January 28, 2000

Via E-Mail

Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

Re: Comments on Proposed Rule Regarding Independent

Directors of Investment Companies; File No. S7-23-99

Dear Mr. Katz:

We are the independent directors of two clusters of Kemper Funds, which as a complex includes over 100 fund portfolios with approximately $58 billion in assets.

We agree with the Commission that fund governance issues are important and affect the ability of the directors to effectively serve the interests of shareholders. We commend the Commission for its efforts in addressing this issue, and we believe that many of the proposals will assist particularly those boards that have not already adopted the core recommendations of the ICI Advisory Group's Best Practices Report. However, we believe that the proposal is flawed in two significant aspects and we urge the Commission to make changes to the proposal prior to adoption.

Specifically, we wish to comment on the following two aspects of the proposed rules:

  • Disclosure of information about fund directors
  • Independent legal counsel

    Disclosure of Information about Fund Directors

    We believe there are many aspects of this portion of the rule proposal that are good, and we generally are in favor of increasing the amount of information provided to shareholders about their board representatives. However, any changes should reasonably balance the benefits to shareholders from receiving such information against the burden to the funds and directors of providing such information. Some of the new proposals would be very burdensome to the Kemper Funds and their directors, without, we believe, a corresponding benefit to shareholders.

    The proposed rules would require disclosure in the Statement of Additional Information (SAI) and proxy statements of the relationships of and transactions by any director or any immediate family member of a director with (1) any investment adviser, principal underwriter or administrator for the funds, (2) any person directly or indirectly controlling, controlled by or under common control with any such investment adviser, principal underwriter or administrator, or (3) any officer of any such investment adviser, principal underwriter, administrator or controlling or controlled person.

    The term "immediate family member" of a person is defined as the person's spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in-law, and brother- or sister-in-law (including step and adoptive relationships).

    We believe this requirement is problematic in two respects. First, the definition of "immediate family member" is too broad. In addition to being of questionable value to shareholders, many directors will not have access to all the required information. We are concerned that many persons classified as "immediate family members" may be unwilling to provide the necessary information. As an example, the proposed rule would require a director to obtain financial information from a step brother or sister, even if the director has had little or no contact with that individual for a considerable period of time. In such a situation, what option would the director have other than to resign if he or she were unable to obtain the necessary information. Even in those circumstances where the information may be obtainable, we believe that many directors will be unwilling to impose on more distant family members to obtain the required information. As a result, many funds may be deprived of the capable services of existing directors. Moreover, many funds likely would experience substantial difficulty in recruiting new directors.

    Second, the definition of persons related to a fund is so broad that for complexes such as ours and many others, the number of entities that would need to be cross checked against is literally in the hundreds, and involves many sister companies that are in virtually no way connected with the adviser, other than by common, distant ownership. Again, this information is of little value to shareholders. In addition, this further reduces the ability of the directors to go to family members and obtain the necessary information. Moreover, for complexes that have funds with staggered fiscal year ends such as ours, the directors would be required to obtain this information at multiple times throughout the year. This would impose a huge burden on both the directors and the funds, with the resulting impact on the ability to attract qualified candidates to board membership. We also believe that having directors spend so much time tracking down this type of information would be a distraction from the important work that should be the focus of the board.

    Generally, when the Commission imposes new requirements, it weighs the benefits against the burdens of the proposal. In this case, the burden to directors is very great. Yet in contrast, we see very little benefit to the shareholders. It is not at all clear what value it is to shareholders to receive information about the interests of the directors' extended family members or about remote business relationships. Any value to shareholders is further reduced if the requirement significantly reduces the willingness of persons to serve as directors.

    For the reasons stated above, we strongly urge the Commission to drop this proposal altogether. If, however, the Commission proceeds, we believe the proposal should (1) be limited to directors and their "immediate family members" that reside in their household; (2) be limited to relationships with the adviser/distributor/administrator and their parents and subsidiaries (not common control entities) and (3) set a $60,000 de minimis threshold for disclosure of material interests and material transactions (the standard used in Regulation S-K).

