<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SCUDDER NEW EUROPE FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
<PAGE> 2
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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<PAGE> 3
IMPORTANT NEWS
FOR SCUDDER NEW EUROPE FUND STOCKHOLDERS
[LOGO]
While we encourage you to read the full text of the enclosed Proxy
Statement, here's a brief overview of some matters affecting your Fund that
will be the subject of a stockholder vote.
Q & A: QUESTIONS AND ANSWERS
Q: WHAT IS HAPPENING?
A: The Board believes that, in light of the evolution and developments in the
European markets, the Fund can be successfully managed as an open-end fund.
As a result, the Board of Directors is recommending to stockholders that
the Fund be converted to an open-end investment company -- otherwise known
as a mutual fund -- a company that continuously offers to redeem shares and
to issue new shares. As participants in an open-end fund, shareholders
would continue to receive the benefits of management services provided by
Scudder Kemper Investments. It is expected that the current management team
of the Fund will also remain in place upon the open-ending of the Fund.
Also in connection with this proposal, the Board is recommending to combine
the Fund with Kemper Europe Fund ("KEF"), an open-end fund with
substantially similar investment policies managed by Scudder Kemper
Investments, Inc. ("Scudder Kemper") (the "Reorganization"). The purpose of
the Reorganization is to achieve certain economies of scale for the Fund
and enhance its ability to compete in open-end form by taking advantage of
the distribution facilities currently in place for KEF. The open-ending
proposal is not contingent on the approval of the Reorganization by
stockholders of KEF.
Q: WHAT OTHER MATTERS AM I BEING ASKED TO VOTE ON?
A: In addition to voting on the open-ending proposal, you are being asked to
approve the amendment and restatement of the Fund's Articles of
Incorporation and certain changes in investment restrictions that currently
are inconsistent with operation as an open-end fund. You are also being
asked to elect nominees who would serve as Directors of the Fund if the
open-ending proposal is approved. If the open-ending proposal is not
approved, however, you will be asked to reelect incumbent Directors whose
terms expire this year. You will also be asked to approve a new Investment
Advisory Agreement (which provides for lower advisory fees) with Scudder
Kemper Investments to take effect if the open-ending proposal is approved,
and to ratify the selection of Ernst & Young LLP as new independent
auditors for the Fund.
Q: HOW WILL THE OPEN-ENDING AFFECT ME AS A FUND STOCKHOLDER?
A: Following the conversion to open-end status, shares acquired while the Fund
operated in closed-end form would be redeemable at net asset value subject
to a 2% redemption fee (payable to the Fund) during the first year after
the Fund's conversion to open-end status. In addition, redemptions of these
shares during this period by a stockholder in excess of $250,000 would be
paid in-kind at the discretion of the Fund. Exchanges of Fund shares and
redemptions in-kind would also be subject to the 2% redemption fee. The
Board of Directors strongly believes that these first-year features should
help to avoid or mitigate certain possible negative effects to the Fund,
including adverse tax consequences to stockholders who elect to remain in
the Fund.
Q: HOW DO THE BOARD MEMBERS RECOMMEND THAT I VOTE?
A: AFTER CAREFUL CONSIDERATION, THE BOARD MEMBERS OF YOUR FUND, INCLUDING
THOSE WHO ARE NOT AFFILIATED WITH THE FUND OR SCUDDER KEMPER, RECOMMEND
THAT YOU VOTE FOR THE OPEN-ENDING PROPOSAL AND RELATED ACTIONS ON THE
ENCLOSED PROXY CARD.
Q: WHOM DO I CALL FOR MORE INFORMATION?
A: Please call Shareholder Communications Corporation, your Fund's
information agent, at 1-800-248-2681.
[LOGO]
<PAGE> 4
SCUDDER NEW EUROPE FUND, INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
May __, 1999
Dear Stockholders:
We are pleased to invite you to the Annual Meeting of Stockholders (the
"Meeting") of Scudder New Europe Fund, Inc. (the "Fund"). The Meeting is
scheduled to be held on July 20, 1999, at the offices of Scudder Kemper
Investments, Inc. ("Scudder Kemper"), ____ Floor, 345 Park Avenue (at 51st
Street), New York, New York 10154. At the Meeting, you will be asked to vote
on the following matters.
First, you will be asked to vote on a proposal to convert the Fund from a
closed-end investment company to an open-end investment company. Combined with
this proposal will be actions to amend and restate the Fund's Articles of
Incorporation to provide for the conversion and to change certain of the Fund's
investment policies to reflect operations as an open-end fund. In connection
with the open-ending proposal, the Board has also decided to combine the Fund
with Kemper Europe Fund ("KEF"), an open-end fund with substantially similar
investment policies managed by Scudder Kemper Investments, Inc. (the
"Reorganization"). The purpose of the Reorganization is to achieve certain
economies of scale for the Fund and enhance its ability to compete in open-end
form. The open-ending proposal is not contingent on the approval of the
Reorganization by stockholders of KEF. Please be assured that none of these
proposals involve a change of management or investment style for the Fund.
Scudder Kemper is proposed to continue as the Fund's investment manager (see
Proposal No. 5) and the current portfolio management team would continue to be
responsible for day to day investment decisions.
Second, you will be asked to approve further amendments to the Fund's
Articles of Incorporation to eliminate certain "anti-takeover" provisions that
will no longer be necessary once the Fund is converted to an open-end
investment company. You will be asked to elect nominees who would serve as
Directors of the Fund if the open-ending proposal is approved. If the
open-ending proposal is not approved, however, you will be asked to reelect
incumbent Directors whose terms expire this year.
You will also be asked to approve a new Investment Advisory Agreement with
Scudder Kemper to take effect if the Fund converts to an open-end form. The
Agreement provides for a lower advisory fee rate than that paid under the
current Investment Advisory Agreement. Finally, you will be asked to ratify the
selection of Ernst & Young LLP as new independent auditors to the Fund for the
fiscal year ending October 31, 1999.
AFTER CAREFUL REVIEW, THE MEMBERS OF YOUR FUND'S BOARD BELIEVE THAT THE
PROPOSED CHANGES DISCUSSED IN GREATER DETAIL IN THE ATTACHED PROXY STATEMENT
ARE IN THE BEST INTERESTS OF CURRENT STOCKHOLDERS AND RECOMMEND YOU VOTE "FOR"
THE OPEN-ENDING AND RELATED PROPOSALS.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your executed proxy card after a reasonable amount of time, you may receive a
telephone call from our proxy solicitor, Shareholder Communications
Corporation, reminding you to vote.
Respectfully,
/s/ Nicholas Bratt
Nicholas Bratt
President and Chairman
WE URGE YOU TO SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT REGARDLESS
OF THE NUMBER OF SHARES YOU OWN.
<PAGE> 5
SCUDDER NEW EUROPE FUND, INC.
--------------------
Notice Of Annual Meeting Of Stockholders
To Be Held July 20, 1999
--------------------
Please take notice that the Annual Meeting of Stockholders of Scudder New
Europe Fund, Inc. (the "Fund") has been called to be held at the offices of
Scudder Kemper Investments, Inc., 25th Floor, 345 Park Avenue (at 51st Street),
New York, New York on Tuesday, July 20, 1999 at 9:30 a.m., for the following
purposes:
PROPOSAL 1: To approve or disapprove a proposal to convert the Fund from a
closed-end investment company to an open-end investment
company, which proposal includes the following:
(a) Changing the Fund's subclassification from a closed-end
investment company to an open-end investment company;
(b) Amending and Restating the Fund's Articles of
Incorporation to provide for such conversion; and
(c) Changing certain of the Fund's fundamental investment
policies to reflect its proposed new subclassification.
PROPOSAL 2: To approve or disapprove certain further amendments to the
Fund's Articles of Incorporation in the event that Proposal 1
is approved.
PROPOSAL 3: To elect the Board of Directors
(a) To elect nominees who will continue to serve on the
Board of the Fund in the event that Proposal 1 is not
approved; or
(b) To elect nominees to serve on the Board of the Fund if
Proposal 1 is approved.
PROPOSAL 4: To ratify the selection of Ernst & Young LLP as independent
auditors for the Fund.
PROPOSAL 5: To approve or disapprove a new Investment Advisory Agreement
with Scudder Kemper Investments, Inc. providing for, among
other things, a lower advisory fee rate than that paid under
the current Investment Advisory Agreement, which Agreement
would take effect if Proposal 1 is approved.
<PAGE> 6
The appointed proxies will vote on any other business as may properly come
before the meeting or any adjournments thereof. Holders of record of the shares
of common stock of the Fund at the close of business on May 25, 1999 are
entitled to vote at the meeting and any adjournments thereof.
By Order of the Board of Directors of the Fund,
John Millette, Secretary
May ___, 1999
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE
FOREGOING ITEMS.
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IMPORTANT -- We urge you to sign and date the enclosed proxy card and return it
in the enclosed addressed envelope which requires no postage and is intended for
your convenience. Your prompt return of the enclosed proxy card may save the
Fund the necessity and expense of further solicitations to ensure a quorum at
the Annual Meeting.
- --------------------------------------------------------------------------------
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<PAGE> 7
SCUDDER NEW EUROPE FUND, INC.
345 Park Avenue
New York, New York 10154
-------------------
PROXY STATEMENT FOR THE ANNUAL
MEETING OF STOCKHOLDERS
To Be Held July 20, 1999
--------------------
General
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Scudder New Europe Fund, Inc.
(the "Fund") for use at the Annual Meeting of the Stockholders, to be held at
the offices of Scudder Kemper Investments, Inc., 25th Floor, 345 Park Avenue (at
51st Street), New York, New York 10154 on Tuesday, July 20, 1999, at 9:30 a.m.,
and at any adjournments thereof (collectively, the "Meeting").
This Proxy Statement, the Notice of Annual Meeting and the proxy card are
first being mailed to stockholders on or about May __, 1999 or as soon as
practicable thereafter. Any stockholder giving a proxy has the power to revoke
it by mail (addressed to the Secretary at the principal executive office of the
Fund, c/o Scudder Kemper Investments, Inc., 345 Park Avenue, New York, New York
10154) or in person at the Meeting, by executing a superseding proxy or by
submitting a notice of revocation to the Fund. All properly executed proxies
received in time for the Meeting will be voted as specified in the proxy or, if
no specification is made, in favor of each Proposal referred to in the Proxy
Statement.
The presence at any stockholders meeting, in person or by proxy, of the
holders of a majority of the votes of the shares of the Fund entitled to be cast
shall be necessary and sufficient to constitute a quorum for the transaction of
business. In the event that the necessary quorum to transact business or the
vote required to approve any Proposal is not obtained at the Meeting, the
persons named as proxies may propose one or more adjournments of the Meeting in
accordance with applicable law to permit further solicitation of proxies with
respect to the Proposal that did not receive the vote necessary for its passage
or to obtain a quorum. Any such adjournment as to a matter will require the
affirmative vote of the holders of a majority of the Fund's shares present in
person or by proxy at the Meeting. The persons named as proxies will vote in
favor of such adjournment those proxies which they are entitled to vote in favor
of that Proposal and will vote against any such adjournment those proxies to be
voted against that Proposal. For purposes of determining the presence of a
quorum for transacting business at the Meeting, abstentions and broker
"non-votes" will be treated as shares that are present but which have not been
voted. Broker non-votes are proxies received by the Fund from brokers or
nominees when the broker or nominee has neither received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter. Accordingly, stockholders are urged to forward
their voting instructions promptly.
<PAGE> 8
Abstentions and broker non-votes will have the effect of a "no" vote on
Proposals 1 and 2. Proposal 1 requires the approval of a majority of votes
entitled to be cast at the Meeting, while Proposal 2 requires the affirmative
vote of 75% of the votes entitled to be cast by stockholders.
Abstentions and broker non-votes will not be counted in favor of, but will
have no other effect on the vote for Proposals 3 and 4, which require the
approval of the majority of the votes cast at the Meeting.
Proposal 5 requires the affirmative vote of a "majority of the outstanding
voting securities" of the Fund. The term "majority of the outstanding voting
securities" as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), and as used in this Proxy Statement, means: the affirmative vote of
the lesser of (1) 67% of the voting securities of the Fund present at the
meeting if more than 50% of the outstanding voting securities of the Fund are
present in person or by proxy or (2) more than 50% of the outstanding voting
securities of the Fund. Abstentions and broker non-votes will also have the
effect of a "no" vote on Proposal 5 because it requires the approval of a
specified percentage of the outstanding shares of the Fund or of the shares of
the Fund present at the Meeting.
Stockholders of the Fund will vote separately with respect to each
Proposal.
Holders of record of the shares of the Fund at the close of business on
May 25, 1999 (the "Record Date"), as to any matter on which they are entitled to
vote, will be entitled to one vote per share on all business of the Meeting. The
number of shares outstanding for the Fund as of May 25, 1999, was ____________.
[To the best of the Fund's knowledge, as of May 25, 1999, no shareholder
held 5% or more of the Fund's Shares.]
The Fund provides periodic reports to all of its stockholders which
highlight relevant information, including investment results and a review of
portfolio changes. You may receive an additional copy of the most recent annual
report for the Fund and a copy of any more recent semi-annual report, without
charge, by calling 800-349-4281 or writing the Fund, c/o Scudder Kemper
Investments, Inc., 345 Park Avenue, New York, New York 10154.
Introduction of Proposals
All Proposals are uniquely affected by a recent decision of your Board of
Directors based on a recommendation of Scudder Kemper Investments, Inc., the
Fund's investment adviser ("Scudder Kemper"). The Board has determined to
recommend to you that the Fund be converted from closed-end to open-end status
(the "Open-End Fund"). This proposal does not involve any change in investment
management or investment style of the Fund. In fact, Scudder Kemper is proposed
to continue as investment manager of the Fund (see Proposal No. 5), and the
current portfolio management team is expected to remain in place upon the open-
ending of the fund. As an open-end investment company, the Fund's shares would
be redeemable at net asset value on any business day and the Fund could also
commence issuance of new shares. Because the issuance of new shares was deemed
to be vital to the continued viability of the Fund in open-end status, Scudder
Kemper informed the Board that it believed the Fund could be successfully
marketed in the network already in place for the Kemper family of funds. In
conjunction with the open-ending proposal, the Board also decided that the Fund
should be combined with Kemper Europe Fund ("KEF"), an open-end investment
company with substantially similar investment policies managed by Scudder Kemper
(the "Reorganization") to achieve certain economies of scale and enhance the
Fund's ability to compete in open-end form. The Board formally approved
open-ending and the Reorganization at its meeting held on April 27, 1999.
Immediately after the Reorganization (which would be effected by your Fund's
acquiring the assets of KEF), your Fund
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<PAGE> 9
would assume the name of "Kemper Europe Fund" (the "Reorganized Fund") and begin
offering its shares through the sales and distribution mechanisms already
established for KEF. The Reorganization is contingent on the approval of the
transaction by the stockholders of KEF. If the Reorganization is not so
approved, the Fund would continue to be named "Scudder New Europe Fund, Inc."
In order to accomplish these goals and to place the Fund in the Kemper
family of funds, you are being asked to approve the open-ending of the Fund, the
amendment and restatement of the Fund's Articles of Incorporation and certain
changes in investment restrictions that currently are inconsistent with
operation as an open-end fund. In addition, you are being asked to elect
nominees who would serve as Directors of the Fund if the open-ending proposal is
approved. If the open-ending proposal is not approved, however, you will be
asked to reelect incumbent Directors whose terms expire this year. Finally, a
new Investment Advisory Agreement is proposed for your consideration, which
Agreement is consistent with similar agreements for other Kemper open-end funds,
and would be implemented only if Proposal 1 is also approved.
If the open-ending proposal is approved (and the stockholders of KEF vote
to approve the Reorganization with the Fund at a meeting also scheduled to be
held on July 20, 1999), the conversion to open-end status and the Reorganization
would occur simultaneously on or about September 1, 1999. Therefore, the Fund
would remain a closed-end fund until such time. If, however, the open-ending
proposal is approved but the Reorganization is not approved by the stockholders
of KEF, the Fund intends to proceed with open-ending as soon as practicable,
although there can be no assurances of an exact timetable.
PROPOSAL 1: CONVERSION TO AN OPEN-END INVESTMENT COMPANY
Introduction
The Board, at a meeting held on April 27, 1999, approved the conversion of
the Fund from a closed-end investment company to an open-end investment company.
As a part of its deliberation with respect to the conversion, the Board also
approved an Agreement and Plan of Reorganization pursuant to which the Fund
would acquire substantially all of the assets of KEF. Information relating
specifically to the Reorganization is provided below. The Fund, as an open-end
fund, would allow stockholders to redeem their shares at net asset value. If the
Reorganization is approved by KEF stockholders, stockholders of KEF would
receive Class A, Class B and Class C shares of the Reorganized Fund, as
appropriate, each with substantially the same rights and privileges as the
similar class of shares of KEF, while stockholders of the Fund at the time of
the Reorganization would receive Class M shares of the Reorganized Fund. If the
Reorganization is not approved by the stockholders of KEF, shares of the Fund
previously held in closed-end form would nevertheless be renamed "M" shares
after the open-ending. In an attempt to minimize adverse income tax consequences
for non-redeeming stockholders 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 Fund would pay in-kind a portion of the proceeds of large
redemptions (i.e., redemptions exceeding $250,000) by Class M stockholders.
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 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. At the end of the one year period, Class M
shares would automatically convert into Class A shares of the Open-End Fund at
no cost to the stockholder. Class A shares, as well as other classes of shares
of the Open-End Fund, are described below.
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<PAGE> 10
This Proposal is intended to comply with an undertaking of the Fund's
Board contained in the Fund's original Prospectus and By-Laws to consider
certain actions relating to the elimination of any substantial discount in the
price of the Fund's shares. In addition, the Proposal reflects the recognition
by Scudder Kemper of changes in the markets for European equity securities
suitable for the Fund and its advice to the Board that the Fund's objectives
could be met effectively after the Fund's conversion to open-end status as part
of the Kemper family of funds. Specifically, the Fund's Prospectus dated
February 9, 1990 provided that:
The Fund's By-Laws provide that if, at any time during or after the fifth
year following the offering made hereby, shares of the Fund's Common Stock
publicly trade for a substantial period of time at a substantial discount
from the Fund's then current net asset value per share, the Board of
Directors of the Fund will consider, at its next regularly scheduled
meeting, taking various actions designed to eliminate the discount. The
actions considered by the Board of Directors may include periodic
repurchases of shares or recommending to stockholders amendments to the
Fund's Articles of Incorporation to convert the Fund to an open-end
investment company.
Under the Fund's Articles of Incorporation, the affirmative vote of 75% of
the Directors is required to authorize the conversion of the Fund to an open-end
investment company. The conversion also requires the affirmative vote of the
holders of 75% of the outstanding shares of the Fund, unless the conversion is
approved by a vote of 75% of the Continuing Directors, in which event such
conversion requires the approval of the holders of a majority of the outstanding
shares of the Fund. A "Continuing Director" is any member of the Board of
Directors of the Fund who (i) is not a person or affiliate of a person (other
than an investment company advised by the Fund's initial investment manager,
namely, Scudder Kemper, or any of its affiliates) who enters or proposes to
enter into a "Business Combination" (as defined in the Fund's Articles of
Incorporation) with the Fund (an "Interested Party") and (ii) who has been a
member of the Board of Directors of the Fund for a period of at least 12 months,
or is a successor of a Continuing Director who is unaffiliated with an
Interested Party and is recommended to succeed a Continuing Director by a
majority of the Continuing Directors then on the Board of Directors of the Fund.
Since the proposal to open-end the Fund was approved by all of the Continuing
Directors of the Fund, a vote of the majority of the outstanding shares of the
Fund is now required to effectuate the conversion.
Background
The Fund commenced operations in 1990. It was organized to offer investors
access to smaller and emerging European securities markets and the opportunity
to participate in the dynamic changes affecting Europe without the
administrative burden associated with purchasing and selling European securities
on an individual basis. Emphasis was to be placed on "Specialized Investments,"
which included equity securities of (i) privately-held European companies, (ii)
European companies that have recently made initial public offerings, (iii)
government-owned or -controlled European companies that are being privatized,
(iv) smaller publicly-held European companies and (v) companies and joint
ventures based in Eastern Europe. Given the market for these securities at the
time the Fund was organized -- and reasonable expectations for the development
of those markets in the future -- the Fund's classification as a closed-end
company was appropriate. Further, at the time of the Fund's organization,
relatively few U.S. registered mutual funds invested primarily in European
equities, and the policies of the SEC limited a fund's holdings in illiquid
securities to 10% of net assets. A closed-end structure, among other things,
permits investment in less liquid securities without regard to daily
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<PAGE> 11
redemption activity and further permits a portfolio to be fully invested. At the
same time, however, shares of closed-end investment companies frequently trade
at a discount from their net asset value.
Shares of the Fund have traded at a discount from time to time. During the
last three years, the discount has grown to as large as 33.24% (as of August 31,
1998). As of March 31, 1999, the Fund's shares were trading at $19.00 per share
and the net asset value was $20.96 per share, resulting in a discount of 9.4%.
Notwithstanding this discount, however, the Fund's average annual return since
inception through March 31, 1999 has been 9.85% (based on market value) and
12.01% (based on net asset value). The Fund had a one year market return of
36.13% for the period ended December 31, 1998. In terms of actual performance of
the Fund's portfolio, the Fund's return was 34.39% for the year ended December
31, 1998.
The Fund's Board of Directors has regularly monitored the Fund's discount
from net asset value and the continuing appropriateness of the Fund's closed-end
structure. Scudder Kemper has advised the Board that political, economic and
investment developments have rendered the Fund's closed-end structure
unnecessary and that the market discount at which the Fund's shares have traded
recently may unnecessarily diminish stockholder value. Scudder Kemper believes
that there is ample liquidity in most European securities currently of interest
to the Fund, including securities that are the subject of initial public
offerings and privatizations; the advent of the euro has attracted capital and
will facilitate trading in European companies, including smaller companies; the
possibility of a joint European stock exchange likely will further enhance
liquidity; and, finally, Eastern European businesses -- particularly Russian
companies and companies dependent on the Russian economy -- are more
speculative, and are likely to remain so for the foreseeable future, than would
be attractive to the Fund. On October 28, 1998, Scudder Kemper described for
the Board's consideration various alternatives to the Fund's current structure
in order to enhance stockholder value and Fund operational efficiencies. The
Board requested that Scudder Kemper prepare a detailed proposal regarding the
proposed transaction for the next meeting. On January 26, 1999, Scudder Kemper
recommended the general terms of a restructuring which is set forth in detail in
this Proxy Statement.
After the consideration of other alternatives that the Board believed not
to be in the best interest of the Fund's stockholders, the Board approved in
principle a proposal, which was announced in a press release dated January 28,
1999, that the Fund be converted to an open-end investment company and combined
with KEF.
At a meeting held on April 27, 1999, the Board of Directors formally
considered and approved the proposal to convert the Fund to open-end status and
the Agreement and Plan of Reorganization relating to the combination with KEF.
The Board reviewed information and representations presented to it by Scudder
Kemper, including information concerning the differences between closed-end and
open-end investment companies, the Fund's operations and performance to date,
and the possible effects of conversion on the Fund. The Board was informed that
the proposal to open-end the Fund would not involve a change of management or
investment style for the Fund. Scudder Kemper is proposed to continue as the
Fund's investment manager and the current portfolio management team would
continue to be responsible for day to day investment decisions. The Board also
took into account, among other things, changes in the European markets for
investments by the Fund which facilitate its operation as an open-end investment
company and the possible impact of these changes on the price at which the
Fund's shares trade on the NYSE. Further, the Board was advised by Scudder
Kemper, over a period of [several months], that the increased liquidity of
portfolio investments in the Fund, the introduction of the euro as a common
currency in eleven European countries, and the relative opportunities for
investing in highly liquid European securities, will permit the Fund to operate
efficiently and in the best interests of its stockholders as an open-end
investment company. Scudder Kemper advised the Board that the benefits of
elimination of the Fund's discount, together with the right of redemption for
stockholders, could be expected to outweigh the potential drawbacks to
stockholders resulting from open-ending the
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<PAGE> 12
Fund. The Board was informed that, following a conversion, stockholders would be
able to redeem their shares at net asset value, less any applicable redemption
fees and subject to the ability of the Fund to pay large redemptions in-kind,
rather than sell their shares in the secondary market through broker-dealers at
a discount to net asset value. Stockholders who receive redemptions in-kind will
also be subject to transaction costs associated with the establishment of
securities accounts and/or the liquidation of their in-kind redemption proceeds.
The Board was also informed that, while conversion to open-end form was expected
to result immediately in a reduction in size of the Fund as a consequence of
redemption requests, conversion would create the opportunity, which the Fund
does not currently enjoy, to achieve the investment benefits associated with
greater asset size through sales of Fund shares. Consistent with this latter
opportunity, Scudder Kemper will recommend and the Board of the Fund intends to
approve with respect to Class B and C Shares, a proposal for those classes to
participate in a plan of distribution pursuant to Rule 12b-1 under the 1940 Act.
Class A and M shares of the Open-End Fund will not be subject to Rule 12b-1
distribution fees.
After considering the potential drawbacks of conversion of the Fund to
open-end form, the Board determined that (i) the right of redemption of the
Fund's shares provided to stockholders; (ii) the elimination of the Fund's
discount as a result of such a conversion, (iii) the distribution of the
Open-End Fund's shares to investors as part of the Kemper family of funds
pursuant to the dealer network already in place for that family of funds and
(iv) the imposition of a 2% redemption fee on redemptions and exchanges
(including redemptions-in-kind) of Class M shares were sufficient to outweigh
such drawbacks, and that conversion to open-end form and the Reorganization
would be in the best interests of the Fund. The Board also determined that the
anticipated increase in expenses for the Fund's stockholders, as described
below, is an acceptable increase, given certain higher operating costs of an
open-end fund, the additional services required to be provided to stockholders
of such funds generally and the opportunity for stockholders to recognize net
asset value. As a result, the Board unanimously approved the recommendation of
Scudder Kemper to submit to stockholders a proposal to convert the Fund from a
closed-end investment company to an open-end investment company and to
reorganize the Fund as discussed below.
