<PAGE> 1
KEMPER EUROPE FUND
222 South Riverside Plaza Chicago, Illinois 60606
Dear Shareholder:
The Board of Trustees of Kemper Europe Fund has recently reviewed and
unanimously endorsed a proposal for the reorganization of the Kemper Europe
Fund. UNDER THE TERMS OF THE PROPOSAL, SCUDDER NEW EUROPE FUND, INC. ("SCUDDER
EUROPE FUND") WOULD ACQUIRE THE ASSETS AND LIABILITIES OF THE KEMPER EUROPE
FUND. We are pleased to invite you to attend a special meeting (the "Meeting")
of the shareholders of the Kemper Europe Fund to consider the approval of an
Agreement and Plan of Reorganization (the "Plan") pursuant to which the
reorganization of your Fund (the "Reorganization") would be effected. The
Reorganization is contingent upon the approval by the shareholders of the
Scudder Europe Fund of a proposal necessary to convert that Fund from closed-
end form to open-end form.
The Kemper Europe Fund's Board of Trustees and Scudder Kemper Investments, Inc.
("Scudder Kemper"), the Kemper Europe Fund's investment adviser, believe that
the Reorganization is in the best interests of the Kemper Europe Fund and its
shareholders.
Scudder Kemper believes, and intends to manage the Scudder Europe Fund, such
that the Reorganization will not result in any material changes to the
investment philosophy or operations of your Fund, since the Scudder Europe Fund
has substantially similar investment objectives and policies as the Kemper
Europe Fund. In addition, the Scudder Europe Fund will have the same investment
adviser, transfer agent and distributor as the Kemper Europe Fund, although
Scudder Investments (U.K.) Limited will not serve as sub-investment adviser to
the Scudder Europe Fund. Moreover, the Scudder Europe Fund will adopt the name
of the Kemper Europe Fund in connection with the Reorganization. The closing of
the Reorganization is expected to occur on or about September 1, 1999. The fees
and expenses to be borne by the Scudder Europe Fund for advisory,
administration, shareholder and other operational services are expected to be
comparable to those charges borne currently
(continued on inside front cover)
<PAGE> 2
KEMPER EUROPE FUND
222 South Riverside Plaza Chicago, Illinois 60606
by the Kemper Europe Fund, except that Scudder Europe Fund will incur an annual
accounting service fee expected to equal approximately .10% of that Fund's
assets which is not currently paid by the Kemper Europe Fund. After the
Reorganization, however, former shareholders of Kemper Europe Fund may realize
certain economies of scale based on its greater asset size as shareholders of
Scudder Europe Fund that may offset, in part, the accounting service fee.
Moreover, Scudder Kemper has agreed to limit the total annual operating expenses
of Class A, B and C shares of Scudder Europe Fund to 1.75%, 2.65% and 2.62%,
respectively, for the one year period following the Reorganization.
If shareholders of the Kemper Europe Fund approve the Plan and shareholders of
the Scudder Europe Fund approve the open-ending proposal, upon consummation of
the Reorganization the Kemper Europe Fund will be liquidated. You will become a
shareholder of the Scudder Europe Fund, having received shares of the same class
with an aggregate value equal to the aggregate net asset value of your
investment in the Kemper Europe Fund at the time of the transaction. No sales
charge will be imposed in the transaction. The transaction will, in the opinion
of counsel, be free from federal income taxes to you, the Kemper Europe Fund and
the Scudder Europe Fund. All expenses incurred in connection with the
Reorganization will be borne by the Kemper Europe Fund and the Scudder Europe
Fund based on their relative net assets.
The Meeting will be held on July 20, 1999 to consider the Reorganization. WE
STRONGLY INVITE YOUR PARTICIPATION BY ASKING YOU TO REVIEW, COMPLETE AND RETURN
YOUR PROXY PROMPTLY.
Detailed information about the proposed Reorganization is described in the
attached Prospectus/Proxy Statement.
The Board of Trustees of the Kemper Europe Fund has unanimously approved the
Reorganization of the Kemper Europe Fund and recommends that you vote to approve
the Plan.
On behalf of the Board of Trustees, I thank you for your participation as a
shareholder and urge you to please exercise your right to vote by
<PAGE> 3
KEMPER EUROPE FUND
222 South Riverside Plaza Chicago, Illinois 60606
completing, dating and signing the enclosed proxy card. A self-addressed,
postage-paid envelope has been enclosed for your convenience.
Please read the full text of the Prospectus/Proxy Statement before you vote.
If you have any questions regarding the proposed Reorganization, please feel
free to call Shareholder Communications Corporation, who will be pleased to
assist you.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED PROMPTLY.
Sincerely,
/s/ Thomas W. Littauer
Thomas W. Littauer
Chairman
June 14, 1999
<PAGE> 4
KEMPER EUROPE FUND
222 South Riverside Plaza Chicago, Illinois 60606
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 20, 1999
Notice is hereby given that a Special Meeting of Shareholders (the "Meeting") of
Kemper Europe Fund will be held at the offices of Scudder Kemper Investments,
Inc., 345 Park Avenue, New York, New York 10154, on July 20, 1999, commencing at
9:00 a.m. for the following purposes:
1. To approve the Agreement and Plan of Reorganization dated as of May 28, 1999
(the "Plan") providing: (i) that the Kemper Europe Fund would transfer to
Scudder New Europe Fund, Inc. (the "Scudder Europe Fund") all of its assets
in exchange for Class A, B and C shares of the Scudder Europe Fund and the
assumption by Scudder Europe Fund of all of the Kemper Europe Fund's
liabilities, (ii) that such shares of Scudder Europe Fund would be
distributed to shareholders of Kemper Europe Fund in liquidation of Kemper
Europe Fund, and (iii) that Kemper Europe Fund would subsequently be
terminated.
2. To transact such other business as may properly come before the Meeting or
any adjournment or adjournments thereof.
THE BOARD OF TRUSTEES OF THE KEMPER EUROPE FUND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE TO APPROVE THE PLAN.
The enclosed proxy is being solicited by the Board of Trustees of the Kemper
Europe Fund. The Board of Trustees of the Kemper Europe Fund has fixed the close
of business on May 25, 1999 as the record date for the determination of
shareholders of the Kemper Europe Fund entitled to notice of and to vote at the
Meeting and any adjournment or adjournments thereof.
(continued on next page)
<PAGE> 5
KEMPER EUROPE FUND
222 South Riverside Plaza Chicago, Illinois 60606
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE URGED TO SIGN AND
RETURN WITHOUT DELAY THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, SO THAT THEIR SHARES MAY BE
REPRESENTED AT THE MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE
EXERCISED BY THE SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED PROXY, BY
GIVING WRITTEN NOTICE OF REVOCATION TO THE KEMPER EUROPE FUND AT ANY TIME BEFORE
THE PROXY IS EXERCISED OR BY VOTING IN PERSON AT THE MEETING.
By Order of the Board of Trustees
/s/ Philip J. Collora
Philip J. Collora,
Secretary
June 14, 1999
YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE OF
FURTHER SOLICITATION.
<PAGE> 6
PROSPECTUS/PROXY STATEMENT
JUNE 8, 1999
ACQUISITION OF THE ASSETS OF
KEMPER EUROPE FUND
222 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
(800) 621-1048
BY AND IN EXCHANGE FOR SHARES OF
SCUDDER NEW EUROPE FUND, INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
(212) 326-6200
This Prospectus/Proxy Statement is being furnished to shareholders of Kemper
Europe Fund in connection with a proposed Agreement and Plan of Reorganization
(the "Plan") to be submitted to shareholders of the Kemper Europe Fund for
consideration at a Special Meeting of Shareholders to be held on July 20, 1999
at 9:00 a.m. (the "Meeting"), at the offices of Scudder Kemper Investments,
Inc., 345 Park Avenue, New York, New York, 10154, or any adjournment or
adjournments thereof.
Scudder New Europe Fund, Inc. (the "Scudder Europe Fund") is a closed-end
nondiversified registered investment company. The shareholders of the Scudder
Europe Fund are currently considering a proposal to convert that Fund to an
open-end investment company. The Reorganization (as described below) is
contingent upon such approval by the Scudder Europe Fund shareholders. All
descriptions of the Scudder Europe Fund herein are of the Fund in open-end form
unless otherwise stated. Although the Scudder Europe Fund, as a business entity,
will be the surviving company after the Reorganization, it will change its name
to Kemper Europe Fund, Inc., and it intends to operate very much like the Kemper
Europe Fund in which you currently own shares.
Kemper Europe Fund is registered as a diversified open-end investment company
and its investment objective is long-term capital growth. Scudder Europe Fund's
investment objective is long-term capital appreciation, and, like the Kemper
Europe Fund, seeks to achieve its investment objective by investing primarily in
the equity securities of European companies. Scudder Europe Fund is a
nondiversified investment company and, therefore, may invest a greater
proportion of its assets in the securities of a smaller number of issuers. As a
result, the Scudder Europe
1
<PAGE> 7
Fund may be subject to greater risks with respect to its portfolio than a more
broadly diversified fund. Still, Scudder Europe Fund held positions in 80
issuers and no single issuer constituted more than 5.8% of that Fund's assets as
of March 31, 1999.
The investment objectives, policies and risks of the Scudder Europe Fund are
substantially similar to those of the Kemper Europe Fund except for those
differences described under "Comparison of Investment Objectives and Policies"
in this Prospectus/Proxy Statement. The investment adviser, transfer agent and
independent auditors for the Scudder Europe Fund will be the same as those of
the Kemper Europe Fund, although Scudder Investments (U.K.) Limited will not
serve as sub-adviser to the Scudder Europe Fund. The distributor of shares of
the Scudder Europe Fund will be Kemper Distributors, Inc., which has been the
distributor for the Kemper Europe Fund. As stated above, upon consummation of
the Reorganization, the Scudder Europe Fund will also adopt the Kemper Europe
Fund's name and the Fund will be distributed as part of the Kemper family of
funds.
The Plan provides for all of the assets of the Kemper Europe Fund to be acquired
by the Scudder Europe Fund in exchange for shares of the Scudder Europe Fund and
the assumption by the Scudder Europe Fund of all of the liabilities of the
Kemper Europe Fund, (hereinafter referred to as the "Reorganization"). Shares of
the Scudder Europe Fund would be distributed to shareholders of the Kemper
Europe Fund in liquidation of the Kemper Europe Fund and thereafter the Kemper
Europe Fund would be terminated. As a result of the proposed Reorganization,
each shareholder of the Kemper Europe Fund will receive that number of shares of
the Scudder Europe Fund having an aggregate net asset value equal to the
aggregate value of such shareholder's shares of the Kemper Europe Fund
immediately prior to the Reorganization. All expenses of the Reorganization
(including the cost of preparing, printing and mailing the proxy card and proxy
statement and related solicitation costs for the Scudder Europe Fund's annual
meeting of stockholders) will be borne by the Scudder Europe Fund and the Kemper
Europe Fund based on their relative net assets. No sales charge will be imposed
on the shares of the Scudder Europe Fund received by the shareholders of the
Kemper Europe Fund. This transaction is structured to be tax-free for federal
income tax purposes to shareholders and to both the Scudder Europe Fund and the
Kemper Europe Fund.
The shares of common stock of the Scudder Europe Fund are currently listed on
the New York Stock Exchange (the "NYSE") under the symbol NEF. If the
Reorganization is approved, the Scudder Europe Fund will no longer be listed on
the NYSE. Reports, proxy materials and other informa-
2
<PAGE> 8
tion concerning the Scudder Europe Fund may be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
This Prospectus/Proxy Statement, which should be retained for future reference,
sets forth concisely the information about the Scudder Europe Fund that a
prospective investor should know before voting. This Prospectus/Proxy Statement
is expected to first be sent to shareholders on or about June 14, 1999. A
Statement of Additional Information dated June 8, 1999, relating to this
Prospectus/Proxy Statement and the Reorganization, has been filed with the
Securities and Exchange Commission (the "SEC") and is incorporated by reference
into this Prospectus/Proxy Statement. A copy of such Statement of Additional
Information and additional information relating to the Scudder Europe Fund is
available upon written or oral request and without charge by writing to the
Scudder Europe Fund at the address listed on the cover page of this
Prospectus/Proxy Statement or by calling 1-800-349-4281.
The following documents, which have been filed with the SEC, are incorporated
herein in their entirety by reference.
1. The Preliminary Prospectus of the Scudder Europe Fund, dated June 8, 1999.
The Preliminary Prospectus accompanies this Prospectus/Proxy Statement.
2. The current Prospectus of the Kemper Europe Fund, dated March 1, 1999. This
may be obtained without charge by writing to the address on the cover page of
this Prospectus/Proxy Statement or by calling (800) 621-1048.
3. The Annual Report of the Kemper Europe Fund for the fiscal year ended
November 30, 1998.
4. The Annual Report of the Scudder Europe Fund for the fiscal year ended
October 31, 1998. The Scudder Europe Fund Annual Report accompanies this
Prospectus/Proxy Statement.
Accompanying this Prospectus/Proxy Statement as Exhibit A is a copy of the Plan
for the proposed Reorganization.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy or accuracy of this Prospectus/Proxy
Statement. Any representation to the contrary is a criminal offense.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus/Proxy Statement
and in the materials expressly incorporated herein by reference and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Kemper Europe Fund or the Scudder Europe Fund.
3
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
VOTING INFORMATION....................................... 5
SUMMARY.................................................. 7
RISK FACTORS............................................. 14
REASONS FOR THE REORGANIZATION........................... 15
FEES AND EXPENSES........................................ 18
PERFORMANCE.............................................. 26
INFORMATION ABOUT THE REORGANIZATION..................... 26
PRINCIPAL SHAREHOLDERS................................... 33
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES......... 34
INVESTMENT RESTRICTIONS.................................. 42
RISK FACTORS............................................. 45
MANAGEMENT OF THE FUNDS.................................. 49
INTEREST OF CERTAIN PERSONS IN THE REORGANIZATION........ 50
INFORMATION ON SHAREHOLDERS' RIGHTS...................... 50
ADDITIONAL INFORMATION................................... 55
OTHER BUSINESS........................................... 55
FINANCIAL STATEMENTS AND EXPERTS......................... 55
LEGAL PROCEEDINGS........................................ 56
LEGAL MATTERS............................................ 56
EXHIBIT A: AGREEMENT AND PLAN OF REORGANIZATION......... A-1
</TABLE>
4
<PAGE> 10
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with a solicitation
of proxies by the Board of Trustees of the Kemper Europe Fund to be used at the
Special Meeting of Shareholders to be held at 9:00 a.m. on July 20, 1999, at the
offices of Scudder Kemper, 345 Park Avenue, New York, New York 10054, and at any
adjournment or adjournments thereof. This Prospectus/Proxy Statement, along with
a Notice of the Meeting and proxy card, is first being mailed to shareholders of
the Kemper Europe Fund on or about June 14, 1999. Only shareholders of record as
of the close of business on May 25, 1999 (the "Record Date") will be entitled to
notice of, and to vote at, the Meeting or any adjournment thereof. As of the
Record Date, the Kemper Europe Fund had 4,488,330 shares outstanding and
entitled to vote, which consisted of 2,156,330, 2,013,385, and 318,715, Class A,
Class B and Class C shares, respectively. The holders of one-third of the shares
of the Kemper Europe Fund outstanding at the close of business on the Record
Date present in person or represented by proxy will constitute a quorum for the
Meeting of the Kemper Europe Fund. For purposes of determining a quorum for
transacting business at the Meeting, abstentions and broker "non-votes" (that
is, proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owner or other persons entitled to
vote shares on a particular matter with respect to which the brokers or nominees
do not have discretionary power) will be treated as shares that are present, but
which have not been voted and, therefore are counted for purposes of determining
a quorum. For purposes of obtaining the requisite approval of the Plan, however,
abstentions and broker non-votes will have the effect of a "NO" vote. If the
enclosed proxy is properly executed and returned in time to be voted at the
Meeting, the proxies named therein will vote the shares represented by the proxy
in accordance with the instructions marked thereon. Unmarked proxies will be
voted FOR approval of the Plan and FOR approval of any other matters deemed
appropriate. A proxy may be revoked at any time on or before the Meeting by
written notice to the Secretary of the Kemper Europe Fund.
Shareholder Communications Corporation ("SCC") has been engaged to assist in the
solicitation of proxies. The cost of SCC's services is estimated at $25,000 plus
expenses. As the Special Meeting date approaches, certain shareholders of the
Kemper Europe Fund may receive a telephone call from a representative of SCC if
their votes have not yet been received. Authorization to permit SCC to execute
proxies may be obtained by telephonic or electronically transmitted instructions
from shareholders of the Kemper Europe Fund. Proxies that are obtained
telephonically will be recorded in accordance with the procedures set forth
below.
5
<PAGE> 11
In all cases where a telephonic proxy is solicited, the SCC representative is
required to ask for each shareholder's full name, address, social security or
employer identification number, title (if the shareholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned,
and to confirm that the shareholder has received the proxy materials in the
mail. If the information solicited agrees with the information provided to SCC,
then the SCC representative has the responsibility to explain the process, read
the Proposal on the proxy card, and ask for the shareholder's instructions on
the Proposal. The SCC representative, although he or she is permitted to answer
questions about the process, is not permitted to recommend to the shareholder
how to vote, other than to read any recommendation set forth in the Proxy
Statement. SCC will record the shareholder's instructions on the card. Within 72
hours, the shareholder will be sent a letter or mailgram to confirm his or her
vote and asking the shareholder to call SCC immediately if his or her
instructions are not correctly reflected in the confirmation.
Article IX, Section 1 of the Kemper Europe Fund's Declaration of Trust requires
the affirmative vote of the shareholders of more than fifty percent (50%) of the
votes entitled to be cast on the matter, in order for the Trustees to "sell,
convey or transfer the assets of the [Fund] or the assets belonging to any one
or more series of the [Fund], to another trust, partnership, association or
corporation." Approval of the Plan, therefore, will require the affirmative vote
of a majority of the votes entitled to be cast by the shareholders of the Kemper
Europe Fund, voting in the aggregate without regard to class, in person or by
proxy, if a quorum is present. Shareholders of the Kemper Europe Fund are
entitled to one vote for each share. Implementing the Reorganization is
contingent on the approval of the shareholders of the Scudder Europe Fund to
convert that Fund to an open-end investment company.
Proxy solicitations will be made primarily by mail, but proxy solicitations also
may be made by telephone, telegraph or personal interviews conducted by officers
and employees of Scudder Kemper and its affiliates and/or by Shareholder
Communications Corporation. All expenses of the Reorganization, including the
costs of the proxy solicitation and the preparation of enclosures to the
Prospectus/Proxy Statement, reimbursement of expenses of forwarding solicitation
material to beneficial owners of shares of the Kemper Europe Fund, expenses
incurred in connection with the preparation of this Prospectus/Proxy Statement
and the cost of preparing, printing and mailing the proxy card and proxy
statement and related solicitation costs for Scudder Europe Fund's annual
meeting of stockholders (approximately $600,000) will be borne by the Scudder
Europe Fund and the Kemper Europe Fund based on their relative net assets. Based
upon this allocation, it is currently estimated that Scudder
6
<PAGE> 12
Europe Fund would bear 83% and Kemper Europe Fund would bear 17% of these
expenses. It is anticipated that banks, brokerage houses and other institutions,
nominees and fiduciaries will be requested to forward proxy materials to
beneficial owners and to obtain authorization for the execution of proxies. Each
Fund may, upon request, reimburse banks, brokerage houses and other
institutions, nominees and fiduciaries for their expenses in forwarding proxy
materials to beneficial owners.
In the event that a quorum necessary for the Meeting is not present or
sufficient votes to approve the Reorganization of the Kemper Europe Fund are not
received by July 20, 1999, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. In
determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the reasons for the solicitation.
Any such adjournment will require an affirmative vote by the holders of a
majority of the shares of the Kemper Europe Fund present in person or by proxy
and entitled to vote at the Meeting. The persons named as proxies will vote upon
a decision to adjourn the Meeting with respect to the Kemper Europe Fund after
consideration of the best interests of all shareholders of the Kemper Europe
Fund.
PROPOSAL TO APPROVE THE AGREEMENT AND
PLAN OF REORGANIZATION
SUMMARY
This summary of certain information contained in the Prospectus/Proxy Statement
is qualified by reference to the more complete information contained elsewhere
in the Prospectus/Proxy Statement, the Statement of Additional Information the
Preliminary Prospectus and Statement of Additional Information of the Scudder
Europe Fund, the Prospectus and Statement of Additional Information of the
Kemper Europe Fund and the Plan attached to this Prospectus/Proxy Statement as
Exhibit A.
PROPOSED REORGANIZATION. The Plan provides for the transfer of all of the
assets of the Kemper Europe Fund to the Scudder Europe Fund in exchange for
shares of the Scudder Europe Fund and its assumption of all of the liabilities
of the Kemper Europe Fund. The Plan also calls for the distribution of shares of
the Scudder Europe Fund to the Kemper Europe Fund's shareholders in liquidation
of the Kemper Europe Fund (the "Reorganization"). As a result of the
Reorganization, each shareholder of the Kemper Europe Fund will become the owner
of that number of full and fractional shares of the same class of the Scudder
7
<PAGE> 13
Europe Fund having an aggregate net asset value equal to the aggregate value of
the shareholder's shares of the Kemper Europe Fund as of the close of business
on the date that the Kemper Europe Fund's assets are exchanged for shares of the
Scudder Europe Fund. HOLDERS OF CLASS A, B AND C SHARES OF THE KEMPER EUROPE
FUND WILL BECOME HOLDERS OF THE CORRESPONDING CLASS OF SHARES OF THE SCUDDER
EUROPE FUND. THE EXISTING SHAREHOLDERS OF THE SCUDDER EUROPE FUND WILL RECEIVE
CLASS M SHARES WHICH WILL CONVERT TO CLASS A SHARES ONE YEAR AFTER THE
REORGANIZATION. See "Information About the Reorganization -- Plan of
Reorganization."
