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As filed with the Securities and Exchange Commission
on April 28, 1999
Registration No. 33-32430
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. [ ] Post-Effective Amendment No.
Scudder New Europe Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (212) 326-6200
345 Park Avenue
New York, New York 10154
(Address of Principal Executive Offices) (Zip code)
Bruce H. Goldfarb, Esq.
Scudder New Europe Fund, Inc.
345 Park Avenue
New York, New York 10154
(Name and Address of Agent for Service)
copies to:
Burton M. Leibert, Esq. David A. Sturms, Esq.
Willkie Farr & Gallagher Vedder, Price, Kaufman & Kammholz
787 Seventh Avenue 222 North LaSalle Street
New York, NY 10019-6099 Chicago, IL 60601
Approximate date of proposed public offering: As soon as possible after the
effective date of this Registration Statement.
Title of Securities Being Registered: Common Stock, $.001 par value per share.
Registrant is registering an indefinite amount of securities pursuant to Rule
24f-2 under the Investment Company Act of 1940, as amended; accordingly, no fee
is payable herewith.
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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CONTENTS OF
REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Letter to Shareholders
Notice of Special Meeting
Part A - Prospectus/Proxy Statement
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
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KEMPER EUROPE FUND
YOUR VOTE IS IMPORTANT
Dear Shareholder:
The Board of Trustees of Kemper Europe Fund has recently reviewed and
unanimously endorsed a proposal for the reorganization of the Kemper Europe
Fund. UNDER THE TERMS OF THE PROPOSAL, SCUDDER NEW EUROPE FUND, INC. ("SCUDDER
EUROPE FUND") WOULD ACQUIRE THE ASSETS AND LIABILITIES OF THE KEMPER EUROPE
FUND. We are pleased to invite you to attend a special meeting (the "Meeting")
of the shareholders of the Kemper Europe Fund to consider the approval of an
Agreement and Plan of Reorganization (the "Plan") pursuant to which the
reorganization of your Fund (the "Reorganization") would be effected. The
Reorganization is contingent upon the approval by the shareholders of the
Scudder Europe Fund of a proposal necessary to convert that Fund from closed-end
form to open-end form.
The Kemper Europe Fund's Board of Trustees and Scudder Kemper Investments, Inc.
("Scudder Kemper"), the Kemper Europe Fund's investment adviser, believe that
the Reorganization is in the best interests of the Kemper Europe Fund and its
shareholders.
Scudder Kemper believes, and intends to manage the Scudder Europe Fund, such
that the Reorganization will not result in any material changes to the
investment philosophy or operations of your Fund, since the Scudder Europe Fund
has substantially similar investment objectives and policies as the Kemper
Europe Fund. In addition, the Scudder Europe Fund will have the same investment
adviser, transfer agent and distributor as the Kemper Europe Fund, although
Scudder Investments (U.K.) Limited will not serve as sub-investment adviser to
the Scudder Europe Fund. Moreover, the Scudder Europe Fund will adopt the name
of the Kemper Europe Fund in connection with the Reorganization. The closing of
the Reorganization is expected to occur on or about September 1, 1999. The fees
and expenses to be borne by the Scudder Europe Fund for advisory,
administration, shareholder and other operational services are expected to be
comparable to those charges borne currently by the Kemper Europe Fund, except
that Scudder Europe Fund will incur an annual accounting service fee expected to
equal approximately .10% of that Fund's assets which is not currently paid by
the Kemper Europe Fund. After the Reorganization, however, former shareholders
of Kemper Europe Fund may realize certain economies of scale based on its
greater asset size as shareholders of Scudder Europe Fund that may offset, in
part, the accounting service fee. Moreover, Scudder Kemper has agreed to limit
the total annual operating expenses of Class A, B and C shares of Scudder Europe
Fund to 1.75%, 2.65% and 2.62%, respectively, for the one year period following
the Reorganization.
If shareholders of the Kemper Europe Fund approve the Plan and shareholders of
the Scudder Europe Fund approve the open-ending proposal, upon consummation of
the Reorganization the Kemper Europe Fund will be liquidated. You will become a
shareholder of the Scudder Europe Fund, having received shares of the same class
with an aggregate value equal to the
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aggregate net asset value of your investment in the Kemper Europe Fund at the
time of the transaction. No sales charge will be imposed in the transaction. The
transaction will, in the opinion of counsel, be free from federal income taxes
to you, the Kemper Europe Fund and the Scudder Europe Fund. All expenses
incurred in connection with the Reorganization will be borne by the Kemper
Europe Fund and the Scudder Europe Fund based on their relative net assets.
The Meeting will be held on July 20, 1999 to consider the Reorganization. WE
STRONGLY INVITE YOUR PARTICIPATION BY ASKING YOU TO REVIEW, COMPLETE AND RETURN
YOUR PROXY PROMPTLY.
Detailed information about the proposed Reorganization is described in the
attached Prospectus/Proxy Statement.
THE BOARD OF TRUSTEES OF THE KEMPER EUROPE FUND HAS UNANIMOUSLY APPROVED THE
REORGANIZATION OF THE KEMPER EUROPE FUND AND RECOMMENDS THAT YOU VOTE TO APPROVE
THE PLAN.
On behalf of the Board of Trustees, I thank you for your participation as a
shareholder and urge you to please exercise your right to vote by completing,
dating and signing the enclosed proxy card. A self-addressed, postage-paid
envelope has been enclosed for your convenience.
Please read the full text of the Prospectus/Proxy Statement before you vote.
If you have any questions regarding the proposed Reorganization, please feel
free to call Shareholder Communications Corporation, who will be pleased to
assist you.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED PROMPTLY.
Sincerely,
[ ]
, 1999
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KEMPER EUROPE FUND
222 South Riverside Plaza
Chicago, Illinois 60606
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on July 20, 1999
Notice is hereby given that a Special Meeting of Shareholders
(the "Meeting") of Kemper Europe Fund will be held at the offices of Scudder
Kemper Investments, Inc., 345 Park Avenue, New York, New York 10154, on July 20,
1999, commencing at [ ] a.m./p.m. for the following purposes:
1. To approve the Agreement and Plan of Reorganization dated as
of _________, 1999 (the "Plan") providing: (i) that the Kemper
Europe Fund would transfer to Scudder New Europe Fund, Inc.
(the "Scudder Europe Fund") all of its assets in exchange for
shares of the Scudder Europe Fund and the assumption by
Scudder Europe Fund of all of the Kemper Europe Fund's
liabilities, (ii) that such shares of Scudder Europe Fund
would be distributed to shareholders of Kemper Europe Fund in
liquidation of Kemper Europe Fund, and (iii) that Kemper
Europe Fund would subsequently be terminated.
2. To transact such other business as may properly come before
the Meeting or any adjournment or adjournments thereof.
THE BOARD OF TRUSTEES OF THE KEMPER EUROPE FUND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE PLAN.
The enclosed proxy is being solicited by the Board of Trustees
of the Kemper Europe Fund. The Board of Trustees of the Kemper Europe Fund has
fixed the close of business on May 25, 1999 as the record date for the
determination of shareholders of the Kemper Europe Fund entitled to notice of
and to vote at the Meeting and any adjournment or adjournments thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE URGED TO SIGN
AND RETURN WITHOUT DELAY THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, SO THAT THEIR SHARES MAY BE
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REPRESENTED AT THE MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE
EXERCISED BY THE SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED PROXY, BY
GIVING WRITTEN NOTICE OF REVOCATION TO THE KEMPER EUROPE FUND AT ANY TIME BEFORE
THE PROXY IS EXERCISED OR BY VOTING IN PERSON AT THE MEETING.
By Order of the Board of Trustees
Philip J. Collora,
Secretary
, 1999
YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY
WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
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THE INFORMATION IN THIS PROSPECTUS/PROXY STATEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS/PROXY
STATEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL 28, 1999
PROSPECTUS/PROXY STATEMENT
_____________, 1999
ACQUISITION OF THE ASSETS OF
KEMPER EUROPE FUND
222 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
(800) 621-1048
BY AND IN EXCHANGE FOR SHARES OF
SCUDDER NEW EUROPE FUND, INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
(212) 326-6200
This Prospectus/Proxy Statement is being furnished to
shareholders of Kemper Europe Fund in connection with a proposed Agreement and
Plan of Reorganization (the "Plan") to be submitted to shareholders of the
Kemper Europe Fund for consideration at a Special Meeting of Shareholders to be
held on July 20, 1999 at [ ] a.m./p.m. (the "Meeting"), at the offices of
Scudder Kemper Investments, Inc., 345 Park Avenue, New York, New York, 10154, or
any adjournment or adjournments thereof.
Scudder New Europe Fund, Inc. (the "Scudder Europe Fund") is a
closed-end nondiversified registered investment company. The shareholders of the
Scudder Europe Fund are currently considering a proposal to convert that Fund to
an open-end investment company. The Reorganization (as described below) is
contingent upon such approval by the Scudder Europe Fund shareholders. All
descriptions of the Scudder Europe Fund herein are of the Fund in open-end form
unless otherwise stated. Although the Scudder Europe Fund, as a business entity,
will be the surviving company after the Reorganization, it will change its name
to Kemper Europe Fund, Inc., and it intends to operate very much like the Kemper
Europe Fund in which you currently own shares.
Kemper Europe Fund is registered as a diversified open-end
investment company and its investment objective is long-term capital growth.
Scudder Europe Fund's investment objective is long-term capital appreciation,
and, like the Kemper Europe Fund, seeks to achieve its investment objective by
investing primarily in the equity securities of European companies. Scudder
Europe Fund is a nondiversified investment company and, therefore, may invest a
greater proportion of its assets in the securities of a smaller number of
issuers. As a result, the Scudder Europe Fund may be subject to greater risks
with respect to its portfolio than a more
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broadly diversified fund. Still, Scudder Europe Fund held positions in 80
issuers and no single issuer constituted more than 5.8% of that Fund's assets as
of March 31, 1999.
The investment objectives, policies and risks of the Scudder
Europe Fund are substantially similar to those of the Kemper Europe Fund except
for those differences described under "Comparison of Investment Objectives and
Policies" in this Prospectus/Proxy Statement. The investment adviser, transfer
agent and independent auditors for the Scudder Europe Fund will be the same as
those of the Kemper Europe Fund, although Scudder Investments (U.K.) Limited
will not serve as sub-adviser to the Scudder Europe Fund. The distributor of
shares of the Scudder Europe Fund will be Kemper Distributors, Inc., which has
been the distributor for the Kemper Europe Fund. As stated above, upon
consummation of the Reorganization, the Scudder Europe Fund will also adopt the
Kemper Europe Fund's name and the Fund will be distributed as part of the Kemper
family of funds.
The Plan provides for all of the assets of the Kemper Europe
Fund to be acquired by the Scudder Europe Fund in exchange for shares of the
Scudder Europe Fund and the assumption by the Scudder Europe Fund of all of the
liabilities of the Kemper Europe Fund, (hereinafter referred to as the
"Reorganization"). Shares of the Scudder Europe Fund would be distributed to
shareholders of the Kemper Europe Fund in liquidation of the Kemper Europe Fund
and thereafter the Kemper Europe Fund would be terminated. As a result of the
proposed Reorganization, each shareholder of the Kemper Europe Fund will receive
that number of shares of the Scudder Europe Fund having an aggregate net asset
value equal to the aggregate value of such shareholder's shares of the Kemper
Europe Fund immediately prior to the Reorganization. All expenses of the
Reorganization (including the cost of preparing, printing and mailing the proxy
card and proxy statement and related solicitation costs for the Scudder Europe
Fund's annual meeting of stockholders) will be borne by the Scudder Europe Fund
and the Kemper Europe Fund based on their relative net assets. No sales charge
will be imposed on the shares of the Scudder Europe Fund received by the
shareholders of the Kemper Europe Fund. This transaction is structured to be
tax-free for federal income tax purposes to shareholders and to both the Scudder
Europe Fund and the Kemper Europe Fund.
The shares of common stock of the Scudder Europe Fund are
currently listed on the New York Stock Exchange (the "NYSE") under the symbol
NEF. If the Reorganization is approved, the Scudder Europe Fund will no longer
be listed on the NYSE. Reports, proxy materials and other information concerning
the Scudder Europe Fund may be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
This Prospectus/Proxy Statement, which should be retained for
future reference, sets forth concisely the information about the Scudder Europe
Fund that a prospective investor should know before voting. This
Prospectus/Proxy Statement is expected to first be sent to shareholders on or
about _______, 1999. A Statement of Additional Information dated _________,
1999, relating to this Prospectus/Proxy Statement and the Reorganization, has
been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus/Proxy Statement. A copy of such
Statement of Additional Information is available upon written or oral request
and without charge by writing to the
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Scudder Europe Fund at the address listed on the cover page of this
Prospectus/Proxy Statement or by calling [ ].
The following documents, which have been filed with the SEC,
are incorporated herein in their entirety by reference.
1. The Preliminary Prospectus of the Scudder Europe Fund, dated
________, 1999. The Scudder Europe Fund Preliminary Prospectus
accompanies this Prospectus/Proxy Statement.
2. The current Prospectus of the Kemper Europe Fund, dated March
1, 1999. This may be obtained without charge by writing to the
address on the cover page of this Prospectus/Proxy Statement
or by calling (800) 621-1048.
3. The Annual Report of the Kemper Europe Fund for the fiscal
year ended November 30, 1998.
Accompanying this Prospectus/Proxy Statement as Exhibit A is a
copy of the Plan for the proposed Reorganization.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY
STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND,
IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE KEMPER EUROPE FUND OR THE SCUDDER EUROPE
FUND.
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TABLE OF CONTENTS
PAGE
VOTING INFORMATION...................................................... 5
SUMMARY................................................................. 7
RISK FACTORS............................................................ 11
REASONS FOR THE REORGANIZATION.......................................... 12
FEE AND EXPENSES........................................................ 14
PERFORMANCE............................................................. 19
INFORMATION ABOUT THE REORGANIZATION.................................... 20
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES........................ 25
MANAGEMENT OF THE FUNDS................................................. 38
INTEREST OF CERTAIN PERSONS IN THE REORGANIZATION....................... 39
INFORMATION ON SHAREHOLDERS' RIGHTS..................................... 39
ADDITIONAL INFORMATION.................................................. 43
OTHER BUSINESS.......................................................... 43
FINANCIAL STATEMENTS AND EXPERTS........................................ 43
LEGAL PROCEEDINGS....................................................... 44
LEGAL MATTERS........................................................... 44
EXHIBIT A: AGREEMENT AND PLAN OF REORGANIZATION............... A-1
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VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection
with a solicitation of proxies by the Board of Trustees of the Kemper Europe
Fund to be used at the Special Meeting of Shareholders to be held at ____
a.m./p.m. on July 20, 1999, at the offices of Scudder Kemper, 345 Park Avenue,
New York, New York 10054, and at any adjournment or adjournments thereof. This
Prospectus/Proxy Statement, along with a Notice of the Meeting and proxy card,
is first being mailed to shareholders of the Kemper Europe Fund on or about
_______, 1999. Only shareholders of record as of the close of business on May
25, 1999 (the "Record Date") will be entitled to notice of, and to vote at, the
Meeting or any adjournment thereof. As of the Record Date, the Kemper Europe
Fund had [ ] shares outstanding and entitled to vote, which consisted of
, , and , Class A, Class B and Class C shares, respectively.
The holders of one-third of the shares of the Kemper Europe Fund outstanding at
the close of business on the Record Date present in person or represented by
proxy will constitute a quorum for the Meeting of the Kemper Europe Fund. For
purposes of determining a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power) will
be treated as shares that are present, but which have not been voted and,
therefore are counted for purposes of determining a quorum. For purposes of
obtaining the requisite approval of the Plan, however, abstentions and broker
non-votes will have the effect of a "NO" vote. If the enclosed proxy is properly
executed and returned in time to be voted at the Meeting, the proxies named
therein will vote the shares represented by the proxy in accordance with the
instructions marked thereon. Unmarked proxies will be voted FOR approval of the
Plan and FOR approval of any other matters deemed appropriate. A proxy may be
revoked at any time on or before the Meeting by written notice to the Secretary
of the Kemper Europe Fund.
Shareholder Communications Corporation ("SCC") has been
engaged to assist in the solicitation of proxies. As the Special Meeting date
approaches, certain shareholders of the Kemper Europe 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 shareholders of the
Kemper Europe Fund. Proxies that are obtained telephonically will be recorded in
accordance with the procedures set forth below.