Stockholders of the Fund are being asked to consider the conversion of the
Fund from a closed-end to an open-end investment company and certain related
matters in connection with the conversion. If Proposal 1 is approved by the
stockholders, the Fund's Articles of Incorporation will be amended to reflect
the Fund's status as an open-end investment company and the Fund's
sub-classification will be changed from a closed-end investment company to an
open-end investment company. Also, certain of the Fund's fundamental investment
policies will be changed to reflect the conversion to an open-end investment
company. Finally, in a separate transaction, the Fund will acquire KEF's assets
in return for shares of the Reorganized Fund and the assumption of KEF's
liabilities pursuant to an Agreement and Plan of Reorganization, subject to the
approval of KEF stockholders. Shares of the Open-End Fund will be continually
offered, subject to a registration statement becoming effective under the
Securities Act of 1933, as amended, and the 1940 Act. If Proposal 1 is not
approved, however, the Fund will remain a closed-end investment company and
there will be no combination with KEF.
The factors considered by the Board in making its recommendation to
convert the Fund from a closed-end fund to an open-end fund are discussed in
greater detail below.
This Proxy Statement contains certain statements that may be deemed to be
"forward-looking statements" including, but not limited to, projected expenses
and expense ratios. Actual results could
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<PAGE> 13
differ materially from those projected in the forward-looking statements as a
result of actual expenses varying from estimates, changes in assumptions made,
and other factors.
Comparison Between Closed-End and Open-End Investment Companies
Generally, closed-end funds, such as the Fund, neither redeem their
outstanding stock nor engage in the continuous sale of new securities.
Therefore, a closed-end fund operates with a relatively fixed capitalization.
Stockholders who wish to buy or sell shares generally must do so through a
broker-dealer, and pay or receive whatever price the market may bear. This price
may be more or less than the net asset value per share of the closed-end fund's
shares. In contrast, open-end funds issue redeemable securities entitling
stockholders to surrender those securities to the fund and receive in return
their proportionate share of the value of the fund's net assets (less any
redemption fee charged by the fund and any "sales load" if purchased through a
broker-dealer). Also, open-end funds generally issue new shares at the fund's
net asset value.
In addition to these structural distinctions between the two types of
funds, several other differences exist. These distinctions can give rise to
advantages and disadvantages to the Fund if, on the one hand, it remains a
closed-end fund or if, on the other hand, it converts to open-end status. Based
upon information provided by Scudder Kemper, the Board has considered the
advantages and disadvantages to the Fund and its stockholders associated with
remaining closed-end or converting to open-end form. The most significant
advantages and disadvantages, as identified by Scudder Kemper and perceived by
the Board, are discussed below.
Advantages of Converting to an Open-End Investment Company
1. Elimination of Discount, Redeemability of Shares. If the Fund converts
to open-end status, stockholders will be able to realize the value of their
shares by redeeming their shares at the then current net asset value of the
shares less any applicable redemption fee, rather than at a discount from net
asset value (less any brokerage costs) of the type that has characterized the
Fund's shares from time to time. The Fund's average annual discount by year
computed as of the end of each month is as follows:
<TABLE>
<CAPTION>
Calendar Year Month End Averages
-------------------------------------------------------------
Date Premium/Discount
--------------------------------------------------------------
<S> <C>
As of December 31
1999 (January 1 - March 31) - 8.63%
1998 -18.50%
1997 -18.94%
1996 -19.39%
1995 -18.44%
1994 - 9.83%
1993 - 5.31%
1992 -11.39%
1991 -15.54%
1990 (February 28 - December 31) -14.18%
</TABLE>
From February 9, 1990 to , 1999, the Fund's shares have traded on
the NYSE at prices ranging from % above to % below net asset value.
On , 1999, the closing price of a Fund share on the NYSE was %
below its net asset value.
Conversion to an open-end investment company will eliminate any discount
and will allow stockholders of the Fund to realize promptly net asset value of
the Fund's shares (subject to any redemption fee and the costs and potential
time delays associated with disposing of securities received in-kind). However,
it will also eliminate any possibility that the Fund's shares will trade at a
premium over net asset value.
Stockholders should note that if the proposal to convert the Fund to an
open-end investment company is approved by the stockholders, or even upon notice
of the Board's approval of conversion, the discount may be reduced prior to the
date of conversion to the extent investors may purchase shares
-7-
<PAGE> 14
in the open market in anticipation of the prospect of the Fund becoming an
open-end investment company.
2. Ability to Raise New Capital Through the Continuous Offering of Common
Stock. A closed-end fund is prohibited by the 1940 Act under most circumstances
from issuing shares at a discount to net asset value. Therefore, as long as the
Fund is trading at a discount to net asset value (and even if shares were to
trade at a small premium), it is not generally possible to raise new capital,
except by means of a rights offering. To the extent such rights are exercised at
less than net asset value, as is usually the case, it would have a dilutive
effect on the interests of non-participating stockholders. As an open-end
investment company, the Fund would be able to sell shares to the public at net
asset value (plus, if applicable, a sales load). Kemper Distributors, Inc.
("KDI"), an affiliate of Scudder Kemper, has advised the Board that it believes
that, given the Fund's strong performance record and other factors, shares of
the Fund could be successfully marketed in an open-end format, although no
assurance can be given as to such results. Moreover, KDI has developed a network
through which shares of the Open-End Fund would be distributed as part of the
Kemper family of funds.
The Fund's Board considered this to be an important factor in approving
the proposal to convert the Fund to open-end status as it believes that the
Open-End Fund's ability to raise additional capital to be critical to the Fund's
continuing success as an open-end fund to offset the consequences of redemption
requests, and it believes that the Open-End Fund's position in the Kemper family
of funds is vital to its market acceptance and the avoidance of confusion with
other funds. The ability to raise new capital may allow the Fund to achieve
certain economies of scale and may give the Fund additional flexibility to
invest assets in furtherance of its investment objective, since with new cash
flow the manager is able to reposition the portfolio or take advantage of new
opportunities without having to sell other securities.
3. Voting Rights. If the Fund converts to open-end form and Proposal 2 is
approved, the Fund will not hold annual stockholder meetings unless required
under the 1940 Act. The shares of the Fund currently are listed on the NYSE.
NYSE rules generally provide for annual meetings of the stockholders of listed
companies for the election of directors. If the proposal to convert the Fund to
an open-end investment company is approved, the Fund's shares will be delisted
and voting for the election of Directors will be determined solely by reference
to the 1940 Act and to the Maryland General Corporation Law. Subject to the
approval of Proposal 2, the Fund will not be required to hold an annual meeting
in any year in which the election of Directors is not required to be acted upon
under the 1940 Act. By not holding annual stockholder meetings, the Fund will
save the cost of preparing proxy materials and soliciting stockholders' votes on
the usual proposals contained therein. Based on the number of outstanding shares
and stockholders as of the Record Date, such costs could aggregate in the range
of approximately $50,000 to $60,000 per year.
Under the 1940 Act, the Fund would be required to hold a stockholders
meeting if the number of Directors elected by the stockholders were less than a
majority of the total number of Directors, to fill vacancies if less than
two-thirds of the Directors then holding office have been elected by the
stockholders, if a change were sought in the fundamental investment policies of
the Fund, if a material change were sought in the investment management
agreement or in a distribution plan adopted pursuant to Rule 12b-1 under the
1940 Act, or for certain other matters. A meeting will also be called for the
purpose of voting on the removal of a Director at the written request of holders
of 10% of the Fund's outstanding shares.
-8-
<PAGE> 15
As more fully described below, the Open-End Fund would continue to hold
annual meetings of stockholders for the purpose of electing Directors if
Proposal 2 is not approved and the Fund's Board remains divided into three
classes.
The holders of shares of the Fund will continue to have one vote for each
share held on each matter submitted to a vote of stockholders if the Fund
converts to an open-end investment company, except that each class of shares
will have exclusive voting rights on any matter submitted to stockholders that
relates solely to its distribution arrangement and separate voting rights on any
matter submitted to stockholders in which the interests of one class differ from
the interests of any other class.
4. Stockholder Services. If Proposal 1 is approved and the Fund becomes an
open-end investment company, stockholders will have access to additional
services. Details of these services will be more fully disclosed in the
Preliminary Prospectus and Statement of Additional Information of the Open-End
Fund. In addition to the exchange privilege discussed below, these services
include:
- Payroll and Government Direct Deposit Plans. Stockholders will be
able to establish a preauthorized investment plan to purchase shares
with automatic bank account debiting. Stockholders may automatically
invest in shares all or a portion of a stockholders' net pay or
government check each payment period.
- Systematic Exchange Privilege. The owner of $1,000 or more of any
class of shares of the Fund may authorize the automatic exchange of
a specified amount ($100 minimum) of such shares for shares of the
same class of another Kemper Mutual Fund or money market fund
(subject to any applicable redemption fee).
- Systematic Withdrawal Plan. Stockholders will be able to elect to
have monthly, quarterly, semi-annual or annual payments in any fixed
amount up to $50,000 ($100 minimum) made to the stockholder, or to
anyone else the stockholder properly designates, as long as the
account has a current value of at least $5,000 (subject to any
applicable redemption fee).
- Retirement Plans. The Open-End Fund will have available prototype
qualified retirement plans for both corporations and for
self-employed individuals. It will also have available prototype IRA
and SIMPLE IRA plans (for both individuals and employers),
Simplified Employee Pension Plans, Pension and Profit Sharing Plans
and Tax Sheltered Retirement Plans for employees of public
educational institutions and certain non-profit, tax-exempt
organizations.
5. New York Stock Exchange Listing Fees. If the Fund were to become an
open-end fund, it would no longer be listed on the NYSE. Delisting from the NYSE
would save the Fund listing fees. Currently, these fees amount to approximately
$24,000 per year.
6. Exchange Privilege. If the Fund converts to an open-end format,
stockholders will be allowed to participate in an exchange privilege that allows
stockholders of the Fund to exchange their shares for shares of the
corresponding class of an open-end Kemper Mutual Fund. Class M stockholders will
be able to exchange their shares for Class A Shares of another Kemper Fund.
However, Class M stockholders may only exchange shares in an amount less than
$250,000, and a 2.0% fee will apply to any exchange of the Fund's Class M
shares for the one year period following the conversion. Shares of a Kemper
Mutual Fund with a value in excess of $1 million (except Kemper Cash Reserves
Fund) acquired by exchange from another Kemper Fund may not be exchanged
thereafter until they have been owned for 15 days (the "15-Day Hold Policy").
Shares of a Kemper Fund with a value of $1 million or less (except Kemper
-9-
<PAGE> 16
Cash Reserve Fund) acquired by exchange from another Kemper Fund or a Money
Market Fund may not be exchanged thereafter until they have been owned for 15
days if, in the investment manager's judgment, the exchange activity may have an
adverse effect on the Fund. In particular, a pattern of exchanges that coincides
with a "market-timing" strategy may be disruptive to the Fund and therefore may
be subject to the 15-Day Hold Policy. In addition, owners of shares of other
open-end Kemper Mutual Funds will also be able to exchange their shares for
shares of the same class of the Open-End Fund at net asset value. Exchanges of
the Open-End Fund's shares for shares of other funds will be a taxable
transaction for federal income tax purposes. Details of the exchange privilege
will be more fully disclosed in the Preliminary Prospectus and Statement of
Additional Information of the Open-End Fund.
7. Fees and Expenses. If the Fund converts to open-end status,
stockholders will also benefit from the payment of lower advisory fees to
Scudder Kemper. Stockholders of the Fund currently pay advisory fees ranging
from 1.25% to 1.10% based on the Fund's current net assets. Upon conversion,
these advisory fees would be lowered to a graduated fee starting at 0.75% of the
Open-End Fund's net assets. Stockholders are being asked in Proposal No. 5 to
approve a new investment advisory agreement with Scudder Kemper to reflect the
lower advisory fees and to implement certain other changes appropriate to
operating as an open-end fund. As noted above, however, other costs of
maintaining and servicing an open-end investment company and its stockholders
are expected to exceed those costs in closed-end fund companies, resulting in an
increase in total expenses over the total expenses of the Fund currently.
Scudder Kemper has represented to the Board that it will amend its current
Investment Advisory Agreement so that the advisory fees of the Open-End Fund do
not exceed the lower level of fees described herein in the event Proposal 1 is
approved but Proposal 5 is not.
Advantages of Remaining a Closed-End Investment Company
1. Portfolio Management. Because they do not have to be concerned about
maintaining cash to be able to pay redemptions, and because they do not have
inflows of new capital from offering new shares, closed-end funds generally may
be more fully invested than open-end funds. In contrast, many open-end funds
maintain a buffer of cash and highly liquid assets to meet net redemptions, and
must consider cash flow needs when making investment decisions. Open-end funds
face the possibility of having to liquidate portfolio securities to meet
redemption demands at a time when the portfolio manager believes that the market
price is low or otherwise wishes to retain the security. Closed-end funds,
therefore, may invest with less emphasis on liquidity, and this consideration
may contribute to disparities in investment performance between managed open-end
and closed-end funds.
The larger reserves of cash or cash equivalents required to operate as an
open-end investment company when net redemptions are anticipated could reduce
the Open-End Fund's investment flexibility and the scope of its investment
opportunities. The Open-End Fund's portfolio might have to be restructured by
selling portfolio securities to accommodate the need for larger reserves of cash
or cash equivalents than would otherwise be maintained. In connection with any
such restructuring, there may be an increase in transactional costs and
portfolio turnover and an adverse effect on investment return.
Scudder Kemper has advised the Fund's Board that it does not expect
significant changes in the Fund's investment strategies as a result of
open-ending, and that the Fund's current strategies do not
-10-
<PAGE> 17
rely primarily on the closed-end format. However, Scudder Kemper believes that
to a limited degree in current markets certain investment opportunities in
smaller capitalization and less liquid securities that the Fund may currently
invest in may not be available to the Fund after conversion to open-end form.
This may have a negative impact on the Open-End Fund's total return performance.
Scudder Kemper, however, has informed the Board that the Open-End Fund could
still be substantially invested in equity securities of European companies in
furtherance of its objective and consistent with its investment policies. The
open-end format would require management of cash flow for incoming and outgoing
cash. It is likely that this difference also may cause a sacrifice in total
return performance. However, Scudder Kemper handles cash flow management for
other open-end funds, and while cash flow adds a complexity to fund management,
Scudder Kemper has advised the Board that it normally should not interrupt
portfolio strategy. (See discussion of the Fund's investment strategies and
risks, below.)
2. Liquidity. An open-end investment company is subject to current federal
regulatory requirements that no more than 15% of its net assets may be invested
in securities that are illiquid. In its closed-end format, the Fund currently
operates subject to a self-imposed limit under which it may invest up to 25% of
its assets in unlisted securities and securities that are not readily
marketable. If the Fund is converted to an open-end fund, it will be restricted
from investing more than 15% of its net assets in illiquid securities. While the
Open-End Fund would be subject to this liquidity requirement, Scudder Kemper
believes that the improved liquidity of the European markets generally and the
Fund's portfolio specifically and the relative unattractiveness of smaller, less
liquid European markets currently, should enable the Fund to operate in the
open-end format. As of December 31, 1998, illiquid securities represented less
than 3% of the Fund's net assets.
3. Expenses; Potential Net Redemptions. Conversion of the Fund to open-end
form would result in an immediate increase in the Fund's expenses as a
percentage of average net assets ("expense ratio"). While the investment
management fee would be decreased from a graduated fee starting at 1.25% (based
on current assets the weighted average advisory fee is 1.15%) to a graduated fee
starting at 0.75% of average daily net assets (on a pro forma basis assuming the
combination of the Fund and KEF with aggregate assets of $417,000,000 as of
February 28, 1999, the weighted average advisory fee would be .74%), the Fund
would bear certain expenses that it currently does not bear, including an
administrative service fee of up to approximately 0.25% of average daily net
assets with respect to each class of shares, a higher fund accounting fee,
higher transfer agency expenses, increased portfolio transaction expenses, and
stockholder communications expenses. If the Fund is converted to an open-end
investment company, shares of the Fund currently held by its stockholders will
be classified as Class M shares. After conversion, Scudder Kemper projects that
the Fund's expense ratio, currently 1.41% (as of October 31, 1998), would
increase for Class M shares to approximately 1.42%, assuming no reduction in net
assets. These figures do not include extraordinary expenses associated with
efforts to restructure the Fund (see note 1 to the "Annual Fund Operating
Expenses" table below). Holders of Class A shares of the Fund (into which Class
M shares would be converted automatically one year after the open-ending) are
expected to incur an expense ratio of approximately 1.36% at the time of such
conversion, assuming no reduction in net assets. Since the Open-End Fund's size
cannot be predicted at this time, there can be no assurance that the expense
ratio will total the amount estimated above.
Conversion to an open-end investment company could result in immediate
redemptions of Fund shares, which could be substantial, and, consequently,
result in a marked reduction in the size of the Fund. Conversion to an open-end
investment company may create an incentive for stockholders to capitalize on the
elimination of the Fund's historical discount by redeeming their shares. In
addition,
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<PAGE> 18
market professionals and other investors who view closed-end funds as arbitrage
opportunities could have taken or could take sizable positions in shares of the
Fund prior to conversion for the purpose of profiting through redemption
immediately following an open-ending. This arbitrage phenomenon could serve to
increase the percentage of Fund shares subject to redemption requests. Other
closed-end funds that have converted to open-end format have experienced
redemptions that exceed sales after conversion, and, in some instances, net
redemptions have been substantial. The Fund bears this risk. A decrease in net
assets could result in less diversification or in smaller portfolio positions in
its investments, which could adversely affect total return performance. In
addition, as a result of any decrease in size resulting from redemptions, the
Open-End Fund could experience a further increase in its expense ratio. Scudder
Kemper projects that if the Fund's net assets decrease by 50% from the present
size of $340,436,394 as of December 31, 1998 due to redemption requests, for
example, the Fund's expense ratio would increase to approximately 1.45% for
Class M shares. A higher expense ratio would lower the Open-End Fund's total
return performance.
Scudder Kemper, and its affiliate KDI, have advised the Board that, while
no assurances can be given, they believe that the Fund can be successfully
marketed as an open-end fund to attract new assets. As a result, to the extent
the Fund is subject to net redemptions in connection with the conversion to
open-end format, Scudder Kemper and KDI believe that the Fund ultimately may be
able to increase its net assets.
To mitigate the attendant costs of redemptions, the Fund will impose a fee
of 2% on redemptions and exchanges of Class M shares for the one year period
following the conversion to open-end status. The purpose of this fee is to
reimburse the Open-End Fund for costs incurred in portfolio transactions to meet
redemptions and to discourage short-term trading in a vehicle intended for
long-term investment. To minimize the tax burden on remaining stockholders from
redemptions (see discussion below), the Open-End Fund will also pay a portion of
the proceeds of redemptions in-kind for large redemptions by Class M
stockholders (i.e., redemptions exceeding $250,000). In-kind redemptions by
Class M stockholders are also subject to the 2% redemption fee and will result
in the recognition by the redeeming stockholder of gain or loss for federal
income tax purposes based upon the difference between the fair market value of
the securities received and that stockholder's basis in the shares redeemed.
Significant net redemptions could cause the Open-End Fund to become too
small to be considered economically viable. In such circumstances, the Board
would consider alternatives to continuing the Fund's operations, but has no
plans to pursue such alternatives at this time.
4. Potential Tax Consequences. If the Fund experiences net redemptions
after converting to open-end form, the Fund would be required to sell portfolio
securities. Many of the Fund's portfolio securities have appreciated in value
since purchased and, if sold, would result in realization of capital gains. As
of February 28, 1999, the unrealized appreciation of the Fund's portfolio
securities was $134,069,202. The portfolio activity that may be necessitated by
redemption requests following conversion could result in the realization of
significant capital gains by the Open-End Fund, in addition to those
historically incurred in the ordinary course of the Fund's investment activity,
which would be distributed to stockholders. Such distributions would be taxable
to the stockholders who receive them. As of February 28, 1999, based on a
share's net asset value of $21.19, the Fund had 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
-12-
<PAGE> 19
consequences for the Open-End Fund and its remaining stockholders. However, as
noted above, the Open-End Fund intends to satisfy large redemption requests
(i.e., redemptions exceeding $250,000) by Class M stockholders in-kind in an
attempt to minimize the adverse tax consequences resulting from redemptions for
non-redeeming stockholders. (The Open-End Fund also will not offer an exchange
privilege to Class M stockholders with respect to transactions that would
trigger an in-kind redemption.) By paying large redemptions in-kind, the
Open-End Fund may avoid having to sell appreciated portfolio securities and
realizing capital gains. Therefore, the Open-End Fund may avoid distributing
capital gains to remaining stockholders of the Fund as a consequence of large
redemptions.
Even in the absence of conversion, unrealized capital appreciation may be
realized in the future. However, if there are redemptions due to the conversion,
the gains will be realized sooner than they would have been under the closed-end
format. A nonredeeming stockholder who receives a capital gain distribution
resulting from sales of portfolio investments necessitated by redemptions in
connection with the conversion will realize a smaller gain (or a larger loss)
upon a subsequent redemption of shares as the Fund's distribution of such
capital gains will reduce the net asset value of the stockholder's shares.
5. Dividends. The Fund intends to continue to provide the opportunity for
stockholders to reinvest dividends and capital gains distributions into
additional shares of the Fund in open-end form. Effective upon conversion to an
open-end investment company, such reinvestment in shares would be made at net
asset value, rather than, as is currently the case, at the lesser of market
value plus commissions or net asset value. As a result, stockholders would no
longer be able to reinvest distributions into additional shares of the Fund at a
discount to net asset value. Class M stockholders will have the opportunity to
reinvest dividends and capital gains distributions of the Open-End Fund, if any,
into Class A shares of the Fund. Class A shares are not subject to the 2% fee on
redemptions or exchanges.
6. New York Stock Exchange Listing. The Fund is currently listed on the
NYSE. Conversion to an open-end fund would result in delisting of the Fund's
shares, an event that may be perceived by some as disadvantageous because some
investors may consider a listing on the NYSE to be important.
7. Blue Sky Costs. Because the Fund is listed on the NYSE, the offering of
its shares is not required to be registered under the securities laws of most
states. As an open-end investment company, the Fund would be required to qualify
its shares for sale in the states. KDI, however, has agreed to assume the costs
relating to such qualification pursuant to the proposed underwriting and
distribution agreement for the Open-End Fund.
8. Leverage. The ability to borrow is more restricted in the case of
open-end funds than it is in the case of closed-end funds. Closed-end funds can
also issue preferred stock, while open-end funds cannot.
Comparative Investment Strategies and Risks
The Fund's investment objective will continue to be long-term capital
appreciation upon its conversion to open-end status and the Reorganization with
KEF.
In seeking to achieve its objective, the Fund will also invest primarily,
and at least 65% of its total assets, in the equity securities of European
companies.
-13-
<PAGE> 20
As part of its evaluation of the Fund's conversion to open-end status, the
Board, based on the recommendation of Scudder Kemper, evaluated the investment
strategies that had been most beneficial to the Fund in the past and that are
expected to be so in the future. Based on that analysis, the Board authorized
certain changes to the Fund's investment strategies which are not conditional on
the approval of the open-ending proposal or the Reorganization and will be
implemented in any event.
For example, although the Fund will still have the ability to invest in
small companies, emerging markets and "specialized investments" (i.e., equity
securities of privately-held and small European companies, joint ventures and
companies that have recently made an initial public offering), Scudder Kemper
believes that it would be more advantageous at this time for the Fund to invest
the majority of its assets in the more established and liquid markets of Western
and Southern Europe. This change is consistent with Scudder Kemper's view that
Eastern European businesses (particularly companies dependent on the Russian
economy) are currently more speculative than would be attractive to the Fund. In
addition, Scudder Kemper believes that the more developed European markets offer
greater opportunities for the Fund at this time. In fact, [the Fund's success to
date is attributed in great part to investments made in the more established
countries of Western Europe.] The Fund also intends to allocate its investments
among at least three European countries at all times, but will no longer be
subject to any limitation on the amount of its assets that may be invested in
any particular European country. The Fund, however, will retain its
nondiversified status which allows it to invest a greater proportion of its
assets in the securities of a smaller number of issuers.
In addition to the above, the Board approved changes to the Fund's
strategy for investing in debt securities (including those debt securities rated
below investment grade). The Fund will limit its investments in debt securities
to 20% of its total assets as opposed to the current 35% limitation. [In this
regard, the Board observed that the Fund historically never invested more than
20% of its total assets in debt securities.] Further, the Board agreed with
Scudder Kemper's recommendation that the Fund have available a wider array of
risk management strategies (i.e., derivatives) to protect against price declines
in the value of its portfolio, to manage the effective maturity or duration of
fixed-income securities in its portfolio or to enhance potential gain. These
strategies will include the use of swaps, caps, floors and collars. In addition,
the Board also approved limitations on the Fund's use of options. For example,
the Fund may not purchase options unless the aggregate premiums paid on all such
options held by the Fund at any time do not exceed 20% of its total assets, or
sell put options if as a result the aggregate value of the obligations
underlying such put options would exceed 50% of its total assets. Although
authorized to do so, the portfolio managers of the Fund have no current
intention to utilize these derivative strategies to a significant extent.
Additional changes to the Fund's nonfundamental policies are described in
the Open-End Fund's Preliminary Prospectus and Statement of Additional
Information. Proposed changes to certain fundamental policies of the Fund are
described in Section (c) below.
Comparative Expense Information
The expenses of the Fund and the Open-End Fund will differ. Specifically,
the expenses of the Open-End Fund are expected to be higher, notwithstanding the
fact that the rate of advisory fees paid to Scudder Kemper will be substantially
lower.
1. Fee Table. Set forth below is a comparison of the Fund's annual
operating expenses and stockholder transaction expenses as of October 31, 1998
as a closed-end fund and those expenses that would apply to current stockholders
holding Class A, B, C and M shares of the Open-End Fund
-14-
<PAGE> 21
subsequent to the Reorganization on a pro forma (estimated) basis for the fiscal
year ending October 31, 1999. As noted above, stockholders of the Fund will
receive Class M shares if the Reorganization is consummated which will
automatically convert to Class A shares one year after the Reorganization. The
following expense information relating to the Class M shares would also be
applicable to the Fund in open-end form if the Reorganization is not approved by
the stockholders of KEF.
