The Brazil Fund, Inc.
Annual Report
December 31, 1994
A closed-end investment company seeking long-term capital appreciation
through investment in securities, primarily equity securities, of Brazilian
issuers.
Investment objective and policies
* long-term capital appreciation through investment primarily in equity
securities of Brazilian issuers
Investment characteristics
* closed-end investment company investing in a broad spectrum of
Brazilian industries
* a vehicle for international diversification through participation in
the Brazilian economy
General Information
Executive offices
The Brazil Fund, Inc.
345 Park Avenue
New York, NY 10154
Telephone:
Daily net asset value: 212-326-6444
For Fund information: 1-800-349-4281
Transfer agent, registrar and dividend reinvestment plan agent
For account information: 617-575-2900
The First National Bank of Boston
Mail Stop 45-02-09
P.O. Box 644
Boston, MA 02102-0644
Custodian
Brown Brothers Harriman & Co.
Legal counsel
Debevoise & Plimpton
Independent Accountants
Price Waterhouse LLP
New York Stock Exchange Symbol -- BZF
Contents
Letter to Shareholders 3
Investment Summary 7
Portfolio Summary 8
Investment Portfolio 9
Financial Statements 12
Financial Highlights 15
Notes to Financial Statements 16
Report of Independent Accountants 20
Tax Information 21
Dividend Reinvestment and Cash Purchase Plan 22
Investment Manager and Administrator Back Cover
Directors and Officers Back Cover
This report is sent to the shareholders of The Brazil Fund, Inc. for their
information. It is not a prospectus, circular, or representation intended
for use in the purchase or sale of shares of the Fund or of any securities
mentioned in the report.
Letter to Shareholders
Dear Shareholders:
We are pleased to report on the investment activities of The Brazil
Fund, Inc. for the year ended December 31, 1994.
The closing price of the Fund's shares on the New York Stock Exchange
was $33 per share at year-end, a 56.2% gain for the year. As the table
below indicates, the Fund sold at a 6.1% premium to its underlying net
asset value on December 31. The Fund's total investment return, based on
market value, was 69.81% for the year.
The Fund's net assets were $376,521,972, or $31.10 per share, on
December 31. Investments in Brazilian equity securities totaled
$372,981,289. The Fund's net asset value per share increased 48.2% for the
year, before adjustments for cash distributions of $0.34 per share paid in
March and $2.12 per share declared in December and paid in January 1995.
The Fund's total investment return, based on net asset value, was 61.1% for
the year.
The Sao Paulo Stock Exchange Index rose 59.6% in dollar terms for the
year. At the end of 1994, the market value of all stocks listed on the Sao
Paulo Stock Exchange was $189.1 billion.
<TABLE>
<S> <C> <C> <C> <C>
NYSE Price/ Sao Paulo
Close NAV NAV Index ($)
12/31/93 $21 1/8 $20.98 100.7% 11.70
3/31/94 23 7/8 27.54 86.7 16.59
6/30/94 24 22.38 107.2 13.18
9/30/94 35 1/8 37.44 93.8 23.41
12/31/94 33 31.10 106.1 18.67
</TABLE>
Historical performance data for the Fund is shown on page seven of
this report. An important source of investment returns over the years has
been the reinvestment of cash distributions in additional shares of The
Brazil Fund through its common stock dividend reinvestment plan. Including
its most recent dividend payment, the Fund's total cash distributions to
shareholders since its initial public offering in March 1988 at $12.50 per
share have amounted to $95.6 million, equal to $7.93 per share. An investor
who purchased 100 shares of the Fund's stock at its public offering and
participated in the dividend reinvestment program in subsequent years would
own 161.01 shares today.
Country Developments
When Fernando Henrique Cardoso was sworn in as Brazil's 38th president
on New Year's Day, he faced as favorable a combination of economic
conditions as any new head of state might wish for. Economic growth for the
year just ended was an estimated 4.9%, a clear improvement over 1993's
growth rate of 4.1%. Record harvests and surging consumer durable goods
production were the driving forces behind the accelerating rate of
expansion. Inflation had stabilized by year-end at a monthly rate of just
over 1%, and unemployment rates were falling in the country's major
industrial centers.
A great deal of Brazil's economic activity revolves around the
country's sizable internal market. Exports for 1994 of $43.6 billion, for
example, were equal to just 8.7% of GDP and imports of $33.2 billion were
6.6% of estimated GDP of $500 billion. The trade surplus was a solid $10.4
billion for the year, and the 1994 current account deficit of $1.1 billion
was an inconsequential 0.2% of GDP and well-covered by foreign exchange
reserves of over $38 billion. It was with justification that the new
Cardoso administration looked forward to another year of solid economic
progress in 1995.
Despite the good economic news for 1994 and the early optimistic
outlook for 1995, Brazil's financial markets were under strain at year-end.
This was mainly the consequence of the negative impact of the late December
devaluation of the Mexican peso on capital markets throughout Latin
America. From December 20 (just prior to the Mexican government's decision
to float the peso) through January 31, 1995 (when President Clinton
announced an expanded multilateral economic aid package for Mexico), the
Mexican stock market index collapsed by 38% in dollar terms. Over the same
period, the Sao Paulo index fell by 14% and the Brazil Fund's net asset
value also declined by 14%.
There were some superficial similarities between Mexico and Brazil that
concerned investors and allowed the financial problems of Mexico to be
transmitted to Brazil's stock market. Like Mexico, the Brazilian central
bank appeared to be allowing its currency to trade against the U.S. dollar
within a narrow and possibly arbitrary band; like Mexico, the Brazilian
currency appeared to be overvalued against the dollar, given the real's
strong appreciation following its introduction in July; like Mexico,
Brazil's trade account was a growing worry as surpluses turned into
deficits in November and December; and like Mexico, a number of Brazilian
commercial banks were experiencing liquidity and credit quality problems,
requiring the Brazilian central bank to intervene administratively in banks
controlled by the states of Sao Paulo and Rio de Janeiro.