In all cases where a telephonic proxy is solicited, the SCC
representative is required to ask for each shareholder's full name, address,
social security or employer identification number, title (if the shareholder is
authorized to act on behalf of an entity, such as a corporation), and the number
of shares owned, and to confirm that the shareholder 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 Proposal on the proxy card, and ask for the shareholder's
instructions on the Proposal. The SCC representative, although he or she is
permitted to answer questions about
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the process, is not permitted to recommend to the shareholder how to vote, other
than to read any recommendation set forth in the Proxy Statement. SCC will
record the shareholder's instructions on the card. Within 72 hours, the
shareholder will be sent a letter or mailgram to confirm his or her vote and
asking the shareholder to call SCC immediately if his or her instructions are
not correctly reflected in the confirmation.
Article IX, Section 1 of the Kemper Europe Fund's Declaration
of Trust requires the affirmative vote of the shareholders of more than fifty
percent (50%) of the votes entitled to be cast on the matter, in order for the
Trustees to "sell, convey or transfer the assets of the [Fund] or the assets
belonging to any one or more series of the [Fund], to another trust,
partnership, association or corporation." Approval of the Plan, therefore, will
require the affirmative vote of a majority of the votes entitled to be cast by
the shareholders of the Kemper Europe Fund, voting in the aggregate without
regard to class, in person or by proxy, if a quorum is present. Shareholders of
the Kemper Europe Fund are entitled to one vote for each share. Implementing the
Reorganization is contingent on the approval of the shareholders of the Scudder
Europe Fund to convert that Fund to an open-end investment company.
Proxy solicitations will be made primarily by mail, but proxy
solicitations also may be made by telephone, telegraph or personal interviews
conducted by officers and employees of Scudder Kemper and its affiliates and/or
by Shareholder Communications Corporation. All expenses of the Reorganization,
including the costs of the proxy solicitation and the preparation of enclosures
to the Prospectus/Proxy Statement, reimbursement of expenses of forwarding
solicitation material to beneficial owners of shares of the Kemper Europe Fund,
expenses incurred in connection with the preparation of this Prospectus/Proxy
Statement and the cost of preparing, printing and mailing the proxy card and
proxy statement and related solicitation costs for Scudder Europe Fund's annual
meeting of stockholders (approximately $600,000) will be borne by the Scudder
Europe Fund and the Kemper Europe Fund based on their relative net assets. It is
anticipated that banks, brokerage houses and other institutions, nominees and
fiduciaries will be requested to forward proxy materials to beneficial owners
and to obtain authorization for the execution of proxies. Each Fund may, upon
request, reimburse banks, brokerage houses and other institutions, nominees and
fiduciaries for their expenses in forwarding proxy materials to beneficial
owners.
In the event that a quorum necessary for the Meeting is not
present or sufficient votes to approve the Reorganization of the Kemper Europe
Fund are not received by July 20, 1999, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. In determining whether to adjourn the Meeting, the following factors
may be considered: the percentage of votes actually cast, the percentage of
negative votes actually cast, the nature of any further solicitation and the
information to be provided to shareholders with respect to the reasons for the
solicitation. Any such adjournment will require an affirmative vote by the
holders of a majority of the shares of the Kemper Europe Fund present in person
or by proxy and entitled to vote at the Meeting. The persons named as proxies
will vote upon a decision to adjourn the Meeting with respect to the Kemper
Europe Fund after consideration of the best interests of all shareholders of the
Kemper Europe Fund.
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PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION
SUMMARY
This summary of certain information contained in the
Prospectus/Proxy Statement is qualified by reference to the more complete
information contained elsewhere in the Prospectus/Proxy Statement, the Statement
of Additional Information the Preliminary Prospectus and Statement of Additional
Information of the Scudder Europe Fund, the Prospectus and Statement of
Additional Information of the Kemper Europe Fund and the Plan attached to this
Prospectus/Proxy Statement as Exhibit A.
PROPOSED REORGANIZATION. The Plan provides for the transfer of
all of the assets of the Kemper Europe Fund to the Scudder Europe Fund in
exchange for shares of the Scudder Europe Fund and its assumption of all of the
liabilities of the Kemper Europe Fund. The Plan also calls for the distribution
of shares of the Scudder Europe Fund to the Kemper Europe Fund's shareholders in
liquidation of the Kemper Europe Fund (the "Reorganization"). As a result of the
Reorganization, each shareholder of the Kemper Europe Fund will become the owner
of that number of full and fractional shares of the same class of the Scudder
Europe Fund having an aggregate net asset value equal to the aggregate value of
the shareholder's shares of the Kemper Europe Fund as of the close of business
on the date that the Kemper Europe Fund's assets are exchanged for shares of the
Scudder Europe Fund. HOLDERS OF CLASS A, B AND C SHARES OF THE KEMPER EUROPE
FUND WILL BECOME HOLDERS OF THE CORRESPONDING CLASS OF SHARES OF THE SCUDDER
EUROPE FUND. THE EXISTING SHAREHOLDERS OF THE SCUDDER EUROPE FUND WILL RECEIVE
CLASS M SHARES WHICH WILL CONVERT TO CLASS A SHARES ONE YEAR AFTER THE
REORGANIZATION. See "Information About the Reorganization -- Plan of
Reorganization."
For the reasons set forth below under "Reasons for the
Reorganization," the Board of Trustees of the Kemper Europe Fund, including the
Trustees of the Kemper Europe Fund who are not "interested persons" (the
"Independent Trustees"), as that term is defined in the Investment Company Act
of 1940, as amended (the "1940 Act"), has unanimously concluded that the
Reorganization would be in the best interests of the shareholders of the Kemper
Europe Fund and that the interests of the Kemper Europe Fund's existing
shareholders will not be diluted as a result of the transaction contemplated by
the Reorganization. The Board therefore has submitted the Plan for approval by
the Kemper Europe Fund's shareholders. The Board of Directors of the Scudder
Europe Fund has also reached similar conclusions and approved the Reorganization
with respect to the Scudder Europe Fund.
Approval of the Reorganization of the Kemper Europe Fund will
require the affirmative vote of a majority of the votes entitled to be cast by
the shareholders of the Kemper Europe Fund. The Reorganization is contingent
upon a number of things, including the approval of the shareholders of the
Scudder Europe Fund of a proposal to convert that Fund to an open-end investment
company. See "Voting Information."
TAX CONSEQUENCES. Prior to completion of the Reorganization,
the Kemper Europe Fund and the Scudder Europe Fund will have received an opinion
of counsel that, upon
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the closing of the Reorganization and the transfer of the assets of the Kemper
Europe Fund, no gain or loss will be recognized by the Kemper Europe Fund or its
shareholders for federal income tax purposes. The holding period and aggregate
tax basis of the Scudder Europe Fund's shares received by a Kemper Europe Fund
shareholder will be the same as the holding period and aggregate tax basis of
the shares of the Kemper Europe Fund previously held by such shareholder. In
addition, the holding period and tax basis of the assets of the Kemper Europe
Fund in the hands of the Scudder Europe Fund as a result of the Reorganization
will be the same as in the hands of the Kemper Europe Fund immediately prior to
the Reorganization.
If the Scudder Europe Fund experiences net redemptions after
converting to open-end status, the Scudder Europe Fund would be required to sell
portfolio securities. The portfolio activity that may be necessitated by
redemption requests following conversion could result in the realization of
significant capital gains by the Scudder Europe 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 and, accordingly, the actions of redeeming
stockholders may have adverse tax consequences for the Scudder Europe Fund and
its remaining stockholders. See "Potential Tax Consequences." In an attempt to
minimize adverse income tax consequences for non-redeeming shareholders in the
first year of operation as an open-end fund and to discourage short-term trading
in a vehicle intended for long-term investment, the Scudder Europe Fund would
pay in-kind a portion of the proceeds of large redemptions (i.e., redemptions
exceeding $250,000) by Class M shareholders. 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. The Scudder Europe Fund would also impose a
2% fee on all redemptions (including redemptions paid-in-kind and exchanges) of
Class M shares held during the first year after the Fund's conversion to
open-end status.
INVESTMENT OBJECTIVES AND POLICIES. The Scudder Europe Fund's
investment objective is long-term capital appreciation, which it seeks to
achieve by investing primarily in the equity securities of European companies.
The Scudder Europe Fund has substantially similar investment objectives,
investment policies, limitations and risks as the Kemper Europe Fund, except
that it is a non-diversified fund (Kemper Europe Fund is diversified) as noted
below under "Comparison of Investment Objectives and Policies."
FEES AND OTHER CHARGES. The fees and expenses to be borne by
the Scudder Europe Fund for advisory, administration, shareholder and other
operational services are expected to be comparable to those charges borne
currently by the Kemper Europe Fund, except that the Scudder Europe Fund will
incur an annual accounting service fee that is based on the actual services
provided, but is expected to equal approximately .10% of average daily net
assets, which is not currently paid by the Kemper Europe Fund. The Scudder
Europe Fund may, however, realize certain economies of scale based on its
greater asset size that may offset, in part, the accounting service fee. Scudder
Kemper has also agreed to limit the total annual operating expenses of Class A,
B and C shares of Scudder Europe Fund to 1.75%, 2.65% and 2.62%, respectively,
for the one year period following the Reorganization.
8
<PAGE> 15
PURCHASE AND REDEMPTION PROCEDURES. Upon consummation of the
Reorganization, the Scudder Europe Fund will adopt the same distribution
structure as the Kemper Europe Fund and will be distributed as part of the
Kemper family of funds. Therefore, the purchase and redemption procedures
available to shareholders of the Scudder Europe Fund will be identical to those
available to shareholders of the Kemper Europe Fund. All shares of the Scudder
Europe Fund will be sold at net asset value, subject to any applicable sales
charge. Class A shares of the Scudder Europe Fund are subject to a maximum sales
charge of 5.75%. Class B and C shares are subject to contingent deferred sales
charges and a 12b-1 distribution fee of .75%. Class M shares represent the
initial shares of the Scudder Europe Fund and are no longer offered. The Scudder
Europe Fund will also satisfy all large redemption requests by Class M
shareholders (i.e. redemptions exceeding $250,000) in-kind. Class M shares are
subject to a 2% fee on all redemptions (including redemptions in-kind) and
exchanges. The purpose of the redemption fee is to offset certain expenses
incurred to meet redemptions and to discourage short-term trading in a vehicle
intended for long-term investment. Class M shares are not subject to a
contingent deferred sales charge or a 12b-1 distribution fee, and will convert
to Class A shares one year after the Reorganization. All share classes are also
subject to an administrative service fee of up to .25%.
EXCHANGE PRIVILEGES. The exchange privileges available to
shareholders of the Scudder Europe Fund are substantially identical to those
available to shareholders of the Kemper Europe Fund. Shareholders of the Scudder
Europe Fund may exchange at net asset value all or a portion of their shares for
shares of the same class of certain other mutual funds in the Kemper family of
funds at their respective net asset values, subject to any applicable contingent
deferred sales charge or redemption fee. Shareholders of Class M shares may
exchange their shares for Class A shares of a corresponding Kemper Mutual Fund.
As stated above, a 2% fee will apply to any exchanges of Class M shares and
exchanges of Class M shares would be limited to an amount that would not trigger
an in-kind redemption. Exchanges may be effected by mail or by telephone. Shares
of a Kemper Mutual Fund with a value in excess of $1,000,000 (except Kemper Cash
Reserves Fund) acquired by exchange from another Kemper Mutual Fund may not be
exchanged thereafter until they have been owned for 15 days. In addition, shares
of a Kemper Mutual Fund with a value of $1,000,000 or less (except Kemper Cash
Reserves Fund) acquired by exchange from another Kemper Mutual Fund or from a
Money Market Fund may not be exchanged thereafter until they have been owned for
15 days (the "15-Day Hold Policy") 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.
Currently, exchanges may be made among the following Kemper Mutual Funds: Kemper
Technology Fund, Kemper Total Return Fund, Kemper Growth Fund, Kemper Small
Capitalization Equity Fund, Kemper Income and Capital Preservation Fund, Kemper
Municipal Bond Fund, Kemper Strategic Income Fund, Kemper High Yield Series,
Kemper U.S. Government Securities Fund, Kemper International Fund, Kemper State
Tax-Free Income Series, Kemper Blue Chip Fund, Kemper Global Income Fund, Kemper
Target Equity Fund (series are subject to a limited offering period), Kemper
Intermediate Municipal Bond Fund, Kemper Cash Reserves Fund, Kemper U.S.
Mortgage Fund, Kemper Short-Intermediate Government Fund, Kemper Value Series,
Inc.,
9
<PAGE> 16
Kemper Value Plus Growth Fund, Kemper Horizon Fund, Kemper Europe Fund, Inc.,
Kemper Asian Growth Fund, Kemper Aggressive Growth Fund, Kemper
Global/International Series, Inc., Kemper Equity Trust, Kemper Income Trust,
Kemper Funds Trust and Kemper Securities Trust.
The exchange privilege is available to shareholders residing
in any state in which the Scudder Europe Fund's shares being acquired may
legally be sold. When an investor effects an exchange of shares, the exchange is
treated for federal income tax purposes as a redemption. Therefore, the investor
may realize a taxable gain or loss in connection with the exchange. See "Selling
and Exchanging" in the accompanying Preliminary Prospectus of the Scudder Europe
Fund.
DIVIDENDS. The Scudder Europe Fund and the Kemper Europe Fund
distribute substantially all of their net investment income and net realized
capital gains, if any, to shareholders. All distributions are reinvested in the
form of additional full and fractional shares unless a shareholder elects
otherwise. The Scudder Europe Fund and the Kemper Europe Fund declare and pay
dividends, if any, from net investment income annually. Net realized short-term
capital gains (and long-term capital gains) of the Scudder Europe Fund, like the
Kemper Europe Fund, will be distributed at least annually. See "Distributions
and Taxes" in the accompanying Preliminary Prospectus of the Scudder Europe
Fund.
SHAREHOLDER VOTING RIGHTS. The Scudder Europe Fund is
currently registered with the Securities and Exchange Commission as a closed-end
management investment company, but will convert to open-end status upon the
approval of its shareholders. The Kemper Europe Fund is registered as an
open-end management investment company. The Scudder Europe Fund is a Maryland
corporation, having a Board of Directors. The Kemper Europe Fund is organized as
a Massachusetts business trust, having a Board of Trustees. Although the
organizational form of each Fund differs, shareholders of both Scudder Europe
Fund and Kemper Europe Fund are expected to have similar voting rights if
certain amendments to the Scudder Europe Fund's Articles of Incorporation (the
"Charter") are approved by its shareholders. See "Information on Shareholders'
Rights." For example, one-third of the outstanding shares of the Kemper Europe
Fund constitute a quorum for shareholder voting purposes. The Scudder Europe
Fund has proposed an amendment to its Charter reducing the quorum requirement
from the current majority of outstanding shares to one-third of its outstanding
shares. Approval of this Charter amendment would be included in the approval of
the open-ending proposal by the shareholders of the Scudder Europe Fund. As an
open-end fund, the Kemper Europe Fund does not hold a meeting of shareholders
annually, except as required by the 1940 Act or other applicable law. As a
closed-end fund, however, the Board of Directors of the Scudder Europe Fund is
currently divided into three classes and each Director currently serves for a
term of three years. Annual meetings of shareholders of the Scudder Europe Fund
are therefore required to elect Directors as terms expire. The Scudder Europe
Fund has proposed an amendment to its Charter to eliminate the classified Board
structure and the approval of such amendment would permit the Scudder Europe
Fund to dispense with annual shareholders meetings, except when required by law
to hold such meetings. By not having to hold annual shareholders' meetings, the
Scudder Europe Fund
10
<PAGE> 17
would save the costs of preparing proxy materials and soliciting shareholders'
votes on the usual proposals contained therein. If the shareholders of the
Scudder Europe Fund, however, do not approve this Charter amendment, Fund will
continue to be required to hold annual meetings for the purpose of electing
Directors and therefore will continue to incur the costs relating to such
meetings (approximately $50,000 to $60,000). Approval of this Charter amendment
requires the affirmative vote of 75% of the votes entitled to be cast by
shareholders of the Scudder Europe Fund. The open-ending of the Scudder Europe
Fund is not contingent upon the approval of this amendment to the Charter.