-15-
<PAGE> 22
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
(CLOSED-END) (OPEN-END)(1)
---------- -------------------------------------
Class A Class B Class C Class M
-------------------------------------
<S> <C> <C> <C> <C> <C>
Management Fees(2) ........... 1.15 .74 .74 .74 .74
Distribution 12b-1
Fees ......................... None None .75 .75 None
Other Expenses ............... .26 1.01 1.16 1.13 .68
Total Fund Operating
Expenses(3) .................. 1.41 1.75 2.65 2.62 1.42
</TABLE>
- ----------
(1) Estimated for the Fund's current fiscal year ending October 31, 1999,
based on the proposed fee schedule for open-end operations and expenses
incurred by the Fund during its most recent fiscal year. "Other Expenses"
do not include extraordinary expenses associated with efforts to
restructure the Fund. If such expenses had been included, "Other Expenses"
would have been increased to 1.99%, 3.28%, 2.76% and 1.56%, for Class A,
B, C and M shares respectively. Also, as reflected below under "Expenses;
Potential Net Redemptions," significant redemptions from the Fund would
result in an increase of expenses.
(2) As a closed-end fund, the Fund currently pays Scudder Kemper a fee based
on the average weekly net assets of the Fund. If this Proposal is
approved, the management fee will be calculated on the basis of the Fund's
average daily net assets instead of weekly net assets.
(3) Pursuant to proposed agreements with the Open-End Fund, the investment
manager, the underwriter, the accounting agent and the transfer agent have
agreed, for the one year period commencing on the date of Conversion, to
limit their respective fees and to reimburse other operating expenses to
the extent necessary to limit total operating expenses of the classes of
the Open-End Fund to the levels set forth 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 Open-End 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.
Set forth below are examples which show the expenses that an investor in
the Fund would pay on a $10,000 investment if the Fund remained closed-end
compared to those expenses which an investor would incur if the Fund were
converted to an open-end format, assuming a 5% annual return, based upon the
expense ratios set forth above but without regard to any applicable sales
charges or redemption fees.
Scudder Europe Fund as of October 31, 1998 (closed-end form):
Fees and expenses if you sold shares after:
<TABLE>
<S> <C>
1 Year $ 144
3 Year $ 446
</TABLE>
-16-
<PAGE> 23
<TABLE>
<S> <C>
5 Year $ 771
10 Year $1,691
</TABLE>
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 as of October 31, 1999:
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 examples are not an illustration of past or future investment results and
should not be considered a representation of past or future expenses. Actual
expenses may be greater or less than those shown.
-17-
<PAGE> 24
STOCKHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
(CLOSED-END) (OPEN-END)
------------ ----------
<S> <C> <C>
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price)............ (1) (2)
Maximum Deferred Sales Load... N/A (3)
Maximum Sales Load Imposed on
Reinvested Dividends....... (1) None
Redemption Fees............... (1) 2% (Class M only)
Exchange Fee.................. N/A (4)
</TABLE>
- ------------
(1) The underwriting spread (sales load) imposed on purchases made during the
initial offering period in 1990 was [7]%. Purchases and sales made
thereafter on the NYSE or otherwise through broker-dealers were subject to
customary brokerage commissions which vary. With respect to shares issued
in connection with the Fund's dividend reinvestment plan, to the extent
the plan agent is required to purchase shares on the NYSE, stockholders
may also incur brokerage commissions.
(2) No sales load will be imposed in connection with the conversion of the
Fund from a closed-end to an open-end investment company. However, to the
extent current stockholders make purchases of Class A shares after the
conversion, such purchases will be subject to a maximum sales load of
5.75%. The maximum sales load is reduced for purchases of $50,000 and
over. If the conversion is approved, the Open-End Fund also intends to
offer Class B shares and Class C shares which will be described in the
Preliminary Prospectus of the Open-End Fund.
(3) The redemption of Class A shares purchased at net asset value under the
"Large Order NAV Purchase Privilege" (as will be described in the Open-End
Fund's Preliminary Prospectus) may be subject to a contingent deferred
sales charge of 1% if redeemed within one year of purchase and 0.50% if
redeemed during the second year of purchase. Class B and C shares will be
subject to a maximum deferred sales charge of 4% and 1%, respectively.
(4) Class M shares exchanged for other shares of Kemper Funds pursuant to the
Exchange Privilege, as described above, will be subject to the 2%
redemption fee at the time of the exchange during the one year period
after the conversion of the Fund to open-end form. Class M stockholders
may only exchange shares in an amount less than $250,000.
2. Management Fees. Currently, Scudder Kemper serves as investment manager
and receives a monthly investment management fee from the Fund of 1/12 of the
average weighted annual advisory fee, currently equal to approximately 1.15%. As
proposed, the Open-End Fund would pay Scudder Kemper a monthly investment
management fee of 1/12 of the applicable annual rate based upon the average
daily net assets for such month as follows:
-18-
<PAGE> 25
<TABLE>
<CAPTION>
ANNUAL MANAGEMENT FEE RATES
AVERAGE DAILY NET ASSETS OPEN-END FUND
- -------------------------------------------- ---------------------------------
<S> <C>
$0 -- $250 million........................ .75%
$250 million -- $1 billion................ .72
$1 billion -- $2.5 billion................ .70
$2.5 billion -- $5 billion................ .68
$5 billion -- $7.5 billion................ .65
$7.5 billion -- $10 billion............... .64
$10 billion -- $12.5 billion.............. .63
Over $12.5 billion........................ .62
</TABLE>
3. Administrative Service Fees. Currently, the Fund does not pay any
administrative service fees. As proposed, the Open-End Fund would pay KDI an
administrative service fee of up to .25% of average daily net assets of each of
Class A, B, C and M shares of the Fund. KDI intends to enter into related
arrangements with various broker-dealers and other service or administrative
firms that provide services and facilities for their customers or clients of the
Open-End Fund. These firms provide such office space and equipment, telephone
facilities and personnel as is necessary or beneficial for providing information
and services to their clients.
4. Fund Accounting Fees. Currently, Scudder Fund Accounting Corporation, a
subsidiary of Scudder Kemper ("SFAC"), computes the net asset value for and
provides accounting services to the Fund pursuant to a Fund Accounting Agreement
at a rate of [0.06%] of the Fund's assets. As proposed, the Open-End Fund would
pay SFAC a fee that is based on the actual services provided, but is expected to
equal approximately .10%. The Fund was charged $202,557 by SFAC during the last
fiscal year.
5. Other Operating Fees and New Service Providers. As a closed-end fund,
the Fund does not generally incur the types and levels of expenses that an
open-end fund does. As proposed, the Open-End Fund would incur higher transfer
agency costs, as well as distribution expenses and administrative services fees,
along with other costs typically incurred by open-end funds. The Open-End Fund
would also enter into agreements with new service providers that currently
provide services to KEF and other funds in the Kemper family of funds. In
addition to SFAC and KDI who will provide accounting and distribution services,
the Open-End Fund would enter into an agreement with Investors Fiduciary Trust
Company who will provide transfer agency and dividend paying services to the
Fund through its agreement with Kemper Services Company, an affiliate of Scudder
Kemper. Ernst & Young LLP would serve as the Open-End Fund's independent
auditors (subject to the approval of the stockholders below). The Fund's
custodian, however, will remain Brown Brothers Harriman & Co. after the
conversion to open-end status.
6. Redemption Fees. The Open-End Fund will impose a redemption fee of
2.0%, payable to the Fund, on redemptions of all Class M shares during the one
year period following the conversion to open-end status, including redemptions
in-kind. The purpose of this fee is to compensate the Open-End Fund for certain
expenses incurred to meet redemptions and to discourage short-term trading in a
vehicle intended for long-term investment.
-19-
<PAGE> 26
7. Redemptions In-Kind. The Open-End Fund will reserve the right to honor
any request for redemption by making payment in whole or in part in readily
marketable securities. With respect to Class M stockholders, the Open-End Fund
intends to pay the proceeds of large redemption requests (i.e., redemptions
exceeding $250,000) in-kind. Class M stockholders who redeem their shares
in-kind will also be charged a 2% redemption fee for a period of one year from
the date of the conversion to open-end status. The Open-End Fund will value such
securities at the same value used to determine net asset value and will select
the securities to be distributed in such manner as the Board of Directors may
deem fair and equitable. Such in-kind redemptions will result in the redeeming
stockholder recognizing gain or loss for federal income tax purposes.
Stockholders receiving securities and selling them could receive less than the
redemption value of such securities and will further incur certain transaction
costs related to transfer and delivery of the securities to the stockholders
from the Open-End Fund (i.e., certain custody and transfer-related expenses),
which will be deducted from the redemption proceeds. Such expenses may total
more than 1% of the net asset value of the shares redeemed. Such stockholders
will also incur transaction costs upon the disposition of the securities
redeemed. Such a redemption would not be as liquid as a redemption entirely in
cash.
The Open-End Fund will require, in the case of any redemption effected
in-kind, that the redeeming stockholder provide information concerning the
arrangements that the stockholder has made to accept the delivery of portfolio
securities. Such arrangements as well as others related to such arrangements are
the responsibility of the redeeming stockholder. In the alternative, a
stockholder may appoint a liquidating agent for purposes of effecting the
liquidation of such securities. Any liquidation of securities will be at the
expense and risk of the stockholder, who bears the market risk of holding the
securities pending liquidation and further will be responsible for the costs and
expenses of liquidation, which will be deducted from the liquidation proceeds.
The liquidating agent will not be able to assure that the liquidation is
effected at any given time or price.
Combination of the Fund with Kemper Europe Fund
Subject to stockholder approval of Proposal No. 1, the Board of Directors
has approved an Agreement and Plan of Reorganization (the "Reorganization
Agreement") in the form of Exhibit B. The Reorganization Agreement provides for
the acquisition by the Fund of the assets of KEF. The Board of Directors has
determined that the Fund's opportunities for successful operation as an open-end
fund depend upon its ability to operate as part of the Kemper family of funds
and to distribute its shares in an effort to offset or mitigate any impact of
redemptions which can be expected to occur at the time of the conversion to
open-end form and on a continuous basis as part of the normal operation of an
open-end fund. In addition, the Board believes that the Reorganization will
enhance the Fund's ability to compete in open-end form and may result in the
realization of certain economics of scale.
The Reorganization contemplates that (i) KEF will transfer all of its
assets to the Reorganized Fund, in exchange for Class A, B and C shares of the
Reorganized Fund and the assumption by the Reorganized Fund of the liabilities
of KEF; (ii) distribution by KEF to its stockholders of the Class A, B, and C
shares of the Reorganized Fund (including any fractional shares) equal in value
to such stockholders' KEF shares; (iii) conversion of the outstanding shares of
the Fund immediately prior to the Reorganization to a number of the Open-End
Fund's Class M shares (including any fractional shares) equal in value and
number to stockholders' Fund shares; and (iv) the subsequent termination of KEF
and cancellation of the outstanding shares of KEF.
The Board of Directors has considered the benefits and costs of the
Reorganization and determined that the Reorganization is in the best interests
of the Fund and that the interests of existing
-20-
<PAGE> 27
stockholders will not be diluted as a result of the Reorganization. Scudder
Kemper believes that both the open-ending and the Reorganization are desirable
for the following reasons:
1. KEF, a relatively new fund of moderate size, is already the subject
of a meaningful number of dealer agreements from which the Open-End
Fund would benefit going forward;
2. KEF's transfer agent is equipped to maintain relationships with
selected dealers, including those broker-dealers that hold record
ownership of current Fund shares;
3. KEF's 12b-1 plan, which can be made applicable to certain of the
Open-End Fund's classes (as discussed above) after conversion to
open-end status (assuming the stockholders approve), would be
important in compensating dealers and others who would be expected
to explain the Open-End Fund's new form of operations to investors;
and
4. the Fund would adopt KEF's management fee structure which is geared
to the market for open-end funds investing in European equities and
is lower than that of the Fund's.
2. Procedures For Reorganization. In connection with the Reorganization,
after the close of business on the date of effectiveness of the Reorganization
(the "Effective Date"), (i) KEF will transfer all of its assets to the
Reorganized Fund, in exchange for Class A, B, and C shares of the Reorganized
Fund and the Reorganized Fund will assume the liabilities of KEF; (ii) KEF will
distribute to its stockholders Class A, B and C shares of the Reorganized Fund
(including any fractional shares) equal in value to such stockholders' KEF
shares; (iii) upon the effectiveness of the Amended and Restated Articles of
Incorporation the Fund's shares will convert to a number of the Reorganized
Fund's Class M shares (including any fractional shares) equal in value and
number to stockholders' Fund shares; and (iv) KEF will terminate and its
outstanding shares will be canceled. Certificates for shares of the Fund issued
prior to the Reorganization will represent the same number of Class M shares.
After the expiration of the one year period following the Reorganization, Class
M shares will automatically convert into Class A shares based on their relative
net asset values and all outstanding certificates previously representing Class
M shares will represent Class A shares. The Reorganized Fund will then operate
in the same manner and with the same investment objectives and policies of the
Fund, giving effect to the results of the stockholder votes on the other
Proposals.
If approved by stockholders of KEF, it is expected that the Reorganization
will be made effective on or about September 1, 1999, but it may be effective at
a different time.
3. Federal Income Tax Consequences. The following is a general discussion
of the material federal income tax consequences of the Reorganization to
stockholders of the Fund. The discussion set forth below is for general
information only and may not apply to a stockholder subject to special treatment
under the Internal Revenue Code of 1986, as amended (the "Code"), such as a
holder that is a bank, an insurance company, a dealer in securities, a
tax-exempt organization, a foreign person or one who acquired shares of the Fund
pursuant to the exercise of employee stock options or otherwise as compensation.
It is based upon the Code, legislative history, Treasury Regulations, judicial
authorities, published positions of the Internal Revenue Service (the "Service")
and other relevant authorities, all as in effect on the date hereof and all of
which are subject to change or different interpretations (possibly on a
retroactive basis). This summary is limited to stockholders who hold their Fund
shares as capital assets. No advance rulings have been or will be sought from
the Service regarding any matter discussed in this Proxy Statement. Accordingly,
no assurances can be given that the Service could not successfully challenge the
intended federal income tax treatment
-21-
<PAGE> 28
described below. Stockholders should consult their own tax advisers to determine
the specific federal income tax consequences of all transactions relating to the
Reorganization, as well as the effects of state, local and foreign tax laws and
possible changes to the tax laws.
The Reorganization is intended to qualify as a "reorganization" within the
meaning of section 368(a)(1) of the Code. As a condition to closing, the Fund
and KEF will receive an opinion of Willkie Farr & Gallagher that under the Code
the acquisition by the Fund of the assets of KEF and the distribution of the
Reorganized Fund's shares to KEF stockholders pursuant to the Reorganization
will not give rise to the recognition of gain or loss for federal income tax
purposes to the Fund, KEF, the Reorganized Fund, or the stockholders of the Fund
and KEF. A stockholder's adjusted basis for federal income tax purposes in
shares of the Reorganized Fund after the Reorganization will be the same as his
or her adjusted basis for tax purposes in the shares of the Fund immediately
before the Reorganization. The holding period of the shares of the Reorganized
Fund received by the stockholders of the Fund will include the holding period of
shares of the Fund exchanged therefor, provided that at the time of the exchange
the shares of the Fund were held as capital assets.
Conversion to an Open-End Investment Company
(a) Changing Sub-Classification
The conversion of the Fund to an open-end investment company will be
accomplished, subject to stockholder approval, by: (i) the filing of Amended and
Restated Articles of Incorporation for the Fund with the State Department of
Assessments and Taxation of Maryland and (ii) changing the Fund's
subclassification under the 1940 Act from a closed-end investment company to an
open-end investment company. In addition, since shares of an open-end investment
company are offered to the public on a continuous basis, the Fund will enter
into a Distribution Agreement with KDI in a form approved by the Board,
including by a majority of the Noninterested Directors. A registration statement
under the Securities Act of 1933, as amended, for the Fund covering the offering
of the shares of the Fund has been filed and appropriate state securities law
notices will be filed.
Certain costs, many of which will be nonrecurring, will be incurred in
connection with the change from a closed-end to an open-end investment company,
including costs associated with the seeking of necessary government clearances,
the preparation of a registration statement, prospectus and statement of
additional information as required by federal securities laws (including
printing and mailing costs), the costs of preparing this Proxy Statement,
transfer agent fees relating to the conversion, and legal fees and accounting
fees related to the foregoing. Fund Management estimates that these additional
costs, which will be paid by the Fund and KEF (based upon their relative net
asset values), will be approximately $600,000. Management anticipates that
substantially all of these costs will be incurred prior to the effective date of
the conversion.
The Fund believes that neither the Fund nor its stockholders will realize
any gain or loss for federal income tax purposes as a result of the Fund's
conversion. However, stockholders will recognize a gain or loss if they later
redeem their shares to the extent that redemption proceeds (including the fair
market value of any proceeds received in-kind) are greater or less than the
respective adjusted tax bases of their redeemed shares. Payment for any such
redemption (less the 2.0% redemption fee applicable to Class M stockholders)
normally will be made within three days after receipt of a proper request for
redemption, in accordance with redemption procedures that will be specified in
the Fund's Preliminary Prospectus. Payments of any in-kind redemptions, however,
may take longer than three days. The Open-End Fund may suspend the right of
redemption under certain
-22-
<PAGE> 29
extraordinary circumstances in accordance with the rules of the SEC. As stated
above, the Open-End Fund also will pay proceeds of redemptions in-kind for large
redemptions (i.e., redemptions exceeding $250,000) by Class M stockholders, and
not offer an exchange privilege to Class M stockholders with respect to
transactions that would trigger an in-kind redemption.
(b) Amendment and Restatement of the Fund's Articles of Incorporation to
Provide for Open-Ending
If the proposed conversion to open-end status is approved, the conversion
of the Fund to an open-end investment company will be accomplished by amending
and restating the Fund's Articles of Incorporation to authorize the issuance of
redeemable securities at net asset value and to provide that the Fund's
outstanding common stock will be redeemable at the option of the stockholders.
In connection with such amendments to the Fund's Articles of Incorporation, the
Board of Directors will make any necessary conforming changes to the By-Laws of
the Fund. A copy of the proposed Amended and Restated Articles of Incorporation
which reflect the amendments contemplated by this Proposal is attached hereto as
Exhibit A.
As included in Exhibit A, the stockholders are also being asked to approve
an amendment to the Articles of Incorporation providing that the presence in
person or by proxy of stockholders entitled to cast one-third of the votes
entitled to be cast constitutes a quorum for a meeting of stockholders. Under
Maryland law, unless the charter of a corporation (the "Charter") provides
otherwise, the presence in person or by proxy of stockholders entitled to cast a
majority of the votes entitled to be cast constitutes a quorum for a meeting of
stockholders. Currently, the presence in person or by proxy of stockholders
entitled to cast a majority of the votes entitled to be cast constitutes a
quorum at stockholder meetings. The proposed Amended and Restated Articles also
provide the Board of Directors with the authority to impose a fee upon
redemptions of the Fund's shares.
Also, the Fund's current Articles of Incorporation authorize the issuance
of 100 million shares of common stock with a par value of $.01 per share. In
connection with Proposal 1, the Board of Directors proposes to amend the Fund's
Articles of Incorporation, subject to the approval of the stockholders, to: (i)
increase the amount of authorized capital stock to 500,000,000 shares, to create
three additional share classes, to rename the existing share class "M" shares
and describe the rights and privileges of each such class; (ii) reduce the par
value from $.01 per share to $.001 per share; and (iii) reduce the stated
capital of the Fund to an amount equal to the aggregate par value (as so
reduced) of all outstanding shares of the Fund. Moreover, as the Board of an
open-end fund, the Board will be authorized to increase the amount of authorized
capital stock going forward without stockholder approval and to utilize the
ability to create new classes or series of the Open-End Fund.
Under the laws of the State of Maryland, where the Fund is incorporated,
par value per share has no substantive legal significance other than in
connection with the calculation of fees for filing certain charter documents. By
decreasing the par value, the Fund will realize a savings in such fees in the
future. In addition, the Board of Directors believes that the reduction in the
par value of the shares of the Fund is desirable to provide the Fund with
greater flexibility in managing its corporate funds, such that share dividends
or share distributions can be accomplished without the Fund transferring a
substantial sum from its retained earnings account to its stated capital
account. The reduction of the par value of the Fund's shares will not have any
effect on the rights of existing shareholders. Further, the Board of Directors
believes that reducing the par value to $.001 per share is consistent with the
structure of other open-end funds and will have no material effect on the
business of the Fund.
-23-
<PAGE> 30
Proposal 2 below discusses additional changes proposed to the Fund's
Articles of Incorporation which, however, require the affirmative vote of 75% of
the votes entitled to be cast by the stockholders. These changes are also
desirable in that they would allow the Fund to operate in a manner consistent
with other open-end investment companies. Although the Fund will nevertheless
convert to open-end status upon the approval of Proposal 1, including this
Section (b), the Board of Directors strongly encourages the stockholders to vote
in favor of Proposal 2 below.
(c) Amendment of the Fund's Fundamental Investment Policies
If the stockholders vote to approve the conversion of the Fund to an
open-end investment company, the Fund's fundamental investment policy regarding
investments in restricted and illiquid securities is proposed to be amended to
conform with the limitations under the 1940 Act for open-end investment
companies. A fundamental investment policy may not be changed without the
approval of a "majority of the outstanding voting securities" of the Fund. If
this change is approved, the policy would be reclassified as non-fundamental
which could be changed by vote of the Board in response to regulatory or market
developments without further approval by the stockholders. This amendment
conforms the Fund's investment restriction to that of open-end investment
companies under the 1940 Act. As an open-end investment company, the Fund may
not hold a significant amount of illiquid securities because these securities
may be difficult to value accurately and because it is possible that the Fund
would have difficulty liquidating such securities if necessary in order to
satisfy in a timely manner requests to redeem its shares. Therefore, assuming
the conversion is approved, the Fund's current limitation of investing no more
than 25% of its net assets in illiquid and restricted securities would be
reclassified as a non-fundamental policy and lowered to 15%. It is not
anticipated that this amendment would have a material effect on the Fund, since
as discussed above, Scudder Kemper believes that there is ample liquidity in
most European securities currently of interest to the Fund. The Fund's
fundamental investment policies would be amended and reclassified as
non-fundamental as follows: "The Fund may not invest more than 15% of its assets
in illiquid securities."
In addition, the Fund has a current fundamental policy which limits
permissible borrowings to 33 1/3% of the Fund's total assets not including the
amount borrowed. The Board recommends that stockholders approve a modification
to this policy which would allow the Fund to include amounts received from
borrowing in determining its total assets for purposes of satisfying the 1940
Act's 300% asset coverage requirement. This change is consistent with current
SEC pronouncements and the investment policies of other open-end funds in the
Kemper family of funds. If approved by stockholders, the fundamental investment
policy would be amended as follows:
The Fund may not issue senior securities, borrow money or pledge its
assets, except that the Fund may borrow money as permitted under the
1940 Act, as interpreted or modified by regulatory authority having
jurisdiction from time to time, and may also pledge its assets to
secure such borrowings. For the purposes of this investment
restriction, collateral arrangements with respect to the writing of
options or the purchase or sale of futures contracts are not deemed
a pledge of assets or the issuance of a senior security.
Required Vote
Approval of the conversion of the Fund's subclassification under the 1940
Act to an open-end investment company and the changes to the Fund's fundamental
investment policies require the
-24-
<PAGE> 31
affirmative vote of the holders of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act). The changes to the Fund's
Articles of Incorporation to provide for open-ending require the approval of a
majority of the votes entitled to be cast at the meeting, which is higher than
the 1940 Act requirement. Consequently, approval of Proposal 1 requires the
approval of a majority of the votes entitled to be cast at the Meeting. Your
Fund's Directors recommend that stockholders approve the conversion of the Fund
to an open-end investment company and the related changes in the Fund's Articles
of Incorporation and fundamental investment policies.
PROPOSAL 2: CERTAIN FURTHER AMENDMENTS TO THE FUND'S ARTICLES OF INCORPORATION
IN THE EVENT THAT PROPOSAL 1 IS APPROVED
As discussed above, if Proposal 1 is approved, the Fund intends to file
Amended and Restated Articles of Incorporation, in the form approved by the
Board of Directors at its meeting held on April 27, 1999 and by the stockholders
at the Meeting (Exhibit A), to reflect the conversion of the Fund to an open-end
investment company. At this time, the Board of Directors is also recommending
changes to the Fund's Articles of Incorporation in addition to those described
in Proposal 1. Proposal 1, however, is not contingent on the approval of these
additional changes.
In connection with this Proposal 2, the Fund's stockholders are being
asked to approve amendments to the Articles of Incorporation in order to
eliminate certain provisions that are intended to have the effect of limiting
(i) the ability of other entities and persons to acquire control of the Fund,
(ii) the Fund's freedom to engage in certain transactions, and (iii) the ability
of the Fund's stockholders to effect changes in the Fund's Board of Directors.
These provisions may be regarded as "anti-takeover provisions" and the
stockholders are being asked to approve amendments to the Articles of
Incorporation to eliminate them because the need for such "anti-takeover"
provisions would no longer exist once the Fund is converted to an open-end
investment company. Changes to these provisions, however, may only be
effectuated by the affirmative vote of 75% of the votes entitled to be cast by
stockholders. Proposal 2 will be implemented only if Proposal 1 is approved and
implemented.
A copy of the further proposed Amended and Restated Articles of
Incorporation, which reflects the amendments contemplated by this Proposal, as
well as those previously discussed in Proposal 1 above, is attached to this
Proxy Statement as Exhibit C. Exhibit C is marked against Exhibit A for ease of
review.