The similarities between Mexico and Brazil were superficial, yet they
had a clear and negative impact on the market. Foreign investors
repatriated an estimated $525 million net from the Sao Paulo Exchange
during January. This sum equalled almost 5% of the $10.9 billion of foreign
equity investments in Brazil at the end of 1994.
Where Brazil differs materially from Mexico and many of the other
leading Latin American countries is that Brazil is in the very early stages
of its economic stabilization program. Brazil came to terms with its
commercial bank lenders for a Brady bond restructuring just last year, and
as a result the country has not had a long lead time to build up new layers
of foreign debt, as did Mexico. The Real Plan, the cornerstone of the
Cardoso stabilization program to date, is legally established by
Provisional Measures which the executive branch re-issues every thirty
days; it has not been sanctioned by the legislature. Finally, it was not
until February 1995 that Brazil's new congress took office and was in a
position to join with the Cardoso government in pursuing permanent
legislative and constitutional remedies to the country's chronic
instability.
The Cardoso administration's negotiations with congress on the
stabilization and economic recovery program are just beginning and the
outcome is difficult to predict. The political background is complex and
President Cardoso seems to prefer building consensus through negotiation
rather than confrontation. Investors should not expect the quick fix for
problems that have developed over decades, but their impatience may add to
the anxiety and volatility of the stock market.
What the Cardoso program is all about, of course, is growth: how to
get it, how to keep it, how to advance it. While the economy is currently
enjoying the fruits of a strong demand-led recovery, Brazil requires
sharply higher rates of savings and investment in order to sustain economic
expansion at rates that will create new jobs for the 1.5 million annual
entrants into the work force and deliver rising living standards.
Since political authority was returned to a civilian government in
1985, however, Brazil has had great difficulty in promoting policies that
favor savings over consumption. Economic growth has fallen short of
potential due to declining rates of capital investment, and Brazil is
unique among the major Latin American economies in delivering a decline in
per capita gross domestic product to its citizens over the 1985-92 period,
according to World Bank statistics. The challenge facing President Cardoso
is to create conditions of stability, predictability and profitability that
will stimulate higher rates of savings and investment and growth.
The Portfolio
The Brazil Fund ended 1994 maintaining its long-standing practice of
investing mostly in Brazilian stocks. As indicated on page eight of this
report, equity securities accounted for 93% of the portfolio.
Telecommunications remained the Fund's largest industry concentration and
accounted for 13% of total equities. Petroleo Brasileiro S/A ("Petrobras")
was the Fund's largest equity holding, having displaced Telecomunicacoes
Brasileiras S.A. ("Telebras") from the number one position it had occupied
for so many years.
There has been little change over time in the companies that comprise
the portfolio's ten largest equity holdings, although the annual ranking of
individual names will change. The portfolio's core holdings have not been
chosen to represent any particular investment theme, such as privatization
or export orientation. Our goal has been to invest in the best-managed and
highest quality companies traded on the Brazilian stock markets. Portfolio
turnover has been low because fundamentals such as managerial excellence
and investment quality do not change quickly.
The liquidity of portfolio securities has not been a major issue
because of the closed-end nature of the Fund. This has allowed the Fund to
invest in outstanding companies with limited stock market liquidity. New
investments during 1994 in Companhia Petroquimica do Sul S.A. ("Copesul")
and Companhia Paranaense de Energia ("Copel") are examples of high quality
companies with comparatively low trading volumes. Copel is an electric
power generator and distributor serving the dynamic and wealthy state of
Parana. The state government holds voting control of the company.
All of the Fund's portfolio companies have yet to report their 1994
earnings. Based on preliminary results disclosed to date, however, profit
comparisons with 1993 should be distinctly favorable. Shareholders should
keep in mind that reported 1994 earnings will tend to overstate core, or
recurring, earning power for many companies. This is a result of the
windfall benefit to earnings from the appreciation of the real against the
dollar. Companies with dollar debt will enjoy a foreign exchange gain from
converting their dollar liabilities into reals. This is a non-cash item and
may disappear as an earnings component in 1995 if the real is devalued
against the dollar, as some experts forecast. The Franco administration
raised corporate tax rates near the end of 1994, and this could also prove
to be a negative for 1995 reported profits.
Company earnings are clearly important to investors. For 1995,
however, we expect that the stock market will be influenced more by
perceptions of the progress President Cardoso is making with congress in
advancing his program than by one year's worth of potentially poor earnings
comparisons. The Brazil Fund is managed with the long-term in mind, and it
is vital for continued long-term investment success that President Cardoso
and congress work harmoniously to set Brazil back on the track of sustained
economic growth.
A Team Approach to Investing
The Brazil Fund, Inc. is run by a team of Scudder investment
professionals who each play an important role in the portfolio's management
process. Team members work together to develop investment strategies and
select securities for the portfolio. They are supported by Scudder's large
staff of economists, research analysts, traders, and other investment
specialists who work in our offices across the United States and abroad. We
believe our team approach benefits Fund investors by bringing together many
disciplines and leveraging Scudder's extensive resources.
Lead Portfolio Manager Edmund B. Games, Jr. has set Fund investment
strategy and overseen its daily operation since 1988. Mr. Games joined
Scudder's equity research area in 1960. William F. Truscott, Portfolio
Manager, helps set the portfolio's general investment strategies. Mr.
Truscott, a member of the portfolio's team since 1993, has over 10 years of
experience in the financial industry. Nicholas Bratt, Portfolio Manager,
has been a member of the portfolio team since 1988 and has over 20 years of
experience in worldwide investing. Mr. Bratt, who has been at Scudder since
1976, is the head of Scudder's Global Equity Department.
Dividend Reinvestment Option
The Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan")
offers you a convenient way to have your dividends and capital gains
distributions reinvested in the shares of the Fund. Your participation is
automatic unless you or the bank, broker or other nominee holding shares
beneficially owned by you specifies otherwise. We believe this Plan is
attractive for shareholders. Its features are more fully described on page
22. Of particular interest is the ability of Plan participants to reinvest
their dividends and capital gains distributions at up to a 5% discount to
the Fund's share price on the New York Stock Exchange (but not less than
the net assets value) when the Fund's shares are selling at a premium to
net asset value.