In addition, under the laws of the State of Maryland and the
Commonwealth of Massachusetts, shareholders do not have appraisal rights in
connection with a combination or acquisition of the assets of a fund by another
entity. Shareholders of the Kemper Europe Fund may, however, redeem their shares
at net asset value prior to the date of the Reorganization (subject only to
certain restrictions as set forth in the 1940 Act). See "Information on
Shareholders' Rights -- Voting Rights."
RISK FACTORS
Due to the fact that the investment objectives, policies and
restrictions of the Scudder Europe Fund are substantially similar to those of
the Kemper Europe Fund, the investment risks are similar. There are, however,
some distinctions in the investment program of the Scudder Europe Fund and the
Kemper Europe Fund. For example, (i) up to 20% of the Scudder Europe Fund's
assets may be held in cash and short and medium term high grade debt to maintain
liquidity, while the Kemper Europe Fund has no such stated policy; (ii) unlike
the Kemper Europe Fund, the Scudder Europe Fund is authorized to invest in
when-issued securities, non-investment grade debt securities, swaps, caps,
floors and collars; and (iii) the Scudder Europe Fund is classified as
non-diversified, while the Kemper Europe Fund is classified as diversified for
purposes of the 1940 Act. See the accompanying Preliminary Prospectus of the
Scudder Europe Fund for a complete discussion of the risks of investing in that
Fund.
Because the Scudder Europe Fund is converting from a
closed-end to an open-end investment company, it is possible that a meaningful
number of shareholders in that Fund may redeem their shares immediately or soon
after the Reorganization. Other closed-end funds that have converted to open-end
form have experienced redemptions that exceed sales after conversion, and, in
some instances, net redemptions have been substantial. If such redemptions
occur, the Scudder Europe Fund could be adversely affected because of lost
economies of scale and portfolio management disruption. A decrease in net assets
could result in less diversification or in smaller portfolio positions in its
investments, which could adversely affect the Scudder Europe Fund's total return
performance. In addition, as a result of any decrease in size resulting from
redemptions, the Scudder Europe Fund could experience a further increase in its
expense ratio. A higher expense ratio would lower the Scudder Europe Fund's
total return performance.
11
<PAGE> 18
As stated above, the Scudder Europe Fund is currently
registered as a closed-end fund and intends to convert to open-end status
subject to the approval of its stockholders at a July 20, 1999 annual meeting.
The Reorganization is contingent upon the approval of the open-ending proposal
by Scudder Europe Fund shareholders. In connection with the Scudder Europe
Fund's open-ending proposal, that Fund is also proposing certain further
amendments to its Charter for approval by its stockholders. The open-ending
proposal is not conditioned upon the approval of all of those further changes.
However, if all of the changes are not approved, the Scudder Europe Fund will
retain certain characteristics more typically associated with a closed-end fund.
See "Information on Shareholders' Rights."
REASONS FOR THE REORGANIZATION
The Reorganization has been proposed by Scudder Kemper as a
means of combining the Kemper Europe Fund with a fund managed by Scudder Kemper
with compatible investment objectives, policies, restrictions and risks. Scudder
Kemper informed the Board of the Kemper Europe Fund that the investment
portfolios of the Scudder Europe Fund and the Kemper Europe Fund are compatible
and that the Reorganization, if approved, offers a number of potential benefits
to both the Kemper Europe Fund and the Scudder Europe Fund. Foremost, Scudder
Kemper believes that the Scudder Europe Fund should be more viable than the
Kemper Europe Fund. By combining with a fund with a solid performance history,
the Kemper Europe Fund may be able to overcome its inability to achieve desired
increases in asset size. At only $72 million in assets (as of March 31, 1999),
the Kemper Europe Fund is well below its first breakpoint in management fees,
which is at $250 million. (At $250 million, management fees are reduced from
.75% to .72% and at $1 billion they are reduced to .70%) and its non-variable
expenses are spread over that relatively small asset base. Unless significant
redemptions offset the assets gained in the Reorganization, the immediately
greater asset size should allow the Scudder Europe Fund to achieve some
economies of scale. These economies of scale, however, may be offset (in whole
or in part) by the imposition of an accounting service fee of approximately
.10%, which is not currently paid by the Kemper Europe Fund. Kemper
Distributors, Inc. ("KDI"), though, informed the Kemper Europe Fund Board that
more assets as well as the strong track record of the Scudder Europe Fund's
portfolio managers could give the Scudder Europe Fund greater market appeal.
These changes, in turn, might provide an improved basis for support from the
brokerage community. As a result, the Scudder Europe Fund may be better
positioned for further growth and further economies of scale. Moreover, as a
stand-alone open-end fund, Scudder Kemper informed the Board that Scudder Kemper
would likely offer the Scudder Europe Fund in an environment where it might
otherwise compete for investors and investment opportunities with Kemper Europe
Fund. As separate entities, investors might be confused by the existence of two
funds with similar objectives and policies with the same investment manager and
with shares offered in the same marketing channels. Combination of the Funds
will avoid this concern, although Scudder Europe Fund will proceed with
open-ending (subject to shareholder approval) even if the Reorganization is not
approved by the shareholders of Kemper Europe Fund. The Board of Trustees of the
Kemper Europe Fund has determined that it is in the best interest of the Kemper
Europe Fund to effect the Reorganization. In reaching this conclusion, the Board
considered a number of factors, including the following:
12
<PAGE> 19
1. the terms and conditions of the Reorganization;
2. the investment objectives and policies of the Scudder
Europe Fund in relation to those of the Kemper Europe
Fund;
3. the compatibility of the investment portfolios of the
Funds;
4. the investment adviser, transfer agent, distributor
and independent auditors for the Scudder Europe Fund
would be the same as those of the Kemper Europe Fund;
5. the federal tax consequences of the Reorganization to
the Kemper Europe Fund, the Scudder Europe Fund and
the shareholders of each, and that a legal opinion
will be rendered that no recognition of income, gain
or loss for federal income tax purposes will occur as
a result of the Reorganization to any of them;
6. the Scudder Europe Fund will adopt the Kemper Europe
Fund's lower management fee schedule;
7. no sales charge will be imposed in connection with
the Reorganization;
8. the performance history of the Funds and that the
Reorganization may provide shareholders of the Kemper
Europe Fund with a more viable investment vehicle
that has a longer and better performance record; and
9. that the Reorganization may increase economic
efficiencies of the combined entity and better
position it for further growth.
In considering the Reorganization, however, the Board of
Trustees took specific note of the Kemper Europe Fund's pro-rata share of the
expenses to be incurred in connection with the Reorganization, the fact that the
Scudder Europe Fund would incur an accounting service fee of approximately .10%
which is not currently paid by the Kemper Europe Fund, and that Scudder Kemper
estimates that on a net basis (after expense limits) the EXPENSE RATIO OF THE
SCUDDER EUROPE FUND FOR CLASS A, B, AND C SHARES IS EXPECTED TO BE LOWER THAN
THAT OF THE KEMPER EUROPE FUND. The Board also considered that because the
Scudder Europe Fund is converting from a closed-end to an open-end investment
company, a significant number of shareholders may redeem their shares
immediately or soon after the Reorganization and that if such redemptions occur,
the Scudder Europe Fund could be adversely affected because of lost economies of
scale and portfolio management disruption. The Kemper Europe Fund Board noted
with approval that in an attempt to minimize subsequent adverse income tax
consequences for non-redeeming shareholders in the first year of operation as an
open-end fund, the Scudder Europe Fund will pay in-kind the proceeds of large
redemptions (i.e., redemptions exceeding $250,000) by Class M shareholders
(those shareholders who previously held the Scudder Europe Fund's closed-end
fund shares). In addition, the Scudder Europe
13
<PAGE> 20
Fund will impose a 2% fee on all redemptions (including redemptions in-kind) and
exchanges of Class M shares during the first year after the Reorganization. The
Kemper Europe Fund Board observed that redemptions in-kind would minimize
adverse tax consequences to continuing shareholders and that a redemption fee
would help to offset certain expenses and also to discourage short-term trading
in a vehicle intended for long-term investment.
In light of the foregoing, the Board of Trustees of the Kemper
Europe Fund, including the Independent Trustees, has determined that it is in
the best interest of the Kemper Europe Fund and its shareholders to effect the
Reorganization. The Board of Trustees has also determined that the
Reorganization would not result in a dilution of the interests of the Kemper
Europe Fund's existing shareholders.
The Board of Directors of the Scudder Europe Fund has also
determined that it is advantageous to the Scudder Europe Fund to effect the
Reorganization. The Board of Directors of the Scudder Europe Fund also
considered the terms and conditions of the Reorganization and representations
that the Reorganization would be effected as a tax-free Reorganization.
Accordingly, the Board of Directors of the Scudder Europe Fund, including all of
the Independent Directors, has determined that the Reorganization is in the best
interests of the Scudder Europe Fund's shareholders and that the interests of
the existing Scudder Europe Fund's shareholders would not be diluted as a result
of the Reorganization.
FEES AND EXPENSES
Pursuant to its investment advisory agreement with Scudder
Kemper, the Kemper Europe Fund pays Scudder Kemper a (graduated) monthly
investment management fee at the following annual rate:
<TABLE>
<CAPTION>
ANNUAL MANAGEMENT
AVERAGE DAILY NET ASSETS OF THE KEMPER FUND FEE RATES
- ---------------------------------------------------------------------------------------------
<S> <C>
$0 - $250 million 0.75%
$250 million - $1 billion 0.72
$1 billion - $2.5 billion 0.70
$2.5 billion - $5 billion 0.68
$5 billion - $7.5 billion 0.65
$7.5 billion - $10 billion 0.64
$10 billion - $12.5 billion 0.63
Over $12.5 billion 0.62
</TABLE>
In connection with the Reorganization, the Board of Directors
of Scudder Europe Fund has recommended that shareholders of that Fund approve
the management fee schedule of the Kemper Europe Fund as described above
pursuant to an advisory agreement substantially similar to the advisory
agreement currently in effect between Scudder Kemper and the Kemper Europe Fund.
Scudder Kemper has indicated, however, that it will
14
<PAGE> 21
contractually reduce its fees so that its advisory fees do not exceed this lower
level in the event that shareholders of Scudder Europe Fund approve the proposal
to open-end, but do not approve the proposed new advisory agreement. Based on
the combination of the current assets of the two Funds, the management fee rate
to be paid by the combined entity will be lower than that currently in effect
for the Kemper Europe Fund, although there can be no assurance that the current
assets will not decline substantially following the Reorganization.
Currently, Scudder Investments (UK) Limited, a subsidiary of
Scudder Kemper, receives a monthly fee at the annual rate of .35% from Scudder
Kemper for sub-advisory services provided to the Kemper Europe Fund. The Scudder
Europe Fund has no current intention to engage any sub-adviser following the
Reorganization and the fees paid to Scudder Kemper will not be redistributed to
any affiliated or unaffiliated sub-adviser.
For the fiscal year ended November 30, 1998, the investment
management fees charged to the Kemper Europe Fund totaled $349,000. The entire
amount of these investment management fees, however, were waived by Scudder
Kemper.
The Scudder Europe Fund also retains Scudder Kemper to manage
its daily investment and business affairs subject to the policies established by
its Board of Directors. As a closed-end fund, the Scudder Europe Fund pays
advisory fees ranging from 1.25% to 1.10% based on its current assets. For the
fiscal year ending October 31, 1999, the estimated management fees to be paid by
the reorganized Scudder Europe Fund to Scudder Kemper (based on the lower
management fee schedule as set forth above) are $3,200,000, assuming that the
net assets of the two Funds are combined and the resulting Fund experiences
neither net sales nor net redemptions.
After giving effect to the proposed Reorganization, the
expense ratio of the Scudder Europe Fund is projected to be approximately 1.85%
for Class A shares, 3.14% for Class B shares, 2.62% for Class C shares and 1.42%
for Class M shares. The actual expense ratios for the Scudder Europe Fund for
the current and future fiscal years, if the Reorganization is consummated, may
be higher or lower than this projection, depending upon the Scudder Europe
Fund's performance, general stock market and economic conditions, net asset
levels and other factors. However, Scudder Kemper has agreed to limit the total
annual operating expenses to 1.75%, 2.65% and 2.62% for the Class A, B and C
shares of the Scudder Europe Fund, respectively, for the one year period
following the Reorganization.
The current expenses of both the Kemper Europe Fund and the
Scudder Europe Fund and pro forma expenses following the proposed Reorganization
are outlined below.
15
<PAGE> 22
FEE TABLES
AS OF OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL
------------------------------------------------------
Scudder
Kemper Europe Fund Europe Fund
-------------------------------------- ------------
Class A Class B Class C
<S> <C> <C> <C> <C>
Shareholder fees: Fees paid directly from your investment
Maximum Sales Charge (Load) Imposed on Purchases 5.75% None None None
(as a % of offering price)
Maximum Deferred Sales Charge (Load) (as a % of None None None None
offering price)
Maximum Sales Charge (Load) Imposed on Reinvested None 4.00% 1.00% None
Dividends/Distributions
Redemption Fee (as a % of amount redeemed, if None None None None
applicable)
Exchange Fee None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets at October
31, 1998)
Management Fee (after fee waivers and 0.00% 0.00% 0.00% 1.15%
reimbursements)
12b-1 Fees (after fee waivers and reimbursements) None 0.31% 0.70% None
Other Expenses (after fee waivers and 1.61% 2.39% 1.48% 0.26%
reimbursements)
-------------------------------------------------
Total Operating Expenses (after fee waivers and 1.61% 2.70% 2.18% 1.41%
reimbursements)
</TABLE>
PROFORMA AFTER REORGANIZATION
(UNAUDITED)
<TABLE>
<CAPTION>
========================================================================================================================
SHAREHOLDER FEES: FEES PAID DIRECTLY FROM YOUR INVESTMENT.
- ------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class M
- --------------------------------------------- --------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on 5.75% None None None
Purchases (as a % of offering price)
- --------------------------------------------- --------- ---------------- ---------------- ---------------
Maximum Deferred Sales Charge (Load) (as a None (1) 4% 1% None
% of redemption proceeds)
- --------------------------------------------- --------- ---------------- ---------------- ---------------
Maximum Sales Charge (Load) Imposed on None None None None
Reinvested Dividends/Distributions
- --------------------------------------------- --------- ---------------- ---------------- ---------------
Redemption Fee (as % of amount redeemed, if None None None 2% (2)
applicable)
- --------------------------------------------- --------- ---------------- ---------------- ---------------
Exchange Fee None None None 2% (2)
============================================= ========= ================ ================ ===============
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES: (ESTIMATED AS A PERCENTAGE OF AVERAGE NET ASSETS).
- --------------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class M
- --------------------------------------------- --------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Management Fee .74 .74 .74 .74
- --------------------------------------------- --------------- ---------------- ---------------- ---------------
Distribution (12b-1) Fees None .75 .75 None
- --------------------------------------------- --------------- ---------------- ---------------- ---------------
Other Expenses(3) 1.01 1.16 1.13 .68
- --------------------------------------------- --------------- ---------------- ---------------- ---------------
Total Annual Fund Operating Expenses (4) 1.75 2.65 2.62 1.42
============================================= =============== ================ ================ ===============
</TABLE>
16
<PAGE> 23
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege 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.
(2) A 2% redemption fee, which will be retained by the Scudder Europe Fund,
is imposed on all redemptions (including redemptions paid in-kind) and
exchanges of Class M shares for a period of one year from the date of the
Reorganization.
(3) "Other Expenses" do not include extraordinary expenses associated with
efforts to restructure the Scudder Europe Fund. If such expenses had been
included, "Other Expenses" world have been increased to 1.99%, 3.28%,
2.76% and 1.56% for Class A, B, C and M shares, respectively.
(4) The expense ratios shown above are estimated for the Scudder Europe
Fund's current fiscal year ending October 31, 1999, based on the Fund's
current fee schedule and expenses incurred during its most recent fiscal
year. The actual expenses for each class of shares in future years may be
more or less than the numbers above, depending on a number of factors,
including changes in actual value of the Scudder Europe Fund's assets
represented by each class of shares. Pursuant to their respective
agreements with the Fund, the investment manager, the underwriter, the
administrator, the accounting agent and the transfer agent have agreed,
for the one year period commencing on the date of the Reorganization, 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 Fund to the levels set forth in the table above. Without taking into
effect these expense caps, for the Class A, Class B, Class C and Class M
shares of the Fund: management fees are estimated to be .74% (all
classes); 12b-1 fees are estimated to be None, .75%, .75% and None,
respectively; Other Expenses are estimated to be 1.11%, 1.65%, 1.13% and
.68%, respectively; and total operating expenses are estimated to be
1.85%, 3.14%, 2.62% and 1.42%, respectively.