For the reasons set forth below under "Reasons for the Reorganization," the
Board of Trustees of the Kemper Europe Fund, including the Trustees of the
Kemper Europe Fund who are not "interested persons" (the "Independent
Trustees"), as that term is defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), has unanimously concluded that the Reorganization
would be in the best interests of the shareholders of the Kemper Europe Fund and
that the interests of the Kemper Europe Fund's existing shareholders will not be
diluted as a result of the transaction contemplated by the Reorganization. The
Board therefore has submitted the Plan for approval by the Kemper Europe Fund's
shareholders. The Board of Directors of the Scudder Europe Fund has also reached
similar conclusions and approved the Reorganization with respect to the Scudder
Europe Fund.
Approval of the Reorganization of the Kemper Europe Fund will require the
affirmative vote of a majority of the votes entitled to be cast by the
shareholders of the Kemper Europe Fund. The Reorganization is contingent upon a
number of things, including the approval of the shareholders of the Scudder
Europe Fund of a proposal to convert that Fund to an open-end investment
company. See "Voting Information."
TAX CONSEQUENCES. Prior to completion of the Reorganization, the Kemper Europe
Fund and the Scudder Europe Fund will have received an opinion of counsel that,
upon the closing of the Reorganization and the transfer of the assets of the
Kemper Europe Fund, no gain or loss will be recognized by the Kemper Europe Fund
or its shareholders for federal income tax purposes. The holding period and
aggregate tax basis of the Scudder Europe Fund's shares received by a Kemper
Europe Fund shareholder will be the same as the holding period and aggregate tax
basis of the shares of the Kemper Europe Fund previously held by such
shareholder. In addition, the holding period and tax basis of the assets of the
Kemper Europe Fund in the hands of the Scudder Europe Fund as a result of the
Reorganization will be the same as in the hands of the Kemper Europe Fund
immediately prior to the Reorganization.
If the Scudder Europe Fund experiences net redemptions after converting to
open-end status, the Scudder Europe Fund would be required to sell
8
<PAGE> 14
portfolio securities. The portfolio activity that may be necessitated by
redemption requests following conversion could result in the realization of
significant capital gains by the Scudder Europe Fund, in addition to those
historically incurred in the ordinary course of the Fund's investment activity,
which would be distributed to stockholders. Such distributions would be taxable
to the stockholders who receive them and, accordingly, the actions of redeeming
stockholders may have adverse tax consequences for the Scudder Europe Fund and
its remaining stockholders. The Scudder Europe Fund may employ the equalization
method of tax accounting, which would reduce the portion of realized capital
gains required to be paid to remaining shareholders as taxable distributions.
See "Potential Tax Consequences." In an attempt to minimize adverse income tax
consequences for non-redeeming shareholders in the first year of operation as an
open-end fund and to discourage short-term trading in a vehicle intended for
long-term investment, the Scudder Europe Fund would pay in-kind redemptions
sought by Class M shareholders to the extent those redemptions exceed $500,000.
Exchanges of Class M shares for shares of other Kemper Mutual Funds would be
limited to transactions that would not result in in-kind redemptions. The
Scudder Europe Fund would also impose a 2% fee on all redemptions (including
redemptions paid-in-kind and exchanges) of Class M shares held during the first
year after the Fund's conversion to open-end status.
INVESTMENT OBJECTIVES AND POLICIES. The Scudder Europe Fund's investment
objective is long-term capital appreciation, which it seeks to achieve by
investing primarily in the equity securities of European companies. The
investment objective of Kemper Europe Fund is long-term capital growth. Under
normal circumstances, Scudder Europe Fund will invest at least 65% of its total
assets in European equity securities, while Kemper Europe Fund will invest at
least 85% of its total assets in European equity securities. The Scudder Europe
Fund has substantially similar investment objectives, investment policies,
limitations and risks as the Kemper Europe Fund, except that it is a
non-diversified fund (Kemper Europe Fund is diversified). Some differences
between Scudder Europe Fund and Kemper Europe Fund include: (i) Scudder Europe
Fund may hold up to 20% of its assets in cash and short and medium term high
grade debt to maintain liquidity, while Kemper Europe Fund has no such stated
policy; (ii) unlike Kemper Europe Fund, Scudder Europe Fund is authorized to
invest in when-issued securities, non-investment grade debt securities (i.e.,
"junk bonds"), swaps, caps, floors and collars; (iii) Scudder Europe Fund is not
limited in the amount of its assets that may be invested in emerging markets,
while Kemper Europe Fund may not invest more than 25% of its total assets in
emerging markets; and (iv) Scudder Europe Fund may invest up to 20% of its total
assets in debt securities (including debt securities rated below investment
grade), while Kemper Europe Fund does not intend to invest more than
9
<PAGE> 15
5% of its net assets in debt securities (except for temporary defensive
purposes).
In pursuing its objective, each Fund invests primarily in European equity
securities believed to have potential for capital growth. In addition, each Fund
invests principally in developed countries, but also has the flexibility to
invest in emerging markets. Scudder Europe Fund intends to allocate its
investments among at least three European countries at all times, while under
normal circumstances, business activities in not less than five different
European countries will be represented in Kemper Europe Fund's portfolio.
In choosing investments for Scudder Europe Fund, Scudder Kemper focuses on
European companies that (i) generate or apply new technologies, distribution
systems or services; (ii) expect to benefit from changing consumer demands or
lifestyles; (iii) have prospects for above-average earnings growth; or (iv) are
undervalued due to market misperception, temporary negative developments or
limited investor familiarity. In the case of Scudder Europe Fund, a stock is
typically sold when, in the opinion of the portfolio manager, (i) the stock has
reached its fair market value and its appreciation is limited; (ii) a company's
fundamentals have deteriorated; (iii) the portfolio management team loses
confidence in company management; (iv) the Fund's portfolio is too heavily
weighted in a particular company, country or sector; or (v) more attractive
alternatives are available in other companies or sectors. In choosing
investments for Kemper Europe Fund, Scudder Kemper focuses on European companies
that have (i) strong earnings growth; (ii) clean balance sheets; (iii) strong
management; and (iv) increasing revenue. In the case of Kemper Europe Fund, a
stock is typically sold when, in the opinion of the portfolio manager, (i) the
stock has reached a predetermined value; (ii) the company's fundamentals have
deteriorated; and (iii) the company deviates from a previously demonstrated
business plan.
You will find a more detailed discussion of the investment objectives,
investment policies and the types of investments that can be made by each Fund
(e.g., debt securities, small companies, temporary defensive practices,
derivatives, convertible securities and illiquid securities) under "Comparison
of Investment Objectives and Policies" below.
FEES AND OTHER CHARGES. The fees and expenses to be borne by the Scudder Europe
Fund for advisory, administration, shareholder and other operational services
are expected to be comparable to those charges borne currently by the Kemper
Europe Fund, except that the Scudder Europe Fund will incur an annual accounting
service fee that is based on the actual services provided, but is expected to
equal approximately .10% of average daily net assets, which is not currently
paid by the Kemper Europe Fund. The Scudder Europe Fund may, however,
10
<PAGE> 16
realize certain economies of scale based on its greater asset size that may
offset, in part, the accounting service fee. Scudder Kemper has also agreed to
limit the total annual operating expenses of Class A, B and C shares of Scudder
Europe Fund to 1.75%, 2.65% and 2.62%, respectively, for the one year period
following the Reorganization.
PURCHASE AND REDEMPTION PROCEDURES AND DISTRIBUTION ARRANGEMENTS. Upon
consummation of the Reorganization, the Scudder Europe Fund will adopt the same
distribution structure as the Kemper Europe Fund and will be distributed as part
of the Kemper family of funds. Therefore, the purchase and redemption procedures
and distribution arrangements available to shareholders of the Scudder Europe
Fund will be identical to those available to shareholders of the Kemper Europe
Fund. All shares of the Scudder Europe Fund will be sold at net asset value,
subject to any applicable sales charge. Class A shares of the Scudder Europe
Fund are subject to a maximum sales charge of 5.75%. Class B and C shares are
subject to contingent deferred sales charges and a 12b-1 distribution fee of
.75%. Class M shares represent the initial shares of the Scudder Europe Fund and
are no longer offered. The Scudder Europe Fund will also pay in-kind redemptions
sought by Class M shareholders to the extent those redemptions exceed $500,000.
Class M shares are subject to a 2% fee on all redemptions (including redemptions
in-kind) and exchanges. The purpose of the redemption fee is to offset certain
expenses incurred to meet redemptions and to discourage short-term trading in a
vehicle intended for long-term investment. Class M shares are not subject to a
contingent deferred sales charge or a 12b-1 distribution fee, and will convert
to Class A shares one year after the Reorganization. All share classes are also
subject to an administrative service fee of up to .25%.
EXCHANGE PRIVILEGES. The exchange privileges available to shareholders of the
Scudder Europe Fund are substantially identical to those available to
shareholders of the Kemper Europe Fund. Shareholders of the Scudder Europe Fund
may exchange at net asset value all or a portion of their shares for shares of
the same class of certain other mutual funds in the Kemper family of funds at
their respective net asset values, subject to any applicable contingent deferred
sales charge or redemption fee. Shareholders of Class M shares may exchange
their shares for Class A shares of a corresponding Kemper Mutual Fund. As stated
above, a 2% fee will apply to any exchanges of Class M shares and exchanges of
Class M shares would be limited to an amount that would not trigger an in-kind
redemption. Exchanges may be effected by mail or by telephone. Shares of a
Kemper Mutual Fund with a value in excess of $1,000,000 (except Kemper Cash
Reserves Fund) acquired by exchange from another Kemper Mutual Fund may not be
exchanged thereafter until they have been owned for 15 days. In addition, shares
of a Kemper Mutual
11
<PAGE> 17
Fund with a value of $1,000,000 or less (except Kemper Cash Reserves Fund)
acquired by exchange from another Kemper Mutual Fund or from a Money Market Fund
may not be exchanged thereafter until they have been owned for 15 days (the
"15-Day Hold Policy") if, in the investment manager's judgment, the exchange
activity may have an adverse effect on the Fund. In particular, a pattern of
exchanges that coincides with a "market timing" strategy may be disruptive to
the Fund and therefore may be subject to the 15-Day Hold Policy. Currently,
exchanges may be made among the following Kemper Mutual Funds: Kemper Technology
Fund, Kemper Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization
Equity Fund, Kemper Income and Capital Preservation Fund, Kemper Municipal Bond
Fund, Kemper Strategic Income Fund, Kemper High Yield Series, Kemper U.S.
Government Securities Fund, Kemper International Fund, Kemper State Tax-Free
Income Series, Kemper Blue Chip Fund, Kemper Global Income Fund, Kemper Target
Equity Fund (series are subject to a limited offering period), Kemper
Intermediate Municipal Bond Fund, Kemper Cash Reserves Fund, Kemper U.S.
Mortgage Fund, Kemper Short-Intermediate Government Fund, Kemper Value Series,
Inc., Kemper Value Plus Growth Fund, Kemper Horizon Fund, Kemper Europe Fund,
Inc., Kemper Asian Growth Fund, Kemper Aggressive Growth Fund, Kemper
Global/International Series, Inc., Kemper Equity Trust, Kemper Income Trust,
Kemper Funds Trust and Kemper Securities Trust.
The exchange privilege is available to shareholders residing in any state in
which the Scudder Europe Fund's shares being acquired may legally be sold. When
an investor effects an exchange of shares, the exchange is treated for federal
income tax purposes as a redemption. Therefore, the investor may realize a
taxable gain or loss in connection with the exchange. See "Selling and
Exchanging" in the accompanying Preliminary Prospectus of the Scudder Europe
Fund.
DIVIDENDS. The Scudder Europe Fund and the Kemper Europe Fund distribute
substantially all of their net investment income and net realized capital gains,
if any, to shareholders. All distributions are reinvested in the form of
additional full and fractional shares unless a shareholder elects otherwise. The
Scudder Europe Fund and the Kemper Europe Fund declare and pay dividends, if
any, from net investment income annually. Net realized short-term capital gains
(and long-term capital gains) of the Scudder Europe Fund, like the Kemper Europe
Fund, will be distributed at least annually. See "Distributions and Taxes" in
the accompanying Preliminary Prospectus of the Scudder Europe Fund.
SHAREHOLDER VOTING RIGHTS. The Scudder Europe Fund is currently registered with
the Securities and Exchange Commission as a closed-end management investment
company, but will convert to open-end status upon the approval of its
shareholders. The Kemper Europe Fund is
12
<PAGE> 18
registered as an open-end management investment company. The Scudder Europe Fund
is a Maryland corporation, having a Board of Directors. The Kemper Europe Fund
is organized as a Massachusetts business trust, having a Board of Trustees.
Although the organizational form of each Fund differs, shareholders of both
Scudder Europe Fund and Kemper Europe Fund are expected to have similar voting
rights if certain amendments to the Scudder Europe Fund's Articles of
Incorporation (the "Charter") are approved by its shareholders. See "Information
on Shareholders' Rights." For example, one-third of the outstanding shares of
the Kemper Europe Fund constitute a quorum for shareholder voting purposes. The
Scudder Europe Fund has proposed an amendment to its Charter reducing the quorum
requirement from the current majority of outstanding shares to one-third of its
outstanding shares. Approval of this Charter amendment would be included in the
approval of the open-ending proposal by the shareholders of the Scudder Europe
Fund. As an open-end fund, the Kemper Europe Fund does not hold a meeting of
shareholders annually, except as required by the 1940 Act or other applicable
law. As a closed-end fund, however, the Board of Directors of the Scudder Europe
Fund is currently divided into three classes and each Director currently serves
for a term of three years. Annual meetings of shareholders of the Scudder Europe
Fund are therefore required to elect Directors as terms expire. The Scudder
Europe Fund has proposed an amendment to its Charter to eliminate the classified
Board structure and the approval of such amendment would permit the Scudder
Europe Fund to dispense with annual shareholders meetings, except when required
by law to hold such meetings. By not having to hold annual shareholders'
meetings, the Scudder Europe Fund would save the costs of preparing proxy
materials and soliciting shareholders' votes on the usual proposals contained
therein. If the shareholders of the Scudder Europe Fund, however, do not approve
this Charter amendment, Fund will continue to be required to hold annual
meetings for the purpose of electing Directors and therefore will continue to
incur the costs relating to such meetings (approximately $50,000 to $60,000).
Approval of this Charter amendment requires the affirmative vote of 75% of the
votes entitled to be cast by shareholders of the Scudder Europe Fund. The
open-ending of the Scudder Europe Fund is not contingent upon the approval of
this amendment to the Charter.
In addition, under the laws of the State of Maryland and the Commonwealth of
Massachusetts, shareholders do not have appraisal rights in connection with a
combination or acquisition of the assets of a fund by another entity.
Shareholders of the Kemper Europe Fund may, however, redeem their shares at net
asset value prior to the date of the Reorganization (subject only to certain
restrictions as set forth in the 1940 Act). See "Information on Shareholders'
Rights -- Voting Rights."
13
<PAGE> 19
RISK FACTORS
Due to the fact that the investment objectives, policies and restrictions of the
Scudder Europe Fund are substantially similar to those of the Kemper Europe
Fund, the investment risks are similar. There are, however, some distinctions in
the investment program of the Scudder Europe Fund and the Kemper Europe Fund.
For example, (i) up to 20% of the Scudder Europe Fund's assets may be held in
cash and short and medium term high grade debt to maintain liquidity, which may
prevent Scudder Europe Fund from achieving its goal, while the Kemper Europe
Fund has no such stated policy; (ii) unlike the Kemper Europe Fund, the Scudder
Europe Fund is authorized to invest in when-issued securities, non-investment
grade debt securities (i.e., "junk bonds"), swaps, caps, floors and collars,
which investments may be more speculative and may require greater skill on the
part of the investment manager; (iii) the Scudder Europe Fund is classified as
non-diversified which may subject the Fund to greater risks than the Kemper
Europe Fund which is classified as diversified for purposes of the 1940 Act;
(iv) Scudder Europe Fund is not limited in the amount of its assets that may be
invested in emerging markets which involve higher levels of risk, while Kemper
Europe Fund may not invest more than 25% of its total assets in emerging market;
and (v) Scudder Europe Fund intends to allocate its investments among at least
three European countries which may result in greater exposure to a particular
country, while business activities in not less than five different European
countries will be represented in Kemper Europe Fund's portfolio. You will find a
more detailed discussion of the risk factors relating to the conversion of
Scudder Europe Fund to an open-end investment company, as well as a more
detailed comparison of the principal risk factors of investing in each Fund
(e.g., foreign securities risk, emerging markets risk, European securities risk,
lower rated securities and liquidity risks and risks of derivative instruments)
under "Risk Factors" below.
Because the Scudder Europe Fund is converting from a closed-end to an open-end
investment company, it is possible that a meaningful number of shareholders in
that Fund may redeem their shares immediately or soon after the Reorganization.
Other closed-end funds that have converted to open-end form have experienced
redemptions that exceed sales after conversion, and, in some instances, net
redemptions have been substantial. If such redemptions occur, the Scudder Europe
Fund could be adversely affected because of lost economies of scale and
portfolio management disruption. A decrease in net assets could result in less
diversification or in smaller portfolio positions in its investments, which
could adversely affect the Scudder Europe Fund's total return performance. In
addition, as a result of any decrease in size resulting from redemptions, the
Scudder Europe Fund could experience a further in-
14
<PAGE> 20
crease in its expense ratio. A higher expense ratio would lower the Scudder
Europe Fund's total return performance.
As stated above, the Scudder Europe Fund is currently registered as a closed-end
fund and intends to convert to open-end status subject to the approval of its
stockholders at a July 20, 1999 annual meeting. The Reorganization is contingent
upon the approval of the open-ending proposal by Scudder Europe Fund
shareholders. In connection with the Scudder Europe Fund's open-ending proposal,
that Fund is also proposing certain further amendments to its Charter for
approval by its stockholders. The open-ending proposal is not conditioned upon
the approval of all of those further changes. However, if all of the changes are
not approved, the Scudder Europe Fund will retain certain characteristics more
typically associated with a closed-end fund. See "Information on Shareholders'
Rights."
REASONS FOR THE REORGANIZATION
The Reorganization has been proposed by Scudder Kemper as a means of combining
the Kemper Europe Fund with a fund managed by Scudder Kemper with compatible
investment objectives, policies, restrictions and risks. Scudder Kemper informed
the Board of the Kemper Europe Fund that the investment portfolios of the
Scudder Europe Fund and the Kemper Europe Fund are compatible and that the
Reorganization, if approved, offers a number of potential benefits to both the
Kemper Europe Fund and the Scudder Europe Fund. Foremost, Scudder Kemper
believes that the Scudder Europe Fund should be more viable than the Kemper
Europe Fund. By combining with a fund with a solid performance history, the
Kemper Europe Fund may be able to overcome its inability to achieve desired
increases in asset size. At only $72 million in net assets (as of March 31,
1999), the Kemper Europe Fund is well below its first breakpoint in management
fees, which is at $250 million. (At $250 million, management fees are reduced
from .75% to .72% and at $1 billion they are reduced to .70%) and its
non-variable expenses are spread over that relatively small asset base. Unless
significant redemptions offset the assets gained in the Reorganization, the
immediately greater asset size should allow the Scudder Europe Fund to achieve
some economies of scale. These economies of scale, however, may be offset (in
whole or in part) by the imposition of an accounting service fee of
approximately .10%, which is not currently paid by the Kemper Europe Fund.
Kemper Distributors, Inc. ("KDI"), though, informed the Kemper Europe Fund Board
that more assets as well as the strong track record of the Scudder Europe Fund's
portfolio managers could give the Scudder Europe Fund greater market appeal.
These changes, in turn, might provide an improved basis for support from the
brokerage community. As a
15
<PAGE> 21
result, the Scudder Europe Fund may be better positioned for further growth and
further economies of scale.
Moreover, as a stand-alone open-end fund, Scudder Kemper informed the Board that
Scudder Kemper would likely offer the Scudder Europe Fund in an environment
where it might otherwise compete for investors and investment opportunities with
Kemper Europe Fund. As separate entities, investors might be confused by the
existence of two funds with similar objectives and policies with the same
investment manager and with shares offered in the same marketing channels.
Combination of the Funds will avoid this concern, although Scudder Europe Fund
will proceed with open-ending (subject to shareholder approval) even if the
Reorganization is not approved by the shareholders of Kemper Europe Fund. The
Board of Trustees of the Kemper Europe Fund has determined that it is in the
best interest of the Kemper Europe Fund to effect the Reorganization. In
reaching this conclusion, the Board considered a number of factors, including
the following:
1. the terms and conditions of the Reorganization;
2. the investment objectives and policies of the Scudder Europe Fund in relation
to those of the Kemper Europe Fund;
3. the compatibility of the investment portfolios of the Funds;
4. the investment adviser, transfer agent, distributor and independent auditors
for the Scudder Europe Fund would be the same as those of the Kemper Europe
Fund;
5. the federal tax consequences of the Reorganization to the Kemper Europe Fund,
the Scudder Europe Fund and the shareholders of each, and that a legal
opinion will be rendered that no recognition of income, gain or loss for
federal income tax purposes will occur as a result of the Reorganization to
any of them;
6. the Scudder Europe Fund will adopt the Kemper Europe Fund's lower management
fee schedule;
7. no sales charge will be imposed in connection with the Reorganization;
8. the performance history of the Funds and that the Reorganization may provide
shareholders of the Kemper Europe Fund with a more viable investment vehicle
that has a longer and better performance record; and
9. that the Reorganization may increase economic efficiencies of the combined
entity and better position it for further growth.
