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SIGNATURE PHILIP J. COLLORA
TITLE SECRETARY
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<CIK> 0000931014
<NAME> KEMPER INTERNATIONAL BOND FUND
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</TABLE>
REPORT OF INDEPENDENT AUDITORS
Board of Trustees
Kemper Funds
In planning and performing our audit of the financial statements of
each of the Kemper Funds listed in Exhibit A attached hereto (the
"Funds") for the period ended as of the date listed in Exhibit A
attached hereto ("Report Date"), we considered their internal
control, including control activities for safeguarding securities, in
order to determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and to comply with
the requirements of Form N-SAR, not to provide assurance on the
internal control.
The management of the Funds is responsible for establishing and
maintaining internal control. In fulfilling this responsibility,
estimates and judgments by management are required to assess the
expected benefits and related costs of controls. Generally, controls
that are relevant to an audit pertain to the entity's objective of
preparing financial statements for external purposes that are fairly
presented in conformity with generally accepted accounting
principles. Those controls include the safeguarding of assets
against unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or
irregularities may occur and not be detected. Also, projection of
any evaluation of internal control to future periods is subject to
the risk that it may become inadequate because of changes in
conditions or that the effectiveness of the design and operation may
deteriorate.
Our consideration of the internal control would not necessarily
disclose all matters in the internal control that might be material
weaknesses under standards established by the American Institute of
Certified Public Accountants. A material weakness is a condition in
which the design or operation of one or more of the internal control
components does not reduce to a relatively low level the risk that
errors or irregularities in amounts that would be material in
relation to the financial statements being audited may occur and not
be detected within a timely period by employees in the normal course
of performing their assigned functions. However, we noted no matters
involving the internal control and its operation, including controls
for safeguarding securities, that we consider to be material
weaknesses as defined above as of Report Date.
This report is intended solely for the information and use of
management and the Securities and Exchange Commission.
ERNST & YOUNG LLP
Chicago, Illinois
February 17, 1998
Kemper Funds Exhibit A
December 31, 1997
Investors Fund Series
Total Return Portfolio
High Yield Portfolio
Growth Portfolio
Government Securities Portfolio
Money Market Portfolio
International Portfolio
Small Cap Value Portfolio
Investment Grade Bond Portfolio
Value Portfolio
Small Cap Value Portfolio
Value + Growth Portfolio
Horizon 20+ Portfolio
Horizon 10+ Portfolio
Horizon 5 Portfolio
Blue Chip Portfolio
Global Portfolio
Kemper Global Income Fund
Kemper Intermediate Government Trust
Kemper International Bond Fund
Exhibit 77Q1(e)(1)
Kemper International Bond Fund
Form N-SAR for the period ended 12/31/97
File No. 811-8818
INVESTMENT MANAGEMENT AGREEMENT
Kemper International Bond Fund
222 South Riverside Plaza
Chicago, Illinois 60606
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper International Bond Fund
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 (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized the Kemper International Bond Fund
(the "Fund"). Series may be abolished and dissolved, and
additional series established, from time to time by action of the
Trustees.
The Trust, on behalf of the Fund, has selected you to act as the
investment manager of the Fund and to provide certain other
services, as more fully set forth below, and you have indicated
that you are willing to act as such investment manager and to
perform such services under the terms and conditions hereinafter
set forth. Accordingly, the Trust on behalf of the Fund agrees
with you as follows:
1. Delivery of Documents. The Trust engages in the business of
investing and reinvesting the assets of the Fund in the manner
and in accordance with the investment objectives, policies and
restrictions specified in the currently effective Prospectus (the
"Prospectus") and Statement of Additional Information (the "SAI")
relating to the Fund included in the Trust's Registration
Statement on Form N-1A, as amended from time to time, (the
"Registration Statement") filed by the Trust under the Investment
Company Act of 1940, as amended, (the "1940 Act") and the
Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you
by the Trust. The Trust has also furnished you with copies
properly certified or authenticated of each of the following
additional documents related to the Trust and the Fund:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof
(the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the
shareholders of the Fund selecting you as investment manager and
approving the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies,
properly certified or authenticated, of all amendments of or
supplements, if any, to the foregoing, including the Prospectus,
the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of
the Fund, you shall provide continuing investment management of
the assets of the Fund in accordance with the investment
objectives, policies and restrictions set forth in the Prospectus
and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating
to regulated investment companies and all rules and regulations
thereunder; and all other applicable federal and state laws and
regulations of which you have knowledge; subject always to
policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable
efforts to manage the Fund so that it will qualify as a regulated
investment company under Subchapter M of the Code and regulations
issued thereunder. The Fund shall have the benefit of the
investment analysis and research, the review of current economic
conditions and trends and the consideration of long-range
investment policy generally available to your investment advisory
clients. In managing the Fund in accordance with the requirements
set forth in this section 2, you shall be entitled to receive and
act upon advice of counsel to the Trust. You shall also make
available to the Trust promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the
Trust in complying with the requirements of the 1940 Act and
other applicable laws. To the extent required by law, you shall
furnish to regulatory authorities having the requisite authority
any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in
order to ascertain whether the operations of the Trust are being
conducted in a manner consistent with applicable laws and
regulations.
