<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SCUDDER NEW EUROPE FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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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.
[ ] 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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(4) Date Filed:
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<PAGE> 2
June 3, 1999
IMPORTANT NEWS
FOR SCUDDER NEW EUROPE FUND STOCKHOLDERS
While we encourage you to read the full text of the enclosed Proxy
Statement, here's a brief overview of some matters affecting your Fund that will
be the subject of a stockholder vote.
Q & A: QUESTIONS AND ANSWERS
Q: WHAT IS HAPPENING?
A. The principal action before stockholders is a proposal to convert the Fund
from a closed-end to an open-end investment company. Several steps are
necessary to do that, most importantly amendments to the Fund's Charter that
authorize the Fund, among other things, to impose redemption fees. Other
changes designed to allow or facilitate the Fund's open-ending include:
changes in investment restrictions, election of Directors, approval of a new
Investment Management Agreement with Scudder Kemper and the ratification of
Ernst & Young LLP as new independent auditors for the Fund. If the
open-ending proposal is approved, the Board of Directors of your Fund
intends to combine the Fund with Kemper Europe Fund ("KEF"), an open-end
fund with similar investment policies managed by Scudder Kemper (the
"Reorganization"). Only stockholders of KEF will be voting on the
Reorganization, but we are providing you with details on the transaction for
informational purposes. If approved by the Fund's stockholders, the Fund
will open-end even if the Reorganization is not approved by stockholders of
KEF.
Q. WHAT IS THE DIFFERENCE BETWEEN A CLOSED-END AND AN OPEN-END INVESTMENT
COMPANY?
A. Closed-end investment companies, like the Fund, generally do not redeem
their outstanding shares or engage in the continuous sale of new shares.
Thus, persons wishing to buy or sell closed-end fund shares generally must
do so through a broker-dealer and pay or receive the market price. This
price may be more (a premium) or less (a discount) than the net asset value
per share of the closed-end fund's shares.
Open-end investment companies issue shares that can be redeemed or sold back
to the fund generally at the fund's net asset value per share. Moreover,
open-end investment companies issue new shares at the fund's offering price
which is net asset value per share plus any sales charge. Since they must be
ready to redeem their shares on a daily basis, open-end funds may not be as
fully invested as closed-end funds and may also have higher operating
expenses, both of which may affect performance.
<PAGE> 3
Q. WHY DOES THE BOARD BELIEVE THAT OPEN-ENDING THIS FUND BENEFITS STOCKHOLDERS?
A: The Board and the Fund's portfolio management team believe that, in light of
developments in the European markets, Scudder Kemper can successfully manage
the Fund in open-end form. Further, Scudder Kemper now believes, in view of
this critical development, that benefits resulting from the elimination of
the Fund's discount together with the right of redemption could outweigh
potential drawbacks resulting from converting the Fund to the open-end
structure. The Board of Directors believes that it is in the best interest
of stockholders to approve the proposal to open-end the Fund.
Q: WHAT ARE THE DEVELOPMENTS IN THE EUROPEAN MARKETS TO SUPPORT THE BOARD'S
RECOMMENDATION?
A: Scudder Kemper advised the Board that the increased liquidity of the
European markets, the introduction of the euro as a common currency in
eleven European countries, the relative opportunities for investing in
highly liquid European securities and the possibility of a joint European
stock exchange will permit the Fund to operate efficiently as an open-end
investment company. Further, Eastern European businesses -- particularly
Russian companies and those dependent on the Russian economy are more
speculative than would be attractive to the Fund.
Q. HOW DOES OPEN-ENDING BENEFIT STOCKHOLDERS?
A. Conversion to an open-end fund will eliminate any discount in the value of
the Fund's shares and will also allow the Fund to raise new capital through
the continuous offering of its shares.
Q. WILL THE SAME PORTFOLIO MANAGEMENT TEAM BE INVOLVED IF THE FUND OPEN-ENDS?
A. Yes. The current management team will remain in place following open-ending.
Q. DOES OPEN-ENDING INVOLVE ANY RISKS?
A. Conversion to an open-end fund would create an opportunity for stockholders
to capitalize on the elimination of the Fund's historical discount by
redeeming their shares, which could result in a significant reduction in the
Fund's size and an increase in its operating costs. Net redemptions may be
substantial after the conversion and the actions of redeeming stockholders
could have adverse tax consequences for the Fund and remaining stockholders.
The increased portfolio activity due to subscription and redemption requests
following conversion could result in the realization of significant capital
gains by the Fund, which would be distributed to stockholders.
Q. WHAT ARE THE TAX CONSEQUENCES OF OPEN-ENDING?
A. Although the open-ending itself will have no direct tax effects, the
increased portfolio activity due to redemption requests following conversion
could result in the realization of significant capital gains by the Fund,
which would be distributed to
stockholders. These distributions would be taxable to stockholders who
receive them.
(Continues on inside back cover)
<PAGE> 4
We have tried to mitigate these adverse tax consequences by paying in-kind
redemptions by previous closed-end fund stockholders that exceed $500,000
and by charging those stockholders a 2% redemption fee during the first year
of open-end operations.
Q. HAS THE FUND ATTEMPTED TO MITIGATE POTENTIAL RISKS?
A. The Board has authorized certain policies in an attempt to avoid or mitigate
additional costs to the Fund and adverse tax consequences to stockholders. A
2% redemption fee (payable to the Fund) will be charged to previous
closed-end fund shareholders during the first year of open-end operations to
offset costs incurred by the Fund to meet redemptions. In addition,
redemptions of shares held by previous closed-end fund stockholders in
excess of $500,000 would be paid in-kind. Exchanges of Fund shares and
redemptions in-kind would also be subject to the 2% redemption fee.
Q. WHAT IS AN IN-KIND REDEMPTION?
A. In-kind redemption means that stockholders receive portfolio securities
rather than cash upon redemption.
Q. WHY ARE SOME STOCKHOLDERS BEING REDEEMED IN-KIND?
A. The in-kind redemption policy is intended to help minimize adverse tax
consequences to the Fund and non-redeeming stockholders that may be caused
by certain large-scale redemptions. These "adverse tax consequences" could
be in the form of significant capital gains realized by the Fund due to
liquidations of portfolio securities that have appreciated significantly and
would be distributed to stockholders. These distributions would be taxable
to stockholders who receive them.
Q. WHY IS THERE A 2% REDEMPTION FEE?
A. After closed-end funds convert to open-end funds they typically experience
high levels of redemptions. The redemption fee is designed to protect the
long-term stockholder from administrative and transactional expenses that
could be imposed on the Fund by redeeming short-term stockholders during the
first year of open-end operations, and to discourage short-term trading in a
vehicle intended for long-term investment.
Q. WHAT TYPE OF DISTRIBUTION SUPPORT WILL THERE BE IF THE FUND OPEN-ENDS?
A. The Fund will be marketed in the network already in place for the Kemper
family of open-end funds.
Q. WHAT HAPPENS IF STOCKHOLDERS DO NOT APPROVE THE OPEN-ENDING?
A. If the open-ending proposal is not approved, the Fund will remain closed-end
and will not combine with KEF.
<PAGE> 5
SCUDDER NEW EUROPE FUND, INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
June 3, 1999
Dear Stockholders:
We are pleased to invite you to the Annual Meeting of Stockholders (the
"Meeting") of Scudder New Europe Fund, Inc. (the "Fund"). The Meeting is
scheduled to be held on July 20, 1999, at the offices of Scudder Kemper
Investments, Inc. ("Scudder Kemper"), 25th Floor, 345 Park Avenue (at 51st
Street), New York, New York 10154. At the Meeting, you will be asked to vote on
the following matters:
- A proposal to convert the Fund from a closed-end investment company to an
open-end investment company, which also involves amendments to the Fund's
Charter, including the redeemability of shares, imposition of redemption
fees and changes to quorum requirements and changes to the Fund's
investment policies relating to borrowing and restricted securities to
reflect operations as an open-end fund. These and other changes are
outlined in the beginning of Proposal 1;
- A proposal to further amend the Fund's Charter to eliminate
"anti-takeover" provisions (like the classified Board and super-majority
voting requirements) that will no longer be necessary once the Fund
converts to open-end status. These and other changes are outlined in the
beginning of Proposal 2;
- A proposal to elect nominees who would serve as Directors of the Fund if
the open-ending proposal is approved or to reelect incumbent Directors
whose terms expire this year if the open-ending proposal is not approved
(See Proposal 3);
- A proposal to ratify the selection of Ernst & Young LLP as new
independent auditors to the Fund for the fiscal year ending October 31,
1999 (See Proposal 4); and
- A proposal to approve a new Investment Advisory Agreement with Scudder
Kemper Investments, Inc. ("Scudder Kemper") which provides for lower
advisory fees and will take effect if the open-ending is approved (See
Proposal 5).
For your information, the Fund has entered into an agreement to acquire the
assets of Kemper Europe Fund ("KEF"), an open-end fund with substantially
similar investment policies managed by Scudder Kemper (the "Reorganization").
The principal purpose of the Reorganization is to achieve certain economies of
scale for the Fund and enhance its ability to compete in open-end form. Only
stockholders of KEF will be voting on the Reorganization, but we are providing
you with details on the transaction for informational purposes.
Please be assured that none of the above involve a change of investment
management or investment style for the Fund. Scudder Kemper is proposed to
<PAGE> 6
continue as the Fund's investment manager (see Proposal 5) and the current
portfolio management team would continue to be responsible for day to day
investment decisions.
AFTER CAREFUL REVIEW, YOUR FUND'S BOARD OF DIRECTORS BELIEVES THAT THE
PROPOSED CHANGES DISCUSSED IN GREATER DETAIL IN THE ATTACHED PROXY STATEMENT ARE
IN THE BEST INTERESTS OF CURRENT STOCKHOLDERS AND RECOMMEND THAT YOU VOTE "FOR"
THE OPEN-ENDING AND RELATED PROPOSALS.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your executed proxy card after a reasonable amount of time, you may receive a
telephone call from our proxy solicitor, Shareholder Communications Corporation,
reminding you to vote.
Respectfully,
/s/ Nicholas Bratt
Nicholas Bratt
President and Chairman
WE URGE YOU TO SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT REGARDLESS OF
THE NUMBER OF SHARES YOU OWN.
<PAGE> 7
SCUDDER NEW EUROPE FUND, INC.
------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 20, 1999
------------------------------------
Please take notice that the Annual Meeting of Stockholders of Scudder New
Europe Fund, Inc. (the "Fund") has been called to be held at the offices of
Scudder Kemper Investments, Inc., 25th Floor, 345 Park Avenue (at 51st Street),
New York, New York on Tuesday, July 20, 1999 at 9:30 a.m., for the following
purposes:
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PROPOSAL 1: To approve or disapprove a proposal to convert the Fund
from a closed-end investment company to an open-end
investment company, which proposal includes the
following:
(a) Changing the Fund's subclassification from a
closed-end investment company to an open-end
investment company;
(b) Amending and Restating the Fund's Articles of
Incorporation to provide for such conversion, which
includes the authority to impose redemption fees and
changes to quorum requirements; and
(c) Changing the Fund's fundamental investment policies
relating to restricted securities and borrowing to
reflect its proposed new subclassification.
PROPOSAL 2: To approve or disapprove further amendments to the Fund's
Articles of Incorporation, including the elimination of
the classified Board and super-majority voting
requirements, in the event that Proposal 1 is approved.
PROPOSAL 3: To elect the Board of Directors
(a) To elect nominees who will continue to serve on the
Board of the Fund in the event that Proposal 1 is not
approved; or
(b) To elect nominees to serve on the Board of the Fund
if Proposal 1 is approved.
PROPOSAL 4: To ratify the selection of Ernst & Young LLP as
independent auditors for the Fund.
PROPOSAL 5: To approve or disapprove a new Investment Advisory
Agreement with Scudder Kemper Investments, Inc. providing
for, among other things, a lower advisory fee rate than
that paid under the current Investment Advisory
Agreement, which Agreement would take effect if Proposal
1 is approved.
</TABLE>
The appointed proxies will vote on any other business as may properly come
before the meeting or any adjournments thereof. Holders of record of the shares
of
<PAGE> 8
common stock of the Fund at the close of business on May 25, 1999 are entitled
to vote at the meeting and any adjournments thereof.
By Order of the Board of Directors of
the Fund,
[/s/JOHN MILLETTE]
John Millette, Secretary
June 3, 1999
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE FOREGOING ITEMS.
IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS
INTENDED FOR YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD MAY
SAVE THE FUND THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A
QUORUM AT THE ANNUAL MEETING.
<PAGE> 9
SCUDDER NEW EUROPE FUND, INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
------------------------------------
PROXY STATEMENT FOR THE ANNUAL
MEETING OF STOCKHOLDERS
TO BE HELD JULY 20, 1999
------------------------------------
General
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Scudder New Europe Fund, Inc.
(the "Fund") for use at the Annual Meeting of the Stockholders, to be held at
the offices of Scudder Kemper Investments, Inc., 25th Floor, 345 Park Avenue (at
51st Street), New York, New York 10154 on Tuesday, July 20, 1999, at 9:30 a.m.,
and at any adjournments thereof (collectively, the "Meeting").
This Proxy Statement, the Notice of Annual Meeting and the proxy card are
first being mailed to stockholders on or about June 3, 1999 or as soon as
practicable thereafter. Any stockholder giving a proxy has the power to revoke
it by mail (addressed to the Secretary at the principal executive office of the
Fund, c/o Scudder Kemper Investments, Inc., 345 Park Avenue, New York, New York
10154) or in person at the Meeting, by executing a superseding proxy or by
submitting a notice of revocation to the Fund. All properly executed proxies
received in time for the Meeting will be voted as specified in the proxy or, if
no specification is made, in favor of each Proposal referred to in the Proxy
Statement.
The presence at any stockholders meeting, in person or by proxy, of the
holders of a majority of the votes of the shares of the Fund entitled to be cast
shall be necessary and sufficient to constitute a quorum for the transaction of
business. In the event that the necessary quorum to transact business or the
vote required to approve any Proposal is not obtained at the Meeting, the
persons named as proxies may propose one or more adjournments of the Meeting in
accordance with applicable law to permit further solicitation of proxies with
respect to the Proposal that did not receive the vote necessary for its passage
or to obtain a quorum. Any such adjournment as to a matter will require the
affirmative vote of the holders of a majority of the Fund's shares present in
person or by proxy at the Meeting. The persons named as proxies will vote in
favor of such adjournment those proxies which they are entitled to vote in favor
of that Proposal and will vote against any such adjournment those proxies to be
voted against that Proposal. For purposes of determining the presence of a
quorum for transacting business at the Meeting, abstentions and broker
"non-votes" will be treated as shares that are present but which have not been
voted. Broker non-votes are proxies received by the Fund from brokers or
nominees when the broker or nominee has neither received instructions from the
beneficial owner or other persons entitled to vote nor has
<PAGE> 10
discretionary power to vote on a particular matter. Accordingly, stockholders
are urged to forward their voting instructions promptly.
Abstentions and broker non-votes will have the effect of a "no" vote on
Proposals 1 and 2. Proposal 1 requires the approval of a majority of votes
entitled to be cast at the Meeting, while Proposal 2 requires the affirmative
vote of 75% of the votes entitled to be cast by stockholders.
Abstentions and broker non-votes will not be counted in favor of, but will
have no other effect on the vote for Proposals 3 and 4, which require the
approval of the majority of the votes cast at the Meeting.
Proposal 5 requires 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 Investment Company Act of 1940, as amended (the
"1940 Act"), and as used in this Proxy Statement, means: the affirmative vote of
the lesser of (1) 67% of the voting securities of the Fund present at the
meeting if more than 50% of the outstanding voting securities of the Fund are
present in person or by proxy or (2) more than 50% of the outstanding voting
securities of the Fund. Abstentions and broker non-votes will also have the
effect of a "no" vote on Proposal 5 because it requires the approval of a
specified percentage of the outstanding shares of the Fund or of the shares of
the Fund present at the Meeting.
Stockholders of the Fund will vote separately with respect to each
Proposal.
Holders of record of the shares of the Fund at the close of business on May
25, 1999 (the "Record Date"), as to any matter on which they are entitled to
vote, will be entitled to one vote per share on all business of the Meeting. The
number of shares outstanding for the Fund as of March 31, 1999, was 16,310,537.
To the best of the Fund's knowledge, as of March 31, 1999, no shareholder
held 5% or more of the Fund's Shares, with the exception of Lazard Freres & Co.
LLC which held 6.40% of the Fund's shares.
The Fund provides periodic reports to all of its stockholders which
highlight relevant information, including investment results and a review of
portfolio changes. You may receive an additional copy of the most recent annual
report for the Fund and a copy of any more recent semi-annual report, without
charge, by calling 800-349-4281 or writing the Fund, c/o Scudder Kemper
Investments, Inc., 345 Park Avenue, New York, New York 10154.
INTRODUCTION OF PROPOSALS
All Proposals are uniquely affected by a recent decision of your Board of
Directors based on a recommendation of Scudder Kemper Investments, Inc., the
Fund's investment adviser ("Scudder Kemper"). The Board has determined to
recommend to you that the Fund be converted from closed-end to open-end status
(the "Open-End Fund"). This proposal does not involve any change in investment
management or investment style of the Fund. In fact, Scudder Kemper is proposing
to continue as
2
<PAGE> 11
investment adviser to the Fund (see Proposal 5), and the current portfolio
management team is expected to remain in place upon the open-ending of the Fund.
As an open-end investment company, the Fund's shares would be redeemable at net
asset value on any business day and the Fund could also commence issuance of new
shares. Because the issuance of new shares was deemed to be vital to the
continued viability of the Fund in open-end status, Scudder Kemper informed the
Board that it believed the Fund could be successfully marketed in the network
already in place for the Kemper family of funds.
In order to accomplish these goals and to place the Fund in the Kemper
family of funds, you are being asked to approve the open-ending of the Fund, the
amendment and restatement of the Fund's Articles of Incorporation and certain
changes in investment restrictions that currently are inconsistent with
operation as an open-end fund. In addition, you are being asked to elect
nominees who would serve as Directors of the Fund if the open-ending proposal is
approved. If the open-ending proposal is not approved, however, you will be
asked to reelect incumbent Directors whose terms expire this year. Finally, a
new Investment Advisory Agreement is proposed for your consideration, which is
consistent with similar agreements for other Kemper open-end funds, and would be
implemented only if Proposal 1 is also approved.
In conjunction with the open-ending proposal, the Board also decided that
the Fund should acquire the assets of the Kemper Europe Fund ("KEF"), an
open-end investment company with substantially similar investment policies
managed by Scudder Kemper (the "Reorganization") to achieve certain economies of
scale and enhance the Fund's ability to compete in the Kemper distribution
network. Immediately after the Reorganization (which would be effected by your
Fund's acquiring the assets of KEF), your Fund would assume the name of "Kemper
Europe Fund" (the "Reorganized Fund") and begin offering its shares through the
sales and distribution mechanisms already established for KEF. The
Reorganization is contingent on the approval of the transaction by the
stockholders of KEF. If the Reorganization is not so approved, it is currently
expected that the Fund would assume a Kemper family brand name. Stockholders of
the Fund are not required to approve the Reorganization.
If the open-ending proposal is approved (and the stockholders of KEF vote
to approve the Reorganization with the Fund at a meeting also scheduled to be
held on July 20, 1999), the conversion to open-end status and the Reorganization
would occur simultaneously on or about September 1, 1999. Therefore, the Fund
would remain a closed-end fund until such time. If, however, the open-ending
proposal is approved but the Reorganization is not approved by the stockholders
of KEF, the Fund intends to proceed with open-ending as soon as practicable,
although there can be no assurances of an exact timetable.
3
<PAGE> 12
PROPOSAL 1: CONVERSION TO AN OPEN-END INVESTMENT COMPANY
OUTLINE OF PROPOSAL
Proposal 1 is a recommendation of the Board of Directors to convert the
Fund from a closed-end investment company to an open-end investment company. In
the discussion that follows, we explain the differences between a closed-end and
an open-end investment company, the advantages and disadvantages of converting
to open-end form and provide expense and tax information. In order to accomplish
the open-ending, the Board also determined that additional actions would be
necessary and desirable. A vote for Proposal 1, therefore, includes approval of
the following specific items:
- changing the Fund's subclassification under the 1940 Act to an open-end
investment company;
- amending and restating the Fund's Articles of Incorporation (a) to
authorize the issuance of redeemable securities, (b) to authorize the
imposition of redemption fees and the ability to redeem stockholders
in-kind, (c) to change quorum requirements, (d) to change the Fund's
name, (e) to increase the amount of authorized capital stock, (f) to
create three additional share classes and rename the existing share class
"M" and (g) to reduce the par value and stated capital of the Fund; and
- changing the Fund's fundamental investment policies relating to
investments in restricted securities and borrowing to conform with
limitations under the 1940 Act for open-end investment companies.
GENERAL
The Board, at a meeting held on April 27, 1999, approved the conversion of
the Fund from a closed-end investment company to an open-end investment company.
The Fund, as an open-end fund, would allow stockholders to redeem their shares
at net asset value. If the open-ending is approved, shares of the Fund
previously held in closed-end form would be renamed "M" shares and three new
additional share classes would be offered -- Class A, Class B and Class C. In an
attempt to minimize adverse consequences for non-redeeming stockholders in the
first year of operation as an open-end fund, including extraordinary expenses
and adverse tax implications, and to discourage short-term trading in a vehicle
intended for long-term investment, the Fund would (a) pay in-kind redemptions
sought by Class M stockholders to the extent those redemptions exceed $500,000.
Exchanges of Class M shares for shares of other Kemper Mutual Funds would be
limited to transactions that would not result in in-kind redemptions; and (b)
impose a 2% fee on all redemptions (including redemptions paid in-kind and
exchanges) of Class M shares during the first year after the Fund's conversion
to open-end status. At the end of the one year period, Class M shares would
automatically convert into Class A shares of the Open-End Fund at no cost to the
4
<PAGE> 13
stockholder, which would no longer be subject to a redemption fee. Class A
shares, as well as other classes of shares of the Open-End Fund, are described
below.
This Proposal is intended to comply with an undertaking of the Fund's Board
contained in the Fund's original Prospectus and By-Laws to consider certain
actions relating to the elimination of any substantial discount in the price of
the Fund's shares. In addition, the Proposal reflects the recognition by Scudder
Kemper of changes in the markets for European equity securities suitable for the
Fund and its advice to the Board that the Fund's objectives could be met
effectively after the Fund's conversion to open-end status as part of the Kemper
family of funds. Specifically, the Fund's Prospectus dated February 9, 1990
provided that:
The Fund's By-Laws provide that if, at any time during or after the
fifth year following the offering made hereby, shares of the Fund's Common
Stock publicly trade for a substantial period of time at a substantial
discount from the Fund's then current net asset value per share, the Board
of Directors of the Fund will consider, at its next regularly scheduled
meeting, taking various actions designed to eliminate the discount. The
actions considered by the Board of Directors may include periodic
repurchases of shares or recommending to stockholders amendments to the
Fund's Articles of Incorporation to convert the Fund to an open-end
investment company.
Under the Fund's Articles of Incorporation, the affirmative vote of 75% of
the Directors is required to authorize the conversion of the Fund to an open-end
investment company. The conversion also requires the affirmative vote of the
holders of 75% of the outstanding shares of the Fund, unless the conversion is
approved by a vote of 75% of the Continuing Directors, in which event such
conversion requires the approval of the holders of a majority of the outstanding
shares of the Fund. A "Continuing Director" is any member of the Board of
Directors of the Fund who (i) is not a person or affiliate of a person (other
than an investment company advised by the Fund's initial investment manager,
namely, Scudder Kemper, or any of its affiliates) who enters or proposes to
enter into a "Business Combination" (as defined in the Fund's Articles of
Incorporation) with the Fund (an "Interested Party") and (ii) who has been a
member of the Board of Directors of the Fund for a period of at least 12 months,
or is a successor of a Continuing Director who is unaffiliated with an
Interested Party and is recommended to succeed a Continuing Director by a
majority of the Continuing Directors then on the Board of Directors of the Fund.
Since the proposal to open-end the Fund was approved by all of the Continuing
Directors of the Fund, a vote of the majority of the outstanding shares of the
Fund is now required to effectuate the conversion.
BACKGROUND
The Fund commenced operations in 1990. It was organized to offer investors
access to smaller and emerging European securities markets and the opportunity
to participate in the dynamic changes affecting Europe without the
administrative burden
5
<PAGE> 14
associated with purchasing and selling European securities on an individual
basis. Emphasis was to be placed on "Specialized Investments," which included
equity securities of (i) privately-held European companies, (ii) European
companies that have recently made initial public offerings, (iii)
government-owned or -controlled European companies that are being privatized,
(iv) smaller publicly-held European companies and (v) companies and joint
ventures based in Eastern Europe. Given the market for these securities at the
time the Fund was organized -- and reasonable expectations for the development
of those markets in the future -- the Fund's classification as a closed-end
company was appropriate. Further, at the time of the Fund's organization,
relatively few U.S. registered mutual funds invested primarily in European
equities, and the policies of the Securities and Exchange Commission (the "SEC")
limited a fund's holdings in illiquid securities to 10% of net assets. A closed-
end structure, among other things, permits investment in less liquid securities
without regard to daily redemption activity and further permits a portfolio to
be fully invested. At the same time, however, shares of closed-end investment
companies frequently trade at a discount from their net asset value.
Shares of the Fund have traded at a discount from time to time. During the
last three years, the discount has grown to as large as 33.24% (as of August 31,
1998). As of March 31, 1999, the Fund's shares were trading at $19.00 per share
and the net asset value was $20.96 per share, resulting in a discount of 9.4%.
Notwithstanding this discount, however, the Fund's average annual return since
inception through March 31, 1999 has been 9.85% (based on market value) and
12.01% (based on net asset value). The Fund had a one year market return of
36.13% for the period ended December 31, 1998. In terms of actual performance of
the Fund's portfolio, the Fund's return was 34.39% for the year ended December
31, 1998.
The Fund's Board of Directors has regularly monitored the Fund's discount
from net asset value and the continuing appropriateness of the Fund's closed-end
structure. Scudder Kemper has advised the Board that: (i) political, economic
and investment developments have rendered the Fund's closed-end structure
unnecessary; (ii) that the market discount at which the Fund's shares have
traded recently may unnecessarily diminish stockholder value; (iii) that there
is ample liquidity in most European securities currently of interest to the
Fund, including securities that are the subject of initial public offerings and
privatizations; (iv) the advent of the euro has attracted capital and will
facilitate trading in European companies, including smaller companies; (v) the
possibility of a joint European stock exchange likely will further enhance
liquidity; (vi) and, finally, Eastern European businesses -- particularly
Russian companies and companies dependent on the Russian economy -- are more
speculative, and are likely to remain so for the foreseeable future, than would
be attractive to the Fund. On October 28, 1998, Scudder Kemper described for the
Board's consideration various alternatives to the Fund's current structure in
order to enhance stockholder value and Fund operational efficiencies. The Board
requested that Scudder Kemper prepare a detailed proposal regarding the proposed
transaction for the next meeting. On Janu-
6
<PAGE> 15
ary 26, 1999, Scudder Kemper recommended the general terms of a restructuring
which is set forth in detail in this Proxy Statement.
After the consideration of other alternatives that the Board believed not
to be in the best interest of the Fund's stockholders, the Board approved in
principle a proposal, which was announced in a press release dated January 28,
1999, that the Fund be converted to an open-end investment company and combined
with KEF.
At a meeting held on April 27, 1999, the Board of Directors formally
considered and approved the proposal to convert the Fund to open-end status and
the Agreement and Plan of Reorganization relating to the acquisition of the
assets of KEF. The Board reviewed information and representations presented to
it by Scudder Kemper, including information concerning the differences between
closed-end and open-end investment companies, the Fund's operations and
performance to date, and the possible effects of conversion on the Fund. The
Board was informed that the proposal to open-end the Fund would not involve a
change of investment management or investment style for the Fund. Scudder Kemper
is proposing to continue as the Fund's investment adviser and the current
portfolio management team would continue to be responsible for day to day
investment decisions. The Board also took into account, among other things,
changes in the European markets for investments by the Fund which facilitate its
operation as an open-end investment company and the possible impact of these
changes on the price at which the Fund's shares trade on the New York Stock
Exchange ("NYSE"). Scudder Kemper advised the Board that the benefits of
elimination of the Fund's discount, together with the right of redemption for
stockholders, could be expected to outweigh the potential drawbacks to
stockholders resulting from open-ending the Fund. The Board was informed that,
following the conversion, stockholders would be able to redeem their shares at
net asset value, less any applicable redemption fees and subject to the ability
of the Fund to pay large redemptions in-kind, rather than sell their shares in
the secondary market through broker-dealers at a discount to net asset value.
Stockholders who receive redemptions in-kind will also be subject to transaction
costs associated with the establishment of securities accounts and/or the
liquidation of their in-kind redemption proceeds. The Board was also informed
that, while conversion to open-end form was expected to result immediately in a
reduction in size of the Fund as a consequence of redemption requests,
conversion would create the opportunity, which the Fund does not currently
enjoy, to achieve the benefits associated with greater asset size through sales
of Fund shares. Consistent with this latter opportunity, Scudder Kemper
recommended and the Board of the Fund approved with respect to Class B and C
shares, a proposal for those classes to participate in a plan of distribution
pursuant to Rule 12b-1 under the 1940 Act. Class A and M shares of the Open-End
Fund will not be subject to Rule 12b-1 distribution fees.
After considering the potential drawbacks of conversion of the Fund to
open-end form (as discussed below), the Board determined that (i) the right of
redemption of the Fund's shares provided to stockholders; (ii) the elimination
of the Fund's discount
7
<PAGE> 16
as a result of such a conversion, (iii) the distribution of the Open-End Fund's
shares to investors as part of the Kemper family of funds pursuant to the dealer
network already in place for that family of funds and (iv) the imposition of a
2% redemption fee on redemptions and exchanges (including redemptions-in-kind)
of Class M shares for the benefit of the Fund and nonredeeming stockholders were
sufficient to outweigh such drawbacks, and that conversion to open-end form
would be in the best interests of the Fund. The Board also determined that the
anticipated increase in expenses for the Fund's stockholders, as described
below, is an acceptable increase, given certain higher operating costs of an
open-end fund, the additional services required to be provided to stockholders
of such funds generally and the opportunity for stockholders to recognize net
asset value. As a result, the Board unanimously approved the recommendation of
Scudder Kemper to submit to stockholders a proposal to convert the Fund from a
closed-end investment company to an open-end investment company and to
reorganize the Fund as discussed below.
Stockholders of the Fund are being asked to consider the conversion of the
Fund from a closed-end to an open-end investment company and certain related
matters in connection with the conversion. If Proposal 1 is approved by the
stockholders, the Fund's Articles of Incorporation will be amended to reflect
the Fund's status as an open-end investment company and the Fund's
sub-classification will be changed from a closed-end investment company to an
open-end investment company. Also, certain of the Fund's fundamental investment
policies will be changed to reflect the conversion to an open-end investment
company. Shares of the Open-End Fund will be continually offered, subject to a
registration statement becoming effective under the Securities Act of 1933, as
amended, and the 1940 Act. If Proposal 1 is not approved, however, the Fund will
remain a closed-end investment company.