In considering the Reorganization, however, the Board of Trustees took specific
note of the Kemper Europe Fund's pro-rata share of the expenses
16
<PAGE> 22
to be incurred in connection with the Reorganization, the fact that the Scudder
Europe Fund would incur an accounting service fee of approximately .10% which is
not currently paid by the Kemper Europe Fund, and that Scudder Kemper has agreed
to limit total operating expenses to 1.75%, 2.65% and 2.62% for the Class A, B
and C shares of Scudder Europe Fund, respectively, for the one year period
following the Reorganization. These expense limitations are currently in effect
for Kemper Europe Fund. The Board also considered that because the Scudder
Europe Fund is converting from a closed-end to an open-end investment company, a
significant number of shareholders may redeem their shares immediately or soon
after the Reorganization and that if such redemptions occur, the Scudder Europe
Fund could be adversely affected because of lost economies of scale and
portfolio management disruption. The Kemper Europe Fund Board noted with
approval that in an attempt to minimize subsequent adverse income tax
consequences for non-redeeming shareholders in the first year of operation as an
open-end fund, the Scudder Europe Fund will pay in-kind redemptions sought by
Class M shareholders (those shareholders who previously held the Scudder Europe
Fund's closed-end fund shares) to the extent those redemptions exceed $500,000.
In addition, the Scudder Europe Fund will impose a 2% fee on all redemptions
(including redemptions in-kind) and exchanges of Class M shares during the first
year after the Reorganization. The Kemper Europe Fund Board observed that
redemptions in-kind would minimize adverse tax consequences to continuing
shareholders and that a redemption fee would help to offset certain expenses and
also to discourage short-term trading in a vehicle intended for long-term
investment.
In light of the foregoing, the Board of Trustees of the Kemper Europe Fund,
including the Independent Trustees, has determined that it is in the best
interest of the Kemper Europe Fund and its shareholders to effect the
Reorganization. The Board of Trustees has also determined that the
Reorganization would not result in a dilution of the interests of the Kemper
Europe Fund's existing shareholders.
The Board of Directors of the Scudder Europe Fund has also determined that it is
advantageous to the Scudder Europe Fund to effect the Reorganization. The Board
of Directors of the Scudder Europe Fund also considered the terms and conditions
of the Reorganization and representations that the Reorganization would be
effected as a tax-free Reorganization. Accordingly, the Board of Directors of
the Scudder Europe Fund, including all of the Independent Directors, has
determined that the Reorganization is in the best interests of the Scudder
Europe Fund's shareholders and that the interests of the existing Scudder Europe
Fund's shareholders would not be diluted as a result of the Reorganization.
17
<PAGE> 23
FEES AND EXPENSES
Pursuant to its investment advisory agreement with Scudder Kemper, the Kemper
Europe Fund pays Scudder Kemper a (graduated) monthly investment management fee
at the following annual rate:
<TABLE>
<CAPTION>
ANNUAL MANAGEMENT
AVERAGE DAILY NET ASSETS OF THE KEMPER FUND FEE RATES
- ------------------------------------------- -----------------
<S> <C>
$0 - $250 million....................... 0.75%
$250 million - $1 billion............... 0.72
$1 billion - $2.5 billion............... 0.70
$2.5 billion - $5 billion............... 0.68
$5 billion - $7.5 billion............... 0.65
$7.5 billion - $10 billion.............. 0.64
$10 billion - $12.5 billion............. 0.63
Over $12.5 billion...................... 0.62
</TABLE>
In connection with the Reorganization, the Board of Directors of Scudder Europe
Fund has recommended that shareholders of that Fund approve the management fee
schedule of the Kemper Europe Fund as described above pursuant to an advisory
agreement substantially similar to the advisory agreement currently in effect
between Scudder Kemper and the Kemper Europe Fund. Scudder Kemper has indicated,
however, that it will contractually reduce its fees so that its advisory fees do
not exceed this lower level in the event that shareholders of Scudder Europe
Fund approve the proposal to open-end, but do not approve the proposed new
advisory agreement. Based on the combination of the current assets of the two
Funds, the management fee rate to be paid by the combined entity will be lower
than that currently in effect for the Kemper Europe Fund, although there can be
no assurance that the current assets will not decline substantially following
the Reorganization.
Currently, Scudder Investments (UK) Limited, a subsidiary of Scudder Kemper,
receives a monthly fee at the annual rate of .35% from Scudder Kemper for
sub-advisory services provided to the Kemper Europe Fund. The Scudder Europe
Fund has no current intention to engage any sub-adviser following the
Reorganization and the fees paid to Scudder Kemper will not be redistributed to
any affiliated or unaffiliated sub-adviser.
For the fiscal year ended November 30, 1998, the investment management fees
charged to the Kemper Europe Fund totaled $349,000. The entire amount of these
investment management fees, however, were waived by Scudder Kemper.
The Scudder Europe Fund also retains Scudder Kemper to manage its daily
investment and business affairs subject to the policies established by its Board
of Directors. As a closed-end fund, the Scudder Europe Fund pays advisory fees
ranging from 1.25% to 1.10% based on its
18
<PAGE> 24
current assets. For the fiscal year ending October 31, 1999, the estimated
management fees to be paid by the reorganized Scudder Europe Fund to Scudder
Kemper (based on the lower management fee schedule as set forth above) are
$3,200,000, assuming that the net assets of the two Funds are combined and the
resulting Fund experiences neither net sales nor net redemptions.
After giving effect to the proposed Reorganization, the expense ratio of the
Scudder Europe Fund is projected to be approximately 1.85% for Class A shares,
3.14% for Class B shares, 2.62% for Class C shares and 1.42% for Class M shares.
The actual expense ratios for the Scudder Europe Fund for the current and future
fiscal years, if the Reorganization is consummated, may be higher or lower than
this projection, depending upon the Scudder Europe Fund's performance, general
stock market and economic conditions, net asset levels and other factors.
However, Scudder Kemper has agreed to limit the total annual operating expenses
to 1.75%, 2.65% and 2.62% for the Class A, B and C shares of the Scudder Europe
Fund, respectively, for the one year period following the Reorganization.
19
<PAGE> 25
Set forth below is a comparison of each Fund's annual operating expenses and
shareholder transaction expenses on a current basis and those expenses that
would apply to shareholders holding Class A, B, C and M shares of Scudder Europe
Fund following the Reorganization on a pro forma (estimated) basis for the
fiscal year ending October 31, 1999. Pro forma expense information is also
provided for Scudder Europe Fund following the Reorganization assuming 50%
redemptions.
FEE TABLES
CURRENT
(UNAUDITED)
<TABLE>
<CAPTION>
KEMPER EUROPE FUND
----------------------------- SCUDDER
CLASS A CLASS B CLASS C EUROPE FUND
------- ------- ------- -----------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES: (FEES PAID
DIRECTLY FROM YOUR INVESTMENT).
Maximum Sales Charge (Load)
Imposed on Purchases (as a
% of offering price)...... 5.75% None None None
Maximum Deferred Sales
Charge (Load) (as a % of
redemption proceeds)...... None None None None
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends/
Distributions............. None 4.00% 1.00% None
Redemption Fee (as a % of
amount redeemed, if
applicable)............... None None None None
Exchange Fee................ None None None None
ANNUAL FUND OPERATING
EXPENSES: (EXPENSES THAT
ARE DEDUCTED FROM FUND
ASSETS).
Management Fee.............. 0.75% 0.75% 0.75% 1.15%
Distribution and Service
(12b-1) Fees.............. None 0.75% 0.75% None
Other Expenses.............. 1.61% 2.64% 1.48% 0.26%
Total Annual Fund Operating
Expenses(1)............... 2.36% 4.14% 2.98% 1.41%
Expense reimbursement....... 0.61% 1.49% 0.36% None
Net Annual Fund Operating
Expenses(2)............... 1.75% 2.65% 2.62% 1.41%
</TABLE>
20
<PAGE> 26
PROFORMA AFTER REORGANIZATION
(UNAUDITED)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS M
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES: (FEES PAID DIRECTLY
FROM YOUR INVESTMENT).
Maximum Sales Charge (Load)
Imposed on Purchases (as a % of
offering price)................. 5.75% None None None
Maximum Deferred Sales Charge
(Load) (as a % of redemption
proceeds)....................... None(3) 4% 1% None
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends/
Distributions................... None None None None
Redemption Fee (as % of amount
redeemed, if applicable)........ None None None 2%(4)
Exchange Fee...................... None None None 2%(4)
</TABLE>
ANNUAL FUND OPERATING EXPENSES:
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS).
<TABLE>
<S> <C> <C> <C> <C>
Management Fee.................... 0.74% 0.74% 0.74% 0.74%
Distribution (12b-1) Fees......... None 0.75% 0.75% None
Other Expenses(5)................. 1.11% 1.65% 1.13% 0.68%
Total Annual Fund Operating
Expenses........................ 1.85% 3.14% 2.62% 1.42%
Expense Reimbursement............. 0.10% 0.49% None None
Net Annual Operating
Expenses(6)..................... 1.75% 2.65% 2.62% 1.42%
</TABLE>
21
<PAGE> 27
PROFORMA AFTER REORGANIZATION ASSUMING 50% REDEMPTIONS
(UNAUDITED)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS M
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES: (FEES PAID DIRECTLY
FROM YOUR INVESTMENT).
Maximum Sales Charge (Load)
Imposed on Purchases (as a %
of offering price)............ 5.75% None None None
Maximum Deferred Sales Charge
(Load) (as a % of redemption
proceeds)..................... None(3) 4% 1% None
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends/Distributions....... None None None None
Redemption Fee (as % of amount
redeemed, if applicable)...... None None None 2%(4)
Exchange Fee.................... None None None 2%(4)
</TABLE>
ANNUAL FUND OPERATING EXPENSES:
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS).
<TABLE>
<S> <C> <C> <C> <C>
Management Fee.................. 0.74% 0.74% 0.74% 0.74%
Distribution (12b-1) Fees....... None 0.75% 0.75% None
Other Expenses(7)............... 1.13% 1.72% 1.16% 0.71%
Total Annual Fund Operating
Expenses...................... 1.87% 3.21% 2.65% 1.45%
Expense Reimbursement........... 0.12% 0.56% 0.03% None
Net Annual Operating
Expenses(6)................... 1.75% 2.65% 2.62% 1.45%
</TABLE>
- ---------------
(1) This information is based on historical data as of October 31, 1998.
(2) Reflects current expense limitations for Class A, B and C shares of Kemper
Europe Fund, respectively. Under the prior expense limitations in place as
of October 31, 1998, total net annual operating expenses were 1.61%, 2.70%
and 2.18% for the Class A, B and C Shares of Kemper Europe Fund,
respectively.
(3) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% if redeemed within one year of purchase and 0.50% if
redeemed during the second year of purchase.
(4) A 2% redemption fee, which will be retained by the Open-End Fund, is imposed
on all redemptions (including redemptions paid in-kind) and ex-
22
<PAGE> 28
changes of Class M shares for a period of one year from the date of the
Reorganization.
(5) The expense ratios shown above are estimated for the Scudder Europe Fund's
current fiscal year ending October 31, 1999, based on the Fund's proposed
fee schedules and expenses expected to be incurred during its most recent
fiscal year. The actual expenses for each class of shares in future years
may be more or less than the numbers above, depending on a number of
factors, including changes in actual value of the Scudder Europe Fund's
assets represented by each class of shares. "Other Expenses" do not include
extraordinary expenses associated with efforts to restructure the Scudder
Europe Fund. If such expenses had been included, "Other Expenses" would have
been increased to 1.25%, 1.79%, 1.27% and .82% for Class A, B, C and M
shares, respectively, and "Total Annual Fund Operating Expenses" would have
been increased to 1.99%, 3.28%, 2.76% and 1.56% for Class A, B, C and M
shares, respectively.
(6) Pursuant to contractual agreements with the Fund, the investment manager,
the underwriter, the administrator, the accounting agent and the transfer
agent have agreed, for the one year period commencing on the date of the
Reorganization, to limit their respective fees and to reimburse other
operating expenses to the extent necessary to limit total operating expenses
of the classes of the Fund to the levels set forth in the table above.
(7) The expense ratios shown above are estimated for the Scudder Europe Fund's
current fiscal year ending October 31, 1999, based on the Fund's proposed
fee schedules and expenses expected to be incurred during its most recent
fiscal year. The actual expenses for each class of shares in future years
may be more or less than the numbers above, depending on a number of
factors, including changes in actual value of the Scudder Europe Fund's
assets represented by each class of shares. "Other Expenses" do not include
extraordinary expenses associated with efforts to restructure the Scudder
Europe Fund. If such expenses had been included, "Other Expenses" would have
been increased to 1.30%, 1.89%, 1.33% and 0.88% for Class A, B, C and M
shares, respectively, and "Total Annual Fund Operating Expenses" would have
been increased to 2.04%, 3.38%, 2.82% and 1.62% for Class A, B, C and M
shares, respectively.
23
<PAGE> 29
EXAMPLE:
These examples illustrate the impact of the above fees and expenses on an
account with an initial investment of $10,000, based on the expenses shown
above. They assume a 5% annual return, the reinvestment of all dividends and
distributions and annual fund operating expenses remaining the same. The expense
calculations incorporate the contractual expense reimbursements in place for the
first year in the periods reflected below. These examples are hypothetical:
actual fund expenses and returns vary from year to year, and may be higher or
lower than those shown.
KEMPER EUROPE FUND (CURRENT):
Fees and expenses if you sold shares after:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
1 Year.................... $ 729 $ 673 $ 321
3 Years................... $1,205 $1,440 $ 851
5 Years................... $1,713 $2,247 $1,518
10 Years*.................. $3,143 $3,656 $3,355
</TABLE>
Fees and expenses if you did not sell your shares:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
1 Year.................... $ 729 $ 273 $ 221
3 Years................... $1,205 $1,140 $ 851
5 Years................... $1,713 $2,047 $1,518
10 Years*.................. $3,143 $3,656 $3,355
</TABLE>
SCUDDER EUROPE FUND (CURRENT):
Fees and expenses if you sold shares after:
<TABLE>
<S> <C>
1 Year................................ $ 144
3 Years............................... $ 446
5 Years............................... $ 771
10 Years*.............................. $1,691
</TABLE>
Fees and expenses if you did not sell your shares:
<TABLE>
<S> <C>
1 Year................................ $ 144
3 Years............................... $ 446
5 Years............................... $ 771
10 Years*.............................. $1,691
</TABLE>
24
<PAGE> 30
PROFORMA EXPENSE RATIOS OF SCUDDER EUROPE FUND AFTER REORGANIZATION:
Fees and expenses if you sold shares after:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
1 Year**.................. $ 743 $ 668 $ 365
3 Years................... $1,118 $1,230 $ 814
5 Years................... $1,519 $1,824 $1,390
10 Years*.................. $2,641 $3,529 $2,954
</TABLE>
Fees and expenses if you did not sell your shares:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
1 Year**.................. $ 743 $ 268 $ 265
3 Years................... $1,118 $ 930 $ 814
5 Years................... $1,519 $1,624 $1,390
10 Years*.................. $2,641 $3,529 $2,954
</TABLE>
PROFORMA EXPENSE RATIOS OF SCUDDER EUROPE FUND AFTER REORGANIZATION ASSUMING 50%
REDEMPTIONS
Fees and expenses if you sold shares after:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
1 Year**.................. $ 743 $ 668 $ 365
3 Years................... $1,118 $1,241 $ 821
5 Years................... $1,519 $1,845 $1,403
10 Years*.................. $2,641 $2,925 $2,985
</TABLE>
Fees and expenses if you did not sell your shares:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
1 Year**.................. $ 743 $ 268 $ 265
3 Years................... $1,118 $ 941 $ 821
5 Years................... $1,519 $1,645 $1,403
10 Years*.................. $2,641 $2,925 $2,985
</TABLE>
- ---------------
* Class B automatically converts into Class A six years after purchase.
** These examples do not include extraordinary expenses associated with efforts
to restructure the Fund.
The foregoing tables are designed to assist the investor in understanding the
various costs and expenses that a shareholder will bear directly or
25
<PAGE> 31
indirectly. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
PERFORMANCE
Set forth below is performance data for periods ending March 31, 1999 based on
each Fund's net asset value. Past performance is not a guarantee of future
results, and it is not possible to predict whether or how investment performance
will be affected by the Reorganization.
<TABLE>
<CAPTION>
SCUDDER EUROPE FUND KEMPER EUROPE FUND(1)
--------------------------- ---------------------------
CUMULATIVE AVERAGE ANNUAL CUMULATIVE AVERAGE ANNUAL
---------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
One Year............. 4.73% 4.73% -2.04% -2.04%
Three Years.......... 90.23% 23.91% N/A N/A
Five Years........... 147.55% 19.88% N/A N/A
Since inception(2)... 181.38% 12.01% 57.00% 16.73%
</TABLE>
- ---------------
(1) Performance information is shown without sales charges for Class A Shares of
the Kemper Europe Fund.
(2) The Scudder Europe Fund commenced operations on February 9, 1990. The Kemper
Europe Fund commenced operations on May 1, 1996.
INFORMATION ABOUT THE REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION. The following summary of the Plan is
qualified in its entirety by reference to the Plan (Exhibit A hereto). The Plan
provides that the Scudder Europe Fund will acquire all of the assets of the
Kemper Europe Fund in exchange for shares of the Scudder Europe Fund and the
assumption by the Scudder Europe Fund of all of the liabilities of the Kemper
Europe Fund on the closing. The closing date is September 1, 1999 (the "Closing
Date"), but it may be changed by the parties.
Prior to the Closing Date, the Kemper Europe Fund will endeavor to discharge
liabilities and obligations. The Scudder Europe Fund shall assume all other
liabilities, expenses, costs, charges and reserves of the Kemper Europe Fund.
The net asset value per share of each class of the Kemper Europe Fund will be
determined by addition of the relevant class' pro rata share of the actual and
accrued liabilities and the liabilities specifically allocated to that class of
shares, and dividing the result by the total number of outstanding shares of the
relevant class. The Kemper Europe Fund and the Scudder Europe Fund will utilize
the procedures set forth in their respective current Prospectuses or State-
26
<PAGE> 32
ments of Additional Information to determine the value of their respective
portfolio securities and to determine the aggregate value of each Fund's
portfolio.
On or as soon after the Closing Date as conveniently practicable, the Kemper
Europe Fund will liquidate and distribute pro rata to shareholders of record as
of the close of business on such Closing Date the shares of the same class of
the Scudder Europe Fund received by the Kemper Europe Fund. Such liquidation and
distribution will be accomplished by the establishment of accounts in the names
of the Kemper Europe Fund's shareholders on the share records of the Scudder
Europe Fund's transfer agent. Each account will represent the respective pro
rata number of shares of the class of shares of the Scudder Europe Fund due to
the Kemper Europe Fund's shareholders. After such distribution and the winding
up of its affairs, the Kemper Europe Fund will be terminated.
The consummation of the Reorganization is subject to the conditions set forth in
the Plan. Notwithstanding approval by the shareholders of the Kemper Europe Fund
and the Scudder Europe Fund, the Plan may be terminated with respect to the
Reorganization at any time at or prior to the Closing Date: (i) by mutual
agreement of the Kemper Europe Fund and the Scudder Europe Fund; (ii) by the
Kemper Europe Fund, in the event the Scudder Europe Fund shall, or the Scudder
Europe Fund, in the event the Kemper Europe Fund shall, materially breach any
representation, warranty or agreement contained in the Plan to be performed at
or prior to the Closing Date; or (iii) if a condition to the Plan expressed to
be precedent to the obligations of the terminating party has not been met and it
reasonably appears that it will not or cannot be met.
Approval of the Plan with respect to the Kemper Europe Fund will require the
affirmative vote of a majority of the votes entitled to be cast by the
shareholders of the Kemper Europe Fund in the aggregate without regard to class,
in person or by proxy, if a quorum is present. The Reorganization is also
subject to a number of conditions, including the approval by the shareholders of
the Scudder Europe Fund to convert that Fund to an open-end investment company
and adoption by the Scudder Europe Fund of the Kemper Europe Fund management fee
schedule. Shareholders of the Kemper Europe Fund are entitled to one vote for
each share. If the Reorganization is not approved by shareholders of the Kemper
Europe Fund, the Board of Trustees will consider other possible courses of
action available to it, including resubmitting the Reorganization proposal to
shareholders.
DESCRIPTION OF THE SCUDDER EUROPE FUND'S SHARES. Shares of the Scudder Europe
Fund will be issued to the Kemper Europe Fund in accordance with the procedures
detailed in the Plan and as described in the Scudder Europe Fund's Preliminary
Prospectus. These procedures are
27
<PAGE> 33
substantially similar to those currently in place for the Kemper Europe Fund.
The Scudder Europe Fund does not issue share certificates to shareholders.
The Scudder Europe Fund currently has authorized four classes of common stock,
called Class A shares, Class B shares, Class C shares and Class M shares. The
Scudder Europe Fund intends to continuously offer its shares (with the exception
of Class M shares) after the Reorganization. The per share net asset value of
the Class B and Class C shares will generally be lower than that of the Class A
and M shares because of the higher annual expenses borne by the Class B and C
Shares. Also, because of the 12b-1 fees to be paid by the Class B and C shares,
the total return on the Class B and C shares can be expected to be lower than
the total return on the Class A and M shares.