PROFORMA AFTER REORGANIZATION POST 50% REDEMPTIONS
(UNAUDITED)
<TABLE>
<CAPTION>
===================================================================================================================
SHAREHOLDER FEES: FEES PAID DIRECTLY FROM YOUR INVESTMENT.
- -------------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class M
- --------------------------------------------- --------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on 5.75% None None None
Purchases (as a % of offering price)
- --------------------------------------------- --------------- ---------------- ---------------- ---------------
Maximum Deferred Sales Charge (Load) (as a None (1) 4% 1% None
% of redemption proceeds)
- --------------------------------------------- --------------- ---------------- ---------------- ---------------
Maximum Sales Charge (Load) Imposed on None None None None
Reinvested Dividends/Distributions
- --------------------------------------------- --------------- ---------------- ---------------- ---------------
Redemption Fee (as % of amount redeemed, if None None None 2% (2)
applicable)
- --------------------------------------------- --------------- ---------------- ---------------- ---------------
Exchange Fee None None None 2% (2)
============================================= =============== ================ ================ ===============
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES: (ESTIMATED AS A PERCENTAGE OF AVERAGE NET ASSETS).
- -------------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class M
- --------------------------------------------- --------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Management Fee .74 .74 .74 .74
- --------------------------------------------- --------------- ---------------- ---------------- ---------------
Distribution (12b-1) Fees None .75 .75 None
- --------------------------------------------- --------------- ---------------- ---------------- ---------------
Other Expenses(3) 1.01 1.16 1.13 .71
- --------------------------------------------- --------------- ---------------- ---------------- ---------------
Total Annual Fund Operating Expenses (4) 1.75 2.65 2.62 1.45
============================================= =============== ================ ================ ===============
</TABLE>
17
<PAGE> 24
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege 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.
(2) A 2% redemption fee, which will be retained by the Open-End Fund, is
imposed on all redemptions (including redemptions paid in-kind) and
exchanges of Class M shares for a period of one year from the date of the
Reorganization.
(3) "Other Expenses" do not include extraordinary expenses associated with
efforts to restructure the Scudder Europe Fund. If such expenses had been
included, "Other Expenses" world have been increased to 2.04%, 3.33%,
2.79% and 1.62% for Class A, B, C and M shares, respectively.
(4) The expense ratios shown above are estimated for the Scudder Europe
Fund's current fiscal year ending October 31, 1999, based on the Fund's
current fee schedule and expenses incurred during its most recent fiscal
year. The actual expenses for each class of shares in future years may be
more or less than the numbers above, depending on a number of factors,
including changes in actual value of the Scudder Europe Fund's assets
represented by each class of shares. Pursuant to their respective
agreements with the Fund, the investment manager, the underwriter, the
administrator, the accounting agent and the transfer agent have agreed,
for the one year period commencing on the date of the Reorganization, 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 Fund to the levels set forth in the table above. Without taking into
effect these expense caps, for the Class A, Class B, Class C, and Class M
shares of the Fund: management fees are estimated to be .74% (all
classes); 12b-1 fees are estimated to be None, .75%, .75% and None,
respectively; Other Expenses are estimated to be 1.13%, 1.67%, 1.07% and
.85%, respectively; and total operating expenses are estimated to be
1.87%, 3.16%, 2.62% and 1.45%, respectively.
EXAMPLE:
Based on the level of expenses listed above, an investor would pay the
following expenses on a $10,000 investment, assuming a 5% annual return and
redemption at the end of each time period:
KEMPER EUROPE FUND AS OF OCTOBER 31, 1998:
Fees and expenses if you sold shares after:
<TABLE>
<CAPTION>
----------------- ---------------- -----------------
Class A Class B Class C
----------------- ---------------- -----------------
<S> <C> <C> <C>
1 Year $ 729 $ 673 $ 321
3 Years $1,054 $1,138 $ 682
5 Years $1,401 $1,630 $1,169
10 Years $2,376 $2,525 $2,513
</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 $ 729 $ 273 $ 221
3 Years $1,054 $ 838 $ 682
5 Years $1,401 $1,430 $1,169
10 Years $2,376 $2,525 $2,513
</TABLE>
SCUDDER EUROPE FUND AS OF OCTOBER 31, 1998:
Fees and expenses if you sold shares after:
<TABLE>
<S> <C>
1 Year $ 144
3 Year $ 446
5 Year $ 771
10 Year $ 1,691
</TABLE>
18
<PAGE> 25
Fees and expenses if you did not sell your shares:
<TABLE>
<S> <C>
1 Year $ 144
3 Year $ 446
5 Year $ 771
10 Year $ 1,691
</TABLE>
PROFORMA EXPENSE RATIOS OF SCUDDER EUROPE FUND AFTER REORGANIZATION:
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 $1,094 $1,123 $ 814
5 Years $1,469 $1,605 $1,390
10 Years $2,519 $2,565 $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 $1,094 $ 823 $ 814
5 Years $1,469 $1,405 $1,390
10 Years $2,519 $2,565 $2,954
</TABLE>
The foregoing tables are designed to assist the investor in
understanding the various costs and expenses that a shareholder will bear
directly or indirectly. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
PERFORMANCE
Set forth below is performance data for periods ending March
31, 1999 based on each Fund's net asset value. Past performance is not a
guarantee of future results, and it is not possible to predict whether or how
investment performance will be affected by the Reorganization.
<TABLE>
<CAPTION>
Scudder Europe Fund Kemper Europe Fund(1)
------------------- ---------------------
Cumulative Average Annual Cumulative Average Annual
---------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
One Year 4.73% 4.73% -2.04% -2.04%
Three Years 90.23% 23.91% N/A N/A
Five Years 147.55% 19.88% N/A N/A
Since inception(1) 181.38% 12.01% 57.00% 16.73%
</TABLE>
19
<PAGE> 26
(1) Performance information is shown without sales charges for Class A Shares
of the Kemper Europe Fund.
(2) The Scudder Europe Fund commenced operations on February 9, 1990. The
Kemper Europe Fund commenced operations on May 1, 1996.
INFORMATION ABOUT THE REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION. The following summary of the Plan
is qualified in its entirety by reference to the Plan (Exhibit A hereto). The
Plan provides that the Scudder Europe Fund will acquire all of the assets of the
Kemper Europe Fund in exchange for shares of the Scudder Europe Fund and the
assumption by the Scudder Europe Fund of all of the liabilities of the Kemper
Europe Fund on the closing. The closing date is September 1, 1999, but it may be
changed by the parties.
Prior to the Closing Date, the Kemper Europe Fund will endeavor to
discharge liabilities and obligations. The Scudder Europe Fund shall assume all
other liabilities, expenses, costs, charges and reserves of the Kemper Europe
Fund. The net asset value per share of each class of the Kemper Europe Fund will
be determined by addition of the relevant class' pro rata share of the actual
and accrued liabilities and the liabilities specifically allocated to that class
of shares, and dividing the result by the total number of outstanding shares of
the relevant class. The Kemper Europe Fund and the Scudder Europe Fund will
utilize the procedures set forth in their respective current Prospectuses or
Statements of Additional Information to determine the value of their respective
portfolio securities and to determine the aggregate value of each Fund's
portfolio.
On or as soon after the Closing Date as conveniently practicable, the
Kemper Europe Fund will liquidate and distribute pro rata to shareholders of
record as of the close of business on such Closing Date the shares of the same
class of the Scudder Europe Fund received by the Kemper Europe Fund. Such
liquidation and distribution will be accomplished by the establishment of
accounts in the names of the Kemper Europe Fund's shareholders on the share
records of the Scudder Europe Fund's transfer agent. Each account will represent
the respective pro rata number of shares of the class of shares of the Scudder
Europe Fund due to the Kemper Europe Fund's shareholders. After such
distribution and the winding up of its affairs, the Kemper Europe Fund will be
terminated.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan. Notwithstanding approval by the shareholders of the Kemper
Europe Fund and the Scudder Europe Fund, the Plan may be terminated with respect
to the Reorganization at any time at or prior to the Closing Date: (i) by mutual
agreement of the Kemper Europe Fund and the Scudder Europe Fund; (ii) by the
Kemper Europe Fund, in the event the Scudder Europe Fund shall, or the Scudder
Europe Fund, in the event the Kemper Europe Fund shall, materially breach any
representation, warranty or agreement contained in the Plan to be performed at
or prior to the Closing Date; or (iii) if a condition to the Plan expressed to
be precedent to the obligations of the terminating party has not been met and it
reasonably appears that it will not or cannot be met.
20
<PAGE> 27
Approval of the Plan with respect to the Kemper Europe Fund will
require the affirmative vote of a majority of the votes entitled to be cast by
the shareholders of the Kemper Europe Fund in the aggregate without regard to
class, in person or by proxy, if a quorum is present. The Reorganization is also
subject to a number of conditions, including the approval by the shareholders of
the Scudder Europe Fund to convert that Fund to an open-end investment company
and adoption by the Scudder Europe Fund of the Kemper Europe Fund management fee
schedule. Shareholders of the Kemper Europe Fund are entitled to one vote for
each share. If the Reorganization is not approved by shareholders of the Kemper
Europe Fund, the Board of Trustees will consider other possible courses of
action available to it, including resubmitting the Reorganization proposal to
shareholders.
DESCRIPTION OF THE SCUDDER EUROPE FUND'S SHARES. Shares of the Scudder
Europe Fund will be issued to the Kemper Europe Fund in accordance with the
procedures detailed in the Plan and as described in the Scudder Europe Fund's
Preliminary Prospectus. These procedures are substantially similar to those
currently in place for the Kemper Europe Fund. The Scudder Europe Fund does not
issue share certificates to shareholders.
The Scudder Europe Fund currently has authorized four classes of common
stock, called Class A shares, Class B shares, Class C shares and Class M shares.
The Scudder Europe Fund intends to continuously offer its shares (with the
exception of Class M shares) after the Reorganization. The per share net asset
value of the Class B and Class C shares will generally be lower than that of the
Class A and M shares because of the higher annual expenses borne by the Class B
and C Shares. Also, because of the 12b-1 fees to be paid by the Class B and C
shares, the total return on the Class B and C shares can be expected to be lower
than the total return on the Class A and M shares.
Class A shares are offered at net asset value plus a maximum sales
charge of 5.75% of the offering price and are subject to an administrative
services fee of up to 0.25%. Reduced sales charges apply to purchases of $50,000
or more of Class A shares. Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege (as described in the Scudder Europe Fund's
Preliminary Prospectus) may be subject to a 1% contingent deferred sales charge
if redeemed within one year of purchase and a 0.50% contingent deferred sales
charge if redeemed during the second year of purchase.
Class B shares of the Scudder Europe Fund are offered at net asset
value without an initial sales charge, but are subject to a 0.75% 12b-1
distribution fee, a contingent deferred sales charge that declines from 4% to
zero on certain redemptions made within six years of purchase and an
administrative services fee of up to 0.25%. Class B shares automatically convert
into Class A shares (which have lower ongoing expenses) six years after
purchase.
Class C shares are offered at net asset value without an initial sales
charge, but are subject to a 0.75% 12b-1 distribution fee, a 1% contingent
deferred sales charge on redemptions made within one year of purchase, and an
administrative services fee of up to 0.25%. Class C shares do not convert into
another class.
21
<PAGE> 28
Class M shares represent the initial shares of the Scudder Europe Fund
and are no longer offered. Class M shares are not subject to a contingent
deferred sales charge or a 12b-1 distribution fee, but are subject to an
administrative services fee of up to 0.25%. Class M shares are subject to a 2%
fee on all redemptions (including redemptions in-kind) and exchanges. The
Scudder Europe Fund will satisfy large redemptions (i.e., redemptions exceeding
$250,000) by Class M shareholders in-kind. Class M shares will automatically
convert to Class A shares one year after the date of the Reorganization. See the
Preliminary Prospectus of the Scudder Europe Fund and "Organization of the Fund"
in the Scudder Europe Fund's Preliminary Statement of Additional Information for
other information with respect to the shares of the Scudder Europe Fund.
FEDERAL INCOME TAX CONSEQUENCES. The exchange of assets of the Kemper
Europe Fund for shares of the Scudder Europe Fund, followed by the distribution
of these shares, is intended to qualify for federal income tax purposes as a
tax-free reorganization under Section 368(a)(l)(F) of the Internal Revenue Code
of 1986, as amended (the "Code"). As a condition to the closing of the
Reorganization, the Scudder Europe Fund and the Kemper Europe Fund will receive
an opinion from Willkie Farr & Gallagher, counsel to the Scudder Europe Fund, to
the effect that, on the basis of the existing provisions of the Code, U.S.
Treasury regulations issued thereunder, current administrative rules,
pronouncements and court decisions, for federal income tax purposes, upon
consummation of the Reorganization:
(1) the transfer of all of the Kemper Europe Fund's assets in
exchange for the Scudder Europe Fund's shares and the
assumption by the Scudder Europe Fund of the liabilities of
the Kemper Europe Fund, and the distribution of the Scudder
Europe Fund's shares to the shareholders of the Kemper Europe
Fund in exchange for their shares of the Kemper Europe Fund,
will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and the Scudder Europe Fund and
the Kemper Europe Fund will each be a "party to a
reorganization" within the meaning of Section 368(b) of the
Code;
(2) no gain or loss will be recognized by the Scudder Europe Fund
upon the receipt of the assets of the Kemper Europe Fund
solely in exchange for the Scudder Europe Fund's shares and
the assumption by the Scudder Europe Fund of the liabilities
of the Kemper Europe Fund;
(3) no gain or loss will be recognized by the Kemper Europe Fund
upon the transfer of the Kemper Europe Fund's assets to the
Scudder Europe Fund in exchange for the Scudder Europe Fund's
shares and the assumption by the Scudder Europe Fund of the
liabilities of the Kemper Europe Fund or upon the distribution
of the Scudder Europe Fund's shares to the Kemper Europe
Fund's shareholders;
(4) no gain or loss will be recognized by shareholders of the
Kemper Europe Fund upon the exchange of their shares for
shares of the Scudder Europe
22
<PAGE> 29
Fund or upon the assumption by the Scudder Europe Fund of the
liabilities of the Kemper Europe Fund;
(5) the aggregate tax basis of the shares of the Scudder Europe
Fund received by each shareholder of the Kemper Europe Fund
pursuant to the Reorganization will be the same as the
aggregate tax basis of shares of the Kemper Europe Fund held
by such shareholder immediately prior to the Reorganization,
and the holding period of shares of the Scudder Europe Fund to
be received by each shareholder of the Kemper Europe Fund will
include the period during which shares of the Kemper Europe
Fund exchanged therefor were held by such shareholder
(provided shares of the Kemper Europe Fund were held as
capital assets on the date of the Reorganization); and
(6) the tax basis of Kemper Europe Fund's assets acquired by the
Scudder Europe Fund will be the same as the tax basis of such
assets to the Kemper Europe Fund immediately prior to the
Reorganization, and the holding period of the assets of the
Kemper Europe Fund in the hands of the Scudder Europe Fund
will include the period during which those assets were held by
the Kemper Europe Fund.
Shareholders of the Kemper Europe Fund should consult their tax
advisors regarding the effect, if any, of the proposed Reorganization in light
of their individual circumstances. Since the foregoing discussion only relates
to the federal income tax consequences of the Reorganization, shareholders of
the Kemper Europe Fund should also consult their tax advisors as to state and
local tax consequences, if any, of the Reorganization.