You shall determine the securities, instruments, investments,
currencies, repurchase agreements, futures, options and other
contracts relating to investments to be purchased, sold or
entered into by the Fund and place orders with broker-dealers,
foreign currency dealers, futures commission merchants or others
pursuant to your determinations and all in accordance with Fund
policies as expressed in the Registration Statement. You shall
determine what portion of the Fund's portfolio shall be invested
in securities and other assets and what portion, if any, should
be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic
reports on the investment performance of the Fund and on the
performance of your obligations pursuant to this Agreement, and
you shall supply such additional reports and information as the
Trust's officers or Board of Trustees shall reasonably request.
2. Administrative Services. In addition to the portfolio
management services specified above in section 2, you shall
furnish at your expense for the use of the Fund such office space
and facilities in the United States as the Fund may require for
its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative
services on behalf of the Fund necessary for operating as an open
end investment company and not provided by persons not parties to
this Agreement including, but not limited to, preparing reports
to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising,
negotiating contractual arrangements with, to the extent
appropriate, and monitoring the performance of, accounting
agents, custodians, depositories, transfer agents and pricing
agents, accountants, attorneys, printers, underwriters, brokers
and dealers, insurers and other persons in any capacity deemed to
be necessary or desirable to Fund operations; preparing and
making filings with the Securities and Exchange Commission (the
"SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Registration
Statement, semi-annual reports on Form N-SAR and notices pursuant
to Rule 24f-2 under the 1940 Act; overseeing the tabulation of
proxies by the Fund's transfer agent; assisting in the
preparation and filing of the Fund's federal, state and local tax
returns; preparing and filing the Fund's federal excise tax
return pursuant to Section 4982 of the Code; providing assistance
with investor and public relations matters; monitoring the
valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund
under applicable federal and state securities laws; maintaining
or causing to be maintained for the Fund all books, records and
reports and any other information required under the 1940 Act, to
the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other
agents of the Fund; assisting in establishing the accounting
policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and
3
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.
3. Allocation of Charges and Expenses. Except as otherwise
specifically provided in this section 4, you shall pay the
compensation and expenses of all Trustees, officers and executive
employees of the Trust (including the Fund's share of payroll
taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of
your directors, officers and employees as may duly be elected
officers of the Trust, subject to their individual consent to
serve and to any limitations imposed by law. You shall provide at
your expense the portfolio management services described in
section 2 hereof and the administrative services described in
section 3 hereof.
You shall not be required to pay any expenses of the Fund other
than those specifically allocated to you in this section 4. In
particular, but without limiting the generality of the foregoing,
you shall not be responsible, except to the extent of the
reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose
services may be involved, for the following expenses of the Fund:
organization expenses of the Fund (including out of-pocket
expenses, but not including your overhead or employee costs);
fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses;
maintenance of books and records which are required to be
maintained by the Fund's custodian or other agents of the Trust;
telephone, telex, facsimile, postage and other communications
expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment
company trade organizations; fees and expenses of the Fund's
accounting agent for which the Trust is responsible pursuant to
the terms of the Fund Accounting Services Agreement, custodians,
subcustodians, transfer agents, dividend disbursing agents and
4
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 $1,000,000,000,
the fee payable for that month based on the portion of the
average of such values in excess of $1,000,000,000 shall be 1/12
of .70 of 1 percent of such portion; provided that, for any
5
calendar month during which the average of such values exceeds
$2,500,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $2,500,000,000
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 $5,000,000,000, the fee payable for that month
based on the portion of the average of such values in excess of
$5,000,000,000 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 $7,500,000,000, the fee payable for that
month based on the portion of the average of such values in
excess of $7,500,000,000 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 $10,000,000,000, the fee
payable for that month based on the portion of the average of
such values in excess of $10,000,000,000 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
$12,500,000,000, the fee payable for that month based on the
portion of the average of such values in excess of
$12,500,000,000 shall be 1/12 of .62 of 1 percent of such
portion; over (b)any compensation waived by you from time to time
(as more fully described below). You shall be entitled to receive
during any month such interim payments of your fee hereunder as
you shall request, provided that no such payment shall exceed 75
percent of the amount of your fee then accrued on the books of
the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average
of the values placed on the Fund's net assets as of 4:00 p.m.