Class A shares are offered at net asset value plus a maximum sales charge of
5.75% of the offering price and are subject to an administrative services fee of
up to 0.25%. Reduced sales charges apply to purchases of $50,000 or more of
Class A shares. Class A shares purchased at net asset value under the Large
Order NAV Purchase Privilege (as described in the Scudder Europe Fund's
Preliminary Prospectus) may be subject to a 1% contingent deferred sales charge
if redeemed within one year of purchase and a 0.50% contingent deferred sales
charge if redeemed during the second year of purchase.
Class B shares of the Scudder Europe Fund are offered at net asset value without
an initial sales charge, but are subject to a 0.75% 12b-1 distribution fee, a
contingent deferred sales charge that declines from 4% to zero on certain
redemptions made within six years of purchase and an administrative services fee
of up to 0.25%. Class B shares automatically convert into Class A shares (which
have lower ongoing expenses) six years after purchase.
Class C shares are offered at net asset value without an initial sales charge,
but are subject to a 0.75% 12b-1 distribution fee, a 1% contingent deferred
sales charge on redemptions made within one year of purchase, and an
administrative services fee of up to 0.25%. Class C shares do not convert into
another class.
Class M shares represent the initial shares of the Scudder Europe Fund and are
no longer offered. Class M shares are not subject to a contingent deferred sales
charge or a 12b-1 distribution fee, but are subject to an administrative
services fee of up to 0.25%. Class M shares are subject to a 2% fee on all
redemptions (including redemptions in-kind) and exchanges. The Scudder Europe
Fund will pay in-kind redemptions sought by Class M shareholders to the extent
those redemptions exceed $500,000. Class M shares will automatically convert to
Class A shares one year after the date of the Reorganization. See the
Preliminary Pro-
28
<PAGE> 34
spectus of the Scudder Europe Fund and "Organization of the Fund" in the Scudder
Europe Fund's Preliminary Statement of Additional Information for other
information with respect to the shares of the Scudder Europe Fund.
FEDERAL INCOME TAX CONSEQUENCES. The exchange of assets of the Kemper Europe
Fund for shares of the Scudder Europe Fund, followed by the distribution of
these shares, is intended to qualify for federal income tax purposes as a
tax-free reorganization under Section 368(a)(l) of the Internal Revenue Code of
1986, as amended (the "Code"). As a condition to the closing of the
Reorganization, the Scudder Europe Fund and the Kemper Europe Fund will receive
an opinion from Willkie Farr & Gallagher, counsel to the Scudder Europe Fund, to
the effect that, on the basis of the existing provisions of the Code, U.S.
Treasury regulations issued thereunder, current administrative rules,
pronouncements and court decisions, for federal income tax purposes, upon
consummation of the Reorganization:
(1) the transfer of all of the Kemper Europe Fund's assets in exchange for the
Scudder Europe Fund's shares and the assumption by the Scudder Europe Fund
of the liabilities of the Kemper Europe Fund, and the distribution of the
Scudder Europe Fund's shares to the shareholders of the Kemper Europe Fund
in exchange for their shares of the Kemper Europe Fund, will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and the
Scudder Europe Fund and the Kemper Europe Fund will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code;
(2) no gain or loss will be recognized by the Scudder Europe Fund upon the
receipt of the assets of the Kemper Europe Fund solely in exchange for the
Scudder Europe Fund's shares and the assumption by the Scudder Europe Fund
of the liabilities of the Kemper Europe Fund;
(3) no gain or loss will be recognized by the Kemper Europe Fund upon the
transfer of the Kemper Europe Fund's assets to the Scudder Europe Fund in
exchange for the Scudder Europe Fund's shares and the assumption by the
Scudder Europe Fund of the liabilities of the Kemper Europe Fund or upon the
distribution of the Scudder Europe Fund's shares to the Kemper Europe Fund's
shareholders;
(4) no gain or loss will be recognized by shareholders of the Kemper Europe Fund
upon the exchange of their shares for shares of the Scudder Europe Fund or
upon the assumption by the Scudder Europe Fund of the liabilities of the
Kemper Europe Fund;
29
<PAGE> 35
(5) the aggregate tax basis of the shares of the Scudder Europe Fund received by
each shareholder of the Kemper Europe Fund pursuant to the Reorganization
will be the same as the aggregate tax basis of shares of the Kemper Europe
Fund held by such shareholder immediately prior to the Reorganization, and
the holding period of shares of the Scudder Europe Fund to be received by
each shareholder of the Kemper Europe Fund will include the period during
which shares of the Kemper Europe Fund exchanged therefor were held by such
shareholder (provided shares of the Kemper Europe Fund were held as capital
assets on the date of the Reorganization); and
(6) the tax basis of Kemper Europe Fund's assets acquired by the Scudder Europe
Fund will be the same as the tax basis of such assets to the Kemper Europe
Fund immediately prior to the Reorganization, and the holding period of the
assets of the Kemper Europe Fund in the hands of the Scudder Europe Fund
will include the period during which those assets were held by the Kemper
Europe Fund.
Shareholders of the Kemper Europe Fund should consult their tax advisors
regarding the effect, if any, of the proposed Reorganization in light of their
individual circumstances. Since the foregoing discussion only relates to the
federal income tax consequences of the Reorganization, shareholders of the
Kemper Europe Fund should also consult their tax advisors as to state and local
tax consequences, if any, of the Reorganization.
POTENTIAL TAX CONSEQUENCES. If the Scudder Europe Fund experiences net
redemptions after converting to an open-end investment company, the Scudder
Europe Fund would be required to sell portfolio securities. Many of the Scudder
Europe Fund's portfolio securities have appreciated in value since purchased
and, if sold, would result in realization of capital gains. As of February 28,
1999, the unrealized appreciation of the Scudder Europe Fund's portfolio
securities was $134,069,202 (39% of the Fund's portfolio). The portfolio
activity that may be necessitated by redemption requests following conversion
could result in the realization of significant capital gains by the Scudder
Europe Fund, in addition to those historically incurred in the ordinary course
of the Scudder Europe Fund's investment activity, which would be distributed to
stockholders. Such distributions would be taxable to the stockholders who
receive them. As of February 28, 1999, based on a share's net asset value of
$21.19, the Scudder Europe Fund had net undistributed realized short-term
capital gains of $0 per share and net undistributed realized long-term capital
gains of $1.96 per share. Distributed net short-term capital gains are taxable
to recipient stockholders as ordinary income and long-term capital gains are
taxable as capital gains. Accordingly, the actions of redeeming stockholders may
have adverse tax consequences for the Scudder Europe Fund and its remaining
stockholders. The Scud-
30
<PAGE> 36
der Europe Fund may employ the equalization method of tax accounting, which
would reduce the portion of realized capital gains required to be paid to
remaining shareholders as taxable distributions. In addition, as noted above,
the Scudder Europe Fund intends to pay in-kind redemptions sought by Class M
Shareholders to the extent those redemptions exceed $500,000 in an attempt to
minimize the adverse tax consequences resulting from redemptions for
non-redeeming stockholders. (The Scudder Europe Fund also will not offer an
exchange privilege to Class M shareholders with respect to transactions that
would trigger an in-kind redemption.) By paying large redemptions in-kind, the
Scudder Europe Fund may avoid having to sell appreciated portfolio securities
and realizing capital gains. Therefore, the Scudder Europe Fund may avoid
distributing capital gains to remaining stockholders of the Scudder Europe Fund
as a consequence of large redemptions.
Even in the absence of conversion, unrealized capital appreciation may be
realized in the future. However, if there are redemptions due to conversion, the
gains will be realized sooner than they would have been under the closed-end
format. A nonredeeming stockholder who receives a capital gain distribution
resulting from sales of portfolio investments necessitated by redemptions in
connection with the Reorganization will realize a smaller gain (or a larger
loss) upon a subsequent redemption of shares as the Fund's distribution of such
capital gains will reduce the net asset value of the stockholder's shares.
CAPITALIZATION. The following table sets forth, as of April 30, 1999, (i) the
capitalization of the Kemper Europe Fund, (ii) the capitalization of the Scudder
Europe Fund, and (iii) the pro forma capitalization of the Scudder Europe Fund
as adjusted to give effect to the Reorganization. The capitalization of the
Scudder Europe Fund is likely to be different when the Reorganization is
consummated.
31
<PAGE> 37
PRO FORMA CAPITALIZATION (UNAUDITED)
The following table sets forth the unaudited capitalization of the Scudder
Europe Fund and the Kemper Europe Fund as of April 30, 1999 as adjusted giving
effect to the Reorganization discussed herein(1).
<TABLE>
<CAPTION>
SCUDDER EUROPE KEMPER EUROPE
FUND FUND PRO FORMA PRO FORMA FOR
(ACTUAL) (ACTUAL) ADJUSTMENTS REORGANIZATION
-------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Net Assets........... $351,657,237 $67,364,406 $(39,221,388)(2) $379,800,255
Net asset value
per share........... $ 21.56 -- -- $ 19.26(3)(5)
Net asset value per
share, Class A...... -- $ 14.40 -- $ 19.26(3)
Net asset value per
share, Class B...... -- $ 14.05 -- $ 19.26(3)
Net asset value per
share, Class C...... -- $ 14.15 -- $ 19.26(3)
Shares outstanding... 16,310,537 -- -- 16,310,537(5)
Shares outstanding,
Class A(4).......... -- 2,253,099 (610,487) 1,642,612
Shares outstanding,
Class B(4).......... -- 2,154,354 (623,381) 1,530,973
Shares outstanding,
Class C(4).......... -- 328,918 (93,400) 235,518
</TABLE>
- ---------------
(1) Assumes the Reorganization had been consummated on April 30, 1999, and is
for information purposes only. No assurance can be given as to how many
shares of the Scudder Europe Fund will be received by the shareholders of
the Kemper Europe Fund on the date the Reorganization takes place, and the
foregoing should not be relied upon to reflect the number of shares of the
Scudder Europe Fund that actually will be received on or after such date.
(2) Assumes capital gains distributions, without any reinvestment, of
$37,516,294 and $1,705,094 for the Scudder Europe Fund and the Kemper Europe
Fund, respectively.
(3) Net asset value per share after capital gains distributions, assuming no
reinvestment.
(4) Assumes the issuance of 1,642,612 Class A, 1,530,973 Class B, and 235,518
Class C shares in exchange for the net assets of the Kemper Europe Fund. The
number of shares issued is based on the pro forma net asset value of each
class of Fund shares, net of estimated capital gains distributions on April
30, 1999.
(5) Existing shares of Scudder Europe Fund will be redesignated as Class M
shares.
32
<PAGE> 38
PRINCIPAL SHAREHOLDERS
As of the Record Date, the following persons owned beneficially more than 5% of
the outstanding shares of the Kemper Europe Fund:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS CLASS SHARES HELD OWNERSHIP
- ---------------- ----- ----------- ---------
<S> <C> <C> <C>
National Financial Services
Corporation*................. A 191,439 8.87
200 Liberty Street,
4th Floor
New York, NY 10281
Donaldson, Lufkin & Jenrette
Securities Corp., Inc.*...... A 137,903 6.39
P.O. Box 2052
Jersey City, NJ 07303
National Financial Services
Corporation*................. B 182,565 9.06
200 Liberty Street,
4th Floor
New York, NY 10281
Donaldson, Lufkin & Jenrette
Securities Corp., Inc.*...... B 163,943 8.14
P.O. Box 2052
Jersey City, NJ 07303
National Financial Services
Corporation*................. C 27,014 8.47
200 Liberty Street,
4th Floor
New York, NY 10281
National Financial Services
Corporation*................. C 25,579 8.65
200 Liberty Street,
4th Floor
New York, NY 10281
</TABLE>
- ---------------
* Kemper Europe Fund believes that these entities are not the beneficial owners
of shares held of record by them.
All of the officers and Trustees of the Kemper Europe Fund as a group owned less
than 1% of the outstanding voting securities of the Kemper Europe Fund, as of
the Record Date.
To the best of Scudder Europe Fund's knowledge, as of March 31, 1999, no
shareholder held 5% or more of the Fund's shares, with the exception of Lazard
Freres & Co. LLC which held 6.40% of the Fund's shares. All of the officers and
Directors of the Scudder Europe Fund as a
33
<PAGE> 39
group owned less than 1% of the outstanding voting securities of the Scudder
Europe Fund as of March 31, 1999.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion is based upon and qualified in its entirety by the
disclosures in the Statement of Additional Information to this Prospectus/Proxy
Statement, the Preliminary Prospectus and Statement of Additional Information of
the Scudder Europe Fund and the Prospectus and Statement of Additional
Information of the Kemper Europe Fund.
INVESTMENT OBJECTIVES. The investment objective of the Scudder Europe Fund is
long-term capital appreciation. The investment objective of the Kemper Europe
Fund is long-term capital growth. There can be no assurance that any Fund will
achieve its investment objective. The investment objective of the Scudder Europe
Fund may not be changed by the Board of Directors without the affirmative vote
of the holders of a majority of the outstanding shares (as defined in the 1940
Act) of the Scudder Europe Fund. The Kemper Europe Fund's investment objective,
however, may be changed without a vote of shareholders.
INVESTMENT POLICIES. In seeking to achieve their investment objectives, the
Scudder Europe Fund and the Kemper Europe Fund are guided by substantially
similar policies that should be considered by the shareholders of the Kemper
Europe Fund.
Both the Scudder Europe Fund and the Kemper Europe Fund seek to achieve their
objectives by investing primarily in equity securities of European companies
("European Equity Securities"). European Equity Securities include common
stocks, preferred stocks, securities convertible into or exchangeable for common
or preferred stocks, equity investments in partnerships, joint ventures and
other forms of non-corporate investments and warrants, options and rights
exercisable for equity securities that are issued by European companies as
defined below.
Each Fund considers an issuer of securities to be a European company if: (i) it
is organized under the laws of a European country and has a principal office in
a European country; (ii) it derives 50% or more of its total revenues from
business in Europe; or (iii) its equity securities are traded principally on a
stock exchange in Europe. Under normal circumstances, the Scudder Europe Fund
will invest at least 65% of its total assets in European Equity Securities. The
Kemper Europe Fund, however, invests at least 85% of its total assets in
European Equity Securities and will also invest at least 65% of its total assets
in European Equity Securities of issuers meeting at least one of the first two
criteria described above. For purposes of the foregoing, each Fund also
considers European Equity Securities to include: (i) shares of closed-end
management
34
<PAGE> 40
investment companies, the assets of which are invested primarily in European
Equity Securities and (ii) depository receipts (such as American Depository
Receipts and European Depository Receipts) where the underlying or deposited
securities are European Equity Securities.
Each Fund invests principally in developed countries, but the Kemper Europe Fund
may invest up to 25% of its total assets in developing or "emerging" countries.
The Scudder Europe Fund may also invest in emerging markets, but no such
limitation is imposed on the amount of assets that may be so invested.
Currently, the developed European countries in which each Fund may invest
(without limit) include: Austria, France, Germany, the Netherlands, Switzerland,
Spain, Italy, Luxembourg, United Kingdom, Ireland, Belgium, Denmark, Sweden,
Norway and Finland. Each Fund may, in the discretion of its investment manager,
invest without limit in other European countries in the future if they become
developed countries. Some examples of emerging European countries in which both
Funds may invest are Portugal, Greece, Turkey, Hungary, Poland and the Czech
Republic.
In pursuing its objective, each Fund invests primarily in European Equity
Securities believed to have potential for capital growth. However, there is no
requirement that each Fund invest exclusively in European Equity Securities.
Subject to the limits described above, each Fund may invest in any other type of
security including, but not limited to, equity securities of non-European
companies, bonds, notes and other debt securities of domestic or foreign
companies (including euro-currency instruments and securities) and obligations
of domestic or foreign governments and their political subdivisions. Currently,
the Kemper Europe Fund does not intend to invest more than 5% of its net assets
in debt securities during the coming year (except for temporary defensive
investments as described below). The Scudder Europe Fund, however, may invest up
to 20% of its total assets in debt securities, including those deemed to be
below investment grade.
Each Fund makes investments in various European countries. Under normal
circumstances, business activities in not less than five different European
countries will be represented in the Kemper Europe Fund's portfolio. The Kemper
Europe Fund may, from time to time, have 25% or more of its assets invested in
any major European industrial or developed country which, in the view of its
investment manager, poses no unique investment risk. Although Scudder Europe
Fund has no such stated policy, it is not precluded from investing 25% or more
of its assets in any major European industrial or developed country as deemed
appropriate by its investment manager. The Scudder Europe Fund intends to
allocate its investments among at least three countries at all times.
NON-DIVERSIFIED. Unlike the Kemper Europe Fund, the Scudder Europe Fund has
elected to operate as a "non-diversified" investment company
35
<PAGE> 41
under the 1940 Act and is permitted to invest a greater proportion of its assets
in the securities of a smaller number of issuers. As a result, the Scudder
Europe Fund may be subject to greater risks with respect to its portfolio than a
more broadly diversified fund. As of March 31, 1999, however, Scudder Europe
Fund held positions in securities issued by 80 issuers and no single issuer
constituted more than 5.8% of the Fund's assets.
PRIVATIZED ENTERPRISES. Both the Scudder Europe Fund and the Kemper Europe Fund
may invest in securities issued by foreign enterprises that have undergone or
are currently undergoing privatization.
DEPOSITORY RECEIPTS. Both the Scudder Europe Fund and the Kemper Europe Fund
may invest in securities of foreign issuers through sponsored or unsponsored
American, European and Global depository receipts.
DEBT SECURITIES. Both the Scudder Europe Fund and the Kemper Europe Fund may
invest in debt securities. As stated above, the Kemper Europe Fund does not
intend to invest more than 5% of its net assets in debt securities (except for
temporary defensive purposes). The Scudder Europe Fund, however, may invest up
to 20% of its total assets in debt securities, including debt securities rated
below investment grade (i.e., rated below Baa by Moody's Investors Services,
Inc. ("Moody's") or below BBB by Standard & Poor's ("S&P") and unrated
securities of similar quality as determined by the investment manager. These
securities usually entail greater risk (including the possibility of default or
bankruptcy of the issuers of such securities), generally involve greater
volatility of price and risk of principal and income, and may be less liquid
than securities in the higher rating categories. The lower the ratings of such
debt securities, the greater their risks. The Scudder Europe Fund may also
purchase bonds rated B or lower by Moody's or S&P, and may invest in securities
which are rated C by Moody's or D by S&P or securities of comparable quality in
its investment manager's judgment. Such securities may be in default with
respect to payment of principal or interest, carry a high degree of risk and are
considered speculative.
SMALL COMPANIES. Both the Scudder Europe Fund and the Kemper Europe Fund may
invest their assets in the securities of companies with small or low market
capitalizations.
TEMPORARY DEFENSIVE PRACTICES. When in the opinion of the investment manager
market conditions warrant, the Scudder Europe Fund and the Kemper Europe Fund
may hold foreign or U.S. debt instruments, as well as cash or cash equivalents
including foreign and domestic money market instruments, short-term government
and corporate obligations, and repurchase agreements without limit for temporary
defensive purposes.
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The Scudder Europe Fund may also invest up to 20% of its assets in the above
instruments to maintain liquidity.
SPECIALIZED INVESTMENTS. The Scudder Europe Fund may also invest in
"Specialized Investments" which consist of equity securities of: (i)
privately-held European companies; (ii) European companies that have recently
made initial public offerings of their shares; (iii) government-owned or
- -controlled companies that are being privatized; (iv) smaller publicly-held
European companies, i.e., any European company having a market capitalization of
less than $500 million (the Board of Directors of the Scudder Europe Fund may,
in the future, reevaluate and increase or decrease the maximum market
capitalization for qualification as a smaller European company); (v) companies
and joint ventures based in Eastern Europe; (vi) private placements and joint
venture participations in European companies that may not be readily marketable;
(vii) pooled investment funds that invest principally in securities in which the
Fund may invest, which are considered investment companies for purposes of the
1940 Act restrictions described below; and (viii) European companies with
private market values perceived by the investment manager to be substantially in
excess of their publicly-traded values. The Kemper Europe Fund is not prohibited
from entering into "Specialized Investments", but any such investments would
constitute a small portion of its investment portfolio. Scudder Europe Fund has
no present intention of investing a significant amount of its assets in
"Specialized Investments."
CONVERTIBLE SECURITIES. Both the Scudder Europe Fund and the Kemper Europe Fund
may invest in convertible securities which are bonds, notes, debentures,
preferred stocks, and other securities which are convertible into common stocks.
Investments in convertible securities can provide income through interest and
dividend payment and/or an opportunity for capital appreciation by virtue of
their conversion or exchange features. The convertible securities in which each
Fund may invest may be converted or exchanged at a stated or determinable
exchange ratio into underlying shares of common stock. The exchange ratio for
any particular convertible security may be adjusted from time to time due to
stock splits, dividends, spin-offs, other corporate distributions, or scheduled
changes in the exchange ratio.
REPURCHASE AGREEMENTS. Both the Scudder Europe Fund and the Kemper Europe Fund
may enter into repurchase agreements with member banks of the Federal Reserve
System, any foreign bank or with any domestic or foreign broker-dealer which is
recognized as a reporting government securities dealer if the creditworthiness
of the bank or broker-dealer has been determined by the investment manager to be
at least as high as that of other obligations the Funds may purchase. The Kemper
Europe Fund, however, does not intend to invest more than 5% of
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its net assets in repurchase agreements. Scudder Europe Fund is not limited in
the amount of its assets that may be invested in repurchase agreements, although
it has no current intention of investing a significant amount of its assets in
such instruments.