The Fund's stockholders are being asked to approve an amendment to the
Articles of Incorporation to declassify the Board of Directors. Currently, the
Fund's Articles of Incorporation provide that the Board of Directors will be
divided into three classes of Directors. According to the relevant provision of
the Fund's Articles of Incorporation, the term of office of the first class
expired on the date of the second annual meeting of stockholders, the term of
office of the second class expired on the date of the third annual meeting of
stockholders and the term of office of the third class expired on the date of
the fourth annual meeting of stockholders. Upon the expiration of the term of
the office of each class, the Directors in such class are elected for a term of
three years to succeed the Directors whose terms of office expire.
Elimination of the provisions in the Articles of Incorporation creating a
classified Board will permit the Open-End Fund to dispense with annual
stockholders meetings, except when required by law to hold such meetings.
Maryland corporate law provides that, if the articles of incorporation or
by-laws of either an open-end or closed-end fund registered under the 1940 Act
so provides, then the fund is not required to hold an annual stockholders'
meeting in any year in which the election of
-25-
<PAGE> 32
directors is not required to be acted upon under the 1940 Act. The Articles of
Incorporation and By-Laws of the Fund do not so provide. However, the Board of
Directors anticipates amending the By-Laws, to go into effect if this Proposal
is approved and implemented , to provide that the Fund will not be required to
hold an annual meeting in any year in which the election of Directors is not
required to be acted upon under the 1940 Act. The Open-End Fund does not intend
to hold annual meetings in any year in which it is not so required. By not
having to hold annual stockholders' meetings, the Open-End Fund would save the
costs of preparing proxy materials and soliciting stockholders' votes on the
usual proposals contained therein. Based on the number of outstanding shares and
stockholders as of the record date, such costs could aggregate approximately
$50,000 to $60,000 per year.
The Open-End Fund would nevertheless be required to hold a meeting of
stockholders when stockholder approvals are necessary under the 1940 Act or
Maryland law. Under the 1940 Act, the Open-End Fund would be required to hold a
stockholder meeting if the number of Directors elected by the stockholders were
less than a majority of the total number of Directors, to fill vacancies if less
than two-thirds of the Directors then holding office have been elected by the
stockholders, if a change were sought in the fundamental investment policies of
the Fund or in the Investment Advisory Agreement. Maryland law requires the
Secretary to call a special meeting of stockholders when requested in writing to
do so by the stockholders entitled to cast at least 25% of all the votes
entitled to be cast at the special meeting; provided, however, that, unless
requested by stockholders entitled to cast a majority of all the votes entitled
to be cast at the special meeting, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted on any at
a special meeting of the stockholders held during the proceeding twelve months.
In addition, under the 1940 Act, the Open-End Fund will be required to call a
special meeting of stockholders to remove Directors if requested by stockholders
entitled to cast 10% of the votes entitled to be cast at the meeting.
The stockholders are also being asked to approve an amendment to the
Articles of Incorporation that would eliminate the Charter requirement that the
number of Directors shall never be more than 12, as well as the requirement that
a Director may be removed only by the affirmative vote of 75% of the votes
entitled to be cast for the election of Directors. This vote is higher than the
majority vote required under the Maryland General Corporation Law in the absence
of a Charter provision providing otherwise.
In addition, the stockholders are being asked to approve an amendment to
the Articles of Incorporation to remove certain provisions that limit the Fund's
ability to consolidate with or merge with or into another corporation or to
liquidate or dissolve. Under the Articles of Incorporation, the affirmative vote
of 75% (which is higher than that otherwise required under Maryland law or the
1940 Act) of the votes entitled to be cast by stockholders of the Fund would be
required (unless 75% of the Continuing Directors approve in which case the
affirmative vote of the holders of a majority of the outstanding shares of the
Fund would be required) to authorize: (i) a merger or consolidation or share
exchange of the Fund with or into another corporation; (ii) the sale, lease,
exchange, mortgage, pledge, transfer or other disposition (in one transaction or
a series of transactions in any 12 month period) to or with any other person of
any assets of the Fund having an aggregate fair market value of $1,000,000 or
more except for portfolio transactions of the Fund effected in the ordinary
course of the Fund's business; or (iii) the issuance or transfer by the Fund (in
one transaction or a series of transactions in any 12 month period) of any
securities of the Fund to any other person in exchange for cash, securities or
other property (or a combination thereof) having an aggregate fair market value
of $1,000,000 or more excluding (x) sales of any securities of the Fund in
connection with a public offering thereof, (y) issuances of any securities of
the Fund pursuant to a dividend reinvestment plan
-26-
<PAGE> 33
adopted by the Fund and (z) issuances of any securities of the Fund upon the
exercise of any stock subscription rights distributed by the Fund.
These "anti-takeover" provisions were intended to have the effect of
making it more difficult and time-consuming to change majority control of the
Board of Directors without its consent and thus to reduce the Fund's
vulnerability to an unsolicited takeover proposal and to render more difficult
the accomplishment of a merger or the assumption of control by a stockholder.
The conversion of the Fund to an open-end investment company would eliminate the
need for these precautionary measures. Therefore, the Board of Directors has
considered and approved, subject to stockholder approval, the amendments to the
Articles of Incorporation eliminating the "anti-takeover" provisions contained
in the Articles of Incorporation in the event that the proposed conversion of
the Fund to open-end status is approved.
The following chart summarizes the key differences between the Fund's
current Articles of Incorporation and the Amended Articles as discussed in this
Proposal, as well as in Proposal 1 above.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Current Articles Amended Articles
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Name Scudder New Europe Fund, Inc. Kemper Europe Fund, Inc. (subject
to the approval of the
Reorganization by the stockholders
of KEF)
- ------------------------------------------------------------------------------------------------
Corporate To function as a closed-end To function as an open-end
management investment company under management investment company under
the 1940 Act the 1940 Act
- ------------------------------------------------------------------------------------------------
Capital Authorized capital stock of 100 Increase authorized capital stock
million shares, all of one class to 500,000,000 million shares,
called Common Stock, with a par reduce par value to $.001 per share
value of $.01 per share and create three additional classes
of shares (i.e., A, B and C);
Rename the existing share class
"Class M" which will convert to
Class A one year after the
Reorganization. Describe terms,
rights and privileges of each class
of shares (including the authority
of the Board to impose redemption
fees).
- ------------------------------------------------------------------------------------------------
Stockholder Voting Majority voting on most matters; Super-majority voting requirements
Super-majority vote (i.e., 75%) eliminated; Substantially all
necessary to approve mergers, matters that require stockholder
reorganizations and other "business approval to be decided by majority
combinations" and dissolutions vote
unless approved by the "Continuing
Directors" of the Fund in which case
a majority vote would be required
and to amend certain provisions of
the Articles
- ------------------------------------------------------------------------------------------------
</TABLE>
-27-
<PAGE> 34
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Current Articles Amended Articles
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Issuance of Not permitted Permit shares to be redeemed at net
Redeemable asset value
Securities
- ------------------------------------------------------------------------------------------------
Structure of Classified (staggered) Board divided Eliminate classified structure and
Board of Directors into 3 classes, each class having a the limitation in number of the
term of 3 years; Maximum number of Directors and the super-majority
Directors is 12 and Directors may (i.e., 75%) vote necessary to
only be removed upon the affirmative remove Directors
vote of 75% of the stockholders.
- ------------------------------------------------------------------------------------------------
Quorum for Not specified in the Articles, but Specify one-third quorum requirement
Stockholder the By-Laws provide for a majority
Meetings of the votes entitled to be cast at
a meeting of stockholders to
constitute a quorum
- ------------------------------------------------------------------------------------------------
Annual Required to elect Directors No longer required unless the
Stockholder Directors must be elected by the
Meetings stockholders in accordance with the
1940 Act
- ------------------------------------------------------------------------------------------------
</TABLE>
If Proposal No. 1, however, is not approved, the Fund will not file the
Amended Articles addressed in Proposal 1 and will continue to operate under its
existing closed-end structure.
Required Vote
Approval of the further amendments to the Articles of Incorporation
pursuant to this Proposal 2 requires the affirmative vote of 75% of the votes
entitled to be cast by stockholders. Your Fund's Directors recommend that
stockholders approve the Amended Articles.
PROPOSAL 3: ELECTION OF THE BOARD OF DIRECTORS
This Proposal has two parts: Proposal 3(a) proposes for reelection those
incumbent Directors who will continue to serve on the Board of the Fund if
Proposal 1 is not approved and Proposal 3(b) proposes to elect nominees to serve
on the Board of the Fund and replace the current Directors if and when Proposal
1 is approved and implemented. If Proposal 1 is approved, the new Directors
would take office upon the resignation of the current Directors scheduled to
occur at the time the Reorganization is implemented.
(a) Closed-end Fund Board
Pursuant to the Fund's Articles of Incorporation, the Board is currently
divided into three classes, each class having a term of three years. At the
annual meeting of stockholders in each year, the term of one class of Directors
expires. In accordance with the Fund's Articles of Incorporation, the number of
Directors is apportioned among the classes so as to maintain the classes as
nearly equal in number as possible.
-28-
<PAGE> 35
The persons named on the accompanying proxy card intend, in the absence of
contrary instructions, to vote all proxies in favor of the election of the two
nominees listed below as Directors of the Fund (Class II) to serve for a term of
three years, or until their successors are duly elected and qualified. All
nominees have consented to stand for election and to serve if elected, unless
Proposal 1 is approved, in which case these nominees and the other incumbent
Directors have expressed an intention to resign as of the time of the
implementation of the Reorganization and the Director Nominees identified in
Proposal 3(b) below would comprise the Board of Directors. If any such nominee
should be unable to serve, an event not now anticipated, the proxies will be
voted for such person, if any, as shall be designated by the Committee on
Independent Directors to replace any such nominee.
Information Concerning Nominees
The following table sets forth certain information concerning each of the
two nominees for Director of the Fund. Each of the nominees is now a Director of
the Fund and of other funds managed by Scudder Kemper. Unless otherwise noted,
each of the nominees has engaged in the principal occupation listed in the
following table for more than five years, but not necessarily in the same
capacity.
Class II - Nominees to serve until 2002 Annual Meeting of Stockholders:
<TABLE>
<CAPTION>
Present Office with the Fund,
if any; Principal Occupation Shares
or Employment and Year First Beneficially
Name (Age) Directorships in Publicly Became a Owned ____, Percent of
Held Companies Director 1999(1) Class
- --------------------------- ------------------------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Wilson Nolen (72) Consultant; Trustee, Cultural 1990
Institutions Retirement Fund,
Inc., New York Botanical
Garden, Skowhegan School of
Painting & Sculpture;
Director, Ecohealth, Inc.
(biotechnology company)
(until 1996), Chattem, Inc.
(drug and chemical company)
(until 1993). Mr. Nolen
serves on the boards of
certain other funds managed
by Scudder Kemper.
Ladislas O. Rice (72) Director, Huntingdon 1990
International Holdings, plc
(biological and environmental
testing company), (until
1998) Stanley Gibbons
Holdings plc (publisher)
(until 1998) and Whittington
Hospital Trust; Chairman and
Chief Executive Officer,
Burton Group plc
</TABLE>
-29-
<PAGE> 36
<TABLE>
<CAPTION>
Present Office with the Fund,
if any; Principal Occupation Shares
or Employment and Year First Beneficially
Name (Age) Directorships in Publicly Became a Owned ____, Percent of
Held Companies Director 1999(1) Class
- --------------------------- ------------------------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
(diversified retailer)
(until 1993).
</TABLE>
Information Concerning Continuing Directors
The terms of Class I and III Directors do not expire this year. The
following table sets forth certain information regarding the Directors in such
classes. Unless otherwise noted, each Director has engaged in the principal
occupation listed in the following table during the past five years, but not
necessarily in the same capacity.
Class I - Directors serving until 2001 Annual Meeting of Stockholders:
<TABLE>
<CAPTION>
Present Office with the Fund,
if any; Principal Occupation Shares
or Employment and Year First Beneficially
Name (Age) Directorships in Publicly Became a Owned ____, Percent of
Held Companies Director 1999(1) Class
- --------------------------- ------------------------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Nicholas Bratt (50)*+ President; Managing Director 1990
of Scudder Kemper; and
Director, Korea Society
(private society). Mr. Bratt
serves on the board of one
additional fund managed by
Scudder Kemper.
Mary Johnston Evans (68) Director, Baxter 1990
International, Inc. (health
care), Saint-Gobain Corp.
(industrial products
manufacturer), Delta Air
Lines, Inc. (air lines),
Household International, Inc.
(financial services), The Sun
Company, Inc. (petroleum
products) and Dun &
Bradstreet Corporation
(marketing and financial
information services).
William H. Luers (69) Chairman and President, UN 1990 (2)
Association of the U.S.A.;
President, The Metropolitan
Museum of Art (until 1999);
Director, IDEX Corporation
(liquid handling equipment
manufacturer), Wickes Lumber
</TABLE>
-30-
<PAGE> 37
<TABLE>
<CAPTION>
Present Office with the Fund,
if any; Principal Occupation Shares
or Employment and Year First Beneficially
Name (Age) Directorships in Publicly Became a Owned ____, Percent of
Held Companies Director 1999(1) Class
- --------------------------- ------------------------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Company (building materials),
StoryFirst Communications, Inc.
(owns television and radio
stations in Russia and Ukraine),
Transco Energy Company (natural
gas transmission company) (until
1995) and The Discount
Corporation of New York (bond
trading) (until 1993). Mr. Luers
serves on the boards of certain
other funds managed by Scudder
Kemper.
</TABLE>
-31-
<PAGE> 38
Class III - Directors serving until 2000 Annual Meeting of Stockholders:
<TABLE>
<CAPTION>
Present Office with the Fund,
if any; Principal Occupation Shares
or Employment and Year First Beneficially
Name (Age) Directorships in Publicly Became a Owned ____, Percent of
Held Companies Director 1999(1) Class
- --------------------------- ------------------------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Daniel Pierce (65)*+ Chairman of the Board; 1991 (3)
Managing Director of Scudder
Kemper; and Director,
Fiduciary Trust Company (bank
and trust company) and
Fiduciary Company Incorporated
(bank and trust company). Mr.
Pierce serves on the boards
of certain other funds managed
by Scudder Kemper.
Paul Bancroft III (69) Trustee, Venture Capitalist 1990
and Consultant; Retired
President, Chief Executive
Officer and Director,
Bessemer Securities Corp.
(private investment company);
Director, Unova, Inc. (industrial
automation company); and former
Director, Albany International,
Inc. (paper machine belt
manufacturer) and Measurex
Corporation (process control
systems company). Mr. Bancroft
serves on the boards of
certain other funds managed
by Scudder Kemper.
</TABLE>
-32-
<PAGE> 39
<TABLE>
<CAPTION>
Present Office with the Fund,
if any; Principal Occupation Shares
or Employment and Year First Beneficially
Name (Age) Directorships in Publicly Became a Owned ____, Percent of
Held Companies Director 1999(1) Class
- --------------------------- ------------------------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Richard M. Hunt (71) University Marshal and Senior 1990
Lecturer, Harvard University;
Vice Chairman, American
Council on Germany; Director,
Council on the United States
and Italy; Life Trustee,
American Field Service; and
Partner, Elmhurst Investment
Trust (family investment
firm). Mr. Hunt serves on
the boards of certain other
funds managed by Scudder
Kemper.
All Directors and Officers (4)
as a group
</TABLE>
- ----------
* Persons considered by the Fund and its counsel to be "interested persons"
(as defined in the 1940 Act) of the Fund or of Scudder Kemper. Messrs.
Bratt and Pierce are deemed to be interested persons because of their
affiliation with the Fund's investment manager, Scudder Kemper, or because
they are Officers of the Fund or both.
+ Messrs. Bratt and Pierce are members of the Executive Committee of the
Fund.
(1) The information as to beneficial ownership is based on statements
furnished to the Fund by the Directors. Unless otherwise noted, beneficial
ownership is based on sole voting and investment power.
(2) Mr. Luers' shares are held with shared voting and investment power with a
member of his family.
(3) Mr. Pierce's total includes shares held in a fiduciary capacity as to
which he shares investment and voting power.
(4) The total for the group includes shares held with sole investment and
voting power and shares held with shared investment voting power.
Section 16 Reporting Compliance
Section 30(h) of the 1940 Act and Section 16(a) of the Securities Exchange
Act of 1934 require the Fund's Officers and Directors, Scudder Kemper,
affiliated persons of Scudder Kemper and persons who own more than 10 percent of
a registered class of the Fund's equity securities to file forms reporting their
affiliation with the Fund and report ownership and changes in ownership of the
Fund's
-33-
<PAGE> 40
shares with the Securities and Exchange Commission (the "SEC") and the New York
Stock Exchange (the "NYSE"). These persons and entities are required by SEC
regulations to furnish the Fund with copies of all Section 16(a) forms they
file. Based upon a review of these forms as furnished to the Fund, the Fund
believes that, during the fiscal year ended October 31, 1998, there was
compliance with all Section 16(a) filing requirements applicable to the Fund's
Officers and Directors, Scudder Kemper and affiliated persons of Scudder Kemper.
If Proposal 1 is approved, the above-referenced filings will no longer be
required.
Committees of the Board--Board Meetings
The Board of Directors of the Fund met four times during the fiscal year
ended October 31, 1998.
The Board of Directors, in addition to an Executive Committee, has an
Audit Committee, a Valuation Committee and a Committee on Independent Directors.
The Executive and Valuation Committees consist of regular members, allowing
alternates.
Audit Committee
The Board has an Audit Committee consisting of those Directors who are not
interested persons of the Fund or of Scudder Kemper ("Noninterested Directors"),
as defined in the 1940 Act, which last met on January 26, 1999. The Audit
Committee reviews with management and the independent accountants for the Fund,
among other things, the scope of the audit and the controls of the Fund and its
agents, reviews and approves in advance the type of services to be rendered by
independent accountants, recommends the selection of independent accountants for
the Fund to the Board and in general considers and reports to the Board on
matters regarding the Fund's accounting and bookkeeping practices.
Committee on Independent Directors
The Board has a Committee on Independent Directors consisting of the
Noninterested Directors. The Committee is charged with the duty of making all
nominations for Noninterested Directors, recommendations as to compensation for
the Independent Directors and consideration of other related matters.
Stockholders' recommendations as to nominees received by management are referred
to the Committee for its consideration and action. The Committee last met on
April 27, 1999 to consider and to nominate the nominees set forth above, as
well as those nominees set forth in (b) below.
Transactions with and Remuneration of Directors and Officers
The aggregate direct remuneration by the Fund of Directors not affiliated
with Scudder Kemper was $98,708, including expenses, for the fiscal year ended
October 31, 1998. Each such unaffiliated Director currently receives fees paid
by the Fund of $750 per Directors' meeting attended and an annual Director's fee
of $6,000. Each Director also receives $250 per committee meeting attended
(other than Audit Committee meetings and meetings held for the purposes of
considering arrangements between the Fund and Scudder Kemper or an affiliate of
Scudder Kemper, for which such Director receives a fee of $750). Scudder Kemper
supervises the Fund's investments, pays the compensation and certain expenses of
its personnel who serve as Directors and Officers of the Fund and receives a
management fee for its services. Several of the Fund's Officers and Directors
are also
-34-
<PAGE> 41
officers, directors, employees or stockholders of Scudder Kemper and participate
in the fees paid to that firm, although the Fund makes no direct payments to
them other than for reimbursement of travel expenses in connection with the
attendance at Directors and committee meetings.
The following Compensation Table, provides in tabular form, the following
data:
Column (1) All Directors who receive compensation from the Fund.
Column (2) Aggregate compensation received by a Director from the Fund and
Scudder Kemper.
Columns (3) and (4) Pension or retirement benefits accrued or proposed to
be paid by the Fund. The Fund does not pay its Directors such benefits.
Column (5) Total compensation received by a Director from the Fund,
Scudder Kemper, plus compensation received from all funds managed by Scudder
Kemper for which a Director serves. The total number of funds from which a
Director receives such compensation is also provided in Column (5). Generally,
compensation received by a Director for serving on the Board of a closed-end
fund is greater than the compensation received by a Director for serving on the
Board of an open-end fund.
Compensation Table
for the Year ended December 31, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Aggregate
Compensation as a
Aggregate Compensation Director/Trustee of
as a Director of the the Fund and Other
Fund Scudder Kemper Funds
- ---------------------------------------------------------------------------------------------------
Pension or
Retirement Estimated
Benefits Annual
Paid by Accrued As Benefits Paid by
Name of Person, Paid by Scudder Part of Fund Upon Paid by Scudder
Position Fund Kemper Expenses Retirement Funds Kemper
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Paul Bancroft III, $11,500 0 N/A N/A $174,200 $8,925
Director
Mary Johnston $8,500 0 N/A N/A $8,500 0
Evans, Director
Richard M. Hunt, $11,500 0 N/A N/A $50,930 0
Director
William H. Luers, $10,000 0 N/A N/A $157,050 $8,925
Director
Wilson Nolen, $11,500 0 N/A N/A $189,075 $6,375
Director
Ladislas O. Rice, $9,850 0 N/A N/A $9,850 0
Director
</TABLE>
-35-
<PAGE> 42
(b) Open-End Fund Board
As noted herein, if Proposal 1 is approved, the Fund will be reorganized
as an open-end fund and, subject to the approval by KEF stockholders, will
acquire the assets and assume the liabilities of KEF. In anticipation of a
favorable vote of stockholders on Proposal 1, the Board of the Fund, based on
recommendations of the Committee on Independent Directors, has nominated persons
to serve as Directors of the Fund that would be different from that of the Fund,
but are persons who are familiar with matters affecting mutual funds in the
Kemper family of funds by reason of their membership on boards of other funds in
that group. Assuming the approval of Proposals 1 and 2 above, the Directors of
the Fund would not be elected in staggered terms of three years, but would be
elected to serve until the next meeting of stockholders, if any, called for the
purpose of electing Directors and until the election and qualification of a
successor or until such Director sooner dies, resigns or is removed as provided
in the Fund's proposed Amended and Restated Articles of Incorporation and
By-Laws. If Proposal 1 is approved and Proposal 2 is not approved, however, it
is presently intended that the following persons would be divided into three
classes as follows: Class I, James E. Akins and Arthur R. Gottschalk; Class II,
Frederick T. Kelsey and Fred B. Renwick; and Class III, Thomas W. Littauer and
John G. Weithers. Further, annual meetings of stockholders would continue to be
held thereafter to elect Directors as the term of each class expires.
At this Meeting, six Board members have been nominated for election to the
Board of the Fund if Proposal 1 is approved. It is intended that the proxies
will be voted for the election of the nominees described below. The nominees, if
elected, will take office upon the resignation of the current Directors
scheduled to occur at the time the Reorganization is implemented, and their
election and qualification is contingent upon approval of Proposal 1. Therefore,
if Proposal 1 is not approved, the Fund's current Directors, as described above,
will continue to serve on the Board of the Fund.
All the nominees listed below have consented to serve as Board members of
the Fund, if elected. In case any nominee shall be unable or shall fail to act
as a Board member by virtue of an unexpected occurrence, the proxies may be
voted for such other person(s) as shall be proposed by the Committee on
Independent Directors by the persons acting under the proxies in their
discretion.
Information Concerning Nominees
Name, Age, Principal Occupation and Affiliations
- --------------------------------------------------------------------------------
James E. Akins (72)
Consultant on International, Political, and Economic Affairs; formerly, a
career United States Foreign Service Officer; Energy Adviser for the White
House; United States Ambassador to Saudi Arabia, 1973-1976.
Arthur R. Gottschalk (74)
Retired; formerly, President, Illinois Manufacturers Association; Trustee,
Illinois Masonic Medical Center; formerly, Illinois State Senator; formerly,
Vice President, The Reuben H. Donnelley Corp.; formerly, attorney.
-36-
<PAGE> 43
Name, Age, Principal Occupation and Affiliations
- --------------------------------------------------------------------------------
Frederick T. Kelsey (72)
Retired; formerly, consultant to Goldman, Sachs & Co.; formerly, President,
Treasurer and Trustee of Institutional Liquid Assets and its affiliated mutual
funds; Trustee of the Northern Institutional Funds; formerly, Trustee of the
Pilot Funds.
Fred B. Renwick (69)
Professor of Finance, New York University, Stern School of Business; Director,
TIFF Investment Program, Inc.; Director, The Warburg Home Foundation;
Chairman, Investment Committee of Morehouse College Board of Trustees;
Chairman, American Bible Society Investment Committee; formerly, member of the
Investment Committee of Atlanta University Board of Trustees; formerly,
Director of Board of Pensions Evangelical Lutheran Church of America.
*Thomas W. Littauer (44)
Managing Director, Scudder Kemper; formerly, Head of Broker Dealer Division of
Putnam Investment Management; formerly, President of Client Management
Services for Fidelity Investments.
John G. Weithers (65)
Retired; formerly, Chairman of the Board and Chief Executive Officer, Chicago
Stock Exchange; Director, Federal Life Insurance Company; President of the
Members of the Corporation and Trustee, DePaul University.
- ---------------
* Interested person of Scudder Kemper as defined in the 1940 Act.
All the nominees, except Mr. Littauer, serve as board member of ____
Scudder Kemper funds. Mr. Littauer serves as a board member of ____ Scudder
Kemper Funds. A Scudder Kemper Fund is an investment company for which Scudder
Kemper or its affiliates serves as investment manager.
The table below shows, for each Noninterested Director Nominee of the
Fund, the aggregate compensation from Scudder Kemper funds paid or accrued
during calendar year 1998.
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION
FROM SCUDDER KEMPER FUND
NAME OF DIRECTOR COMPLEX
- -------------------------- ------------------------
<S> <C>
James E. Akins........... $140,800
Arthur R. Gottschalk..... $146,300
Frederick T. Kelsey...... $141,300
Fred B. Renwick.......... $141,300
</TABLE>
-37-
<PAGE> 44
<TABLE>
<S> <C>
John G. Weithers......... $146,300
</TABLE>
(c) Information Relevant to Proposals 3(a) and (b)
Executive Officers
In addition to Messrs. Bratt and Pierce, Directors who are also Officers
of the Fund, the following persons are current Executive Officers of the Fund:
<TABLE>
<CAPTION>
Year First
Present Office with the Fund; Became an
Name (Age) Principal Occupation or Employment (1) Officer (2)
---------- -------------------------------------- -----------
<S> <C> <C>
Paul J. Elmlinger (39) Vice President and Assistant Secretary; 1990
Managing Director of Scudder Kemper.