POTENTIAL TAX CONSEQUENCES. If the Scudder Europe Fund experiences net
redemptions after converting to an open-end investment company, the Scudder
Europe Fund would be required to sell portfolio securities. Many of the Scudder
Europe 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 Scudder Europe Fund's portfolio
securities was $134,069,202 (39% of the Fund's portfolio). The portfolio
activity that may be necessitated by redemption requests following conversion
could result in the realization of significant capital gains by the Scudder
Europe Fund, in addition to those historically incurred in the ordinary course
of the Scudder Europe 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 Scudder Europe Fund had net undistributed realized short-term
capital gains of $0 per share and 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 Scudder Europe Fund and its remaining
stockholders. However, as noted above, the Scudder Europe Fund intends to pay
in-kind the proceeds of large redemptions (i.e., redemptions exceeding $250,000)
in an
23
<PAGE> 30
attempt to minimize the adverse tax consequences resulting from redemptions for
non-redeeming stockholders. (The Scudder Europe Fund also will not offer an
exchange privilege to Class M shareholders with respect to transactions that
would trigger an in-kind redemption.) By paying large redemptions in-kind, the
Scudder Europe Fund may avoid having to sell appreciated portfolio securities
and realizing capital gains. Therefore, the Scudder Europe Fund may avoid
distributing capital gains to remaining stockholders of the Scudder Europe 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 due to 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 Reorganization 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.
CAPITALIZATION. The following table sets forth, as of April 30, 1999,
(i) the capitalization of the Kemper Europe Fund, (ii) the capitalization of the
Scudder Europe Fund, and (iii) the pro forma capitalization of the Scudder
Europe Fund as adjusted to give effect to the Reorganization. The capitalization
of the Scudder Europe Fund is likely to be different when the Reorganization is
consummated.
<TABLE>
<CAPTION>
Pro Forma After
Kemper Europe Fund Scudder Europe Fund Reorganization
------------------ ------------------- --------------
<S> <C> <C> <C>
Net assets.................................... [TO BE PROVIDED BY SCUDDER KEMPER]
Net asset value per share.....................
Shares outstanding............................
</TABLE>
PRINCIPAL SHAREHOLDERS
As of the Record Date, the following persons owned beneficially more
than 5% of the outstanding shares of the Kemper Europe Fund:
NAME AND ADDRESS SHARES HELD PERCENT OWNERSHIP
- ---------------- ----------- -----------------
[TO BE PROVIDED BY SCUDDER KEMPER]
[All of the officers and Trustees of the Kemper Europe Fund as a group
owned less than 1% of the outstanding voting securities of the Kemper Europe
Fund, as of the Record Date.]
To the knowledge of the Scudder Europe Fund, no person owned
beneficially more than 5% of the outstanding shares of the Scudder Europe Fund
as of ______, 1999. [All
24
<PAGE> 31
of the officers and Directors of the Scudder Europe Fund as a group owned less
than 1% of the outstanding voting securities of the Scudder Europe Fund as of
such date.]
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion is based upon and qualified in its entirety by
the disclosures in the Statement of Additional Information to this
Prospectus/Proxy Statement, the Preliminary Prospectus and Statement of
Additional Information of the Scudder Europe Fund and the Prospectus and
Statement of Additional Information of the Kemper Europe Fund.
INVESTMENT OBJECTIVES. The investment objective of the Scudder Europe
Fund is long-term capital appreciation. The investment objective of the Kemper
Europe Fund is long-term capital growth. There can be no assurance that any Fund
will achieve its investment objective. The investment objective of the Scudder
Europe Fund may not be changed by the Board of Directors without the affirmative
vote of the holders of a majority of the outstanding shares (as defined in the
1940 Act) of the Scudder Europe Fund. The Kemper Europe Fund's investment
objective, however, may be changed without a vote of shareholders.
INVESTMENT POLICIES. In seeking to achieve their investment objectives,
the Scudder Europe Fund and the Kemper Europe Fund are guided by substantially
similar policies that should be considered by the shareholders of the Kemper
Europe Fund.
Both the Scudder Europe Fund and the Kemper Europe Fund seek to achieve
their objectives by investing primarily in equity securities of European
companies ("European Equity Securities"). European Equity Securities include
common stocks, preferred stocks, securities convertible into or exchangeable for
common or preferred stocks, equity investments in partnerships, joint ventures
and other forms of non-corporate investments and warrants, options and rights
exercisable for equity securities that are issued by European companies as
defined below.
Each Fund considers an issuer of securities to be a European company
if: (i) it is organized under the laws of a European country and has a principal
office in a European country; (ii) it derives 50% or more of its total revenues
from business in Europe; or (iii) its equity securities are traded principally
on a stock exchange in Europe. Under normal circumstances, the Scudder Europe
Fund will invest at least 65% of its total assets in European Equity Securities.
The Kemper Europe Fund, however, invests at least 85% of its total assets in
European Equity Securities and will also invest at least 65% of its total assets
in European Equity Securities of issuers meeting at least one of the first two
criteria described above. For purposes of the foregoing, each Fund also
considers European Equity Securities to include: (i) shares of closed-end
management investment companies, the assets of which are invested primarily in
European Equity Securities and (ii) depository receipts (such as American
Depository Receipts and European Depository Receipts) where the underlying or
deposited securities are European Equity Securities.
Each Fund invests principally in developed countries, but the Kemper
Europe Fund may invest up to 25% of its total assets in developing or "emerging"
countries. The
25
<PAGE> 32
Scudder Europe Fund may also invest in emerging markets, but no such limitation
is imposed on the amount of assets that may be so invested. Currently, the
developed European countries in which each Fund may invest (without limit)
include: Austria, France, Germany, the Netherlands, Switzerland, Spain, Italy,
Luxembourg, United Kingdom, Ireland, Belgium, Denmark, Sweden, Norway and
Finland. Each Fund may, in the discretion of its investment manager, invest
without limit in other European countries in the future if they become developed
countries. Some examples of emerging European countries in which both Funds may
invest are Portugal, Greece, Turkey, Hungary, Poland and the Czech Republic.
In pursuing its objective, each Fund invests primarily in European
Equity Securities believed to have potential for capital growth. However, there
is no requirement that each Fund invest exclusively in European Equity
Securities. Subject to the limits described above, each Fund may invest in any
other type of security including, but not limited to, equity securities of
non-European companies, bonds, notes and other debt securities of domestic or
foreign companies (including euro-currency instruments and securities) and
obligations of domestic or foreign governments and their political subdivisions.
Currently, the Kemper Europe Fund does not intend to invest more than 5% of its
net assets in debt securities during the coming year (except for temporary
defensive investments as described below). The Scudder Europe Fund, however, may
invest up to 20% of its total assets in debt securities, including those deemed
to be below investment grade.
Each Fund makes investments in various European countries. Under normal
circumstances, business activities in not less than five different European
countries will be represented in the Kemper Europe Fund's portfolio. The Kemper
Europe Fund may, from time to time, have 25% or more of its assets invested in
any major European industrial or developed country which, in the view of its
investment manager, poses no unique investment risk. The Scudder Europe Fund
intends to allocate its investments among at least three countries at all times.
NON-DIVERSIFIED. Unlike the Kemper Europe Fund, the Scudder Europe Fund
has elected to operate as a "non-diversified" investment company under the 1940
Act and is permitted to invest a greater proportion of its assets in the
securities of a smaller number of issuers. As a result, the Scudder Europe Fund
may be subject to greater risks with respect to its portfolio than a more
broadly diversified fund. As of March 31, 1999, however, Scudder Europe Fund
held positions in securities issued by 80 issuers and no single issuer
constituted more than 5.8% of the Fund's assets.
PRIVATIZED ENTERPRISES. Both the Scudder Europe Fund and the Kemper
Europe Fund may invest in securities issued by foreign enterprises that have
undergone or are currently undergoing privatization.
DEPOSITORY RECEIPTS. Both the Scudder Europe Fund and the Kemper Europe
Fund may invest in securities of foreign issuers through sponsored or
unsponsored American, European and Global depository receipts.
26
<PAGE> 33
DEBT SECURITIES. Both the Scudder Europe Fund and the Kemper Europe
Fund may invest in debt securities. As stated above, the Kemper Europe Fund does
not intend to invest more than 5% of its net assets in debt securities (except
for temporary defensive purposes). The Scudder Europe Fund, however, may invest
up to 20% of its total assets in debt securities, including debt securities
rated below investment grade (i.e., rated below Baa by Moody's Investors
Services, Inc. ("Moody's") or below BBB by Standard & Poor's ("S&P") and unrated
securities of similar quality as determined by the investment manager. These
securities usually entail greater risk (including the possibility of default or
bankruptcy of the issuers of such securities), generally involve greater
volatility of price and risk of principal and income, and may be less liquid
than securities in the higher rating categories. The lower the ratings of such
debt securities, the greater their risks. The Scudder Europe Fund may also
purchase bonds rated B or lower by Moody's or S&P, and may invest in securities
which are rated C by Moody's or D by S&P or securities of comparable quality in
its investment manager's judgment. Such securities may be in default with
respect to payment of principal or interest, carry a high degree of risk and are
considered speculative.
SMALL COMPANIES. Both the Scudder Europe Fund and the Kemper Europe
Fund may invest their assets in the securities of companies with small or low
market capitalizations.
TEMPORARY DEFENSIVE PRACTICES. When in the opinion of the investment
manager market conditions warrant, the Scudder Europe Fund and the Kemper Europe
Fund may hold foreign or U.S. debt instruments, as well as cash or cash
equivalents including foreign and domestic money market instruments, short-term
government and corporate obligations, and repurchase agreements without limit
for temporary defensive purposes. The Scudder Europe Fund may also invest up to
20% of its assets in the above instruments to maintain liquidity.
SPECIALIZED INVESTMENTS. The Scudder Europe Fund may also invest in
"Specialized Investments" which consist of equity securities of: (i)
privately-held European companies; (ii) European companies that have recently
made initial public offerings of their shares; (iii) government-owned or
- -controlled companies that are being privatized; (iv) smaller publicly-held
European companies, i.e., any European company having a market capitalization of
less than $500 million (the Board of Directors of the Scudder Europe Fund may,
in the future, reevaluate and increase or decrease the maximum market
capitalization for qualification as a smaller European company); (v) companies
and joint ventures based in Eastern Europe; (vi) private placements and joint
venture participations in European companies that may not be readily marketable;
(vii) pooled investment funds that invest principally in securities in which the
Fund may invest, which are considered investment companies for purposes of the
1940 Act restrictions described below; and (viii) European companies with
private market values perceived by the investment manager to be substantially in
excess of their publicly-traded values. The Kemper Europe Fund is not prohibited
from entering into "Specialized Investments", but any such investments would
constitute a small portion of its investment portfolio.
27
<PAGE> 34
CONVERTIBLE SECURITIES. Both the Scudder Europe Fund and the Kemper
Europe Fund may invest in convertible securities which are bonds, notes,
debentures, preferred stocks, and other securities which are convertible into
common stocks. Investments in convertible securities can provide income through
interest and dividend payment and/or an opportunity for capital appreciation by
virtue of their conversion or exchange features. The convertible securities in
which each Fund may invest may be converted or exchanged at a stated or
determinable exchange ratio into underlying shares of common stock. The exchange
ratio for any particular convertible security may be adjusted from time to time
due to stock splits, dividends, spin-offs, other corporate distributions, or
scheduled changes in the exchange ratio.
REPURCHASE AGREEMENTS. Both the Scudder Europe Fund and the Kemper
Europe Fund may enter into repurchase agreements with member banks of the
Federal Reserve System, any foreign bank or with any domestic or foreign
broker-dealer which is recognized as a reporting government securities dealer if
the creditworthiness of the bank or broker-dealer has been determined by the
investment manager to be at least as high as that of other obligations the Funds
may purchase. The Kemper Europe Fund, however, does not intend to invest more
than 5% of its net assets in repurchase agreements.
BORROWING. Both the Scudder Europe Fund and the Kemper Europe Fund may
not borrow money, except as permitted under the 1940 Act. The Scudder Europe
Fund will borrow only when the investment manager believes that borrowing will
benefit the Scudder Europe Fund after taking into account considerations such as
the costs of the borrowing. The Scudder Europe Fund does not expect to borrow
for investment purposes, to increase return or leverage the portfolio.
ILLIQUID SECURITIES. Both the Scudder Europe Fund and the Kemper Europe
Fund may occasionally purchase securities other than in the open market. While
such purchases may often offer attractive opportunities for investment not
otherwise available on the open market, the securities so purchased are often
"restricted securities" or "not readily marketable," i.e., securities which
cannot be sold to the public without registration under the Securities Act of
1933, as amended (the "1933 Act") or the availability of an exemption from
registration (such as Rules 144 or 144A) or because they are subject to other
legal or contractual delays in or restrictions on resale. Both the Scudder
Europe Fund and the Kemper Europe Fund may not invest more than 15% of their
respective net assets in illiquid securities.
WHEN-ISSUED SECURITIES. Unlike the Kemper Europe Fund, the Scudder
Europe Fund may from time to time purchase equity and debt securities on a
"when-issued" or "forward delivery" basis. The price of such securities, which
may be expressed in yield terms, is fixed at the time the commitment to purchase
is made, but delivery and payment for the when-issued or forward delivery
securities takes place at a later date. During the period between purchase and
settlement, no payment is made by the Scudder Europe Fund to the issuer and no
interest accrues to the Scudder Europe Fund. To the extent that assets of the
Scudder Europe Fund are held in cash pending the settlement of a purchase of
securities, the Scudder Europe Fund would earn no income; however, it is the
Scudder Europe Fund's
28
<PAGE> 35
intention to be fully invested to the extent practicable. While when-issued or
forward delivery securities may be sold prior to the settlement date, the
Scudder Europe Fund intends to purchase such securities with the purpose of
actually acquiring them unless a sale appears desirable for investment reasons.
At the time the Scudder Europe Fund makes the commitment to purchase a security
on a when-issued or forward delivery basis, it will record the transaction and
reflect the value of the security in determining its net asset value. The market
value of the when-issued or forward delivery securities may be more or less than
the purchase price. The Scudder Europe Fund does not believe that its net asset
value or income will be adversely affected by its purchase of securities on a
when-issued or forward delivery basis.
LENDING OF PORTFOLIO SECURITIES. Consistent with the requirements of
the 1940 Act, both the Scudder Europe Fund and the Kemper Europe Fund may lend
their portfolio securities. The Scudder Europe Fund may not lend its portfolio
securities in an amount that would exceed 25% of its total assets and the Kemper
Europe Fund may not lend its portfolio securities in an amount that would exceed
33 1/3% of the value of its total assets.
SHORT SALES AGAINST-THE-BOX. Both the Scudder Europe Fund and the
Kemper Europe Fund may make short sales against-the-box for the purpose of, but
not limited to, deferring realization of loss when deemed advantageous for
federal income tax purposes. A short sale "against-the-box" is a short sale in
which a Fund owns at least an equal amount of the securities sold short or
securities convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and at least equal in amount to,
the securities or other assets sold short. Each Fund may engage in such short
sales only to the extent that not more than 10% of the Fund's total assets
(determined at the time of the short sale) is held as collateral for such sales.
Each Fund currently does not intend, however, to engage in such short sales to
the extent that more than 5% of its net assets will be held as collateral
therefor during the current year.
STRATEGIC TRANSACTIONS. No more than 5% of the Scudder Europe Fund's
assets will be committed to the following transactions if entered into for
non-hedging purposes. The Kemper Europe Fund has no such limitation, [although
it has not engaged in these transactions] [SCUDDER KEMPER TO CONFIRM] and to do
so with respect to futures contracts and related options would subject Kemper
Europe Fund to regulation by the Commodities Futures Trading Commission as a
commodity pool.
Financial Futures Contracts and Related Options. Each Fund may enter
into financial futures contracts for the future delivery of a financial
instrument and may purchase and write call and put options on financial futures
contracts. Transactions involving financial futures and options thereon may be
entered into by the Funds only for hedging purposes and not for speculation.
Options on Securities. Both Funds may purchase exchange-listed and
over-the-counter ("OTC") call options on securities. In addition, both Funds may
write (sell) exchange-listed and OTC "covered" call options on securities as
long as they own the underlying
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securities subject to the option or meet asset segregation requirements to the
extent required by applicable regulation in connection with the optioned
securities. The Scudder Europe Fund may purchase and sell exchange-listed and
OTC put options on securities (whether or not it holds the securities in its
portfolio), but will not sell put options if, as a result, more than 50% of its
total assets would be required to be segregated to cover the potential
obligations under such put options. The Kemper Europe Fund may write
exchange-listed and OTC "covered" put options on securities provided that, as
long as the Fund is obligated as a writer of a put option, it will own an option
to sell the underlying securities subject to the option, having an exercise
price equal to or greater than the exercise price of the "covered" option, or it
will deposit and maintain in a segregated account eligible securities having a
value equal to or greater than the exercise price of the option.