The factors considered by the Board in making its recommendation to convert
the Fund from a closed-end fund to an open-end fund are discussed in greater
detail below.
This Proxy Statement contains certain statements that may be deemed to be
"forward-looking statements" including, but not limited to, projected expenses
and expense ratios. Actual results could differ materially from those projected
in the forward-looking statements as a result of actual expenses varying from
estimates, changes in assumptions made, and other factors.
COMPARISON BETWEEN CLOSED-END AND OPEN-END INVESTMENT COMPANIES
Generally, closed-end funds, such as the Fund, neither redeem their
outstanding stock nor engage in the continuous sale of new securities.
Therefore, a closed-end fund operates with a relatively fixed capitalization.
Stockholders who wish to buy or sell shares generally must do so through a
broker-dealer, and pay or receive whatever price the market may bear. This price
may be more or less than the net asset value per share of the closed-end fund's
shares. In contrast, open-end funds issue redeemable securities entitling
stockholders to surrender those securities to the fund and receive in return
their proportionate share of the value of the fund's net assets (less any
redemption fee
8
<PAGE> 17
charged by the fund and any "sales load" if purchased through a broker-dealer).
Also, open-end funds generally issue new shares at the fund's net asset value.
In addition to these structural distinctions between the two types of
funds, several other differences exist. These distinctions can give rise to
advantages and disadvantages to the Fund if, on the one hand, it remains a
closed-end fund or if, on the other hand, it converts to open-end status. Based
upon information provided by Scudder Kemper, the Board has considered the
advantages and disadvantages to the Fund and its stockholders associated with
remaining closed-end or converting to open-end form. The most significant
advantages and disadvantages, as identified by Scudder Kemper and perceived by
the Board, are discussed below.
ADVANTAGES OF CONVERTING TO AN OPEN-END INVESTMENT COMPANY
1. ELIMINATION OF DISCOUNT, REDEEMABILITY OF SHARES. If the Fund converts
to open-end status, stockholders will be able to realize the value of their
shares by redeeming their shares at the then current net asset value of the
shares less any applicable redemption fee, rather than at a discount from net
asset value (less any brokerage costs) of the type that has characterized the
Fund's shares from time to time. From February 16, 1990 to April 30, 1999, the
Fund's shares at month end have traded on the NYSE at prices ranging from 9.31%
above to 33.24% below net asset value. On April 30, 1999, the closing price of a
Fund share on the NYSE was 7.8% below its net asset value. The Fund's average
annual discount by year computed as of the end of each month is as follows:
CALENDAR YEAR MONTH END AVERAGES
<TABLE>
<CAPTION>
DATE PREMIUM/DISCOUNT
---- ----------------
<S> <C>
As of December 31
1999 (January 1 - April 30).................... (8.43)%
1998........................................... (18.50)%
1997........................................... (18.94)%
1996........................................... (19.39)%
1995........................................... (18.44)%
1994........................................... (9.83)%
1993........................................... (5.31)%
1992........................................... (1.39)%
1991........................................... (15.54)%
1990 (February 28 - December 31)............... (14.18)%
</TABLE>
Conversion to an open-end investment company will eliminate any discount
and will allow stockholders of the Fund to realize promptly net asset value of
the Fund's shares (subject to any redemption fee and the costs and potential
time delays
9
<PAGE> 18
associated with disposing of securities received in-kind). However, it will also
eliminate any possibility that the Fund's shares will trade at a premium over
net asset value.
Stockholders should note that if the proposal to convert the Fund to an
open-end investment company is approved by the stockholders, or even upon notice
of the Board's approval of conversion, the Fund's discount may be reduced prior
to the date of conversion to the extent investors may purchase shares in the
open market in anticipation of the prospect of the Fund becoming an open-end
investment company.
2. ABILITY TO RAISE NEW CAPITAL THROUGH THE CONTINUOUS OFFERING OF COMMON
STOCK. A closed-end fund is prohibited by the 1940 Act under most circumstances
from issuing shares at a discount to net asset value. Therefore, as long as the
Fund is trading at a discount to net asset value (and even if shares were to
trade at a small premium), it is not generally possible to raise new capital,
except by means of a rights offering. To the extent such rights are exercised at
less than net asset value, as is usually the case, it would have a dilutive
effect on the interests of non-participating stockholders. As an open-end
investment company, the Fund would be able to sell shares to the public at net
asset value (plus, if applicable, a sales load). Kemper Distributors, Inc.
("KDI"), an affiliate of Scudder Kemper, has advised the Board that it believes
that, given the Fund's strong performance record and other factors, shares of
the Fund could be successfully marketed in an open-end format, although no
assurance can be given as to such results. Moreover, KDI has developed a network
through which shares of the Open-End Fund would be distributed as part of the
Kemper family of funds.
The Fund's Board considered this to be an important factor in approving the
proposal to convert the Fund to open-end status as it believes that the Open-End
Fund's ability to raise additional capital to be critical to the Fund's
continuing success as an open-end fund to offset the consequences of redemption
requests. The Board also believes that the Open-End Fund's position in the
Kemper family of funds is vital to its market acceptance and the avoidance of
confusion with other funds. The ability to raise new capital may allow the Fund
to achieve certain economies of scale and may give the Fund additional
flexibility to invest assets in furtherance of its investment objective, since
with new cash flow the portfolio managers may be able to reposition the
portfolio or take advantage of new opportunities without having to sell other
securities.
3. VOTING RIGHTS. If the Fund converts to open-end form and Proposal 2 is
approved, the Fund will not hold annual stockholder meetings unless required
under the 1940 Act. The shares of the Fund currently are listed on the NYSE.
NYSE rules generally provide for annual meetings of the stockholders of listed
companies for the election of directors. If the proposal to convert the Fund to
an open-end investment company is approved, the Fund's shares will be delisted
and voting for the election of Directors will be determined solely by reference
to the 1940 Act and to the Maryland General Corporation Law. Subject to the
approval of Proposal 2, the Fund will not be required to hold an annual meeting
in any year in which the election of Directors is not required to be acted upon
under the 1940 Act. By not holding annual stockholder
10
<PAGE> 19
meetings, the Fund will save the cost of preparing proxy materials and
soliciting stockholders' votes on the usual proposals contained therein. Based
on the number of outstanding shares and stockholders as of the date of this
Proxy Statement, such costs could aggregate in the range of approximately
$50,000 to $60,000 per year.
Under the 1940 Act, the Fund would be required to hold a stockholders
meeting if the number of Directors elected by the stockholders were less than a
majority of the total number of Directors, to fill vacancies if less than
two-thirds of the Directors then holding office have been elected by the
stockholders, if a change were sought in the fundamental investment policies of
the Fund, if a material change were sought in the investment management
agreement or in a distribution plan adopted pursuant to Rule 12b-1 under the
1940 Act, or for certain other matters. A meeting will also be called for the
purpose of voting on the removal of a Director at the written request of holders
of 10% of the Fund's outstanding shares.
As more fully described below, the Open-End Fund would continue to hold
annual meetings of stockholders for the purpose of electing Directors if
Proposal 2 is not approved.
The holders of shares of the Fund will continue to have one vote for each
share held on each matter submitted to a vote of stockholders if the Fund
converts to an open-end investment company, except that each class of shares
will have exclusive voting rights on any matter submitted to stockholders that
relates solely to its distribution arrangement and separate voting rights on any
matter submitted to stockholders in which the interests of one class differ from
the interests of any other class.
4. STOCKHOLDER SERVICES. If Proposal 1 is approved and the Fund becomes
an open-end investment company, stockholders will have access to additional
services. Details of these services will be more fully disclosed in the
Prospectus and Statement of Additional Information of the Open-End Fund. In
addition to the exchange privilege discussed below, these services include:
- Payroll and Government Direct Deposit Plans. Stockholders will be able
to establish a preauthorized investment plan to purchase shares with
automatic bank account debiting. Stockholders may automatically invest in
shares all or a portion of a stockholders' net pay or government check
each payment period.
- Systematic Exchange Privilege. The owner of $1,000 or more of any class
of shares of the Fund may authorize the automatic exchange of a specified
amount ($100 minimum) of such shares for shares of the same class of
another Kemper Mutual Fund or money market fund (subject to any
applicable redemption fee).
- Systematic Withdrawal Plan. Stockholders will be able to elect to have
monthly, quarterly, semi-annual or annual payments in any fixed amount up
to $50,000 ($100 minimum) made to the stockholder, or to anyone else the
11
<PAGE> 20
stockholder properly designates, as long as the account has a current
value of at least $5,000 (subject to any applicable redemption fee).
- Retirement Plans. The Open-End Fund will have available prototype
qualified retirement plans for both corporations and for self-employed
individuals. It will also have available prototype IRA and SIMPLE IRA
plans (for both individuals and employers), Simplified Employee Pension
Plans, Pension and Profit Sharing Plans and Tax Sheltered Retirement
Plans for employees of public educational institutions and certain
non-profit, tax-exempt organizations.
5. NEW YORK STOCK EXCHANGE LISTING FEES. If the Fund were to become an
open-end fund, it would no longer be listed on the NYSE. Delisting from the NYSE
would save the Fund listing fees. Currently, these fees amount to approximately
$24,000 per year.
6. EXCHANGE PRIVILEGE. If the Fund converts to an open-end format,
stockholders will be allowed to participate in an exchange privilege that allows
stockholders of the Fund to exchange their shares for shares of the
corresponding class of an open-end Kemper Mutual Fund. Class M stockholders will
be able to exchange their shares for Class A Shares of another Kemper Fund.
However, Class M stockholders may only exchange shares in an amount less than
$500,000, and a 2.0% fee will apply to any exchange of the Fund's Class M shares
for the one year period following the conversion. Shares of a Kemper Mutual Fund
with a value in excess of $1 million (except Kemper Cash Reserves Fund) acquired
by exchange from another Kemper Fund may not be exchanged thereafter until they
have been owned for 15 days (the "15-Day Hold Policy"). Shares of a Kemper Fund
with a value of $1 million or less (except Kemper Cash Reserve Fund) acquired by
exchange from another Kemper Fund or a Money Market Fund may not be exchanged
thereafter until they have been owned for 15 days if, in the investment
manager's judgment, the exchange activity may have an adverse effect on the
Fund. In particular, a pattern of exchanges that coincides with a
"market-timing" strategy may be disruptive to the Fund and therefore may be
subject to the 15-Day Hold Policy. In addition, owners of shares of other
open-end Kemper Mutual Funds will also be able to exchange their shares for
shares of the same class of the Open-End Fund at net asset value. Exchanges of
the Open-End Fund's shares for shares of other funds will be a taxable
transaction for federal income tax purposes. Details of the exchange privilege
will be more fully disclosed in the Prospectus and Statement of Additional
Information of the Open-End Fund.
7. FEES AND EXPENSES. If the Fund converts to open-end status,
stockholders will also benefit from the payment of lower advisory fees to
Scudder Kemper. Stockholders of the Fund currently pay advisory fees ranging
from 1.25% to 1.10% based on the Fund's current net assets. Upon conversion,
these advisory fees would be lowered to a graduated fee starting at 0.75% of the
Open-End Fund's net assets. Stockholders are being asked in Proposal 5 to
approve a new Investment Advisory Agreement with Scudder Kemper to reflect the
lower advisory fees and to implement certain other changes appropriate to
operating as an open-end fund. Scudder Kemper
12
<PAGE> 21
has represented to the Board that it will amend its current Investment Advisory
Agreement so that the advisory fees of the Open-End Fund do not exceed the lower
level of fees described herein in the event Proposal 1 is approved but Proposal
5 is not. As noted below, however, other costs of maintaining and servicing an
open-end investment company and its stockholders are expected to exceed those
costs in closed-end fund companies, resulting in an increase in total expenses
over the total expenses of the Fund currently.
ADVANTAGES OF REMAINING A CLOSED-END INVESTMENT COMPANY
1. PORTFOLIO MANAGEMENT. Because they do not have to be concerned about
maintaining cash to be able to pay redemptions, and because they do not have
inflows of new capital from offering new shares, closed-end funds generally may
be more fully invested than open-end funds. In contrast, many open-end funds
maintain a buffer of cash and highly liquid assets to meet net redemptions, and
must consider cash flow needs when making investment decisions. Open-end funds
face the possibility of having to liquidate portfolio securities to meet
redemption demands at a time when the portfolio manager believes that the market
price is low or otherwise wishes to retain the security. Closed-end funds,
therefore, may invest with less emphasis on liquidity, and this consideration
may contribute to disparities in investment performance between managed open-end
and closed-end funds.
The larger reserves of cash or cash equivalents required to operate as an
open-end investment company when net redemptions are anticipated could reduce
the Open-End Fund's investment flexibility and the scope of its investment
opportunities. The Open-End Fund's portfolio might have to be restructured by
selling portfolio securities to accommodate the need for larger reserves of cash
or cash equivalents than would otherwise be maintained. In connection with any
such restructuring, there may be an increase in transactional costs and
portfolio turnover and an adverse effect on investment return.
Scudder Kemper has advised the Fund's Board that it does not expect
significant changes in the Fund's investment strategies as a result of
open-ending, and that the Fund's current strategies do not rely primarily on the
closed-end format. However, Scudder Kemper believes that to a limited degree in
current markets certain investment opportunities in smaller capitalization and
less liquid securities that the Fund may currently invest in may not be
available to the Fund after conversion to open-end form. This may have a
negative impact on the Open-End Fund's total return performance. Scudder Kemper,
however, has informed the Board that the Open-End Fund could still be
substantially invested in equity securities of European companies in furtherance
of its objective and consistent with its investment policies. The open-end
format would require management of cash flow for incoming and outgoing cash. It
is likely that this difference also may cause a sacrifice in total return
performance. However, Scudder Kemper handles cash flow management for other
open-end funds, and while cash flow adds a complexity to fund management,
Scudder Kemper has
13
<PAGE> 22
advised the Board that it normally should not interrupt portfolio strategy. (See
discussion of the Fund's investment strategies and risks, below.)
2. LIQUIDITY. An open-end investment company is subject to current
federal regulatory requirements that no more than 15% of its net assets may be
invested in securities that are illiquid. In its closed-end format, the Fund
currently operates subject to a self-imposed limit under which it may invest up
to 25% of its assets in unlisted securities and securities that are not readily
marketable. If the Fund is converted to an open-end fund, it will be restricted
from investing more than 15% of its net assets in illiquid securities. While the
Open-End Fund would be subject to this liquidity requirement, Scudder Kemper
believes that the improved liquidity of the European markets generally and the
Fund's portfolio specifically and the relative unattractiveness of smaller, less
liquid European markets currently, should enable the Fund to operate in the
open-end format. Further, as of December 31, 1998, illiquid securities
represented less than 3% of the Fund's net assets.
3. EXPENSES; POTENTIAL NET REDEMPTIONS. Conversion of the Fund to
open-end form would result in an immediate increase in the Fund's expenses as a
percentage of average net assets ("expense ratio"). While the investment
management fee would be decreased from a graduated fee starting at 1.25% (based
on current assets the weighted average advisory fee is 1.15%) to a graduated fee
starting at 0.75% of average daily net assets (on a pro forma basis based on
aggregate assets of the Fund of $345,611,869 as of February 28, 1999, the
weighted advisory fee would be .74%, and assuming the combination of the Fund
and KEF with aggregate assets of $417,000,000 as of February 28, 1999, the
weighted average advisory fee would be .74%), the Fund would bear certain
expenses that it currently does not bear. These expenses include an
administrative service fee of up to approximately 0.25% of average daily net
assets with respect to each class of shares, a higher fund accounting fee,
higher transfer agency expenses, increased portfolio transaction expenses, and
stockholder communications expenses. If the Fund is converted to an open-end
investment company, shares of the Fund currently held by its stockholders will
be classified as Class M shares. After conversion, Scudder Kemper projects that
the Fund's expense ratio, currently 1.41% (as of October 31, 1998), would
increase for Class M shares to approximately 1.45%, assuming no reduction in net
assets upon open-ending and to approximately 1.42% assuming no reduction in
assets upon the Reorganization. These figures do not include extraordinary
expenses associated with efforts to restructure the Fund (see note 1 to the
"Annual Fund Operating Expenses" tables below). Holders of Class A shares of the
Fund (into which Class M shares would be converted automatically one year after
the conversion) are expected to incur an expense ratio of approximately 1.43% at
the time of such conversion, assuming no reduction in net assets and no
Reorganization with KEF, and an expense ratio of approximately 1.36% at the time
of such conversion if the Reorganization is consummated. Since the future size
of the Fund cannot be predicted at this time, however, there can be no assurance
that the expense ratio will total the amounts estimated above.
14
<PAGE> 23
Conversion to an open-end investment company could result in immediate
redemptions of Fund shares, which could be substantial, and, consequently,
result in a marked reduction in the size of the Fund. Conversion to an open-end
investment company will create an opportunity for stockholders to capitalize on
the elimination of the Fund's historical discount by redeeming their shares. In
addition, market professionals and other investors who view closed-end funds as
arbitrage opportunities could have taken or could take sizable positions in
shares of the Fund prior to conversion for the purpose of profiting through
redemption immediately following an open-ending. This arbitrage phenomenon could
serve to increase the percentage of Fund shares subject to redemption requests.
Other closed-end funds that have converted to open-end format have experienced
redemptions that exceed sales after conversion, and, in some instances, net
redemptions have been substantial. The Fund bears this risk. A decrease in net
assets could result in less diversification or in smaller portfolio positions in
its investments, which could adversely affect total return performance. In
addition, as a result of any decrease in size resulting from redemptions, the
Open-End Fund could experience a further increase in its expense ratio. Scudder
Kemper projects that if the Fund's net assets decrease by 50% from the present
size of $340,436,394 as of December 31, 1998 due to redemption requests, for
example, the Fund's expense ratio would increase to approximately 1.47% for
Class M shares upon open-ending and to approximately 1.45% upon the
Reorganization. A higher expense ratio would lower the Fund's total return
performance.
Scudder Kemper, and its affiliate KDI, have advised the Board that, while
no assurances can be given, they believe that the Fund can be successfully
marketed as an open-end fund to attract new assets. As a result, to the extent
the Fund is subject to net redemptions in connection with the conversion to
open-end form, Scudder Kemper and KDI believe that the Fund ultimately may be
able to increase its net assets.
To mitigate the attendant costs of redemptions, the Fund will impose a fee
of 2% on redemptions and exchanges of Class M shares for the one year period
following the conversion to open-end status. The purpose of this fee is to
reimburse the Open-End Fund for costs incurred to meet redemptions and to
discourage short-term trading in a vehicle intended for long-term investment. To
minimize the tax burden on remaining stockholders from redemptions (see
discussion below), the Open-End Fund will also pay in-kind redemptions sought by
Class M stockholders to the extent those redemptions exceed $500,000. In-kind
redemptions by Class M stockholders are also subject to the 2% redemption fee
and will result in the recognition by the redeeming stockholder of gain or loss
for federal income tax purposes based upon the difference between the fair
market value of the securities received and that stockholder's basis in the
shares redeemed.
Significant net redemptions could cause the Open-End Fund to become too
small to be considered economically viable. In such circumstances, the Board
would consider alternatives to continuing the Fund's operations, but has no
plans to pursue such alternatives at this time.
15
<PAGE> 24
4. POTENTIAL TAX CONSEQUENCES. If the Fund experiences net redemptions
after converting to open-end form, the Fund would be required to sell portfolio
securities. Many of the Fund's portfolio securities have appreciated in value
since purchased and, if sold, would result in realization of capital gains. As
of February 28, 1999, the unrealized appreciation of the Fund's portfolio
securities was $134,069,202. The portfolio activity that may be necessitated by
redemption requests following conversion could result in the realization of
significant capital gains by the Open-End Fund, in addition to those
historically incurred in the ordinary course of the Fund's investment activity,
which would be distributed to stockholders. Such distributions would be taxable
to the stockholders who receive them. As of February 28, 1999, based on a
share's net asset value of $21.19, the Fund had no net undistributed realized
short-term capital gains but had net undistributed realized long-term capital
gains of $1.96 per share. Distributed net short-term capital gains are taxable
to recipient stockholders as ordinary income and long-term capital gains are
taxable as capital gains. Accordingly, the actions of redeeming stockholders may
have adverse tax consequences for the Open-End Fund and its remaining
stockholders. The Fund may employ the equalization method of tax accounting,
which would reduce the portion of realized capital gains required to be paid to
remaining stockholders as taxable distributions. In addition, the Open-End Fund
intends to pay in-kind redemptions sought by Class M stockholders to the extent
those redemptions exceed $500,000 in an attempt to minimize the adverse tax
consequences resulting from redemptions for non-redeeming stockholders. (The
Open-End Fund also will not offer an exchange privilege to Class M stockholders
with respect to transactions that would trigger an in-kind redemption.) By
paying large redemptions in-kind, the Open-End Fund may avoid having to sell
appreciated portfolio securities and realizing capital gains. Therefore, the
Open-End Fund may avoid distributing capital gains to remaining stockholders of
the Fund as a consequence of large redemptions.
Even in the absence of conversion, unrealized capital appreciation may be
realized in the future. However, if there are redemptions following the
conversion, the gains will be realized sooner than they would have been under
the closed-end format. A nonredeeming stockholder who receives a capital gain
distribution resulting from sales of portfolio investments necessitated by
redemptions in connection with the conversion will realize a smaller gain (or a
larger loss) upon a subsequent redemption of shares as the Fund's distribution
of such capital gains will reduce the net asset value of the stockholder's
shares.
5. DIVIDENDS. The Fund intends to continue to provide the opportunity for
stockholders to reinvest dividends and capital gains distributions into
additional shares of the Fund in open-end form. Effective upon conversion to an
open-end investment company, such reinvestment in shares would be made at net
asset value, rather than, as is currently the case, at the lesser of market
value plus commissions or net asset value. As a result, stockholders would no
longer be able to reinvest distributions into additional shares of the Fund at a
discount to net asset value. Class M stockholders will have the opportunity to
reinvest dividends and capital gains distributions of the Open-
16
<PAGE> 25
End Fund, if any, into Class A shares of the Fund. Class A shares are not
subject to the 2% fee on redemptions or exchanges.
6. NEW YORK STOCK EXCHANGE LISTING. The Fund is currently listed on the
NYSE. Conversion to an open-end fund would result in delisting of the Fund's
shares, an event that may be perceived by some as disadvantageous because some
investors may consider a listing on the NYSE to be important.
7. BLUE SKY COSTS. Because the Fund is listed on the NYSE, the offering
of its shares is not required to be registered under the securities laws of most
states. As an open-end investment company, the Fund would be required to qualify
its shares for sale in the states. KDI, however, has agreed to assume the costs
relating to such qualification pursuant to the proposed underwriting and
distribution agreement for the Open-End Fund.
8. LEVERAGE. The ability to borrow is more restricted in the case of
open-end funds than in the case of closed-end funds. Closed-end funds can also
issue preferred stock, while open-end funds cannot.
COMPARATIVE INVESTMENT STRATEGIES AND RISKS
The Fund's investment objective will continue to be long-term capital
appreciation upon its conversion to open-end status. The proposed Reorganization
with KEF would also have no effect on the Fund's investment objective.
In seeking to achieve its objective, the Fund will also invest primarily,
and at least 65% of its total assets, in the equity securities of European
companies.
As part of its evaluation of the Fund's conversion to open-end status, the
Board, based on the recommendation of Scudder Kemper, evaluated the investment
strategies that had been most beneficial to the Fund in the past and that are
expected to be so in the future. Based on that analysis, the Board authorized
certain changes to the Fund's investment strategies which are not conditional on
the approval of the open-ending proposal and will be implemented in any event.
For example, although the Fund will still have the ability to invest in
small companies, emerging markets and "specialized investments" (i.e., equity
securities of privately-held and small European companies, joint ventures and
companies that have recently made an initial public offering), Scudder Kemper
believes that it would be more advantageous at this time for the Fund to invest
the majority of its assets in the more established and liquid markets of Western
and Southern Europe. This change is consistent with Scudder Kemper's view that
Eastern European businesses (particularly companies dependent on the Russian
economy) are currently more speculative than would be attractive to the Fund. In
addition, Scudder Kemper believes that the more developed European markets offer
greater opportunities for the Fund at this time. In fact, the Fund's success to
date is attributed in great part to investments made in the more established
countries of Western Europe. The Fund also intends to allocate its
17
<PAGE> 26
investments among at least three European countries at all times, but will no
longer be subject to any limitation on the amount of its assets that may be
invested in any particular European country. The Fund, however, will retain its
nondiversified status which allows it to invest a greater proportion of its
assets in the securities of a smaller number of issuers.
In addition to the above, the Board approved changes to the Fund's strategy
for investing in debt securities (including those debt securities rated below
investment grade). The Fund will limit its investments in debt securities to 20%
of its total assets as opposed to the current 35% limitation. Further, the Board
agreed with Scudder Kemper's recommendation that the Fund have available a wider
array of risk management strategies (i.e., derivatives) to protect against price
declines in the value of its portfolio, to manage the effective maturity or
duration of fixed-income securities in its portfolio or to enhance potential
gain. These strategies will include the use of swaps, caps, floors and collars.
In addition, the Board also approved limitations on the Fund's use of options.
For example, the Fund may not purchase options unless the aggregate premiums
paid on all such options held by the Fund at any time do not exceed 20% of its
total assets, or sell put options if as a result the aggregate value of the
obligations underlying such put options would exceed 50% of its total assets.
Although authorized to do so, the portfolio managers of the Fund have no current
intention to utilize these derivative strategies to a significant extent.
Additional changes to the Fund's nonfundamental policies are described in
the Open-End Fund's Prospectus and Statement of Additional Information. Proposed
changes to certain fundamental policies of the Fund are described in Section (c)
below.
COMPARATIVE EXPENSE INFORMATION
The expenses of the Fund and the Open-End Fund will differ. Specifically,
the expenses of the Open-End Fund are expected to be higher, notwithstanding the
fact that the rate of advisory fees paid to Scudder Kemper will be substantially
lower.
1. FEE TABLE. Set forth below is a comparison of the Fund's annual
operating expenses and stockholder transaction expenses as of October 31, 1998
as a closed-end fund and those expenses that would apply to stockholders holding
Class A, B, C and M shares of the Fund following the conversion to open-end
status on a pro forma (estimated) basis for the fiscal year ending October 31,
1999. Comparative fee and expense information is also provided on a pro forma
(estimated) basis for the fiscal year ending October 31, 1999 assuming the
Reorganization is consummated. As noted above, stockholders of the Fund will
receive Class M shares if the open-ending is approved which will automatically
convert to Class A shares one year after the conversion.
18
<PAGE> 27
ASSUMING CONVERSION TO OPEN-END STATUS
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
(CLOSED-END) (OPEN-END)(1)
------------ ----------------------------------------
CLASS A CLASS B CLASS C CLASS M
------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER FEES: (FEES PAID
DIRECTLY FROM YOUR
INVESTMENT).
Maximum Sales Charge (Load)
Imposed on Purchases (as a %
of offering price)............ None(2) 5.75% None None None
Maximum Deferred Sales Charge
(Load) (as a % of redemption
proceeds)..................... None None(3) 4% 1% None
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends/Distributions....... None None None None None
Redemption Fee (as % of amount
redeemed, if applicable)...... None None None None 2%(4)
Exchange Fee.................... None None None None 2%(5)
ANNUAL FUND OPERATING EXPENSES:
(EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS).
Management Fee(6)............... 1.15% .74 .74 .74 .74
Distribution (12b-1) Fees....... None None .75 .75 None
Other Expenses.................. 0.26% 1.77 1.76 2.38 .71
Total Annual Fund Operating
Expenses(7)................... 1.41% 2.51 3.25 3.87 1.45
==== ==== ==== ==== ====
</TABLE>
- ---------------
(1) Estimated for the Fund's current fiscal year ending October 31, 1999, based
on the proposed fee schedule for open-end operations and expenses incurred
by the Fund during its most recent fiscal year. "Other Expenses" do not
include extraordinary expenses associated with efforts to restructure the
Fund. If such expenses had been included, "Other Expenses" would have been
increased to 1.90%, 1.89%, 2.51% and .84%, for Class A, B, C and M shares
respectively. Also, as reflected below under "Expenses; Potential Net
Redemptions," significant redemptions from the Fund would result in an
increase of expenses.
(2) The underwriting spread (sales load) imposed on purchases made during the
initial offering period in 1990 was 7%. Purchases and sales made thereafter
on the NYSE or otherwise through broker-dealers were subject to customary
brokerage commissions which vary. With respect to shares issued in
connection with the Fund's dividend reinvestment plan, to the extent the
plan agent is required to purchase shares on the NYSE, stockholders may also
incur brokerage commissions.
(3) The redemption of Class A shares purchased at net asset value under the
"Large Order NAV Purchase Privilege" (as will be described in the Open-End
Fund's Prospectus) may be subject to a contingent deferred sales charge of
1% if
19
<PAGE> 28
redeemed within one year of purchase and 0.50% if redeemed during the second
year of purchase. Class B and C shares will be subject to a maximum deferred
sales charge of 4% and 1%, respectively.
(4) A 2% redemption fee, which is retained by the Fund, is imposed on all
redemptions (including redemptions paid in-kind) of Class M shares for the
one year period following conversion.
(5) Class M shares exchanged for other shares of Kemper Funds pursuant to the
Exchange Privilege, as described above, will be subject to the 2% redemption
fee at the time of the exchange during the one year period after the
conversion of the Fund to open-end form. Class M stockholders may only
exchange shares in an amount less than $500,000.
(6) As a closed-end fund, the Fund currently pays Scudder Kemper a fee based on
the average weekly net assets of the Fund. If this Proposal is approved, the
management fee will be calculated on the basis of the Fund's average daily
net assets instead of weekly net assets.
(7) Total operating expenses of the Open-End Fund may be subject to expense
limitations as determined by the Board of Directors at some later date.
Set forth below are examples which show the expenses that an investor in
the Fund would pay on a $10,000 investment if the Fund remained closed-end
compared to those expenses which an investor would incur if the Fund were
converted to an open-end fund, assuming a 5% annual return, based upon the
expense ratios set forth above.