BORROWING. Both the Scudder Europe Fund and the Kemper Europe Fund may not
borrow money, except as permitted under the 1940 Act. The Scudder Europe Fund
will borrow only when the investment manager believes that borrowing will
benefit the Scudder Europe Fund after taking into account considerations such as
the costs of the borrowing. The Scudder Europe Fund does not expect to borrow
for investment purposes, to increase return or leverage the portfolio.
ILLIQUID SECURITIES. Both the Scudder Europe Fund and the Kemper Europe Fund
may occasionally purchase securities other than in the open market. While such
purchases may often offer attractive opportunities for investment not otherwise
available on the open market, the securities so purchased are often "restricted
securities" or "not readily marketable," i.e., securities which cannot be sold
to the public without registration under the Securities Act of 1933, as amended
(the "1933 Act") or the availability of an exemption from registration (such as
Rules 144 or 144A) or because they are subject to other legal or contractual
delays in or restrictions on resale. Both the Scudder Europe Fund and the Kemper
Europe Fund may not invest more than 15% of their respective net assets in
illiquid securities.
WHEN-ISSUED SECURITIES. Unlike the Kemper Europe Fund, the Scudder Europe Fund
may from time to time purchase equity and debt securities on a "when-issued" or
"forward delivery" basis. The price of such securities, which may be expressed
in yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for the when-issued or forward delivery securities takes
place at a later date. During the period between purchase and settlement, no
payment is made by the Scudder Europe Fund to the issuer and no interest accrues
to the Scudder Europe Fund. To the extent that assets of the Scudder Europe Fund
are held in cash pending the settlement of a purchase of securities, the Scudder
Europe Fund would earn no income; however, it is the Scudder Europe Fund's
intention to be fully invested to the extent practicable. While when-issued or
forward delivery securities may be sold prior to the settlement date, the
Scudder Europe Fund intends to purchase such securities with the purpose of
actually acquiring them unless a sale appears desirable for investment reasons.
At the time the Scudder Europe Fund makes the commitment to purchase a security
on a when-issued or forward delivery basis, it will record the transaction and
reflect the value of the security in determining its net asset value. The market
value of the when-issued or forward delivery securities may be more or less than
the purchase price. The Scudder Europe Fund does not
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believe that its net asset value or income will be adversely affected by its
purchase of securities on a when-issued or forward delivery basis.
LENDING OF PORTFOLIO SECURITIES. Consistent with the requirements of the 1940
Act, both the Scudder Europe Fund and the Kemper Europe Fund may lend their
portfolio securities. The Scudder Europe Fund may not lend its portfolio
securities in an amount that would exceed 25% of its total assets and the Kemper
Europe Fund may not lend its portfolio securities in an amount that would exceed
33 1/3% of the value of its total assets.
SHORT SALES AGAINST-THE-BOX. Both the Scudder Europe Fund and the Kemper Europe
Fund may make short sales against-the-box for the purpose of, but not limited
to, deferring realization of loss when deemed advantageous for federal income
tax purposes. A short sale "against-the-box" is a short sale in which a Fund
owns enough shares of the security involved to cover the borrowed securities, if
necessary. Each Fund may engage in such short sales only to the extent that not
more than 10% of the Fund's total assets (determined at the time of the short
sale) is held as collateral for such sales. Each Fund currently does not intend,
however, to engage in such short sales to the extent that more than 5% of its
net assets will be held as collateral therefor during the current year.
STRATEGIC TRANSACTIONS. No more than 5% of the Scudder Europe Fund's assets
will be committed to the following transactions if entered into for non-hedging
purposes. The Kemper Europe Fund has no such limitation, and to do so with
respect to futures contracts and related options would subject Kemper Europe
Fund to regulation by the Commodities Futures Trading Commission as a commodity
pool.
FINANCIAL FUTURES CONTRACTS AND RELATED OPTIONS. Each Fund may enter into
financial futures contracts for the future delivery of a financial instrument
and may purchase and write call and put options on financial futures contracts.
Transactions involving financial futures and options thereon may be entered into
by the Funds only for hedging purposes and not for speculation.
OPTIONS ON SECURITIES. Both Funds may purchase exchange-listed and
over-the-counter ("OTC") call options on securities. In addition, both Funds may
write (sell) exchange-listed and OTC "covered" call options on securities as
long as they own the underlying securities subject to the option or meet asset
segregation requirements to the extent required by applicable regulation in
connection with the optioned securities. The Scudder Europe Fund may purchase
and sell exchange-listed and OTC put options on securities (whether or not it
holds the securities in its portfolio), but will not sell put options if, as a
result, more than 50% of its total assets would be required to be segregated to
cover the potential obligations under such put options. The Kemper Europe Fund
may write
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exchange-listed and OTC "covered" put options on securities provided that, as
long as the Fund is obligated as a writer of a put option, it will own an option
to sell the underlying securities subject to the option, having an exercise
price equal to or greater than the exercise price of the "covered" option, or it
will deposit and maintain in a segregated account eligible securities having a
value equal to or greater than the exercise price of the option.
OTC OPTIONS. The Scudder Europe Fund will engage in OTC option transactions
only with U.S. government securities dealers recognized by the Federal Reserve
Bank of New York as "primary dealers" or broker/dealers, domestic or foreign
banks or other financial institutions which have received (or the guarantors of
the obligation of which have received) a short-term credit rating of A-1 from
S&P or P-1 from Moody's or an equivalent rating from any nationally recognized
statistical rating organization ("NSRO") or are determined to be of equivalent
credit quality by the investment manager. The Kemper Europe Fund will only
engage in OTC options transactions with dealers approved by the investment
manager pursuant to procedures adopted by its Board of Trustees. The Scudder
Europe Fund will only sell OTC options (other than OTC currency options) that
are subject to a buy-back provision permitting the Fund to require the
counterparty to sell the option back to the Fund at a formula price within seven
days. The Scudder Europe Fund also expects generally to enter into OTC options
that have cash settlement provisions, although it is not required to do so. The
Kemper Europe Fund anticipates entering into agreements with dealers to which it
sells OTC options whereby it would have the absolute right to repurchase the OTC
options from the dealer at any time at a price no greater than a price
established under the agreement.
OPTIONS ON INDICES. Both Funds may purchase and sell options on securities and
other financial indices. The Kemper Europe Fund may only enter into these
transactions for hedging purposes and not for speculation.
FOREIGN CURRENCY OPTIONS. Both Funds may engage in foreign currency options
transactions, however the Scudder Europe Fund may only do so for hedging
purposes. In addition, the Scudder Europe Fund may engage in these transactions
only with counterparties which have received (or the guarantors of the
obligations which have received) a credit rating of A-1 or P-1 by S&P or
Moody's, respectively, or that have an equivalent rating from an NSRO or (except
for OTC currency options) are determined to be of equivalent quality by the
investment manager.
FOREIGN CURRENCY FUTURES TRANSACTIONS. Both Funds may engage in foreign
currency futures transactions for hedging purposes only.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Both Funds may engage in forward
foreign currency transactions. The Scudder Europe
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Fund may only do so for hedging purposes. The Kemper Europe may engage in such
transactions when the investment manager believes that it is in the best
interest of the Fund to do so, but it will not speculate in foreign currency
exchange.
SWAPS, CAPS, FLOORS AND COLLARS. Unlike the Kemper Europe Fund, the Scudder
Europe Fund may enter into interest rate, currency and index swaps and purchase
and sell related caps, floors and collars. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in the price of
securities it anticipates purchasing at a later date. The Scudder Europe Fund
intends to use these transactions as hedges and not as speculative investments
and will not sell interest rate caps or floors where it does not own securities
or other instruments providing the income stream that it may be obligated to
pay.
COMBINED TRANSACTIONS. The Scudder Europe Fund may also enter into multiple
transactions, including multiple options transactions, multiple futures
transactions, multiple currency transactions (including forward currency
contracts) and multiple interest rate transactions and any combination of
futures, options, currency and interest rate transactions instead of a single
transaction, or as part of a single or combined strategy when in the option of
the investment manager it is in the best interests of the Fund to do so.
EURODOLLAR INSTRUMENTS. The Scudder Europe Fund may make investments in
Eurodollar instruments which are U.S. dollar-denominated futures contracts or
options thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time to
time. The Fund may use Eurodollar futures contracts and options thereon to hedge
against changes in LIBOR, to which many interest rate swaps and fixed income
instruments are linked.
DERIVATIVES. Both the Scudder Europe Fund and the Kemper Europe Fund may, but
are not required to, utilize various other investment strategies as described
above to hedge various market risks (such as interest rates, currency exchange
rates and broad or specific equity or fixed income market movements), to manage
the effective maturity or duration of the fixed-income securities in their
portfolios, or to enhance potential gain. These strategies may be executed
through the use of derivative contracts. Such strategies are generally accepted
as part of modern portfolio management and are regularly utilized by many mutual
funds and other institutional investors. Techniques and instruments may change
over time as new instruments and strategies are developed or regulatory changes
occur.
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INVESTMENT RESTRICTIONS
The investment restrictions of the Scudder Europe Fund and the Kemper Europe
Fund are substantially similar, but not identical. The following discussion of
fundamental and nonfundamental restrictions is based upon and qualified entirely
by the disclosures in the Statement of Additional Information for this
Prospectus/Proxy Statement, Preliminary Prospectus and Statement of Additional
Information of the Scudder Europe Fund and the Prospectus and Statement of
Additional Information of the Kemper Europe Fund. Fundamental policies may be
changed only with the approval of holders of a majority of the outstanding
voting securities (as defined in the 1940 Act) of a Fund, whereas nonfundamental
policies may be changed by a Fund's Board.
FUNDAMENTAL POLICIES
The Scudder Europe Fund may not purchase securities on margin or make short
sales of securities, except such short-terms credits as may be necessary or
routine for clearance of transactions and the maintenance of margin with respect
to options and financial futures transactions. The Kemper Europe Fund has a
similar restriction, except that it is classified as a non-fundamental policy.
Both Funds are permitted to make short sales against-the-box.
Neither the Scudder Europe Fund nor the Kemper Europe Fund may issue senior
securities or borrow money except that the Funds may borrow money as permitted
under the 1940 Act, as interpreted or modified by the regulatory authority
having jurisdiction from time to time. The Scudder Europe Fund is currently
prohibited from pledging its assets, but has proposed a Charter amendment to
permit the Fund to pledge its assets to secure permitted borrowings. However,
there is no assurance that the shareholders of the Scudder Europe Fund will
approve this change. As a nonfundamental policy, the Kemper Europe Fund may
pledge up to 15% of its total assets to secure borrowings. For the purposes of
these investment restrictions, collateral arrangements with respect to the
writing of options or the purchase or sale of futures contracts are not deemed a
pledge of assets or the issuance of a senior security. Further, neither Fund may
make loans, except that each Fund may lend its portfolio securities consistent
with the 1940 Act limitations. The Scudder Europe Fund may lend its portfolio
securities in an amount up to 25% of its total assets, but as a nonfundamental
policy currently intends to limit securities lending to 5% of its total assets.
Also, neither the Scudder Europe Fund nor the Kemper Europe Fund may invest more
than 25% of the total value of their assets in a particular industry or act as
underwriter except to the extent that, in connection
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with the disposition of portfolio securities, a Fund may be deemed to be an
underwriter under applicable securities laws.
In addition, neither Fund may buy or sell commodities or commodity contracts or
real estate or interests in real estate, although they may purchase and sell
securities that are secured by real estate or commodities and securities of
companies that invest or deal in real estate or commodities, may purchase and
sell futures contracts and related options on stock indices and currencies, may
enter into forward currency exchange contracts, may write options on stocks and
may purchase and sell options on currencies and stock indexes. The Kemper Europe
Fund also reserves freedom of action to hold and to sell real estate acquired as
a result of the Fund's ownership of securities.
NONFUNDAMENTAL POLICIES
The Scudder Europe Fund may not borrow money in an amount greater than 5% of its
total assets, except (i) for temporary or emergency purposes and (ii) by
engaging in reverse repurchase agreements, dollar rolls, or other investments or
transactions described in the Scudder Europe Fund's Preliminary Prospectus and
Statement of Additional Information which may be deemed to be borrowings. In
addition, the Scudder Europe Fund may not enter into either of reverse
repurchase agreements or dollar rolls in an amount greater than 5% of its total
assets.
The Scudder Europe Fund may not purchase options, unless the aggregate premiums
paid on all such options held by the Scudder Europe Fund at any time do not
exceed 20% of its total assets; or sell put options, if as a result the
aggregate value of the obligations underlying such put options would exceed 50%
of its total assets. Although authorized to do so, the portfolio managers of the
Scudder Europe Fund have no current intention to utilize these strategies to a
significant extent.
The Scudder Europe Fund may not enter into futures contracts or purchase options
thereon unless immediately after the purchase, the value of the aggregate
initial margin with respect to such futures contracts entered into on behalf of
the Scudder Europe Fund and the premiums paid for such options on futures
contracts does not exceed 5% of the fair market value of the Scudder Europe
Fund's total assets; provided that, in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
computing the 5% limit. The Kemper Europe Fund may not write or sell put or call
options, combinations thereof or similar options on more than 25% of its net
assets; nor may it purchase put or call options if more than 5% of its net
assets would be invested in premiums on put and call options, combinations
thereof or similar options; however, it may buy or sell options on financial
futures contracts.
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The Scudder Europe Fund may not purchase warrants if as a result such
securities, taken at the lower of cost or market value, would represent more
than 5% of the value of the Scudder Europe Fund's total assets (for this
purpose, warrants acquired in units or attached to securities will be deemed to
have no value). Although the Scudder Europe Fund may lend its portfolio
securities in an amount up to 25% of its total assets, it currently intends as a
nonfundamental policy to limit securities lending to 5% of its total assets.
Also, the Scudder Europe Fund may not participate on a joint and several basis
in any trading account in securities.
Neither the Scudder Europe Fund nor the Kemper Europe Fund may (i) invest for
the purpose of exercising control or management of another issuer; (ii) invest
more than 15% of their respective net assets in illiquid securities; or (iii)
purchase more than 10% of any class of voting securities of any issuer.
Finally, the Kemper Europe Fund may not purchase securities of other investment
companies, except in connection with a merger, consolidation, acquisition or
reorganization, or by purchase in the open market of securities of closed-end
investment companies where no underwriter or dealer's commission or profit,
other than customary broker's commission, is involved and only if immediately
thereafter not more than (i) 3% of the total outstanding voting stock of such
company is owned by the Fund, (ii) 5% of the Fund's total assets would be
invested in any one such company, and (iii) 10% of the Fund's total assets would
be invested in such securities.
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RISK FACTORS
CONVERSION OF SCUDDER EUROPE FUND TO OPEN-END FORM. Shareholders of Scudder
Europe Fund are being asked to vote on a number of proposals. Approval of the
open-ending proposal by the shareholders of the Scudder Europe Fund is a
condition to the Reorganization. The other proposals are factors to be
considered by Kemper Europe Fund shareholders, but are not essential to the
Reorganization. These factors include: (i) the election of the Board of
Directors, (ii) the ratification of the selection of the independent auditors,
(iii) the approval of certain further amendments to the Fund's Articles of
Incorporation to reflect provisions that are consistent with articles of
incorporation for an open-end fund and (iv) the approval of a new Investment
Advisory Agreement with Scudder Kemper providing for, among other things, an
advisory fee rate identical to that currently in place for Kemper Europe Fund to
take effect if the open-ending provision is approved. As stated above, Scudder
Kemper has indicated that it will contractually reduce its fees so that its
advisory fees do not exceed the level currently paid by Kemper Europe Fund in
the event that shareholders of Scudder Europe Fund approve the proposal to
open-end, but do not approve the proposed new Investment Advisory Agreement.
Conversion to an open-end investment company could result in immediate
redemptions of Scudder Europe Fund shares, which could be substantial, and,
consequently, result in a marked reduction in the Fund's size. Conversion to an
open-end investment company may create an incentive for stockholders to
capitalize on the elimination of the Scudder Europe Fund's historical discount
by redeeming their shares. In addition, market professionals and other investors
who view closed-end funds as arbitrage opportunities could have taken or could
take sizable positions in shares of the Scudder Europe Fund prior to conversion
for the purpose of profiting through redemption immediately following an open-
ending. This arbitrage phenomenon could serve to increase the percentage of
Scudder Europe Fund shares subject to redemption requests. Other closed-end
funds that have converted to open-end form have experienced redemptions that
exceed sales after conversion, and, in some instances, net redemptions have been
substantial. The Scudder Europe Fund bears this risk. A decrease in net assets
could result in less diversification or in smaller portfolio positions in its
investments, which could adversely affect total return performance. In addition,
as a result of any decrease in size resulting from redemptions, the Scudder
Europe Fund could experience a further increase in its expense ratio. It is
estimated that if the Scudder Europe Fund's net assets decrease by 50% from the
present size of $374,049,172 as of December 31, 1998 due to redemption requests,
for example, the Scudder Europe Fund's expense ratio would be approximately
1.87%, 3.16%, 2.62% and 1.59% for Class A,
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B, C and M shares. A higher expense ratio would lower the Scudder Europe Fund's
total return performance. Scudder Kemper, however, has agreed to limit the total
annual operating expenses of Class A, B and C shares to 1.75%, 2.65% and 2.62%
for the one year period following the Reorganization.
Scudder Kemper, and its affiliate KDI, believe that the Scudder Europe Fund can
be successfully marketed as an open-end fund to attract new assets. As a result,
to the extent the Scudder Europe Fund is subject to net redemptions in
connection with the conversion to open-end form, Scudder Kemper and KDI believe
that the Scudder Europe Fund ultimately may be able to increase its net assets.
To mitigate the attendant costs of redemptions, the Scudder Europe Fund will
impose a fee of 2% on redemptions and exchanges of Class M shares (those shares
previously held by shareholders of the Scudder Europe Fund in closed-end form)
for a one year period following the Reorganization. The purpose of this fee is
to discourage short-term trading in a vehicle intended for long-term investment
and to restrict the ability of short-term traders to cause the Fund and its
non-redeeming stockholders to bear undue transaction and other expenses forced
by the redemption of others. To minimize the tax burden on remaining
shareholders from redemptions, the Scudder Europe Fund will also pay in-kind
redemptions sought by Class M stockholders to the extent those redemptions
exceed $500,000. In-kind redemptions by Class M shareholders are also subject to
a 2% redemption fee and will result in the recognition by the redeeming
shareholder of gain or loss for federal income tax purposes based upon the
difference between the fair market value of the securities received and that
shareholder's basis in the shares redeemed. Although significant net redemptions
could cause the Scudder Europe Fund to become too small to be considered
economically viable, redemptions at such level are not presently anticipated.
Because of their substantially similar investment policies, the Scudder Europe
Fund and the Kemper Europe Fund are exposed to similar risks. The following
summarizes principal risk factors of each Fund:
STOCK MARKET. Both the Scudder Europe Fund and the Kemper Europe Fund invest
primarily in equity securities. As a result, each Fund's returns and net asset
value will go up and down. Stock market movements will affect each Fund's share
price on a daily basis. Declines in value are possible both in the overall stock
market or in the types of securities held by a Fund.
PORTFOLIO STRATEGY. The portfolio manager's skill in choosing appropriate
investments for both Funds will determine in large part each Fund's ability to
achieve its investment objective.
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FOREIGN SECURITIES. Investing in foreign securities involves other
considerations including limited information, higher brokerage costs, different
accounting standards and thinner trading markets as compared to U.S. markets. In
addition, investing in foreign securities involves special risks including
changes in foreign currency exchange rates and political and economic
instability. Some countries may also restrict a Fund's access to investments or
offer terms that are less advantageous than those for local investors. This
could limit the attractive investment opportunities available to a Fund. Some
countries may also have less developed securities markets (and related
transaction, registration and custody practices).
EUROPEAN SECURITIES. Each Fund's performance will be affected by political,
social and economic factors affecting issuers in European countries, including:
growth of GDP or GNP, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position, as well as interest and
monetary exchange rates among European countries.
EMERGING MARKETS. Both Funds have the ability to invest in emerging markets.
Eastern European countries and certain Southern European countries are
considered to be emerging markets. Investing in emerging markets involves higher
levels of risk, including increased currency, information, liquidity, market,
political and valuation risk. Deficiencies in regulatory oversight, market
infrastructure, shareholder protections and company laws could expose the fund
to operational and other risks as well. Some countries may have restrictions
that could limit a Fund's access to attractive opportunities. Additionally,
emerging markets often face serious problems (such as high external debt,
inflation and unemployment) that could subject a Fund to increased volatility or
substantial declines in value.
NONDIVERSIFIED STATUS. The Scudder Europe Fund is considered a nondiversified
investment company under the 1940 Act and is permitted to invest a greater
proportion of its assets in the securities of a smaller number of issuers. As a
result, the Scudder Europe Fund may be subject to greater risks with respect to
its portfolio securities than a fund that is more broadly diversified, such as
the Kemper Europe Fund.
LIQUIDITY RISK. The risk that certain securities may be difficult or impossible
to sell at the time and the price that the fund would like. A Fund may have to
lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on fund management or
performance.
LOWER RATED SECURITIES. These securities carry a higher risk that the issuer
will be unable to pay principal and interest when due, and the market to sell
such securities may be limited. This risk may be more
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pronounced for the Scudder Europe Fund since it may invest up to 20% of its
assets in such securities.
RISKS OF DERIVATIVE INSTRUMENTS. The use of these instruments requires special
skills, knowledge and investment techniques that differ from those required for
normal portfolio management. The success of a Fund in selecting these
instruments for its portfolio depends on the skill of the investment manager in
predicting the movement of interest rates, the value of particular instruments
and other economic variables. There is no assurance that the investment manager
will accurately predict these movements.