Other Information
The Fund's NAV is published every Monday in The Wall Street Journal
under the heading "Closed End Funds." The Fund's NAV is also published in
The New York Times and Barron's.
As a Service to overseas shareholders, the Fund's NAV is listed daily
in The Financial Times ("FT"). For your information the NAV of the Fund and
other Scudder managed closed-end funds can be found in the "FT Managed
Funds Service" section under the heading "other offshore funds" below the
Scudder, Stevens & Clark banner.
We appreciate your interest in The Brazil Fund and welcome any
questions and comments that you may have. We can be reached at
1-800-349-4281.
Respectfully,
/s/Nicholas Bratt /s/Juris Padegs
Nicholas Bratt Juris Padegs
President Chairman of the Board
<PAGE>
The Brazil Fund, Inc.
Investment Summary as of December 31, 1994
- -----------------------------------------------------------------------------
Historical
Information
Life of Fund
Total Return (%)
---------------------------------------------------------------
Market Value Net Asset Value(a) Index(b)
------------------- ------------------- -------------------
Average Average Average
Cumulative Annual Cumulative Annual Cumulative Annual
------------------- ------------------- -------------------
Current Quarter .69 -- -11.01 -- -20.25 --
One Year 69.81 69.81 61.09 61.09 59.57 59.57
Three Year 162.53 37.95 164.36 38.27 224.70 48.08
Five Year 204.04 24.91 95.65 14.37 244.46 28.06
Life of Fund* 330.25 24.20 339.07 24.57 439.42 28.33
- -----------------------------------------------------------------------------
Per Share Information and Returns (a)
Yearly periods ended December 31
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
1988* 1989 1990 1991 1992 1993 1994
------------------------------------------------------
Net Asset Value... $12.90 $18.85 $ 5.97 $13.80 $14.12 $20.98 $31.10
Income Dividends.. $ .41 $ .89 $ .12 $ -- $ -- $ .08 $ --
Capital Gains and
Other Distributions $ .28 $ 2.29 -- -- .66 .74 2.46
Total Return (%).. 21.99 83.96 -67.98 131.16 6.43 54.19 61.09
</TABLE>
(a) Total investment return based on per share net asset value reflects the
effects of changes in net asset value on the performance of the Fund
during each period, and assumes dividends and capital gains distributions,
if any, were reinvested. These percentages are not an indication of the
performance of a shareholder's investment in the Fund based on market
value due to differences between the market price of the stock and the
net asset value of the Fund during each period.
(b) Sao Paulo Stock Exchange Index ($).
* The Fund commenced operations on April 8, 1988.
Past results are not necessarily indicative of future performance
of the Fund.
The Brazil Fund, Inc.
Portfolio Summary as of December 31, 1994
- -----------------------------------------------------------------------------
Diversification
- -----------------------------------------------------------------------------
Equity Securities 93%
Cash Equivalents 7%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -----------------------------------------------------------------------------
Sectors
- -----------------------------------------------------------------------------
Sector breakdown of the Fund's equity securities
Telecommunications 13%
Food and Beverage 12%
Forest Products 10%
Chemicals 8%
Petroleum 8%
Mining 8%
Electrical Equipment 6%
Banking 6%
Iron and Steel 5%
Other 24%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Ten Largest Equity Holdings
- --------------------------------------------------------------------------
1. Petroleo Brasileiro S/A
2. Companhia Vale de Rio Doce
3. Telecomunicacoes Brasileiras S.A.
4. Banco Itau S.A.
5. Sadia Concordia S/A
6. Telecomunicacoes de Sao Paulo S.A.
7. Companhia Cervejaria Brahma
8. S/A White Martins
9. Companhia Souza Cruz Industria e Comercio
10. Companhia Suzano de Papel e Celulose S.A.
<PAGE>
The Brazil Fund, Inc.
Investment Portfolio As Of December 31, 1994
<TABLE>
========================================================================================================================
Industry Shares Company Value ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EQUITY SECURITIES 92.8%
AUTO PARTS 1.1% 103,761,800 (pfd.) Metal Leve S.A. Indcstria e Comercio . . . . . 4,354,071
----------
BANKING 5.4% 77,794,208 (pfd.) Banco Itac S.A. . . . . . . . . . . . . . . . 21,794,332
----------
CHEMICALS 7.8% 21,347,000 (voting) Companhia Petroquimica do Sul S.A. . . . . . . 1,261,643
11,029,400 (pfd.) COPENE Petroquimica do Nordeste S.A. "A" . . . 9,634,429
182,330,850 (voting) Ucar Carbon S.A. . . . . . . . . . . . . . . . 3,232,816
1,176,720,133 (voting) S/A White Martins. . . . . . . . . . . . . . . 17,108,342
----------
31,237,230
----------
CONSTRUCTION 2.2% 4,476,300 (voting) Odebrecht S.A. . . . . . . . . . . . . . . . . 3,783,161
1,182,600 (voting) S/A Moinho Santista Indcstrias Gerais* . . . . 4,892,553
----------
8,675,714
----------
ELECTRICAL EQUIPMENT 5.9% 14,718,000 (pfd.) Brasmotor S.A. . . . . . . . . . . . . . . . . 5,967,227
5,613,800 (pfd.) Empresa Brasileira de Compressores S.A. (b). . 5,175,844
610,582 (voting) Pirelli Cabos S.A.*. . . . . . . . . . . . . . 1,263,024
17,006,600 (pfd.) Weg S.A. (b) . . . . . . . . . . . . . . . . . 11,458,348
----------
23,864,443
----------
FOOD AND BEVERAGE 11.2% 58,096,254 (pfd.) Companhia Cervejaria Brahma . . . . . . . . . 19,149,102
6,314,433 (pfd.) Companhia Cervejaria Brahma Warrants
(expire 9/30/96)* . . . . . . . . . . . . . 671,748
1,748,900 (voting) Santista Alimentos S.A.* . . . . . . . . . . . 3,597,028
14,551,430 (pfd.) Sadia Concordia S/A. . . . . . . . . . . . . . 20,296,321
51,481,812 (pfd.) Sementes Agroceres S/A. . . . . . . . . . . . 1,399,624
----------
45,113,823
----------
FOREST PRODUCTS 9.0% 4,747,700 (pfd.) Aracruz Celulose S.A. "B"* . . . . . . . . . . 12,901,847
2,236,600 (pfd.) Companhia Suzano de Papel e Celulose S.A. . . 15,333,664
5,199,792 (pfd.) Indcstrias Klabin de Papel e Celulose S/A. . . 7,744,371
----------
35,979,882
----------
GLASS 2.9% 2,310,236 (voting) Companhia Vidraria Santa Marina. . . . . . . . 11,824,258
----------
IRON AND STEEL 5.0% 17,207,708 (pfd.) Companhia Sidercrgica Belgo-Mineira. . . . . . 2,379,789
12,911,670 (voting) Companhia Sidercrgica Belgo-Mineira. . . . . . 1,839,074
185,600,000 (voting) Companhia Sidercrgica Nacional . . . . . . . . 6,329,267
7,000,000,000 (pfd.) Usinas Sidercrgicas de Minas Gerais S/A . . . 9,515,366
----------
20,063,496
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Brazil Fund, Inc.