SCUDDER EUROPE FUND AS OF OCTOBER 31, 1998 (CLOSED-END FORM):
Fees and expenses if you sold shares after:
<TABLE>
<S> <C>
1 Year......................................... $ 144
3 Years........................................ $ 446
5 Years........................................ $ 771
10 Years....................................... $1,691
</TABLE>
Fees and expenses if you did not sell your shares:
<TABLE>
<S> <C>
1 Year......................................... $ 144
3 Years........................................ $ 446
5 Years........................................ $ 771
10 Years....................................... $1,691
</TABLE>
20
<PAGE> 29
PROFORMA EXPENSE RATIOS OF SCUDDER EUROPE FUND AS OF OCTOBER 31, 1999
(OPEN-END FORM):
Fees and expenses if you sold shares after:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
1 Year*............................... $ 815 $ 728 $ 489
3 Years............................... $1,312 $1,301 $1,181
5 Years............................... $1,834 $1,898 $1,990
10 Years.............................. $3,257 $3,226 $4,096
</TABLE>
Fees and expenses if you did not sell your shares:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
1 Year*............................... $ 815 $ 328 $ 389
3 Years............................... $1,312 $1,001 $1,181
5 Years............................... $1,834 $1,698 $1,990
10 Years.............................. $3,257 $3,226 $4,096
</TABLE>
The examples are not an illustration of past or future investment results
and should not be considered a representation of past or future expenses. Actual
expenses may be greater or less than those shown above.
- ---------------
* These examples do not include extraordinary expenses associated with efforts
to restructure the Fund.
21
<PAGE> 30
ASSUMING REORGANIZATION WITH KEMPER EUROPE FUND
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
(CLOSED-END) (OPEN-END)(1)
------------ ----------------------------------------
CLASS A CLASS B CLASS C CLASS M
------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER FEES: (FEES PAID
DIRECTLY FROM YOUR
INVESTMENT).
Maximum Sales Charge (Load)
Imposed on Purchases (as a %
of offering price)............ None(2) 5.75% None None None
Maximum Deferred Sales Charge
(Load) (as a % of redemption
proceeds)..................... None None(3) 4% 1% None
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends/Distributions....... None None None None None
Redemption Fee (as % of amount
redeemed, if applicable)...... None None None None 2%(4)
Exchange Fee.................... None None None None 2%(5)
ANNUAL FUND OPERATING EXPENSES:
(EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS).
Management Fee(6)............... 1.15% .74 .74 .74 .74
Distribution (12b-1) Fees....... None None .75 .75 None
Other Expenses.................. 0.26% 1.11 1.65 1.13 .68
Total Annual Fund Operating
Expenses...................... 1.41% 1.85 3.14 2.62 1.42
Expense Reimbursement........... N/A .10 .49 None None
Net Annual Operating
Expenses(7)................... N/A 1.75 2.65 2.62 1.42
==== ==== ==== ==== ====
</TABLE>
- ---------------
(1) Estimated for the Fund's current fiscal year ending October 31, 1999, based
on the proposed fee schedule for open-end operations and expenses incurred
by the Fund during its most recent fiscal year. "Other Expenses" do not
include extraordinary expenses associated with efforts to restructure the
Fund. If such expenses had been included, "Other Expenses" would have been
increased to 1.25%, 1.79%, 1.27% and .82%, for Class A, B, C and M shares
respectively. Also, as reflected below under "Expenses; Potential Net
Redemptions," significant redemptions from the Fund would result in an
increase of expenses.
(2) The underwriting spread (sales load) imposed on purchases made during the
initial offering period in 1990 was 7%. Purchases and sales made thereafter
on the NYSE or otherwise through broker-dealers were subject to customary
brokerage commissions which vary. With respect to shares issued in
connection with the Fund's dividend reinvestment plan, to the extent the
plan agent is required to purchase shares on the NYSE, stockholders may also
incur brokerage commissions.
22
<PAGE> 31
(3) The redemption of Class A shares purchased at net asset value under the
"Large Order NAV Purchase Privilege" (as will be described in the Open-End
Fund's Prospectus) may be subject to a contingent deferred sales charge of
1% if redeemed within one year of purchase and 0.50% if redeemed during the
second year of purchase. Class B and C shares will be subject to a maximum
deferred sales charge of 4% and 1%, respectively.
(4) A 2% redemption fee, which is retained by the Fund, is imposed on all
redemptions (including redemptions paid in-kind) of Class M shares for the
one year period following conversion.
(5) Class M shares exchanged for other shares of Kemper Funds pursuant to the
Exchange Privilege, as described above, will be subject to the 2% redemption
fee at the time of the exchange during the one year period after the
conversion of the Fund to open-end form. Class M stockholders may only
exchange shares in an amount less than $500,000.
(6) As a closed-end fund, the Fund currently pays Scudder Kemper a fee based on
the average weekly net assets of the Fund. If this Proposal is approved, the
management fee will be calculated on the basis of the Fund's average daily
net assets instead of weekly net assets.
(7) Pursuant to proposed agreements with the Open-End Fund, Scudder Kemper, KDI,
the accounting agent and the transfer agent have agreed, for the one year
period commencing on the date of conversion, to limit their respective fees
and to reimburse other operating expenses to the extent necessary to limit
total operating expenses of the classes of the Open-End Fund to the levels
set forth above.
Set forth below are examples which show the expenses that an investor in
the Fund would pay on a $10,000 investment if the Fund remained closed-end
compared to those expenses which an investor would incur if the Fund were
converted to an open-end fund and combined with KEF, assuming a 5% annual
return, based upon the expense ratios set forth above.
SCUDDER EUROPE FUND AS OF OCTOBER 31, 1998 (CLOSED-END FORM):
Fees and expenses if you sold shares after:
<TABLE>
<S> <C>
1 Year......................................... $ 144
3 Years........................................ $ 446
5 Years........................................ $ 771
10 Years....................................... $1,691
</TABLE>
23
<PAGE> 32
Fees and expenses if you did not sell your shares:
<TABLE>
<S> <C>
1 Year......................................... $ 144
3 Years........................................ $ 446
5 Years........................................ $ 771
10 Years....................................... $1,691
</TABLE>
PROFORMA EXPENSE RATIOS OF SCUDDER EUROPE FUND AS OF OCTOBER 31, 1999
(OPEN-END FORM):
Fees and expenses if you sold shares after:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
1 Year*............................... $ 743 $ 668 $ 365
3 Years............................... $1,118 $1,230 $ 814
5 Years............................... $1,519 $1,824 $1,390
10 Years.............................. $2,641 $3,529 $2,954
</TABLE>
Fees and expenses if you did not sell your shares:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
1 Year*............................... $ 743 $ 268 $ 265
3 Years............................... $1,118 $ 930 $ 814
5 Years............................... $1,519 $1,624 $1,390
10 Years.............................. $2,641 $3,529 $2,954
</TABLE>
The examples are not an illustration of past or future investment results
and should not be considered a representation of past or future expenses. Actual
expenses may be greater or less than those shown above.
* These examples do not include extraordinary expenses associated with efforts
to restructure the Fund.
2. MANAGEMENT FEES. Currently, Scudder Kemper serves as investment
manager and receives a monthly investment management fee from the Fund of 1/12
of the average weighted annual advisory fee, currently equal to approximately
1.15%. As the Open-End Fund would pay Scudder Kemper a monthly investment
management fee of 1/12 of the applicable annual rate based upon the average
daily net assets for such month
24
<PAGE> 33
as set forth below. Stockholders will be asked to consider a new Investment
Advisory Agreement with Scudder Kemper which reflects this lower fee schedule in
Proposal 5.
<TABLE>
<CAPTION>
ANNUAL MANAGEMENT
FEE RATES
AVERAGE DAILY NET ASSETS OPEN-END FUND
- ------------------------ -----------------
<S> <C>
$0 -- $250 million.................................... 75%
$250 million -- $1 billion............................ 72
$1 billion -- $2.5 billion............................ 70
$2.5 billion -- $5 billion............................ 68
$5 billion -- $7.5 billion............................ 65
$7.5 billion -- $10 billion........................... 64
$10 billion -- $12.5 billion.......................... 63
Over $12.5 billion.................................... 62
</TABLE>
3. ADMINISTRATIVE SERVICE FEES. Currently, the Fund does not pay any
administrative service fees. As proposed, the Open-End Fund would pay KDI an
administrative service fee of up to .25% of average daily net assets of each of
Class A, B, C and M shares of the Fund. KDI intends to pay corresponding amounts
under related arrangements with various broker-dealers and other service or
administrative firms that provide services and facilities for their customers or
clients of the Open-End Fund. These firms provide such office space and
equipment, telephone facilities and personnel as is necessary or beneficial for
providing information and services to their clients.
4. FUND ACCOUNTING FEES. Currently, Scudder Fund Accounting Corporation,
a subsidiary of Scudder Kemper ("SFAC"), computes the net asset value for and
provides accounting services to the Fund pursuant to a Fund Accounting Agreement
at a rate of approximately 0.06% of the Fund's assets. As proposed, the Open-End
Fund would pay SFAC a fee that is based on the actual services provided, but is
expected to equal approximately .10%. The Fund was charged $202,557 by SFAC
during the last fiscal year.
5. OTHER OPERATING FEES AND NEW SERVICE PROVIDERS. As a closed-end fund,
the Fund does not generally incur the types and levels of expenses that an
open-end fund does. As proposed, the Open-End Fund would incur higher transfer
agency costs, as well as distribution expenses and administrative services fees,
along with other costs typically incurred by open-end funds. The Open-End Fund
would also enter into agreements with new service providers that currently
provide services to KEF and other funds in the Kemper family of funds. In
addition to SFAC and KDI who will provide accounting and distribution services,
the Open-End Fund would enter into an agreement with Investors Fiduciary Trust
Company who will provide transfer agency and dividend paying services to the
Fund through its agreement with Kemper Services Company, an affiliate of Scudder
Kemper. Ernst & Young LLP would serve as the Open-End Fund's independent
auditors (subject to the approval of the stockholders
25
<PAGE> 34
below). The Fund's custodian, however, will remain Brown Brothers Harriman & Co.
after the conversion to open-end status.
6. REDEMPTION FEES. The Open-End Fund will impose a redemption fee of
2.0%, payable to the Fund, on redemptions of all Class M shares during the one
year period following the conversion to open-end status, including redemptions
in-kind. The purpose of this fee is to compensate the Open-End Fund for certain
expenses incurred to meet redemptions and to discourage short-term trading in a
vehicle intended for long-term investment.
7. REDEMPTIONS IN-KIND. The Open-End Fund will reserve the right to honor
any request for redemption by making payment in whole or in part in readily
marketable securities. With respect to Class M stockholders, the Open-End Fund
intends to pay in-kind redemptions sought by Class M stockholders to the extent
those redemptions exceed $500,000. Class M stockholders who redeem their shares
in-kind will also be charged a 2% redemption fee for a period of one year from
the date of the conversion to open-end status. The purpose of the 2% fee on
redemptions in-kind by Class M stockholders is intended to mitigate the
extraordinary administrative costs associated with processing in-kind
redemptions. In connection with these in-kind redemptions, Scudder Kemper will
incur certain extraordinary administrative costs that are not contemplated under
the Investment Advisory Agreement described in Proposal 5 and therefore would be
a responsibility of the Fund. These include expenses attributable to the (i)
establishment of a central area within the firm's transfer agency area to
process in-kind redemption requests; (ii) hiring of additional personnel to whom
all in-kind redemption requests will be routed; (iii) training of client service
phone representatives and other staff to handle the special questions of
stockholders seeking in-kind redemptions; (iv) costs of calculating share
entitlements for in-kind transfers; and (v) additional administrative work to be
performed by personnel in identifying, accounting for and segregating portfolio
securities to be delivered as part of each in-kind redemption. In addition to
these indirect costs, the Fund would directly incur custodial charges relating
to transactions in the various markets that the Fund is currently invested.
The Open-End Fund will value such securities at the same value used to
determine net asset value and will select the securities to be distributed in
such manner as the Board of Directors may deem fair and equitable. Such in-kind
redemptions will result in the redeeming stockholder recognizing gain or loss
for federal income tax purposes. Stockholders receiving securities and selling
them could receive less than the redemption value of such securities and will
further incur certain transaction costs related to transfer and delivery of the
securities to the stockholders from the Open-End Fund (i.e., certain custody and
transfer-related expenses), which will be deducted from the redemption proceeds.
Such expenses may total more than 1% of the net asset value of the shares
redeemed. Such stockholders will also incur transaction costs upon the
disposition of the securities redeemed. Such a redemption would not be as liquid
as a redemption paid entirely in cash.
26
<PAGE> 35
The Open-End Fund will require, in the case of any redemption effected
in-kind, that the redeeming stockholder provide information concerning the
arrangements that the stockholder has made to accept the delivery of portfolio
securities. Such arrangements are the responsibility of the redeeming
stockholder. In the alternative, a stockholder may appoint a liquidating agent
for purposes of effecting the liquidation of such securities. Any liquidation of
securities will be at the expense and risk of the stockholder, who bears the
market risk of holding the securities pending liquidation and further will be
responsible for the costs and expenses of liquidation, which will be deducted
from the liquidation proceeds. The liquidating agent will not be able to assure
that the liquidation is effected at any given time or price.
ACQUISITION OF ASSETS OF KEMPER EUROPE FUND
Subject to stockholder approval of Proposal 1, the Board of Directors has
approved an Agreement and Plan of Reorganization (the "Reorganization
Agreement") in the form of Exhibit B. The Reorganization Agreement provides for
the acquisition by the Fund of the assets of KEF. The Board believes that the
Reorganization will enhance the Fund's ability to compete in open-end form and
may result in the realization of certain economies of scale. The Reorganization
is not subject to approval by stockholders of the Fund.
The Reorganization contemplates that (i) KEF will transfer all of its
assets to the Reorganized Fund, in exchange for Class A, B and C shares of the
Reorganized Fund and the assumption by the Reorganized Fund of the liabilities
of KEF; (ii) distribution by KEF to its stockholders of the Class A, B, and C
shares of the Reorganized Fund (including any fractional shares) equal in value
to such stockholders' KEF shares; (iii) conversion of the outstanding shares of
the Fund immediately prior to the Reorganization to a number of the Open-End
Fund's Class M shares (including any fractional shares) equal in value and
number to stockholders' Fund shares; and (iv) the subsequent termination of KEF
and cancellation of the outstanding shares of KEF.
The Board of Directors has considered the benefits and costs of the
Reorganization and determined that the Reorganization is in the best interests
of the Fund and that the interests of existing stockholders will not be diluted
as a result of the Reorganization. Scudder Kemper believes that both the
open-ending and the Reorganization are desirable for the following reasons:
1. KEF, a relatively new fund of moderate size, is already the subject of
a meaningful number of dealer agreements from which the Open-End Fund
would benefit going forward;
2. KEF's transfer agent is equipped to maintain relationships with
selected dealers, including those broker-dealers that hold record
ownership of current Fund shares;
3. KEF's 12b-1 plan, which can be made applicable to certain of the
Open-End Fund's classes (as discussed above) after conversion to
open-end status
27
<PAGE> 36
(assuming the stockholders approve), would be important in compensating
dealers and others who would be expected to explain the Open-End Fund's
new form of operations to investors; and
4. the Fund would adopt KEF's management fee structure which is geared to
the market for open-end funds investing in European equities and is
lower than that of the Fund's.
2. PROCEDURES FOR REORGANIZATION. In connection with the Reorganization,
after the close of business on the date of effectiveness of the Reorganization
(the "Effective Date"), (i) KEF will transfer all of its assets to the
Reorganized Fund, in exchange for Class A, B, and C shares of the Reorganized
Fund and the Reorganized Fund will assume the liabilities of KEF; (ii) KEF will
distribute to its stockholders Class A, B and C shares of the Reorganized Fund
(including any fractional shares) equal in value to such stockholders' KEF
shares; (iii) upon the effectiveness of the Amended and Restated Articles of
Incorporation, the Fund's shares will convert to a number of the Reorganized
Fund's Class M shares (including any fractional shares) equal in value and
number to stockholders' Fund shares; and (iv) KEF will terminate and its
outstanding shares will be canceled. Certificates for shares of the Fund issued
prior to the Reorganization will represent the same number of Class M shares.
After the expiration of the one year period following the Reorganization, Class
M shares will automatically convert into Class A shares based on their relative
net asset values and all outstanding certificates previously representing Class
M shares will represent Class A shares. The Reorganized Fund will then operate
in the same manner and with the same investment objectives and policies of the
Fund, giving effect to the results of the stockholder votes on the other
Proposals.
If approved by stockholders of KEF, it is expected that the Reorganization
will be made effective on or about September 1, 1999, but it may be effective at
a different time.
3. FEDERAL INCOME TAX CONSEQUENCES. The following is a general discussion
of the material federal income tax consequences of the Reorganization to
stockholders of the Fund. The discussion set forth below is for general
information only and may not apply to a stockholder subject to special treatment
under the Internal Revenue Code of 1986, as amended (the "Code"), such as a
holder that is a bank, an insurance company, a dealer in securities, a
tax-exempt organization, a foreign person or one who acquired shares of the Fund
pursuant to the exercise of employee stock options or otherwise as compensation.
It is based upon the Code, legislative history, Treasury Regulations, judicial
authorities, published positions of the Internal Revenue Service (the "Service")
and other relevant authorities, all as in effect on the date hereof and all of
which are subject to change or different interpretations (possibly on a
retroactive basis). This summary is limited to stockholders who hold their Fund
shares as capital assets. No advance rulings have been or will be sought from
the Service regarding any matter discussed in this Proxy Statement. Accordingly,
no assurances can be given that the Service could not successfully challenge the
intended federal income tax treatment
28
<PAGE> 37
described below. Stockholders should consult their own tax advisers to determine
the specific federal income tax consequences of all transactions relating to the
Reorganization, as well as the effects of state, local and foreign tax laws and
possible changes to the tax laws.
The Reorganization is intended to qualify as a "reorganization" within the
meaning of section 368(a)(1) of the Code. As a condition to closing, the Fund
and KEF will receive an opinion of Willkie Farr & Gallagher that under the Code
the acquisition by the Fund of the assets of KEF and the distribution of the
Reorganized Fund's shares to KEF stockholders pursuant to the Reorganization
will not give rise to the recognition of gain or loss for federal income tax
purposes to the Fund, KEF, the Reorganized Fund, or the stockholders of the Fund
and KEF. A stockholder's adjusted basis for federal income tax purposes in
shares of the Reorganized Fund after the Reorganization will be the same as his
or her adjusted basis for tax purposes in the shares of the Fund immediately
before the Reorganization. The holding period of the shares of the Reorganized
Fund received by the stockholders of the Fund will include the holding period of
shares of the Fund exchanged therefor, provided that at the time of the exchange
the shares of the Fund were held as capital assets.
CONVERSION TO AN OPEN-END INVESTMENT COMPANY
(a) Changing Sub-Classification
The conversion of the Fund to an open-end investment company will be
accomplished, subject to stockholder approval, by: (i) the filing of Amended and
Restated Articles of Incorporation for the Fund with the State Department of
Assessments and Taxation of Maryland and (ii) changing the Fund's
subclassification under the 1940 Act from a closed-end investment company to an
open-end investment company. In addition, since shares of an open-end investment
company are offered to the public on a continuous basis, the Fund will enter
into an Underwriting and Distribution Agreement with KDI in a form approved by
the Board, including by a majority of the Noninterested Directors. A
registration statement under the Securities Act of 1933, as amended, for the
Fund covering the offering of the shares of the Fund has been filed and
appropriate state securities law notices will be filed.
Certain costs, many of which will be nonrecurring, will be incurred in
connection with the change from a closed-end to an open-end investment company,
including costs associated with the seeking of necessary government clearances,
the preparation of a registration statement, prospectus and statement of
additional information as required by federal securities laws (including
printing and mailing costs), the costs of preparing this Proxy Statement,
transfer agent fees relating to the conversion, and legal fees and accounting
fees related to the foregoing. Fund Management estimates that these additional
costs, which will be paid by the Fund and KEF (based upon their relative net
asset values), will be approximately $600,000. Based upon this allocation, it is
currently estimated that the Fund would bear 83% and KEF would bear 17% of these
expenses. The Board of Directors of the Fund and the Board of Trustees of KEF
29
<PAGE> 38
determined that the allocation of these costs was appropriate and in the best
interest of the respective stockholders. Management anticipates that
substantially all of these costs will be incurred prior to the effective date of
the conversion.
The Fund believes that neither the Fund nor its stockholders will realize
any gain or loss for federal income tax purposes as a result of the Fund's
conversion. However, stockholders will recognize a gain or loss if they later
redeem their shares to the extent that redemption proceeds (including the fair
market value of any proceeds received in-kind) are greater or less than the
respective adjusted tax bases of their redeemed shares. Payment for any such
redemption (less the 2.0% redemption fee applicable to Class M stockholders)
normally will be made within three days after receipt of a proper request for
redemption, in accordance with redemption procedures that will be specified in
the Open-End Fund's Prospectus. Payments of any in-kind redemptions, however,
may take longer than three days. The Open-End Fund may suspend the right of
redemption under certain extraordinary circumstances in accordance with the
rules of the SEC. As stated above, the Open-End Fund also will pay in-kind
redemptions sought by Class M stockholders to the extent those redemptions
exceed $500,000, and not offer an exchange privilege to Class M stockholders
with respect to transactions that would trigger an in-kind redemption.
(b) Amendment and Restatement of the Fund's Articles of Incorporation to
Provide for Open-Ending
If the proposed conversion to open-end status is approved, the conversion
of the Fund to an open-end investment company will be accomplished by amending
and restating the Fund's Articles of Incorporation to authorize the issuance of
redeemable securities at net asset value and to provide that the Fund's
outstanding common stock will be redeemable at the option of the stockholders.
In connection with such amendments to the Fund's Articles of Incorporation, the
Board of Directors will make any necessary conforming changes to the By-Laws of
the Fund. A copy of the proposed Amended and Restated Articles of Incorporation
which reflect the amendments contemplated by this Proposal is attached hereto as
Exhibit A.
As included in Exhibit A, the stockholders are also being asked to approve
an amendment to the Articles of Incorporation providing that the presence in
person or by proxy of stockholders entitled to cast one-third of the votes
entitled to be cast constitutes a quorum for a meeting of stockholders. Under
Maryland law, unless the articles of incorporation of a corporation provide
otherwise, the presence in person or by proxy of stockholders entitled to cast a
majority of the votes entitled to be cast constitutes a quorum for a meeting of
stockholders. Currently, the presence in person or by proxy of stockholders
entitled to cast a majority of the votes entitled to be cast constitutes a
quorum at stockholder meetings. The proposed Amended and Restated Articles also
provide the Board of Directors with the authority to impose a fee upon
redemptions of the Fund's shares.
30
<PAGE> 39
Also, the Fund's current Articles of Incorporation authorize the issuance
of 100 million shares of common stock with a par value of $.01 per share. In
connection with Proposal 1, the Board of Directors proposes to amend the Fund's
Articles of Incorporation, subject to the approval of the stockholders, to: (i)
increase the amount of authorized capital stock to 500,000,000 shares, to create
three additional share classes, to rename the existing share class "M" shares
and describe the rights and privileges of each such class; (ii) reduce the par
value from $.01 per share to $.001 per share; and (iii) reduce the stated
capital of the Fund to an amount equal to the aggregate par value (as so
reduced) of all outstanding shares of the Fund. Moreover, as the Board of an
open-end fund, the Board will be authorized to increase the amount of authorized
capital stock going forward without stockholder approval and to utilize the
ability to create new classes or series of the Open-End Fund.
Under the laws of the State of Maryland, where the Fund is incorporated,
par value per share has no substantive legal significance other than in
connection with the calculation of fees for filing certain charter documents. By
decreasing the par value, the Fund will realize a savings in such fees in the
future. In addition, the Board of Directors believes that the reduction in the
par value of the shares of the Fund is desirable to provide the Fund with
greater flexibility in managing its corporate funds, such that share dividends
or share distributions can be accomplished without the Fund transferring a
substantial sum from its retained earnings account to its stated capital
account. The reduction of the par value of the Fund's shares will not have any
effect on the rights of existing shareholders. Further, the Board of Directors
believes that reducing the par value to $.001 per share is consistent with the
structure of other open-end funds and will have no material effect on the
business of the Fund.
Proposal 2 below discusses additional changes proposed to the Fund's
Articles of Incorporation which, however, require the affirmative vote of 75% of
the votes entitled to be cast by the stockholders. These changes are also
desirable in that they would allow the Fund to operate in a manner consistent
with other open-end investment companies. Although the Fund will nevertheless
convert to open-end status upon the approval of Proposal 1, including this
Section (b), the Board of Directors strongly encourages the stockholders to vote
in favor of Proposal 2 below.
(c) Amendment of the Fund's Fundamental Investment Policies
If the stockholders vote to approve the conversion of the Fund to an
open-end investment company, the Fund's fundamental investment policy regarding
investments in restricted and illiquid securities is proposed to be amended to
conform with the limitations under the 1940 Act for open-end investment
companies. A fundamental investment policy may not be changed without the
approval of a "majority of the outstanding voting securities" of the Fund. If
this change is approved, the policy would be reclassified as non-fundamental
which could be changed by vote of the Board in response to regulatory or market
developments without further approval by the stockholders. This amendment
conforms the Fund's investment restriction to that of open-end investment
companies under the 1940 Act. As an open-end investment
31
<PAGE> 40
company, the Fund may not hold a significant amount of illiquid securities
because these securities may be difficult to value accurately and because it is
possible that the Fund would have difficulty liquidating such securities if
necessary in order to satisfy in a timely manner requests to redeem its shares.
Therefore, assuming the conversion is approved, the Fund's current limitation of
investing no more than 25% of its net assets in illiquid and restricted
securities would be reclassified as a non-fundamental policy and lowered to 15%.
It is not anticipated that this amendment would have a material effect on the
Fund, since as discussed above, Scudder Kemper believes that there is ample
liquidity in most European securities currently of interest to the Fund. The
Fund's fundamental investment policies would be amended and reclassified as non-
fundamental as follows: "The Fund may not invest more than 15% of its assets in
illiquid securities."
In addition, the Fund has a current fundamental policy which limits
permissible borrowings to 33 1/3% of the Fund's total assets not including the
amount borrowed. The Board recommends that stockholders approve a modification
to this policy which would allow the Fund to include amounts received from
borrowing in determining its total assets for purposes of satisfying the 1940
Act's 300% asset coverage requirement. This change is consistent with current
SEC pronouncements and the investment policies of other open-end funds in the
Kemper family of funds. If approved by stockholders, the fundamental investment
policy would be amended as follows:
The Fund may not issue senior securities, borrow money or pledge its
assets, except that the Fund may borrow money as permitted under the 1940
Act, as interpreted or modified by regulatory authority having jurisdiction
from time to time, and may also pledge its assets to secure such
borrowings. For the purposes of this investment restriction, collateral
arrangements with respect to the writing of options or the purchase or sale
of futures contracts are not deemed a pledge of assets or the issuance of a
senior security.
REQUIRED VOTE
Approval of the conversion of the Fund's subclassification under the 1940
Act to an open-end investment company and the changes to the Fund's fundamental
investment policies require the affirmative vote of the holders of a majority of
the outstanding voting securities of the Fund (as defined in the 1940 Act). The
changes to the Fund's Articles of Incorporation to provide for open-ending
require the approval of a majority of the votes entitled to be cast at the
meeting, which is higher than the 1940 Act requirement. Consequently, approval
of Proposal 1 requires the approval of a majority of the votes entitled to be
cast at the Meeting. Your Fund's Directors recommend that stockholders approve
the conversion of the Fund to an open-end investment company and the related
changes in the Fund's Articles of Incorporation and fundamental investment
policies.
32
<PAGE> 41
PROPOSAL 2: CERTAIN FURTHER AMENDMENTS TO THE FUND'S
ARTICLES OF INCORPORATION IN THE EVENT THAT PROPOSAL 1 IS APPROVED
OUTLINE OF PROPOSAL
Proposal 2 is a recommendation of the Board of Directors to approve further
amendments to the Fund's Articles of Incorporation (a) to declassify the Board
of Directors, (b) to eliminate super-majority voting requirements and provisions
that limit the ability of others to acquire control of the Fund as well as the
Fund's freedom to engage in particular transactions, and (c) to eliminate the
requirement that the number of Directors not exceed 12 and that Directors may
only be removed by the affirmative vote of 75% of the votes entitled to be cast
for the election of Directors.
DISCUSSION
As discussed above, if Proposal 1 is approved, the Fund intends to file
Amended and Restated Articles of Incorporation, in the form approved by the
Board of Directors at its meeting held on April 27, 1999 and by the stockholders
at the Meeting (Exhibit A), to reflect the conversion of the Fund to an open-end
investment company. At this time, the Board of Directors is also recommending
changes to the Fund's Articles of Incorporation in addition to those described
in Proposal 1. Proposal 1, however, is not contingent on the approval of these
additional changes.
In connection with this Proposal 2, the Fund's stockholders are being asked
to approve amendments to the Articles of Incorporation in order to eliminate
certain provisions that are intended to have the effect of limiting (i) the
ability of other entities and persons to acquire control of the Fund, (ii) the
Fund's freedom to engage in certain transactions, and (iii) the ability of the
Fund's stockholders to effect changes in the Fund's Board of Directors. These
provisions may be regarded as "anti-takeover provisions" and the stockholders
are being asked to approve amendments to the Articles of Incorporation to
eliminate them because the need for such "anti-takeover" provisions would no
longer exist once the Fund is converted to an open-end investment company.
Changes to these provisions, however, may only be effectuated by the affirmative
vote of 75% of the votes entitled to be cast by stockholders. Proposal 2 will be
implemented only if Proposal 1 is approved and implemented.
A copy of the further proposed Amended and Restated Articles of
Incorporation, which reflects the amendments contemplated by this Proposal, as
well as those previously discussed in Proposal 1 above, is attached to this
Proxy Statement as Exhibit C.
The Fund's stockholders are being asked to approve an amendment to the
Articles of Incorporation to declassify the Board of Directors. Currently, the
Fund's Articles of Incorporation provide that the Board of Directors will be
divided into three classes of Directors. According to the relevant provision of
the Fund's Articles of Incorporation, the term of office of the first class
expired on the date of the second annual meeting of
33
<PAGE> 42
stockholders, the term of office of the second class expired on the date of the
third annual meeting of stockholders and the term of office of the third class
expired on the date of the fourth annual meeting of stockholders. Upon the
expiration of the term of the office of each class, the Directors in such class
are elected for a term of three years to succeed the Directors whose terms of
office expire.
Elimination of the provisions in the Articles of Incorporation creating a
classified Board will permit the Open-End Fund to dispense with annual
stockholders meetings, except when required by law to hold such meetings.
Maryland corporate law provides that, if the articles of incorporation or
by-laws of either an open-end or closed-end fund registered under the 1940 Act
so provides, then the fund is not required to hold an annual stockholders'
meeting in any year in which the election of directors is not required to be
acted upon under the 1940 Act. The Articles of Incorporation and By-Laws of the
Fund do not so provide. However, the Board of Directors anticipates amending the
By-Laws, to go into effect if this Proposal is approved and implemented, to
provide that the Fund will not be required to hold an annual meeting in any year
in which the election of Directors is not required to be acted upon under the
1940 Act. The Open-End Fund does not intend to hold annual meetings in any year
in which it is not so required. By not having to hold annual stockholders'
meetings, the Open-End Fund would save the costs of preparing proxy materials
and soliciting stockholders' votes on the usual proposals contained therein.
Based on the number of outstanding shares and stockholders as of the date of
this Proxy Statement, such costs could aggregate approximately $50,000 to
$60,000 per year.