    Independent Legal Counsel

    We agree with the Commission's premise that independent directors need to have access to qualified, unbiased legal advice in order to effectively exercise their responsibilities. Further, we support the Commission's goal of ensuring that independent directors obtain such advice. However, we disagree with the proposed regulatory approach to reach that goal.

    The selection of counsel, both in terms of the structure of relationships and the firms selected to provide advice, has been an area to which we, as independent directors, have devoted considerable attention. Moreover, it is a subject on which we feel well qualified to act. We have prominent attorneys within our ranks, and we have extensive experience in selecting and judging counsel to advise us, not only from our service as directors of the funds, but from our professional experiences as well. We have devoted extensive energy to our process of selecting counsel to the independent directors. We believe we are very capable of determining whether we are receiving high quality and unbiased advice, in general, and we believe that we are better able than a uniform rule to evaluate conflicts of interest. Therefore, we are adverse, as a matter of principle, to a Commission rule that would substitute the Commission's judgment for ours in the matter of selection of our own counsel.

    Further, we are concerned by the Commission's articulated standard of independence, particularly the fact that relatively minor work for a remote affiliate of the adviser during any two-year period could undo our extensive evaluation and selection of counsel. Although the proposed rule provides some discretion to independent directors to make an exception for remote or minor conflicts of interest, the proposed rule is so vague regarding what is permissible (and the examples in the proposing release are so extreme), it invites litigation on this issue. Our concern about the independent counsel proposal is heightened for complexes served by investment advisers, principal underwriters or administrators that are part of large organizations such as ours, where there may be many distant affiliates engaged in businesses completely unrelated to the fund business, and where application of the rule could have unintended and adverse consequences to our ability to receive desired and effective counsel representation.

    * * * *

    We urge the Commission to consider these comments and to adopt appropriate amendments to the proposals prior to implementing them.
    Sincerely,

    /s/ John W. Ballantine

    John W. Ballantine

    /s/ Lewis A. Burnham

    Lewis A. Burnham

    /s/ Donald L. Dunaway

    Donald L. Dunaway

    /s/ Robert B. Hoffman

    Robert B. Hoffman

    Independent Directors of:

    Kemper Income and Capital Preservation Fund
    Kemper Strategic Income Fund
    Kemper High Yield Series
    Kemper High Yield Fund
    Kemper High Yield Opportunity Fund
    Kemper Income Trust
    Kemper High Yield Fund II
    Kemper U.S. Government Securities Fund
    Kemper Portfolios
    Kemper Cash Reserves Fund
    Kemper U.S. Mortgage Fund
    Kemper Short-Term U.S. Government Fund
    Kemper National Tax-Free Income Series
    Kemper Municipal Bond Fund
    Kemper Intermediate Municipal Bond Fund
    Kemper State Tax-Free Income Series
    Kemper California Tax-Free Income Fund
    Kemper New York Tax-Free Income Fund
    Kemper Florida Tax-Free Income Fund
    Kemper Ohio Tax-Free Income Fund
    Kemper Technology Fund
    Kemper Total Return Fund
    Kemper Growth Fund
    Kemper Small Capitalization Equity Fund
    Kemper Blue Chip Fund
    Kemper Value Plus Growth Fund
    Kemper Asian Growth Fund
    Kemper Aggressive Growth Fund

