portfolio modest long-term fee as the manager
appreciation through will receive a fee
investment primarily from the
in AARP bond mutual underlying funds.
funds.
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
*** Program assets as of 6/30/97.
</TABLE>
E-18
<PAGE> 71
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
---- --------- -------- -------
<S> <C> <C> <C>
Current income free 0.350% to $ 111,264,728
AARP High Quality Tax from federal income $2 billion
Free Money Fund taxes and liquidity, 0.330% next
consistent with $2 billion
maintaining stability 0.300% next
and safety of $2 billion
principal, through 0.280% next
investment in $2 billion
high-quality municipal 0.260% next
securities. $3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.100% of
net assets
AARP Insured Tax Free High level of income 0.350% to $1,755,412,222
General Bond Fund free from federal $2 billion
income taxes, 0.330% next
consistent with $2 billion
greater share price 0.300% next
stability than a long- $2 billion
term municipal bond, 0.280% next
through investment $2 billion
primarily in municipal 0.260% next
securities covered by $3 billion
insurance. 0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND
FEE
0.190% of
net assets
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
</TABLE>
E-19
<PAGE> 72
EXHIBIT F
FEES AND EXPENSES
<TABLE>
<CAPTION>
KIBF
----
<S> <C>
Fiscal Year End.................................... 12/31/96
Management Fees Paid to ZKI........................ $94,000
Effective Management Fee Rate......................
Shareholder Service Fees Paid by IFTC to ZKSC...... $100
Brokerage Commissions Paid by Fund................. 0
Percent of Brokerage Commissions Paid by........... 0%
Fund Allocated on Basis of Research................
</TABLE>
F-1
<PAGE> 73
Thank you
Thank you
for mailing your proxy card promptly!
================================================================================
WE APPRECIATE YOUR
CONTINUING SUPPORT AND
LOOK FORWARD TO SERVING
YOUR FUTURE INVESTMENT NEEDS.
<PAGE> 74
================================================================================
KEMPER INTERNATIONAL
BOND FUND
(LOGO)Printed on recycled paper
<PAGE> 75
[KEMPER FUNDS LOGO]
PROXY SERVICES
P.O. BOX 9148
FARMINGDALE, NY 11735
KEMPER INTERNATIONAL BOND FUND
FOR THE SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 3, 1997
The signers of this proxy hereby appoint Arthur
R. Gottschalk and Stephen B. Timbers and each of
them, attorneys and proxies, with power of
substitution in each, to vote all shares for the
signers at the Special Meeting of Shareholders to
be held December 3, 1997, 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 "FOR" the proposals set forth on
this proxy.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X]
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL BOND FUND
PLEASE VOTE PROMPTLY!
Your vote is needed! Please vote below and sign in the space provided.
THE PROXY IS SOLICITED BY THE BOARD OF THE FUND WHICH RECOMMENDS A VOTE "FOR"
ALL ITEMS.
<TABLE>
<S><C>
1. To elect the following as trustees: For Withhold For All
All All Except
/ / / / / /
01) James B. Akins, 02) Arthur R. Gottschalk, 03) Frederick T. Kelsey,
04) Daniel Pierce, 05) Fred B. Renwick, 06) John B. Tingleff, 07) Edmond D. Villani,
08) John G. Weithers
-----------------------------------------------------------------------------------------
To withhold authority to vote on any individual nominee(s), please print the number(s)
on the line above.
2. To ratify the selection of Ernst & Young LLP
as independent auditors for the For Against Abstain
current fiscal year. / / / / / /
3. To approve a new investment management
agreement with Scudder Kemper Investments,
Inc. ("SKI") (or with Zurich Kemper
Investments, Inc. transferable to SKI). For Against Abstain
/ / / / / /
4. To approve a new sub-advisory agreement
with Zurich Investment Management Limited For Against Abstain
(including approval of a subseqent assignment). / / / / / /
5. To approve changes in the Fund's fundamental
investment policies to permit a master/feeder For Against Abstain
fund structure. / / / / / /
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" ALL ITEMS.
Signature(s) (All registered owners of accounts shown above must sign.
If signing for a corporation, estate or trust, please indicate your capacity or
title.)
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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