The Open-End Fund would nevertheless be required to hold a meeting of
stockholders when stockholder approvals are necessary under the 1940 Act or
Maryland law. Under the 1940 Act, the Open-End Fund would be required to hold a
stockholder meeting if the number of Directors elected by the stockholders were
less than a majority of the total number of Directors, to fill vacancies if less
than two-thirds of the Directors then holding office have been elected by the
stockholders, if a change were sought in the fundamental investment policies of
the Fund or in the Investment Advisory Agreement. Maryland law requires the
Secretary to call a special meeting of stockholders when requested in writing to
do so by the stockholders entitled to cast at least 25% of all the votes
entitled to be cast at the special meeting; provided, however, that, unless
requested by stockholders entitled to cast a majority of all the votes entitled
to be cast at the special meeting, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted on any at
a special meeting of the stockholders held during the proceeding twelve months.
In addition, under the 1940 Act, the Open-End Fund will be required to call a
special meeting of stockholders to remove Directors if requested by stockholders
entitled to cast 10% of the votes entitled to be cast at the meeting.
The stockholders are also being asked to approve an amendment to the
Articles of Incorporation that would eliminate the requirement that the number
of Directors shall never be more than 12, as well as the requirement that a
Director may be removed only
34
<PAGE> 43
by the affirmative vote of 75% of the votes entitled to be cast for the election
of Directors. This vote is higher than the majority vote required under the
Maryland General Corporation Law in the absence of a Charter provision providing
otherwise.
In addition, the stockholders are being asked to approve an amendment to
the Articles of Incorporation to remove certain provisions that limit the Fund's
ability to consolidate with or merge with or into another corporation or to
liquidate or dissolve. Under the Articles of Incorporation, the affirmative vote
of 75% (which is higher than that otherwise required under Maryland law or the
1940 Act) of the votes entitled to be cast by stockholders of the Fund would be
required (unless 75% of the Continuing Directors approve in which case the
affirmative vote of the holders of a majority of the outstanding shares of the
Fund would be required) to authorize: (i) a merger or consolidation or share
exchange of the Fund with or into another corporation; (ii) the sale, lease,
exchange, mortgage, pledge, transfer or other disposition (in one transaction or
a series of transactions in any 12 month period) to or with any other person of
any assets of the Fund having an aggregate fair market value of $1,000,000 or
more except for portfolio transactions of the Fund effected in the ordinary
course of the Fund's business; or (iii) the issuance or transfer by the Fund (in
one transaction or a series of transactions in any 12 month period) of any
securities of the Fund to any other person in exchange for cash, securities or
other property (or a combination thereof) having an aggregate fair market value
of $1,000,000 or more excluding (x) sales of any securities of the Fund in
connection with a public offering thereof, (y) issuances of any securities of
the Fund pursuant to a dividend reinvestment plan adopted by the Fund and (z)
issuances of any securities of the Fund upon the exercise of any stock
subscription rights distributed by the Fund.
These "anti-takeover" provisions were intended to have the effect of making
it more difficult and time-consuming to change majority control of the Board of
Directors without its consent and thus to reduce the Fund's vulnerability to an
unsolicited takeover proposal and to render more difficult the accomplishment of
a merger or the assumption of control by a stockholder. The conversion of the
Fund to an open-end investment company would eliminate the need for these
precautionary measures. Therefore, the Board of Directors has considered and
approved, subject to stockholder approval, the amendments to the Articles of
Incorporation eliminating the "anti-takeover" provisions contained in the
Articles of Incorporation in the event that the proposed conversion of the Fund
to open-end status is approved.
The following chart summarizes the key differences between the Fund's
current Articles of Incorporation and the Amended Articles as discussed in this
Proposal, as well as in Proposal 1 above.
35
<PAGE> 44
<TABLE>
<CAPTION>
CURRENT ARTICLES AMENDED ARTICLES
---------------- ----------------
<S> <C> <C>
Name...................... Scudder New Europe Fund, Kemper Europe Fund, Inc.
Inc. (subject to the approval
of the Reorganization by
the stockholders of KEF)
Corporate Purpose......... To function as a To function as an open-end
closed-end management management investment
investment company under company under the 1940 Act
the 1940 Act
Capital................... Authorized capital stock Increase authorized
of 100 million shares, all capital stock to
of one class called Common 500,000,000 million
Stock, with a par value of shares, reduce par value
$.01 per share to $.001 per share and
create three additional
classes of shares (i.e.,
A, B and C); Rename the
existing share class
"Class M" which will
convert to Class A one
year after the
Reorganization. Describe
terms, rights and
privileges of each class
of shares (including the
authority of the Board to
impose redemption fees).
Stockholder Voting........ Majority voting on most Super-majority voting
matters; Super-majority requirements eliminated;
vote (i.e., 75%) necessary Substantially all matters
to approve mergers, that require stockholder
reorganizations and other approval to be decided by
"business combinations" majority vote
and dissolutions unless
approved by the
"Continuing Directors" of
the Fund in which case a
majority vote would be
required and to amend
certain provisions of the
Articles
Issuance of Redeemable
Securities.............. Not permitted Permit shares to be
redeemed at net asset
value
Structure of Board of
Directors............... Classified (staggered) Eliminate classified
Board divided into 3 structure and the
classes, each class having limitation in number of
a term of 3 years; Maximum the Directors and the
number of Directors is 12 super-majority (i.e., 75%)
and Directors may only be vote necessary to remove
removed upon the Directors
affirmative vote of 75% of
the stockholders.
</TABLE>
36
<PAGE> 45
<TABLE>
<CAPTION>
CURRENT ARTICLES AMENDED ARTICLES
---------------- ----------------
<S> <C> <C>
Quorum for Stockholder
Meetings................ Not specified in the Specify one-third quorum
Articles, but the By-Laws requirement
provide for a majority of
the votes entitled to be
cast at a meeting of
stockholders to constitute
a quorum
Annual Stockholder
Meetings................ Required to elect No longer required unless
Directors the Directors must be
elected by the
stockholders in accordance
with the 1940 Act
</TABLE>
If Proposal 1, however, is not approved, the Fund will not file the Amended
Articles addressed in Proposal 1 and will continue to operate under its existing
closed-end structure.
REQUIRED VOTE
Approval of the further amendments to the Articles of Incorporation
pursuant to this Proposal 2 requires the affirmative vote of 75% of the votes
entitled to be cast by stockholders. Your Fund's Directors recommend that
stockholders approve these further amendments.
PROPOSAL 3: ELECTION OF THE BOARD OF DIRECTORS
This Proposal has two parts: Proposal 3(a) proposes for reelection those
incumbent Directors who will continue to serve on the Board of the Fund if
Proposal 1 is not approved and Proposal 3(b) proposes to elect nominees to serve
on the Board of the Fund and replace the current Directors if and when Proposal
1 is approved and implemented. If Proposal 1 is approved, the new Directors
would take office upon the resignation of the current Directors scheduled to
occur at the time the Reorganization is implemented.
(a) Closed-end Fund Board
Pursuant to the Fund's Articles of Incorporation, the Board is currently
divided into three classes, each class having a term of three years. At the
annual meeting of stockholders in each year, the term of one class of Directors
expires. In accordance with the Fund's Articles of Incorporation, the number of
Directors is apportioned among the classes so as to maintain the classes as
nearly equal in number as possible.
The persons named on the accompanying proxy card intend, in the absence of
contrary instructions, to vote all proxies in favor of the election of the two
nominees listed below as Directors of the Fund (Class II) to serve for a term of
three years, or until their successors are duly elected and qualified. All
nominees have consented to stand for election and to serve if elected, unless
Proposal 1 is approved, in which case
37
<PAGE> 46
these nominees and the other incumbent Directors have expressed an intention to
resign as of the time of the open-ending and the Director Nominees identified in
Proposal 3(b) below would comprise the Board of Directors. If any such nominee
should be unable to serve, an event not now anticipated, the proxies will be
voted for such person, if any, as shall be designated by the Committee on
Independent Directors to replace any such nominee.
INFORMATION CONCERNING NOMINEES
The following table sets forth certain information concerning each of the
two nominees for Director of the Fund. Each of the nominees is now a Director of
the Fund and of other funds managed by Scudder Kemper. Unless otherwise noted,
each of the nominees has engaged in the principal occupation listed in the
following table for more than five years, but not necessarily in the same
capacity.
Class II -- Nominees to serve until 2002 Annual Meeting of Stockholders:
<TABLE>
<CAPTION>
PRESENT OFFICE WITH
THE FUND, IF ANY; SHARES
PRINCIPAL OCCUPATION BENEFICIALLY
OR EMPLOYMENT AND YEAR FIRST OWNED
DIRECTORSHIPS IN BECAME A MARCH 31, PERCENT
NAME (AGE) PUBLICLY HELD COMPANIES DIRECTOR 1999(1) OF CLASS
---------- ----------------------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Wilson Nolen (72).............. Consultant; Trustee, 1990 10,360 Less than%
Cultural Institutions 1/4 of 1
Retirement Fund, Inc., New
York Botanical Garden,
Skowhegan School of Painting
& Sculpture; Director,
Ecohealth, Inc.
(biotechnology company)
(until 1996), Chattem, Inc.
(drug and chemical company)
(until 1993). Mr. Nolen
serves on the boards of
certain other funds managed
by Scudder Kemper.
Ladislas O. Rice (72).......... Director, Huntingdon 1990 900 Less than%
International Holdings, plc 1/4 of 1
(biological and
environmental testing
company), (until 1998)
Stanley Gibbons Holdings plc
(publisher) (until 1998) and
Whittington Hospital Trust;
Chairman and Chief Executive
Officer, Burton Group plc
(diversified retailer)
(until 1993).
</TABLE>
38
<PAGE> 47
INFORMATION CONCERNING CONTINUING DIRECTORS
The terms of Class I and III Directors do not expire this year. The
following table sets forth certain information regarding the Directors in such
classes. Unless otherwise noted, each Director has engaged in the principal
occupation listed in the following table during the past five years, but not
necessarily in the same capacity.
Class I -- Directors serving until 2001 Annual Meeting of Stockholders:
<TABLE>
<CAPTION>
PRESENT OFFICE WITH
THE FUND, IF ANY; SHARES
PRINCIPAL OCCUPATION BENEFICIALLY
OR EMPLOYMENT AND YEAR FIRST OWNED
DIRECTORSHIPS IN BECAME A MARCH 31, PERCENT
NAME (AGE) PUBLICLY HELD COMPANIES DIRECTOR 1999(1) OF CLASS
---------- ----------------------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Nicholas Bratt (50)*+.......... President; Managing Director 1990 1,931 Less than%
of Scudder Kemper; and 1/4 of 1
Director, Korea Society
(private society). Mr. Bratt
serves on the board of one
additional fund managed by
Scudder Kemper.
Mary Johnston Evans (68)....... Director, Baxter 1990 400 Less than%
International, Inc. (health 1/4 of 1
care), Saint-Gobain Corp.
(industrial products
manufacturer), Delta Air
Lines, Inc. (air lines),
Household International,
Inc. (financial services),
The Sun Company, Inc.
(petroleum products) and Dun
& Bradstreet Corporation
(marketing and financial
information services).
William H. Luers (69).......... Chairman and President, UN 1990 117(2) Less than%
Association of the U.S.A.; 1/4 of 1
President, The Metropolitan
Museum of Art (until 1999);
Director, IDEX Corporation
(liquid handling equipment
manufacturer), Wickes Lumber
Company (building
materials), StoryFirst
Communications, Inc. (owns
television and radio
stations in Russia and
Ukraine), Transco Energy
Company (natural gas
transmission company) (until
1995) and The Discount
Corporation of New York
(bond trading) (until 1993).
Mr. Luers serves on the
boards of certain other
funds managed by Scudder
Kemper.
</TABLE>
39
<PAGE> 48
Class III -- Directors serving until 2000 Annual Meeting of Stockholders:
<TABLE>
<CAPTION>
PRESENT OFFICE WITH
THE FUND, IF ANY; SHARES
PRINCIPAL OCCUPATION BENEFICIALLY
OR EMPLOYMENT AND YEAR FIRST OWNED
DIRECTORSHIPS IN BECAME A MARCH 31, PERCENT
NAME (AGE) PUBLICLY HELD COMPANIES DIRECTOR 1999(1) OF CLASS
---------- ----------------------- ---------- ------------ ----------------
<S> <C> <C> <C> <C>
Daniel Pierce (65)*+........... Chairman of the Board; 1991 16,274(3) Less than 1/4%
Managing Director of of 1
Scudder Kemper; and
Director, Fiduciary
Trust Company (bank and
trust company) and
Fiduciary Company
Incorporated (bank and
trust company). Mr.
Pierce serves on the
boards of certain other
funds managed by
Scudder Kemper.
</TABLE>
40
<PAGE> 49
<TABLE>
<CAPTION>
PRESENT OFFICE WITH
THE FUND, IF ANY; SHARES
PRINCIPAL OCCUPATION BENEFICIALLY
OR EMPLOYMENT AND YEAR FIRST OWNED
DIRECTORSHIPS IN BECAME A MARCH 31, PERCENT
NAME (AGE) PUBLICLY HELD COMPANIES DIRECTOR 1999(1) OF CLASS
---------- ----------------------- ---------- ------------ ----------------
<S> <C> <C> <C> <C>
Paul Bancroft III (69)......... Trustee, Venture 1990 7,000 Less than 1/4%
Capitalist and of 1
Consultant; Retired
President, Chief
Executive Officer and
Director, Bessemer
Securities Corp.
(private investment
company); Director,
Unova, Inc. (industrial
automation company);
and former Director,
Albany International,
Inc. (paper machine
belt manufacturer) and
Measurex Corporation
(process control
systems company). Mr.
Bancroft serves on the
boards of certain other
funds managed by
Scudder Kemper.
Richard M. Hunt (71)........... University Marshal and 1990 6,000 Less than 1/4%
Senior Lecturer, of 1
Harvard University;
Vice Chairman, American
Council on Germany;
Director, Council on
the United States and
Italy; Life Trustee,
American Field Service;
and Partner, Elmhurst
Investment Trust
(family investment
firm). Mr. Hunt serves
on the boards of
certain other funds
managed by Scudder
Kemper.
All Directors and Officers as a 43,984 .27%
group(4).....................
</TABLE>
- ---------------
* Persons considered by the Fund and its counsel to be "interested persons"
(as defined in the 1940 Act) of the Fund or of Scudder Kemper. Messrs. Bratt
and Pierce are deemed to be interested persons because of their affiliation
with the
41
<PAGE> 50
Fund's investment manager, Scudder Kemper, or because they are Officers of
the Fund or both.
+ Messrs. Bratt and Pierce are members of the Executive Committee of the Fund.
(1) The information as to beneficial ownership is based on statements furnished
to the Fund by the Directors. Unless otherwise noted, beneficial ownership
is based on sole voting and investment power.
(2) Mr. Luers' shares are held with shared voting and investment power with a
member of his family.
(3) Mr. Pierce's total includes 12,900 shares held in a fiduciary capacity as to
which he shares investment and voting power.
(4) The total for the group includes 30,084 shares held with sole investment and
voting power and 13,900 shares held with shared investment voting power.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 30(h) of the 1940 Act and Section 16(a) of the Securities Exchange
Act of 1934 require the Fund's Officers and Directors, Scudder Kemper,
affiliated persons of Scudder Kemper and persons who own more than 10 percent of
a registered class of the Fund's equity securities to file forms reporting their
affiliation with the Fund and report ownership and changes in ownership of the
Fund's shares with the SEC and the NYSE. These persons and entities are required
by SEC regulations to furnish the Fund with copies of all Section 16(a) forms
they file. Based upon a review of these forms as furnished to the Fund, the Fund
believes that, during the fiscal year ended October 31, 1998, there was
compliance with all Section 16(a) filing requirements applicable to the Fund's
Officers and Directors, Scudder Kemper and affiliated persons of Scudder Kemper.
If Proposal 1 is approved, the above-referenced filings will no longer be
required.
COMMITTEES OF THE BOARD -- BOARD MEETINGS
The Board of Directors of the Fund met four times during the fiscal year
ended October 31, 1998.
The Board of Directors, in addition to an Executive Committee, has an Audit
Committee, a Valuation Committee and a Committee on Independent Directors. The
Executive and Valuation Committees consist of regular members, allowing
alternates.
AUDIT COMMITTEE
The Board has an Audit Committee consisting of those Directors who are not
interested persons of the Fund or of Scudder Kemper ("Noninterested Directors"),
as defined in the 1940 Act, which last met on January 26, 1999. The Audit
Committee met once during the fiscal year ended October 31, 1998. The Audit
Committee reviews with management and the independent accountants for the Fund,
among other things,
42
<PAGE> 51
the scope of the audit and the controls of the Fund and its agents, reviews and
approves in advance the type of services to be rendered by independent
accountants, recommends the selection of independent accountants for the Fund to
the Board and in general considers and reports to the Board on matters regarding
the Fund's accounting and bookkeeping practices.
COMMITTEE ON INDEPENDENT DIRECTORS
The Board has a Committee on Independent Directors consisting of the
Noninterested Directors. The Committee met once during the fiscal year ended
October 31, 1998. The Committee is charged with the duty of making all
nominations for Noninterested Directors, recommendations as to compensation for
the Independent Directors and consideration of other related matters.
Stockholders' recommendations as to nominees received by management are referred
to the Committee for its consideration and action. The Committee last met on
April 27, 1999 to consider and to nominate the nominees set forth above, as well
as those nominees set forth in (b) below.
TRANSACTIONS WITH AND REMUNERATION OF DIRECTORS AND OFFICERS
The aggregate direct remuneration by the Fund of Directors not affiliated
with Scudder Kemper was $98,708, including expenses, for the fiscal year ended
October 31, 1998. Each such unaffiliated Director currently receives fees paid
by the Fund of $750 per Directors' meeting attended and an annual Director's fee
of $6,000. Each Director also receives $250 per committee meeting attended
(other than Audit Committee meetings and meetings held for the purposes of
considering arrangements between the Fund and Scudder Kemper or an affiliate of
Scudder Kemper, for which such Director receives a fee of $750). Scudder Kemper
supervises the Fund's investments, pays the compensation and certain expenses of
its personnel who serve as Directors and Officers of the Fund and receives a
management fee for its services. Several of the Fund's Officers and Directors
are also officers, directors, employees or stockholders of Scudder Kemper and
participate in the fees paid to that firm, although the Fund makes no direct
payments to them other than for reimbursement of travel expenses in connection
with the attendance at Directors and committee meetings.
The following Compensation Table, provides in tabular form, the following
data:
Column (1) All Directors who receive compensation from the Fund.
Column (2) Aggregate compensation received by a Director from the Fund and
Scudder Kemper.
Columns (3) and (4) Pension or retirement benefits accrued or proposed to
be paid by the Fund. The Fund does not pay its Directors such benefits.
Column (5) Total compensation received by a Director from the Fund, Scudder
Kemper, plus compensation received from all funds managed by Scudder Kemper for
43
<PAGE> 52
which a Director serves. The total number of funds from which a Director
receives such compensation is also provided in Column (5). Generally,
compensation received by a Director for serving on the Board of a closed-end
fund is greater than the compensation received by a Director for serving on the
Board of an open-end fund.
COMPENSATION TABLE
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
AGGREGATE
COMPENSATION AS A
AGGREGATE DIRECTOR/TRUSTEE OF
COMPENSATION AS A THE FUND AND OTHER
DIRECTOR OF THE PENSION OR SCUDDER KEMPER
FUND RETIREMENT ESTIMATED FUNDS
----------------- BENEFITS ANNUAL --------------------
PAID BY ACCRUED AS BENEFITS PAID BY
NAME OF PERSON, PAID BY SCUDDER PART OF FUND UPON PAID BY SCUDDER
POSITION FUND KEMPER EXPENSES RETIREMENT FUNDS KEMPER
- --------------- ------- ------- ------------ ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Paul Bancroft III........... $11,500 0 N/A N/A $174,200 $8,925
Director
Mary Johnston Evans......... $ 8,500 0 N/A N/A $ 8,500 0
Director
Richard M. Hunt............. $11,500 0 N/A N/A $ 50,930 0
Director
William H. Luers............ $10,000 0 N/A N/A $157,050 $8,925
Director
Wilson Nolen................ $11,500 0 N/A N/A $189,075 $6,375
Director
Ladislas O. Rice............ $ 9,850 0 N/A N/A $ 9,850 0
Director
</TABLE>
(b) Open-End Fund Board
As noted herein, if Proposal 1 is approved, the Fund will be reorganized as
an open-end fund and, subject to the approval by KEF stockholders, will acquire
the assets and assume the liabilities of KEF. In anticipation of a favorable
vote of stockholders on Proposal 1, the Board of the Fund, based on
recommendations of the Committee on Independent Directors, has nominated persons
to serve as Directors of the Fund that would be different from that of the Fund,
but are persons who are familiar with matters affecting mutual funds in the
Kemper family of funds by reason of their membership on boards of other funds in
that group. Assuming the approval of Proposals 1 and 2 above, the Directors of
the Fund would not be elected in staggered terms of three years, but would be
elected to serve until the next meeting of stockholders, if any, called for the
purpose of electing Directors and until the election and qualification of a
successor or until such Director sooner dies, resigns or is removed as provided
in the Fund's proposed Amended and Restated Articles of Incorporation and
By-Laws. If Proposal 1 is approved and Proposal 2 is not approved, however, it
is presently intended that the following persons would be divided into three
classes as
44
<PAGE> 53
follows: Class I, James E. Akins and Arthur R. Gottschalk; Class II, Frederick
T. Kelsey and Fred B. Renwick; and Class III, Thomas W. Littauer and John G.
Weithers. Further, annual meetings of stockholders would continue to be held
thereafter to elect Directors as the term of each class expires.
At this Meeting, six Board members have been nominated for election to the
Board of the Fund if Proposal 1 is approved. 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 the resignation of the current Directors
scheduled to occur at the time of open-ending, and their election and
qualification is contingent upon approval of Proposal 1. Therefore, if Proposal
1 is not approved, the Fund's current Directors, as described above, will
continue to serve on the Board of the Fund.
All the nominees listed below have consented to serve as Board members of
the Fund, if elected. In case any nominee shall be unable or shall fail to act
as a Board member by virtue of an unexpected occurrence, the proxies may be
voted for such other person(s) as shall be proposed by the Committee on
Independent Directors by the persons acting under the proxies in their
discretion.
INFORMATION CONCERNING NOMINEES
NAME, AGE, PRINCIPAL OCCUPATION AND AFFILIATIONS
James E. Akins (72)
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, 1973-1976.
Arthur R. Gottschalk (74)
Retired; formerly, President, Illinois Manufacturers Association; Trustee,
Illinois Masonic Medical Center; formerly, Illinois State Senator; formerly,
Vice President, The Reuben H. Donnelley Corp.; formerly, attorney.
Frederick T. Kelsey (72)
Retired; formerly, consultant to Goldman, Sachs & Co.; formerly, President,
Treasurer and Trustee of Institutional Liquid Assets and its affiliated mutual
funds; Trustee of the Northern Institutional Funds; formerly, Trustee of the
Pilot Funds.
Fred B. Renwick (69)
Professor of Finance, New York University, Stern School of Business;
Director, TIFF Investment Program, Inc.; Director, The Warburg 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.
45
<PAGE> 54
*Thomas W. Littauer (44)
Managing Director, Scudder Kemper; formerly, Head of Broker Dealer Division
of Putnam Investment Management; formerly, President of Client Management
Services for Fidelity Investments.
John G. Weithers (65)
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.
- ---------------
* Interested person of Scudder Kemper as defined in the 1940 Act.
All the nominees serve as board member of several Scudder Kemper funds. A
Scudder Kemper Fund is an investment company for which Scudder Kemper or its
affiliates serves as investment manager.
The table below shows, for each Noninterested Director Nominee of the Fund,
the aggregate compensation from Scudder Kemper funds paid or accrued during
calendar year 1998.
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION
FROM SCUDDER KEMPER
NAME OF DIRECTOR FUND COMPLEX
- ---------------- ----------------------
<S> <C>
James E. Akins..................................... $140,800
Arthur R. Gottschalk............................... $146,300
Frederick T. Kelsey................................ $141,300
Fred B. Renwick.................................... $141,300
John G. Weithers................................... $146,300
</TABLE>
(c) Information Relevant to Proposals 3(a) and (b)
46
<PAGE> 55
EXECUTIVE OFFICERS
In addition to Messrs. Bratt and Pierce, Directors who are also Officers of
the Fund, the following persons are current Executive Officers of the Fund:
<TABLE>
<CAPTION>
YEAR FIRST
BECAME
PRESENT OFFICE WITH THE FUND; AN
NAME (AGE) PRINCIPAL OCCUPATION OR EMPLOYMENT(1) OFFICER(2)
- ---------- ------------------------------------- ----------
<S> <C> <C>
Paul J. Elmlinger (40)..... Vice President and Assistant Secretary; 1990
Managing Director of Scudder Kemper.
Carol L. Franklin (46)..... Vice President; Managing Director of 1990
Scudder Kemper.
Bruce H. Goldfarb (34)..... Vice President and Assistant Secretary; 1998
Senior Vice President of Scudder Kemper;
Prior to February 1997; practiced law with
the law firm of Cravath, Swaine & Moore.
Joan R. Gregory (53)....... Vice President; Vice President of Scudder 1996
Kemper.
John R. Hebble (40)........ Treasurer; Senior Vice President of Scudder 1998
Kemper.
Kathryn L. Quirk (46)...... Vice President and Assistant Secretary; 1990
Managing Director of Scudder Kemper.
Ann M. McCreary (42)....... Vice President; Managing Director of 1998
Scudder Kemper.
John Millette (36)......... Vice President and Secretary; Assistant 1999
Vice President of Scudder Kemper; Prior to
September 1994; employed by Kaye, Scholer,
Fierman, Hays & Handler.
Judith A. Hannaway (46).... Vice President; Senior Vice President of 1998
Scudder Kemper.
Caroline Pearson (37)...... Assistant Secretary; Senior Vice President 1998
of Scudder Kemper; Prior to September 1997;
practiced law with the law firm of Dechert
Price & Rhoads.
</TABLE>
- ---------------
(1) Unless otherwise stated, all Executive Officers have been associated with
Scudder Kemper for more than five years, although not necessarily in the
same capacity.
(2) The President, Treasurer and Secretary each hold office until his successor
has been duly elected and qualified, and all other officers hold office in
accordance with the By-Laws of the Fund.
47
<PAGE> 56
If Proposal 1 is approved, it is expected that the following persons will
be elected by the Directors to serve as Executive Officers of the Fund at the
time of the Reorganization or earlier if the Reorganization is not approved:
<TABLE>
<CAPTION>
PROPOSED OFFICE WITH THE OPEN-END FUND;
NAME (AGE) PRINCIPAL OCCUPATION OR EMPLOYMENT
- ---------- ---------------------------------------
<S> <C>
Cornelia M. Small (55)....... Chairman; Managing Director of Scudder Kemper.
Mark S. Casady (38).......... President; Managing Director of Scudder Kemper.
Philip J. Collora (53)....... Vice President and Secretary; Senior Vice
President of Scudder Kemper.
Thomas W. Littauer (44)...... Vice President; Managing Director of Scudder
Kemper.
Ann M. McCreary (42)......... Vice President; Managing Director of Scudder
Kemper.
Linda J. Wondrack (34)....... Vice President; Senior Vice President of Scudder
Kemper.
John R. Hebble (40).......... Treasurer; Senior Vice President of Scudder
Kemper.
Brenda Lyons (36)............ Assistant Treasurer; Senior Vice President of
Scudder Kemper.
Carol L. Franklin (46)....... Vice President; Managing Director of Scudder
Kemper.
Joan R. Gregory (53)......... Vice President; Vice President of Scudder Kemper.
Kathryn L. Quirk (46)........ Vice President; Managing Director of Scudder
Kemper.
Maureen E. Kane (37)......... Assistant Secretary; Vice President of Scudder
Kemper.
Marc Slendebroek (34)........ Vice President; Vice President of Scudder Kemper.
Caroline Pearson (37)........ Assistant Secretary; Senior Vice President of
Scudder Kemper.
</TABLE>
The Officers of the Fund are elected by the Board of Directors on an annual
basis to serve until their successors are elected and qualified.
REQUIRED VOTE
Election of each of the listed nominees for Director of the Fund and of the
Open-End Fund requires the affirmative vote of a majority of the votes cast at
the Meeting in person or by proxy. Your Fund's Directors recommend that
Stockholders vote in favor of each of the nominees.
PROPOSAL 4: RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS FOR THE FUND
The fourth Proposal to be submitted at the Meeting is the ratification or
rejection of the selection by the Board of Directors of Ernst & Young LLP as
independent auditors for the Fund for the current fiscal year. In connection
with the proposal to open-end the Fund and combine the Fund with KEF, the Board
approved, at its April 27, 1999 Board meeting, the appointment of Ernst & Young
LLP ("E&Y") to replace PricewaterhouseCoopers LLP ("PwC") as the independent
auditors of the
48
<PAGE> 57
Fund, subject to stockholder ratification of E&Y's appointment. The decision to
change auditors did not involve any disagreement between PwC and the Fund, nor
has there been any such disagreement since the Fund's commencement of operations
and the decision is not related to PwC's reports on the financial condition of
the Fund. In fact, the decision was made solely because E&Y currently serves as
independent auditors to KEF and other funds in the Kemper family of funds and
there may be certain efficiencies for the Fund in establishing a relationship
with E&Y. On the recommendation of the Audit Committee, the Directors (including
a majority of the Directors who are not interested persons of the Fund) have
selected E&Y, independent auditors, to succeed PwC to audit the financial
statements of the Fund filed with the SEC and other regulatory authorities. The
Fund has been advised that neither E&Y nor any of its partners has any financial
interest in the Fund. The selection of auditors is subject to ratification or
rejection by Fund stockholders at the Meeting.
The Fund's auditors examine the financial statements of the Fund annually,
issue a report on internal controls and procedures for inclusion in SEC filings
for the year and review the Fund's income tax returns.
Representatives of PwC and E&Y will be available at the Meeting to respond
to any questions and will have the opportunity to make a statement.
REQUIRED VOTE
Ratification of the selection of independent auditors requires the
affirmative vote of a majority of the votes cast at the Meeting in person or by
proxy. Your Fund's Directors recommend that stockholders ratify the selection of
Ernst & Young LLP as independent auditors for the Fund.
PROPOSAL 5: NEW INVESTMENT ADVISORY AGREEMENT WITH SCUDDER KEMPER
GENERAL
Stockholders are being asked to approve a new Investment Advisory Agreement
with Scudder Kemper (the "New Agreement"). A form of New Agreement is attached
as Exhibit D.