EXPOSURE RISK. The risk associated with techniques that increase a Fund's
exposure to a security, index or its investment portfolio. Exposure is a Fund's
maximum potential gain or loss from an investment. Certain investments (such as
options and futures) may have the effect of magnifying declines as well as
increases in a Fund's net asset value. Losses from writing options and entering
into futures can be unlimited.
YEAR 2000 READINESS. Like other mutual funds and financial and business
organizations worldwide, both Funds could be adversely affected if computer
systems on which they rely, which primarily include those used by the investment
manager, its affiliates or other service providers, are unable to process
correctly date-related information on and after January 1, 2000. This risk is
commonly called the Year 2000 Issue. Failure to address successfully the Year
2000 Issue could result in interruptions to and other material adverse effects
on each Fund's business and operations, such as problems with calculating net
asset value and difficulties in implementing a Fund's purchase and redemption
procedures. The investment manager has commenced a review of the Year 2000 Issue
as it may affect each Fund and is taking steps it believes are reasonably
designed to address the Year 2000 issue, although there can be no assurances
that these steps will be sufficient. In addition, there can be no assurances
that the Year 2000 Issue will not have an adverse effect on the issuers whose
securities are held by the Funds or on global markets or economies generally.
EURO CONVERSION. The introduction of a new European currency, the Euro, may
result in uncertainties for European securities and the operations of both
Funds. The Euro was introduced on January 1, 1999 by eleven European countries
that are members of the European Economic and Monetary Union (EMU). The
introduction of the Euro will require the redenomination of European debt and
equity securities over a period of time, which may result in various accounting
differences and/or tax treatments. Additional questions are raised by the fact
that certain other European Union members, including the United Kingdom, did not
officially implement the Euro on January 1, 1999.
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The investment manager is actively working to address Euro-related issues and
understands that other key service providers are taking similar steps. At this
time, no one knows precisely what the degree of impact will be. To the extent
that the market impact or effect on a Fund's holdings is negative, a Fund's
performance could be hurt.
MANAGEMENT OF THE FUNDS
As stated above, if approved by the shareholders of the Scudder Europe Fund,
that Fund will have the same investment advisory agreement in place and will be
governed by the same directors and officers as the Kemper Europe Fund upon the
Reorganization. Scudder Kemper will provide investment advisory services to the
Scudder Europe Fund under an advisory agreement substantially similar to the
advisory agreement currently in effect between Scudder Kemper and the Kemper
Europe Fund. The specific persons at Scudder Kemper who are responsible for the
day-to-day management of the Scudder Europe Fund are described in the
Preliminary Prospectus of the Scudder Europe Fund which accompanies this
Prospectus/Proxy Statement.
In addition, (1) Scudder Fund Accounting Corporation, a subsidiary of Scudder
Kemper, will provide accounting services, (2) KDI will provide administration
and distribution services, and Investors Fiduciary Trust Company ("IFTC") will
provide transfer agency and dividend paying services through its agreement with
Kemper Services Company, an affiliate of Scudder Kemper, all pursuant to
agreements substantially similar to those currently in effect between such
service providers and the Kemper Europe Fund. With the exception of a new
accounting service fee of approximately .10%, THE ADVISORY FEES, ADMINISTRATIVE
FEES AND DISTRIBUTION FEES PAYABLE UNDER THE NEW AGREEMENTS FOR THE REORGANIZED
SCUDDER EUROPE FUND IN THE AGGREGATE WOULD BE THE SAME AS THOSE CURRENTLY IN
EFFECT FOR KEMPER EUROPE FUND. Unlike the Kemper Europe Fund, however, Brown
Brothers Harriman & Co. ("BBH") will provide custodial services for all cash and
securities of the Scudder Europe Fund. BBH currently provides custodial services
to the Scudder Europe Fund as well as to other funds in the Kemper family. THE
FEES PAYABLE FOR SUCH CUSTODIAL SERVICES WILL BE NO HIGHER AFTER THE
REORGANIZATION THAN THOSE CURRENTLY PAID BY THE KEMPER EUROPE FUND. In addition,
Ernst & Young, LLP, the current independent auditors for the Kemper Europe Fund,
is proposed to serve in that capacity for the Scudder Europe Fund. The
shareholders of the Scudder Europe Fund are being asked to ratify the selection
of Ernst & Young LLP as independent auditors for that Fund for the purpose of
obtaining certain efficiencies by having the same auditors as other funds in the
Kemper family of funds. Ratification of the selection of Ernst & Young LLP
requires the affirmative vote of a
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majority of the votes cast by the shareholders of Scudder Europe Fund at the
Fund's annual meeting.
INTEREST OF CERTAIN PERSONS IN THE REORGANIZATION
Scudder Kemper may be deemed to have an interest in the Plan and the
Reorganization because it provides investment advisory services to the Scudder
Europe Fund and the Kemper Europe Fund. Scudder Kemper receives compensation
from the Scudder Europe Fund and the Kemper Europe Fund for services it provides
pursuant to investment advisory agreements. The terms and provisions of these
arrangements are described in each Fund's Prospectus and Statement of Additional
Information. Future growth of assets of the Scudder Europe Fund, if any, can be
expected to increase the total amount of fees payable to Scudder Kemper and its
affiliates. Further, as a result of the Reorganization, Scudder Investments
(U.K.) Limited, a subsidiary of Scudder Kemper, will not serve as the
sub-adviser to the Scudder Europe Fund as it currently does for the Kemper
Europe Fund. Therefore, Scudder Kemper will retain the amount it had previously
paid to the affiliated sub-adviser in connection with the services provided in
connection with the management of the Kemper Europe Fund. No fee or expense of
the Scudder Europe Fund will increase, however, as a result of the absence of
the above sub-advisory arrangement. Further, Scudder Kemper has agreed to adopt
the lower advisory fees currently paid by the Kemper Europe Fund.
Affiliates of Scudder Kemper (i.e., KDI, Scudder Fund Accounting Corporation and
Kemper Services Company) may also be deemed to have an interest in the Plan and
the Reorganization because of the services they provide to the Kemper Europe
Fund and will continue to provide to the Scudder Europe Fund. Further, a fee of
approximately .10% will be paid to Scudder Fund Accounting Corporation for
services which is not currently paid by the Kemper Europe Fund. With the
exception of this new accounting fee, however, these service providers have
agreed to charge the same fees to the Scudder Europe Fund as those currently in
effect for the Kemper Europe Fund.
INFORMATION ON SHAREHOLDERS' RIGHTS
The following discussion, as it pertains to the Scudder Europe Fund, relates to
the Fund in open-end form, and assumes that certain amendments to the Scudder
Europe Fund's Charter will be approved by its shareholders. The open-ending
proposal of the Scudder Europe Fund is not conditioned upon the approval of all
of those changes (certain of which require the affirmative vote of 75% of the
votes entitled to be cast by stockholders of the Scudder Europe Fund). However,
if all of those changes are not approved, the Scudder Europe Fund will retain
certain
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characteristics more typically associated with a closed-end fund. Those specific
characteristics are discussed in the relevant sections below.
GENERAL. The Scudder Europe Fund is a Maryland corporation that was
incorporated on November 22, 1989 and is governed by its Articles of
Incorporation, By-Laws and Board of Directors. The Kemper Europe Fund is a
Massachusetts business trust organized on June 12, 1995 and is governed by its
Declaration of Trust, By-Laws and Board of Trustees. Each Fund is also governed
by applicable state and federal law. The Kemper Europe Fund may issue an
unlimited number of shares of beneficial interest in one or more series or
portfolios, all having no par value, which may be divided by the Board of
Trustees into classes of shares. The Scudder Europe Fund has an authorized
capital of 500,000,000 shares of common stock with a par value of $.001 per
share. The Board of Directors of the Scudder Europe Fund has the power to
increase the authorized amount of capital stock and to classify unissued shares
for the purposes of creating new series or classes. In both the Kemper Europe
Fund and the Scudder Europe Fund, shares represent interests in the assets of
the relevant Fund and have identical voting, dividend, liquidation and other
rights on the same terms and conditions, unless specified otherwise in the
Fund's governing documents. Expenses related to the distribution of each class
of shares of each Fund are borne solely by such class and each class of shares
has exclusive voting rights with respect to provisions of any 12b-1 distribution
plan. Shares of each Fund are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive rights. Class B shares
of each Fund automatically convert to Class A shares six years after purchase.
Class M shares of the Scudder Europe Fund will convert to Class A shares one
year after the Reorganization.
The Kemper Europe Fund is not required to hold annual shareholder meetings and
does not intend to do so unless required by the 1940 Act or other applicable
law. The Kemper Europe Fund will hold special meetings as required or deemed
desirable for such purposes as electing Trustees, changing fundamental policies
or approving an investment management agreement. Kemper Europe Fund Trustees
serve until the next meeting of shareholders, if any, called for the purpose of
electing Trustees and until the election and qualification of a successor or
until such Trustee sooner dies, resigns, retires or is removed by a majority
vote of the shares entitled to vote (as described below) or a majority of the
Trustees. In accordance with the 1940 Act: (a) the Kemper Europe Fund will hold
a shareholder meeting for the election of Trustees at such time as less than a
majority of the Trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
Trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
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Currently, the Scudder Europe Fund's Charter provides that the Board of
Directors will be divided into three classes. According to the relevant
provision of the Scudder Europe Fund's Charter, the term of office of the first
class expired on the date of the second annual meeting of stockholders, the term
of office of the second class expired on the date of the third annual meeting of
stockholders and the term of office of the third class expired on the date of
the fourth annual meeting of stockholders. Upon the expiration of the term of
the office of each class, the Directors in such class are elected for a term of
three years to succeed the Directors whose terms of office expire. In connection
with the open-ending proposal, the shareholders of the Scudder Europe Fund are
being asked to approve an amendment to the Charter to declassify the Board of
Directors. Elimination of this Charter provision will permit the Scudder Europe
Fund to dispense with annual stockholders meetings, except when required by law
to hold such meetings. There is no assurance, however, that this Charter
amendment will be approved by the Scudder Europe Fund shareholders. If the
amendment is not approved, that Fund will be required to continue to hold annual
meetings to elect Directors and incur the related costs of the proxy
solicitation process (approximately $50,000 to $60,000).
Subject to each Fund's governing documents, shareholders may remove Directors
and Trustees from office at a meeting called for that purpose, which meeting
shall be held upon the written request of the holders of not less than 10% of
the outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of each Fund stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider the removal of a Director
or Trustee, each Fund has undertaken to disseminate appropriate materials at the
expense of the requesting shareholders.
Each Fund's governing documents provide that the presence at a shareholder
meeting in person or by proxy of at least one-third of the shares entitled to
vote on a matter shall constitute a quorum. Thus, a meeting of shareholders of
each Fund could take place even if less than a majority of the shareholders were
represented on its scheduled date. Shareholders would in such a case be
permitted to take action which does not require a larger vote than a majority of
a quorum, such as the election of Directors or Trustees and ratification of the
selection of independent auditors. Investors in each Fund are entitled to one
vote for each full share held and fractional votes for fractional shares held.
MULTI-CLASS STRUCTURE. Like the Kemper Europe Fund, the Scudder Europe Fund
will offer Class A, B and C shares upon the Reorganization.
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Class M Shares represent the initial shares of the Scudder Europe Fund in
closed-end form and are no longer offered.
BOARD. The By-Laws of the Kemper Europe Fund and of the Scudder Europe Fund
(assuming that the proposed Charter amendment eliminating the classified Board
structure is approved by Scudder Europe Fund shareholders) provide that the term
of office of each Director/Trustee shall be from the time of his or her election
and qualification until the next annual meeting of shareholders and until his or
her successor shall have been elected and shall have qualified. Any
Director/Trustee of the Kemper Europe Fund or the Scudder Europe Fund may be
removed by the vote of at least a majority of the outstanding shares then
entitled to be cast for the election of Directors/Trustees. Vacancies on the
Boards of the Kemper Europe Fund or the Scudder Europe Fund may be filled by the
Directors/Trustees remaining in office. A meeting of shareholders will be
required for the purpose of electing additional Directors/Trustees whenever
fewer than a majority of the Directors/Trustee then in office were elected by
shareholders and to fill vacancies if less than two-thirds of the
Directors/Trustees then holding office have been elected by the shareholders.
As stated above, the Board of Scudder Europe Fund will be comprised of the same
persons currently serving on the Board of the Kemper Europe Fund.
VOTING RIGHTS. The Kemper Europe Fund does not hold a meeting of shareholders
annually, and there normally is no meeting of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders or as otherwise
required by applicable law (see discussion above). If certain Charter amendments
are approved by the shareholders of Scudder Europe Fund as discussed above, that
Fund will also not be required to hold annual meetings of shareholders for the
purpose of electing Directors.
LIQUIDATION OR TERMINATION. In the event of the liquidation or termination of
the Kemper Europe Fund or the Scudder Europe Fund, the shareholders of each Fund
are entitled to receive, when and as declared by the Directors/Trustees, the
excess of the assets over the liabilities belonging to the relevant Fund. In
either case, the assets so distributed to shareholders will be distributed among
the shareholders in proportion to the number of shares of the class held by them
and recorded on the books of the relevant Fund. The net asset value of the
classes of shares would differ due to differences in expense ratios.
LIABILITY OF DIRECTORS/TRUSTEES. The Articles of Incorporation of the Scudder
Europe Fund and the Declaration of Trust of the Kemper Europe Fund provide that
the Directors/Trustees and officers shall not be
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liable for monetary damages for breach of fiduciary duty as a Director/ Trustee
or officer, except to the extent such exemption is not permitted by law. The
Articles of Incorporation of the Scudder Europe Fund and the Declaration of
Trust of the Kemper Europe Fund provide that the relevant Fund shall indemnify
each Director, Trustee and officer and make advances for the payment of expenses
relating to the matter for which indemnification is sought, each to the fullest
extent permitted by Maryland or Massachusetts law and other applicable law.
RIGHTS OF INSPECTION. Maryland law permits any shareholder of the Scudder
Europe Fund or any agent of such shareholders to inspect and copy, during usual
business hours, the By-Laws, minutes of shareholder proceedings, annual
statements of the affairs and voting trust agreements (if any) of the Scudder
Europe Fund on file at its principal office. The Declaration of Trust of the
Kemper Europe Fund permits any shareholder of the Kemper Europe Fund or his
agent to inspect and copy during normal business hours the By-Laws, minutes of
the proceedings of shareholders and annual financial statements of Kemper Europe
Fund (including a balance sheet and financial statements of operations) on file,
at its principal offices.
SHAREHOLDER LIABILITY. Under Maryland law, shareholders of the Scudder Europe
Fund do not have personal liability for corporate acts and obligations. Under
Massachusetts law, shareholders of a Massachusetts business trust could, under
certain circumstances, be held personally liable for obligations of a fund. The
Declaration of Trust for the Kemper Europe Fund, however, disclaims shareholder
liability for acts or obligations of that Fund and requires that notice of such
disclaimer be given in each agreement, obligation, or instrument entered into or
executed by that Fund or its Trustees. Moreover, the Declaration of Trust
provides for indemnification out of the Kemper Europe Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of that Fund and that Fund will be covered by insurance which the
Trustees consider adequate to cover foreseeable tort claims. Thus, the risk of a
shareholder of Kemper Europe Fund incurring financial loss on account of
shareholder liability is considered by Scudder Kemper remote and not material,
since it is limited to circumstances in which a disclaimer is inoperative and
the Kemper Europe Fund itself is unable to meet its obligations.
Shares of the Scudder Europe Fund issued to the shareholders of the Kemper
Europe Fund in the Reorganization will be fully paid and nonassessable when
issued, transferable without restrictions and will have no preemptive rights.
The foregoing is only a summary of certain characteristics of the operations of
the Scudder Europe Fund and the Kemper Europe Fund. The
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foregoing is not a complete description of the documents cited. Shareholders
should refer to the provisions of the corporate and trust documents and state
laws governing each Fund for a more thorough description.
ADDITIONAL INFORMATION
Both the Scudder Europe Fund and the Kemper Europe Fund are subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act and in accordance therewith file reports and other information including
proxy material, reports and charter documents, with the SEC. These materials can
be inspected and copies obtained at the Public Reference Facilities maintained
by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the New York
Regional Office of the SEC at 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can also be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information Services, SEC,
Washington, D.C. 20549 at the prescribed rates. The Preliminary Prospectus and
Statement of Additional Information for the Scudder Europe Fund, along with
related information, may be found on the SEC website as well
(http://www.sec.gov).
OTHER BUSINESS
The Kemper Europe Fund Board of Trustees knows of no other business to be
brought before the Meeting. However, if any other matters come before the
Meeting, proxies that do not contain specific restrictions to the contrary will
be voted on such matters in accordance with the judgment of the persons named in
the enclosed proxy card.
FINANCIAL STATEMENTS AND EXPERTS
The audited statement of net assets of the Kemper Europe Fund, including the
schedule of portfolio investments, as of November 30, 1998, the related
statements of operations for the year then ended, the statement of changes in
net assets for each of the two years in the period then ended and the financial
highlights for each of the fiscal periods since 1996 have been incorporated by
reference into this Prospectus/Proxy Statement in reliance upon the reports of
Ernst & Young LLP, independent auditors, given on the authority of such firm as
experts in accounting and auditing.
The annual report of the Scudder Europe Fund for the fiscal year ended October
31, 1998 is also incorporated by reference.
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LEGAL PROCEEDINGS
The Scudder Europe Fund is a defendant in a class action filed in the Southern
District of New York that also names the Fund's Directors and investment adviser
(Brautigam v. Bratt, et al. No. 98 Civ. 9060 (AKH)). The complaint alleges
breaches of fiduciary duty under sections 36(a) and 48 of the 1940 Act and
common law by the defendants in allegedly failing to take adequate steps to
diminish the discount to net asset value at which shares of the Fund have traded
in recent years. The action has been stayed pending a decision in a similar case
on whether such a case may be maintained as a "class action". In any event, the
plaintiff's counsel has acknowledged that the case will become moot if and when
the Fund converts to open-end status, although they have also expressed an
intent to continue to press for a recovery of attorney's fees. In light of how
and when the open-ending proposal was developed by the Board and the likelihood
that it will be approved by its shareholders, the Scudder Europe Fund has been
advised by counsel that it has meritorious defenses to the action and will
oppose any effort by plaintiff to recover attorney's fees. Shareholders of the
Kemper Europe Fund could possibly bear some expenses for this litigation upon
becoming shareholders of the Scudder Europe Fund after the Reorganization.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the Scudder Europe
Fund will be passed upon by Willkie Farr & Gallagher, 787 Seventh Avenue, New
York, New York 10019-6099, counsel to the Scudder Europe Fund. In rendering such
opinion, Willkie Farr & Gallagher may rely on an opinion of Venable, Baetjer and
Howard, LLP as to certain matters under Maryland law.
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of this
28th day of May, 1999, between Scudder New Europe Fund, Inc., a Maryland
corporation, (the "Scudder Fund"), and Kemper Europe Fund, a Massachusetts
business trust (the "Kemper Fund").
This Agreement is intended to be and is adopted as a plan of reorganization
within the meaning of Section 368(a) of the United States Internal Revenue Code
of 1986, as amended (the "Code"). The reorganization of the Kemper Fund (the
"Reorganization") will consist of the transfer of substantially all of the
assets of the Kemper Fund in exchange solely for shares of the applicable class
or classes of common stock of the Scudder Fund (the "Scudder Fund Shares"), the
assumption by the Scudder Fund of all of the liabilities of the Kemper Fund, and
the distribution, on or after the Closing Date determined pursuant to paragraph
3.1, of the Scudder Fund Shares to the shareholders of the Kemper Fund in
liquidation of the Kemper Fund, all upon the terms and conditions set forth in
this Agreement.
WHEREAS, the Board of Trustees of the Kemper Fund has determined that the
exchange of all of the assets of the Kemper Fund for Scudder Fund Shares and the
assumption of all of the liabilities of the Kemper Fund by the Scudder Fund is
in the best interests of the Kemper Fund and that the interests of the existing
shareholders of the Kemper Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Directors of the Scudder Fund has determined that the
exchange of all of the assets of the Kemper Fund for Scudder Fund Shares and the
assumption of the Kemper Fund's liabilities by the Scudder Fund is in the best
interests of the Scudder Fund's shareholders and that the interests of the
existing shareholders of the Scudder Fund would not be diluted as a result of
this transaction.
NOW, THEREFORE, in consideration of the foregoing and of the covenants and
agreements set forth herein, the parties hereto covenant and agree as follows:
1. Transfer of Assets of the Kemper Fund in Exchange for Scudder Fund Shares
and Assumption of the Kemper Fund's Liabilities and Liquidation of the
Kemper Fund
1.1. Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the Kemper
Fund agrees to transfer its assets as set forth in paragraph 1.2 to the
Scudder Fund, and the Scudder Fund agrees in exchange therefor: (i) to
deliver to the Kemper Fund the number of Scudder Fund Shares, including
fractional Scudder Fund Shares, of each class of the Scudder Fund
determined by dividing the value of the Kemper Fund's net assets
attributable to each such class of
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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 would
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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
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thereon shall be restricted or (b) trading or the reporting of trading on
the NYSE or elsewhere shall be disrupted so that accurate appraisal of the
value of the net assets of the Scudder Fund or the Kemper Fund is
impracticable, the applicable Closing Date shall be postponed until the
first business day after the day when trading shall have been fully resumed
and reporting shall have been restored.