Investment Portfolio (Continued)
<TABLE>
========================================================================================================================
Industry Shares Company Value ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MINING 7.3% 133,888,000 (pfd.) Companhia Vale do Rio Doce . . . . . . . . . . . . 25,479,868
32,408,536 (pfd.) S.A. Mineraceo da Trindade . . . . . . . . . . . . 1,681,720
33,088,000 (voting) S.A. Mineraceo da Trindade . . . . . . . . . . . . 1,994,667
------------
29,156,255
------------
PETROLEUM 7.7% 245,739,999 (pfd.) Petroleo Brasileiro S/A. . . . . . . . . . . . . . 31,077,686
------------
RETAILING 4.8% 15,408,041 (pfd.) Casa Anglo Brasileira S.A.* . . . . . . . . . . . 3,642,563
119,311,600 (pfd.) Lojas Americanas S.A. . . . . . . . . . . . . . . 3,525,757
242,237,800 (voting) Lojas Americanas S.A. . . . . . . . . . . . . . . 6,731,691
29,909,465 (pfd.) Mesbla S.A. . . . . . . . . . . . . . . . . . . . 5,373,805
------------
19,273,816
------------
TELECOMMUNICATIONS 11.8% 561,256,600 (pfd.) Telecomunicacges Brasileiras S.A. . . . . . . . . 25,143,765
6,478,900 (pfd.) Telecomunicacges do Parana S.A. . . . . . . . . . 2,144,317
141,212,067 (pfd.) Telecomunicacges de Seo Paulo S.A. . . . . . . . . 20,113,539
------------
47,401,621
------------
TEXTILES AND APPAREL 3.3% 460,166,740 (pfd.) Cia. Hering . . . . . . . . . . . . . . . . . . . 7,071,120
32,529,600 (pfd.) Seo Paulo Alpargatas S.A. . . . . . . . . . . . . 6,152,170
------------
13,223,290
------------
TOBACCO 4.0% 1,943,043 (voting) Companhia Souza Cruz Indcstria e Comercio. . . . . 16,077,188
------------
TRANSPORTATION 0.1% 139,030 (pfd.) Varig S.A.* . . . . . . . . . . . . . . . . . . . 460,147
------------
UTILITY 3.3% 145,408,480 (pfd.) Cia. Energetica de Minas Gerais . . . . . . . . . 13,234,578
15,911,500 (voting) Companhia Paranaense de Energia. . . . . . . . . . 169,459
------------
13,404,037
------------
TOTAL EQUITY SECURITIES (Cost $121,447,944). . . . 372,981,289
------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Principal
Amount ($)
- -------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER 7.2%
7,000,000 Chevron Oil Finance Co., 5.48%, 1/5/95 . . . . . . 7,000,000
21,762,000 CIT Group Holdings Inc., 6.05%, 1/3/95 . . . . . . 21,762,000
------------
TOTAL COMMERCIAL PAPER (Cost $28,762,000). . . . . 28,762,000
------------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $150,209,944) (a) . . . . . . . . . . . . 401,743,289
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
(a) The cost of the investment portfolio for federal income tax purposes was
$150,229,111. At December 31, 1994, net unrealized appreciation for all
securities based on tax cost was $251,514,178. This consisted of aggregate
gross unrealized appreciation for all securities in which there was an
excess of market value over tax cost of $251,757,523 and aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over market value of $243,345.
(b) Securities valued in good faith by the Board of Directors. The cost of
these securities at December 31, 1994 aggregated $5,227,974. See Note A of
the Notes to Financial Statements.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Brazil Fund, Inc.
Financial Statements
<TABLE>
==================================================================================================================
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at value (identified cost $150,209,944) (Notes A and D) . . . . $ 401,743,289
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,102
Foreign currency holdings, at market (identified cost $882,345) (Note A) . . 888,603
Dividends and interest receivable . . . . . . . . . . . . . . . . . . . . . . 243,342
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,979
-------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402,880,315
LIABILITIES
Payables:
Dividend Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,668,371
Accrued management fee (Note C) . . . . . . . . . . . . . . . . . . . . . 405,013
Accrued administrator's fee (Note C) . . . . . . . . . . . . . . . . . . . 33,333
Other accrued expenses (Note C) . . . . . . . . . . . . . . . . . . . . . 251,626
-------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,358,343
-------------
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 376,521,972
=============
NET ASSETS
Net assets consist of:
Accumulated net realized gain . . . . . . . . . . . . . . . . . . . . . . $ 2,749,794
Net unrealized appreciation (depreciation) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251,533,345
Foreign currency denominated transactions . . . . . . . . . . . . . . . (37,460)
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,077
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 122,155,216
-------------
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 376,521,972
=============
NET ASSET VALUE per share ($376,521,972 -:- 12,107,722 shares of common stock
outstanding, 50,000,000 shares authorized, $.01 par value) . . . . . . . . $31.10
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
===================================================================================================================
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment income
Income:
Dividends (net of withholding tax of $582,727) (Note A) . . . . . . . . $ 3,283,641
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667,145
-------------
3,950,786
Expenses:
Management fee (Note C) . . . . . . . . . . . . . . . . . . . . . . . . $ 4,371,086
Administrator's fee (Note C) . . . . . . . . . . . . . . . . . . . . . 52,961
Directors' fees and expenses (Note C) . . . . . . . . . . . . . . . . . 84,504
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,003,419
Auditing, accounting and tax services . . . . . . . . . . . . . . . . . 85,600
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . 51,917
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,069
IPMF tax (Note A) . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,687
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129,342 5,960,585
------------- -------------
Net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,009,799)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments (net of IOF tax of $47,046) (Note A) . . . . . . . . . . . 28,912,830
Foreign currency denominated transactions . . . . . . . . . . . . . . . (314,635) 28,598,195
-------------
Net unrealized appreciation during the period on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,676,020
Foreign currency denominated transactions . . . . . . . . . . . . . . . 15,529 125,691,549
------------- -------------
Net gain on investment transactions . . . . . . . . . . . . . . . . . . . 154,289,744
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . $ 152,279,945
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Brazil Fund, Inc.