Scudder Kemper acts as the investment adviser to and manager and
administrator for the Fund pursuant to an Investment Advisory, Management and
Administration Agreement (the "Existing Agreement"). As discussed above, if
Proposal 1 is approved, Scudder Kemper has agreed to accept new advisory fees
for the Fund which are lower than those currently paid by the Fund. In addition,
Scudder Kemper has proposed to conform the Existing Agreement with the Fund to
those in place for other open-end funds in the Kemper family of funds. These
changes are discussed below. If Proposal 1 is not approved, however, the
Existing Agreement will continue. Scudder Kemper, however, has indicated that it
will waive fees so that the advisory fees of the
49
<PAGE> 58
Open-End Fund do not exceed the level described in this Proposal in the event
Proposal 1 is approved but this Proposal is not.
Section 8 of the Existing Agreement provides that it may be amended by
mutual agreement, but only after authorization of such amendment by the
affirmative vote of (i) the holders of a majority of the outstanding voting
securities of the Fund, and (ii) a majority of the members of the Fund's Board
of Directors who are not parties to the Existing Agreement or interested persons
of any party to the Existing Agreement, or of any entity regularly furnishing
investment advisory services with respect to the Fund pursuant to an agreement
with any party to the Existing Agreement, cast in person at a meeting called for
the purpose of voting on such approval. The requisite majority of the Fund's
Noninterested Directors and the full Board of Directors have unanimously
approved the New Agreement with Scudder Kemper which reflects lower advisory
fees and certain other changes and which will take effect at the time of the
Fund converts to open-end investment company status.
In return for the services provided by Scudder Kemper and the expenses it
assumes, the Fund currently pays Scudder Kemper under the Existing Agreement a
monthly fee, which, on an annual basis, is equal to the rate per annum of the
value of the Fund's average weekly net assets as follows: 1.25% on the first $75
million of average daily net assets; 1.15% on the next $125 million; and 1.10%
on assets over $200 million. As of the end of the Fund's last fiscal year, the
Fund had net assets and paid an aggregate fee to Scudder Kemper under its
Existing Agreement of $358,521,370 and $4,151,077, respectively.
Scudder Kemper has acted as the investment manager for the Fund since its
inception. The Existing Agreement is dated September 7, 1998 and was last
approved by the stockholders on December 17, 1998, and the Directors on July 23,
1998. The Existing Agreement was last submitted to stockholders prior to it
becoming effective, as required by the 1940 Act.
BOARD'S RECOMMENDATION
At a meeting held on April 27, 1999 called for the purpose of, among other
things, voting on approval of the New Agreement, the Board of the Fund met and
the Board members of the Fund, including the Board members who are not parties
to the Agreement or "interested persons" (as defined in the 1940 Act) of any
such party, voted to approve the New Agreement and to recommend approval to the
stockholders of the Fund. In reaching this conclusion, the Board obtained from
Scudder Kemper such information as it deemed reasonably necessary to approve the
New Agreement and considered a number of factors, including, among other things,
the nature, scope and quality of services that Scudder Kemper will provide to
the Fund as an open-end fund; the reduction in advisory fees; the continuity of
the management of the Fund and the management personnel after the
Reorganization; and the materially and substantively identical nature of the
Existing Agreement and the New Agreement.
50
<PAGE> 59
Based on the foregoing and because the New Agreement is identical in all
material respects to the Existing Agreement (other than the lower advisory fees,
the execution dates and certain other changes discussed below), the Board
determined that the New Agreement is fair and reasonable and in the best
interest of the Fund and its stockholders.
DESCRIPTION OF THE NEW AGREEMENT
Under the New Agreement, Scudder Kemper will provide the Open-End Fund with
continuing investment management services. Scudder Kemper will make investment
decisions, prepare and make available research and statistical data and
supervise the acquisition and disposition of securities by the Open-End Fund,
all in accordance with guidelines and directions from the Fund's Board of
Directors. Scudder Kemper will assist the Open-End Fund as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Fund's Board of Directors. Scudder Kemper would be required to
maintain or cause to be maintained for the Open-End Fund all books, records and
reports and any other information required to be maintained under the 1940 Act
to the extent such books, records and reports and any other information are not
maintained by the Open-End Fund's custodian or other agents of the Open-End
Fund. Scudder Kemper would also supply the Open-End Fund with office space in
New York and furnish clerical services in the United States related to research,
statistical and investment work. Scudder Kemper will render to the Open-End Fund
administrative services such as preparing reports to, and meeting materials for,
the Fund's Board of Directors and reports and notices to Fund stockholders,
preparing and making filings with the SEC and other regulatory and
self-regulatory organizations, including preliminary and definitive proxy
materials and post-effective amendments to the Open-End Fund's registration
statement, providing assistance in certain accounting and tax matters and
investor public relations, monitoring the valuation of portfolio securities,
calculation of net asset value and calculation and payment of distributions to
stockholders, and overseeing arrangements with the Open-End Fund's custodian.
Scudder Kemper would pay reasonable salaries, fees and expenses of the Open-End
Fund's officers and employees and any fees and expenses of the Open-End Fund's
Directors who are directors, officers or employees of Scudder Kemper.
Under the New Agreement, the Open-End Fund pays or causes to be paid all of
its other expenses, including, among others, the following: organization and
certain offering expenses (including out-of-pocket expenses, but not including
overhead or employee costs of Scudder Kemper or of any one or more organizations
retained as an advisor or consultant of the Open-End Fund; legal expenses;
auditing and accounting expenses; telephone, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred in connection with membership in investment company trade
organizations; fees and expenses of the Open-End Fund's custodians,
subcustodians, transfer agents and registrars, and accounting agents; payment
for portfolio pricing or valuation services to pricing agents, accountants,
51
<PAGE> 60
bankers and other specialists, if any; expenses of preparing share certificates
and other expenses in connection with the issuance, offering, distribution, sale
or underwriting of securities issued by the Open-End Fund; expenses related to
investor and public relations; freight, insurance and other charges in
connection with the shipment of the Open-End Fund's portfolio securities;
brokerage commissions or other costs of acquiring or disposing of any portfolio
securities of the Open-End Fund; expenses of preparing and distributing reports,
notices and dividends to stockholders; expenses of the dividend reinvestment and
cash purchase plan (except for brokerage expenses paid by participants in such
plan); costs of stationery; any litigation expenses; and costs of stockholders'
and other meetings.
Under the New Agreement, Scudder Kemper is permitted to provide investment
advisory services to other clients, including clients which may invest in
securities of issuers in the countries in which the Open-End Fund primarily
invests and, in providing such services, may use information furnished by
advisors and consultants to the Open-End Fund and others. Conversely,
information furnished by others to Scudder Kemper in providing services to other
clients may be useful to Scudder Kemper in providing services to the Open-End
Fund.
The New Agreement may be terminated at any time without payment of penalty
by the Open-End Fund's Board of Directors, by vote of holders of a majority of
the outstanding voting securities of the Open-End Fund, or by Scudder Kemper on
60 days' written notice. The Existing Agreement automatically terminates in the
event of its assignment (as defined under the 1940 Act).
The New Agreement provides that Scudder Kemper is not liable for any act or
omission, error of judgment or mistake of laws or for any loss suffered by the
Open-End Fund in connection with matters to which the New Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of Scudder Kemper in the performance of its duties or from reckless
disregard by Scudder Kemper of its obligations and duties under the New
Agreement. The New Agreement also contains provisions that provide that Scudder
Kemper shall use its best efforts to seek the best overall terms available in
executing transactions for the Open-End Fund and selecting brokers and dealers
and shall consider on a continuing basis all factors it deems relevant,
including the consideration of the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Open-End Fund and/or other accounts over which Scudder Kemper or
an affiliate exercises investment discretion. In addition, with respect to the
allocation of investment and sale opportunities among the Open-End Fund and
other accounts or funds managed by Scudder Kemper, the New Agreement provides
that Scudder Kemper shall allocate such opportunities in accordance with
procedures believed by Scudder Kemper to be equitable to each entity.
If approved by the stockholders along with Proposal 1, the New Agreement
for the Open-End Fund will be dated the date the Fund commences operations as an
open-end investment company and may continue for two years and thereafter from
52
<PAGE> 61
year to year only if specifically approved by the vote of "a majority of the
outstanding voting securities" of the Open-End Fund, or by a majority of the
Open-End Fund's Board and, in either event, the vote of a majority of the
Open-End Fund's Directors who are not parties to the New Agreement or interested
persons of any such party, cast in person at a meeting called for such purpose.
As previously discussed, the New Agreement will reflect a lower annual
advisory fee than the Existing Agreement to be paid monthly based upon the
average daily net assets of the Open-End Fund as follows:
<TABLE>
<CAPTION>
ANNUAL MANAGEMENT
AVERAGE DAILY NET ASSETS FEE RATES
- ------------------------ ---------------------------
<S> <C>
$0 -- $250 million............................. .75%
$250 million -- $1 billion..................... .72
$1 billion -- $2.5 billion..................... .70
$2.5 billion -- $5 billion..................... .68
$5 billion -- $7.5 billion..................... .65
$7.5 billion -- $10 billion.................... .64
$10 billion -- $12.5 billion................... .63
Over $12.5 billion............................. .62
</TABLE>
Scudder Kemper would have received $2,677,215 for fiscal year 1998 if the
above proposed fee had been in effect, which is $1,473,862 (36%) less than the
fee paid to Scudder Kemper during the Fund's last fiscal year under the Existing
Agreement.
DIFFERENCES BETWEEN THE EXISTING AGREEMENT AND THE NEW AGREEMENT
The New Agreement is substantially identical to the Existing Agreement,
except for the lower advisory fees, as discussed above, dates of execution and
those additional matters described below.
The New Agreement does not include a provision relating to the licensing of
the "Scudder Marks" which is currently included in the Existing Agreement. The
Existing Agreement identifies Scudder Kemper as the exclusive licensee of the
rights to use and sublicense the names "Scudder," "Scudder Kemper Investments,
Inc.," and "Scudder, Stevens & Clark, Inc." (i.e., the "Scudder Marks"). Under
this license, the Fund has the non-exclusive right to use and sublicense the
Scudder name and marks as part of its name, and to use the Scudder Marks in the
Fund's investment products and services. This provision, however, would no
longer be relevant if Proposal 1 is approved since the Fund would assume a
Kemper family brand name.
The New Agreement does not require the Open-End Fund to incur travel
expenses of Directors and officers of the Fund who are also directors, officers
and employees of Scudder Kemper for attendance at Board or Committee meetings.
In addition, as an open-end fund, the Fund will not be subject to stock exchange
listing
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<PAGE> 62
fees and KDI will bear the expenses of registering or qualifying securities of
the Fund for sale.
INVESTMENT MANAGER
Scudder Kemper, a member of the Zurich Financial Services Group ("Zurich"),
is one of the largest and most experienced investment management firms in the
United States. Scudder, Stevens & Clark, Inc. ("Scudder") was established in
1919 as a partnership and was restructured as a Delaware corporation in 1985. On
December 31, 1997, the businesses of Scudder and Zurich Kemper Investments, Inc.
("Kemper") were combined. Since December 31, 1997, Scudder Kemper has served as
investment adviser to both Scudder and Kemper funds. As of December 31, 1998,
Scudder Kemper has more than $280 billion in assets under management. The
principal source of Scudder Kemper's income is professional fees received from
providing continuing investment advice. Scudder Kemper provides investment
management for many individuals and institutions, including insurance companies,
endowments, industrial corporations and financial and banking organizations.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world. Zurich owns approximately 70% of Scudder Kemper, with the balance
owned by Scudder Kemper's officers and employees.
Scudder Kemper is a Delaware corporation. Rolf Huppi* is the Chairman of
the Board and Director, Edmond D. Villani# is the President, Chief Executive
Officer and Director, Stephen R. Beckwith# is the Treasurer and Chief Financial
Officer, Kathryn L. Quirk# is the General Counsel, Chief Compliance Officer and
Secretary, Lynn S. Birdsong# is a Corporate Vice President and Director,
Cornelia M. Small# is a Corporate Vice President and Director, Laurence Cheng*
is a Director, and, effective November 1, 1998, each of Gunther Gose* and
William H. Bolinder+ is a Director of Scudder Kemper. The principal occupation
of each of Edmond D. Villani, Stephen R. Beckwith, Kathryn L. Quirk, Lynn S.
Birdsong and Cornelia M. Small is serving as a Managing Director of Scudder
Kemper; the principal occupation of Rolf Huppi is serving as Chairman and Chief
Executive Officer of Zurich; the principal occupation of Laurence Cheng is
serving as a senior partner of Capital Z Partners, an investment
- ---------------
* Mythenquai 2, Zurich, Switzerland
# 345 Park Avenue, New York, New York
+ 1400 American Lane, Schaumburg, Illinois
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<PAGE> 63
fund; the principal occupation Gunther Gose is serving as the Chief
Financial Officer of Zurich Financial Services; the principal occupation of
William H. Bolinder is serving as a member of the Group Executive Board of
Zurich. Proposal 3 includes information regarding each Director and Officer of
the Fund who is associated with Scudder Kemper.
The outstanding voting securities of Scudder Kemper are held of record
36.63% by Zurich Holding Company of America ("ZHCA"), a subsidiary of Zurich;
32.85% by ZKI Holding Corp. ("ZKIH"), a subsidiary of Zurich; 20.86% by Stephen
R. Beckwith, Lynn S. Birdsong, Kathryn L. Quirk, Cornelia M. Small and Edmond D.
Villani, in their capacity as representatives (the "Management Representatives")
of Scudder Kemper's management holders and retiree holders pursuant to a Second
Amended and Restated Security Holders Agreement (the "Security Holders
Agreement") among Scudder Kemper, Zurich, ZHCA, ZKIH, the Management
Representatives, the management holders, the retiree holders and Edmond D.
Villani, as trustee of the Scudder Kemper Executive Defined Contribution Plan
Trust (the "Plan Trust"); and 9.66% by the Plan Trust. There are no outstanding
non-voting securities of Scudder Kemper.
Pursuant to the Security Holders Agreement (which was entered into in
connection with the Scudder-Zurich Transaction), the Board of Directors of
Scudder Kemper consists of four directors designated by ZHCA and ZKIH and three
directors designated by Management Representatives.
The Security Holders Agreement requires the approval of a majority of the
Scudder-designated directors for certain decisions, including changing the name
of Scudder Kemper, effecting an initial public offering before April 15, 2005,
causing Scudder Kemper to engage substantially in non-investment management and
related business, making material acquisitions or divestitures, making material
changes in Scudder Kemper's capital structure, dissolving or liquidating Scudder
Kemper, or entering into certain affiliated transactions with Zurich. The
Security Holders Agreement also provides for various put and call rights with
respect to Scudder Kemper stock held by persons who were employees of Scudder at
the time of the Scudder-Zurich Transaction, limitations on Zurich's ability to
purchase other asset management companies outside of Scudder Kemper, rights of
Zurich to repurchase Scudder Kemper stock upon termination of employment of
Scudder Kemper personnel, and registration rights for stock held by stockholders
of Scudder continuing after the Scudder-Zurich Transaction.
Directors, officers and employees of Scudder Kemper from time to time may
enter into transactions with various banks, including each Fund's custodian
bank. It is Scudder Kemper's opinion that the terms and conditions of those
transactions will not be influenced by existing or potential custodial or other
Fund relationships.
Scudder Service Corporation ("SSC"), a subsidiary of Scudder Kemper, is the
transfer agent for the Fund. The Fund was charged $15,000 by SSC during the last
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<PAGE> 64
fiscal year. Kemper Service Company, an affiliate of Scudder Kemper, will
provide transfer agency services to the Open-End Fund.
Exhibit E sets forth (as of each fund's last fiscal year end, unless
otherwise noted) the fees and other information regarding investment companies
advised by Scudder Kemper that have similar investment objectives to the Fund.
BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS
To the maximum extent feasible, Scudder Kemper places orders for portfolio
transactions through Scudder Investor Services, Inc. ("SIS"), Two International
Place, Boston, Massachusetts 02110, which in turn places orders on behalf of the
Fund with issuers, underwriters or other brokers and dealers. SIS is a
corporation registered as a broker/dealer and a subsidiary of Scudder Kemper.
SIS does not receive any commissions, fees or other remuneration from the Fund
for this service. In selecting brokers and dealers with which to place portfolio
transactions for the Fund, Scudder Kemper will not consider sales of shares of
funds currently advised by Scudder Kemper. When it can be done consistently with
the policy of obtaining the most favorable net results, Scudder Kemper may place
such orders with brokers and dealers who supply research, market and statistical
information to the Fund or to Scudder Kemper. Scudder Kemper is authorized when
placing portfolio transactions for equity securities to pay a brokerage
commission (to the extent applicable) in excess of that which another broker
might charge for executing the same transaction on account of the receipt of
research, market or statistical information. Allocation of portfolio
transactions is supervised by Scudder Kemper.
REQUIRED VOTE
Approval of the New Agreement requires the affirmative vote of the holders
of a majority of the outstanding voting securities of the Fund (as defined in
the 1940 Act). Your Fund's Directors recommend that stockholders approve the New
Agreement.
ADDITIONAL INFORMATION
GENERAL
The cost of preparing, printing and mailing the enclosed proxy card and
Proxy Statement and all other costs incurred in connection with the solicitation
of proxies, including any additional solicitation made by letter, telephone or
telegraph (approximately $250,000) will be paid by the Fund and KEF based on
their relative net assets. In addition to solicitation by mail, certain officers
and representatives of the Fund, officers and employees of Scudder Kemper 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.
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<PAGE> 65
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies. The cost of SCC's services is estimated at
approximately $25,000 plus expenses. As the Meeting date approaches, certain
stockholders of the Fund may receive a telephone call from a representative of
SCC if their votes have not yet been received. Authorization to permit SCC to
execute proxies may be obtained by telephonic or electronically transmitted
instructions from stockholders of the Fund. Proxies that are obtained
telephonically will be recorded in accordance with the procedures set forth
below. The Directors believe that these procedures are reasonably designed to
ensure that the identity of the stockholder casting the vote is accurately
determined and that the voting instructions of the stockholder are accurately
determined.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each stockholder's full name, address, social security or
employer identification number, title (if the stockholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned,
and to confirm that the stockholder has received the proxy materials in the
mail. If the information solicited agrees with the information provided to SCC,
then the SCC representative has the responsibility to explain the process, read
the Proposals on the proxy card, and ask for the stockholder's instructions on
the Proposals. The SCC representative, although he or she is permitted to answer
questions about the process, is not permitted to recommend to the stockholder
how to vote, other than to read any recommendation set forth in the Proxy
Statement. SCC will record the stockholder's instructions on the card. Within 72
hours, but in any event before the Meeting, the stockholder will be sent a
letter or mailgram to confirm his or her vote and asking the stockholder to call
SCC immediately if his or her instructions are not correctly reflected in the
confirmation.
If a stockholder wishes to participate in the Meeting, but does not wish to
give a proxy by telephone, the stockholder may still submit the proxy card
originally sent with the Proxy Statement or attend in person. Should
stockholders require additional information regarding the proxy or replacement
proxy cards, they may contact SCC toll-free at 1-800-723-8613. Any proxy given
by a stockholder, whether in writing or by telephone, is revocable until voted
at the Meeting.
LEGAL PROCEEDINGS
The Fund is a defendant in a class action filed in the Southern District of
New York that also names the Fund's Directors and investment adviser (Brautigam
v. Bratt, et al. No. 98 Civ. 9060 (AKH)). The complaint alleges breaches of
fiduciary duty under Sections 36(a) and 48 of the 1940 Act and common law by the
defendants in allegedly failing to take adequate steps to diminish the discount
to net asset value at which shares of the Fund have traded in recent years. The
action has been stayed pending a decision in a similar case on whether such a
case may be maintained as a "class action". In any event, the plaintiff's
counsel has acknowledged that the case will
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<PAGE> 66
become moot if and when the Fund converts to open-end status, although they have
also expressed an intent to continue to press for a recovery of attorney's fees.
In light of how and when the open-ending proposal was developed by the Board and
the likelihood that it will be approved by stockholders, the Fund has been
advised by counsel that it has meritorious defenses to the action and will
oppose any effort by plaintiff to recover attorney's fees.
OTHER MATTERS TO COME BEFORE THE MEETING
No Board member is 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 stockholders 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.
PROPOSALS OF STOCKHOLDERS
Stockholders wishing to submit proposals for inclusion in a proxy statement
for a subsequent stockholders' meeting should send their written proposals to
the Secretary of the Fund, as appropriate, at the address set forth on the cover
of this Proxy Statement. Proposals must be received at a reasonable time prior
to the date of a meeting of stockholders to be considered for inclusion in the
materials for the Fund's meeting. If Proposal No. 1 is not approved and the Fund
continues to operate in closed-end form or if Proposal 1 is approved and the
Fund open-ends, but Proposal 2 is not approved by the stockholders, stockholders
wishing to submit proposals for inclusion in a proxy statement for the 2000
annual meeting of stockholders of the Fund should send their written proposals
to the Fund at 345 Park Avenue, New York, New York 10154, by February 4, 2000.
Timely submission of a proposal does not, however, necessarily mean that the
proposal will be included.
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<PAGE> 67
The Fund may exercise discretionary voting authority with respect to
stockholder proposals for any 2000 annual meeting of its stockholders which are
not included in the proxy statement and form of proxy, if notice of such
proposal is not received by the Fund at the above address on or before April 19,
2000. Even if timely notice is received, the Fund may exercise discretionary
voting authority in certain other circumstances. Discretionary voting authority
is the ability to vote proxies that stockholders have executed and returned to
the Fund on matters not specifically reflected on the form of proxy.
By Order of the Board of Directors of
the Fund,
[/s/JOHN MILLETTE]
John Millette
Secretary
June 3, 1999
THE BOARD OF DIRECTORS OF THE FUND HOPES THAT STOCKHOLDERS WILL ATTEND THE
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY OR VOTING INSTRUCTION CARD IN THE
ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR
THE MEETING AND YOUR COOPERATION WILL BE APPRECIATED.
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<PAGE> 68
EXHIBIT INDEX
<TABLE>
<S> <C>
Amendment to the Fund's Articles of Incorporation to
Open-End the Fund......................................... Exhibit A
Agreement and Plan of Reorganization........................ Exhibit B
Amendment to the Fund's Articles of Incorporation
Eliminating Certain Provisions............................ Exhibit C
Form of Investment Advisory Agreement....................... Exhibit D
Information Relating to Similar Funds Managed by Scudder
Kemper.................................................... Exhibit E
</TABLE>
<PAGE> 69
EXHIBIT A
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
SCUDDER NEW EUROPE FUND, INC.
Scudder New Europe Fund, Inc. a Maryland corporation, having its principal
office in Maryland in Baltimore City (hereinafter called the "Corporation")
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
ARTICLE I: The Charter of the Corporation is amended and as so amended is
restated in its entirety by striking out Article First through Twelfth and
inserting in lieu thereof the following:
"FIRST: The undersigned, Joshua M. Levine, whose address is One Citicorp
Center, 153 East 53rd Street, New York, New York 10022, being at least eighteen
years of age, acting as incorporator, does hereby form a corporation under the
Maryland General Corporation Law.
SECOND: The name of the Corporation is Kemper Europe Fund, Inc. (the
"Corporation").*
THIRD: The purposes for which the Corporation is formed are to operate and
carry out the business of an open-end management investment company under the
Investment Company Act of 1940, as amended, and generally to exercise and enjoy
all of the powers, rights and privileges granted to, or conferred upon,
corporations by the Maryland General Corporation Law.
FOURTH: The post office address of the principal office of the Corporation
in the State of Maryland is c/o The Corporation Trust Incorporated, 300 East
Lombard Street, Baltimore, Maryland 21202. The name and address of the resident
agent of the Corporation in the State of Maryland is The Corporation Trust
Incorporated, 300 East Lombard Street, Baltimore, Maryland 21202.
FIFTH: (1) The total number of shares of capital stock which the
Corporation shall have authority to issue is five hundred million (500,000,000),
all of which shall be Common Stock having a par value of one-tenth of one cent
($0.001) per share and an aggregate par value of five hundred thousand dollars
($500,000). Until such time as the Board of Directors shall provide otherwise in
accordance with paragraph (1)(d) of Article Seventh hereof, two hundred million
(200,000,000) of the authorized shares of Common Stock of the Corporation are
classified as Class A Common Stock, one hundred million (100,000,000) of such
shares are classified as Class B Common Stock, one hundred million (100,000,000)
of such shares are classified as Class C Common
- ---------------
*If the Reorganization is not approved by the shareholders of Kemper Europe
Fund, it is currently expected that the Fund would assume a Kemper family brand
name.
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<PAGE> 70
Stock and one hundred million (100,000,000) of such shares are classified as
Class M Common Stock. Each share (including for this purpose a fraction of a
share) of Common Stock issued and outstanding immediately prior to these
Articles of Amendment and Restatement becoming effective, shall, at such
effective time, be reclassified automatically, and without any action or choice
on the part of the holder, into a share (or the same fraction of a share) of
Class M Common Stock.
(2) As more fully set forth hereafter, the assets and liabilities and the
income and expenses attributable to each class of the Corporation's stock shall
be determined separately from those of each other class of the Corporation's
stock and, accordingly, the net asset value, the dividends and distributions
payable to stockholders, and the amounts distributable in the event of
liquidation or dissolution of the Corporation to stockholders of the
Corporation's stock may vary from class to class.
(3) The assets of the Corporation attributable to each of the Class A
Common Stock, the Class B Common Stock, the Class C Common Stock and the Class M
Common Stock shall be invested in the same investment portfolio of the
Corporation.
(4) The allocations of investment income and losses and capital gains and
losses and expenses and liabilities of the Corporation among each of the classes
of Common Stock of the Corporation shall be determined by the Board of Directors
in a manner that is consistent with the Investment Company Act of 1940, as
amended. The determination of the Board of Directors shall be conclusive as to
the allocation of investment income and losses, capital gains and losses,
expenses and liabilities (including accrued expenses and reserves) and assets to
a particular class or classes.
(5) Shares of each class of stock shall be entitled to such dividends or
distributions, in stock or in cash or both, as may be declared from time to time
by the Board of Directors with respect to such class. Specifically, and without
limiting the generality of the foregoing, the dividends and distributions of
investment income and capital gains with respect to each class of stock may vary
with respect to each such class to reflect differing allocations of the expenses
of the Corporation among the holders of the classes and any resultant
differences among the net asset values per share of the classes, to such extent
and for such purposes as the Board of Directors may deem appropriate. The Board
of Directors may provide that dividends and distributions on the Class M Common
Stock may be paid or reinvested in shares of Class A Common Stock. The Board of
Directors may provide that dividends and distributions shall be payable only
with respect to those shares of stock that have been held of record continuously
by the stockholder for a specified period, not to exceed 72 hours, prior to the
record date of the dividend or distribution.
(6) On each matter submitted to a vote of the stockholders, each holder of
a share of stock shall be entitled to one vote for each such share standing in
such holder's name upon the books of the Corporation regardless of the class
thereof, and all shares of all classes shall vote together as a single class;
provided, however, that (i) when the Maryland General Corporation Law or the
Investment Company Act of 1940, as
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<PAGE> 71
amended, requires that a class vote separately with respect to a given matter,
the separate voting requirements of the applicable law shall govern with respect
to the affected class or classes: (ii) in the event that the separate vote
requirement referred to in (i) above applies with respect to one or more
classes, then, subject to (iii) below, the shares of all other classes shall
vote as one single class; and (iii) as to any matter, which, in the judgment of
the Board of Directors (which shall be conclusive and binding for all purposes),
does not affect the interests of a particular class, such class shall not be
entitled to any vote and only the holders of shares of the affected class or
classes shall be entitled to vote.
(7) In the event of the liquidation or dissolution of the Corporation,
stockholders of each class of the Corporation's stock shall be entitled to
receive, as a class, out of the assets of the Corporation available for
distribution to stockholders, but other than general assets not attributable to
any particular class of stock, the assets attributable to the class less the
liabilities allocated to that class; and the assets so distributable to the
stockholders shall be distributed among the stockholders in proportion to the
number of shares of the class held by them and recorded on the books of the
Corporation. In the event that there are any general assets not attributable to
any particular class of stock, and such assets are available for distribution,
the distribution shall be made to the holders of all classes in proportion to
the net asset value of the respective classes or as otherwise determined by the
Board of Directors.
(8) To the extent permitted by law, each holder of shares of the
Corporation's stock shall be entitled to require the Corporation to redeem all
or any part of the shares of stock of the Corporation standing in the name of
the holder on the books of the Corporation, and all shares of stock issued by
the Corporation shall be subject to redemption by the Corporation, at the
redemption price of the shares as in effect from time to time as may be
determined by or pursuant to the direction of the Board of Directors of the
Corporation in accordance with the provisions of Article Seventh, less the
amount of any applicable redemption charge, deferred sales charge or other
amount imposed by the Board of Directors (to the extent consistent with
applicable law), subject to the right of the Board of Directors of the
Corporation to suspend the right of redemption or postpone the date of payment
of the redemption price in accordance with provisions of applicable law. The
proceeds of the redemption of a share (including a fractional share) of any
class of stock of the Corporation shall be reduced by the amount of any
redemption charge, deferred sales charge or other amount payable on such
redemption pursuant to the terms of issuance of such shares or otherwise imposed
by the Board of Directors. Without limiting the generality of the foregoing, the
Corporation shall, to the extent permitted by applicable law, have the right at
any time, at the Corporation's option, to redeem, in whole or in part, the
shares owned by any holder of stock of the Corporation (i) if the redemption is,
in the opinion of the Board of Directors of the Corporation, desirable in order
to prevent the Corporation from being deemed a "personal holding company" within
the meaning of the Internal Revenue Code of 1986, as amended, or (ii) if the
value of the shares in the account maintained by the Corporation or its transfer
agent for any class of stock for
A-3
<PAGE> 72
the stockholder is below an amount determined from time to time by the Board of
Directors of the Corporation (the "Minimum Account Balance") and (a) the
stockholder has been given notice of the redemption and has failed to make
additional purchases of shares in an amount sufficient to bring the value in his
account to at least the Minimum Account Balance before the redemption is
effected by the Corporation or (b) the redemption is with respect to fees to be
paid by the stockholder to the Corporation for failing to maintain the Minimum
Account Balance or (iii) the Board of Directors has otherwise determined that it
is in the best interests of the Corporation to redeem the shares.
Notwithstanding any other provision of this Article FIFTH(8), if certificates
representing the redeemed shares have been issued, the redemption price need not
be paid by the Corporation until such certificates are presented in proper form
for transfer to the Corporation or the agent of the Corporation appointed for
such purpose; however, the redemption shall be effective in accordance with the
action of the Board of Directors, regardless of whether or not such presentation
has been made. Payment of the redemption price shall be made in cash by the
Corporation at the time and in the manner as may be determined from time to time
by the Board of Directors of the Corporation unless, in the opinion of the Board
of Directors, which shall be conclusive, conditions exist that make payment
wholly in cash unwise or undesirable; in such event the Corporation may make
payment wholly or partly by securities or other property included in the assets
allocable to the class of the shares for which redemption is being sought, the
value of which shall be determined as provided herein.