3.4. The Kemper Fund shall deliver at the Closing a list of the names
and addresses of the Kemper Fund's shareholders and the number and class of
outstanding Shares owned by each such shareholder immediately prior to the
Closing or provide evidence that such information has been provided to the
Scudder Fund's transfer agent. The Scudder Fund shall issue and deliver a
confirmation evidencing the Scudder Fund Shares to be credited to the
Kemper Fund's account on the Closing Date to the Secretary of the Kemper
Fund or provide evidence satisfactory to the Kemper Fund that the Scudder
Fund Shares have been credited to the Kemper Fund's account on the books of
the Scudder Fund. At the Closing, each party shall deliver to the relevant
other parties such bills of sale, checks, assignments, share certificates,
if any, receipts or other documents as such other party or its counsel may
reasonably request.
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 termi-
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nated with liability to the Kemper Fund prior to the Closing Date;
(e) Except as previously disclosed to and accepted by the Scudder
Fund, no litigation or administrative proceeding or investigation of
or before any court or governmental body is presently pending or to
its knowledge threatened against the Kemper Fund or any of its
properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Kemper Fund knows of no facts which might form the basis
for the institution of such proceedings and is not party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business
or its ability to consummate the transaction herein contemplated;
(f) The statements of assets and liabilities of the Kemper Fund
for each of the fiscal years ended November 30 in the period beginning
with commencement of the Kemper Fund and ending November 30, 1998 have
been audited by Ernst & Young LLP, certified public accountants, and
are in accordance with generally accepted accounting principles
consistently applied, and such statements (copies of which have been
furnished to the Scudder Fund) fairly reflect the financial condition
of the Kemper Fund as of such dates, and there are no known contingent
liabilities of the Kemper Fund as of such dates not disclosed therein;
(g) Since November 30, 1998, there has not been any material
adverse change in the Kemper Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary
course of business, or any incurrence by the Kemper Fund of
indebtedness maturing more than one year from the date that such
indebtedness was incurred, except as otherwise disclosed to and
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
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under audit and no assessment has been asserted with respect to such
returns;
(i) For the fiscal year ended November 30, 1998, the Kemper Fund
has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company; and all of the Kemper
Fund's issued and outstanding shares have been offered and sold in
compliance in all material respects with applicable federal and state
securities laws;
(j) All issued and outstanding shares of each class of the Kemper
Fund are, and at the applicable Closing Date will be, duly and validly
issued and outstanding, fully paid and non-assessable by the Kemper
Fund, except that shareholders of the Kemper Fund may under certain
circumstances be held personally liable for its obligations. All of
the issued and outstanding shares of the Kemper Fund will, at the time
of Closing, be held by the persons and the amounts set forth in the
records of the transfer agent as provided in paragraph 3.4. The Kemper
Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of the Kemper Fund's shares, nor is
there outstanding any security convertible into any of the Kemper
Fund's shares, except for the conversion feature described in the
Kemper Fund's prospectus;
(k) At the Closing Date, the Kemper Fund will have good and
marketable title to the assets to be transferred to the Scudder Fund
pursuant to section 1.2 and full right, power, and authority to sell,
assign, transfer and deliver such assets hereunder free of any liens
or other encumbrances, except those liens or encumbrances as to which
the Scudder Fund has received notice at or prior to the Closing, and
upon delivery and payment for such assets, the Scudder Fund will
acquire good and marketable title thereto, subject to no restrictions
on the full transfer thereof, including such restrictions as might
arise under the Securities Act of 1933 (the "1933 Act") and the 1940
Act, except those restrictions as to which the Scudder Fund has
received notice and necessary documentation at or prior to the
Closing;
(l) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary actions on the part of the
Kemper Fund's Board of Trustees, and subject to the approval of the
Kemper Fund's shareholders, this Agreement will constitute a valid and
binding obligation of the Kemper Fund, enforceable in accordance with
its terms, subject to the effect of bankruptcy, insolvency, fraudulent
conveyance, reor-
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ganization, moratorium and other laws relating to or affecting
creditors' rights and to general equity principles;
(m) Insofar as the following relate to the Kemper Fund, the
registration statement filed by the Scudder Fund on Form N-14 relating
to Scudder Fund Shares that will be registered with the Commission
pursuant to this Agreement, which, without limitation, shall include a
proxy statement of the Kemper Fund (the "Proxy Statement") and the
prospectus of the Scudder Fund with respect to the transaction
contemplated by this Agreement, and any supplement or amendment
thereto, and the documents contained or incorporated therein by
reference (the "N-14 Registration Statement"), on the effective date
of the N-14 Registration Statement, at the time of any shareholders'
meeting referred to herein, on the Valuation Date and on the Closing
Date: (i) shall comply in all material respects with the provisions of
the 1933 Act, the Securities Exchange Act of 1934 (the "1934 Act") and
the 1940 Act and the rules and regulations under those Acts, and (ii)
shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that
the representations and warranties in this subsection shall only apply
to statements in or omissions from the N-14 Registration Statement
made in reliance upon and in conformity with information furnished by
the Kemper Fund for use in the N-14 Registration Statement.
4.2. The Scudder Fund represents and warrants to the Kemper Fund as
follows:
(a) The Scudder Fund is a Maryland corporation, duly organized,
validly existing and in good standing under the laws of the State of
Maryland;
(b) The Scudder Fund is a registered investment company and its
registration with the Commission as an investment company under the
1940 Act is in full force and effect, and as of the Closing Date the
Scudder Fund will be classified as a management company of the
open-end type;
(c) The preliminary prospectus and statement of additional
information filed as part of the Scudder Fund registration statement
on Form N-1A on April 28, 1999 (the "Scudder Fund Registration
Statement"), when declared effective by the Commission will conform in
all material respects to the applicable requirements of the 1933 Act
and the 1940 Act and the rules and regulations of the Commission under
those Acts and
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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 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;
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(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;
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;
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(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.
5.8. The Kemper Fund will provide the Scudder Fund with information
reasonably necessary for the preparation of the Scudder Fund Registration
Statement.
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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;
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6.4. The Kemper Fund shall have received on the Closing Date a
favorable opinion from Willkie Farr & Gallagher, counsel to the Scudder
Fund, dated as of the Closing Date, in a form reasonably satisfactory to
the Kemper Fund, covering the following points:
That (a) the Scudder Fund is a validly existing corporation and in
good standing under the laws of the State of Maryland, has the
corporate power to own all of its properties and assets and to carry
on its business as a registered investment company; (b) the Agreement
has been duly authorized, executed and delivered by the Scudder Fund
and, assuming due authorization, execution and delivery of the
Agreement by the other party thereto, is a valid and binding
obligation of the Scudder Fund enforceable against the Scudder Fund in
accordance with its terms, subject to the effect of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and to
general equity principles; (c) the Scudder Fund Shares to be issued to
the Kemper Fund's shareholders as provided by this Agreement are duly
authorized and upon such delivery will be validly issued and
outstanding and fully paid and nonassessable with no personal
liability attaching to ownership thereof, and no shareholder of the
Scudder Fund has any preemptive rights to subscription or purchase in
respect thereof under the Charter or By-Laws of the Scudder Fund or to
the knowledge of such counsel, otherwise; (d) the execution and
delivery of this Agreement did not, and the consummation of the
transaction contemplated hereby will not, result in a violation of the
Scudder Fund's Charter or By-Laws as they are proposed to be amended
or in a material violation of any provision of any agreement (known to
such counsel) to which the Scudder Fund is a party or by which it or
its property is bound or, to the knowledge of such counsel, result in
the acceleration of any obligation or the imposition of any penalty,
under any agreement, judgment, or decree to which the Scudder Fund is
a party or by which it or its property is bound; (e) to the knowledge
of such counsel, no consent, approval, authorization or order of any
court or governmental authority of the United States or state of
Maryland is required for the consummation by the Scudder Fund of the
actions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act, and such as may be
required under state securities laws; (f) the descriptions in the N-14
Registration Statement of statutes, legal and governmental
proceedings, investigations, orders, decrees or judgments of any court
or governmental body in the United States and contracts and
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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 required;
(h) the Scudder Fund is registered as an investment company under the
1940 Act and classified as a management company of the open-end type
and its registration with the Commission as an investment company
under the 1940 Act is in full force and effect; (i) the Proxy
Statement and the Scudder Fund Registration Statement (except as to
financial and statistical data contained therein, as to which no
opinion need be given) comply as to form in all material respects with
the requirements of the 1933 Act, the 1934 Act and the 1940 Act and
the rules and regulations thereunder; and (j) the Scudder Fund
Registration Statement is effective under the 1933 Act and the 1940
Act and no stop-order suspending its effectiveness or order pursuant
to section 8(e) of the 1940 Act has been issued.
In addition, such counsel also shall state that they have participated
in conferences with officers and other representatives of the Scudder
Fund at which the contents of the N-14 Registration Statement, the
Scudder Fund Registration Statement and related matters were discussed
and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the N-14 Registration Statement and the
Scudder Fund Registration Statement (except to the extent indicated in
paragraph 6 of their above opinion), on the basis of the foregoing
(relying as to materiality to a large extent upon the opinions of
officers and other representatives of the Scudder Fund), they do not
believe that the Proxy Statement and the Scudder Fund Registration
Statement as of their respective dates, as of the date of the Kemper
Fund shareholders' meeting, and as of the Closing Date, contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein regarding the Scudder Fund or
necessary to make the statements therein regarding the Scudder Fund,
in the light of the circumstances under which they were made, not
misleading. Such opinion may state that such counsel does not express
any
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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;
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
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<PAGE> 78
$5,000,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $5,000,000,000 shall be 1/12 of .65 of
1 percent of such portion; provided that, for any calendar month during
which the average of such values exceeds $7,500,000,000, the fee payable
for that month based on the portion of the average of such values in excess
of $7,500,000,000 shall be 1/12 of .64 of 1 percent of such portion;
provided that, for any calendar month during which the average of such
values exceeds $10,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $10,000,000,000 shall be
1/12 of .63 of 1 percent of such portion; and provided that, for any
calendar month during which the average of such values exceeds
$12,500,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $12,500,000,000 shall be 1/12 of .62 of
1 percent of such portion.
7. Conditions Precedent to Obligations of the Scudder Fund
The obligations of the Scudder Fund to complete the transaction provided for
herein shall be subject, at its election, to the performance by the Kemper Fund
of all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
7.1. All representations and warranties of the Kemper Fund contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and, 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,
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counsel to the Kemper Fund, in a form satisfactory to the Secretary of the
Scudder Fund, covering the following points:
That (a) the Kemper Fund is validly existing as a business trust and
in good standing under the laws of the Commonwealth of Massachusetts
and has the statutory power to own all of its properties and assets
and to carry on its business as a registered investment company; (b)
the Agreement has been duly authorized, executed and delivered by the
Kemper Fund and, assuming due authorization, execution and delivery of
the Agreement by the other party hereto, is a valid and binding
obligation of the Kemper Fund enforceable against the Kemper Fund in
accordance with its terms, subject to the effect of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and to
general equity principles; (c) the execution and delivery of the
Agreement did not, and the consummation of the transaction
contemplated hereby will not, result in a violation of the Kemper
Fund's Declaration of Trust or By-Laws or a material violation of any
provision of any agreement (known to such counsel) to which the Kemper
Fund is a party or by which either it or its property is bound or, to
the knowledge of such counsel, result in the acceleration of any
obligation or the imposition of any penalty, under any agreement,
judgment or decree to which the Kemper Fund is a party or by which it
or its property is bound, (d) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental
authority of the United States or the Commonwealth of Massachusetts is
required for the consummation by the Kemper Fund of the transactions
contemplated herein, except such as have been obtained under the 1933
Act, the 1934 Act and the 1940 Act, and such as may be required under
state securities laws; (e) the Proxy Statement (except as to financial
and statistical data contained therein, as to which no opinion need be
given) comply as to form in all material respects with 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
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materially and adversely affect the Kemper Fund's business; and (g)
the Kemper Fund is registered as an investment company under the 1940
Act and its registration with the Commission as an investment company
under the 1940 Act is in full force and effect.
Such counsel also shall state that they have participated in
conferences with officers and other representatives of the Kemper Fund
at which the contents of the Proxy Statement and related matters were
discussed and, although they are not passing upon and do not assume
any responsibility for the accuracy, completeness or fairness of the
statements contained in the Proxy Statement (except to the extent
indicated in paragraph (e) of their above opinion), on the basis of
the foregoing (relying as to materiality to a large extent upon the
opinions of officers and other representatives of the Kemper Fund),
they do not believe that the Proxy Statement as of its date, as of the
date of the Kemper Fund's shareholder meeting, and as of the Closing
Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein regarding the
Kemper Fund or necessary in the light of the circumstances under which
they were made, to make the statements therein regarding the Kemper
Fund not misleading.
Such opinion may state that such counsel does not express any opinion
or belief as to the financial statements or other financial data, or
as to the information relating to the Kemper Fund, contained in the
Proxy Statement or the Scudder Fund Registration Statement, and that
such opinion is solely for the benefit of the Kemper Fund and its
directors and officers. Such opinion also shall include such other
matters incident to the transaction contemplated hereby as the Kemper
Fund may reasonably request.
In this paragraph 7.4, references to the Proxy Statement include and relate
only to the text of such Proxy Statement and not to any exhibits or
attachments thereto or to any documents incorporated by reference therein;
7.5. The Scudder Fund shall have received from Ernst & Young LLP a
letter addressed to the Scudder Fund dated as of the effective date of the
N-14 Registration Statement in form and substance satisfactory to the
Scudder Fund, to the effect that:
(a) they are independent public accountants with respect to the
Kemper Fund within the meaning of the 1933 Act and the applicable
regulations thereunder;
A-19
<PAGE> 81
(b) in their opinion, the financial statements and financial
highlights of the Kemper Fund included or incorporated by reference in
the N-14 Registration Statement and the Proxy Statement and reported
on by them comply as to form in all material aspects with the
applicable accounting requirements of the 1933 Act and the rules and
regulations thereunder; and
(c) on the basis of limited procedures agreed upon by the Scudder
Fund and the Kemper Fund and described in such letter (but not an
examination in accordance with generally accepted auditing standards),
specified information relating to the Kemper Fund appearing in the
N-14 Registration Statement and the Proxy Statement has been obtained
from the accounting records of the Kemper Fund or from schedules
prepared by officers of Kemper Fund having responsibility for
financial and reporting matters and such information is in agreement
with such records, schedules or computations made therefrom;
7.6. The Kemper Fund shall have delivered to the Scudder Fund,
pursuant to paragraph 4.1(f), copies of financial statements of the Kemper
Fund as of and for the fiscal year ended November 30, 1998;
7.7. The Scudder Fund shall have received from Ernst & Young LLP a
letter addressed to the Scudder Fund and dated as of the applicable Closing
Date stating that as of a date no more than three (3) business days prior
to the applicable Closing Date, Ernst & Young LLP performed limited
procedures and that on the basis of those procedures it confirmed the
matters set forth in paragraph 7.5; and
7.8. The Board of Trustees of the Kemper Fund, including a majority
of the trustees who are not "interested persons" of the Kemper Fund (as
defined by the 1940 Act), shall have determined that this Agreement and the
transactions contemplated hereby are in the best interests of the Kemper
Fund and that the interests of the shareholders in the Kemper Fund would
not be diluted as a result of such transactions, and the Kemper Fund shall
have delivered to the Scudder Fund at the applicable Closing, a
certificate, executed by an officer, to the effect that the condition
described in this subparagraph has been satisfied.
8. Further Conditions Precedent to Obligations of the Scudder Fund and the
Kemper Fund
If any of the conditions set forth below do not exist on or before the Closing
Date with respect to the Scudder Fund, the Kemper Fund shall,
A-20
<PAGE> 82
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:
(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
A-21
<PAGE> 83
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.
A-22
<PAGE> 84
9.2. The expenses of entering into and carrying out the provisions of
this Agreement, whether or not consummated, shall be borne exclusively by
the Scudder Fund and the Kemper Fund and shall be allocated based upon the
relative net assets of the Scudder Fund and the Kemper Fund as of May 28,
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.
A-23
<PAGE> 85
13. Notices
13.1. Any notice, report, statement or demand required or permitted
by any provisions of this Agreement shall be in writing and shall be given
by prepaid telegraph, telecopy or certified mail addressed to the Kemper
Fund at:
222 South Riverside Plaza
Chicago, IL 60606
Attention:
with a copy to:
David Sturms, Esq.
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, IL 60601
or to the Scudder Fund at:
345 Park Avenue
New York, NY
Attention: Bruce H. Goldfarb, Esq.
with a copy to:
Burton M. Leibert, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
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
A-24
<PAGE> 86
shall be construed to confer upon or give any person, firm or corporation,
other than the parties hereto and their respective successors and assigns,
any rights or remedies under or by reason of this Agreement.
14.5. Consistent with the Kemper Fund's Declaration of Trust, notice
is hereby given and the parties hereto acknowledge and agree that this
instrument is executed on behalf of the Trustees of the Kemper Fund, as
Trustees and not individually and that the obligations of this instrument
are not binding upon any of the Trustees or shareholders of the Kemper Fund
individually but binding only upon the assets and property of the Kemper
Fund.
[Signature page follows]
A-25
<PAGE> 87
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: /s/ KATHRYN L. QUIRK
-----------------------------------------------------------------------------
Name: Kathryn L. Quirk
TITLE: VICE PRESIDENT
Attest: /s/ BRUCE H. GOLDFARB
-----------------------------------------------------------------------------
Kemper Europe Fund
By: /s/ PHILIP J. COLLORA
-----------------------------------------------------------------------------
Name: Philip J. Collora
TITLE: VICE PRESIDENT
Attest: /s/ ELIZABETH C. WERTH
-----------------------------------------------------------------------------
A-26
<PAGE> 88
KEMPER EUROPE FUND
PLEASE CALL SHAREHOLDER COMMUNICATIONS CORPORATION,
YOUR FUND'S INFORMATION AGENT, AT (800) 401-2532
KEF
[RECYCLE LOGO] PRINTED ON RECYCLED PAPER.
<PAGE> 89
STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 8, 1999
ACQUISITION OF THE ASSETS OF
KEMPER EUROPE FUND
222 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
(800) 621-1048
BY AND IN EXCHANGE FOR SHARES OF
SCUDDER NEW EUROPE FUND, INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
1-800-349-4281
This Statement of Additional Information, relating specifically to the
proposed transfer of all of the assets of the Kemper Europe Fund to the Scudder
Europe Fund in exchange for shares of the Scudder Europe Fund and the assumption
by the Scudder Europe Fund of the liabilities of the Kemper Europe Fund,
consists of this cover page and the following described documents, each of which
accompanies this Statement of Additional Information and is incorporated herein
by reference.
1. Preliminary Statement of Additional Information for the Scudder Europe
Fund dated June 8, 1999.
2. Statement of Additional Information for Kemper Europe Fund, dated March
1, 1999.
3. Annual Report of the Scudder Europe Fund for the fiscal year ended
October 31, 1998.
4. Annual Report of the Kemper Europe Fund for the fiscal year ended
November 30, 1998.
This Statement of Additional Information is not a prospectus. A Prospectus/Proxy
Statement, dated June 8, 1999, relating to the above-referenced matter may be
obtained without charge by calling or writing the Scudder Europe Fund at the
telephone number or address set forth above. This Statement of Additional
Information should be read in conjunction with the Prospectus/Proxy Statement.
<PAGE> 90
TABLE OF CONTENTS
<TABLE>
<S> <C>
Financial Statements........................................ F2
</TABLE>
F-1
<PAGE> 91
FINANCIAL STATEMENTS
The Scudder Europe Fund's Annual Report for the fiscal year ended October
31, 1998 and the Kemper Europe Fund's Annual Report for the fiscal year ended
November 30, 1998, each including audited financial statements, notes to the
financial statements and report of independent auditors, are incorporated by
reference herein. The Funds will furnish a copy of the Annual Reports by calling
1-800-349-4281.
PRO FORMA FINANCIAL STATEMENTS
The following tables set forth the unaudited pro forma condensed balance
sheet and unaudited pro forma condensed income statement of the Funds as of and
for the period ending April 30, 1999 and as adjusted to give effect to the
Reorganization.
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The following tables set forth the unaudited pro forma condensed Statement
of Assets and Liabilities as of April 30, 1999 and the unaudited pro forma
condensed Statement of Operations for the twelve month period ended April 30,
1999 for the Scudder Europe Fund and the Kemper Europe Fund as adjusted giving
effect to the Reorganization.
PRO FORMA CONDENSED STATEMENT OF ASSETS AND LIABILITIES
AS OF APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SCUDDER KEMPER
EUROPE EUROPE
FUND FUND PRO FORMA ACQUIRING FUND
(ACTUAL) (ACTUAL) ADJUSTMENTS(1) (AS ADJUSTED)
------------ ----------- -------------- --------------
<S> <C> <C> <C> <C>
Investments, at value.............. $355,074,509 $68,506,739 $423,581,248
Cash and foreign currency, at
value............................ 227 1,311 1,538
Other assets less liabilities...... (3,417,499) (1,143,644) $(39,221,388)(2) (43,782,531)
Net assets......................... $351,657,237 $67,364,406 $(39,221,388) $379,800,255
============ =========== ============ ============
Shares outstanding................. 16,310,537 -- -- 16,310,537
Net asset value per share.......... $ 21.56 -- -- $ 19.26(4)
Shares outstanding................. -- 2,253,099 (610,487)(3) 1,642,612
Net asset value per share, Class A
(and redemption price)........... -- $ 14.40 -- $ 19.26
Shares outstanding................. -- 2,154,354 (623,381)(3) 1,530,973
Net asset value per share, Class B
(subject to contingent deferred
sales charge)................. -- $ 14.05 -- $ 19.26
Shares outstanding................. -- 328,918 (93,400)(3) 235,518
Net asset value per share, Class C
(subject to contingent deferred
sales charge)................. -- $ 14.15 -- $ 19.26
Class A (Maximum offering price)... -- $ 15.28 -- $ 20.44
</TABLE>
- ---------------
(1) See note (1) to Pro Forma Capitalization table contained in the Scudder
Europe Fund's Prospectus/ Proxy Statement as to the time of the
Reorganization.