Financial Statements
<TABLE>
===================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) . . . . . . . . . . . . . . . . . . . $ (2,009,799) $ 1,231,789
Net realized gain from investment transactions . . . . . . . . . . 28,598,195 10,570,428
Net unrealized appreciation on investment
transactions during the period . . . . . . . . . . . . . . . . 125,691,549 80,936,531
-------------- -------------
Net increase in net assets resulting from operations . . . . . . . . 152,279,945 92,738,748
-------------- -------------
Distributions to shareholders from:
Net investment income ($.08 per share) . . . . . . . . . . . . . . -- (967,506)
-------------- -------------
Net realized gains from investment transactions
($2.46 and $.74 per share, respectively) . . . . . . . . . . . (29,783,356) (8,888,487)
-------------- -------------
Net asset value of shares issued to shareholders in reinvestment of
distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 330,047 181,900
-------------- -------------
INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . 122,826,636 83,064,655
Net assets at beginning of period . . . . . . . . . . . . . . . . . . 253,695,336 170,630,681
-------------- -------------
NET ASSETS AT END OF PERIOD (including accumulated net investment
loss of $39,750 in 1993) . . . . . . . . . . . . . . . . . . . . . $ 376,521,972 $ 253,695,336
============== =============
OTHER INFORMATION
INCREASE IN FUND SHARES
Shares outstanding at beginning of period . . . . . . . . . . . . . . 12,093,826 12,081,227
Shares issued to shareholders in reinvestment of distributions . . 13,896 12,599
-------------- -------------
Shares outstanding at end of period . . . . . . . . . . . . . . . . . 12,107,722 12,093,826
============== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Brazil Fund, Inc.
Financial Highlights
<TABLE>
====================================================================================================================
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE
INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS AND MARKET PRICE DATA.
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period . . . . . . . $20.98 $14.12 $13.80 $ 5.97 $ 18.85
------ ------ ------ ------- -------
Net investment income (loss)(a) . . . . . . . . . (.17) .10 .19 .95 1.32
Net realized and unrealized gain
(loss) on investment transactions(a) . . . . . . 12.75 7.58 .79 6.88 (14.08)
------ ------ ------ ------- -------
Total from investment operations . . . . . . . . . 12.58 7.68 .98 7.83 (12.76)
------ ------ ------ ------- -------
Less distributions from:
Net investment income . . . . . . . . . . . . . . -- (.08) -- -- (.12)
Net realized gains on investments . . . . . . . . (2.46) (.74) (.66) -- --
------ ------ ------ ------- -------
Total distributions . . . . . . . . . . . . . . . . (2.46) (.82) (.66) -- (.12)
------ ------ ------ ------- -------
Net asset value, end of period . . . . . . . . . . $31.10 $20.98 $14.12 $ 13.80 $ 5.97
====== ====== ====== ======= =======
Market value, end of period . . . . . . . . . . . . $33.00 $21.13 $13.63 $ 14.75 $ 6.63
====== ====== ====== ======= =======
TOTAL INVESTMENT RETURN
Per share market value (%) . . . . . . . . . . . 69.81 60.89 (3.91) 122.64 (47.98)
Per share net asset value (%)(b) . . . . . . . . 61.09 54.19 6.43 131.16 (67.98)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) . . . . . 377 254 171 167 72
Ratio of operating expenses to
average net assets (%)(c) . . . . . . . . . . . . 1.71 1.84 2.22 2.15 2.25
Ratio of net investment income (loss)
to average net assets (%) . . . . . . . . . . . . (.58) .56 1.13 8.13 11.27
Portfolio turnover rate (%) . . . . . . . . . . . 5.76 4.67 7.94 12.69 4.31
<FN>
(a) Realized and unrealized currency losses on the Fund's interest bearing accounts amounted to $.31, $.86 and $2.96
per share in 1992, 1991 and 1990, respectively, of which $1.27 per share is included in net investment income in 1990.
(b) Total investment return based on per share net asset value reflects the effects of changes in net asset value on the
performance of the Fund during each period, and assumes dividends and capital gains distributions, if any, were reinvested.
These percentages are not an indication of the performance of a shareholder's investment in the Fund based on market value
due to differences between the market price of the stock and the net asset value of the Fund during each period.
(c) For the years ended December 31, 1993, 1992 and 1990 the ratioexpenses, including the Brazilian repatriation tax, to average
net assets was 2.22%, 2.39% and 2.56%, respectively.
</TABLE>
<PAGE>
A. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
The Brazil Fund, Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as amended, as a non-diversified, closed-end management investment
company. The policies described below are followed consistently by the Fund in
the preparation of its financial statements in conformity with generally
accepted accounting principles.
SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors. Securities valued in good
faith amounted to $16,634,192 (4.4% of net assets) and are noted in the
Investment Portfolio as of December 31, 1994.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) values of investment securities, other assets and liabilities at
the daily rate of exchange;
(ii) purchases and sales of investment securities, dividend and interest
income and expenses at the daily rate of exchange prevailing on the
respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments. Such fluctuations are included with the
net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
TAXATION. The Fund's policy is to comply with the requirements of the Internal
Revenue Code which are applicable to regulated investment companies, and to
distribute all of its taxable income to its shareholders. The Fund accordingly
paid no U.S. federal income taxes, and no federal income tax provision was
required.
Effective January 1, 1994, the Fund will be subject to a 15% withholding tax on
dividend and interest income. Prior to January 1, 1994, the Fund had been
subject to a 15% Brazilian repatriation tax with respect to remittances outside
of Brazil of its dividend and interest income net of applicable expenses. The
Fund is also subject to a 0.25% Imposto Provisorio Sobre Movimentacoes
Financieras ("IPMF") tax on debits (withdrawals) for banking transactions.
Effective January 1, 1995, the IPMF tax will no longer be enforced.
Additionally, the Fund is subject to a variable rate Imposto Sobre Operacoes
Financeiras ("IOF") tax which is imposed on the redemption of certain
short-term investments. Effective October 20, 1994, the Fund was no longer able
to hold such short-term investments. Therefore, the Fund was not subject to the
IOF tax subsequent to that date.
<PAGE>
DISTRIBUTION OF INCOME AND GAINS. The Fund intends to distribute to
shareholders, at least annually, all of its tax basis net investment income,
any net short-term capital gains in excess of net long-term capital losses
(including any capital loss carryover) and expects to distribute annually any
net long-term capital gains in excess of net short-term capital losses
(including any capital loss carryover), which would be taxable to the Fund if
not distributed. An additional distribution may be made to the extent necessary
to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences primarily relate to foreign denominated investments and
certain securities sold at a loss. As a result, net investment income (loss)
and net realized gain (loss) on investment and foreign currency related
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
OTHER. Investment security transactions are accounted for on a trade date
basis. Dividend income is recorded on the ex-dividend date. Interest income is
recorded on the accrual basis. Distributions to shareholders are recorded at
the earlier of ex or record date. The Fund uses the identified cost method for
determining realized gain or loss on investments and foreign currency for both
financial and federal income tax reporting purposes.
B. PURCHASES AND SALES OF SECURITIES
---------------------------------
During the year ended December 31, 1994, purchases and sales of investment
securities (excluding short-term investments) aggregated $18,932,956 and
$46,021,425, respectively.
C. INVESTMENT ADVISORY AGREEMENTS AND TRANSACTIONS WITH AFFILIATED PERSONS
-----------------------------------------------------------------------
Under the Fund's Investment Advisory and Management Agreement (the "Management
Agreement") with Scudder, Stevens & Clark, Inc. (the "Adviser"), the Fund
agrees to pay the Adviser a monthly fee at an annual rate equal to 1.30% of the
first $150,000,000 of the Fund's average weekly net assets, 1.25% of such
assets over $150,000,000 and up to and including $300,000,000, and 1.20% of
such assets in excess of $300,000,000. For the year ended December 31, 1994,
the fee pursuant to the Management Agreement amounted to $4,371,086.
The Adviser has entered into a Research and Advisory Agreement (the "Advisory
Agreement") with Banco Icatu S/A (the "Brazilian Adviser"), whereby the
Brazilian Adviser provides such investment advice, research, and assistance as
the Adviser may from time to time reasonably request. Under the Advisory
Agreement, the Adviser pays the Brazilian Adviser a monthly fee, equal to 0.25%
of the first $150,000,000 of the Fund's average weekly net assets, 0.15% of
such assets over $150,000,000 and up to and including $300,000,000, and 0.05%
of such assets over $300,000,000. Effective November 1, 1994, the Brazilian
Adviser has agreed to waive approximately one half of their fees. The Adviser
has agreed to pass this waiver through to the Fund and has reduced its fees
accordingly. For the year ended December 31, 1994, the fee pursuant to the
Advisory Agreement aggregated $617,844, of which $55,048 was waived and
reflected as a reduction of the management fee.
<PAGE>
The Fund and the Adviser entered into an Administration Agreement with Banco de
Boston S.A. ("Banco de Boston"), pursuant to which Banco de Boston acts as the
Fund's Brazilian Administrator. The Fund has agreed to pay Banco de Boston, for
services rendered, an annual fee payable quarterly in Brazilian currency equal
to $50,000 per year plus out of pocket expenses. For the year ended December
31, 1994, the Administrator fee amounted to $52,961.
The Fund pays each Director not affiliated with the Adviser an annual fee of
$4,500 except for two Directors who, as residents of Brazil, receive a fee of
$9,000, plus specified amounts for each Board of Directors or committee meeting
attended. Effective August 1, 1994, the Fund pays each Director not affiliated
with the Adviser an annual fee of $6,000 except for two Directors who, as
residents of Brazil, receive a fee of $12,000, plus specified amounts for each
Board of Directors or committee meeting attended. For the year ended December
31, 1994, Directors' fees and expenses amounted to $84,504, of which $4,886 is
unpaid at December 31, 1994.
D. FOREIGN INVESTMENT AND EXCHANGE CONTROLS IN BRAZIL
--------------------------------------------------
Investing in Brazil may involve considerations not typically associated with
investing in securities issued by domestic companies such as more volatile
prices and less liquid securities.
The Brazilian Government has exercised and continues to exercise substantial
influence over many aspects of the private sector by legislation and
regulation, including regulation of prices and wages.
Brazilian law imposes certain limitations and controls which generally affect
foreign investors in Brazil. The Fund has obtained from the Brazilian
Securities Commission authorization, subject to certain restrictions, to invest
in Brazilian securities. Under current Brazilian law, the Fund may repatriate
income received from dividends and interest earned on, and net realized capital
gain from, its investments in Brazilian securities. Under its authorization,
the Fund may also repatriate capital, but only to the extent necessary to
distribute income and capital gains (as computed for U.S. federal income tax
purposes), to pay expenses incurred outside of Brazil, to repay borrowings made
for temporary or emergency purposes, and in connection with the termination of
the Fund (provided that the Fund's dissolution has been approved by holders of
at least two-thirds of the Fund's shares). Under current Brazilian law,
whenever there occurs a serious imbalance in Brazil's balance of payments or
serious reasons to foresee the imminence of such an imbalance, Brazil's
National Monetary Council may, for a limited period, impose restrictions on
foreign capital remittances abroad. Exchange control regulations, which may
restrict repatriation of investment income, capital or the proceeds of
securities sales by foreign investors, may limit the Fund's ability to make
sufficient distributions, within applicable time periods, to qualify for the
favorable U.S. tax treatment afforded to regulated investment companies.