OTC Options. The Scudder Europe Fund will engage in OTC option
transactions only with U.S. government securities dealers recognized by the
Federal Reserve Bank of New York as "primary dealers" or broker/dealers,
domestic or foreign banks or other financial institutions which have received
(or the guarantors of the obligation of which have received) a short-term credit
rating of A-1 from S&P or P-1 from Moody's or an equivalent rating from any
nationally recognized statistical rating organization ("NSRO") or are determined
to be of equivalent credit quality by the investment manager. The Kemper Europe
Fund will only engage in OTC options transactions with dealers approved by the
investment manager pursuant to procedures adopted by its Board of Trustees. The
Scudder Europe Fund will only sell OTC options (other than OTC currency options)
that are subject to a buy-back provision permitting the Fund to require the
counterparty to sell the option back to the Fund at a formula price within seven
days. The Scudder Europe Fund also expects generally to enter into OTC options
that have cash settlement provisions, although it is not required to do so. The
Kemper Europe Fund anticipates entering into agreements with dealers to which it
sells OTC options whereby it would have the absolute right to repurchase the OTC
options from the dealer at any time at a price no greater than a price
established under the agreement.
Options on Indices. Both Funds may purchase and sell options on
securities and other financial indices. The Kemper Europe Fund may only enter
into these transactions for hedging purposes and not for speculation.
Foreign Currency Options. Both Funds may engage in foreign currency
options transactions, however the Scudder Europe Fund may only do so for hedging
purposes. In addition, the Scudder Europe Fund may engage in these transactions
only with counterparties which have received (or the guarantors of the
obligations which have received) a credit rating of A-1 or P-1 by S&P or
Moody's, respectively, or that have an equivalent rating from an NSRO or (except
for OTC currency options) are determined to be of equivalent quality by the
investment manager.
Foreign Currency Futures Transactions. Both Funds may engage in foreign
currency futures transactions for hedging purposes only.
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Forward Foreign Currency Exchange Contracts. Both Funds may engage in
forward foreign currency transactions. The Scudder Europe Fund may only do so
for hedging purposes. The Kemper Europe may engage in such transactions when the
investment manager believes that it is in the best interest of the Fund to do
so, but it will not speculate in foreign currency exchange.
Swaps, Caps, Floors and Collars. Unlike the Kemper Europe Fund, the
Scudder Europe Fund may enter into interest rate, currency and index swaps and
purchase and sell related caps, floors and collars. The Fund expects to enter
into these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities it anticipates purchasing at a later date.
The Scudder Europe Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream that it
may be obligated to pay.
Combined Transactions. The Scudder Europe Fund may also enter into
multiple transactions, including multiple options transactions, multiple futures
transactions, multiple currency transactions (including forward currency
contracts) and multiple interest rate transactions and any combination of
futures, options, currency and interest rate transactions instead of a single
transaction, or as part of a single or combined strategy when in the option of
the investment manager it is in the best interests of the Fund to do so.
Eurodollar Instruments. The Scudder Europe Fund may make investments in
Eurodollar instruments which are U.S. dollar-denominated futures contracts or
options thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time to
time. The Fund may use Eurodollar futures contracts and options thereon to hedge
against changes in LIBOR, to which many interest rate swaps and fixed income
instruments are linked.
DERIVATIVES. Both the Scudder Europe Fund and the Kemper Europe Fund
may, but are not required to, utilize various other investment strategies as
described above to hedge various market risks (such as interest rates, currency
exchange rates and broad or specific equity or fixed income market movements),
to manage the effective maturity or duration of the fixed-income securities in
their portfolios, or to enhance potential gain. These strategies may be executed
through the use of derivative contracts. Such strategies are generally accepted
as part of modern portfolio management and are regularly utilized by many mutual
funds and other institutional investors. Techniques and instruments may change
over time as new instruments and strategies are developed or regulatory changes
occur.
INVESTMENT RESTRICTIONS
The investment restrictions of the Scudder Europe Fund and the Kemper
Europe Fund are substantially similar, but not identical. The following
discussion of fundamental and nonfundamental restrictions is based upon and
qualified entirely by the disclosures in the Statement of Additional Information
for this Prospectus/Proxy Statement, Preliminary
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Prospectus and Statement of Additional Information of the Scudder Europe Fund
and the Prospectus and Statement of Additional Information of the Kemper Europe
Fund. Fundamental policies may be changed only with the approval of holders of a
majority of the outstanding voting securities (as defined in the 1940 Act) of a
Fund, whereas nonfundamental policies may be changed by a Fund's Board.
FUNDAMENTAL POLICIES
The Scudder Europe Fund may not purchase securities on margin or make
short sales of securities, except such short-terms credits as may be necessary
or routine for clearance of transactions and the maintenance of margin with
respect to options and financial futures transactions. The Kemper Europe Fund
has a similar restriction, except that it is classified as a non-fundamental
policy. Both Funds are permitted to make short sales against-the-box.
Neither the Scudder Europe Fund nor the Kemper Europe Fund may issue
senior securities or borrow money except that the Funds may borrow money as
permitted under the 1940 Act, as interpreted or modified by the regulatory
authority having jurisdiction from time to time. The Scudder Europe Fund is
currently prohibited from pledging its assets, but has proposed a Charter
amendment to permit the Fund to pledge its assets to secure permitted
borrowings. However, there is no assurance that the shareholders of the Scudder
Europe Fund will approve this change. As a nonfundamental policy, the Kemper
Europe Fund may pledge up to 15% of its total assets to secure borrowings. For
the purposes of these investment restrictions, 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. Further,
neither Fund may make loans, except that each Fund may lend its portfolio
securities consistent with the 1940 Act limitations. The Scudder Europe Fund may
lend its portfolio securities in an amount up to 25% of its total assets, but as
a nonfundamental policy currently intends to limit securities lending to 5% of
its total assets.
Also, neither the Scudder Europe Fund nor the Kemper Europe Fund may
invest more than 25% of the total value of their assets in a particular industry
or act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, a Fund may be deemed to be an underwriter
under applicable securities laws.
In addition, neither Fund may buy or sell commodities or commodity
contracts or real estate or interests in real estate, although they may purchase
and sell securities that are secured by real estate or commodities and
securities of companies that invest or deal in real estate or commodities, may
purchase and sell futures contracts and related options on stock indices and
currencies, may enter into forward currency exchange contracts, may write
options on stocks and may purchase and sell options on currencies and stock
indexes. The Kemper Europe Fund also reserves freedom of action to hold and to
sell real estate acquired as a result of the Fund's ownership of securities.
NONFUNDAMENTAL POLICIES
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The Scudder Europe Fund may not borrow money in an amount greater than
5% of its total assets, except (i) for temporary or emergency purposes and (ii)
by engaging in reverse repurchase agreements, dollar rolls, or other investments
or transactions described in the Scudder Europe Fund's Preliminary Prospectus
and Statement of Additional Information which may be deemed to be borrowings. In
addition, the Scudder Europe Fund may not enter into either of reverse
repurchase agreements or dollar rolls in an amount greater than 5% of its total
assets.
The Scudder Europe Fund may not purchase options, unless the aggregate
premiums paid on all such options held by the Scudder Europe 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
Scudder Europe Fund have no current intention to utilize these strategies to a
significant extent.
The Scudder Europe Fund may not enter into futures contracts or
purchase options thereon unless immediately after the purchase, the value of the
aggregate initial margin with respect to such futures contracts entered into on
behalf of the Scudder Europe Fund and the premiums paid for such options on
futures contracts does not exceed 5% of the fair market value of the Scudder
Europe Fund's total assets; provided that, in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
computing the 5% limit. The Kemper Europe Fund may not write or sell put or call
options, combinations thereof or similar options on more than 25% of its net
assets; nor may it purchase put or call options if more than 5% of its net
assets would be invested in premiums on put and call options, combinations
thereof or similar options; however, it may buy or sell options on financial
futures contracts.
The Scudder Europe Fund may not purchase warrants if as a result such
securities, taken at the lower of cost or market value, would represent more
than 5% of the value of the Scudder Europe Fund's total assets (for this
purpose, warrants acquired in units or attached to securities will be deemed to
have no value). Although the Scudder Europe Fund may lend its portfolio
securities in an amount up to 25% of its total assets, it currently intends as a
nonfundamental policy to limit securities lending to 5% of its total assets.
Also, the Scudder Europe Fund may not participate on a joint and several basis
in any trading account in securities.
Neither the Scudder Europe Fund nor the Kemper Europe Fund may (i)
invest for the purpose of exercising control or management of another issuer;
(ii) invest more than 15% of their respective net assets in illiquid securities;
or (iii) purchase more than 10% of any class of voting securities of any issuer.
Finally, the Kemper Europe Fund may not purchase securities of other
investment companies, except in connection with a merger, consolidation,
acquisition or reorganization, or by purchase in the open market of securities
of closed-end investment companies where no underwriter or dealer's commission
or profit, other than customary
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broker's commission, is involved and only if immediately thereafter not more
than (i) 3% of the total outstanding voting stock of such company is owned by
the Fund, (ii) 5% of the Fund's total assets would be invested in any one such
company, and (iii) 10% of the Fund's total assets would be invested in such
securities.
RISK FACTORS
CONVERSION OF SCUDDER EUROPE FUND TO OPEN-END FORM. Shareholders of
Scudder Europe Fund are being asked to vote on a number of proposals. Approval
of the open-ending proposal by the shareholders of the Scudder Europe Fund is a
condition to the Reorganization. The other proposals are factors to be
considered by Kemper Europe Fund shareholders, but are not essential to the
Reorganization. These factors include: (i) the election of the Board of
Directors, (ii) the ratification of the selection of the independent auditors,
(iii) the approval of certain further amendments to the Fund's Articles of
Incorporation to reflect provisions that are consistent with articles of
incorporation for an open-end fund and (iv) the approval of a new Investment
Advisory Agreement with Scudder Kemper providing for, among other things, an
advisory fee rate identical to that currently in place for Kemper Europe Fund to
take effect if the open-ending provision is approved. As stated above, Scudder
Kemper has indicated that it will contractually reduce its fees so that its
advisory fees do not exceed the level currently paid by Kemper Europe Fund in
the event that shareholders of Scudder Europe Fund approve the proposal to
open-end, but do not approve the proposed new Investment Advisory Agreement.
Conversion to an open-end investment company could result in immediate
redemptions of Scudder Europe Fund shares, which could be substantial, and,
consequently, result in a marked reduction in the Fund's size. Conversion to an
open-end investment company may create an incentive for stockholders to
capitalize on the elimination of the Scudder Europe 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 Scudder Europe 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
Scudder Europe Fund shares subject to redemption requests. Other closed-end
funds that have converted to open-end form have experienced redemptions that
exceed sales after conversion, and, in some instances, net redemptions have been
substantial. The Scudder Europe 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 Scudder
Europe Fund could experience a further increase in its expense ratio. It is
estimated that if the Scudder Europe Fund's net assets decrease by 50% from the
present size of $374,049,172 as of December 31, 1998 due to redemption requests,
for example, the Scudder Europe Fund's expense ratio would be approximately
1.87%, 3.16%, 2.62% and 1.59% for Class A, B, C and M shares. A higher expense
ratio would lower the Scudder Europe Fund's total return performance. Scudder
Kemper, however, has agreed to limit the total annual operating expenses of
Class A, B and C shares to 1.75%, 2.65% and 2.62% for the one year period
following the Reorganization.
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Scudder Kemper, and its affiliate KDI, believe that the Scudder Europe
Fund can be successfully marketed as an open-end fund to attract new assets. As
a result, to the extent the Scudder Europe Fund is subject to net redemptions in
connection with the conversion to open-end form, Scudder Kemper and KDI believe
that the Scudder Europe Fund ultimately may be able to increase its net assets.
To mitigate the attendant costs of redemptions, the Scudder Europe Fund
will impose a fee of 2% on redemptions and exchanges of Class M shares (those
shares previously held by shareholders of the Scudder Europe Fund in closed-end
form) for a one year period following the Reorganization. The purpose of this
fee is to discourage short-term trading in a vehicle intended for long-term
investment and to restrict the ability of short-term traders to cause the Fund
and its non-redeeming stockholders to bear undue transaction and other expenses
forced by the redemption of others. To minimize the tax burden on remaining
shareholders from redemptions, the Scudder Europe Fund will also pay the
proceeds of large redemptions by Class M stockholders (i.e., redemptions
exceeding $250,000) in-kind. In-kind redemptions by Class M shareholders are
also subject to a 2% redemption fee and will result in the recognition by
the redeeming shareholder of gain or loss for federal income tax purposes based
upon the difference between the fair market value of the securities received and
that shareholder's basis in the shares redeemed. Although significant net
redemptions could cause the Scudder Europe Fund to become too small to be
considered economically viable, redemptions at such level are not presently
anticipated.
Because of their substantially similar investment policies, the Scudder
Europe Fund and the Kemper Europe Fund are exposed to similar risks. The
following summarizes principal risk factors of each Fund:
STOCK MARKET. Both the Scudder Europe Fund and the Kemper Europe Fund
invest primarily in equity securities. As a result, each Fund's returns and net
asset value will go up and down. Stock market movements will affect each Fund's
share price on a daily basis. Declines in value are possible both in the overall
stock market or in the types of securities held by a Fund.
PORTFOLIO STRATEGY. The portfolio manager's skill in choosing
appropriate investments for both Funds will determine in large part each Fund's
ability to achieve its investment objective.
FOREIGN SECURITIES. Investing in foreign securities involves other
considerations including limited information, higher brokerage costs, different
accounting standards and thinner trading markets as compared to U.S. markets. In
addition, investing in foreign securities, and to a greater extent emerging
markets, involves special risks including changes in foreign currency exchange
rates and political and economic instability.
EUROPEAN SECURITIES. Each Fund's performance will be affected by
political, social and economic factors affecting issuers in European countries,
including: growth of GDP or GNP, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position, as well as interest
and monetary exchange rates among European countries.
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NONDIVERSIFIED STATUS. The Scudder Europe Fund is considered a
nondiversified investment company under the 1940 Act and is permitted to invest
a greater proportion of its assets in the securities of a smaller number of
issuers. As a result, the Scudder Europe Fund may be subject to greater risks
with respect to its portfolio securities than a fund that is more broadly
diversified, such as the Kemper Europe Fund.
EMERGING MARKETS. Both Funds have the ability to invest in emerging
markets. Eastern European countries and certain Southern European countries are
considered to be emerging markets. Investing in emerging markets involves higher
levels of risk, including increased currency, information, liquidity, market,
political and valuation risk. Deficiencies in regulatory oversight, market
infrastructure, shareholder protections and company laws could expose the fund
to operational and other risks as well. Some countries may have restrictions
that could limit a Fund's access to attractive opportunities. Additionally,
emerging markets often face serious problems (such as high external debt,
inflation and unemployment) that could subject a Fund to increased volatility or
substantial declines in value.
ACCESS RISK. The risk that some countries may restrict a Fund's access
to investments or offer terms that are less advantageous than those for local
investors. This could limit the attractive investment opportunities available to
a Fund.
CORRELATION RISK. The risk that the relationships between markets are
not contemplated in the investment decision-making process. Incomplete
correlation, or inaccurately forecasted correlation, can result in unanticipated
risks.
CREDIT RISK. The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to honor a
financial obligation.
EXPOSURE RISK. The risk associated with techniques that increase a
Fund's exposure to a security, index or its investment portfolio. Exposure is a
Fund's maximum potential gain or loss from an investment. Certain investments
(such as options and futures) may have the effect of magnifying declines as well
as increases in a Fund's net asset value. Losses from writing options and
entering into futures can be unlimited.
LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that the fund would like. A Fund
may have to lower the price, sell other securities instead or forego an
investment opportunity. Any of these could have a negative effect on fund
management or performance.
LOWER RATED SECURITIES. These securities carry a higher risk that the
issuer will be unable to pay principal and interest when due, and the market to
sell such securities may be limited. This risk may be more pronounced for the
Scudder Europe Fund since it may invest up to 20% of its assets in such
securities.
OPERATIONAL RISK. The risk that some countries may have less developed
securities markets (and related transaction, registration and custody
practices). Related to this
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factor is the concern that reliance on computer systems not Year 2000 compliant
could severely hamper a marketplace's ability to handle securities transactions.