Carol L. Franklin (45) Vice President; Managing Director of Scudder 1990
Kemper.
Bruce H. Goldfarb (34) Vice President and Assistant Secretary; Senior 1998
Vice President of Scudder Kemper; Prior to
February 1997; practiced law with the law firm
of Cravath, Swaine & Moore.
Joan R. Gregory (52) Vice President; Vice President of Scudder 1996
Kemper.
Jerard K. Hartman (65) Vice President; Advisory Managing Director of 1990
Scudder Kemper.
John R. Hebble (40) Treasurer; Senior Vice President of Scudder 1998
Kemper.
Kathryn L. Quirk (45) Vice President and Assistant Secretary; 1990
Managing Director of Scudder Kemper.
John Millette (36) Vice President and Secretary; Assistant Vice 1999
President of Scudder Kemper; Prior to
September 1994; employed by Kaye, Scholer,
Fierman, Hays & Handler
Judith A. Hannaway ( ) Vice President; Senior Vice President of 1998
Scudder Kemper.
Caroline Pearson (36) Assistant Secretary; Senior Vice President of 1998
Scudder Kemper; Prior to September 1997;
practiced law with the law firm of Dechert
Price & Rhoads.
</TABLE>
(1) Unless otherwise stated, all Executive Officers have been associated with
Scudder Kemper for more than five years, although not necessarily in the same
capacity.
(2) The President, Treasurer and Secretary each hold office until his successor
has been duly elected and qualified, and all other officers hold office in
accordance with the By-Laws of the Fund.
If Proposal 1 is approved, it is expected that the following persons will
be elected by the Directors to serve as Executive Officers of the Fund at the
time of the Reorganization or earlier if the Reorganization is not approved:
-38-
<PAGE> 45
<TABLE>
<CAPTION>
Proposed Office with the Open-End Fund;
Name (Age) Principal Occupation or Employment
- ---------- ---------------------------------------
<S> <C>
Cornelia M. Small (55) Chairman; Managing Director of Scudder Kemper.
Mark S. Casady (38) President; Managing Director of Scudder
Kemper.
Philip J. Collora (53) Vice President and Secretary; Senior Vice
President of Scudder Kemper.
Thomas W. Littauer (44) Vice President; Managing Director of Scudder
Kemper.
Ann M. McCreary (42) Vice President; Managing Director of Scudder
Kemper.
Linda J. Wondrack (34) Vice President; Senior Vice President of
Scudder Kemper.
John R. Hebble (40) Treasurer; Senior Vice President of Scudder
Kemper.
Brenda Lyons (36) Assistant Treasurer; Senior Vice President of
Scudder Kemper.
Carol L. Franklin (45) Vice President; Managing Director of Scudder
Kemper.
Joan R. Gregory (52) Vice President; Vice President of Scudder
Kemper.
Kathryn L. Quirk (45) Vice President; Managing Director of Scudder
Kemper.
Maureen E. Kane (37) Assistant Secretary; Vice President of
Scudder Kemper.
Marc Slendebroek ( ) Vice President; ( ), Scudder Kemper.
Caroline Pearson (36) Assistant Secretary; Senior Vice President of
Scudder Kemper.
Elizabeth C. Werth ( ) Assistant Secretary; Vice President of
Scudder Kemper; Vice President and Director
of State Registrations of Kemper
Distributors, Inc.
</TABLE>
The Officers of the Fund are elected by the Board of Directors on an
annual basis to serve until their successors are elected and qualified.
Required Vote
Election of each of the listed nominees for Director of the Fund and of
the Open-End Fund requires the affirmative vote of a majority of the votes cast
at the Meeting in person or by proxy. Your Fund's Directors recommend that
Stockholders vote in favor of each of the nominees.
-39-
<PAGE> 46
PROPOSAL 4: RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS FOR THE FUND
The fourth Proposal to be submitted at the Meeting is the ratification or
rejection of the selection by the Board of Directors of Ernst & Young LLP as
independent auditors for the Fund for the current fiscal year. In connection
with the proposal to open-end the Fund and combine the Fund with KEF, the Board
approved, at its April 27, 1999 Board meeting, the appointment of Ernst & Young
LLP ("E&Y") to replace PricewaterhouseCoopers LLP ("PwC") as the independent
auditors of the Fund, subject to stockholder ratification of E&Y's appointment.
The decision to change auditors did not involve any disagreement between PwC and
the Fund, nor has there been any such disagreement since the Fund's commencement
of operations and the decision is not related to PwC's reports on the financial
condition of the Fund. In fact, the decision was made solely because E&Y
currently serves as independent auditors to KEF and other funds in the Kemper
family of funds and there may be certain efficiencies for the Fund in
establishing a relationship with E&Y. On the recommendation of the Audit
Committee, the Directors (including a majority of the Directors who are not
interested persons of the Fund) have selected E&Y, independent auditors, to
succeed PwC to audit the financial statements of the Fund filed with the SEC and
other regulatory authorities. The Fund has been advised that neither E&Y nor any
of its partners has any financial interest in the Fund. The selection of
auditors is subject to ratification or rejection by Fund stockholders at the
Meeting.
The Fund's auditors examine the financial statements of the Fund annually,
issue a report on internal controls and procedures for inclusion in SEC filings
for the year and review the Fund's income tax returns.
Representatives of PwC and E&Y will be available at the Meeting to respond
to any questions.
Required Vote
Ratification of the selection of independent auditors requires the
affirmative vote of a majority of the votes cast at the Meeting in person or by
proxy. Your Fund's Directors recommend that stockholders ratify the selection of
Ernst & Young LLP as independent auditors for the Fund.
PROPOSAL 5: NEW INVESTMENT ADVISORY AGREEMENT WITH SCUDDER KEMPER
General
Stockholders are being asked to approve a new Investment Advisory
Agreement with Scudder Kemper (the "New Agreement"). A form of New Agreement is
attached as Exhibit D.
Scudder Kemper acts as the investment adviser to and manager and
administrator for the Fund pursuant to an Investment Advisory, Management and
Administration Agreement (the "Existing Agreement"). As discussed above, if
Proposal 1 is approved, Scudder Kemper has agreed to accept new advisory fees
for the Fund which are lower than those currently paid by the Fund. In addition,
Scudder Kemper has proposed to conform the Existing Agreement with the Fund to
those in place for other open-end funds in the Kemper family of funds. These
changes are discussed below. If Proposal 1 is not approved, however, the
Existing Agreement will continue. Scudder Kemper, however, has indicated that it
will waive fees so that the advisory fees of the Open-End Fund do not exceed the
level described in this Proposal in the event Proposal 1 is approved but this
Proposal is not.
-40-
<PAGE> 47
Section 8 of the Existing Agreement provides that it may be amended by
mutual agreement, but only after authorization of such amendment by the
affirmative vote of (i) the holders of a majority of the outstanding voting
securities of the Fund, and (ii) a majority of the members of the Fund's Board
of Directors who are not parties to the Existing Agreement or interested persons
of any party to the Existing Agreement, or of any entity regularly furnishing
investment advisory services with respect to the Fund pursuant to an agreement
with any party to the Existing Agreement, cast in person at a meeting called for
the purpose of voting on such approval. The requisite majority of the Fund's
Noninterested Directors and the full Board of Directors have unanimously
approved the New Agreement with Scudder Kemper which reflects lower advisory
fees and certain other changes and which will take effect at the time of the
Fund converts to open-end investment company status.
In return for the services provided by Scudder Kemper and the expenses it
assumes, the Fund currently pays Scudder Kemper under the Existing Agreement a
monthly fee, which, on an annual basis, is equal to the rate per annum of the
value of the Fund's average weekly net assets as follows: 1.25% on the first $75
million of average daily net assets; 1.15% on the next $125 million; and 1.10%
on assets over $200 million. As of the end of the Fund's last fiscal year, the
Fund had net assets and paid an aggregate fee to Scudder Kemper under its
Existing Agreement of $358,521,370 and $4,151,077, respectively.
Scudder Kemper has acted as the investment manager for the Fund since its
inception. The Existing Agreement is dated _______, 199_ and was last approved
by [the stockholders on _____, 199_,] and the Directors on April 27, 1999. The
Existing Agreement was last submitted to stockholders prior to it becoming
effective, as required by the 1940 Act.
Board's Recommendation
At a meeting held on April 27, 1999 called for the purpose of, among other
things, voting on approval of the New Agreement, the Board of the Fund met and
the Board members of the Fund, including the Board members who are not parties
to the Agreement or "interested persons" (as defined in the 1940 Act) of any
such party, voted to approve the New Agreement and to recommend approval to the
stockholders of the Fund. In reaching this conclusion, the Board obtained from
Scudder Kemper such information as it deemed reasonably necessary to approve the
New Agreement and considered a number of factors, including, among other things,
the nature, scope and quality of services that Scudder Kemper will provide to
the Fund as an open-end fund; the reduction in advisory fees; the continuity of
the management of the Fund and the management personnel after the
Reorganization; and the materially and substantively identical nature of the
Existing Agreement and the New Agreement.
Based on the foregoing and because the New Agreement is identical in all
material respects to the Existing Agreement (other than the lower advisory fees,
the execution dates and certain other changes discussed below), the Board
determined that the New Agreement is fair and reasonable and in the best
interest of the Fund and its stockholders.
At the same meeting, the Board considered the possibility that Proposal 1
would not be approved by stockholders and it voted to continue the Existing
Agreement in that eventuality.
Description of the New Agreement
Under the New Agreement, Scudder Kemper will provide the Open-End Fund
with continuing investment management services. Scudder Kemper will make
investment decisions, prepare and make
-41-
<PAGE> 48
available research and statistical data and supervise the acquisition and
disposition of securities by the Open-End Fund, all in accordance with
guidelines and directions from the Fund's Board of Directors. Scudder Kemper
will assist the Open-End Fund as it may reasonably request in the conduct of the
Fund's business, subject to the direction and control of the Fund's Board of
Directors. Scudder Kemper would be required to maintain or cause to be
maintained for the Open-End Fund all books, records and reports and any other
information required to be maintained under the 1940 Act to the extent such
books, records and reports and any other information are not maintained by the
Open-End Fund's custodian or other agents of the Open-End Fund. Scudder Kemper
would also supply the Open-End Fund with office space in New York and furnish
clerical services in the United States related to research, statistical and
investment work. Scudder Kemper will render to the Open-End Fund administrative
services such as preparing reports to, and meeting materials for, the Fund's
Board of Directors and reports and notices to Fund stockholders, preparing and
making filings with the SEC and other regulatory and self-regulatory
organizations, including preliminary and definitive proxy materials and
post-effective amendments to the Open-End Fund's registration statement,
providing assistance in certain accounting and tax matters and investor public
relations, monitoring the valuation of portfolio securities, calculation of net
asset value and calculation and payment of distributions to stockholders, and
overseeing arrangements with the Open-End Fund's custodian. Scudder Kemper would
pay reasonable salaries, fees and expenses of the Open-End Fund's officers and
employees and any fees and expenses of the Open-End Fund's Directors who are
directors, officers or employees of Scudder Kemper.
Under the New Agreement, the Open-End Fund pays or causes to be paid all
of its other expenses, including, among others, the following: organization and
certain offering expenses (including out-of-pocket expenses, but not including
overhead or employee costs of Scudder Kemper or of any one or more organizations
retained as an advisor or consultant of the Open-End Fund; legal expenses;
auditing and accounting expenses; telephone, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred in connection with membership in investment company trade
organizations; fees and expenses of the Open-End Fund's custodians,
subcustodians, transfer agents and registrars, and accounting agents; payment
for portfolio pricing or valuation services to pricing agents, accountants,
bankers and other specialists, if any; expenses of preparing share certificates
and other expenses in connection with the issuance, offering, distribution, sale
or underwriting of securities issued by the Open-End Fund; expenses related to
investor and public relations; freight, insurance and other charges in
connection with the shipment of the Open-End Fund's portfolio securities;
brokerage commissions or other costs of acquiring or disposing of any portfolio
securities of the Open-End Fund; expenses of preparing and distributing reports,
notices and dividends to stockholders; expenses of the dividend reinvestment and
cash purchase plan (except for brokerage expenses paid by participants in such
plan); costs of stationery; any litigation expenses; and costs of stockholders'
and other meetings.
Under the New Agreement, Scudder Kemper is permitted to provide investment
advisory services to other clients, including clients which may invest in
securities of issuers in the countries in which the Open-End Fund primarily
invests and, in providing such services, may use information furnished by
advisors and consultants to the Open-End Fund and others. Conversely,
information furnished by others to Scudder Kemper in providing services to other
clients may be useful to Scudder Kemper in providing services to the Open-End
Fund.
The New Agreement may be terminated at any time without payment of penalty
by the Open-End Fund's Board of Directors, by vote of holders of a majority of
the outstanding voting
-42-
<PAGE> 49
securities of the Open-End Fund, or by Scudder Kemper on 60 days' written
notice. The Existing Agreement automatically terminates in the event of its
assignment (as defined under the 1940 Act).
The New Agreement provides that Scudder Kemper is not liable for any act
or omission, error of judgment or mistake of laws or for any loss suffered by
the Open-End Fund in connection with matters to which the New Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of Scudder Kemper in the performance of its duties or from reckless
disregard by Scudder Kemper of its obligations and duties under the New
Agreement. The New Agreement also contains provisions that provide that Scudder
Kemper shall use its best efforts to seek the best overall terms available in
executing transactions for the Open-End Fund and selecting brokers and dealers
and shall consider on a continuing basis all factors it deems relevant,
including the consideration of the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Open-End Fund and/or other accounts over which Scudder Kemper or
an affiliate exercises investment discretion. In addition, with respect to the
allocation of investment and sale opportunities among the Open-End Fund and
other accounts or funds managed by Scudder Kemper, the New Agreement provides
that Scudder Kemper shall allocate such opportunities in accordance with
procedures believed by Scudder Kemper to be equitable to each entity.
If approved by the stockholders along with Proposal 1, the New Agreement
for the Open-End Fund will be dated the date the Fund commences operations as an
open-end investment company and may continue for two years and thereafter from
year to year only if specifically approved by the vote of "a majority of the
outstanding voting securities" of the Open-End Fund, or by a majority of the
Open-End Fund's Board and, in either event, the vote of a majority of the
Open-End Fund's Directors who are not parties to the New Agreement or interested
persons of any such party, cast in person at a meeting called for such purpose.
As previously discussed, the New Agreement will reflect a lower annual
advisory fee than the Existing Agreement to be paid monthly based upon the
average daily net assets of the Open-End Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets Annual Management Fee Rates
- ----------------------------------------- -------------------------------------
<S> <C>
$0 -- $250 million................... .75%
$250 million -- $1 billion........... .72
$1 billion -- $2.5 billion........... .70
$2.5 billion -- $5 billion........... .68
$5 billion -- $7.5 billion........... .65
$7.5 billion -- $10 billion.......... .64
$10 billion -- $12.5 billion......... .63
Over $12.5 billion................... .62
</TABLE>
Scudder Kemper would have received $2,677,215 for fiscal year 1998 if the
above proposed fee had been in effect, which is $1,473,862 less than the fee
paid to Scudder Kemper during the Fund's last fiscal year under the Existing
Agreement.
-43-
<PAGE> 50
Differences Between the Existing Agreement and the New Agreement
The New Agreement is substantially identical to the Existing Agreement,
except for the lower advisory fees, as discussed above, dates of execution and
those additional matters described below.
The New Agreement does not include a provision relating to the licensing
of the "Scudder Marks" which is currently included in the Existing Agreement.
The Existing Agreement identifies Scudder Kemper as the exclusive licensee of
the rights to use and sublicense the names "Scudder," "Scudder Kemper
Investments, Inc.," and "Scudder, Stevens & Clark, Inc." (i.e., the "Scudder
Marks"). Under this license, the Fund has the non-exclusive right to use and
sublicense the Scudder name and marks as part of its name, and to use the
Scudder Marks in the Fund's investment products and services. This provision,
however, would no longer be relevant if the Reorganization is approved by the
stockholders of KEF since the Fund would change its name to "Kemper Europe Fund,
Inc."
The New Agreement does not require the Open-End Fund to incur travel
expenses of Directors and officers of the Fund who are also directors, officers
and employees of Scudder Kemper for attendance at Board or Committee meetings.
In addition, as an open-end fund, the Fund will not be subject to stock exchange
listing fees and KDI will bear the expenses of registering or qualifying
securities of the Fund for sale.
Investment Manager
Scudder Kemper, a member of the Zurich Financial Services Group
("Zurich"), is one of the largest and most experienced investment management
firms in the United States. Scudder, Stevens & Clark, Inc. ("Scudder") was
established in 1919 as a partnership and was restructured as a Delaware
corporation in 1985. On December 31, 1997, the businesses of Scudder and Zurich
Kemper Investments, Inc. ("Kemper") were combined. Since December 31, 1997,
Scudder Kemper has served as investment adviser to both Scudder and Kemper
funds. As of December 31, 1998, Scudder Kemper has more than $280 billion in
assets under management. The principal source of Scudder Kemper's income is
professional fees received from providing continuing investment advice. Scudder
Kemper provides investment management for many individuals and institutions,
including insurance companies, endowments, industrial corporations and financial
and banking organizations.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world. Zurich owns approximately 70% of Scudder Kemper, with the balance
owned by Scudder Kemper's officers and employees.
Scudder Kemper is a Delaware corporation. Rolf Huppi* is the Chairman of
the Board and Director, Edmond D. Villani# is the President, Chief Executive
Officer and Director, Stephen R. Beckwith# is the Treasurer and Chief Financial
Officer, Kathryn L. Quirk# is the General Counsel,
- ----------
* Mythenquai 2, Zurich, Switzerland
# 345 Park Avenue, New York, New York
-44-
<PAGE> 51
Chief Compliance Officer and Secretary, Lynn S. Birdsong# is a Corporate Vice
President and Director, Cornelia M. Small# is a Corporate Vice President and
Director, Laurence Cheng* is a Director, and, effective November 1, 1998, each
of Gunther Gose* and William H. Bolinder+ is a Director of Scudder Kemper. The
principal occupation of each of Edmond D. Villani, Stephen R. Beckwith, Kathryn
L. Quirk, Lynn S. Birdsong and Cornelia M. Small is serving as a Managing
Director of Scudder Kemper; the principal occupation of Rolf Huppi is serving as
Chairman and Chief Executive Officer of Zurich; the principal occupation of
Laurence Cheng is serving as a senior partner of Capital Z Partners, an
investment fund; the principal occupation Gunther Gose is serving as the Chief
Financial Officer of Zurich Financial Services; the principal occupation of
William H. Bolinder is serving as a member of the Group Executive Board of
Zurich. Proposal 3 includes information regarding each Director and Officer of
the Fund who is associated with Scudder Kemper.
The outstanding voting securities of Scudder Kemper are held of record
36.63% by Zurich Holding Company of America ("ZHCA"), a subsidiary of Zurich;
32.85% by ZKI Holding Corp. ("ZKIH"), a subsidiary of Zurich; 20.86% by Stephen
R. Beckwith, Lynn S. Birdsong, Kathryn L. Quirk, Cornelia M. Small and Edmond D.
Villani, in their capacity as representatives (the "Management Representatives")
of Scudder Kemper's management holders and retiree holders pursuant to a Second
Amended and Restated Security Holders Agreement (the "Security Holders
Agreement") among Scudder Kemper, Zurich, ZHCA, ZKIH, the Management
Representatives, the management holders, the retiree holders and Edmond D.
Villani, as trustee of the Scudder Kemper Executive Defined Contribution Plan
Trust (the "Plan Trust"); and 9.66% by the Plan Trust. There are no outstanding
non-voting securities of Scudder Kemper.
Pursuant to the Security Holders Agreement (which was entered into in
connection with the Scudder-Zurich Transaction), the Board of Directors of
Scudder Kemper consists of four directors designated by ZHCA and ZKIH and three
directors designated by Management Representatives.
The Security Holders Agreement requires the approval of a majority of the
Scudder-designated directors for certain decisions, including changing the name
of Scudder Kemper, effecting an initial public offering before April 15, 2005,
causing Scudder Kemper to engage substantially in non-investment management and
related business, making material acquisitions or divestitures, making material
changes in Scudder Kemper's capital structure, dissolving or liquidating Scudder
Kemper, or entering into certain affiliated transactions with Zurich. The
Security Holders Agreement also provides for various put and call rights with
respect to Scudder Kemper stock held by persons who were employees of Scudder at
the time of the Scudder-Zurich Transaction, limitations on Zurich's ability to
purchase other asset management companies outside of Scudder Kemper, rights of
Zurich to repurchase Scudder Kemper stock upon termination of employment of
Scudder Kemper personnel, and registration rights for stock held by stockholders
of Scudder continuing after the Scudder-Zurich Transaction.
Directors, officers and employees of Scudder Kemper from time to time may
enter into transactions with various banks, including each Fund's custodian
bank. It is Scudder Kemper's opinion that the terms and conditions of those
transactions will not be influenced by existing or potential custodial or other
Fund relationships.
- --------
+ 1400 American Lane, Schaumburg, Illinois
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<PAGE> 52
Scudder Service Corporation ("SSC"), a subsidiary of Scudder Kemper, is
the transfer agent for the Fund. The Fund was charged $15,000 by SSC during the
last fiscal year. Kemper Service Company, an affiliate of Scudder Kemper, will
provide transfer agency services to the Open-End Fund.
Exhibit E sets forth (as of each fund's last fiscal year end, unless
otherwise noted) the fees and other information regarding investment companies
advised by Scudder Kemper that have similar investment objectives to the Fund.
Brokerage Commissions on Portfolio Transactions
To the maximum extent feasible, Scudder Kemper places orders for portfolio
transactions through Scudder Investor Services, Inc. ("SIS"), Two International
Place, Boston, Massachusetts 02110, which in turn places orders on behalf of the
Fund with issuers, underwriters or other brokers and dealers. SIS is a
corporation registered as a broker/dealer and a subsidiary of Scudder Kemper.
SIS does not receive any commissions, fees or other remuneration from the Fund
for this service. In selecting brokers and dealers with which to place portfolio
transactions for the Fund, Scudder Kemper will not consider sales of shares of
funds currently advised by Scudder Kemper. When it can be done consistently with
the policy of obtaining the most favorable net results, Scudder Kemper may place
such orders with brokers and dealers who supply research, market and statistical
information to the Fund or to Scudder Kemper. Scudder Kemper is authorized when
placing portfolio transactions for equity securities to pay a brokerage
commission (to the extent applicable) in excess of that which another broker
might charge for executing the same transaction on account of the receipt of
research, market or statistical information. Allocation of portfolio
transactions is supervised by Scudder Kemper.
Required Vote
Approval of the New Agreement requires the affirmative vote of the holders
of a majority of the outstanding voting securities of the Fund (as defined in
the 1940 Act). Your Fund's Directors recommend that stockholders approve the New
Agreement.
ADDITIONAL INFORMATION
General
The cost of preparing, printing and mailing the enclosed proxy card and
Proxy Statement and all other costs incurred in connection with the solicitation
of proxies, including any additional solicitation made by letter, telephone or
telegraph (approximately $250,000), will be paid by the Fund and KEF based on
their relative net assets. In addition to solicitation by mail, certain officers
and representatives of the Fund, officers and employees of Scudder Kemper and
certain financial services firms and their representatives, who will receive no
extra compensation for their services, may solicit proxies by telephone,
telegram or personally.
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies. As the Meeting date approaches, certain
stockholders of the Fund may receive a telephone call from a representative of
SCC if their votes have not yet been received. Authorization to permit SCC to
execute proxies may be obtained by telephonic or electronically transmitted
instructions from stockholders of the Fund. Proxies that are obtained
telephonically will be recorded
-46-
<PAGE> 53
in accordance with the procedures set forth below. The Directors believe that
these procedures are reasonably designed to ensure that the identity of the
stockholder casting the vote is accurately determined and that the voting
instructions of the stockholder are accurately determined.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each stockholder's full name, address, social security or
employer identification number, title (if the stockholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned,
and to confirm that the stockholder has received the proxy materials in the
mail. If the information solicited agrees with the information provided to SCC,
then the SCC representative has the responsibility to explain the process, read
the Proposals on the proxy card, and ask for the stockholder's instructions on
the Proposals. The SCC representative, although he or she is permitted to answer
questions about the process, is not permitted to recommend to the stockholder
how to vote, other than to read any recommendation set forth in the Proxy
Statement. SCC will record the stockholder's instructions on the card. Within 72
hours, but in any event before the Meeting, the stockholder will be sent a
letter or mailgram to confirm his or her vote and asking the stockholder to call
SCC immediately if his or her instructions are not correctly reflected in the
confirmation.
If a stockholder wishes to participate in the Meeting, but does not wish
to give a proxy by telephone, the stockholder may still submit the proxy card
originally sent with the Proxy Statement or attend in person. Should
stockholders require additional information regarding the proxy or replacement
proxy cards, they may contact SCC toll-free at 1-800-248-2681. Any proxy given
by a stockholder, whether in writing or by telephone, is revocable until voted
at the Meeting.
Legal Proceedings
The Fund is a defendant in a class action filed in the Southern District
of New York that also names the Fund's Directors and investment adviser
(Brautigam v. Bratt, et al. No. 98 Civ. 9060 (AKH)). The complaint alleges
breaches of fiduciary duty under Sections 36(a) and 48 of the 1940 Act and
common law by the defendants in allegedly failing to take adequate steps to
diminish the discount to net asset value at which shares of the Fund have traded
in recent years. The action has been stayed pending a decision in a similar case
on whether such a case may be maintained as a "class action". In any event, the
plaintiff's counsel has acknowledged that the case will become moot if and when
the Fund converts to open-end status, although they have also expressed an
intent to continue to press for a recovery of attorney's fees. In light of how
and when the open-ending proposal was developed by the Board and the likelihood
that it will be approved by stockholders, the Fund has been advised by counsel
that it has meritorious defenses to the action and will oppose any effort by
plaintiff to recover attorney's fees.