The Fund is unable to predict whether further economic reforms or modifications
to the existing policies by the Brazilian Government may adversely affect the
liquidity of the Brazilian stock market in the future.
<PAGE>
E. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (000 OMITTED)
--------------------------------------------------------
<TABLE>
<CAPTION>
NET GAIN (LOSS) NET INCREASE
ON INVESTMENT AND (DECREASE)
FOREIGN CURRENCY IN NET ASSETS
INVESTMENT NET INVESTMENT DENOMINATED RESULTING
INCOME INCOME (LOSS) TRANSACTIONS FROM OPERATIONS
--------------- ---------------- --------------- ---------------
PER PER PER PER
1994 TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
- ---- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, $ 1,119 $ .09 $ (373) $ (.03) $ 83,849 $ 6.93 $ 83,476 $ 6.90
June 30, 986 .08 (133) (.01) (62,259) (5.15) (62,392) (5.16)
September 30, 1,017 .09 (503) (.04) 182,768 15.11 182,265 15.07
December 31, 829 .07 (1,001) (.09) (50,068) (4.14) (51,069) (4.23)
------- ------ -------- ------ -------- ------ -------- ------
Totals $ 3,951 $ .33 $ (2,010) $ (.17) $154,290 $12.75 $152,280 $12.58
======= ====== ======== ====== ======== ====== ======== ======
PER PER PER PER
1993 TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
- ---- ----- ----- ----- ----- ----- ----- ----- -----
March 31, $ 1,180 $ .10 $ 245 $ .02 $ 28,741 $ 2.38 $ 28,986 $ 2.40
June 30, 3,097 .26 1,757 .15 23,242 1.92 24,999 2.07
September 30, 3,985 .33 2,526 .21 29,066 2.41 31,592 2.62
December 31, (2,135) (.18) (3,296) (.28) 10,458 .87 7,162 .59
------- ------ -------- ------ -------- ------ -------- ------
Totals $ 6,127 $ .51 $ 1,232 $ .10 $ 91,507 $ 7.58 $ 92,739 $ 7.68
======= ====== ======== ====== ======== ====== ======== ======
</TABLE>
<PAGE>
THE BRAZIL FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To The Shareholders and the Board of Directors of The Brazil Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Brazil Fund, Inc. (the "Fund")
at December 31, 1994, the results of its operations, the changes in its net
assets and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at December 31, 1994 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 13, 1995
<PAGE>
THE BRAZIL FUND, INC.
TAX INFORMATION
- --------------------------------------------------------------------------------
By now shareholders for whom year-end tax reporting is required by the IRS
should have received their Form 1099-DIV and tax information letter from the
Fund.
The Fund paid distributions of $2.46 per share from net long term capital gains
during its fiscal year ended December 31, 1994. Pursuant to section 852 of the
Internal Revenue Code, the Fund designates $28,544,979 as capital gain
dividends for its fiscal year ended December 31, 1994.
The Fund pays taxes to Brazil and intends to make an election under section 853
of the Internal Revenue Code. This election will allow shareholders of record
on December 31, 1994, to treat their proportionate shares of certain foreign
taxes paid by the Fund as having been paid directly by them. Such shareholders
will be required to report their proportionate shares of such taxes paid as
gross income. The Brazilian taxes paid were $0.0514 per share and gross income
from sources in Brazil was $0.0514 per share.
Please consult a tax adviser if you have questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Brazil Fund account, please call (617) 575-2900.
<PAGE>
Dividend Reinvestment and Cash Purchase Plan
The Plan
The Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan")
offers you an automatic way to reinvest your dividends and capital gain
distributions in shares of the Fund. The Plan also provides for cash
investments in Fund shares of $100 to $3,000 semiannually through The First
National Bank of Boston, the Plan Agent.
Automatic Participation
Each shareholder of record is automatically a participant in the Plan
unless the shareholder has instructed the Plan Agent in writing otherwise.
Such a notice must be received by the Plan Agent not less than 10 days
prior to the record date for a dividend or distribution in order to be
effective with respect to that dividend or distribution. A notice which is
not received by that time will be effective only with respect to subsequent
dividends and distributions.
Shareholders who do not participate in the Plan will receive all
distributions in cash paid by check in dollars mailed directly to the
shareholder by The First National Bank of Boston, as dividend paying agent.
Shares Held by a Nominee
If your shares are held in the name of a brokerage firm, bank, or
other nominee as the shareholder of record, please consult your nominee (or
any successor nominee) to determine whether it is participating in the Plan
on your behalf. Many nominees are generally authorized to receive cash
dividends unless they are specifically instructed by a client to reinvest.
If you would like your nominee to participate in the Plan on your behalf,
you should give your nominee instructions to that effect as soon as
possible.
Pricing of Dividends and Distributions
If the market price per share on the payment date for the dividend or
distribution or, if that date is not a New York Stock Exchange trading
date, the next preceding trading date (the "Valuation Date") equals or
exceeds net asset value per share on that date, the Fund will issue new
shares to participants at the greater of the following on the Valuation
Date: (a) net asset value, or (b) 95% of the market price. If the net asset
value exceeds the market price of Fund shares at such time, participants in
the Plan are considered to have elected to receive shares of stock from the
Fund, valued at market price, on the Valuation Date. In either case, for
Federal income tax purposes, the shareholder receives a distribution equal
to the market value on the Valuation Date of new shares issued. State and
local taxes may also apply. If the Fund should declare an income dividend
or net capital gain distribution payable only in cash, the Plan Agent will,
as agent for the participants, buy Fund shares in the open market, on the
New York Stock Exchange or elsewhere, for the participants' account on, or
shortly after, the payment date.