(9) At such times as may be determined by the Board of Directors (or with
the authorization of the Board of Directors, by the officers of the Corporation)
in accordance with the Investment Company Act of 1940, as amended, applicable
rules and regulations thereunder and applicable rules and regulations of the
National Association of Securities Dealers, Inc. and from time to time reflected
in the registration statement of the Corporation (the "Corporation's
Registration Statement"), shares of a particular class of stock of the
Corporation may be automatically converted into shares of another class of stock
of the Corporation based on the relative net asset values of such classes at the
time of conversion, subject, however, to any conditions of conversion that may
be imposed by the Board of Directors (or with the authorization of the Board of
Directors, by the officers of the Corporation) and reflected in the
Corporation's Registration Statement. The terms and conditions of such
conversion may vary within and among the classes to the extent determined by the
Board of Directors (or with the authorization of the Board of Directors, by the
officers of the Corporation) and set forth in the Corporation's Registration
Statement. Without limiting the generality of the foregoing, each share (or
fraction of a share) of Class M Common Stock that is issued and outstanding as
of the one year anniversary date of the date on which these Articles of
Amendment and Restatement become effective shall be converted automatically,
without any action or choice on the part of the holder, into a share (or such
fractional share), of Class A Common Stock of the Corporation based on relative
net asset values at the time of conversion, and outstanding certificates
previously representing the issued and outstanding shares of
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<PAGE> 73
Class M Common Stock shall thereafter represent Class A Common Stock in the
resulting number of whole shares.
(10) The Corporation may issue shares of stock in fractional denominations
to the same extent as its whole shares, and shares in fractional denominations
shall be shares of stock having proportionately to the respective fractions
represented thereby all the rights to vote, the right to receive dividends and
distributions, and the right to participate upon liquidation of the Corporation,
but excluding the right, if any, to receive a stock certificate representing
fractional shares.
(11) No stockholder shall be entitled to any preemptive right other than as
the Board of Directors may establish.
SIXTH: (a) The number of Directors of the Corporation shall be three,
which number shall be increased or decreased from time to time in the manner
provided in the By-Laws of the Corporation, provided that the number of
Directors shall not be less than three, nor more than twelve. A director may be
removed from office only for cause and only by the vote of 75% of the votes
entitled to be cast for the election of directors.
(b) Beginning with the first annual meeting of the stockholders held after
the initial public offering of the shares of the Corporation, the Directors
shall be divided into three classes, and shall be designated as Class I, Class
II and Class III Directors, respectively. The Class I Directors elected at such
initial annual meeting shall serve for a term of office expiring at the next
succeeding annual stockholders meeting. The Class II Directors elected at such
initial annual meeting shall serve for a term of office expiring at the second
succeeding annual stockholders meeting. The Class III Directors elected at such
initial annual meeting shall serve for a term of office expiring at the third
succeeding annual stockholders meeting. After expiration of the terms of office
specified for the Directors elected at such initial annual meeting, the
Directors of each class shall serve for terms of three (3) years, or, when
filling a vacancy, for the unexpired portion of such term and until their
successors are elected and have qualified. If the number of Directors is
changed, any increase or decrease shall be apportioned among the classes by the
Board of Directors so as to maintain the number of Directors in each class as
nearly as possible, but in no event shall a decrease in the number of Directors
shorten the term of any incumbent Director.
(c) The names of the directors who shall act until the first annual meeting
or until their successors are duly chosen and qualify are:
George S. Johnston
Nicholas Bratt
Juris Padegs
SEVENTH: The following provisions are inserted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the Board
of Directors and stockholders.
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<PAGE> 74
(1) In addition to its other powers explicitly or implicitly granted under
the Charter of the Corporation, by law or otherwise, the Board of Directors of
the Corporation:
(a) is expressly and exclusively authorized to make, alter, amend or
repeal the By-Laws of the Corporation;
(b) may from time to time determine whether, to what extent, at what
times and places, and under what conditions and regulations the accounts
and books of the Corporation, or any of them, shall be open to the
inspection of the stockholders, and no stockholder shall have any right to
inspect any account, book or document of the Corporation except as
conferred by statute or as authorized by resolution of the Board of
Directors of the Corporation;
(c) is empowered to authorize, without stockholder approval, the
issuance and sale from time to time of shares of stock of any class of the
Corporation whether now or hereafter authorized and securities convertible
into shares of stock of the Corporation of any class or classes, whether
now or hereafter authorized, for such consideration as the Board may deem
advisable;
(d) is authorized to classify or to reclassify, from time to time, any
unissued shares of stock of the Corporation, whether now or hereafter
authorized, by setting, changing or eliminating the preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms and conditions of or rights to require redemption
for the stock. The provisions of these Articles of Amendment and
Restatement (including those in Article FIFTH hereof) shall apply to each
class of stock unless otherwise provided by the Board of Directors prior to
issuance of any shares of that class;
(e) is empowered to authorize and issue, without stockholder approval,
unsecured obligations of the Corporation, and subject to Article Eighth of
these Articles of Amendment and Restatement, secured obligations of the
Corporation, as the Board of Directors may determine, and to authorize and
cause to be executed mortgages and liens upon the real or personal property
of the Corporation;
(f) Notwithstanding anything in this Charter to the contrary, is
authorized to establish in its absolute discretion the basis or method for
determining the value of the assets attributable to any class, the value of
the liabilities attributable to any class and the net asset value of each
share of any class of the Corporation's stock; and
(g) is authorized to determine in accordance with generally accepted
accounting principles and practices what constitutes net profits, earnings,
surplus or net assets in excess of capital, and to determine what
accounting periods shall be used by the Corporation for any purpose; to set
apart out of any funds of the Corporation reserves for such purposes as it
shall determine and to abolish the
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same; to declare and pay any dividends and distributions in cash,
securities or other property from surplus or any other funds legally
available therefor, at such intervals as it shall determine; to declare
dividends or distributions by means of a formula or other method of
determination, at meetings held less frequently than the frequency of the
effectiveness of such declarations; and to establish payment dates for
dividends or any other distributions on any basis, including dates
occurring less frequently than the effectiveness of declarations thereof.
(2) Notwithstanding any provision of the Maryland General Corporation Law
requiring a greater proportion than a majority of the votes of all classes or of
any class of the Corporation's stock entitled to be cast in order to take or
authorize any action, any such action shall be effective and valid if taken or
authorized by the affirmative vote of a majority of the aggregate number of
votes entitled to be cast thereon subject to any applicable requirements of the
Investment Company Act of 1940, as amended, as from time to time in effect, or
rules or orders of the Securities and Exchange Commission or any successor
thereto.
(3) The presence in person or by proxy of the holders of shares entitled to
cast one-third of the votes entitled to be cast (without regard to class) shall
constitute a quorum at any meeting of the stockholders, except with respect to
any matter which, under applicable statutes or regulatory requirements, requires
approval by a separate vote of one or more classes of stock, in which case the
presence in person or by proxy of the holders of shares entitled to cast
one-third of the votes entitled to be cast by each class entitled to vote as a
class on the matter shall constitute a quorum.
(4) Any determination made in good faith by or pursuant to the direction of
the Board of Directors, as to the amount of the assets, debts, obligations, or
liabilities of the Corporation, as to the amount of any reserves or charges set
up and the propriety thereof, as to the time of or purpose for creating such
reserves or charges, as to the use, alteration or cancellation of any reserves
or charges (whether or not any debt, obligation, or liability for which such
reserves or charges shall have been created shall be then or thereafter required
to be paid or discharged), as to the value of or the method of valuing any
investment owned or held by the Corporation, as to market value or fair value of
any investment or fair value of any other asset of the Corporation, as to the
allocation of any asset of the Corporation to a particular class or classes of
the Corporation's stock, as to the charging of any liability or expense of the
Corporation to a particular class or classes of the Corporation's stock, as to
the number of shares of the Corporation outstanding, as to the estimated expense
to the Corporation in connection with purchases of its shares, as to the ability
to liquidate investments in orderly fashion, or as to any other matters relating
to the issue, sale, redemption or other acquisition or disposition of
investments or shares of the Corporation, shall be final and conclusive and
shall be binding upon the Corporation and all holders of its shares, past,
present and future, and shares of the Corporation are issued and sold on the
condition and understanding that any and all such determinations shall be
binding as aforesaid.
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EIGHTH: Special Vote of Stockholders.
(a) Except as otherwise provided in this Article Eighth, at least 75% of
the votes entitled to be cast by stockholders, in addition to the affirmative
vote of 75% of the Board of Directors, shall be necessary to effect any of the
following actions:
(i) any amendment to these Articles to make the Corporation's Common
Stock a "redeemable security" (as such term is defined in the Investment
Company Act of 1940, as amended) unless the Continuing Directors (as
hereinafter defined) of the Corporation, by a vote of at least 75% of such
Directors, approve such amendment in which case the affirmative vote of the
holders of a majority of the outstanding shares of the Corporation entitled
to vote thereon shall be required;
(ii) any stockholder proposal as to specific investment decisions made
or to be made with respect to the Corporation's assets;
(iii) any proposal as to the voluntary liquidation or dissolution of
the Corporation unless the Continuing Directors of the Corporation, by a
vote of at least 75% of such Directors, approve such proposal in which case
the affirmative vote of the holders of a majority of the outstanding shares
of the Corporation entitled to vote thereon shall be required; or
(iv) any Business Combination (as hereinafter defined) unless either
the condition in clause (A) below is satisfied or all of the conditions in
clauses (B), (C), (D), (E) and (F) below are satisfied:
(A) The Business Combination shall have been approved by a vote of
at least 75% of the Continuing Directors in which case the affirmative
vote of the holders of a majority of the outstanding shares of the
Corporation entitled to vote thereon shall be required.
(B) The aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the Business
Combination, of consideration other than cash to be received per share
by holders of any class of outstanding Voting Stock (as hereinafter
defined) in such Business Combination shall be at least equal to the
higher of the following:
(x) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers fees) paid by
an Interested Party (as hereinafter defined) for any shares of
such Voting Stock acquired by it (aa) within the two-year period
immediately prior to the first public announcement of the proposal
of the Business Combination (the "Announcement Date") or (bb)(i)
in the Threshold Transaction (as hereinafter defined), or (ii) in
any period between the Threshold Transaction and the consummation
of the Business Combination, whichever is higher; and
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(y) the net asset value per share of such Voting Stock on the
Announcement Date or on the date of the Threshold Transaction,
whichever is higher.
(C) The consideration to be received by holders of the particular
class of outstanding Voting Stock shall be in cash or in the same form
as the Interested Party has previously paid for shares of any class of
Voting Stock. If the Interested Party has paid for shares of any class
of Voting Stock with varying forms of consideration, the form of
consideration for such class of Voting Stock shall be either cash or the
form used to acquire the largest number of shares of such class of
Voting Stock previously acquired by it.
(D) After the occurrence of the Threshold Transaction, and prior to
the consummation of such Business Combination, such Interested Party
shall not have become the beneficial owner of any additional shares of
Voting Stock except by virtue of the Threshold Transaction.
(E) After the occurrence of the Threshold Transaction, such
Interested Party shall not have received the benefit, directly or
indirectly (except proportionately as a shareholder of the Corporation),
of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by the
Corporation, whether in anticipation of or in connection with such
Business Combination or otherwise.
(F) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the Investment Company Act of 1940,
as amended, and the rules and regulations thereunder (or any subsequent
provisions replacing such Acts, rules or regulations) shall be prepared
and mailed by the Interested Party, at such Interested Party's expense,
to the shareholders of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Acts or
subsequent provisions).
(b) For the purposes of this Article Eighth:
(i) "Business Combination" shall mean any of the transactions
described or referred to in any one or more of the following subparagraphs:
(A) any merger, consolidation or share exchange of the Corporation
with or into any other person;
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions in any 12
month period) to or with any other person of any assets of the
Corporation having an aggregate Fair Market Value of $1,000,000 or more
except for portfolio transactions of the Corporation effected in the
ordinary course of the Corporation's business;
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(C) the issuance or transfer by the Corporation (in one transaction
or a series of transactions in any 12 month period) of any securities of
the Corporation to any other person in exchange for cash, securities or
other property (or a combination thereof) having an aggregate Fair
Market Value of $100,000,000 or more excluding (x) sales of any
securities of the Corporation in connection with a public offering
thereof, (y) issuances of any securities of the Corporation pursuant to
a dividend reinvestment plan adopted by the Corporation and (z)
issuances of any securities of the Corporation upon the exercise of any
stock subscription rights distributed by the Corporation;
(ii) "Continuing Director" means any member of the Board of Directors
of the Corporation who is not an Interested Party or an Affiliate of an
Interested Party and has been a member of the Board of Directors for a
period of at least 12 months, or is a successor of a Continuing Director
who is unaffiliated with an Interested Party and is recommended to succeed
a Continuing Director by a majority of the Continuing Directors then on the
Board of Directors.
(iii) "Interested Party" shall mean any person, other than an
investment company advised by the Corporation's initial investment manager
or any of its Affiliates, which enters, or proposes to enter, into a
Business Combination with the Corporation.
(iv) "Person" shall mean an individual, a corporation, a trust or a
partnership.
(v) "Voting Stock" shall mean capital stock of the Corporation
entitled to vote generally in the election of directors.
(vi) A person shall be a "beneficial owner" of any Voting Stock:
(A) which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly; or
(B) which such person or any of its Affiliates or Associates has
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or
(C) which is beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any Agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
Voting Stock.
(vii) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule l2b-1 of the General Rules and Regulations
under the Securities Exchange Act of 1934.
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(viii) "Fair Market Value" means:
(A) in the case of stock, the highest closing sale price during the
30-day period immediately preceding the relevant date of a share of such
stock on the New York Stock Exchange, or if such stock is not listed on
such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such stock
is listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such stock
during the 30-day period preceding the relevant date on the National
Association of Securities Dealers, Inc. Automated Quotation Systems
(NASDAQ) or any system then in use, or if no such quotations are
available, the fair market value on the relevant date of the share of
such stock as determined by 75% of the Continuing Directors in good
faith, and
(B) in the case of property other than cash or stock, the fair
market value of such property on the relevant date as determined by 75%
of the Contracting Directors in good faith.
(ix) "Threshold Transaction" means the transaction by or as a result
of which an Interested Party first becomes the beneficial owner of Voting
Stock.
(x) In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used
in subparagraph (a)(iv)(B) above shall include the shares of Common Stock
and/or the shares of any other class of outstanding Voting Stock retained
by the holders of such shares.
(xi) Continuing Directors of the Corporation, acting by a vote of 75%,
shall have the power and duty to determine, on the basis of information
known to them after reasonable inquiry, all facts necessary to determine
(a) the number of shares of Voting Stock beneficially owned by any person,
(b) whether a person is an Affiliate or Associate of another, (c) whether
the requirements of subparagraph (a)(iv) above have been met with respect
to any Business Combination, and (d) whether the assets which are the
subject of any Business Combination have, or the consideration to be
received for the issuance or transfer of securities by the Corporation in
any Business Combination has, an aggregate Fair Market Value of $1,000,000
or more.
NINTH: Pre-Emptive Rights. No holder of the Common stock of the
Corporation or of any other class of stock or securities which may hereafter be
created shall be entitled as such, as a matter of right, to subscribe for or
purchase any part of any new or additional issue of stock of any class, or of
rights or options to purchase any stock, or of securities convertible into, or
carrying rights or options to purchase, stock of any class, whether now or
hereafter authorized or whether issued for a consideration other than money or
by way of a dividend or otherwise, and all such rights are hereby
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waived by each holder of Common Stock and of any other class of stock which may
hereafter be created.
TENTH: Reservation of Right to Amend. From time to time any of the
provisions of this Charter may be amended, altered or repealed (including any
amendment which changes the terms of any of the outstanding stock by
classification, reclassification or otherwise) and all rights at any time
conferred upon the stockholders of the Corporation by this Charter are granted
subject to the provisions of this Article TENTH. With the exception of Articles
THIRD, SIXTH, EIGHTH, NINTH, this Article TENTH and Article ELEVENTH, any of the
provisions of this Charter may be amended, altered or repealed upon the vote of
a majority of the votes entitled to be cast by stockholders. The provisions of
Articles SIXTH, EIGHTH, NINTH, this Article TENTH and Article ELEVENTH may be
amended, altered or repealed only upon the vote of at least 75% of the votes
entitled to be cast by stockholders. The provisions of Article Third may be
amended, altered or repealed only upon the vote of at least 75% of the votes
entitled to be cast by stockholders, unless, pursuant to Article EIGHTH Section
(a)(i), the Continuing Directors of the Corporation, by a vote of at least 75%
of such Directors, approve such amendment in which case the affirmative vote of
a majority of the votes entitled to be cast by stockholders shall be required.
ELEVENTH: Duration. Subject to the provisions of Article Eighth(a)(iii),
the duration of the Corporation shall be perpetual.
TWELFTH: (1) To the full extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for money damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not that person is a director or officer at the
time of any proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance expenses to its currently
acting and its former directors to the full extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The Corporation
shall indemnify and advance expenses to its officers to the same extent as its
directors and may do so to such further extent as is consistent with law. The
Board of Directors may by By-Law, resolution or agreement make further provision
for indemnification of directors, officers, employees and agents to the full
extent permitted by the Maryland General Corporation Law.
(3) No provision of this Article shall be effective to protect or purport
to protect any director or officer of the Corporation against any liability to
the Corporation or its stockholders to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
(4) References to the Maryland General Corporation Law in this Article are
to that law as from time to time amended. No amendment to the Charter of the
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Corporation shall affect any right of any person under this Article based on any
event, omission or proceeding prior to the amendment."
ARTICLE II: Each share (including for this purpose a fraction of a share)
of Common Stock issued and outstanding immediately prior to these Articles of
Amendment and Restatement becoming effective, shall, at such effective time, be
reclassified automatically, and without any action or choice on the part of the
holder, into a share (or the same fraction of a share) of Class M Common Stock.
Outstanding certificates representing issued and outstanding shares of Common
Stock immediately prior to these Articles of Amendment and Restatement becoming
effective, shall upon these Articles of Amendment and Restatement becoming
effective be deemed to represent the same number of shares of Class M Common
Stock. Certificates representing shares of the Class M Common Stock resulting
from the aforesaid reclassification need not be issued until certificates
representing the shares of Common Stock so reclassified, if issued, have been
received by the Corporation or its agent duly endorsed for transfer with the
request that a new certificate be provided. The Class A Common Stock, Class B
Common Stock, Class C Common Stock and Class M Common Stock shall have the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as set forth in the Charter of the Corporation as herein amended and
restated.
ARTICLE III: The Corporation desires to amend and restate its Charter as
currently in effect. The provisions set forth in these Articles of Amendment and
Restatement are all of the provisions of the Charter currently in effect as
herein amended. The current address of the principal office of the Corporation,
and the name and address of the Corporation's current resident agent are as set
forth herein. The number of directors is currently set at six and their names
are [ ], [ ], [ ], [ ],
[ ], and [ ].
ARTICLE IV: The amendment and restatement of the Charter of the
Corporation as hereinabove set forth has been duly advised by the Board of
Directors and approved by the stockholders.
ARTICLE V: The total number of shares of capital stock that the
Corporation had authority to issue immediately prior to these Articles of
Amendment and Restatement becoming effective was one hundred million
(100,000,000) shares of the par value of one cent ($.01) per share and of the
aggregate par value of one million dollars ($1,000,000 ) all of which shares
were designated Common Stock. The total number of shares of capital stock that
the Corporation has authority to issue upon these Articles of Amendment and
Restatement becoming effective is five hundred million (500,000,000) shares, all
of the par value of one-tenth of one cent ($.001) per share, and of the
aggregate par value of five hundred thousand dollars ($500,000). Two hundred
million (200,000,000) of such shares are designated as Class A Common Stock, one
hundred million (100,000,000) of such shares are designated as Class B Common
Stock, one hundred million (100,000,000) of such shares are designated as
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Class C Common Stock and one hundred million (100,000,000) of such shares are
designated as Class M Common Stock.
ARTICLE VI: These Articles of Amendment and Restatement shall become
effective on , 1999 at [a.m./p.m.] Eastern Time.
IN WITNESS WHEREOF, Scudder New Europe Fund, Inc. has caused these Articles
of Amendment and Restatement to be signed in its name and on its behalf by its
President, , and witnessed by its Secretary, , as
of , 1999.
The President acknowledges these Articles of Amendment and Restatement to
be the corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters and facts set forth in these
Articles with respect to the authorization and approval of this amendment and
restatement of the Corporation's Charter are true in all material respects and
that this statement is made under penalties of perjury.
By:
-------------------------------------
President
Witness:
- ---------------------------------------------
Secretary
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EXHIBIT B
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this day of , 1999, between Scudder New Europe Fund, Inc., a
Maryland corporation, (the "Scudder Fund"), and Kemper Europe Fund, a
Massachusetts business trust (the "Kemper Fund").
This Agreement is intended to be and is adopted as a plan of reorganization
within the meaning of Section 368(a) of the United States Internal Revenue Code
of 1986, as amended (the "Code"). The reorganization of the Kemper Fund (the
"Reorganization") will consist of the transfer of substantially all of the
assets of the Kemper Fund in exchange solely for shares of the applicable class
or classes of common stock of the Scudder Fund (the "Scudder Fund Shares"), the
assumption by the Scudder Fund of all of the liabilities of the Kemper Fund, and
the distribution, on or after the Closing Date determined pursuant to paragraph
3.1, of the Scudder Fund Shares to the shareholders of the Kemper Fund in
liquidation of the Kemper Fund, all upon the terms and conditions set forth in
this Agreement.
WHEREAS, the Board of Trustees of the Kemper Fund has determined that the
exchange of all of the assets of the Kemper Fund for Scudder Fund Shares and the
assumption of all of the liabilities of the Kemper Fund by the Scudder Fund is
in the best interests of the Kemper Fund and that the interests of the existing
shareholders of the Kemper Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Directors of the Scudder Fund has determined that the
exchange of all of the assets of the Kemper Fund for Scudder Fund Shares and the
assumption of the Kemper Fund's liabilities by the Scudder Fund is in the best
interests of the Scudder Fund's shareholders and that the interests of the
existing shareholders of the Scudder Fund would not be diluted as a result of
this transaction.
NOW, THEREFORE, in consideration of the foregoing and of the covenants and
agreements set forth herein, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE KEMPER FUND IN EXCHANGE FOR SCUDDER FUND SHARES
AND ASSUMPTION OF THE KEMPER FUND'S LIABILITIES AND LIQUIDATION OF THE
KEMPER FUND
1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Kemper Fund agrees
to transfer its assets as set forth in paragraph 1.2 to the Scudder Fund, and
the Scudder Fund agrees in exchange therefor: (i) to deliver to the Kemper Fund
the number of Scudder Fund Shares, including fractional Scudder Fund Shares, of
each class of the Scudder Fund determined by dividing the value of the Kemper
Fund's net assets attributable to each such class of shares, computed in the
manner and as of the time and date set forth
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in paragraph 2.1, by the offering price of one Scudder Fund Share of the same
class as described in that Fund's then current prospectus; and (ii) to assume
all of the liabilities of the Kemper Fund. Such transactions shall take place at
the closing provided for in paragraph 3.1 (the "Closing").
1.2.
(a) The assets of the Kemper Fund to be acquired by the Scudder Fund shall
consist of all property including, without limitation, all cash, securities and
dividend or interest receivables that are owned by the Kemper Fund and any
deferred or prepaid expenses shown as an asset on the books of the Kemper Fund
on the closing date provided in paragraph 3.1 (the "Closing Date").
(b) The liabilities assumed by the Scudder Fund shall include all of the
Kemper Fund's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Closing Date, and whether or not specifically referred to in this Agreement.
(c) The Kemper Fund has provided the Scudder Fund with a list of all of the
Kemper Fund's assets as of the date of execution of this Agreement and the
Scudder Fund has confirmed that all such assets are of the type in which the
Scudder Fund is permitted to invest and to hold. The Kemper Fund reserves the
right to sell any of these securities but will not, without the prior approval
of the Scudder Fund, acquire any additional securities other than securities of
the type in which the Scudder Fund is permitted to invest. The Scudder Fund,
will, within a reasonable time prior to the Closing Date, furnish the Kemper
Fund with a list of its assets. In the event that the Kemper Fund holds any
investments which the Scudder Fund identifies as a type which it may not hold,
and the Scudder Fund so requests, the Kemper Fund will dispose of such
securities prior to the Closing Date. In addition, if it is determined that the
portfolios of the Kemper Fund and the Scudder Fund, when aggregated, would
contain investments exceeding certain percentage limitations imposed upon the
Scudder Fund with respect to such investments, the Kemper Fund, if requested by
the Scudder Fund, will dispose of and/or reinvest a sufficient amount of such
investments as may be necessary to avoid violating such limitations as of the
Closing Date.
1.3. The Kemper Fund will endeavor to discharge all the Kemper Fund's
known liabilities and obligations prior to the Closing Date, other than those
liabilities and obligations which would otherwise be discharged at a later date
in the ordinary course of business.
1.4. As soon as practicable prior to the Closing Date, both the Scudder
Fund and the Kemper Fund will declare and pay to their respective shareholders
of record one or more dividends and/or distributions so that they will have
distributed substantially all of their investment company taxable income
(computed without regard to any deduction for dividends paid) and realized net
capital gain, if any, for the current taxable year through the Closing Date.
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1.5. As soon on or after the Closing Date as is conveniently practicable
(the "Liquidation Date"), the Kemper Fund will liquidate and distribute pro rata
to the Kemper Fund's shareholders of record determined as of the close of
business on the Closing Date (the "Kemper Fund Shareholders") the Scudder Fund
Shares it receives pursuant to paragraph 1.1. Such liquidation and distribution
will be accomplished by the transfer of the Scudder Fund Shares then credited to
the account of the Kemper Fund on the books of the Scudder Fund to open accounts
on the share records of the Scudder Fund in the name of the Kemper Fund's
shareholders representing the respective pro rata number of the Scudder Fund
Shares of the particular class due such shareholders. All issued and outstanding
shares of the Kemper Fund will simultaneously be canceled on the books of the
Kemper Fund, although share certificates representing interests in the Kemper
Fund, if any, will represent a number of Scudder Fund Shares after the Closing
Date as determined in accordance with paragraph 2.2. The Scudder Fund shall not
issue certificates representing the Scudder Fund Shares in connection with such
exchange.
1.6. Ownership of Scudder Fund Shares will be shown on the books of the
Scudder Fund's transfer agent. Shares of the Scudder Fund will be issued in the
manner described in the Scudder Fund's then current prospectus and statement of
additional information.
1.7. Any transfer taxes payable upon issuance of the Scudder Fund Shares
in a name other than the registered holder of the Kemper Fund Shares on the
books of the Kemper Fund as of that time shall, as a condition of such issuance
and transfer, be paid by the person to whom such Scudder Fund Shares are to be
issued and transferred.
1.8. Any reporting responsibility of the Kemper Fund is and shall remain
the responsibility of the Kemper Fund up to and including the applicable Closing
Date and such later dates on which the Kemper Fund is terminated.
2. VALUATION
2.1. The value of the Kemper Fund's assets to be acquired hereunder shall
be the value of such assets computed as of the close of regular trading on the
New York Stock Exchange, Inc. (the "NYSE") on the applicable Closing Date (such
time and date being hereinafter called the "Valuation Date"), using the
valuation procedures set forth in the Kemper Fund's then current prospectus or
statement of additional information, such procedures having been accepted by the
Accounting Service Agent for the Scudder Fund.
2.2. The number of Shares of each class of the Scudder Fund to be issued
(including fractional shares, if any) in exchange for the corresponding Kemper
Fund's net assets shall be determined by dividing the value of the net assets of
the Kemper Fund attributable to each such class of shares determined using the
same valuation procedures referred to in paragraph 2.1 by the offering price per
Share of such class of
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the Scudder Fund, such procedures having been accepted by the Accounting Service
Agent for the Kemper Fund.
2.3. All computations of value shall be made by Scudder Accounting
Corporation in accordance with the regular practice of the Kemper Fund and
Scudder Fund, respectively.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date for the Reorganization shall be September 1, 1999, or
such other date as the parties to the Reorganization may agree to in writing.
All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of trading on the NYSE on the Closing Date unless
otherwise provided. The Closing shall be held as of 4:00 p.m., at the offices of
Scudder Kemper Investments, Inc., 345 Park Avenue, New York, New York, or at
such other time and/or place as the parties may agree.
3.2. The custodian for the Scudder Fund (the "Custodian") shall deliver at
the Closing a certificate of an authorized officer stating that: (a) the Kemper
Fund's portfolio securities, cash and any other assets have been delivered in
proper form to the Scudder Fund on the Closing Date and (b) all necessary taxes,
including all applicable federal and state stock transfer stamps, if any, have
been paid, or provision for payment has been made, in conjunction with the
delivery of portfolio securities.
3.3. In the event that on the Valuation Date (a) the NYSE or another
primary trading market for portfolio securities of the Scudder Fund or the
Kemper Fund shall be closed to trading or trading thereon shall be restricted or
(b) trading or the reporting of trading on the NYSE or elsewhere shall be
disrupted so that accurate appraisal of the value of the net assets of the
Scudder Fund or the Kemper Fund is impracticable, the applicable Closing Date
shall be postponed until the first business day after the day when trading shall
have been fully resumed and reporting shall have been restored.
3.4. The Kemper Fund shall deliver at the Closing a list of the names and
addresses of the Kemper Fund's shareholders and the number and class of
outstanding Shares owned by each such shareholder immediately prior to the
Closing or provide evidence that such information has been provided to the
Scudder Fund's transfer agent. The Scudder Fund shall issue and deliver a
confirmation evidencing the Scudder Fund Shares to be credited to the Kemper
Fund's account on the Closing Date to the Secretary of the Kemper Fund or
provide evidence satisfactory to the Kemper Fund that the Scudder Fund Shares
have been credited to the Kemper Fund's account on the books of the Scudder
Fund. At the Closing, each party shall deliver to the relevant other parties
such bills of sale, checks, assignments, share certificates, if any, receipts or
other documents as such other party or its counsel may reasonably request.