Other Matters To Come Before the Meeting
No Board member is aware of any matters that will be presented for action
at the Meeting other than the matters set forth herein. Should any other matters
requiring a vote of stockholders arise, the proxy in the accompanying form will
confer upon the person or persons entitled to vote the shares represented by
such proxy the discretionary authority to vote the shares as to any such other
matters in accordance with their best judgment in the interest of the Fund.
-47-
<PAGE> 54
Proposals of Stockholders
Stockholders wishing to submit proposals for inclusion in a proxy
statement for a subsequent stockholders' meeting should send their written
proposals to the Secretary of the Fund, as appropriate, at the address set forth
on the cover of this Proxy Statement. Proposals must be received at a reasonable
time prior to the date of a meeting of stockholders to be considered for
inclusion in the materials for the Fund's meeting. If Proposal No. 1 is not
approved and the Fund continues to operate in closed-end form or if Proposal 1
is approved and the Fund open-ends, but Proposal No. 2 is not approved by the
stockholders, stockholders wishing to submit proposals for inclusion in a proxy
statement for the 2000 annual meeting of stockholders of the Fund should send
their written proposals to the Fund at 345 Park Avenue, New York, New York
10154, by _____, 2000. Timely submission of a proposal does not, however,
necessarily mean that the proposal will be included.
The Fund may exercise discretionary voting authority with respect to
stockholder proposals for any 2000 annual meeting of its stockholders which are
not included in the proxy statement and form of proxy, if notice of such
proposal is not received by the Fund at the above address on or before _____,
2000. Even if timely notice is received, the Fund may exercise discretionary
voting authority in certain other circumstances. Discretionary voting authority
is the ability to vote proxies that stockholders have executed and returned to
the Fund on matters not specifically reflected on the form of proxy.
By Order of the Board of Directors of the Fund,
John Millette
Secretary
May ___, 1999
THE BOARD OF DIRECTORS OF THE FUND HOPES THAT STOCKHOLDERS WILL ATTEND THE
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY OR VOTING INSTRUCTION CARD IN THE
ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR
THE MEETING AND YOUR COOPERATION WILL BE APPRECIATED.
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EXHIBIT INDEX
Amendment to the Fund's Articles of Incorporation to Open-End
the Fund.............................................................Exhibit A
Agreement and Plan of Reorganization.................................Exhibit B
Amendment to the Fund's Articles of Incorporation Eliminating
Certain Provisions...................................................Exhibit C
Form of Investment Advisory Agreement................................Exhibit D
Information Relating to Similar Funds Managed by Scudder Kemper......Exhibit E
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EXHIBIT A
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
SCUDDER NEW EUROPE FUND, INC.
Scudder New Europe Fund, Inc. a Maryland corporation, having its principal
office in Maryland in Baltimore City (hereinafter called the "Corporation")
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
ARTICLE I: The Charter of the Corporation is amended and as so amended is
restated in its entirety by striking out Article First through Twelfth and
inserting in lieu thereof the following:
"FIRST: The undersigned, Joshua M. Levine, whose address is One Citicorp
Center, 153 East 53rd Street, New York, New York 10022, being at least eighteen
years of age, acting as incorporator, does hereby form a corporation under the
Maryland General Corporation Law.
SECOND: The name of the Corporation is Kemper Europe Fund, Inc. (the
"Corporation"). *
THIRD: The purposes for which the Corporation is formed are to operate and
carry out the business of an open-end management investment company under the
Investment Company Act of 1940, as amended, and generally to exercise and enjoy
all of the powers, rights and privileges granted to, or conferred upon,
corporations by the Maryland General Corporation Law.
- --------
* The Fund's name will remain "Scudder New Europe Fund, Inc." if the
Reorganization of the Fund is not approved by the shareholders of Kemper
Europe Fund.
<PAGE> 57
FOURTH: The post office address of the principal office of the Corporation
in the State of Maryland is c/o The Corporation Trust Incorporated, 300 East
Lombard Street, Baltimore, Maryland 21202. The name and address of the resident
agent of the Corporation in the State of Maryland is The Corporation Trust
Incorporated, 300 East Lombard Street, Baltimore, Maryland 21202.
FIFTH: (1) The total number of shares of capital stock which the
Corporation shall have authority to issue is five hundred million (500,000,000),
all of which shall be Common Stock having a par value of one-tenth of one cent
($0.001) per share and an aggregate par value of five hundred thousand dollars
($500,000). Until such time as the Board of Directors shall provide otherwise in
accordance with paragraph (1)(d) of Article Seventh hereof, two hundred million
(200,000,000) of the authorized shares of Common Stock of the Corporation are
classified as Class A Common Stock, one hundred million (100,000,000) of such
shares are classified as Class B Common Stock, one hundred million (100,000,000)
of such shares are classified as Class C Common Stock and one hundred million
(100,000,000) of such shares are classified as Class M Common Stock. Each share
(including for this purpose a fraction of a share) of Common Stock issued and
outstanding immediately prior to these Articles of Amendment and Restatement
becoming effective, shall, at such effective time, be reclassified
automatically, and without any action or choice on the part of the holder, into
a share (or the same fraction of a share) of Class M Common Stock.
(2) As more fully set forth hereafter, the assets and liabilities and the
income and expenses attributable to each class of the Corporation's stock shall
be determined separately from those of each other class of the Corporation's
stock and, accordingly, the net asset value, the dividends and distributions
payable to stockholders, and the amounts distributable in the
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event of liquidation or dissolution of the Corporation to stockholders of the
Corporation's stock may vary from class to class.
(3) The assets of the Corporation attributable to each of the Class A
Common Stock, the Class B Common Stock, the Class C Common Stock and the Class M
Common Stock shall be invested in the same investment portfolio of the
Corporation.
(4) The allocations of investment income and losses and capital gains and
losses and expenses and liabilities of the Corporation among each of the classes
of Common Stock of the Corporation shall be determined by the Board of Directors
in a manner that is consistent with the Investment Company Act of 1940, as
amended. The determination of the Board of Directors shall be conclusive as to
the allocation of investment income and losses, capital gains and losses,
expenses and liabilities (including accrued expenses and reserves) and assets to
a particular class or classes.
(5) Shares of each class of stock shall be entitled to such dividends or
distributions, in stock or in cash or both, as may be declared from time to time
by the Board of Directors with respect to such class. Specifically, and without
limiting the generality of the foregoing, the dividends and distributions of
investment income and capital gains with respect to each class of stock may vary
with respect to each such class to reflect differing allocations of the expenses
of the Corporation among the holders of the classes and any resultant
differences among the net asset values per share of the classes, to such extent
and for such purposes as the Board of Directors may deem appropriate. The Board
of Directors may provide that dividends and distributions on the Class M Common
Stock may be paid or reinvested in shares of Class A Common Stock. The Board of
Directors may provide that dividends and distributions shall be payable only
with respect to those shares of stock that have been held of record continuously
by the stockholder for a specified
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period, not to exceed 72 hours, prior to the record date of the dividend or
distribution.
(6) On each matter submitted to a vote of the stockholders, each holder of
a share of stock shall be entitled to one vote for each such share standing in
such holder's name upon the books of the Corporation regardless of the class
thereof, and all shares of all classes shall vote together as a single class;
provided, however, that (i) when the Maryland General Corporation Law or the
Investment Company Act of 1940, as amended, requires that a class vote
separately with respect to a given matter, the separate voting requirements of
the applicable law shall govern with respect to the affected class or classes:
(ii) in the event that the separate vote requirement referred to in (i) above
applies with respect to one or more classes, then, subject to (iii) below, the
shares of all other classes shall vote as one single class; and (iii) as to any
matter, which, in the judgment of the Board of Directors (which shall be
conclusive and binding for all purposes), does not affect the interests of a
particular class, such class shall not be entitled to any vote and only the
holders of shares of the affected class or classes shall be entitled to vote.
(7) In the event of the liquidation or dissolution of the Corporation,
stockholders of each class of the Corporation's stock shall be entitled to
receive, as a class, out of the assets of the Corporation available for
distribution to stockholders, but other than general assets not attributable to
any particular class of stock, the assets attributable to the class less the
liabilities allocated to that class; and the assets so distributable to the
stockholders shall be distributed among the stockholders in proportion to the
number of shares of the class held by them and recorded on the books of the
Corporation. In the event that there are any general assets not attributable to
any particular class of stock, and such assets are available for distribution,
the distribution shall be made to the holders of all classes in proportion to
the net asset value of the
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respective classes or as otherwise determined by the Board of Directors.
(8) To the extent permitted by law, each holder of shares of the
Corporation's stock shall be entitled to require the Corporation to redeem all
or any part of the shares of stock of the Corporation standing in the name of
the holder on the books of the Corporation, and all shares of stock issued by
the Corporation shall be subject to redemption by the Corporation, at the
redemption price of the shares as in effect from time to time as may be
determined by or pursuant to the direction of the Board of Directors of the
Corporation in accordance with the provisions of Article Seventh, less the
amount of any applicable redemption charge, deferred sales charge or other
amount imposed by the Board of Directors (to the extent consistent with
applicable law), subject to the right of the Board of Directors of the
Corporation to suspend the right of redemption or postpone the date of payment
of the redemption price in accordance with provisions of applicable law. The
proceeds of the redemption of a share (including a fractional share) of any
class of stock of the Corporation shall be reduced by the amount of any
redemption charge, deferred sales charge or other amount payable on such
redemption pursuant to the terms of issuance of such shares. Without limiting
the generality of the foregoing, the Corporation shall, to the extent permitted
by applicable law, have the right at any time, at the Corporation's option, to
redeem, in whole or in part, the shares owned by any holder of stock of the
Corporation (i) if the redemption is, in the opinion of the Board of Directors
of the Corporation, desirable in order to prevent the Corporation from being
deemed a "personal holding company" within the meaning of the Internal Revenue
Code of 1986, as amended, or (ii) if the value of the shares in the account
maintained by the Corporation or its transfer agent for any class of stock for
the stockholder is below an amount determined from time to time by the Board of
Directors of the Corporation (the "Minimum Account Balance") and (a) the
stockholder has been given
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notice of the redemption and has failed to make additional purchases of shares
in an amount sufficient to bring the value in his account to at least the
Minimum Account Balance before the redemption is effected by the Corporation or
(b) the redemption is with respect to fees to be paid by the stockholder to the
Corporation for failing to maintain the Minimum Account Balance or (iii) the
Board of Directors has otherwise determined that it is in the best interests of
the Corporation to redeem the shares. Notwithstanding any other provision of
this Article FIFTH(8), if certificates representing the redeemed shares have
been issued, the redemption price need not be paid by the Corporation until such
certificates are presented in proper form for transfer to the Corporation or the
agent of the Corporation appointed for such purpose; however, the redemption
shall be effective in accordance with the action of the Board of Directors,
regardless of whether or not such presentation has been made. Payment of the
redemption price shall be made in cash by the Corporation at the time and in the
manner as may be determined from time to time by the Board of Directors of the
Corporation unless, in the opinion of the Board of Directors, which shall be
conclusive, conditions exist that make payment wholly in cash unwise or
undesirable; in such event the Corporation may make payment wholly or partly by
securities or other property included in the assets allocable to the class of
the shares for which redemption is being sought, the value of which shall be
determined as provided herein.
(9) The Board of Directors may impose a redemption charge on the net asset
value of shares of any Class of Common Stock at the time of their redemption
(including any redemptions in-kind and redemptions with respect to an exchange
for shares of another open-end investment company). The proceeds of the
redemption charge shall be retained by the Corporation. With the approval of the
Board of Directors, any established redemption charge may be reduced or waived,
in whole or in part, and any reductions or waivers may vary among the
stockholders.
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(10) At such times as may be determined by the Board of Directors (or with
the authorization of the Board of Directors, by the officers of the Corporation)
in accordance with the Investment Company Act of 1940, as amended, applicable
rules and regulations thereunder and applicable rules and regulations of the
National Association of Securities Dealers, Inc. and from time to time reflected
in the registration statement of the Corporation (the "Corporation's
Registration Statement"), shares of a particular class of stock of the
Corporation may be automatically converted into shares of another class of stock
of the Corporation based on the relative net asset values of such classes at the
time of conversion, subject, however, to any conditions of conversion that may
be imposed by the Board of Directors (or with the authorization of the Board of
Directors, by the officers of the Corporation) and reflected in the
Corporation's Registration Statement. The terms and conditions of such
conversion may vary within and among the classes to the extent determined by the
Board of Directors (or with the authorization of the Board of Directors, by the
officers of the Corporation) and set forth in the Corporation's Registration
Statement. Without limiting the generality of the foregoing, each share (or
fraction of a share) of Class M Common Stock that is issued and outstanding as
of the one year anniversary date of the date on which these Articles of
Amendment and Restatement become effective shall be converted automatically,
without any action or choice on the part of the holder, into a share (or such
fractional share), of Class A Common Stock of the Corporation based on relative
net asset values, and outstanding certificates previously representing the
issued and outstanding shares of Class M Common Stock shall thereafter represent
Class A Common Stock.
(11) The Corporation may issue shares of stock in fractional denominations
to the same extent as its whole shares, and shares in fractional denominations
shall be shares of stock having proportionately to the respective fractions
represented thereby
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all the rights to vote, the right to receive dividends and distributions, and
the right to participate upon liquidation of the Corporation, but excluding the
right, if any, to receive a stock certificate representing fractional shares.
(12) No stockholder shall be entitled to any preemptive right other than
as the Board of Directors may establish.
SIXTH: (a) The number of Directors of the Corporation shall be three,
which number shall be increased or decreased from time to time in the manner
provided in the By-Laws of the Corporation, provided that the number of
Directors shall not be less than three, nor more than twelve. A director may be
removed from office only for cause and only by the vote of 75% of the votes
entitled to be cast for the election of directors.
(b) Beginning with the first annual meeting of the stockholders held after
the initial public offering of the shares of the Corporation, the Directors
shall be divided into three classes, and shall be designated as Class I, Class
II and Class III Directors, respectively. The Class I Directors elected at such
initial annual meeting shall serve for a term of office expiring at the next
succeeding annual stockholders meeting. The Class II Directors elected at such
initial annual meeting shall serve for a term of office expiring at the second
succeeding annual stockholders meeting. The Class III Directors elected at such
initial annual meeting shall serve for a term of office expiring at the third
succeeding annual stockholders meeting. After expiration of the terms of office
specified for the Directors elected at such initial annual meeting, the
Directors of each class shall serve for terms of three (3) years, or, when
filling a vacancy, for the unexpired portion of such term and until their
successors are elected and have qualified. If the number of Directors is
changed, any increase or decrease shall be apportioned among the classes by the
Board of Directors so as to maintain the number of Directors in each class as
nearly as
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possible, but in no event shall a decrease in the number of Directors shorten
the term of any incumbent Director.
(c) The names of the directors who shall act until the first annual
meeting or until their successors are duly chosen and qualify are:
George S. Johnston
Nicholas Bratt
Juris Padegs
SEVENTH: The following provisions are inserted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the Board
of Directors and stockholders.
(1) In addition to its other powers explicitly or implicitly granted under
the Charter of the Corporation, by law or otherwise, the Board of Directors of
the Corporation:
(a) is expressly and exclusively authorized to make, alter, amend or
repeal the By-Laws of the Corporation;
(b) may from time to time determine whether, to what extent, at what
times and places, and under what conditions and regulations the accounts
and books of the Corporation, or any of them, shall be open to the
inspection of the stockholders, and no stockholder shall have any right to
inspect any account, book or document of the Corporation except as
conferred by statute or as authorized by resolution of the Board of
Directors of the Corporation;
(c) is empowered to authorize, without stockholder approval, the
issuance and sale from time to time of shares of stock of any class of the
Corporation whether now or hereafter authorized and securities convertible
into shares of stock of the Corporation of any class or classes, whether
now or hereafter authorized, for such consideration as the Board may deem
advisable;
(d) is authorized to classify or to reclassify, from time to time,
any unissued shares of stock of the Corporation, whether now or hereafter
authorized, by
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setting, changing or eliminating the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms and conditions of or rights to require redemption
for the stock. The provisions of these Articles of Amendment and
Restatement (including those in Article FIFTH hereof) shall apply to each
class of stock unless otherwise provided by the Board of Directors prior
to issuance of any shares of that class;
(e) is empowered to authorize and issue, without stockholder
approval, unsecured obligations of the Corporation, and subject to Article
Eighth of these Articles of Amendment and Restatement, secured obligations
of the Corporation, as the Board of Directors may determine, and to
authorize and cause to be executed mortgages and liens upon the real or
personal property of the Corporation;
(f) Notwithstanding anything in this Charter to the contrary, is
authorized to establish in its absolute discretion the basis or method for
determining the value of the assets attributable to any class, the value
of the liabilities attributable to any class and the net asset value of
each share of any class of the Corporation's stock; and
(g) is authorized to determine in accordance with generally accepted
accounting principles and practices what constitutes net profits,
earnings, surplus or net assets in excess of capital, and to determine
what accounting periods shall be used by the Corporation for any purpose;
to set apart out of any funds of the Corporation reserves for such
purposes as it shall determine and to abolish the same; to declare and pay
any dividends and distributions in cash, securities or other property from
surplus or any other funds legally available therefor, at such intervals
as it shall determine; to declare dividends or distributions by means of a
formula or other method of determination, at meetings held less frequently
than the frequency of the effectiveness of
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such declarations; and to establish payment dates for dividends or any
other distributions on any basis, including dates occurring less
frequently than the effectiveness of declarations thereof.
(2) Notwithstanding any provision of the Maryland General Corporation Law
requiring a greater proportion than a majority of the votes of all classes or of
any class of the Corporation's stock entitled to be cast in order to take or
authorize any action, any such action shall be effective and valid if taken or
authorized by the affirmative vote of a majority of the aggregate number of
votes entitled to be cast thereon subject to any applicable requirements of the
Investment Company Act of 1940, as amended, as from time to time in effect, or
rules or orders of the Securities and Exchange Commission or any successor
thereto.
(3) The presence in person or by proxy of the holders of shares entitled
to cast one-third of the votes entitled to be cast (without regard to class)
shall constitute a quorum at any meeting of the stockholders, except with
respect to any matter which, under applicable statutes or regulatory
requirements, requires approval by a separate vote of one or more classes of
stock, in which case the presence in person or by proxy of the holders of shares
entitled to cast one-third of the votes entitled to be cast by each class
entitled to vote as a class on the matter shall constitute a quorum.
(4) Any determination made in good faith by or pursuant to the direction
of the Board of Directors, as to the amount of the assets, debts, obligations,
or liabilities of the Corporation, as to the amount of any reserves or charges
set up and the propriety thereof, as to the time of or purpose for creating such
reserves or charges, as to the use, alteration or cancellation of any reserves
or charges (whether or not any debt, obligation, or liability for which such
reserves or charges shall have been created shall be then or thereafter required
to be paid or discharged), as to the value of or the method of valuing any
investment owned or held by the Corporation, as to market value
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or fair value of any investment or fair value of any other asset of the
Corporation, as to the allocation of any asset of the Corporation to a
particular class or classes of the Corporation's stock, as to the charging of
any liability or expense of the Corporation to a particular class or classes of
the Corporation's stock, as to the number of shares of the Corporation
outstanding, as to the estimated expense to the Corporation in connection with
purchases of its shares, as to the ability to liquidate investments in orderly
fashion, or as to any other matters relating to the issue, sale, redemption or
other acquisition or disposition of investments or shares of the Corporation,
shall be final and conclusive and shall be binding upon the Corporation and all
holders of its shares, past, present and future, and shares of the Corporation
are issued and sold on the condition and understanding that any and all such
determinations shall be binding as aforesaid.
EIGHTH: Special Vote of Stockholders.
(a) Except as otherwise provided in this Article Eighth, at least 75% of
the votes entitled to be cast by stockholders, in addition to the affirmative
vote of 75% of the Board of Directors, shall be necessary to effect any of the
following actions:
(i) any amendment to these Articles to make the Corporation's Common
Stock a "redeemable security" (as such term is defined in the Investment Company
Act of 1940, as amended) unless the Continuing Directors (as hereinafter
defined) of the Corporation, by a vote of at least 75% of such Directors,
approve such amendment in which case the affirmative vote of the holders of a
majority of the outstanding shares of the Corporation entitled to vote thereon
shall be required;
(ii) any stockholder proposal as to specific investment decisions
made or to be made with respect to the Corporation's assets;
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(iii) any proposal as to the voluntary liquidation or dissolution of
the Corporation unless the Continuing Directors of the Corporation, by a vote of
at least 75% of such Directors, approve such proposal in which case the
affirmative vote of the holders of a majority of the outstanding shares of the
Corporation entitled to vote thereon shall be required; or
(iv) any Business Combination (as hereinafter defined) unless either
the condition in clause (A) below is satisfied or all of the conditions in
clauses (B), (C), (D), (E) and (F) below are satisfied:
(A) The Business Combination shall have been approved by a
vote of at least 75% of the Continuing Directors in which case the affirmative
vote of the holders of a majority of the outstanding shares of the Corporation
entitled to vote thereon shall be required.
(B) The aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the Business
Combination, of consideration other than cash to be received per share by
holders of any class of outstanding Voting Stock (as hereinafter defined) in
such Business Combination shall be at least equal to the higher of the
following:
(x) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers fees) paid by an Interested
Party (as hereinafter defined) for any shares of such Voting Stock acquired by
it (aa) within the two-year period immediately prior to the first public
announcement of the proposal of the Business Combination (the "Announcement
Date") or (bb)(i) in the Threshold Transaction (as hereinafter defined), or (ii)
in any period between the Threshold Transaction and the consummation of the
Business Combination, whichever is higher; and
(y) the net asset value per share of such Voting Stock
on the Announcement Date or on the date of the Threshold Transaction, whichever
is higher.
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(C) The consideration to be received by holders of the
particular class of outstanding Voting Stock shall be in cash or in the same
form as the Interested Party has previously paid for shares of any class of
Voting Stock. If the Interested Party has paid for shares of any class of Voting
Stock with varying forms of consideration, the form of consideration for such
class of Voting Stock shall be either cash or the form used to acquire the
largest number of shares of such class of Voting Stock previously acquired by
it.
(D) After the occurrence of the Threshold Transaction, and
prior to the consummation of such Business Combination, such Interested Party
shall not have become the beneficial owner of any additional shares of Voting
Stock except by virtue of the Threshold Transaction.
(E) After the occurrence of the Threshold Transaction, such
Interested Party shall not have received the benefit, directly or indirectly
(except proportionately as a shareholder of the Corporation), of any loans,
advances, guarantees, pledges or other financial assistance or any tax credits
or other tax advantages provided by the Corporation, whether in anticipation of
or in connection with such Business Combination or otherwise.
(F) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, as amended, and the
rules and regulations thereunder (or any subsequent provisions replacing such
Acts, rules or regulations) shall be prepared and mailed by the Interested
Party, at such Interested Party's expense, to the shareholders of the
Corporation at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is required to
be mailed pursuant to such Acts or subsequent provisions).
(b) For the purposes of this Article Eighth:
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(i) "Business Combination" shall mean any of the transactions
described or referred to in any one or more of the following subparagraphs:
(A) any merger, consolidation or share exchange of the
Corporation with or into any other person;
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions in any 12
month period) to or with any other person of any assets of the Corporation
having an aggregate Fair Market Value of $1,000,000 or more except for portfolio
transactions of the Corporation effected in the ordinary course of the
Corporation's business;
(C) the issuance or transfer by the Corporation (in one
transaction or a series of transactions in any 12 month period) of any
securities of the Corporation to any other person in exchange for cash,
securities or other property (or a combination thereof) having an aggregate Fair
Market Value of $100,000,000 or more excluding (x) sales of any securities of
the Corporation in connection with a public offering thereof, (y) issuances of
any securities of the Corporation pursuant to a dividend reinvestment plan
adopted by the Corporation and (z) issuances of any securities of the
Corporation upon the exercise of any stock subscription rights distributed by
the Corporation;
(ii) "Continuing Director" means any member of the Board of
Directors of the Corporation who is not an Interested Party or an Affiliate of
an Interested Party and has been a member of the Board of Directors for a period
of at least 12 months, or is a successor of a Continuing Director who is
unaffiliated with an Interested Party and is recommended to succeed a Continuing
Director by a majority of the Continuing Directors then on the Board of
Directors.
(iii) "Interested Party" shall mean any person, other than an
investment company advised by the Corporation's initial investment manager or
any of its Affiliates, which
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enters, or proposes to enter, into a Business Combination with the Corporation.
(iv) "Person" shall mean an individual, a corporation, a trust or a
partnership.
(v) "Voting Stock" shall mean capital stock of the Corporation
entitled to vote generally in the election of directors.
(vi) A person shall be a "beneficial owner" of any Voting Stock:
(A) which such person or any of its Affiliates or Associates
(as hereinafter defined) beneficially owns, directly or indirectly; or
(B) which such person or any of its Affiliates or Associates
has the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or
(C) which is beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates or Associates
has any Agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
(vii) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule l2b-1 of the General Rules and Regulations under
the Securities Exchange Act of 1934.
(viii) "Fair Market Value" means:
(A) in the case of stock, the highest closing sale price
during the 30-day period immediately preceding the relevant date of a share of
such stock on the New York Stock Exchange, or if such stock is not listed on
such Exchange, on the principal United States securities exchange registered
under the Securities Exchange Act of 1934 on which such stock is listed, or, if
such stock is not listed on any such exchange, the highest
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closing bid quotation with respect to a share of such stock during the 30-day
period preceding the relevant date on the National Association of Securities
Dealers, Inc. Automated Quotation Systems (NASDAQ) or any system then in use, or
if no such quotations are available, the fair market value on the relevant date
of the share of such stock as determined by 75% of the Continuing Directors in
good faith, and
(B) in the case of property other than cash or stock, the fair
market value of such property on the relevant date as determined by 75% of the
Contracting Directors in good faith.
(ix) "Threshold Transaction" means the transaction by or as a result
of which an Interested Party first becomes the beneficial owner of Voting Stock.