Voluntary Cash Purchases
Participants in the Plan have the option of making additional cash
payments to the Plan Agent, semiannually, in any amount from $100 to
$3,000, for investment in the Fund's shares. The Plan Agent will use all
such monies received from participants to purchase Fund shares in the open
market on or about February 15 and August 15. Any voluntary cash payments
received more than 30 days prior to these dates will be returned by the
Plan Agent, and interest will not be paid on any uninvested cash payments.
To avoid unnecessary cash accumulations, and also to allow ample time for
receipt and processing by the Plan Agent, it is suggested that participants
send in voluntary cash payments to be received by the Plan Agent
approximately ten days before February 15, or August 15, as the case may
be. A participant may withdraw a voluntary cash payment by written notice,
if the notice is received by the Plan Agent not less than 48 hours before
such payment is to be invested.
Participant Plan Accounts
The Plan Agent maintains all participant accounts in the Plan and
furnishes written confirmation of all transactions in the account,
including information needed by participants for personal and tax records.
Shares in the account of each plan participant will be held by the Plan
Agent in non-certificated form in the name of the participant, and each
participant will be able to vote those shares purchased pursuant to the
Plan at a shareholder meeting or by proxy.
No Service Fee to Reinvest
There is no service fee charged to participants for reinvesting
dividends or distributions from net realized capital gains. The Plan
Agent's fees for the handling of the reinvestment of dividends and capital
gain distributions will be paid by the Fund. There will be no brokerage
commissions with respect to shares issued directly by the Fund as a result
of dividends or capital gain distributions payable either in stock or in
cash. However, participants will pay a pro rata share of brokerage
commissions incurred with respect to the Plan Agent's open market purchases
in connection with the reinvestment of any dividends or capital gain
distributions payable only in cash.
Costs for Cash Purchases
With respect to purchases of Fund shares from voluntary cash payments,
the Plan Agent will charge $1.00 for each such purchase for a participant.
Each participant will pay a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open market purchases of Fund
shares in connection with voluntary cash payments made by the participant.
Brokerage charges for purchasing small amounts of stock for individual
accounts through the Plan are expected to be less than the usual brokerage
charges for such transactions, because the Plan Agent will be purchasing
stock for all participants in blocks and pro-rating the lower commission
thus attainable.
Amendment or Termination
The Fund and the Plan Agent each reserve the right to terminate the
Plan. Notice of the termination will be sent to the participants of the
Plan at least 30 days before the record date for a dividend or
distribution. The Plan also may be amended by the Fund or the Plan Agent,
but (except when necessary or appropriate to comply with applicable law,
rules or policies of a regulatory authority) only by giving at least 30
days' written notice to participants in the Plan.
A participant may terminate his account under the Plan by written
notice to the Plan Agent. If the written notice is received 10 days before
the record day of any distribution, it will be effective immediately. If
received after that date, it will be effective as soon as possible after
the reinvestment of the dividend or distribution.
If a participant elects to sell his shares before the Plan is
terminated, the Plan Agent is authorized to deduct a fee of 5% of the gross
proceeds, to a maximum of $3.50, plus brokerage commissions from the sale
transaction.
Plan Agent Address and Telephone Number
You may obtain more detailed information by requesting a copy of the
Plan from the Plan Agent. All correspondence (including notifications)
should be directed to: The Brazil Fund, Inc. Dividend Reinvestment and Cash
Purchase Plan, c/o The First National Bank of Boston, P.O. Box 1681,
Boston, MA 02105, (617) 575-3120.
<PAGE>
Investment Manager and Administrator
The investment manager and administrator of The Brazil Fund, Inc. (the
"Fund") is Scudder, Stevens & Clark, Inc., one of the most experienced
investment management and investment counsel firms in the United States.
Established in 1919, the firm provides investment counsel for individuals,
investment companies and institutions. Scudder has offices throughout the
United States and subsidiaries in London and Tokyo.
Scudder has been a leader in international investment management for
over 40 years. It manages Scudder International Fund, which was initially
incorporated in Canada in 1953 as the first foreign investment company
registered with the U.S. Securities and Exchange Commission. Scudder's
investment company clients include six other open-end investment companies
which invest worldwide.
In addition to the Fund, Scudder also manages the assets of seven
other closed-end investment companies which invest in foreign securities.
The Argentina Fund, Inc. (investing primarily in securities of Argentine
issuers), The Korea Fund, Inc. (investing in a broad spectrum of Korean
companies), The Latin America Dollar Income Fund, Inc. (investing
principally in Latin American debt instruments), Scudder New Asia Fund,
Inc. (investing in a broad spectrum of Asian companies), Scudder New Europe
Fund, Inc. (investing in equity securities traded in smaller or emerging
European securities markets) and Scudder World Income Opportunities Fund,
Inc. (investing in global income and, to a limited extent, equity
securities), are traded on the New York Stock Exchange. The First Iberian
Fund, Inc. (investing primarily in Spanish and Portuguese securities) is
traded on the American Stock Exchange.
Directors and Officers
JURIS PADEGS*
Chairman of the Board and Director
NICHOLAS BRATT*
President and Director
LINO OTTO BOHN
Honorary Director
EDGAR R. FIEDLER
Director
ROBERTO TEIXEIRA DA COSTA
Director and Resident Brazilian Director
RONALDO A. DA FROTA NOGUEIRA
Director and Resident Brazilian Director
WILSON NOLEN
Director
EDMOND D. VILLANI*
Director
EDMUND B. GAMES, Jr.*
Vice President
JERARD K. HARTMAN*
Vice President
DAVID S. LEE*
Vice President
WILLIAM TRUSCOTT*
Vice President
PAMELA A. McGRATH*
Vice President and Assistant Treasurer
KATHRYN L. QUIRK*
Vice President and Assistant Secretary
THOMAS F. McDONOUGH*
Secretary
EDWARD J. O'CONNELL*
Treasurer
COLEEN DOWNS DINNEEN*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
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