(New York time) on each day on which the net asset value of the
Fund is determined consistent with the provisions of Rule 22c-1
under the 1940 Act or, if the Fund lawfully determines the value
of its net assets as of some other time on each business day, as
of such time. The value of the net assets of the Fund shall
always be determined pursuant to the applicable provisions of the
Declaration and the Registration Statement. If the determination
of net asset value does not take place for any particular day,
then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the
value of its net assets as of 4:00 p.m. (New York time), or as of
such other time as the value of the net assets of the Fund s
portfolio may be lawfully determined on that day. If the Fund
determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that
day shall be deemed to be the sole determination thereof on that
day for the purposes of this section 5.
You may waive all or a portion of your fees provided for
hereunder and such waiver shall be treated as a reduction in
purchase price of your services. You shall be contractually bound
hereunder by the terms of any publicly announced waiver of your
6
fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive.
In connection with purchases or sales of portfolio securities and
other investments for the account of the Fund, neither you nor
any of your directors, officers or employees shall act as a
principal or agent or receive any commission. You or your agent
shall arrange for the placing of all orders for the purchase and
sale of portfolio securities and other investments for the Fund s
account with brokers or dealers selected by you in accordance
with Fund policies as expressed in the Registration Statement. If
any occasion should arise in which you give any advice to clients
of yours concerning the Shares of the Fund, you shall act solely
as investment counsel for such clients and not in any way on
behalf of the Fund.
Your services to the Fund pursuant to this Agreement are not to
be deemed to be exclusive and it is understood that you may
render investment advice, management and services to others. In
acting under this Agreement, you shall be an independent
contractor and not an agent of the Trust. Whenever the Fund and
one or more other accounts or investment companies advised by you
have available funds for investment, investments suitable and
appropriate for each shall be allocated in accordance with
procedures believed by you to be equitable to each entity.
Similarly, opportunities to sell securities shall be allocated in
a manner believed by you to be equitable. The Fund recognizes
that in some cases this procedure may adversely affect the size
of the position that may be acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the
Trust agrees that you shall not be liable under this Agreement
for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall
be deemed to protect or purport to protect you against any
liability to the Trust, the Fund or its shareholders to which you
would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and
duties hereunder.
8. Duration and Termination of This Agreement. This Agreement
shall remain in force until April 1, 1998, and continue in force
from year to year thereafter, but only so long as such
continuance is specifically approved at least annually (a) by the
vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on
such approval, and (b) by the Trustees of the Trust, or by the
7
vote of a majority of the outstanding voting securities of the
Fund. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be
construed in a manner consistent with the 1940 Act and the rules
and regulations thereunder and any applicable SEC exemptive order
therefrom.
This Agreement may be terminated with respect to the Fund at any
time, without the payment of any penalty, by the vote of a
majority of the outstanding voting securities of the Fund or by
the Trust's Board of Trustees on 60 days' written notice to you,
or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any
time without the payment of any penalty by the Board of Trustees
or by vote of a majority of the outstanding voting securities of
the Fund in the event that it shall have been established by a
court of competent jurisdiction that you or any of your officers
or directors has taken any action which results in a breach of
your covenants set forth herein.
10. 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
the refrom.
11. Limitation of Liability for Claims. The Declaration, a copy
of which, together with all amendments thereto, is on file in the
Office of the Secretary of the Commonwealth of Massachusetts,
provides that the name "Kemper International Bond Fund" refers to
the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the
Fund, or Trustee, officer, employee or agent of the Trust, shall
be subject to claims against or obligations of the Trust or of
the Fund to any extent whatsoever, but that the Trust estate only
shall be liable.
You are hereby expressly put on notice of the limitation of
liability as set forth in the Declaration and you agree that the
obligations assumed by the Trust on behalf of the Fund pursuant
to this Agreement shall be limited in all cases to the Fund and
its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund
or any other series of the Trust, or from any Trustee, officer,
employee or agent of the Trust. You understand that the rights
and obligations of each Fund, or series, under the Declaration
are separate and distinct from those of any and all other series.
8
12. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or limit
any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the
definitions of "affiliated person," "assignment" and "majority of
the outstanding voting securities"), as from time to time
amended, shall be applied, subject, however, to such exemptions
as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, provided that nothing herein
shall be construed in a manner inconsistent with the 1940 Act, or
in a manner which would cause the Fund to fail to comply with the
requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or
management agreements entered into between you and the Trust on
behalf of the Fund.
9
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,
on behalf of
Kemper International Bond Fund
By: /s/ John E. Neal
--------------------------------
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/ Lynn S. Birdsong
------------------------------
President
10
Exhibit 77Q1(e)(2)
Kemper International Bond Fund
Form N-SAR for the period ended 12/31/97
File No. 811-8818
SUB-ADVISORY AGREEMENT
AGREEMENT made this 31st day of December, 1997, 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 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
2
records and reports as the Adviser may from time to time
reasonably request, including 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
3
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 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
4
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 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 April 1, 1998, 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.
5
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.
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.
6
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:
------------------------------
7