(x) In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be received"
as used in subparagraph (a)(iv)(B) above shall include the shares of Common
Stock and/or the shares of any other class of outstanding Voting Stock retained
by the holders of such shares.
(xi) Continuing Directors of the Corporation, acting by a vote of
75%, shall have the power and duty to determine, on the basis of information
known to them after reasonable inquiry, all facts necessary to determine (a) the
number of shares of Voting Stock beneficially owned by any person, (b) whether a
person is an Affiliate or Associate of another, (c) whether the requirements of
subparagraph (a)(iv) above have been met with respect to any Business
Combination, and (d) whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the issuance or
transfer of securities by the Corporation in any Business Combination has, an
aggregate Fair Market Value of $1,000,000 or more.
NINTH: Pre-Emptive Rights. No holder of the Common stock of the
Corporation or of any other class of stock or securities
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which may hereafter be created shall be entitled as such, as a matter of right,
to subscribe for or purchase any part of any new or additional issue of stock of
any class, or of rights or options to purchase any stock, or of securities
convertible into, or carrying rights or options to purchase, stock of any class,
whether now or hereafter authorized or whether issued for a consideration other
than money or by way of a dividend or otherwise, and all such rights are hereby
waived by each holder of Common Stock and of any other class of stock which may
hereafter be created.
TENTH: Reservation of Right to Amend. From time to time any of the
provisions of this Charter may be amended, altered or repealed (including any
amendment which changes the terms of any of the outstanding stock by
classification, reclassification or otherwise) and all rights at any time
conferred upon the stockholders of the Corporation by this Charter are granted
subject to the provisions of this Article TENTH. With the exception of Articles
THIRD, SIXTH, EIGHTH, NINTH, this Article TENTH and Article ELEVENTH, any of the
provisions of this Charter may be amended, altered or repealed upon the vote of
a majority of the votes entitled to be cast by stockholders. The provisions of
Articles SIXTH, EIGHTH, NINTH, this Article TENTH and Article ELEVENTH may be
amended, altered or repealed only upon the vote of at least 75% of the votes
entitled to be cast by stockholders. The provisions of Article Third may be
amended, altered or repealed only upon the vote of at least 75% of the votes
entitled to be cast by stockholders, unless, pursuant to Article EIGHTH Section
(a)(i), the Continuing Directors of the Corporation, by a vote of at least 75%
of such Directors, approve such amendment in which case the affirmative vote of
a majority of the votes entitled to be cast by stockholders shall be required.
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ELEVENTH: Duration. Subject to the provisions of Article Eighth(a)(iii),
the duration of the Corporation shall be perpetual.
TWELFTH: (1) To the full extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for money damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not that person is a director or officer at the
time of any proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance expenses to its currently
acting and its former directors to the full extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The Corporation
shall indemnify and advance expenses to its officers to the same extent as its
directors and may do so to such further extent as is consistent with law. The
Board of Directors may by By-Law, resolution or agreement make further provision
for indemnification of directors, officers, employees and agents to the full
extent permitted by the Maryland General Corporation Law.
(3) No provision of this Article shall be effective to protect or purport
to protect any director or officer of the Corporation against any liability to
the Corporation or its stockholders to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
(4) References to the Maryland General Corporation Law in this Article are
to that law as from time to time amended. No amendment to the Charter of the
Corporation shall affect any right of any person under this Article based on any
event, omission or proceeding prior to the amendment."
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ARTICLE II. Each share (including for this purpose a fraction of a
share) of Common Stock issued and outstanding immediately prior to these
Articles of Amendment and Restatement becoming effective, shall, at such
effective time, be reclassified automatically, and without any action or choice
on the part of the holder, into a share (or the same fraction of a share) of
Class M Common Stock. Outstanding certificates representing issued and
outstanding shares of Common Stock immediately prior to these Articles of
Amendment and Restatement becoming effective, shall upon these Articles of
Amendment and Restatement becoming effective be deemed to represent the same
number of shares of Class M Common Stock. Certificates representing shares of
the Class M Common Stock resulting from the aforesaid reclassification need not
be issued until certificates representing the shares of Common Stock so
reclassified, if issued, have been received by the Corporation or its agent duly
endorsed for transfer with the request that a new certificate be provided. The
Class A Common Stock, Class B Common Stock, Class C Common Stock and Class M
Common Stock shall have the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption as set forth in the Charter of the Corporation as
herein amended and restated.
ARTICLE III: The Corporation desires to amend and restate its
Charter as currently in effect. The provisions set forth in these Articles of
Amendment and Restatement are all of the provisions of the Charter currently in
effect as herein amended. The current address of the principal office of the
Corporation, and the name and address of the Corporation's current resident
agent are as set forth herein. The number of directors is currently set at six
and their names are [ ], [ ], [ ], [ ], [ ], and [ ].
ARTICLE IV: The amendment and restatement of the Charter of the
Corporation as hereinabove set forth has been duly
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advised by the Board of Directors and approved by the stockholders.
ARTICLE V: The total number of shares of capital stock that the
Corporation had authority to issue immediately prior to these Articles of
Amendment and Restatement becoming effective was one hundred million
(100,000,000) shares of the par value of one cent ($.01) per share and of the
aggregate par value of one million dollars ($1,000,000 ) all of which shares
were designated Common Stock. The total number of shares of capital stock that
the Corporation has authority to issue upon these Articles of Amendment and
Restatement becoming effective is five hundred million (500,000,000) shares, all
of the par value of one-tenth of one cent ($.001) per share, and of the
aggregate par value of five hundred thousand dollars ($500,000). Two hundred
million (200,000,000) of such shares are designated as Class A Common Stock, one
hundred million (100,000,000) of such shares are designated as Class B Common
Stock, one hundred million (100,000,000) of such shares are designated as Class
C Common Stock and one hundred million (100,000,000) of such shares are
designated as Class M Common Stock.
ARTICLE VI: These Articles of Amendment and Restatement shall become
effective on ________, 1999 at _____ [a.m./p.m.] Eastern Time.
IN WITNESS WHEREOF, Scudder New Europe Fund, Inc. has caused these
Articles of Amendment and Restatement to be signed in its name and on its behalf
by its President, ______________, and witnessed by its Secretary,
______________, as of , 1999.
The President acknowledges these Articles of Amendment and Restatement to
be the corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters and facts set forth in these
Articles with respect to the authorization and approval of this amendment and
restatement of
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the Corporation's Charter are true in all material respects and that this
statement is made under penalties of perjury.
By:
--------------------------
President
Witness:
- ---------------------------
Secretary
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EXHIBIT B
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this ___ day of 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
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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:
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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
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of the Trustees or shareholders of the Kemper Fund individually but binding only
upon the assets and property of the Kemper Fund.
[Signature page follows]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its Chairman of the Board, President or Vice President and
attested to by its Secretary or Assistant Secretary.
SCUDDER NEW EUROPE FUND, INC.
By:
-------------------------------------------
Name:
Title:
Attest:
---------------------------------------
KEMPER EUROPE FUND
By:
-------------------------------------------
Name:
Title:
Attest:
---------------------------------------
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EXHIBIT C
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
SCUDDER NEW EUROPE FUND, INC.
Scudder New Europe Fund, Inc. a Maryland corporation, having its principal
office in Maryland in Baltimore City (hereinafter called the "Corporation")
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
ARTICLE I: The Charter of the Corporation is amended and as so amended is
restated in its entirety by striking out Article First through Twelfth and
inserting in lieu thereof the following:
"FIRST: The undersigned, Joshua M. Levine, whose address is One
Citicorp Center, 153 East 53rd Street, New York, New York 10022, being at least
eighteen years of age, acting as incorporator, does hereby form a corporation
under the Maryland General Corporation Law.
SECOND: The name of the Corporation is Kemper Europe Fund, Inc. (the
"Corporation").*
THIRD: The purposes for which the Corporation is formed are to
operate and carry out the business of an open-end
- ----------
* The Fund's name will remain "Scudder New Europe Fund, Inc." if the
Reorganization of the Fund is not approved by the shareholders of Kemper Europe
Fund.
<PAGE> 102
management investment company under the Investment Company Act of 1940, as
amended, and generally to exercise and enjoy all of the powers, rights and
privileges granted to, or conferred upon, corporations by the Maryland General
Corporation Law.
FOURTH: The post office address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation Trust Incorporated,
300 East Lombard Street, Baltimore, Maryland 21202. The name and address of the
resident agent of the Corporation in the State of Maryland is The Corporation
Trust Incorporated, 300 East Lombard Street, Baltimore, Maryland 21202.
FIFTH: (1) The total number of shares of capital stock which the
Corporation shall have authority to issue is five hundred million (500,000,000),
all of which shall be Common Stock having a par value of one-tenth of one cent
($0.001) per share and an aggregate par value of five hundred thousand dollars
($500,000). Until such time as the Board of Directors shall provide otherwise in
accordance with paragraph (1)(d) of Article Seventh hereof, two hundred million
(200,000,000) of the authorized shares of Common Stock of the Corporation are
classified as Class A Common Stock, one hundred million (100,000,000) of such
shares are classified as Class B Common Stock, one hundred million (100,000,000)
of such shares are classified as Class C Common Stock and one hundred million
(100,000,000) of such shares are classified as Class M Common
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<PAGE> 103
Stock. Each share (including for this purpose a fraction of a share) of Common
Stock issued and outstanding immediately prior to these Articles of Amendment
and Restatement becoming effective, shall, at such effective time, be
reclassified automatically, and without any action or choice on the part of the
holder, into a share (or the same fraction of a share) of Class M Common Stock.
(2) As more fully set forth hereafter, the assets and liabilities
and the income and expenses attributable to each class of the Corporation's
stock shall be determined separately from those of each other class of the
Corporation's stock and, accordingly, the net asset value, the dividends and
distributions payable to stockholders, and the amounts distributable in the
event of liquidation or dissolution of the Corporation to stockholders of the
Corporation's stock may vary from class to class.
(3) The assets of the Corporation attributable to each of the Class
A Common Stock, the Class B Common Stock, the Class C Common Stock and the Class
M Common Stock shall be invested in the same investment portfolio of the
Corporation.
(4) The allocations of investment income and losses and capital
gains and losses and expenses and liabilities of the Corporation among each of
the classes of Common Stock of the Corporation shall be determined by the Board
of Directors in a manner that is consistent with the Investment Company Act of
1940, as amended. The determination of the Board of Directors
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<PAGE> 104
shall be conclusive as to the allocation of investment income and losses,
capital gains and losses, expenses and liabilities (including accrued expenses
and reserves) and assets to a particular class or classes.
(5) Shares of each class of stock shall be entitled to such
dividends or distributions, in stock or in cash or both, as may be declared from
time to time by the Board of Directors with respect to such class. Specifically,
and without limiting the generality of the foregoing, the dividends and
distributions of investment income and capital gains with respect to each class
of stock may vary with respect to each such class to reflect differing
allocations of the expenses of the Corporation among the holders of the classes
and any resultant differences among the net asset values per share of the
classes, to such extent and for such purposes as the Board of Directors may deem
appropriate. The Board of Directors may provide that dividends and distributions
on the Class M Common Stock may be paid or reinvested in shares of Class A
Common Stock. The Board of Directors may provide that dividends and
distributions shall be payable only with respect to those shares of stock that
have been held of record continuously by the stockholder for a specified period,
not to exceed 72 hours, prior to the record date of the dividend or
distribution.
(6) On each matter submitted to a vote of the stockholders, each
holder of a share of stock shall be entitled to one vote for each such share
standing in such holder's name
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<PAGE> 105
upon the books of the Corporation regardless of the class thereof, and all
shares of all classes shall vote together as a single class; provided, however,
that (i) when the Maryland General Corporation Law or the Investment Company Act
of 1940, as amended, requires that a class vote separately with respect to a
given matter, the separate voting requirements of the applicable law shall
govern with respect to the affected class or classes: (ii) in the event that the
separate vote requirement referred to in (i) above applies with respect to one
or more classes, then, subject to (iii) below, the shares of all other classes
shall vote as one single class; and (iii) as to any matter, which, in the
judgment of the Board of Directors (which shall be conclusive and binding for
all purposes), does not affect the interests of a particular class, such class
shall not be entitled to any vote and only the holders of shares of the affected
class or classes shall be entitled to vote.
(7) In the event of the liquidation or dissolution of the
Corporation, stockholders of each class of the Corporation's stock shall be
entitled to receive, as a class, out of the assets of the Corporation available
for distribution to stockholders, but other than general assets not attributable
to any particular class of stock, the assets attributable to the class less the
liabilities allocated to that class; and the assets so distributable to the
stockholders shall be distributed among the stockholders in proportion to the
number of shares of the class held by them and recorded on the books of the
Corporation. In
5
<PAGE> 106
the event that there are any general assets not attributable to any particular
class of stock, and such assets are available for distribution, the distribution
shall be made to the holders of all classes in proportion to the net asset value
of the respective classes or as otherwise determined by the Board of Directors.
(8) To the extent permitted by law, each holder of shares of the
Corporation's stock shall be entitled to require the Corporation to redeem all
or any part of the shares of stock of the Corporation standing in the name of
the holder on the books of the Corporation, and all shares of stock issued by
the Corporation shall be subject to redemption by the Corporation, at the
redemption price of the shares as in effect from time to time as may be
determined by or pursuant to the direction of the Board of Directors of the
Corporation in accordance with the provisions of Article Seventh, less the
amount of any applicable redemption charge, deferred sales charge or other
amount imposed by the Board of Directors (to the extent consistent with
applicable law), subject to the right of the Board of Directors of the
Corporation to suspend the right of redemption or postpone the date of payment
of the redemption price in accordance with provisions of applicable law. The
proceeds of the redemption of a share (including a fractional share) of any
class of stock of the Corporation shall be reduced by the amount of any
redemption charge, deferred sales charge or other amount payable on such
redemption pursuant to the terms of issuance of such shares.
6
<PAGE> 107
Without limiting the generality of the foregoing, the Corporation shall, to the
extent permitted by applicable law, have the right at any time, at the
Corporation's option, to redeem, in whole or in part, the shares owned by any
holder of stock of the Corporation (i) if the redemption is, in the opinion of
the Board of Directors of the Corporation, desirable in order to prevent the
Corporation from being deemed a "personal holding company" within the meaning of
the Internal Revenue Code of 1986, as amended, or (ii) if the value of the
shares in the account maintained by the Corporation or its transfer agent for
any class of stock for the stockholder is below an amount determined from time
to time by the Board of Directors of the Corporation (the "Minimum Account
Balance") and (a) the stockholder has been given notice of the redemption and
has failed to make additional purchases of shares in an amount sufficient to
bring the value in his account to at least the Minimum Account Balance before
the redemption is effected by the Corporation or (b) the redemption is with
respect to fees to be paid by the stockholder to the Corporation for failing to
maintain the Minimum Account Balance or (iii) the Board of Directors has
otherwise determined that it is in the best interests of the Corporation to
redeem the Shares. Notwithstanding any other provision of this Article FIFTH(8),
if certificates representing the redeemed shares have been issued, the
redemption price need not be paid by the Corporation until such certificates are
presented in proper form for transfer to the Corporation or the agent of the
Corporation appointed for
7
<PAGE> 108
such purpose; however, the redemption shall be effective in accordance with the
action of the Board of Directors, regardless of whether or not such presentation
has been made. Payment of the redemption price shall be made in cash by the
Corporation at the time and in the manner as may be determined from time to time
by the Board of Directors of the Corporation unless, in the opinion of the Board
of Directors, which shall be conclusive, conditions exist that make payment
wholly in cash unwise or undesirable; in such event the Corporation may make
payment wholly or partly by securities or other property included in the assets
allocable to the class of the shares for which redemption is being sought, the
value of which shall be determined as provided herein.
(9) The Board of Directors may impose a redemption charge on the net
asset value of shares of any Class of Common Stock at the time of their
redemption (including any redemptions in-kind and redemptions with respect to an
exchange for shares of another open-end investment company). The proceeds of the
redemption charge shall be retained by the Corporation. With the approval of the
Board of Directors, any established redemption charge may be reduced or waived,
in whole or in part, and any reductions or waivers may vary among the
stockholders.
(10) At such times as may be determined by the Board of Directors
(or with the authorization of the Board of Directors, by the officers of the
Corporation) in accordance with the Investment Company Act of 1940, as amended,
applicable rules
8
<PAGE> 109
and regulations thereunder and applicable rules and regulations of the National
Association of Securities Dealers, Inc. and from time to time reflected in the
registration statement of the Corporation (the "Corporation's Registration
Statement"), shares of a particular class of stock of the Corporation may be
automatically converted into shares of another class of stock of the Corporation
based on the relative net asset values of such classes at the time of
conversion, subject, however, to any conditions of conversion that may be
imposed by the Board of Directors (or with the authorization of the Board of
Directors, by the officers of the Corporation) and reflected in the
Corporation's Registration Statement. The terms and conditions of such
conversion may vary within and among the classes to the extent determined by the
Board of Directors (or with the authorization of the Board of Directors, by the
officers of the Corporation) and set forth in the Corporation's Registration
Statement. Without limiting the generality of the foregoing, each share (or
fraction of a share) of Class M Common Stock that is issued and outstanding as
of the one year anniversary date of the date on which these Articles of
Amendment and Restatement become effective shall be converted automatically,
without any action or choice on the part of the holder, into a share (or such
fractional share), of Class A Common Stock of the Corporation based on relative
net asset values, and outstanding certificates previously representing the
issued and outstanding shares of
9
<PAGE> 110
Class M Common Stock shall thereafter represent Class A Common Stock.
(11) The Corporation may issue shares of stock in fractional
denominations to the same extent as its whole shares, and shares in fractional
denominations shall be shares of stock having proportionately to the respective
fractions represented thereby all the rights to vote, the right to receive
dividends and distributions, and the right to participate upon liquidation of
the Corporation, but excluding the right, if any, to receive a stock certificate
representing fractional shares.
(12) No stockholder shall be entitled to any preemptive right other
than as the Board of Directors may establish.
SIXTH: The Corporation currently has six directors. The number of
directors of the Corporation may be changed pursuant to the By-Laws of the
Corporation, but shall not be less than the number of directors required under
the Maryland General Corporation Law.
SEVENTH: The following provisions are inserted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the Board
of Directors and stockholders.
(1) In addition to its other powers explicitly or implicitly granted
under the Charter of the Corporation, by law or otherwise, the Board of
Directors of the Corporation:
(a) is expressly and exclusively authorized to make, alter,
amend or repeal the By-Laws of the Corporation;
10
<PAGE> 111
(b) may from time to time determine whether, to what extent,
at what times and places, and under what conditions and regulations the
accounts and books of the Corporation, or any of them, shall be open to
the inspection of the stockholders, and no stockholder shall have any
right to inspect any account, book or document of the Corporation except
as conferred by statute or as authorized by resolution of the Board of
Directors of the Corporation;
(c) is empowered to authorize, without stockholder approval,
the issuance and sale from time to time of shares of stock of any class of
the Corporation whether now or hereafter authorized and securities
convertible into shares of stock of the Corporation of any class or
classes, whether now or hereafter authorized, for such consideration as
the Board may deem advisable;
(d) is authorized to classify or to reclassify, from time to
time, any unissued shares of stock of the Corporation, whether now or
hereafter authorized, by setting, changing or eliminating the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms and conditions of or rights to require
redemption for the stock. The provisions of these Articles of Amendment
and Restatement (including those in Article FIFTH hereof) shall apply to
each class of stock unless otherwise provided by the Board of Directors
prior to issuance of any shares of that class;
11
<PAGE> 112
(e) is empowered to authorize and issue, without stockholder
approval, obligations of the Corporation, secured and unsecured, as the
Board of Directors may determine, and to authorize and cause to be
executed mortgages and liens upon the real or personal property of the
Corporation;
(f) Notwithstanding anything in this Charter to the contrary,
is authorized to establish in its absolute discretion the basis or method
for determining the value of the assets attributable to any class, the
value of the liabilities attributable to any class and the net asset value
of each share of any class of the Corporation's stock; and
(g) is authorized to determine in accordance with generally
accepted accounting principles and practices what constitutes net profits,
earnings, surplus or net assets in excess of capital, and to determine
what accounting periods shall be used by the Corporation for any purpose;
to set apart out of any funds of the Corporation reserves for such
purposes as it shall determine and to abolish the same; to declare and pay
any dividends and distributions in cash, securities or other property from
surplus or any other funds legally available therefor, at such intervals
as it shall determine; to declare dividends or distributions by means of a
formula or other method of determination, at meetings held less frequently
than the frequency of the effectiveness of
12
<PAGE> 113
such declarations; and to establish payment dates for dividends or any
other distributions on any basis, including dates occurring less
frequently than the effectiveness of declarations thereof.
(2) Notwithstanding any provision of the Maryland General
Corporation Law requiring a greater proportion than a majority of the votes of
all classes or of any class of the Corporation's stock entitled to be cast in
order to take or authorize any action, any such action shall be effective and
valid if taken or authorized by the affirmative vote of a majority of the
aggregate number of votes entitled to be cast thereon subject to any applicable
requirements of the Investment Company Act of 1940, as amended, as from time to
time in effect, or rules or orders of the Securities and Exchange Commission or
any successor thereto.
(3) The presence in person or by proxy of the holders of shares
entitled to cast one-third of the votes entitled to be cast (without regard to
class) shall constitute a quorum at any meeting of the stockholders, except with
respect to any matter which, under applicable statutes or regulatory
requirements, requires approval by a separate vote of one or more classes of
stock, in which case the presence in person or by proxy of the holders of shares
entitled to cast one-third of the votes entitled to be cast by each class
entitled to vote as a class on the matter shall constitute a quorum.
13
<PAGE> 114
(4) Any determination made in good faith by or pursuant to the
direction of the Board of Directors, as to the amount of the assets, debts,
obligations, or liabilities of the Corporation, as to the amount of any reserves
or charges set up and the propriety thereof, as to the time of or purpose for
creating such reserves or charges, as to the use, alteration or cancellation of
any reserves or charges (whether or not any debt, obligation, or liability for
which such reserves or charges shall have been created shall be then or
thereafter required to be paid or discharged), as to the value of or the method
of valuing any investment owned or held by the Corporation, as to market value
or fair value of any investment or fair value of any other asset of the
Corporation, as to the allocation of any asset of the Corporation to a
particular class or classes of the Corporation's stock, as to the charging of
any liability or expense of the Corporation to a particular class or classes of
the Corporation's stock, as to the number of shares of the Corporation
outstanding, as to the estimated expense to the Corporation in connection with
purchases of its shares, as to the ability to liquidate investments in orderly
fashion, or as to any other matters relating to the issue, sale, redemption or
other acquisition or disposition of investments or shares of the Corporation,
shall be final and conclusive and shall be binding upon the Corporation and all
holders of its shares, past, present and future, and shares of the Corporation
are issued and sold on the condition
14
<PAGE> 115
and understanding that any and all such determinations shall be binding as
aforesaid.
EIGHTH: (1) To the full extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for money damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not that person is a director or officer at the
time of any proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the full extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to its officers to the
same extent as its directors and may do so to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents to the full extent permitted by the Maryland General
Corporation Law.
(3) No provision of this Article shall be effective to protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or its stockholders to which he or she would
otherwise be subject by
15
<PAGE> 116
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office.
(4) References to the Maryland General Corporation Law in this
Article are to that law as from time to time amended. No amendment to the
Charter of the Corporation shall affect any right of any person under this
Article based on any event, omission or proceeding prior to the amendment.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in its Charter in the manner now or hereafter
prescribed by the laws of the State of Maryland, including any amendment which
alters the contract rights, as expressly set forth in the Charter, of any
outstanding stock, and all rights conferred upon stockholders herein are granted
subject to this reservation.
ARTICLE II. Each share (including for this purpose a fraction of a share)
of Common Stock issued and outstanding immediately prior to these Articles of
Amendment and Restatement becoming effective, shall, at such effective time, be
reclassified automatically, and without any action or choice on the part of the
holder, into a share (or the same fraction of a share) of Class M Common Stock.
Outstanding certificates representing issued and outstanding shares of Common
Stock immediately prior to these Articles of Amendment and Restatement becoming
effective, shall upon these Articles of Amendment and Restatement becoming
effective be deemed to represent the same
16
<PAGE> 117
number of shares of Class M Common Stock. Certificates representing shares of
the Class M Common Stock resulting from the aforesaid reclassification need not
be issued until certificates representing the shares of Common Stock so
reclassified, if issued, have been received by the Corporation or its agent duly
endorsed for transfer with the request that a new certificate be provided. The
Class A Common Stock, Class B Common Stock, Class C Common Stock and Class M
Common Stock shall have the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption as set forth in the Charter of the Corporation as
herein amended and restated.
ARTICLE III: The Corporation desires to amend and restate its Charter as
currently in effect. The provisions set forth in these Articles of Amendment and
Restatement are all of the provisions of the Charter currently in effect as
herein amended. The current address of the principal office of the Corporation,
and the name and address of the Corporation's current resident agent are as set
forth herein. The number of directors is currently set at six and their names
are [ ], [ ], [ ], [ ], [ ], and [ ].
ARTICLE IV: The amendment and restatement of the Charter of the
Corporation as hereinabove set forth has been duly advised by the Board of
Directors and approved by the stockholders.
ARTICLE V: The total number of shares of capital stock that the
Corporation had authority to issue immediately prior to these
17
<PAGE> 118
Articles of Amendment and Restatement becoming effective was one hundred million
(100,000,000) shares of the par value of one cent ($.01) per share and of the
aggregate par value of one million dollars ($1,000,000), all of which shares
were designated Common Stock. The total number of shares of capital stock that
the Corporation has authority to issue upon these Articles of Amendment and
Restatement becoming effective is five hundred million (500,000,000) shares, all
of the par value of one-tenth of one cent ($.001) per share, and of the
aggregate par value of five hundred thousand dollars ($500,000). Two hundred
million (200,000,000) of such shares are designated as Class A Common Stock, one
hundred million (100,000,000) of such shares are designated as Class B Common
Stock, one hundred million (100,000,000) of such shares are designated as Class
C Common Stock and one hundred million (100,000,000) of such shares are
designated as Class M Common Stock.