(2) Assumes capital gains distributions, without any reinvestment, of
$37,516,294 and $1,705,094 for the Scudder Europe Fund and Kemper Europe
Fund, respectively.
(3) See note (4) to Pro Forma Capitalization table contained in the Scudder
Europe Fund's Prospectus/ Proxy Statement. Based on the issuance of
1,642,612 Class A, 1,530,973 Class B, and 235,518 Class C
F-2
<PAGE> 92
additional Scudder Europe Fund shares and the cancellation of Class A, Class
B, and Class C Kemper Europe Fund shares.
(4) Subject to a 2% redemption fee.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE 12 MONTH PERIOD ENDED APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SCUDDER KEMPER
EUROPE EUROPE
FUND FUND PRO FORMA ACQUIRING FUND
(ACTUAL) (ACTUAL) ADJUSTMENTS (AS ADJUSTED)
------------ ----------- ----------- --------------
<S> <C> <C> <C> <C>
Investment Income:
Dividend income, net............. $ 5,071,494 $ 795,639 -- $ 5,867,133
Interest income.................. 1,352,996 307,153 -- 1,660,149
------------ ----------- ----------- ------------
Total Investment Income....... 6,424,490 1,102,792 7,527,282
Expenses
Management and Administrative
fees........................ 3,917,674 562,421 $ (273,461)(1) 4,206,634
Reorganization expenses....... 498,427 101,573 (600,000)(2) --
All other expenses............ 1,268,157 1,462,386 (194,608)(1) 2,535,935
------------ ----------- ----------- ------------
Total expenses before
reductions.................... 5,684,258 2,126,380 (1,068,069) 6,742,569
------------ ----------- ----------- ------------
Expense reductions............... -- (644,430) (1,964,826)(3) (2,609,256)
Expenses, net.................... 5,684,258 1,481,950 (3,032,895) 4,133,313
------------ ----------- ----------- ------------
Net investment income (loss)....... 740,232 (379,158) 3,032,895 3,393,969
------------ ----------- ----------- ------------
Net realized and unrealized gain
(loss) on investment
transactions:
Net realized gain (loss) from
investments and foreign
currency related
transactions.................. 56,406,428 (1,076,646) -- 55,329,782
Net unrealized appreciation
(depreciation) of investments
and foreign currency related
transactions.................. (51,083,362) (1,782,401) -- (52,865,763)
------------ ----------- ----------- ------------
5,323,066 (2,859,047) -- 2,464,019
------------ ----------- ----------- ------------
Net increase (decrease) in net
assets from operations........... $ 6,063,298 $(3,238,205) $ 3,032,895 $ 5,857,988
============ =========== =========== ============
</TABLE>
- ---------------
(1) Represents estimated reduction in operating expenses, including management
fee, directors' fees, shareholder services, and audit; and estimated
increase in Class M administrative fees.
(2) Eliminates the effect of non-recurring reorganization related expenses.
(3) Reflects the effect of expense waivers and reimbursements.
F-3
<PAGE> 93
PORTFOLIO OF INVESTMENTS AT APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
KEMPER SCUDDER KEMPER SCUDDER
EUROPE FUND EUROPE FUND COMBINED EUROPE FUND EUROPE FUND COMBINED
SHARES SHARES SHARES VALUE($) VALUE($) VALUE($)
----------- ----------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Repurchase
Agreements 6.51%
Repurchase
agreement with
Chase Manhattan
Bank, 4.750%,
05/03/1999 207,000 -- 207,000 207,000 -- 207,000
Repurchase
Agreement with
Donaldson,
Lufkin and
Jenrette,
4.870%,
05/03/1999 -- 27,371,000 27,371,000 -- 27,371,000 27,371,000
-----------------------------------------
207,000 27,371,000 27,578,000
-----------------------------------------
U. S.
Government
Agency 0.47%
Federal Home
Loan Bank,
4.900%,
05/03/1999 2,000,000 -- 2,000,000 1,999,456 -- 1,999,456
-----------------------------------------
Convertible
Preferred
Stocks 0.35%
Lernout &
Hauspie Speech
Products N.V -- 40,000 40,000 -- 1,460,000 1,460,000
-----------------------------------------
Common
Stocks 92.67%
CROATIA 0.59%
Pliva D.D. (GDR) -- 158,000 158,000 -- 2,504,300 2,504,300
-----------------------------------------
FINLAND 5.70%
JOT Automation
Group OYJ -- 199,400 199,400 -- 6,573,092 6,573,092
Nokia Oyj 14,400 103,400 117,800 1,109,884 7,969,586 9,079,470
Pohjola
Insurance Co.,
Ltd. "B" 14,200 76,000 90,200 672,885 3,601,355 4,274,240
Tieto Corp. "B" -- 106,200 106,200 -- 4,230,150 4,230,150
-----------------------------------------
1,782,769 22,374,183 24,156,952
-----------------------------------------
FRANCE 13.81%
Altran
Technologies,
S.A -- 25,000 25,000 -- 5,943,092 5,943,092
AXA SA 8,240 -- 8,240 1,063,869 -- 1,063,869
Accor S.A 1,700 -- 1,700 448,136 -- 448,136
Air Liquide 3,300 -- 3,300 509,046 -- 509,046
Castorama-
Dubois
Investissements -- 24,700 24,700 -- 5,910,920 5,910,920
Compagnie de
Saint-Gobain 4,220 -- 4,220 724,529 -- 724,529
Dassault
Systemes S.A -- 105,326 105,326 -- 3,875,957 3,875,957
Dexia France -- 31,343 31,343 -- 4,387,797 4,387,797
Elf Aquitaine SA 7,820 27,500 35,320 1,214,546 4,271,102 5,485,648
Etablissements
Economiques du
Casino Guichard-
Perrachon SA -- 37,700 37,700 -- 3,712,335 3,712,335
</TABLE>
F-4
<PAGE> 94
<TABLE>
<CAPTION>
KEMPER SCUDDER KEMPER SCUDDER
EUROPE FUND EUROPE FUND COMBINED EUROPE FUND EUROPE FUND COMBINED
SHARES SHARES SHARES VALUE($) VALUE($) VALUE($)
----------- ----------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Galeries
Lafayette -- 3,300 3,300 -- 3,800,409 3,800,409
Groupe Danone 2,510 -- 2,510 670,941 -- 670,941
Imetal S.A 2,860 -- 2,860 371,975 -- 371,975
Infogrames
Entertainment SA -- 53,960 53,960 -- 4,076,317 4,076,317
Publicis SA -- 28,400 28,400 -- 5,371,076 5,371,076
Rhone-Poulenc
S.A. "A" 16,700 -- 16,700 793,997 -- 793,997
Sanofi SA 3,700 -- 3,700 579,739 -- 579,739
Societe
Industrielle de
Transports
Automobiles SA -- 7,732 7,732 -- 1,609,341 1,609,341
Suez Lyonnaise
des Eaux 4,000 -- 4,000 680,418 -- 680,418
Television
Francaise 3,685 -- 3,685 720,276 -- 720,276
Total S.A. "B" 9,000 -- 9,000 1,232,360 -- 1,232,360
Valeo SA
(Warrants)
expire 08/07/01 -- 39,000 39,000 -- 131,857 131,857
Valeo SA -- 64,444 64,444 -- 5,447,063 5,447,063
Vivendi 4,130 -- 4,130 964,781 -- 964,781
-----------------------------------------
9,974,613 48,537,266 58,511,879
-----------------------------------------
GERMANY 12.41%
Adidas-Salomon
AG -- 20,130 20,130 -- 1,982,210 1,982,210
Allianz AG 4,515 9,500 14,015 1,438,252 3,026,223 4,464,475
Bayer AG 17,600 -- 17,600 747,530 -- 747,530
Bayerische
Vereinsbank AG 34,000 -- 34,000 2,216,430 -- 2,216,430
Douglas Holding
AG -- 63,545 63,545 -- 2,920,523 2,920,523
EM.TV &
Merchandising AG -- 2,720 2,720 -- 2,572,065 2,572,065
Gehe AG 20,000 -- 20,000 919,198 -- 919,198
Hoechst AG 19,900 -- 19,900 942,986 -- 942,986
Mannesmann AG 7,550 34,700 42,250 993,928 4,568,119 5,562,047
Marschollek
Lautenschlaeger
und Partner AG
(pfd) -- 36,610 36,610 -- 20,500,551 20,500,551
Medion AG -- 11,050 11,050 -- 2,270,763 2,270,763
Metro AG 9,000 -- 9,000 650,412 -- 650,412
PrimaCom AG -- 35,000 35,000 -- 1,516,149 1,516,149
Siemens AG 16,800 54,700 71,500 1,242,502 4,045,529 5,288,031
-----------------------------------------
9,151,238 43,402,132 52,553,370
-----------------------------------------
GREECE 3.17%
Alpha Credit
Bank -- 31,400 31,400 -- 2,241,838 2,241,838
Delta
Informatics S.A -- 237,000 237,000 -- 7,806,679 7,806,679
National Bank of
Greece S.A -- 47,500 47,500 -- 3,237,936 3,237,936
National Bank of
Greece
S.A.(Rights) -- 47,500 47,500 -- 137,965 137,965
-----------------------------------------
-- 13,424,418 13,424,418
-----------------------------------------
</TABLE>
F-5
<PAGE> 95
<TABLE>
<CAPTION>
KEMPER SCUDDER KEMPER SCUDDER
EUROPE FUND EUROPE FUND COMBINED EUROPE FUND EUROPE FUND COMBINED
SHARES SHARES SHARES VALUE($) VALUE($) VALUE($)
----------- ----------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HUNGARY 0.80%
Graboplast Rt
(GDR) -- 4 4 -- 5 5
OTP Bank Rt -- 80,500 80,500 -- 3,392,714 3,392,714
-----------------------------------------
-- 3,392,719 3,392,719
-----------------------------------------
IRELAND 1.38%
Bank of Ireland
PLC 53,079 -- 53,079 1,062,732 -- 1,062,732
ESAT Telecom
Group PLC (ADR) -- 97,600 97,600 -- 4,770,200 4,770,200
-----------------------------------------
1,062,732 4,770,200 5,832,932
-----------------------------------------
ITALY 13.17%
Alleanza
Assicurazioni
SpA -- 148,000 148,000 -- 1,774,792 1,774,792
Assicurazioni
Generali 33,000 110,888 143,888 1,284,817 4,317,298 5,602,115
Autogrill SpA -- 602,500 602,500 -- 5,525,438 5,525,438
Banca Carige SpA -- 125,000 125,000 -- 1,156,922 1,156,922
Banca Popolare
di Brescia SpA 22,500 391,000 413,500 773,791 13,446,761 14,220,552
Ente Nazionale
Idrocarburi SpA 123,000 554,000 677,000 809,623 3,646,597 4,456,220
Finmeccanica SpA -- 4,379,800 4,379,800 -- 4,312,808 4,312,808
Gruppo
Editoriale
L'Espresso 56,200 451,600 507,800 822,387 6,608,359 7,430,746
Istituto
Bancario San
Paolo di Torino 69,856 -- 69,856 1,048,050 -- 1,048,050
Mediaset SpA -- 185,000 185,000 -- 1,602,786 1,602,786
Seat Pagine
Gialle SpA 701,000 2,500,000 3,201,000 873,957 3,116,823 3,990,780
Telecom Italia
Mobile SpA 98,000 -- 98,000 583,976 -- 583,976
Telecom Italia
SpA 66,000 317,500 383,500 702,204 3,378,027 4,080,231
-----------------------------------------
6,898,805 48,886,611 55,785,416
-----------------------------------------
NETHERLANDS 9.50%
Aalberts
Industries 28,505 -- 28,505 677,631 -- 677,631
Akzo Nobel NV 12,200 -- 12,200 551,044 -- 551,044
Detron Group NV 30,000 -- 30,000 472,278 -- 472,278
Equant NV 4,200 90,700 94,900 381,182 8,231,716 8,612,898
Getronics NV 32,723 184,449 217,172 1,343,180 7,571,070 8,914,250
ING Groep NV 29,690 -- 29,690 1,828,810 -- 1,828,810
Koninklijke
Ahold NV 37,551 -- 37,551 1,394,559 -- 1,394,559
Koninklijke
Numico 21,266 -- 21,266 799,882 -- 799,882
Nedcon Groep 9,104 -- 9,104 141,878 -- 141,878
Nutreco Holding
NV -- 146,700 146,700 -- 5,944,091 5,944,091
Qiagen NV -- 60,500 60,500 -- 4,431,625 4,431,625
Unique
International NV 28,290 -- 28,290 754,717 -- 754,717
</TABLE>
F-6
<PAGE> 96
<TABLE>
<CAPTION>
KEMPER SCUDDER KEMPER SCUDDER
EUROPE FUND EUROPE FUND COMBINED EUROPE FUND EUROPE FUND COMBINED
SHARES SHARES SHARES VALUE($) VALUE($) VALUE($)
----------- ----------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United Pan-
Europe
Communications
NV -- 72,800 72,800 -- 3,765,078 3,765,078
Vedior NV CVA 85,844 -- 85,844 1,931,877 -- 1,931,877
-----------------------------------------
10,277,038 29,943,580 40,220,618
-----------------------------------------
POLAND 0.62%
ITI Group S.A -- 10,524 10,524 -- 2,620,476 2,620,476
-----------------------------------------
PORTUGAL 4.52%
Banco Comercial
Portugues 25,000 -- 25,000 704,983 -- 704,983
BPI - SGPS SA,
(Registered) -- 152,900 152,900 -- 4,119,434 4,119,434
Brisa-Auto
Estradas de
Portugal, SA -- 86,500 86,500 -- 3,664,801 3,664,801
Jeronimo Martins
SA -- 192,996 192,996 -- 6,351,792 6,351,792
Jeronimo
Martins, SA
"New" -- 64,332 64,332 -- 2,059,490 2,059,490
Telecel-
Comunicacoes
Pessoais, S.A -- 16,950 16,950 -- 2,265,427 2,265,427
-----------------------------------------
704,983 18,460,944 19,165,927
-----------------------------------------
SPAIN 6.40%
Aldeasa SA -- 68,100 68,100 -- 2,079,385 2,079,385
Argentaria SA 41,000 -- 41,000 964,271 -- 964,271
Baron de Ley, SA -- 158,000 158,000 -- 5,442,076 5,442,076
Compania
Telefonica
Nacional de
Espana SA 37,334 33,381 70,715 1,749,396 1,564,166 3,313,562
Compania
Telefonica
Nacional de
Espana SA (ADR) -- 21,441 21,441 -- 2,988,339 2,988,339
Cortefiel, SA -- 185,100 185,100 -- 5,084,751 5,084,751
Metrovacesa, S.A -- 99,200 99,200 -- 2,164,321 2,164,321
TelePizza, SA -- 787,680 787,680 -- 4,993,338 4,993,338
Compania
Telefonica
Nacional de
Espana SA
(Rights) 37,334 33,381 70,715 34,712 31,036 65,748
-----------------------------------------
2,748,379 24,347,412 27,095,791
-----------------------------------------
SWEDEN 0.27%
Gambro AB 39,750 -- 39,750 412,247 -- 412,247
Industri-
Matematik
International
Corp 12,540 -- 12,540 23,512 -- 23,512
Securitas AB 46,500 -- 46,500 688,930 -- 688,930
-----------------------------------------
1,124,689 -- 1,124,689
-----------------------------------------
SWITZERLAND 3.11%
Adecco SA
(Bearer) -- 11,539 11,539 -- 5,816,013 5,816,013
Baloise Holding
Ltd.
(Registered) -- 4,330 4,330 -- 3,541,876 3,541,876
</TABLE>
F-7
<PAGE> 97
<TABLE>
<CAPTION>
KEMPER SCUDDER KEMPER SCUDDER
EUROPE FUND EUROPE FUND COMBINED EUROPE FUND EUROPE FUND COMBINED
SHARES SHARES SHARES VALUE($) VALUE($) VALUE($)
----------- ----------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Novartis AG
(Registered) 638 -- 638 933,771 -- 933,771
Roche Holdings
AG (PC) 60 -- 60 705,512 -- 705,512
TeleLarm Care AB 545 -- 545 6,363 -- 6,363
UBS AG-
Registered 6,440 -- 6,440 2,186,485 -- 2,186,485
-----------------------------------------
3,832,131 9,357,889 13,190,020
-----------------------------------------
UNITED
KINGDOM 17.22%
Aegis Group PLC -- 3,417,000 3,417,000 -- 7,392,904 7,392,904
AstraZeneca
Group PLC 14,938 -- 14,938 582,506 -- 582,506
Avis Europe PLC -- 1,213,000 1,213,000 -- 5,131,736 5,131,736
BOC Group PLC 50,500 -- 50,500 797,720 -- 797,720
BP Amoco PLC 90,190 -- 90,190 1,711,938 -- 1,711,938
Barclays PLC 30,000 -- 30,000 954,543 -- 954,543
Bodycote
International
PLC 45,000 173,000 218,000 698,534 2,685,475 3,384,009
British Telecom
PLC 131,186 -- 131,186 2,190,446 -- 2,190,446
Capita Group PLC -- 130,700 130,700 -- 1,379,200 1,379,200
Cobham PLC -- 396,000 396,000 -- 6,083,399 6,083,399
Compass Group
PLC 52,350 540,000 592,350 538,945 5,559,318 6,098,263
Dixon Group PLC 39,600 121,500 161,100 844,828 2,592,086 3,436,914
Flextech PLC -- 479,119 479,119 -- 6,907,722 6,907,722
Glaxo Wellcome
PLC 43,650 -- 43,650 1,293,367 -- 1,293,367
Hays PLC 62,720 -- 62,720 696,150 -- 696,150
Marks & Spencer,
PLC 125,000 -- 125,000 857,082 -- 857,082
National
Westminster Bank
PLC 63,225 -- 63,225 1,520,470 -- 1,520,470
Orange PLC 69,270 -- 69,270 935,992 -- 935,992
Reed
International
PLC 109,562 -- 109,562 996,645 -- 996,645
Rentokil
Intitial PLC 205,500 -- 205,500 1,205,743 -- 1,205,743
Select
Appointments
Holdings PLC 63,542 200,000 263,542 809,532 2,548,021 3,357,553
Serco Group PLC -- 265,000 265,000 -- 5,882,646 5,882,646
SmithKline
Beecham PLC 50,145 -- 50,145 663,051 -- 663,051
Taylor Nelson
Sofres PLC -- 3,191,000 3,191,000 -- 8,058,872 8,058,872
Unilever PLC 69,793 -- 69,793 620,286 -- 620,286
Vodafone Group
PLC 44,799 -- 44,799 825,128 -- 825,128
-----------------------------------------
18,742,906 54,221,379 72,964,285
-----------------------------------------
Common Stocks Total $66,300,283 $326,243,509 $392,543,792
-----------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $66,172,546, $221,989,028, and $288,161,574,
respectively) $68,506,739 $355,074,509 $423,581,248
=========================================
</TABLE>
F-8
<PAGE> 98
PRELIMINARY STATEMENT OF ADDITIONAL
INFORMATION OF THE SCUDDER EUROPE FUND
DATED JUNE 8, 1999
IS INCORPORATED BY REFERENCE
TO ITS N-1A REGISTRATION STATEMENT
<PAGE> 99
KEMPER EUROPE FUND
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 20, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF TRUSTEES OF THE FUND
The undersigned holder of shares of Kemper Europe Fund (the "Fund"), hereby
appoints Kathryn L. Quirk, Philip J. Collora, Maureen E. Kane and Caroline
Pearson attorneys and proxies for the undersigned with full powers of
substitution and revocation, to represent the undersigned and to vote on behalf
of the undersigned all shares of the Fund that the undersigned is entitled to
vote at the Special Meeting of Shareholders of the Fund to be held at the
offices of Scudder Kemper Investments, Inc., 25th Floor, 345 Park Avenue (at
51st Street), New York, New York 10154, at 9:00 a.m., and any adjournment or
adjournments thereof. The undersigned hereby acknowledges receipt of the Notice
of Special Meeting and the Prospectus/Proxy Statement dated June 8, 1999 and
hereby instructs said attorneys and proxies to vote said shares as indicated
herein.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. A majority of the proxies present and
acting at the Meeting in person or by substitute (or, if only one shall be so
present, then that one) shall have and may exercise all of the power and
authority of said proxies hereunder. The undersigned hereby revokes any proxy
previously given.
IMPORTANT: VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE THE
EXPENSE OF ADDITIONAL MAILINGS.
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> 100
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR THE FOLLOWING PROPOSAL.
Please indicate your vote by an "X" in the appropriate box below. This proxy, if
properly executed, will be voted in the manner directed by the undersigned
shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" APPROVAL OF
THE PROPOSAL.
1. To approve the Agreement and Plan of
Reorganization dated as of May 28, 1999 (the
"Plan") providing (i) that the Kemper Europe
Fund would transfer to Scudder New Europe
Fund, Inc. (the "Scudder Europe Fund") all of
its assets in exchange for Class A, B and C
Shares of the Scudder Europe Fund and the FOR/ / AGAINST/ / ABSTAIN/ /
assumption by Scudder Europe Fund of all of
the Kemper Europe Fund's liabilities, (ii)
that such shares of the Scudder Europe Fund
would be distributed to shareholders of
Kemper Europe Fund in liquidation of Kemper
Europe Fund and (iii) that Kemper Europe Fund
would subsequently be terminated.
The Proxies are authorized to vote upon such other business as may properly
come before the Meeting.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