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4. REPRESENTATIONS AND WARRANTIES
4.1. The Kemper Fund represents and warrants to the Scudder Fund as
follows:
(a) The Kemper Fund is a business trust duly organized, validly
existing and in good standing under the Commonwealth of Massachusetts;
(b) The Kemper Fund is a registered investment company classified as a
management company of the open-end type and its registration with the
Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940, as amended (the "1940
Act"), is in full force and effect;
(c) The Kemper Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a violation of its
Declaration of Trust or By-Laws or any material agreement, indenture,
instrument, contract, lease or other undertaking to which the Kemper Fund
is a party or by which the Kemper Fund or its property is bound or
affected;
(d) There are no contracts or other commitments (other than this
Agreement) of the Kemper Fund which will be terminated with liability to
the Kemper Fund prior to the Closing Date;
(e) Except as previously disclosed to and accepted by the Scudder
Fund, no litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or to its
knowledge threatened against the Kemper Fund or any of its properties or
assets which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business. The Kemper
Fund knows of no facts which might form the basis for the institution of
such proceedings and is not party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which
materially and adversely affects its business or its ability to consummate
the transaction herein contemplated;
(f) The statements of assets and liabilities of the Kemper Fund for
each of the fiscal years ended November 30 in the period beginning with
commencement of the Kemper Fund and ending November 30, 1998 have been
audited by Ernst & Young LLP, certified public accountants, and are in
accordance with generally accepted accounting principles consistently
applied, and such statements (copies of which have been furnished to the
Scudder Fund) fairly reflect the financial condition of the Kemper Fund as
of such dates, and there are no known contingent liabilities of the Kemper
Fund as of such dates not disclosed therein;
(g) Since November 30, 1998, there has not been any material adverse
change in the Kemper Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Kemper Fund of indebtedness maturing more than one
year from the date that such indebtedness was incurred, except as otherwise
disclosed to and
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accepted by the Scudder Fund. For the purposes of this subparagraph (g), a
decline in net asset value per share or the total assets of the Kemper Fund
in the ordinary course of business shall not constitute a material adverse
change;
(h) At the Closing Date, all federal and other tax returns and reports
of the Kemper Fund required by law to have been filed by such dates shall
have been filed, and all federal and other taxes shall have been paid so
far as due, or provision shall have been made for the payment thereof and,
to the best of the Kemper Fund's knowledge, no such return is currently
under audit and no assessment has been asserted with respect to such
returns;
(i) For the fiscal year ended November 30, 1998, the Kemper Fund has
met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company; and all of the Kemper Fund's
issued and outstanding shares have been offered and sold in compliance in
all material respects with applicable federal and state securities laws;
(j) All issued and outstanding shares of each class of the Kemper Fund
are, and at the applicable Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable by the Kemper Fund, except
that shareholders of the Kemper Fund may under certain circumstances be
held personally liable for its obligations. All of the issued and
outstanding shares of the Kemper Fund will, at the time of Closing, be held
by the persons and the amounts set forth in the records of the transfer
agent as provided in paragraph 3.4. The Kemper Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Kemper Fund's shares, nor is there outstanding any
security convertible into any of the Kemper Fund's shares, except for the
conversion feature described in the Kemper Fund's prospectus;
(k) At the Closing Date, the Kemper Fund will have good and marketable
title to the assets to be transferred to the Scudder Fund pursuant to
section 1.2 and full right, power, and authority to sell, assign, transfer
and deliver such assets hereunder free of any liens or other encumbrances,
except those liens or encumbrances as to which the Scudder Fund has
received notice at or prior to the Closing, and upon delivery and payment
for such assets, the Scudder Fund will acquire good and marketable title
thereto, subject to no restrictions on the full transfer thereof, including
such restrictions as might arise under the Securities Act of 1933 (the
"1933 Act") and the 1940 Act, except those restrictions as to which the
Scudder Fund has received notice and necessary documentation at or prior to
the Closing;
(l) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary actions on the part of the Kemper Fund's
Board of Trustees, and subject to the approval of the Kemper Fund's
shareholders, this Agreement will constitute a valid and binding obligation
of the Kemper Fund, enforceable in accordance with its terms, subject to
the effect of bankruptcy,
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insolvency, fraudulent conveyance, reorganization, moratorium and other
laws relating to or affecting creditors' rights and to general equity
principles;
(m) Insofar as the following relate to the Kemper Fund, the
registration statement filed by the Scudder Fund on Form N-14 relating to
Scudder Fund Shares that will be registered with the Commission pursuant to
this Agreement, which, without limitation, shall include a proxy statement
of the Kemper Fund (the "Proxy Statement") and the prospectus of the
Scudder Fund with respect to the transaction contemplated by this
Agreement, and any supplement or amendment thereto, and the documents
contained or incorporated therein by reference (the "N-14 Registration
Statement"), on the effective date of the N-14 Registration Statement, at
the time of any shareholders' meeting referred to herein, on the Valuation
Date and on the Closing Date: (i) shall comply in all material respects
with the provisions of the 1933 Act, the Securities Exchange Act of 1934
(the "1934 Act") and the 1940 Act and the rules and regulations under those
Acts, and (ii) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the
representations and warranties in this subsection shall only apply to
statements in or omissions from the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by the Kemper
Fund for use in the N-14 Registration Statement.
4.2. The Scudder Fund represents and warrants to the Kemper Fund as
follows:
(a) The Scudder Fund is a Maryland corporation, duly organized,
validly existing and in good standing under the laws of the State of
Maryland;
(b) The Scudder Fund is a registered investment company and its
registration with the Commission as an investment company under the 1940
Act is in full force and effect, and as of the Closing Date the Scudder
Fund will be classified as a management company of the open-end type;
(c) The preliminary prospectus and statement of additional information
filed as part of the Scudder Fund registration statement on Form N-1A on
April 28, 1999 (the "Scudder Fund Registration Statement"), when declared
effective by the Commission will conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission under those Acts and will not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not materially
misleading;
(d) At the Closing Date, the Scudder Fund will have good and
marketable title to its assets;
(e) The Scudder Fund is not, and the execution, delivery and
performance of this Agreement will not result in, a violation of its
Charter or By-Laws or any
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material agreement, indenture, instrument, contract, lease or other
undertaking to which the Scudder Fund is a party or by which it is bound;
(f) Except as previously disclosed to and accepted by the Kemper Fund,
no litigation or administrative proceeding or investigation of or before
any court or governmental body is presently pending or to its knowledge
threatened against the Scudder Fund or any of its properties or assets
which, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The Scudder Fund knows
of no facts which might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which
materially and adversely affects its business or its ability to consummate
the transactions contemplated herein;
(g) Since October 30, 1998, there has not been any material adverse
change in the Scudder Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Scudder Fund of indebtedness maturing more than
one year from the date that such indebtedness was incurred, except as
otherwise disclosed to and accepted by the Kemper Fund. For the purposes of
this subparagraph (g), a decline in net asset value per share or the total
assets of the Scudder Fund in the ordinary course of business shall not
constitute a material adverse change;
(h) At the Closing Date, all federal and other tax returns and reports
of the Scudder Fund required by law then to be filed shall have been filed,
and all federal and other taxes shown as due on said returns and reports
shall have been paid or provision shall have been made for the payment
thereof;
(i) For the fiscal year ended October 31, 1998, the Scudder Fund has
met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company; and all of the Scudder Fund's
issued and outstanding shares have been offered and sold in compliance in
all material respects with applicable federal and state securities laws;
(j) At the date hereof, all issued and outstanding Scudder Fund Shares
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable, with no personal liability
attaching to the ownership thereof. The Scudder Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any Scudder Fund Shares, nor is there outstanding any security
convertible into any Scudder Fund Shares;
(k) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary actions on the part of the Scudder Fund's
Board of Directors, and this Agreement constitutes a valid and binding
obligation of the Scudder Fund enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws relating to or affecting
creditors' rights and to general equity principles;
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(l) The Scudder Fund Shares to be issued and delivered to the Kemper
Fund, for the account of the Kemper Fund's shareholders, pursuant to the
terms of this Agreement, will at the Closing Date have been duly authorized
and when so issued and delivered, will be duly and validly issued Scudder
Fund Shares, and will be fully paid and non-assessable with no personal
liability attaching to the ownership thereof;
(m) The N-14 Registration Statement, on the effective date of the N-14
Registration Statement, at the time of any shareholders' meeting referred
to herein, on the Valuation Date and on the Closing Date: (i) shall comply
in all material respects with the provisions of the 1933 Act, the 1934 Act
and the 1940 Act and the rules and regulations under those Acts, and (ii)
shall not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the
representations and warranties in this subsection shall not apply to
statements in or omission from the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by the Kemper
Fund for use in the N-14 Registration Statement;
(n) The Scudder Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
5. COVENANTS OF THE KEMPER FUND AND THE SCUDDER FUND
5.1. The Scudder Fund and the Kemper Fund will operate their businesses in
the ordinary course between the date hereof and the Closing Date. It is
understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions.
5.2. The Kemper Fund will call a meeting of its shareholders to consider
and act upon this Agreement and to take all other actions necessary to obtain
approval of the transaction contemplated herein.
5.3. The Scudder Fund will call a meeting of its shareholders to consider
and act upon a proposal to convert the Scudder Fund to open-end status.
5.4. The Kemper Fund covenants that the Scudder Fund Shares to be issued
hereunder are not being acquired for the purpose of making any distribution
thereof other than in accordance with the terms of this Agreement.
5.5. The Kemper Fund will assist the Scudder Fund in obtaining such
information as the Scudder Fund reasonably requests concerning the beneficial
ownership of the Kemper Fund's Shares.
5.6. Subject to the provisions of this Agreement, the Scudder Fund and the
Kemper Fund each will take, or cause to be taken, all action, and do or cause to
be
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done, all things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement.
5.7. The Kemper Fund will provide the Scudder Fund with information
reasonably necessary for the preparation of a prospectus which will include the
Proxy Statement referred to in paragraph 4.1(m), all to be included in the N-14
Registration Statement, in compliance with the 1933 Act, the 1934 Act and the
1940 Act in connection with the meeting of the Kemper Fund's shareholders to
consider approval of this Agreement and the transactions contemplated herein.
5.8. The Kemper Fund will provide the Scudder Fund with information
reasonably necessary for the preparation of the Scudder Fund Registration
Statement.
5.9. As promptly as practicable, but in any case within thirty days of the
Closing Date, the Kemper Fund shall furnish the Scudder Fund with a statement
containing information required for purposes of complying with Rule 24f-2 under
the 1940 Act.
5.10. The Scudder Fund agrees to take no action that would adversely
affect the qualification of the Reorganization as a reorganization under Section
368(a) of the Code. In this regard, the Scudder Fund covenants that, following
the Reorganization, it will (i) continue the historic business of the Kemper
Fund or (ii) use a significant portion of the Kemper Fund's historic business
assets in a business.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE KEMPER FUND
The obligations of the Kemper Fund to consummate the transactions provided
for herein shall be subject, at its election, to the performance by the Scudder
Fund of all of the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following further conditions:
6.1. All representations and warranties of the Scudder Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the actions contemplated by this
Agreement, as of the Closing Date with the same force and effect as if made on
and as of the Closing Date;
6.2. The shareholders of the Scudder Fund shall have approved resolutions
presented to them necessary to convert the Scudder Fund to open-end status and
shall have taken such other action so that the Scudder Fund can function
substantially as described in the Scudder Fund Registration Statement on Form
N-1A currently on file with the Commission;
6.3. The Scudder Fund shall have delivered to the Kemper Fund a
certificate executed in its name by its President or Vice President and its
Secretary, Treasurer or Assistant Treasurer, in a form reasonably satisfactory
to the Kemper Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Scudder Fund made in this Agreement are
true and correct at and as of the Closing
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Date, except as they may be affected by the transaction contemplated by this
Agreement and as to such other matters as the Kemper Fund shall reasonably
request;
6.4. The Kemper Fund shall have received on the Closing Date a favorable
opinion from Willkie Farr & Gallagher, counsel to the Scudder Fund, dated as of
the Closing Date, in a form reasonably satisfactory to the Kemper Fund, covering
the following points:
That (a) the Scudder Fund is a validly existing corporation and in
good standing under the laws of the State of Maryland, has the corporate
power to own all of its properties and assets and to carry on its business
as a registered investment company; (b) the Agreement has been duly
authorized, executed and delivered by the Scudder Fund and, assuming due
authorization, execution and delivery of the Agreement by the other party
thereto, is a valid and binding obligation of the Scudder Fund enforceable
against the Scudder Fund in accordance with its terms, subject to the
effect of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other laws relating to or affecting creditors' rights
generally and to general equity principles; (c) the Scudder Fund Shares to
be issued to the Kemper Fund's shareholders as provided by this Agreement
are duly authorized and upon such delivery will be validly issued and
outstanding and fully paid and nonassessable with no personal liability
attaching to ownership thereof, and no shareholder of the Scudder Fund has
any preemptive rights to subscription or purchase in respect thereof under
the Charter or By-Laws of the Scudder Fund or to the knowledge of such
counsel, otherwise; (d) the execution and delivery of this Agreement did
not, and the consummation of the transaction contemplated hereby will not,
result in a violation of the Scudder Fund's Charter or By-Laws as they are
proposed to be amended or in a material violation of any provision of any
agreement (known to such counsel) to which the Scudder Fund is a party or
by which it or its property is bound or, to the knowledge of such counsel,
result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which the Scudder Fund
is a party or by which it or its property is bound; (e) to the knowledge of
such counsel, no consent, approval, authorization or order of any court or
governmental authority of the United States or state of Maryland is
required for the consummation by the Scudder Fund of the actions
contemplated herein, except such as have been obtained under the 1933 Act,
the 1934 Act and the 1940 Act, and such as may be required under state
securities laws; (f) the descriptions in the N-14 Registration Statement of
statutes, legal and governmental proceedings, investigations, orders,
decrees or judgments of any court or governmental body in the United States
and contracts and other documents, if any, are accurate and fairly present
the information required to be shown; (g) such counsel does not know of any
legal, administrative or governmental proceedings, investigation, order,
decree or judgment of any court or governmental body, only insofar as they
relate to the Scudder Fund or its assets or properties, pending, threatened
or otherwise existing on or before the effective date of the
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Scudder Fund Registration Statement or the Closing Date, which are required
to be described in the Scudder Fund Registration Statement or to be filed
as exhibits to the Scudder Fund Registration Statement which are not
described and filed as required; (h) the Scudder Fund is registered as an
investment company under the 1940 Act and classified as a management
company of the open-end type and its registration with the Commission as an
investment company under the 1940 Act is in full force and effect; (i) the
Proxy Statement and the Scudder Fund Registration Statement (except as to
financial and statistical data contained therein, as to which no opinion
need be given) comply as to form in all material respects with the
requirements of the 1933 Act, the 1934 Act and the 1940 Act and the rules
and regulations thereunder; and (j) the Scudder Fund Registration Statement
is effective under the 1933 Act and the 1940 Act and no stop-order
suspending its effectiveness or order pursuant to section 8(e) of the 1940
Act has been issued.
In addition, such counsel also shall state that they have participated
in conferences with officers and other representatives of the Scudder Fund
at which the contents of the N-14 Registration Statement, the Scudder Fund
Registration Statement and related matters were discussed and, although
they are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the N-14
Registration Statement and the Scudder Fund Registration Statement (except
to the extent indicated in paragraph (6) of their above opinion), on the
basis of the foregoing (relying as to materiality to a large extent upon
the opinions of officers and other representatives of the Scudder Fund),
they do not believe that the Proxy Statement and the Scudder Fund
Registration Statement as of their respective dates, as of the date of the
Kemper Fund shareholders' meeting, and as of the Closing Date, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein regarding the Scudder Fund or necessary to
make the statements therein regarding the Scudder Fund, in the light of the
circumstances under which they were made, not misleading. Such opinion may
state that such counsel does not express any opinion or belief as to the
financial statements or other financial data or as to the information
relating to the Kemper Fund, contained in the Proxy Statement, N-14
Registration Statement or Scudder Fund Registration Statement, and that
such opinion is solely for the benefit of the Kemper Fund, its Trustees and
its officers. Such counsel may rely as to matters governed by the laws of
the state of Maryland on an opinion of Maryland counsel and/or certificates
of officers or directors of the Scudder Fund. Such opinion also shall
include such other matters incident to the transaction contemplated hereby,
as the Kemper Fund may reasonably request.
In this paragraph 6.4, references to the Proxy Statement include and
relate only to the text of such Proxy Statement and not, except as
specifically stated above, to any exhibits or attachments thereto or to any
documents incorporated by reference therein;
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6.5. The Board of Directors of the Scudder Fund, including a majority of
the directors who are not "interested persons" of the Scudder Fund (as defined
by the 1940 Act), shall have determined that this Agreement and the transactions
contemplated hereby are in the best interests of the Scudder Fund and that the
interests of the shareholders in the Scudder Fund would not be diluted as a
result of such transactions, and the Scudder Fund shall have delivered to the
Kemper Fund at the applicable Closing, a certificate, executed by an officer, to
the effect that the condition described in this subparagraph has been satisfied;
and
6.6. The Scudder Fund's Investment Advisory Agreement with Scudder Kemper
Investments, Inc. ("Scudder Kemper") shall have been amended to lower the
advisory fees so that the fee payable from the Scudder Fund to Scudder Kemper
thereunder shall be a monthly fee equal to 1/12 of .75 of 1 percent of the
average daily net assets 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 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.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SCUDDER FUND
The obligations of the Scudder Fund to complete the transaction provided
for herein shall be subject, at its election, to the performance by the Kemper
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
7.1. All representations and warranties of the Kemper Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and,
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except as they may be affected by the transaction contemplated by this
Agreement, as of the Closing Date with the same force and effect as if made on
and as of the Closing Date;
7.2. The Kemper Fund shall have delivered to the Scudder Fund a statement
of the Kemper Fund's assets and liabilities as of the Closing Date, certified by
the Treasurer or Assistant Treasurer of the Kemper Fund;
7.3. The Kemper Fund shall have delivered to the Scudder Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Scudder Fund and dated as of the Closing Date, to the effect
that the representations and warranties of the Kemper Fund made in this
Agreement are true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement, and as to such
other matters as the Scudder Fund shall reasonably request;
7.4. The Scudder Fund shall have received on the Closing Date a favorable
opinion of Vedder, Price, Kaufman & Kammholz, counsel to the Kemper Fund, in a
form satisfactory to the Secretary of the Scudder Fund, covering the following
points:
That (a) the Kemper Fund is validly existing as a business trust and
in good standing under the laws of the Commonwealth of Massachusetts and
has the statutory power to own all of its properties and assets and to
carry on its business as a registered investment company; (b) the Agreement
has been duly authorized, executed and delivered by the Kemper Fund and,
assuming due authorization, execution and delivery of the Agreement by the
other party hereto, is a valid and binding obligation of the Kemper Fund
enforceable against the Kemper Fund in accordance with its terms, subject
to the effect of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and to general equity principles; (c) the
execution and delivery of the Agreement did not, and the consummation of
the transaction contemplated hereby will not, result in a violation of the
Kemper Fund's Declaration of Trust or By-Laws or a material violation of
any provision of any agreement (known to such counsel) to which the Kemper
Fund is a party or by which either it or its property is bound or, to the
knowledge of such counsel, result in the acceleration of any obligation or
the imposition of any penalty, under any agreement, judgment or decree to
which the Kemper Fund is a party or by which it or its property is bound,
(d) to the knowledge of such counsel, no consent, approval, authorization
or order of any court or governmental authority of the United States or the
Commonwealth of Massachusetts is required for the consummation by the
Kemper Fund of the transactions contemplated herein, except such as have
been obtained under the 1933 Act, the 1934 Act and the 1940 Act, and such
as may be required under state securities laws; (e) the Proxy Statement
(except as to financial and statistical data contained therein, as to which
no opinion need be given) comply as to form in all material respects with
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the requirements of the 1934 Act and the 1940 Act and the rules and
regulations thereunder; (f) such counsel does not know of any legal,
administrative or governmental proceedings, investigation, order, decree or
judgment of any court or governmental body, only insofar as they relate to
the Kemper Fund or its assets or property, pending, threatened or otherwise
existing on or before the effective date of the Scudder Fund Registration
Statement or the Closing Date, which are required to be described in the
Scudder Fund Registration Statement or to be filed as exhibits to the
Scudder Fund Registration Statement which are not described and filed as
required or which materially and adversely affect the Kemper Fund's
business; and (g) the Kemper Fund is registered as an investment company
under the 1940 Act and its registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
Such counsel also shall state that they have participated in
conferences with officers and other representatives of the Kemper Fund at
which the contents of the Proxy Statement and related matters were
discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Proxy Statement (except to the extent indicated in
paragraph (e) of their above opinion), on the basis of the foregoing
(relying as to materiality to a large extent upon the opinions of officers
and other representatives of the Kemper Fund), they do not believe that the
Proxy Statement as of its date, as of the date of the Kemper Fund's
shareholder meeting, and as of the Closing Date, contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein regarding the Kemper Fund or necessary in the light of
the circumstances under which they were made, to make the statements
therein regarding the Kemper Fund not misleading.
Such opinion may state that such counsel does not express any opinion
or belief as to the financial statements or other financial data, or as to
the information relating to the Kemper Fund, contained in the Proxy
Statement or the Scudder Fund Registration Statement, and that such opinion
is solely for the benefit of the Kemper Fund and its directors and
officers. Such opinion also shall include such other matters incident to
the transaction contemplated hereby as the Kemper Fund may reasonably
request.
In this paragraph 7.4, references to the Proxy Statement include and
relate only to the text of such Proxy Statement and not to any exhibits or
attachments thereto or to any documents incorporated by reference therein;
7.5. The Scudder Fund shall have received from Ernst & Young LLP a letter
addressed to the Scudder Fund dated as of the effective date of the N-14
Registration Statement in form and substance satisfactory to the Scudder Fund,
to the effect that:
(a) they are independent public accountants with respect to the Kemper
Fund within the meaning of the 1933 Act and the applicable regulations
thereunder;
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(b) in their opinion, the financial statements and financial
highlights of the Kemper Fund included or incorporated by reference in the
N-14 Registration Statement and the Proxy Statement and reported on by them
comply as to form in all material aspects with the applicable accounting
requirements of the 1933 Act and the rules and regulations thereunder; and
(c) on the basis of limited procedures agreed upon by the Scudder Fund
and the Kemper Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), specified
information relating to the Kemper Fund appearing in the N-14 Registration
Statement and the Proxy Statement has been obtained from the accounting
records of the Kemper Fund or from schedules prepared by officers of Kemper
Fund having responsibility for financial and reporting matters and such
information is in agreement with such records, schedules or computations
made therefrom;
7.6. The Kemper Fund shall have delivered to the Scudder Fund, pursuant to
paragraph 4.1(f), copies of financial statements of the Kemper Fund as of and
for the fiscal year ended November 30, 1998;
7.7. The Scudder Fund shall have received from Ernst & Young LLP a letter
addressed to the Scudder Fund and dated as of the applicable Closing Date
stating that as of a date no more than three (3) business days prior to the
applicable Closing Date, Ernst & Young LLP performed limited procedures and that
on the basis of those procedures it confirmed the matters set forth in paragraph
7.5; and
7.8. The Board of Trustees of the Kemper Fund, including a majority of the
trustees who are not "interested persons" of the Kemper Fund (as defined by the
1940 Act), shall have determined that this Agreement and the transactions
contemplated hereby are in the best interests of the Kemper Fund and that the
interests of the shareholders in the Kemper Fund would not be diluted as a
result of such transactions, and the Kemper Fund shall have delivered to the
Scudder Fund at the applicable Closing, a certificate, executed by an officer,
to the effect that the condition described in this subparagraph has been
satisfied.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SCUDDER FUND AND THE
KEMPER FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Scudder Fund, the Kemper Fund shall, and if any
of such conditions do not exist on or before the Closing Date with respect to
Kemper Fund, the Scudder Fund shall, at their respective option, not be required
to consummate the transaction contemplated by this Agreement.
8.1. The Agreement and the transaction contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding Shares of the
Kemper Fund in accordance with the provisions of the Kemper Fund's Declaration
of Trust and
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applicable law and certified reports of the votes evidencing such approval shall
have been delivered to the Scudder Fund.
8.2. On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state blue sky and securities authorities, including
"no-action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by the Scudder Fund or the Kemper Fund to permit
consummation, in all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain any such consent, order
or permit would not involve a risk of a material adverse effect on the assets or
properties of the Scudder Fund or the Kemper Fund, provided that either party
hereto may for itself waive any of such conditions.
8.4. The N-14 Registration Statement and the Scudder Fund Registration
Statement shall each have become effective under the 1933 Act and no stop orders
suspending the effectiveness thereof shall have been issued and, to the best
knowledge of the parties hereto, no investigation or proceeding for that purpose
shall have been instituted or be pending, threatened or contemplated under the
1933 Act.
8.5. The parties shall have received a favorable opinion of Willkie Farr &
Gallagher, addressed to, and in form and substance satisfactory to, the Kemper
Fund and the Scudder Fund, substantially to the effect that for federal income
tax purposes:
(a) The transfer of all or substantially all of the Kemper Fund's
assets in exchange for the Scudder Fund Shares and the assumption by the
Scudder Fund of liabilities of the Kemper Fund, and the distribution of
such Scudder Fund Shares to shareholders of the Kemper Fund in exchange for
their shares of the Scudder Fund, will constitute a "reorganization" within
the meaning of Section 368(a) of the Code, and the Scudder Fund and the
Kemper Fund will each be a "party to a reorganization" within the meaning
of Section 368(b) of the Code; (b) no gain or loss will be recognized by
the Scudder Fund on the receipt of the assets of the Kemper Fund solely in
exchange for the Scudder Fund Shares and the assumption by the Scudder Fund
of liabilities of the Kemper Fund; (c) no gain or loss will be recognized
by the Kemper Fund upon the transfer of the Kemper Fund's assets to the
Scudder Fund in exchange for the Scudder Fund Shares and the assumption by
the Scudder Fund of liabilities of the Kemper Fund or upon the distribution
of the Scudder Fund Shares to the Kemper Fund's shareholders in exchange
for their shares of the Kemper Fund; (d) no gain or loss will be recognized
by shareholders of the Kemper Fund upon the exchange of their Kemper Fund
shares for the Scudder Fund Shares or upon the assumption by the Scudder
Fund of liabilities of the Kemper Fund; (e) the aggregate tax basis
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for the Scudder Fund Shares received by each of the Kemper Fund's
shareholders pursuant to the Reorganization will be the same as the
aggregate tax basis of the Scudder Fund Shares held by such shareholder
immediately prior to the Reorganization, and the holding period of the
Scudder Fund Shares to be received by each Kemper Fund shareholder will
include the period during which the Kemper Fund Shares exchanged therefor
were held by such shareholder (provided that the Kemper Fund Shares were
held as capital assets on the date of the Reorganization); and (f) the tax
basis of the Kemper Fund's assets acquired by the Scudder Fund will be the
same as the tax basis of such assets to the Kemper Fund immediately prior
to the Reorganization, and the holding period of the assets of the Kemper
Fund in the hands of the Scudder Fund will include the period during which
those assets were held by the Kemper Fund.
Notwithstanding anything herein to the contrary, neither the Scudder Fund
nor the Kemper Fund may waive the conditions set forth in this paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES
9.1. The Scudder Fund represents and warrants to the Kemper Fund, and the
Kemper Fund represents and warrants to the Scudder Fund, that there are no
brokers or finders or other entities to receive any payments in connection with
the transaction provided for herein.
9.2. The expenses of entering into and carrying out the provisions of this
Agreement, whether or not consummated, shall be borne exclusively by the Scudder
Fund and the Kemper Fund and shall be allocated based upon the relative net
assets of the Scudder Fund and the Kemper Fund as of , 1999.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. The Scudder Fund and the Kemper Fund agree that neither party has
made any representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement among the parties.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transaction contemplated hereunder.
11. TERMINATION
11.1. This Agreement may be terminated at any time at or prior to the
Closing Date by: (1) mutual agreement of the Kemper Fund and the Scudder Fund;
(2) the Kemper Fund in the event the Kemper Fund shall, or the Scudder Fund in
the event the Kemper Fund shall, materially breach any representation, warranty
or agreement contained herein to be performed at or prior to the Closing Date;
or (3) the Kemper Fund or the Scudder Fund in the event a condition herein
expressed to be precedent to
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the obligations of the terminating party or parties has not been met and it
reasonably appears that it will not or cannot be met.
11.2. In the event of any such termination, there shall be no liability
for damages on the part of either the Scudder Fund or the Kemper Fund, or their
respective directors, trustees or officers, to the other party.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in writing in such
manner as may be mutually agreed upon by the authorized officers of the Scudder
Fund and the Kemper Fund; provided, however, that following the meetings of the
Kemper Fund's shareholders called by the Kemper Fund and the Scudder Fund's
shareholders called by the Scudder Fund pursuant to paragraphs 5.2 and 5.3 of
this Agreement, respectively, no such amendment may have the effect of changing
the provisions for determining the number of the Scudder Fund Shares to be
issued to the Kemper Fund's Shareholders under this Agreement to the detriment
of such shareholders without their further approval.
13. NOTICES
13.1. Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Kemper Fund at:
222 South Riverside Plaza
Chicago, IL 60606
Attention:
with a copy to:
David Sturms, Esq.
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, IL 60601
or to the Scudder Fund at:
345 Park Avenue
New York, NY
Attention: Bruce H. Goldfarb, Esq.
with a copy to:
Burton M. Leibert, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
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14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1. The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
14.3. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, except for paragraph 14.5, which shall be
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
14.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5. Consistent with the Kemper Fund's Declaration of Trust, notice is
hereby given and the parties hereto acknowledge and agree that this instrument
is executed on behalf of the Trustees of the Kemper Fund, as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees or shareholders of the Kemper Fund individually but binding
only upon the assets and property of the Kemper Fund.
[Signature page follows]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its Chairman of the Board, President or Vice President and
attested to by its Secretary or Assistant Secretary.
SCUDDER NEW EUROPE FUND, INC.
By:
----------------------------------
Name:
Title:
Attest:
----------------------------------
KEMPER EUROPE FUND
By:
----------------------------------
Name:
Title:
Attest:
---------------------------------
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EXHIBIT C
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
SCUDDER NEW EUROPE FUND, INC.
Scudder New Europe Fund, Inc. a Maryland corporation, having its principal
office in Maryland in Baltimore City (hereinafter called the "Corporation")
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
ARTICLE I: The Charter of the Corporation is amended and as so amended is
restated in its entirety by striking out Article First through Twelfth and
inserting in lieu thereof the following:
"FIRST: The undersigned, Joshua M. Levine, whose address is One Citicorp
Center, 153 East 53rd Street, New York, New York 10022, being at least eighteen
years of age, acting as incorporator, does hereby form a corporation under the
Maryland General Corporation Law.
SECOND: The name of the Corporation is Kemper Europe Fund, Inc. (the
"Corporation").*
THIRD: The purposes for which the Corporation is formed are to operate and
carry out the business of an open-end management investment company under the
Investment Company Act of 1940, as amended, and generally to exercise and enjoy
all of the powers, rights and privileges granted to, or conferred upon,
corporations by the Maryland General Corporation Law.
FOURTH: The post office address of the principal office of the Corporation
in the State of Maryland is c/o The Corporation Trust Incorporated, 300 East
Lombard Street, Baltimore, Maryland 21202. The name and address of the resident
agent of the Corporation in the State of Maryland is The Corporation Trust
Incorporated, 300 East Lombard Street, Baltimore, Maryland 21202.
FIFTH: (1) The total number of shares of capital stock which the
Corporation shall have authority to issue is five hundred million (500,000,000),
all of which shall be Common Stock having a par value of one-tenth of one cent
($0.001) per share and an aggregate par value of five hundred thousand dollars
($500,000). Until such time as the Board of Directors shall provide otherwise in
accordance with paragraph (1)(d) of Article Seventh hereof, two hundred million
(200,000,000) of the authorized shares of Common Stock of the Corporation are
classified as Class A Common Stock, one hundred million (100,000,000) of such
shares are classified as Class B Common Stock, one hundred million (100,000,000)
of such shares are classified as Class C Common
- ---------------
*If the Reorganization is not approved by the shareholders of Kemper Europe
Fund, it is currently expected that the Fund would assume a Kemper family brand
name.