ARTICLE VI: These Articles of Amendment and Restatement shall become
effective on ________, 1999 at _____ [a.m./p.m.] Eastern Time.
IN WITNESS WHEREOF, Scudder New Europe Fund, Inc. has caused these
Articles of Amendment and Restatement to be signed in its name and on its behalf
by its President, ________________, and witnessed by its Secretary,
_________________, as of _______, 1999.
The President acknowledges these Articles of Amendment and Restatement to
be the corporate act of the Corporation and states
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<PAGE> 119
that to the best of his knowledge, information and belief, the matters and facts
set forth in these Articles with respect to the authorization and approval of
this amendment and restatement of the Corporation's Charter are true in all
material respects and that this statement is made under penalties of perjury.
By:
------------------------------
President
Witness:
- ---------------------------
Secretary
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<PAGE> 120
EXHIBIT D
INVESTMENT MANAGEMENT AGREEMENT
KEMPER EUROPE FUND, INC.*
222 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
__________________, 1999
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
INVESTMENT MANAGEMENT AGREEMENT
KEMPER EUROPE FUND, INC.
Ladies and Gentlemen:
Kemper Europe Fund, Inc. (the "Fund") has been established as a Maryland
corporation to engage in the business of an investment company. Pursuant to the
Fund's Articles of Incorporation, as amended and restated from time to time (the
"Articles"), the Board of Directors is authorized to issue the Fund's shares of
Common Stock (the "Shares") in separate series or classes. The Board of
Directors has authorized five classes of shares. Additional series or classes
may be established from time to time by action of the Directors.
The Fund has selected you to act as the investment manager of the Fund and to
provide certain other services, as more fully set forth below, and you have
indicated that you are willing to act as such investment manager and to perform
such services under the terms and conditions hereinafter set forth. Accordingly,
the Fund agrees with you as follows:
1. Delivery of Documents. The Fund engages in the business of investing and
reinvesting its assets in the manner and in accordance with the investment
objectives, policies and restrictions specified in the currently effective
Prospectus (the "Prospectus") and Statement of Additional Information (the
"SAI") included in the Fund's Registration Statement on Form N-1A, as amended
from time to time (the "Registration Statement") filed by the Fund under the
Investment Company Act of
____________
* The Fund's name will remain Scudder Europe Fund, Inc. if the
Reorganization is not consummated.
<PAGE> 121
1940, as amended, (the "1940 Act") and the Securities Act of 1933, as amended.
Copies of the documents referred to in the preceding sentence have been
furnished to you by the Fund. The Fund has also furnished you with copies
properly certified or authenticated of each of the following additional
documents related to the Fund:
(a) The Articles, as amended and restated to date.
(b) By-Laws of the Fund as in effect on the date hereof
(the "By-Laws").
(c) Resolutions of the Directors of the Fund and the
shareholders of the Fund selecting you as investment
manager and approving the form of this Agreement.
The Fund will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Fund's Board of
Directors. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Fund. You shall
also make available to the Fund promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Fund in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Fund are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration
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<PAGE> 122
Statement. You shall determine what portion of the Fund's portfolio shall be
invested in securities and other assets and what portion, if any, should be held
uninvested.
You shall furnish to the Fund's Board of Directors periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Fund's officers or Board of Directors shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Fund administrative services necessary
for operating as an open-end investment company and not provided by persons not
parties to this Agreement including, but not limited to, preparing reports to
and meeting materials for the Fund's Board of Directors and reports and notices
to Fund shareholders; supervising, negotiating contractual arrangements with, to
the extent appropriate, and monitoring the performance of, accounting agents,
custodians, depositories, transfer agents and pricing agents, accountants,
attorneys, printers, underwriters, brokers and dealers, insurers and other
persons in any capacity deemed to be necessary or desirable to Fund operations;
preparing and making filings with the Securities and Exchange Commission (the
"SEC") and other regulatory and self-regulatory organizations, including, but
not limited to, preliminary and definitive proxy materials, post-effective
amendments to the Registration Statement, semi-annual reports on Form N-SAR and
notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the tabulation of
proxies by the Fund's transfer agent; assisting in the preparation and filing of
the Fund's federal, state and local tax returns; preparing and filing the Fund's
federal excise tax return pursuant to Section 4982 of the Code; providing
assistance with investor and public relations matters; monitoring the valuation
of portfolio securities and the calculation of net asset value; monitoring the
registration of Shares of the Fund under applicable federal and state securities
laws; maintaining or causing to be maintained for the Fund all books, records
and reports and any other information required under the 1940 Act, to the extent
that such books, records and reports and other information are not maintained by
the Fund's custodian or other agents of the Fund; assisting in establishing the
accounting policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting with
the Fund's independent accountants, legal counsel and the Fund's other agents as
necessary in connection therewith; establishing and monitoring the Fund's
operating expense budgets; reviewing the Fund's bills; processing the payment of
bills that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Fund as it may reasonably
3
<PAGE> 123
request in the conduct of the its business, subject to the direction and control
of the Fund's Board of Directors. Nothing in this Agreement shall be deemed to
shift to you or to diminish the obligations of any agent of the Fund or any
other person not a party to this Agreement which is obligated to provide
services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Directors,
officers and executive employees of the Fund (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Fund, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Directors and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Fund; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Fund is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Fund business) of Directors, officers and
employees of the Fund who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Directors and officers of the Fund; and costs of
shareholders' and other meetings.
4
<PAGE> 124
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Fund shall have adopted a plan in conformity with Rule 12b-1 under the 1940
Act providing that the Fund (or some other party) shall assume some or all of
such expenses. You shall be required to pay such of the foregoing sales expenses
as are not required to be paid by the principal underwriter pursuant to the
underwriting agreement or are not permitted to be paid by the Fund (or some
other party) pursuant to such a plan.
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Fund
shall pay you in United States Dollars on the last day of each month the unpaid
balance of a fee equal to the excess of (a) 1/12 of .75 of 1 percent of the
average daily net assets as defined below of the Fund for such month; provided
that, for any calendar month during which the average of such values exceeds
$250,000,000, the fee payable for that month based on the portion of the average
of such values in excess of $250,000,000 shall be 1/12 of .72 of 1 percent of
such portion; provided that, for any calendar month during which the average of
such values exceeds $1,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $1,000,000,000 shall be 1/12
of .70 of 1 percent of such portion; provided that, for any calendar month
during which the average of such values exceeds $2,500,000,000, the fee payable
for that month based on the portion of the average of such values in excess of
$2,500,000,000 shall be 1/12 of .68 of 1 percent of such portion; provided that,
for any calendar month during which the average of such values exceeds
$5,000,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $5,000,000,000 shall be 1/12 of .65 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $7,500,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $7,500,000,000
shall be 1/12 of .64 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $10,000,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $10,000,000,000 shall be 1/12 of .63 of 1 percent of such
portion; and provided that, for any calendar month during which the average of
such values exceeds $12,500,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $12,500,000,000 shall be 1/12
of .62 of 1 percent of such portion; over any compensation waived by you from
time to time (as more fully described below). You shall be entitled to receive
during any month such interim payments of your fee hereunder as you shall
request, provided that no such payment shall exceed 75 percent of the amount of
your fee then accrued on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net
5
<PAGE> 125
asset value of the Fund is determined consistent with the provisions of Rule
22c-1 under the 1940 Act or, if the Fund lawfully determines the value of its
net assets as of some other time on each business day, as of such time. The
value of the net assets of the Fund shall always be determined pursuant to the
applicable provisions of the Articles and the Registration Statement. If the
determination of net asset value does not take place for any particular day,
then for the purposes of this section 5, the value of the net assets of the Fund
as last determined shall be deemed to be the value of its net assets as of 4:00
p.m. (New York time), or as of such other time as the value of the net assets of
the Fund's portfolio may be lawfully determined on that day. If the Fund
determines the value of the net assets of its portfolio more than once on any
day, then the last such determination thereof on that day shall be deemed to be
the sole determination thereof on that day for the purposes of this section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Fund. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Fund agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates,
6
<PAGE> 126
provided that nothing in this Agreement shall be deemed to protect or purport to
protect you against any liability to the Fund or its shareholders to which you
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties, or by reason of your reckless
disregard of your obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until April 1, 2001, and continue in force from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of the Directors who are not parties to this
Agreement or interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by the
Directors of the Fund, or by the vote of a majority of the outstanding voting
securities of the Fund. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the 1940 Act and the rules and regulations thereunder and
any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Fund's Board of Directors on 60 days' written
notice to you, or by you on 60 days' written notice to the Fund. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Directors or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. [Use of Scudder Marks. As exclusive licensee of the rights to use and
sublicense the use of the "Scudder," "Scudder Kemper Investments, Inc." and
"Scudder, Stevens & Clark, Inc." trademarks (together, the "Scudder Marks"), you
hereby grant the Fund a non-exclusive right and sublicense to use (i) the
"Scudder" name and mark as part of the Fund's name (the "Fund Name") and (ii)
the Scudder Marks in connection with the Fund's investment products and
services, in each case only for so long as this Agreement, any other investment
management agreement between the Fund and you (or any organization which shall
have succeeded to your business as investment manager (the "Successor")), or any
extension, renewal or
7
<PAGE> 127
amendment hereof or thereof remains in effect, and only for so long as you are a
licensee of the Scudder Marks, provided, however, that you agree to use your
best efforts to maintain your license to use and sublicense the Scudder Marks.
The Fund agrees that it shall have no right to sublicense or assign rights to
use the Scudder Marks, shall acquire no interest in the Scudder Marks other than
the rights granted herein, that all of the Fund's uses of the Scudder Marks
shall inure to the benefit of Scudder Trust Company as owner and licensor of the
Scudder Marks (the "Trademark Owner"), and that the Fund shall not challenge the
validity of the Scudder Marks or the Trademark Owner's ownership thereof, The
Fund further agrees that all services and products it offers in connection with
the Scudder Marks shall meet commercially reasonable standards of quality, as
may be determined by you or the Trademark Owner from time to time, provided that
you acknowledge that the services and products the Fund rendered during the
one-year period preceding the date of this Agreement are acceptable At your
reasonable request, the Fund shall cooperate with you and the Trademark Owner
and shall execute and deliver any and all documents necessary to maintain and
protect (including but not limited to in connection with any trademark
infringement action) the Scudder Marks and/or enter the Fund as a registered
user thereof. At such time as this Agreement or any other investment management
agreement shall no longer be in effect between you (or the Successor) and the
Fund, or you no longer is a licensee of the Scudder Marks, the Fund shall (to
the extent that, and as soon as, it lawfully can) cease to use the Fund Name or
any other name indicating that it is advised by, managed by or otherwise
connected with you (or the Successor) or the Trademark Owner. In no event shall
the Fund use the Scudder Marks or any other name or mark confusingly similar
thereto (including, but not limited to, any name or mark that includes the name
"Scudder") if this Agreement or any other investment advisory agreement between
you (or the Successor) and the Fund is terminated.][FOR INCLUSION ONLY IF THE
REORGANIZATION IS NOT CONSUMMATED]
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the State of
New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, or in a manner which would cause the Fund to
fail to comply with the requirements of Subchapter M of the Code.
8
<PAGE> 128
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Fund, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
KEMPER EUROPE FUND, INC.*
By:
------------------------------
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
------------------------------
- --------
* As stated above, the Fund's name will remain Scudder Europe Fund, Inc. if
the Reorganization is not consummated.
9
<PAGE> 129
EXHIBIT E
INVESTMENT OBJECTIVES AND ADVISORY FEES FOR SIMILAR FUNDS MANAGED BY
SCUDDER KEMPER
SCUDDER FUNDS+
<TABLE>
<CAPTION>
Fund Objective Fee Rate Net Assets
---- --------- -------- ----------
<S> <C> <C> <C>
Global Income Fund
Scudder Emerging Markets High current income 1.000% of net assets $ 323,628,082
Income Fund and, secondarily,
long term capital
appreciation by
investing primarily
in high-yielding
debt securities
issued by
governments and
corporations in
emerging markets.
Scudder Global Bond Fund Total return with 0.750% to $1 billion $ 135,113,465
an emphasis on 0.700% thereafter++
current income by
investing primarily
in high-grade bonds
denominated in
foreign currencies
and the U.S.
dollar. As a
secondary
objective, the Fund
will seek capital
appreciation.
Scudder International Income primarily by 0.850% to $1 billion $ 145,818,767
Bond Fund investing in a 0.800% thereafter++
managed portfolio
of high-grade
international bonds
and, secondarily,
protection and
possible
enhancement of
principal value by
actively managing
currency, bond
market and maturity
exposure and by
</TABLE>
E-1
<PAGE> 130
<TABLE>
<CAPTION>
Fund Objective Fee Rate Net Assets
---- --------- -------- ----------
<S> <C> <C> <C>
security selection.
Asset Allocation Funds
Scudder Pathway Maximize total There will be no fee as $ 11,728,045
International Portfolio return, consisting the Manager will receive
of capital a fee from the
appreciation plus underlying funds
dividend income and
interest by
investing in a
select mix of
established
international and
global Scudder
Funds.
Global Growth Funds
Global Discovery Fund Above-average 1.100% of net assets $ 349,121,954
capital
appreciation over
the long term by
investing primarily
in the equity
securities of small
companies located
throughout the
world.
Scudder Emerging Markets Long term growth of 1.250% of net assets++ $ 219,624,481
Growth Fund capital primarily
through equity
investment in
emerging markets
around the globe.
Scudder Global Fund Long term growth of 1.000% to $500 million $1,766,207,742
capital through a 0.950% next $500 million
diversified 0.900% next $500 million
portfolio of 0.850% over $1.5 billion
marketable
securities,
primarily equity
securities,
including common
stock, preferred
stocks and debt
securities
convertible into
common stocks.
</TABLE>
E-2
<PAGE> 131
<TABLE>
<CAPTION>
Fund Objective Fee Rate Net Assets
---- --------- -------- ----------
<S> <C> <C> <C>
Scudder Gold Fund Maximum return 1.000% of net assets $ 132,131,545
(principal change
and income)
consistent with
investing in a
portfolio of
gold-related equity
securities and gold.
Scudder Greater Europe Long term growth of 1.000% to $1 billion $ 195,514,335
Growth Fund capital through 0.900 thereafter*
investments
primarily in the
equity securities
of European
companies.
Scudder International Fund Long term growth of 0.900% to $500 million $2,884,919,345
capital primarily 0.850% next $500 million
from foreign equity 0.800% next $1 billion
securities. 0.750% next $1 billion
0.700% thereafter
Scudder International Long term growth of 1.000% of net assets++ $ 48,880,164
Growth and Income Fund capital and current
income primarily
from foreign equity
securities.
Scudder International Long term capital 1.000% of net assets N/A**
Growth Fund appreciation
through investment
primarily in the
equity securities
of foreign
companies with high
growth potential.
Scudder International Long term capital 1.000% of net assets N/A**
Value Fund appreciation
through investment
primarily in
undervalued foreign
equity securities.
Scudder Latin America Fund Long term capital 1.250% to $1 billion $ 882,555,049
appreciation 1.150% thereafter
through investment
primarily in the
securities of Latin
American
</TABLE>
E-3
<PAGE> 132
<TABLE>
<CAPTION>
Fund Objective Fee Rate Net Assets
---- --------- -------- ----------
<S> <C> <C> <C>
issuers.
Scudder Pacific Long term growth of 1.100% of net assets $ 147,276,692
Opportunities Fund capital primarily
through investment
in the equity
securities of
Pacific Basin
companies,
excluding Japan.
The Japan Fund, Inc. Long term capital 0.850% to $100 million $ 265,181,931
appreciation 0.750% next $200 million
through investment 0.700% next $300 million
primarily in equity 0.650% thereafter
securities,
(including American
Depository
Receipts) of
Japanese companies.
Closed-End Funds
Montgomery Street Income High level of 0.500% to $150 million $ 207,315,702
Securities, Inc. current income 0.450% next $50 million
consistent with 0.400% thereafter
prudent investment
risks through a
diversified
portfolio primarily
of debt securities.
Scudder Spain and Long term capital Adviser: $ 112,909,567
Portugal Fund, Inc. appreciation 1.000% of net assets
through investment Administrator:
primarily in equity 0.200% of net assets
securities of
Spanish &
Portuguese issuers.
Insurance Products
Scudder Variable Life Above-average 0.975% of net assets++ $ 20,115,141
Investment Fund Global capital
Discovery Portfolio appreciation over
the long term by
investing primarily
in the equity
securities of small
companies located
throughout
</TABLE>
E-4
<PAGE> 133
<TABLE>
<CAPTION>
Fund Objective Fee Rate Net Assets
---- --------- -------- ----------
<S> <C> <C> <C>
the world.
Scudder Variable Life Long term growth of 0.875% to $500 million $ 427,237,880
Investment Fund capital principally 0.725% thereafter
International Portfolio from a diversified
portfolio of
foreign equity
securities.
AARP Funds
AARP Global Growth Fund Long term capital 0.350% to $2 billion $ 148,029,373
growth, consistent 0.330% next $2 billion
with a share price 0.300% next $2 billion
more stable than 0.280% next $2 billion
other global funds, 0.260% next $3 billion
through investment 0.250% next $3 billion
primarily in common 0.240% thereafter
stocks of Individual Fund Fee
established 0.550% of net assets
corporations in a
wide variety of
developed countries.
AARP International Growth Long term capital 0.350% to $2 billion $ 20,259,062
and Income Fund growth, consistent 0.330% next $2 billion
with a share price 0.300% next $2 billion
more stable than 0.280% next $2 billion
other international 0.260% next $3 billion
mutual funds, 0.250% next $3 billion
through investment 0.240% thereafter++
primarily in a Individual Fund Fee
diversified 0.600% of net assets
portfolio of
foreign common
stocks with
above-average
dividend yields and
foreign securities
convertible into
common stocks.
</TABLE>
- ----------
+ The information provided below is shown as of the end of each Fund's last
fiscal year, unless otherwise noted.
++ Subject to waivers and/or expense limitations.
* The addition of this breakpoint is effective October 1, 1998.
** Net asset information is not available for Scudder International Growth
Fund and Scudder International Value Fund, each of which commenced
operations on September 1, 1998.
E-5
<PAGE> 134
KEMPER FUNDS+
<TABLE>
<CAPTION>
Fund Objective Fee Rate Net Assets
---- --------- -------- ----------
<S> <C> <C> <C>
Global and International Funds
Kemper Asian Growth Fund Long-term capital 0.850% to $250 million $ 6,398,000
growth by 0.820% next $750 million
investing in a 0.800% next $1.5 billion
diversified 0.780% next $2.5 billion
portfolio of Asian 0.750% next $2.5 billion
equity securities. 0.740% next $2.5 billion
0.730% next $2.5 billion
0.720% thereafter**
Kemper Emerging Markets Long-term growth 1.250% of net assets** $ 1,147,000@
Growth Fund of capital
primarily through
equity investment
in emerging
markets around the
globe.
Kemper Emerging Markets High current 1.000% of net assets** $ 5,616,000@
Income Fund income and,
secondarily,
long-term capital
appreciation.
Kemper Europe Fund Long-term capital 0.750% to $250 million $ 23,910,000
growth by 0.720% next $750 million
investing in a 0.700% next $1.5 billion
diversified 0.680% next $2.5 billion
portfolio of 0.650% next $2.5 billion
European equity 0.640% next $2.5 billion
securities. 0.630% next $2.5 billion
0.620% thereafter
Kemper Global Blue Chip Fund Long-term growth 1.000% to $250 million $ 3,663,000@
of capital through 0.950% next $750 million
a diversified 0.900% thereafter**
worldwide
portfolio of
marketable
securities,
primarily equity
securities.
Kemper Global Income Fund High current 0.750% to $250 million $ 99,054,000
income consistent 0.720% next $750 million
with prudent total 0.700% next $1.5 billion
return asset 0.680% next $2.5 billion
management by 0.650% next $2.5 billion
investing in a 0.640% next $2.5 billion
portfolio of 0.630% next $2.5 billion
investment grade 0.620% thereafter
foreign and
domestic fixed
income securities.
</TABLE>
E-6
<PAGE> 135
<TABLE>
<CAPTION>
Fund Objective Fee Rate Net Assets
---- --------- -------- ----------
<S> <C> <C> <C>
Kemper International Fund Total return, a 0.750% to $250 million $ 588,069,000
combination of 0.720% next $750 million
capital growth and 0.700% next $1.5 billion
income, 0.680% next $2.5 billion
principally 0.650% next $2.5 billion
through an 0.640% next $2.5 billion
internationally 0.630% next $2.5 billion
diversified 0.620% thereafter
portfolio of
equity securities.
Kemper International Growth Long-term growth 1.000% of net assets** $ 1,556,000@
and Income Fund of capital and
income, primarily
from foreign
equity securities.
Kemper Latin America Fund Long-term capital 1.250% to $250 million $ 1,441,000@
appreciation 1.200% next $750 million
through investment 1.150% thereafter**
primarily in the
securities of
Latin American
issuers.
Asset Allocation Funds A balance between 0.580% to $250 million $ 106,339,000
Kemper Horizon 10+ growth of capital 0.550% next $750
Portfolio and income, million
consistent with 0.530% next $1.5 billion
moderate risk. 0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Horizon 20+ Growth of capital 0.580% to $250 million $ 110,076,000
Portfolio and, secondarily, 0.550% next $750 million
income. 0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Horizon 5 Portfolio Income consistent 0.580% to $250 million $ 55,335,000
with preservation 0.550% next $750 million
of capital and, 0.530% next $1.5 billion
secondarily, 0.510% next $2.5 billion
growth of capital. 0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Closed-End Funds Long-term capital .75% of net assets(1) $ 315,059,000
The Growth Fund of Spain, appreciation by
Inc. investing
primarily in
equity securities
of
</TABLE>
E-7
<PAGE> 136
<TABLE>
<CAPTION>
Fund Objective Fee Rate Net Assets
---- --------- -------- ----------
<S> <C> <C> <C>
Spanish companies.
Kemper High Income Trust Highest current 0.850% of net assets(1) $ 222,919,000
income obtainable
consistent with
reasonable risk
with capital gains
secondary.
Kemper Intermediate High current 0.800% of net assets(1) $ 267,218,000
Government Trust income consistent
with preservation
of capital by
investing in U.S.
and foreign
government
securities.
Kemper Multi-Market High current 0.850% of net assets(1) $ 217,508,000
Income Trust income consistent
with prudent total
return asset
management by
investing in a
diversified portfolio
of investment grade
tax-exempt securities.
Kemper Municipal Income High level of 0.550% of net assets(1) $ 686,179,000
Trust current income
exempt from
federal income tax.
Kemper Strategic Income Fund High current 0.850% of net assets(1) $ 53,129,000
income by
investing its
assets in a
combination of
lower-rated
corporate
fixed-income
securities,
fixed-income
securities of
emerging market
and other foreign
issuers and,
fixed-income
securities of the
U.S. Government
and its agencies
and
instrumentalities
and private
mortgage-backed
issues.
</TABLE>
E-8
<PAGE> 137
<TABLE>
<CAPTION>
Fund Objective Fee Rate Net Assets
---- --------- -------- ----------
<S> <C> <C> <C>
Kemper Strategic Municipal High level of 0.600% of net assets(1) $ 130,895,000
Income Trust current income
exempt from
federal income tax
by investing in a
diversified
portfolio of
tax-exempt
municipal
securities.
Annuity Products
Kemper Global Blue Chip Long-term growth 1.000% to $250 million N/A*
Portfolio of capital through 0.950% next $750 million
diversified 0.900% thereafter
worldwide
portfolio of
marketable
securities,
primarily equity
securities.
Kemper Global Income High current 0.750% of net assets $ 2,145,000
Portfolio income consistent
with prudent total
return asset
management.
Kemper International Growth Long-term growth 1.000% of net assets N/A*
and Income Portfolio of capital and
current income,
primarily from
foreign equity
securities.
Kemper International Total return, a 0.750% of net assets $ 200,046,000
Portfolio combination of
capital growth and
income,
principally
through an
internationally
diversified
portfolio of
equity securities.
</TABLE>
- ----------------------
+ The information provided below is shown as of the end of each Fund's last
fiscal year, unless otherwise noted.
* Net asset information is not available for Kemper Global Blue Chip
Portfolio and Kemper International Growth and Income Portfolio, each of
which commenced operations on May 5, 1998.
** Subject to waivers and/or reimbursements.
*** Net asset information is provided as of the semi-annual period ended April
30, 1998.
@ Net asset information is provided as of the semi-annual period ended March
31, 1998.
E-9
<PAGE> 138
(1) Based on average weekly net assets.
E-10
<PAGE> 139
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 Scudder New Europe Fund, Inc. (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 Annual 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 Annual Meeting and the
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> 140
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 or disapprove a proposal to convert the Fund from a
closed-end investment company to an open-end investment company, which
proposal includes the following:
(a) Changing the Fund's subclassification from a closed-end
investment company to an open-end investment company;
(b) Amending and Restating the Fund's Articles of
Incorporation to provide for such conversion; and
(c) Changing certain of the Fund's fundamental investment
policies to reflect its proposed new subclassification.
FOR / / AGAINST / / ABSTAIN / /
2. To approve or disapprove certain further amendments to the Fund's
Articles of Incorporation in the event that Proposal 1 is approved.
FOR / / AGAINST / / ABSTAIN / /
3. To elect the Board of Directors
(a) To elect nominees who will continue to serve on the
Board of the Fund in the event that Proposal 1 is not
approved; or
(b) To elect nominees to serve on the Board of the Fund if
Proposal 1 is approved.
FOR / / AGAINST / / ABSTAIN / /
4. To ratify the selection of Ernst & Young LLP as independent auditors for
the Fund.
FOR / / AGAINST / / ABSTAIN / /
5. To approve or disapprove a new Investment Advisory Agreement with
Scudder Kemper Investments, Inc. providing for, among other things, a
lower advisory fee rate than that paid under the current Investment
Advisory Agreement, which Agreement would take effect if Proposal 1 is
approved.
FOR / / AGAINST / / ABSTAIN / /
6. To transact such other business as may properly come before the Meeting
or any adjournment or adjournments thereof.