RISKS OF DERIVATIVE INSTRUMENTS. The use of these instruments requires
special skills, knowledge and investment techniques that differ from those
required for normal portfolio management. The success of a Fund in selecting
these instruments for its portfolio depends on the skill of the investment
manager in predicting the movement of interest rates, the value of particular
instruments and other economic variables. There is no assurance that the
investment manager will accurately predict these movements.
TRADING LIMIT AND TRADING HALT RISK. Exchanges on which options and
futures contracts are traded have established limits on how much an option or
futures contract may decline over various time periods within a day. If an
option or futures contract's price declines more than the established limits, no
trading may occur at prices outside that limit. If a trading limit is reached
before the close of a trading day, a fund may not be able to purchase or sell
options or futures contracts at advantageous prices or at all. In such an event,
a fund also may be required to use a "fair-value" method to price its
outstanding contracts.
VALUATION RISK. The risk that a fund has valued certain of its
securities at a higher price that it can sell them for.
INTEREST RATE RISK. Changes in interest rates may cause a decline in an
investment's market value. With bonds and other fixed income securities, a rise
in interest rates typically causes a fall in values, while a fall in interest
rates typically causes a rise in values.
YEAR 2000 READINESS. Like other mutual funds and financial and business
organizations worldwide, both Funds could be adversely affected if computer
systems on which they rely, which primarily include those used by the investment
manager, its affiliates or other service providers, are unable to process
correctly date-related information on and after January 1, 2000. This risk is
commonly called the Year 2000 Issue. Failure to address successfully the Year
2000 Issue could result in interruptions to and other material adverse effects
on each Fund's business and operations, such as problems with calculating net
asset value and difficulties in implementing a Fund's purchase and redemption
procedures. The investment manager has commenced a review of the Year 2000 Issue
as it may affect each Fund and is taking steps it believes are reasonably
designed to address the Year 2000 issue, although there can be no assurances
that these steps will be sufficient. In addition, there can be no assurances
that the Year 2000 Issue will not have an adverse effect on the issuers whose
securities are held by the Funds or on global markets or economies generally.
EURO CONVERSION. The introduction of a new European currency, the Euro,
may result in uncertainties for European securities and the operations of both
Funds. The Euro was introduced on January 1, 1999 by eleven European countries
that are members of the European Economic and Monetary Union (EMU). The
introduction of the Euro will require the redenomination of European debt and
equity securities over a period of time, which may result in various accounting
differences and/or tax treatments. Additional questions are raised
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by the fact that certain other European Union members, including the United
Kingdom, did not officially implement the Euro on January 1, 1999.
The investment manager is actively working to address Euro-related
issues and understands that other key service providers are taking similar
steps. At this time, no one knows precisely what the degree of impact will be.
To the extent that the market impact or effect on a Fund's holdings is negative,
a Fund's performance could be hurt.
MANAGEMENT OF THE FUNDS
As stated above, if approved by the shareholders of the Scudder Europe
Fund, that Fund will have the same investment advisory agreement in place and
will be governed by the same directors and officers as the Kemper Europe Fund
upon the Reorganization. Scudder Kemper will provide investment advisory
services to the Scudder Europe Fund under an advisory agreement substantially
similar to the advisory agreement currently in effect between Scudder Kemper and
the Kemper Europe Fund. The specific persons at Scudder Kemper who are
responsible for the day-to-day management of the Scudder Europe Fund are
described in the Preliminary Prospectus of the Scudder Europe Fund which
accompanies this Prospectus/Proxy Statement.
In addition, (1) Scudder Fund Accounting Corporation, a subsidiary of
Scudder Kemper, will provide accounting services, (2) KDI will provide
administration and distribution services, and Investors Fiduciary Trust Company
("IFTC") will provide transfer agency and dividend paying services through its
agreement with Kemper Services Company, an affiliate of Scudder Kemper, all
pursuant to agreements substantially similar to those currently in effect
between such service providers and the Kemper Europe Fund. With the exception of
a new accounting service fee of approximately .10%, THE ADVISORY FEES,
ADMINISTRATIVE FEES AND DISTRIBUTION FEES PAYABLE UNDER THE NEW AGREEMENTS FOR
THE REORGANIZED SCUDDER EUROPE FUND IN THE AGGREGATE WOULD BE THE SAME AS THOSE
CURRENTLY IN EFFECT FOR KEMPER EUROPE FUND. Unlike the Kemper Europe Fund,
however, Brown Brothers Harriman & Co. ("BBH") will provide custodial services
for all cash and securities of the Scudder Europe Fund. BBH currently provides
custodial services to the Scudder Europe Fund as well as to other funds in the
Kemper family. THE FEES PAYABLE FOR SUCH CUSTODIAL SERVICES WILL BE NO HIGHER
AFTER THE REORGANIZATION THAN THOSE CURRENTLY PAID BY THE KEMPER EUROPE FUND. In
addition, Ernst & Young, LLP, the current independent auditors for the Kemper
Europe Fund, is proposed to serve in that capacity for the Scudder Europe Fund.
The shareholders of the Scudder Europe Fund are being asked to ratify the
selection of Ernst & Young LLP as independent auditors for that Fund for the
purpose of obtaining certain efficiencies by having the same auditors as other
funds in the Kemper family of funds. Ratification of the selection of Ernst &
Young LLP requires the affirmative vote of a majority of the votes cast by the
shareholders of Scudder Europe Fund at the Fund's annual meeting.
INTEREST OF CERTAIN PERSONS IN THE REORGANIZATION
Scudder Kemper may be deemed to have an interest in the Plan and the
Reorganization because it provides investment advisory services to the Scudder
Europe Fund
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and the Kemper Europe Fund. Scudder Kemper receives compensation from the
Scudder Europe Fund and the Kemper Europe Fund for services it provides pursuant
to investment advisory agreements. The terms and provisions of these
arrangements are described in each Fund's Prospectus and Statement of Additional
Information. Future growth of assets of the Scudder Europe Fund, if any, can be
expected to increase the total amount of fees payable to Scudder Kemper and its
affiliates. Further, as a result of the Reorganization, Scudder Investments
(U.K.) Limited, a subsidiary of Scudder Kemper, will not serve as the
sub-adviser to the Scudder Europe Fund as it currently does for the Kemper
Europe Fund. Therefore, Scudder Kemper will retain the amount it had previously
paid to the affiliated sub-adviser in connection with the services provided in
connection with the management of the Kemper Europe Fund. No fee or expense of
the Scudder Europe Fund will increase, however, as a result of the absence of
the above sub-advisory arrangement. Further, Scudder Kemper has agreed to adopt
the lower advisory fees currently paid by the Kemper Europe Fund.
Affiliates of Scudder Kemper (i.e., KDI, Scudder Fund Accounting
Corporation and Kemper Services Company) may also be deemed to have an interest
in the Plan and the Reorganization because of the services they provide to the
Kemper Europe Fund and will continue to provide to the Scudder Europe Fund.
Further, a fee of approximately .10% will be paid to Scudder Fund Accounting
Corporation for services which is not currently paid by the Kemper Europe Fund.
With the exception of this new accounting fee, however, these service providers
have agreed to charge the same fees to the Scudder Europe Fund as those
currently in effect for the Kemper Europe Fund.
INFORMATION ON SHAREHOLDERS' RIGHTS
The following discussion, as it pertains to the Scudder Europe Fund,
relates to the Fund in open-end form, and assumes that certain amendments to the
Scudder Europe Fund's Charter will be approved by its shareholders. The
open-ending proposal of the Scudder Europe Fund is not conditioned upon the
approval of all of those changes (certain of which require the affirmative vote
of 75% of the votes entitled to be cast by stockholders of the Scudder Europe
Fund). However, if all of those changes are not approved, the Scudder Europe
Fund will retain certain characteristics more typically associated with a
closed-end fund. Those specific characteristics are discussed in the relevant
sections below.
GENERAL. The Scudder Europe Fund is a Maryland corporation that was
incorporated on November 22, 1989 and is governed by its Articles of
Incorporation, By-Laws and Board of Directors. The Kemper Europe Fund is a
Massachusetts business trust organized on June 12, 1995 and is governed by its
Declaration of Trust, By-Laws and Board of Trustees. Each Fund is also governed
by applicable state and federal law. The Kemper Europe Fund may issue an
unlimited number of shares of beneficial interest in one or more series or
portfolios, all having no par value, which may be divided by the Board of
Trustees into classes of shares. The Scudder Europe Fund has an authorized
capital of 500,000,000 shares of common stock with a par value of $.001 per
share. The Board of Directors of the Scudder Europe Fund has the power to
increase the authorized amount of capital stock and to classify unissued shares
for the purposes of creating new series or classes. In both the Kemper Europe
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Fund and the Scudder Europe Fund, shares represent interests in the assets of
the relevant Fund and have identical voting, dividend, liquidation and other
rights on the same terms and conditions, unless specified otherwise in the
Fund's governing documents. Expenses related to the distribution of each class
of shares of each Fund are borne solely by such class and each class of shares
has exclusive voting rights with respect to provisions of any 12b-1 distribution
plan. Shares of each Fund are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive rights. Class B shares
of each Fund automatically convert to Class A shares six years after purchase.
Class M shares of the Scudder Europe Fund will convert to Class A shares one
year after the Reorganization.
The Kemper Europe Fund is not required to hold annual shareholder
meetings and does not intend to do so unless required by the 1940 Act or other
applicable law. The Kemper Europe Fund will hold special meetings as required or
deemed desirable for such purposes as electing Trustees, changing fundamental
policies or approving an investment management agreement. Kemper Europe Fund
Trustees serve until the next meeting of shareholders, if any, called for the
purpose of electing Trustees and until the election and qualification of a
successor or until such Trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the Trustees. In accordance with the 1940 Act: (a) the Kemper Europe Fund
will hold a shareholder meeting for the election of Trustees at such time as
less than a majority of the Trustees have been elected by shareholders, and (b)
if, as a result of a vacancy in the Board of Trustees, less than two-thirds of
the Trustees have been elected by the shareholders, that vacancy will be filled
only by a vote of the shareholders.
Currently, the Scudder Europe Fund's Charter provides that the Board of
Directors will be divided into three classes. According to the relevant
provision of the Scudder Europe Fund's Charter, the term of office of the first
class expired on the date of the second annual meeting of 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. In connection
with the open-ending proposal, the shareholders of the Scudder Europe Fund are
being asked to approve an amendment to the Charter to declassify the Board of
Directors. Elimination of this Charter provision will permit the Scudder Europe
Fund to dispense with annual stockholders meetings, except when required by law
to hold such meetings. There is no assurance, however, that this Charter
amendment will be approved by the Scudder Europe Fund shareholders. If the
amendment is not approved, that Fund will be required to continue to hold annual
meetings to elect Directors and incur the related costs of the proxy
solicitation process (approximately $50,000 to $60,000).
Subject to each Fund's governing documents, shareholders may remove
Directors and Trustees from office at a meeting called for that purpose, which
meeting shall be held upon the written request of the holders of not less than
10% of the outstanding shares. Upon the written request of ten or more
shareholders who have been such for at least six
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months and who hold shares constituting at least 1% of the outstanding shares of
each Fund stating that such shareholders wish to communicate with the other
shareholders for the purpose of obtaining the signatures necessary to demand a
meeting to consider the removal of a Director or Trustee, each Fund has
undertaken to disseminate appropriate materials at the expense of the requesting
shareholders.
Each Fund's governing documents provide that the presence at a
shareholder meeting in person or by proxy of at least one-third of the shares
entitled to vote on a matter shall constitute a quorum. Thus, a meeting of
shareholders of each Fund could take place even if less than a majority of the
shareholders were represented on its scheduled date. Shareholders would in such
a case be permitted to take action which does not require a larger vote than a
majority of a quorum, such as the election of Directors or Trustees and
ratification of the selection of independent auditors. Investors in each Fund
are entitled to one vote for each full share held and fractional votes for
fractional shares held.
MULTI-CLASS STRUCTURE. Like the Kemper Europe Fund, the Scudder Europe
Fund will offer Class A, B and C shares upon the Reorganization. Class M Shares
represent the initial shares of the Scudder Europe Fund in closed-end form and
are no longer offered.
BOARD. The By-Laws of the Kemper Europe Fund and of the Scudder Europe
Fund (assuming that the proposed Charter amendment eliminating the classified
Board structure is approved by Scudder Europe Fund shareholders) provide that
the term of office of each Director/Trustee shall be from the time of his or her
election and qualification until the next annual meeting of shareholders and
until his or her successor shall have been elected and shall have qualified. Any
Director/Trustee of the Kemper Europe Fund or the Scudder Europe Fund may be
removed by the vote of at least a majority of the outstanding shares then
entitled to be cast for the election of Directors/Trustees. Vacancies on the
Boards of the Kemper Europe Fund or the Scudder Europe Fund may be filled by the
Directors/Trustees remaining in office. A meeting of shareholders will be
required for the purpose of electing additional Directors/Trustees whenever
fewer than a majority of the Directors/Trustee then in office were elected by
shareholders and to fill vacancies if less than two-thirds of the
Directors/Trustees then holding office have been elected by the shareholders.
As stated above, the Board of Scudder Europe Fund will be comprised of
the same persons currently serving on the Board of the Kemper Europe Fund.
VOTING RIGHTS. The Kemper Europe Fund does not hold a meeting of
shareholders annually, and there normally is no meeting of shareholders for the
purpose of electing Trustees unless and until such time as less than a majority
of the Trustees holding office have been elected by shareholders or as otherwise
required by applicable law (see discussion above). If certain Charter amendments
are approved by the shareholders of Scudder Europe Fund as discussed above, that
Fund will also not be required to hold annual meetings of shareholders for the
purpose of electing Directors.
LIQUIDATION OR TERMINATION. In the event of the liquidation or
termination of the Kemper Europe Fund or the Scudder Europe Fund, the
shareholders of each Fund are
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entitled to receive, when and as declared by the Directors/Trustees, the excess
of the assets over the liabilities belonging to the relevant Fund. In either
case, the assets so distributed to shareholders will be distributed among the
shareholders in proportion to the number of shares of the class held by them and
recorded on the books of the relevant Fund. The net asset value of the classes
of shares would differ due to differences in expense ratios.
LIABILITY OF DIRECTORS/TRUSTEES. The Articles of Incorporation of the
Scudder Europe Fund and the Declaration of Trust of the Kemper Europe Fund
provide that the Directors/Trustees and officers shall not be liable for
monetary damages for breach of fiduciary duty as a Director/Trustee or officer,
except to the extent such exemption is not permitted by law. The Articles of
Incorporation of the Scudder Europe Fund and the Declaration of Trust of the
Kemper Europe Fund provide that the relevant Fund shall indemnify each Director,
Trustee and officer and make advances for the payment of expenses relating to
the matter for which indemnification is sought, each to the fullest extent
permitted by Maryland or Massachusetts law and other applicable law.
RIGHTS OF INSPECTION. Maryland law permits any shareholder of the
Scudder Europe Fund or any agent of such shareholders to inspect and copy,
during usual business hours, the By-Laws, minutes of shareholder proceedings,
annual statements of the affairs and voting trust agreements (if any) of the
Scudder Europe Fund on file at its principal office. The Declaration of Trust of
the Kemper Europe Fund permits any shareholder of the Kemper Europe Fund or his
agent to inspect and copy during normal business hours the By-Laws, minutes of
the proceedings of shareholders and annual financial statements of Kemper Europe
Fund (including a balance sheet and financial statements of operations) on file,
at its principal offices.
SHAREHOLDER LIABILITY. Under Maryland law, shareholders of the Scudder
Europe Fund do not have personal liability for corporate acts and obligations.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of a
fund. The Declaration of Trust for the Kemper Europe Fund, however, disclaims
shareholder liability for acts or obligations of that Fund and requires that
notice of such disclaimer be given in each agreement, obligation, or instrument
entered into or executed by that Fund or its Trustees. Moreover, the Declaration
of Trust provides for indemnification out of the Kemper Europe Fund's property
for all losses and expenses of any shareholder held personally liable for the
obligations of that Fund and that Fund will be covered by insurance which the
Trustees consider adequate to cover foreseeable tort claims. Thus, the risk of a
shareholder of Kemper Europe Fund incurring financial loss on account of
shareholder liability is considered by Scudder Kemper remote and not material,
since it is limited to circumstances in which a disclaimer is inoperative and
the Kemper Europe Fund itself is unable to meet its obligations.
Shares of the Scudder Europe Fund issued to the shareholders of the
Kemper Europe Fund in the Reorganization will be fully paid and nonassessable
when issued, transferable without restrictions and will have no preemptive
rights.