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Stock and one hundred million (100,000,000) of such shares are classified as
Class M Common Stock. Each share (including for this purpose a fraction of a
share) of Common Stock issued and outstanding immediately prior to these
Articles of Amendment and Restatement becoming effective, shall, at such
effective time, be reclassified automatically, and without any action or choice
on the part of the holder, into a share (or the same fraction of a share) of
Class M Common Stock.
(2) As more fully set forth hereafter, the assets and liabilities and the
income and expenses attributable to each class of the Corporation's stock shall
be determined separately from those of each other class of the Corporation's
stock and, accordingly, the net asset value, the dividends and distributions
payable to stockholders, and the amounts distributable in the event of
liquidation or dissolution of the Corporation to stockholders of the
Corporation's stock may vary from class to class.
(3) The assets of the Corporation attributable to each of the Class A
Common Stock, the Class B Common Stock, the Class C Common Stock and the Class M
Common Stock shall be invested in the same investment portfolio of the
Corporation.
(4) The allocations of investment income and losses and capital gains and
losses and expenses and liabilities of the Corporation among each of the classes
of Common Stock of the Corporation shall be determined by the Board of Directors
in a manner that is consistent with the Investment Company Act of 1940, as
amended. The determination of the Board of Directors shall be conclusive as to
the allocation of investment income and losses, capital gains and losses,
expenses and liabilities (including accrued expenses and reserves) and assets to
a particular class or classes.
(5) Shares of each class of stock shall be entitled to such dividends or
distributions, in stock or in cash or both, as may be declared from time to time
by the Board of Directors with respect to such class. Specifically, and without
limiting the generality of the foregoing, the dividends and distributions of
investment income and capital gains with respect to each class of stock may vary
with respect to each such class to reflect differing allocations of the expenses
of the Corporation among the holders of the classes and any resultant
differences among the net asset values per share of the classes, to such extent
and for such purposes as the Board of Directors may deem appropriate. The Board
of Directors may provide that dividends and distributions on the Class M Common
Stock may be paid or reinvested in shares of Class A Common Stock. The Board of
Directors may provide that dividends and distributions shall be payable only
with respect to those shares of stock that have been held of record continuously
by the stockholder for a specified period, not to exceed 72 hours, prior to the
record date of the dividend or distribution.
(6) On each matter submitted to a vote of the stockholders, each holder of
a share of stock shall be entitled to one vote for each such share standing in
such holder's name upon the books of the Corporation regardless of the class
thereof, and all shares of all classes shall vote together as a single class;
provided, however, that (i) when the Maryland General Corporation Law or the
Investment Company Act of 1940, as
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amended, requires that a class vote separately with respect to a given matter,
the separate voting requirements of the applicable law shall govern with respect
to the affected class or classes: (ii) in the event that the separate vote
requirement referred to in (i) above applies with respect to one or more
classes, then, subject to (iii) below, the shares of all other classes shall
vote as one single class; and (iii) as to any matter, which, in the judgment of
the Board of Directors (which shall be conclusive and binding for all purposes),
does not affect the interests of a particular class, such class shall not be
entitled to any vote and only the holders of shares of the affected class or
classes shall be entitled to vote.
(7) In the event of the liquidation or dissolution of the Corporation,
stockholders of each class of the Corporation's stock shall be entitled to
receive, as a class, out of the assets of the Corporation available for
distribution to stockholders, but other than general assets not attributable to
any particular class of stock, the assets attributable to the class less the
liabilities allocated to that class; and the assets so distributable to the
stockholders shall be distributed among the stockholders in proportion to the
number of shares of the class held by them and recorded on the books of the
Corporation. In the event that there are any general assets not attributable to
any particular class of stock, and such assets are available for distribution,
the distribution shall be made to the holders of all classes in proportion to
the net asset value of the respective classes or as otherwise determined by the
Board of Directors.
(8) To the extent permitted by law, each holder of shares of the
Corporation's stock shall be entitled to require the Corporation to redeem all
or any part of the shares of stock of the Corporation standing in the name of
the holder on the books of the Corporation, and all shares of stock issued by
the Corporation shall be subject to redemption by the Corporation, at the
redemption price of the shares as in effect from time to time as may be
determined by or pursuant to the direction of the Board of Directors of the
Corporation in accordance with the provisions of Article Seventh, less the
amount of any applicable redemption charge, deferred sales charge or other
amount imposed by the Board of Directors (to the extent consistent with
applicable law), subject to the right of the Board of Directors of the
Corporation to suspend the right of redemption or postpone the date of payment
of the redemption price in accordance with provisions of applicable law. The
proceeds of the redemption of a share (including a fractional share) of any
class of stock of the Corporation shall be reduced by the amount of any
redemption charge, deferred sales charge or other amount payable on such
redemption pursuant to the terms of issuance of such shares or otherwise imposed
by the Board of Directors. Without limiting the generality of the foregoing, the
Corporation shall, to the extent permitted by applicable law, have the right at
any time, at the Corporation's option, to redeem, in whole or in part, the
shares owned by any holder of stock of the Corporation (i) if the redemption is,
in the opinion of the Board of Directors of the Corporation, desirable in order
to prevent the Corporation from being deemed a "personal holding company" within
the meaning of the Internal Revenue Code of 1986, as amended, or (ii) if the
value of the shares in the account maintained by the Corporation or its transfer
agent for any class of stock for
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<PAGE> 107
the stockholder is below an amount determined from time to time by the Board of
Directors of the Corporation (the "Minimum Account Balance") and (a) the
stockholder has been given notice of the redemption and has failed to make
additional purchases of shares in an amount sufficient to bring the value in his
account to at least the Minimum Account Balance before the redemption is
effected by the Corporation or (b) the redemption is with respect to fees to be
paid by the stockholder to the Corporation for failing to maintain the Minimum
Account Balance or (iii) the Board of Directors has otherwise determined that it
is in the best interests of the Corporation to redeem the Shares.
Notwithstanding any other provision of this Article FIFTH(8), if certificates
representing the redeemed shares have been issued, the redemption price need not
be paid by the Corporation until such certificates are presented in proper form
for transfer to the Corporation or the agent of the Corporation appointed for
such purpose; however, the redemption shall be effective in accordance with the
action of the Board of Directors, regardless of whether or not such presentation
has been made. Payment of the redemption price shall be made in cash by the
Corporation at the time and in the manner as may be determined from time to time
by the Board of Directors of the Corporation unless, in the opinion of the Board
of Directors, which shall be conclusive, conditions exist that make payment
wholly in cash unwise or undesirable; in such event the Corporation may make
payment wholly or partly by securities or other property included in the assets
allocable to the class of the shares for which redemption is being sought, the
value of which shall be determined as provided herein.
(9) At such times as may be determined by the Board of Directors (or with
the authorization of the Board of Directors, by the officers of the Corporation)
in accordance with the Investment Company Act of 1940, as amended, applicable
rules and regulations thereunder and applicable rules and regulations of the
National Association of Securities Dealers, Inc. and from time to time reflected
in the registration statement of the Corporation (the "Corporation's
Registration Statement"), shares of a particular class of stock of the
Corporation may be automatically converted into shares of another class of stock
of the Corporation based on the relative net asset values of such classes at the
time of conversion, subject, however, to any conditions of conversion that may
be imposed by the Board of Directors (or with the authorization of the Board of
Directors, by the officers of the Corporation) and reflected in the
Corporation's Registration Statement. The terms and conditions of such
conversion may vary within and among the classes to the extent determined by the
Board of Directors (or with the authorization of the Board of Directors, by the
officers of the Corporation) and set forth in the Corporation's Registration
Statement. Without limiting the generality of the foregoing, each share (or
fraction of a share) of Class M Common Stock that is issued and outstanding as
of the one year anniversary date of the date on which these Articles of
Amendment and Restatement become effective shall be converted automatically,
without any action or choice on the part of the holder, into a share (or such
fractional share), of Class A Common Stock of the Corporation based on relative
net asset values at the time of conversion, and outstanding certificates
previously representing the issued and outstanding shares of
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<PAGE> 108
Class M Common Stock shall thereafter represent Class A Common Stock in the
resulting number of whole shares.
(10) The Corporation may issue shares of stock in fractional denominations
to the same extent as its whole shares, and shares in fractional denominations
shall be shares of stock having proportionately to the respective fractions
represented thereby all the rights to vote, the right to receive dividends and
distributions, and the right to participate upon liquidation of the Corporation,
but excluding the right, if any, to receive a stock certificate representing
fractional shares.
(11) No stockholder shall be entitled to any preemptive right other than as
the Board of Directors may establish.
SIXTH: The Corporation currently has six directors. The number of
directors of the Corporation may be changed pursuant to the By-Laws of the
Corporation, but shall not be less than the number of directors required under
the Maryland General Corporation Law.
SEVENTH: The following provisions are inserted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the Board
of Directors and stockholders.
(1) In addition to its other powers explicitly or implicitly granted under
the Charter of the Corporation, by law or otherwise, the Board of Directors of
the Corporation:
(a) is expressly and exclusively authorized to make, alter, amend or
repeal the By-Laws of the Corporation;
(b) may from time to time determine whether, to what extent, at what
times and places, and under what conditions and regulations the accounts
and books of the Corporation, or any of them, shall be open to the
inspection of the stockholders, and no stockholder shall have any right to
inspect any account, book or document of the Corporation except as
conferred by statute or as authorized by resolution of the Board of
Directors of the Corporation;
(c) is empowered to authorize, without stockholder approval, the
issuance and sale from time to time of shares of stock of any class of the
Corporation whether now or hereafter authorized and securities convertible
into shares of stock of the Corporation of any class or classes, whether
now or hereafter authorized, for such consideration as the Board may deem
advisable;
(d) is authorized to classify or to reclassify, from time to time, any
unissued shares of stock of the Corporation, whether now or hereafter
authorized, by setting, changing or eliminating the preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms and conditions of or rights to require redemption
for the stock. The provisions of these Articles of Amendment and
Restatement (including those in Article FIFTH
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hereof) shall apply to each class of stock unless otherwise provided by the
Board of Directors prior to issuance of any shares of that class;
(e) is empowered to authorize and issue, without stockholder approval,
obligations of the Corporation, secured and unsecured, as the Board of
Directors may determine, and to authorize and cause to be executed
mortgages and liens upon the real or personal property of the Corporation;
(f) Notwithstanding anything in this Charter to the contrary, is
authorized to establish in its absolute discretion the basis or method for
determining the value of the assets attributable to any class, the value of
the liabilities attributable to any class and the net asset value of each
share of any class of the Corporation's stock; and
(g) is authorized to determine in accordance with generally accepted
accounting principles and practices what constitutes net profits, earnings,
surplus or net assets in excess of capital, and to determine what
accounting periods shall be used by the Corporation for any purpose; to set
apart out of any funds of the Corporation reserves for such purposes as it
shall determine and to abolish the same; to declare and pay any dividends
and distributions in cash, securities or other property from surplus or any
other funds legally available therefor, at such intervals as it shall
determine; to declare dividends or distributions by means of a formula or
other method of determination, at meetings held less frequently than the
frequency of the effectiveness of such declarations; and to establish
payment dates for dividends or any other distributions on any basis,
including dates occurring less frequently than the effectiveness of
declarations thereof.
(2) Notwithstanding any provision of the Maryland General Corporation Law
requiring a greater proportion than a majority of the votes of all classes or of
any class of the Corporation's stock entitled to be cast in order to take or
authorize any action, any such action shall be effective and valid if taken or
authorized by the affirmative vote of a majority of the aggregate number of
votes entitled to be cast thereon subject to any applicable requirements of the
Investment Company Act of 1940, as amended, as from time to time in effect, or
rules or orders of the Securities and Exchange Commission or any successor
thereto.
(3) The presence in person or by proxy of the holders of shares entitled to
cast one-third of the votes entitled to be cast (without regard to class) shall
constitute a quorum at any meeting of the stockholders, except with respect to
any matter which, under applicable statutes or regulatory requirements, requires
approval by a separate vote of one or more classes of stock, in which case the
presence in person or by proxy of the holders of shares entitled to cast
one-third of the votes entitled to be cast by each class entitled to vote as a
class on the matter shall constitute a quorum.
(4) Any determination made in good faith by or pursuant to the direction of
the Board of Directors, as to the amount of the assets, debts, obligations, or
liabilities of the Corporation, as to the amount of any reserves or charges set
up and the propriety
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thereof, as to the time of or purpose for creating such reserves or charges, as
to the use, alteration or cancellation of any reserves or charges (whether or
not any debt, obligation, or liability for which such reserves or charges shall
have been created shall be then or thereafter required to be paid or
discharged), as to the value of or the method of valuing any investment owned or
held by the Corporation, as to market value or fair value of any investment or
fair value of any other asset of the Corporation, as to the allocation of any
asset of the Corporation to a particular class or classes of the Corporation's
stock, as to the charging of any liability or expense of the Corporation to a
particular class or classes of the Corporation's stock, as to the number of
shares of the Corporation outstanding, as to the estimated expense to the
Corporation in connection with purchases of its shares, as to the ability to
liquidate investments in orderly fashion, or as to any other matters relating to
the issue, sale, redemption or other acquisition or disposition of investments
or shares of the Corporation, shall be final and conclusive and shall be binding
upon the Corporation and all holders of its shares, past, present and future,
and shares of the Corporation are issued and sold on the condition and
understanding that any and all such determinations shall be binding as
aforesaid.
EIGHTH: (1) To the full extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for money damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not that person is a director or officer at the
time of any proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance expenses to its currently
acting and its former directors to the full extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The Corporation
shall indemnify and advance expenses to its officers to the same extent as its
directors and may do so to such further extent as is consistent with law. The
Board of Directors may by By-Law, resolution or agreement make further provision
for indemnification of directors, officers, employees and agents to the full
extent permitted by the Maryland General Corporation Law.
(3) No provision of this Article shall be effective to protect or purport
to protect any director or officer of the Corporation against any liability to
the Corporation or its stockholders to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
(4) References to the Maryland General Corporation Law in this Article are
to that law as from time to time amended. No amendment to the Charter of the
Corporation shall affect any right of any person under this Article based on any
event, omission or proceeding prior to the amendment.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in its Charter in the manner now or hereafter
prescribed by the
C-7
<PAGE> 111
laws of the State of Maryland, including any amendment which alters the contract
rights, as expressly set forth in the Charter, of any outstanding stock, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
ARTICLE II: Each share (including for this purpose a fraction of a share)
of Common Stock issued and outstanding immediately prior to these Articles of
Amendment and Restatement becoming effective, shall, at such effective time, be
reclassified automatically, and without any action or choice on the part of the
holder, into a share (or the same fraction of a share) of Class M Common Stock.
Outstanding certificates representing issued and outstanding shares of Common
Stock immediately prior to these Articles of Amendment and Restatement becoming
effective, shall upon these Articles of Amendment and Restatement becoming
effective be deemed to represent the same number of shares of Class M Common
Stock. Certificates representing shares of the Class M Common Stock resulting
from the aforesaid reclassification need not be issued until certificates
representing the shares of Common Stock so reclassified, if issued, have been
received by the Corporation or its agent duly endorsed for transfer with the
request that a new certificate be provided. The Class A Common Stock, Class B
Common Stock, Class C Common Stock and Class M Common Stock shall have the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as set forth in the Charter of the Corporation as herein amended and
restated.
ARTICLE III: The Corporation desires to amend and restate its Charter as
currently in effect. The provisions set forth in these Articles of Amendment and
Restatement are all of the provisions of the Charter currently in effect as
herein amended. The current address of the principal office of the Corporation,
and the name and address of the Corporation's current resident agent are as set
forth herein. The number of directors is currently set at six and their names
are [ ], [ ], [ ], [ ],
[ ], and [ ].
ARTICLE IV: The amendment and restatement of the Charter of the
Corporation as hereinabove set forth has been duly advised by the Board of
Directors and approved by the stockholders.
ARTICLE V: The total number of shares of capital stock that the
Corporation had authority to issue immediately prior to these Articles of
Amendment and Restatement becoming effective was one hundred million
(100,000,000) shares of the par value of one cent ($.01) per share and of the
aggregate par value of one million dollars ($1,000,000), all of which shares
were designated Common Stock. The total number of shares of capital stock that
the Corporation has authority to issue upon these Articles of Amendment and
Restatement becoming effective is five hundred million (500,000,000) shares, all
of the par value of one-tenth of one cent ($.001) per share, and of the
aggregate par value of five hundred thousand dollars ($500,000). Two hundred
million (200,000,000) of such shares are designated as Class A Common Stock, one
hundred million (100,000,000) of such shares are designated as Class B Common
Stock, one hundred million (100,000,000) of such shares are designated as
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<PAGE> 112
Class C Common Stock and one hundred million (100,000,000) of such shares are
designated as Class M Common Stock.
ARTICLE VI: These Articles of Amendment and Restatement shall become
effective on , 1999 at [a.m./p.m.] Eastern Time.
IN WITNESS WHEREOF, Scudder New Europe Fund, Inc. has caused these Articles
of Amendment and Restatement to be signed in its name and on its behalf by its
President, ____________, and witnessed by its Secretary, ____________, as of
__________, 1999.
The President acknowledges these Articles of Amendment and Restatement to
be the corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters and facts set forth in these
Articles with respect to the authorization and approval of this amendment and
restatement of the Corporation's Charter are true in all material respects and
that this statement is made under penalties of perjury.
By:
-------------------------------------
President
Witness:
- ---------------------------------------------
Secretary
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<PAGE> 113
EXHIBIT D
INVESTMENT MANAGEMENT AGREEMENT
KEMPER EUROPE FUND, INC.*
222 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
, 1999
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
INVESTMENT MANAGEMENT AGREEMENT
KEMPER EUROPE FUND, INC.
Ladies and Gentlemen:
Kemper Europe Fund, Inc. (the "Fund") has been established as a Maryland
corporation to engage in the business of an investment company. Pursuant to the
Fund's Articles of Incorporation, as amended and restated from time to time (the
"Articles"), the Board of Directors is authorized to issue the Fund's shares of
Common Stock (the "Shares") in separate series or classes. The Board of
Directors has authorized five classes of shares. Additional series or classes
may be established from time to time by action of the Directors.
The Fund has selected you to act as the investment manager of the Fund and
to provide certain other services, as more fully set forth below, and you have
indicated that you are willing to act as such investment manager and to perform
such services under the terms and conditions hereinafter set forth. Accordingly,
the Fund agrees with you as follows:
1. DELIVERY OF DOCUMENTS. The Fund engages in the business of investing
and reinvesting its assets in the manner and in accordance with the investment
objectives, policies and restrictions specified in the currently effective
Prospectus (the "Prospectus") and Statement of Additional Information (the
"SAI") included in the Fund's Registration Statement on Form N-1A, as amended
from time to time (the "Registration Statement") filed by the Fund 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
- ---------------
*If the Reorganization is not approved by the shareholders of Kemper Europe
Fund, it is currently expected that the Fund would assume a Kemper family brand
name.
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<PAGE> 114
Fund. The Fund has also furnished you with copies properly certified or
authenticated of each of the following additional documents related to the Fund:
(a) The Articles, as amended and restated to date.
(b) By-Laws of the Fund as in effect on the date hereof (the
"By-Laws").
(c) Resolutions of the Directors of the Fund and the shareholders of
the Fund selecting you as investment manager and approving the form of this
Agreement.
The Fund will furnish you from time to time with copies, properly certified
or authenticated, of all amendments of or supplements, if any, to the foregoing,
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 Fund's Board of
Directors. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Fund. You shall
also make available to the Fund promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Fund in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Fund are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
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.
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<PAGE> 115
You shall furnish to the Fund's Board of Directors periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Fund's officers or Board of Directors shall reasonably
request.
3. ADMINISTRATIVE SERVICES. In addition to the portfolio management
services specified above in section 2, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Fund administrative services
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 Fund's Board of Directors 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 consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of dividends and distributions
available to be paid by the Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting the Fund as it may reasonably request
in the conduct of the its business, subject to the direction and control of the
Fund's Board of Directors. Nothing in this Agreement shall be deemed to shift to
you
D-3
<PAGE> 116
or to diminish the obligations of any agent of the Fund or any other person not
a party to this Agreement which is obligated to provide services to the Fund.
4. ALLOCATION OF CHARGES AND EXPENSES. Except as otherwise specifically
provided in this section 4, you shall pay the compensation and expenses of all
Directors, officers and executive employees of the Fund (including the Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Fund, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 2 hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Directors and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Fund; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Fund is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Fund business) of Directors, officers and
employees of the Fund who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Directors and officers of the Fund; and costs of
shareholders' and other meetings.
D-4
<PAGE> 117
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 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
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
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 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
D-5
<PAGE> 118
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 Articles and the Registration Statement. If the
determination of net asset value does not take place for any particular day,
then for the purposes of this section 5, the value of the net assets of the Fund
as last determined shall be deemed to be the value of its net assets as of 4:00
p.m. (New York time), or as of such other time as the value of the net assets of
the Fund's portfolio may be lawfully determined on that day. If the Fund
determines the value of the net assets of its portfolio more than once on any
day, then the last such determination thereof on that day shall be deemed to be
the sole determination thereof on that day for the purposes of this section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. AVOIDANCE OF INCONSISTENT POSITION; SERVICES NOT EXCLUSIVE. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed
to be exclusive and it is understood that you may render investment advice,
management and services to others. In acting under this Agreement, you shall be
an independent contractor and not an agent of the Fund. Whenever the Fund and
one or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. LIMITATION OF LIABILITY OF MANAGER. As an inducement to your
undertaking to render services pursuant to this Agreement, the Fund agrees that
you shall not be liable under this Agreement for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, provided that nothing in this Agreement
shall be deemed to protect or purport to
D-6
<PAGE> 119
protect you against any liability to the Fund or its shareholders to which you
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties, or by reason of your reckless
disregard of your obligations and duties hereunder.
8. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall
remain in force until April 1, 2001, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Directors who are not
parties to this Agreement or interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Fund's Board of Directors on 60 days'
written notice to you, or by you on 60 days' written notice to the Fund. This
Agreement shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time
without the payment of any penalty by the Board of Directors or by vote of a
majority of the outstanding voting securities of the Fund in the event that it
shall have been established by a court of competent jurisdiction that you or any
of your officers or directors has taken any action which results in a breach of
your covenants set forth herein.
9. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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.
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<PAGE> 120
This Agreement shall be construed in accordance with the laws of the State
of New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, or in a manner which would cause the Fund to
fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Fund, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
KEMPER EUROPE FUND, INC.*
By:
----------------------------------
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
----------------------------------
- ---------------
*As stated above, if the Reorganization is not approved by the shareholders of
Kemper Europe Fund, it is currently expected that the Fund would assume a
Kemper family brand name.
D-8
<PAGE> 121
EXHIBIT E
INVESTMENT OBJECTIVES AND ADVISORY FEES FOR SIMILAR FUNDS
MANAGED BY SCUDDER KEMPER
SCUDDER FUNDS+
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
Scudder Greater Europe
Growth Fund............. Long term growth of 1.000% to $1 billion $195,514,335
capital through 0.900 thereafter*
investments primarily
in the equity
securities of European
companies.
Scudder Latin America
Fund.................... Long term capital 1.250% to $1 billion $882,555,049
appreciation through 1.150% thereafter
investment primarily in
the securities of Latin
American issuers.
Scudder Pacific
Opportunities Fund...... Long term growth of 1.100% of net assets $147,276,692
capital primarily
through investment in
the equity securities
of Pacific Basin
companies, excluding
Japan.
</TABLE>
- ---------------
* The addition of this breakpoint is effective October 1, 1998.
E-1
<PAGE> 122
KEMPER FUNDS+
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
- ---- --------- -------- ----------
<S> <C> <C> <C>
GLOBAL AND INTERNATIONAL
FUNDS
Kemper Asian Growth Fund.. Long-term capital 0.850% to $250 million $ 6,398,000
growth by investing in 0.820% next $750 million
a diversified 0.800% next $1.5 billion
portfolio of Asian 0.780% next $2.5 billion
equity securities. 0.750% next $2.5 billion
0.740% next $2.5 billion
0.730% next $2.5 billion
0.720% thereafter**
Kemper Europe Fund........ Long-term capital 0.750% to $250 million $ 23,910,000
growth by investing in 0.720% next $750 million
a diversified 0.700% next $1.5 billion
portfolio of European 0.680% next $2.5 billion
equity securities. 0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper Latin America
Fund.................... Long-term capital 1.250% to $250 million $ 1,441,000@
appreciation through 1.200% next $750 million
investment primarily 1.150% thereafter**
in the securities of
Latin American
issuers.
</TABLE>
- ---------------
+ The information provided below is shown as of the end of each Fund's last
fiscal year, unless otherwise noted.
** Subject to waivers and/or reimbursements.
@ Net asset information is provided as of the semi-annual period ended March
31, 1998.
E-2
<PAGE> 123
Q. WHAT ARE THE BENEFITS OF ACQUIRING THE ASSETS OF KEMPER EUROPE FUND?
A. The purpose of the Reorganization is to enhance the Fund's ability to
compete in open-end form by acquiring the assets of a fund with a similar
investment strategy and to achieve certain economies of scale. The
Reorganization is structured to be "tax free" for federal income tax
purposes for the stockholders of the Fund and KEF. There are some costs
associated with the Reorganization, however, which will be borne by the
stockholders of the Fund and KEF.
Q. WHAT ARE THE TAX CONSEQUENCES OF THE REORGANIZATION?
A. This transaction is structured to be "tax free" for federal income tax
purposes for the stockholders of the Fund and KEF.
Q. WHAT IS THE TIMING OF THE REORGANIZATION?
A. The closing is expected to take place on or about September 1, 1999.
Q: WHAT OTHER MATTERS AM I BEING ASKED TO VOTE ON?
A: Stockholders are also being asked to approve amendments to the Fund's
Charter and changes in investment restrictions that currently are
inconsistent with operation as an open-end fund. You are also being asked to
elect nominees who would serve as Directors of the Fund if the open-ending
proposal is approved. If the open-ending proposal is not approved, however,
you will be asked to reelect incumbent Directors whose terms expire this
year. You will also be asked to approve a new Investment Advisory Agreement
(which provides for lower advisory fees) with Scudder Kemper to take effect
if the open-ending proposal is approved, and to ratify the selection of
Ernst & Young LLP as new independent auditors for the Fund.
Q: HOW DOES THE BOARD OF DIRECTORS RECOMMEND THAT I VOTE?
A: AFTER CAREFUL CONSIDERATION, THE DIRECTORS OF YOUR FUND, INCLUDING THOSE WHO
ARE NOT AFFILIATED WITH SCUDDER KEMPER, RECOMMEND THAT YOU VOTE FOR THE
OPEN-ENDING PROPOSAL AND RELATED ACTIONS ON THE ENCLOSED PROXY CARD.
Q: WHOM DO I CALL FOR MORE INFORMATION?
A: Please call Shareholder Communications Corporation, your Fund's information
agent, at 1-800-723-8613.
SNEF
<PAGE> 124
SCUDDER NEW EUROPE FUND, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 20, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE FUND
The undersigned holder of shares of Scudder New Europe Fund, Inc. (the "Fund"),
hereby appoints Bruce H. Goldfarb, Daniel Pierce and Kathryn L. Quirk attorneys
and proxies for the undersigned with full powers of substitution and revocation,
to represent the undersigned and to vote on behalf of the undersigned all shares
of the Fund that the undersigned is entitled to vote at the Annual Meeting of
Shareholders of the Fund to be held at the offices of Scudder Kemper
Investments, Inc., 25th Floor, 345 Park Avenue, (at 51st Street) New York, New
York 10154, at 9:30 a.m. and any adjournment or adjournments thereof. The
undersigned hereby acknowledges receipt of the Notice of Annual Meeting and the
Proxy Statement dated June 3, 1999 and hereby instructs said attorneys and
proxies to vote said shares as indicated herein.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. A majority of the proxies present and
acting at the Meeting in person or by substitute (or, if only one shall be so
present, then that one) shall have and may exercise all of the power and
authority of said proxies hereunder. The undersigned hereby revokes any proxy
previously given.
IMPORTANT: WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY
CARD AND RETURN IT IN THE ENCLOSED ADDRESSED ENVELOPE WHICH
REQUIRES NO POSTAGE AND IS INTENDED FOR YOUR CONVENIENCE. YOUR
PROMPT RETURN OF THE ENCLOSED PROXY CARD MAY SAVE THE FUND THE
NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A
QUORUM AT THE ANNUAL MEETING.
Please sign this proxy exactly as your name appears on the
books of the Fund. Joint owners should each sign personally.
Trustees and other fiduciaries should indicate the capacity in
which they sign, and where more than one name appears, a
majority must sign. If a corporation, this signature should be
that of an authorized officer who should state his or her
title.
----------------------------------------------
Signature
----------------------------------------------
Signature (if held jointly)
----------------------------------------, 1999
Date
<PAGE> 125
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE FOLLOWING ITEMS.
...............................................................................
...............................................................................
1. To approve a proposal to convert the Fund from a closed-end investment
company to an open-end investment company, which proposal includes the
following:
(a) Changing the Fund's subclassification from a closed-end
investment company to an open-end investment company; (b)
Amending and Restating the Fund's Articles of
Incorporation to provide for such conversion, which
includes the authority to impose redemption fees and
changes to quorum requirements; and (c) Changing the
Fund's fundamental investment policies relating to
restricted securities and borrowing to reflect its
proposed new subclassification.
FOR / / AGAINST / / ABSTAIN / /
2. To approve further amendments to the Fund's Articles of Incorporation,
including the elimination of the classified Board and super-majority
voting requirements, in the event that Proposal 1 is approved.
FOR / / AGAINST / / ABSTAIN / /
3. To elect the Board of Directors
(a) To elect nominees who will continue to serve on the
Board of the Fund in the event that Proposal 1 is not
approved: Wilson Nolen and Ladislas O. Rice
FOR ALL NOMINEES / / WITHHELD / / FOR ALL EXCEPT / /
(b) To elect nominees to serve on the Board of the Fund if
Proposal 1 is approved:
James E. Akins Fred B. Renwick
Arthur R. Gottschalk Thomas W. Littauer
Frederick T. Kelsey John G. Weithers
FOR ALL NOMINEES / / WITHHELD / / FOR ALL EXCEPT / /
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK "FOR
ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NAME(S) OF THE NOMINEE(S).
4. To ratify the selection of Ernst & Young LLP as independent auditors for
the Fund.
FOR / / AGAINST / / ABSTAIN / /
5. To approve a new Investment Advisory Agreement with Scudder Kemper
Investments, Inc. providing for, among other things, a lower advisory
fee rate than that paid under the current Investment Advisory Agreement,
which Agreement would take effect if Proposal 1 is approved.
FOR / / AGAINST / / ABSTAIN / /
PLEASE RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