    /s/ Donald R. Jones
    Donald R. Jones

    /s/ Shirley D. Peterson

    Shirley D. Peterson

    /s/ William P. Sommers
    William P. Sommers

    Kemper International Fund
    Zurich Money Funds
    Zurich Money Market Fund
    Zurich Government Money Fund
    Zurich Tax-Free Money Fund
    Zurich YieldWise Funds
    Zurich YieldWise Money Market Fund
    Zurich YieldWise Government Money Fund
    Zurich YieldWise Municipal Money Fund
    Cash Equivalent Fund
    Money Market Portfolio
    Government Securities Portfolio
    Tax-Exempt Portfolio
    Cash Account Trust
    Money Market Portfolio
    Government Securities Portfolio
    Tax-Exempt Portfolio
    Tax-Exempt California Money Market Fund
    Investors Municipal Cash Fund
    Investors Florida Municipal Cash Fund
    Investors Michigan Municipal Cash Fund
    Investors New Jersey Municipal Cash Fund
    Investors Pennsylvania Municipal Cash Fund
    Tax-Exempt New York Money Market Fund
    Investors Cash Trust
    Government Securities Portfolio
    Treasury Portfolio

    Sincerely,

    /s/ James E. Akins
    James E. Akins

    /s/ James R. Edgar
    James R. Edgar

    /s/ Arthur R. Gottschalk
    Arthur R. Gottschalk

    Independent Directors of:

    Kemper High Income Trust
    Kemper Intermediate Government Trust
    Kemper Municipal Income Trust
    Kemper Multi-Market Income Trust
    Kemper Strategic Municipal Income Trust
    Kemper Strategic Income Trust
    Kemper Value Series, Inc.
    Kemper Contrarian Fund
    Kemper-Dreman High Return Equity Fund
    Kemper Small Cap Value Fund
    Kemper Horizon Fund
    Kemper Horizon 20+ Portfolio
    Kemper Horizon 10+ Portfolio
    Kemper Horizon 5 Portfolio
    Kemper New Europe Fund, Inc.
    Kemper Global/International Series, Inc.
    Kemper Global Blue Chip Fund
    Kemper International Growth and Income Fund
    Kemper Emerging Markets Income Fund
    Kemper Emerging Markets Growth Fund
    Kemper Latin American Fund
    Kemper Growth Fund of Spain
    Kemper Securities Trust
    Kemper U.S. Growth and Income Fund
    Kemper Small Cap Relative Value Fund
    Kemper Equity Trust
    Kemper-Dreman Financial Services Fund
    Kemper Funds Trust
    Kemper Large Company Growth Fund
    Kemper Research Fund
    Kemper Small Cap Value + Growth Fund
    Kemper Target Equity Fund
    Kemper Target 2010 Fund
    Kemper Retirement Fund - Series II
    Kemper Retirement Fund - Series III
    Kemper Retirement Fund - Series IV
    Kemper Retirement Fund - Series V
    Kemper Retirement Fund - Series VI
    Kemper Retirement Fund - Series VII
    Kemper Worldwide 2004 Fund

    /s/ Frederick T. Kelsey

    Frederick T. Kelsey

    /s/ Fred B. Renwick

    Fred B. Renwick

    /s/ John G. Weithers

    John G. Weithers

    Kemper Variable Series
    Kemper Money Market Portfolio
    Kemper Total Return Portfolio
    Kemper High Yield Portfolio
    Kemper Growth Portfolio
    Kemper Government Securities Portfolio
    Kemper International Portfolio
    Kemper Small Cap Growth Portfolio
    Kemper Investment Grade Bond Portfolio
    Kemper Contrarian Value Portfolio
    Kemper Small Cap Value Portfolio
    Kemper Value+Growth Portfolio
    Kemper Horizon 20+ Portfolio
    Kemper Horizon 10+ Portfolio
    Kemper Horizon 5 Portfolio
    Kemper Blue Chip Portfolio
    Kemper Global Income Portfolio
    Kemper-Dreman High Return Equity Portfolio
    Kemper-Dreman Financial Services Portfolio
    Kemper Global Blue Chip Portfolio
    Kemper International Growth and Income Portfolio
    Kemper Aggressive Growth Portfolio
    Kemper Technology Growth Portfolio
    Kemper Index 500 Portfolio
    KVS Focused Large Cap Growth Portfolio
    KVS Growth Opportunities Portfolio
    KVS Growth and Income Portfolio
    Kemper Floating Rate Fund