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The foregoing is only a summary of certain characteristics of the
operations of the Scudder Europe Fund and the Kemper Europe Fund. The foregoing
is not a complete description of the documents cited. Shareholders should refer
to the provisions of the corporate and trust documents and state laws governing
each Fund for a more thorough description.
ADDITIONAL INFORMATION
Both the Scudder Europe Fund and the Kemper Europe Fund are subject to
the informational requirements of the Securities Exchange Act of 1934 and the
1940 Act and in accordance therewith file reports and other information
including proxy material, reports and charter documents, with the SEC. These
materials can be inspected and copies obtained at the Public Reference
Facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549 and at the New York Regional Office of the SEC at 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can also be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, SEC, Washington, D.C. 20549 at the prescribed rates. The
Preliminary Prospectus and Statement of Additional Information for the Scudder
Europe Fund, along with related information, may be found on the SEC website as
well (http://www.sec.gov).
OTHER BUSINESS
The Kemper Europe Fund Board of Trustees knows of no other business to
be brought before the Meeting. However, if any other matters come before the
Meeting, proxies that do not contain specific restrictions to the contrary will
be voted on such matters in accordance with the judgment of the persons named in
the enclosed proxy card.
FINANCIAL STATEMENTS AND EXPERTS
The audited statement of net assets of the Kemper Europe Fund,
including the schedule of portfolio investments, as of November 30, 1998, the
related statements of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended and the
financial highlights for each of the fiscal periods since 1996 have been
incorporated by reference into this Prospectus/Proxy Statement in reliance upon
the reports of Ernst & Young LLP, independent auditors, given on the authority
of such firm as experts in accounting and auditing.
The annual report of the Scudder Europe Fund for the fiscal year ended
October 31, 1998 is also incorporated by reference.
LEGAL PROCEEDINGS
The Scudder Europe 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
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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 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 its
shareholders, the Scudder Europe 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. Shareholders of the Kemper Europe Fund could possibly
bear some expenses for this litigation upon becoming shareholders of the Scudder
Europe Fund after the Reorganization.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the Scudder
Europe Fund will be passed upon by Willkie Farr & Gallagher, 787 Seventh Avenue,
New York, New York 10019-6099, counsel to the Scudder Europe Fund. In rendering
such opinion, Willkie Farr & Gallagher may rely on an opinion of Venable Baetjer
and Howard, LLP as to certain matters under Maryland law.
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this ___ day of June, 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
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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 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
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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.
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.
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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 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
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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.
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 in writing 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
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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 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
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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,
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.
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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
_____________, 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 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
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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;
(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;
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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 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.
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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 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
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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 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
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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
[( )] 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
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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, 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
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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 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.
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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 Kemper Fund dated as of the effective date of the Scudder Fund
Registration Statement in form and substance satisfactory to the Kemper 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;
(b) in their opinion, the financial statements and financial highlights of
the Kemper Fund included or incorporated by reference in the Scudder Fund
Registration 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
directors 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
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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 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:
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(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 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
A-19
<PAGE> 71
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 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:
A-20
<PAGE> 72
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
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
A-21
<PAGE> 73
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]
A-22
<PAGE> 74
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:
---------------------------------------
A-23
<PAGE> 75
PRELIMINARY PROSPECTUS OF SCUDDER EUROPE FUND
DATED ___________, 1999 IS INCORPORATED BY
REFERENCE TO ITS N-1A REGISTRATION STATEMENT
<PAGE> 76
STATEMENT OF ADDITIONAL INFORMATION DATED _______________, 1999
ACQUISITION OF THE ASSETS OF
KEMPER EUROPE FUND
222 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
(800) 621-1048
BY AND IN EXCHANGE FOR SHARES OF
SCUDDER NEW EUROPE FUND, INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
[ ]
This Statement of Additional Information, relating
specifically to the proposed transfer of all of the assets of the Kemper Europe
Fund to the Scudder Europe Fund in exchange for shares of the Scudder Europe
Fund and the assumption by the Scudder Europe Fund of the liabilities of the
Kemper Europe Fund, consists of this cover page and the following described
documents, each of which accompanies this Statement of Additional Information
and is incorporated herein by reference.
1. Preliminary Statement of Additional Information
for each class of shares of the Scudder Europe Fund dated
___________, 1999.
2. Annual Report of the Kemper Europe Fund for the
fiscal year ended November 30, 1998.
3. Annual Report of the Scudder Europe Fund for the
fiscal year ended October 31, 1998.
This Statement of Additional Information is not a prospectus. A Prospectus/Proxy
Statement, dated __________, 1999, relating to the above-referenced matter may
be obtained without charge by calling or writing the Scudder Europe Fund at the
telephone number or address set forth above. This Statement of Additional
Information should be read in conjunction with the Prospectus/Proxy Statement.
<PAGE> 77
TABLE OF CONTENTS
Financial Statements...................
<PAGE> 78
FINANCIAL STATEMENTS
The Scudder Europe Fund's Annual Report for the fiscal year
ended October 31, 1998 and the Kemper Europe Fund's Annual Report for the fiscal
year ended November 30, 1998, each including audited financial statements, notes
to the financial statements and report of independent auditors, are incorporated
by reference herein. The Funds will furnish a copy of the Annual Reports by
calling [ ].
PRO FORMA FINANCIAL STATEMENTS
The following tables set forth the unaudited pro forma condensed balance sheet
and unaudited pro forma condensed income statement of the Funds as of and for
the period ending April 30, 1999 and as adjusted to give effect to the
Reorganization.
[to be provided by Scudder Kemper]
<PAGE> 79
PRELIMINARY STATEMENT OF ADDITIONAL
INFORMATION OF THE SCUDDER EUROPE FUND
DATED ____________, 1999
IS INCORPORATED BY REFERENCE
TO ITS N-1A REGISTRATION STATEMENT
<PAGE> 80
THE ANNUAL REPORT, PROSPECTUS AND STATEMENT
OF ADDITIONAL INFORMATION OF THE KEMPER EUROPE
FUND ARE INCORPORATED BY REFERENCE TO THE
MOST RECENT FILINGS THEREOF BY THE KEMPER EUROPE FUND
<PAGE> 81
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
A policy of insurance covering Scudder Kemper Investments, Inc., its
affiliates including Scudder Investor Services, Inc., and all of the registered
investment companies advised by Scudder Kemper Investments, Inc. insures the
Registrant's directors and officers and others against liability arising by
reason of an alleged breach of duty caused by any negligent act, error or
accidental omission in the scope of their duties.
Article Twelfth of Registrant's Articles of Incorporation state as follows:
TWELFTH: Indemnification
To the fullest 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 to
its stockholders for damages. The limitation on liability applies to events
occurring at the time a person serves as a director or officer of the
Corporation whether or not such person is a director or officer at the time of
any proceeding in which liability is asserted.
The Corporation shall indemnify and advance expenses to its currently
acting and its former directors to the fullest 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 fullest
extent permitted by the Maryland General Corporation Law.
No provision of these Articles of Incorporation shall be effective to
protect or purport to protect any director or officer of the Corporation against
any liability to the Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
References to the Maryland General Corporation Law in this Article
TWELFTH are to that law as from time to time amended. No amendment to the
Corporation's Articles of Incorporation shall affect any right of any person
under this Article TWELFTH based on any event, omission or proceeding prior to
the amendment.
Article X of Registrant's Amended and Restated By-Laws states as follows:
<PAGE> 82
ARTICLE X
INDEMNIFICATION AND INSURANCE
Section 10.1. Indemnification of Directors, Officers and Members of the Advisory
Board. To the maximum extent permitted by the Investment Company Act of 1940,
the Securities Act of 1933 (as such statutes are now or hereinafter in force)
and by Maryland law in effect from time to time, the Corporation shall
indemnify, and shall pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to, (i) any individual who is a present or former
Director, officer or member of the Advisory Board of the Corporation or (ii) any
individual who serves or has served another corporation, partnership, joint
venture, trust, employee benefit plan or any other enterprise as a director or
officer of such corporation or other enterprise or as a partner or trustee of
such partnership, joint venture, trust, employee benefit plan or other
enterprise at the request of the Corporation. The Corporation may, with the
approval of its Board of Directors, provide such indemnification and advancement
of expenses to a person who served a predecessor of the Corporation in any of
the capacities described in (i) or (ii) above and to any employee or agent of
the Corporation or a predecessor of the Corporation. Indemnification or
advancement shall be made only as authorized for a specific proceeding upon (i)
a determination that indemnification of or advancement to such person is proper
in the circumstances because he has met the applicable standard of conduct for
indemnification or applicable requirement for advancement and (ii) such other
authorizations and determinations as may be required by law to be made by (A)
the Board of Directors of the Corporation by the vote of a majority of a quorum
consisting of Directors who are neither "interested persons" of the Corporation
as defined in the Investment Company Act of 1940 nor parties to such proceeding
or, if such quorum cannot be obtained, by a majority vote of a committee of the
Board of Directors consisting solely of two or more such Directors who are duly
designated to act in the matter by a majority vote of the full Board of
Directors; or (B) independent legal counsel in a written opinion, which counsel
shall be selected in accordance with such procedures as may be required by law,
provided, however, that such counsel shall make only such determinations and
authorizations as are permitted by law to be made by independent counsel; or (C)
the stockholders of the Corporation acting in accordance with the Articles of
Incorporation and these By-Laws and applicable law.
Neither the amendment nor repeal of this Article X nor the
adoption or amendment of any other provision of these By-Laws or the Articles of
Incorporation inconsistent with this Article X, shall apply to or affect in any
respect to any act or failure to act which occurred prior to such amendment,
repeal or adoption.
[MGCL Sec. 2-418]
Section 10.2. Insurance of Officers, Directors, Members of the Advisory Board,
Employees and Agents. To the maximum extent permitted by the Investment Company
Act of 1940, the Securities Act of 1933 (as such statutes are now or hereinafter
in force) and by Maryland law in effect from time to time, the Corporation may
purchase and maintain insurance on behalf of any person who is or was a
Director, officer, member of the Advisory Board, employee or
<PAGE> 83
agent of the Corporation, or is or was serving at the request of the Corporation
as a Director, officer, employee, partner, trustee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in or arising out of his
position. [MGCL Sec. 2-419(k)]
<PAGE> 84
ITEM 16. EXHIBITS
References are to Registrant's Registration Statement on Form N-1A as filed with
the Securities and Exchange Commission on April 28, 1999 (the
"N-1A Registration Statement").
(1) Registrant's Articles of Incorporation and related
amendments are incorporated by reference to the N-1A
Registration Statement.
(2) By-Laws and related amendments of the Registrant are
incorporated by reference to the N-1A Registration
Statement.
(4) Form of Plan of Reorganization
(included as Exhibit A to Registrant's
Prospectus/Proxy Statement contained in Part A of
this Registration Statement).
(6) Form of Investment Advisory Agreement for Scudder
Kemper Investments, Inc. is incorporated by reference
to the N-1A Registration Statement.
(7) Form of Underwriting and Distribution Services
Agreement is incorporated by reference to the N-14
Registration Statement.
(9) Form of Custodian Agreement is incorporated by
reference to the N-1A Registration Statement.
(10)(a) Form of Distribution Plan for Class B shares pursuant
to Rule 12b-1 under the 1940 Act is incorporated by
reference to the N-1A Registration Statement.
(10) (b) Form of Distribution Plan for Class C shares pursuant
to Rule 12b-1 under the 1940 Act as incorporated by
reference to the N-1A Registration Statement.
(10) (c) Form of Administrative Services Agreement is
incorporated by reference to the N-1A Registration
Statement.
(10) (d) Form of 18f-3 Plan is incorporated by reference to
the N-1A Registration Statement.
<PAGE> 85
(11) (a) (a) Opinion and Consent of Willkie Farr & Gallagher,
counsel to Registrant, with respect to validity of
shares.*
(11) (b) Opinion of Venable, Baetjer and Howard, L.L.P.,
Maryland counsel to Registrant, with respect to
validity of shares.*
(12) Opinion and Consent of Willkie Farr & Gallagher with
respect to tax matters.*
(13) (a) Form of Transfer Agency Agreement is incorporated by
reference to the N-1A Registration Statement.
(13) (b) Form of Fund Accounting Services Agreement is
incorporated by reference to the N-1A Registration
Statement.
(14) Consent of Ernst & Young LLP*
(17) Form of Proxy Card.
- ----------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any
public reoffering of the securities registered through the use of a prospectus
which is a part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the Securities
Act [17 CFR 230.145c], the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons who
may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus
that is filed under paragraph (1) above will be filed as a part of an amendment
to the registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
<PAGE> 86
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, this Registration Statement
on Form N-14 has been signed on behalf of the Registrant, in the City of New
York and State of New York, on the 27th day of April, 1999.
Scudder New Europe Fund, Inc.
By:/s/ Nicholas Bratt
-----------------------------
Nicholas Bratt
President and Director
The persons whose signature appear below appoint Kathryn L. Quirk,
Caroline Pearson and Maureen Kane and each of them, any of whom may act without
the joinder of the others, as such person's agent and attorney-in-fact to sign
and file on such person's behalf individually and in the capacity stated below
such registration statements, amendments, post-effective amendments, exhibits,
applications, certificates, statements, filings, agreements and other documents
with the Securities and Exchange Commission or any other domestic or foreign
governmental or regulatory authority, pursuant to the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and the Securities
Exchange Act of 1934, as maybe desirable or necessary in connection with the
public offering of shares of Scudder New Europe Fund, Inc. All past acts of the
attorney-in-fact in Europe Fund, Inc. All past acts of the attorney-in-fact in
furtherance of the foregoing are hereby ratified and confirmed.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form N-14 has been signed by the following
persons in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/Daniel Pierce Chairman and April 27, 1999
- ----------------------- Director
Daniel Pierce
/s/Paul Bancroft III Director April 27, 1999
- -----------------------
Paul Bancroft III
/s/Mary Johnston Evans Director April 27, 1999
- -----------------------
Mary Johnston Evans
/s/Richard Hunt Director April 27, 1999
- -----------------------
Richard Hunt
/s/William H. Luers Director April 27, 1999
- -----------------------
William H. Luers
/s/Wilson Nolen Director April 27, 1999
- -----------------------
Wilson Nolen
/s/Ladislas O. Rice Director April 27, 1999
- -----------------------
Ladislas O. Rice
/s/John R. Hebble Treasurer (Principal April 27, 1999
- ----------------- Financial and
John R. Hebble Accounting Officer)
<PAGE> 1
Exhibit 17
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
..............................................................................
..............................................................................
SCUDDER NEW EUROPE FUND, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned holder of shares of Kemper Europe Fund (the "Fund"), hereby
appoints [ ] and [ ] 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 Special Meeting of Shareholders of the Fund to be held
at the offices of Scudder Kemper Investments, Inc., 345 Park Avenue, New York,
New York 10154, at _____ a.m,/p.m., and any adjournment or adjournments thereof.
The undersigned hereby acknowledges receipt of the Notice of Special Meeting and
the Prospectus/Proxy Statement dated __, 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.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
Note: Please sign exactly as your name appears on this Proxy.
If joint owners, EITHER may sign this Proxy. When signing as
attorney, executor, administrator, trustee, guardian or
corporate officer, please give your full title.
Date:
----------------------------------------------
----------------------------------------------
Signature(s) (Title(s), if applicable)
<PAGE> 2
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
...............................................................................
...............................................................................
Please indicate your vote by an "X" in the appropriate box below. This proxy, if
properly executed, will be voted in the manner directed by the undersigned
shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" APPROVAL OF
THE PROPOSAL.
1. To approve the Agreement and Plan of Reorganization dated as of
[INSERT], 1999 (the "Plan") providing (i) that the Kemper Europe Fund would
transfer to Scudder New Europe Fund, Inc. (the "Scudder Europe Fund") all
of its assets in exchange for shares of the Scudder Europe Fund and the
assumption by Scudder Europe Fund of all of the Kemper Europe Fund's
liabilities, (ii) that such shares of the Scudder Europe Fund would be
distributed to shareholders of Kemper Europe Fund in liquidation of Kemper
Europe Fund and (iii) that Kemper Europe Fund would subsequently be
terminated.
FOR / / AGAINST/ / ABSTAIN / /
2. To transact such other business as may properly come before the Meeting
or any adjournment or adjournments thereof.
