<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SCUDDER SPAIN AND PORTUGAL FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Articles of Incorporation)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
SCUDDER SPAIN AND PORTUGAL FUND, INC.
345 Park Avenue
New York, New York 10154
November 6, 1998
Dear Stockholder:
As a result of a significant reduction in the Fund's asset level due to the
recently completed in-kind redemption right offered to all stockholders and
declines in the Spanish and Portuguese equity markets, the Board of Directors of
the Fund has determined that it is advisable and in the best interests of the
Fund's stockholders to recommend the liquidation and dissolution of the Fund.
Although the Board of Directors believes that the Fund's long-term performance
has been outstanding and that Scudder Kemper Investments, Inc. continues to have
the capacity to effectively manage Spanish and Portuguese investment portfolios,
the diminished size of the Fund no longer allows such management to be carried
out in an efficient manner. Accordingly, if stockholders vote to approve the
liquidation and dissolution proposal, as soon as practicable after that vote the
Fund's portfolio will be liquidated, its affairs will be wound up, and the
liquidation proceeds will be distributed pro rata to stockholders.
In addition, stockholders are being asked to approve the Fund's current
investment management agreement, which has been in effect since September 7,
1998. Zurich Insurance Company, the majority owner of Scudder Kemper
Investments, Inc., has combined its businesses with the financial services
businesses of B.A.T Industries p.l.c. The resulting company, Zurich Financial
Services, has become the parent company of Zurich and the majority owner of
Scudder Kemper. As a result of this transaction, we are asking the stockholders
of each of the funds for which Scudder Kemper acts as investment manager,
including your Fund, to approve a new investment management agreement with
Scudder Kemper.
The Zurich-B.A.T transaction should not affect you as a Fund stockholder.
Your Fund shares will not change, the advisory fee rates and expenses paid by
your Fund will not increase, and the investment objective of your Fund will
remain the same.
Stockholders are also being asked to approve certain other matters that
have been set forth in the Notice of Meeting. AFTER CAREFUL REVIEW, THE MEMBERS
OF YOUR FUND'S BOARD HAVE APPROVED LIQUIDATION AND DISSOLUTION OF THE FUND AND
THE NEW INVESTMENT MANAGEMENT AGREEMENT. THE BOARD MEMBERS OF YOUR FUND BELIEVE
THAT EACH OF THE PROPOSALS SET FORTH IN THE NOTICE OF MEETING FOR YOUR FUND IS
IMPORTANT AND RECOMMEND THAT YOU READ THE ENCLOSED MATERIALS CAREFULLY AND THEN
VOTE FOR ALL PROPOSALS. The stockholders present at the Meeting will hear a
report on the Fund and there will be an opportunity to discuss matters of
interest. EVEN THOUGH APPROVAL OF PROPOSAL 1 WILL AUTHORIZE THE LIQUIDATION AND
DISSOLUTION OF THE FUND, IN ORDER TO ENSURE EFFECTIVE AND
<PAGE> 3
EFFICIENT MANAGEMENT AND GOVERNANCE OF THE FUND IT IS IMPORTANT THAT YOU VOTE ON
ALL PROPOSALS.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your executed proxy card(s), you may receive a telephone call from our proxy
solicitor, Shareholder Communications Corporation, reminding you to vote.
Respectfully,
/s/ Nicholas Bratt
Nicholas Bratt
President
/s/ Daniel Pierce
Daniel Pierce
Chairman of the Board
STOCKHOLDERS ARE URGED TO SIGN THE PROXY CARD AND RETURN IT IN THE POSTAGE PAID
ENVELOPE SO AS TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
<PAGE> 4
SCUDDER SPAIN AND PORTUGAL FUND, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
Scudder Spain and Portugal Fund, Inc.:
Please take notice that the Annual Meeting of Stockholders of Scudder Spain
and Portugal Fund, Inc. (the "Fund") for the Fund's 1998 fiscal year will be
held at the offices of Scudder Kemper Investments, Inc., 25th Floor, 345 Park
Avenue (at 51st Street), New York, New York 10154 on December 1, 1998, at 10:30
a.m., Eastern time, for the following purposes:
(1) A. To approve an amendment to the Fund's Articles of Incorporation to
permit the liquidation and dissolution of the Fund, as described
below, to be approved by the affirmative vote of a majority of the
Fund's outstanding shares of common stock;
B. To approve the liquidation and dissolution of the Fund pursuant to
the provisions of the Plan of Dissolution, Liquidation and
Termination of the Fund;
(2) To approve a new investment management, advisory and administration
agreement between the Fund and its investment manager;
(3) To elect two Directors of the Fund to hold office for a term of three
years or until their respective successors shall have been duly
elected and qualified; and
(4) To ratify the action of the Board of Directors in selecting
PricewaterhouseCoopers LLP as the Fund's independent accountants for
the fiscal year ended September 30, 1998.
The appointed proxies will vote in their discretion on any other business
as may properly come before the meeting or any adjournments thereof.
Holders of record of shares of common stock of the Fund at the close of
business on October 9, 1998 are entitled to vote at the Meeting and at any
adjournments thereof.
In the event that the necessary quorum to transact business or the vote
required to approve a Proposal is not obtained at the Meeting, the persons named
as proxies may propose one or more adjournments of the Meeting in accordance
with applicable law, to permit further solicitation of proxies. Any such
adjournment with respect to a Proposal will require the affirmative vote of the
holders of a majority of the Fund's shares present in person or by proxy at the
Meeting. If the necessary quorum is not obtained, the persons named as proxies
will vote in favor of adjournment. If the necessary quorum is obtained, the
persons named as proxies will vote in favor of such adjournment those
<PAGE> 5
proxies which they are entitled to vote in favor of a Proposal and will vote
against any such adjournment those proxies to be voted against a Proposal.
By Order of the Board of Directors,
/s/ Thomas F. McDonough
Thomas F. McDonough
Secretary
November 6, 1998
IMPORTANT--WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN
THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS INTENDED FOR
YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD MAY SAVE THE
NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM AT THE
MEETING. IF YOU CAN ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES IN PERSON AT
THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE> 6
SCUDDER SPAIN AND PORTUGAL FUND, INC.
345 Park Avenue, New York, New York 10154
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Scudder Spain and Portugal
Fund, Inc. (the "Fund") for use at the Annual Meeting of Stockholders, to be
held at the offices of Scudder Kemper Investments, Inc. ("Scudder Kemper"), 25th
Floor, 345 Park Avenue (at 51st Street), New York, New York 10154, on December
1, 1998 at 10:30 a.m., Eastern time, and at any and all adjournments thereof
(the "Meeting"). (In the description below, the word "fund" is sometimes used to
mean investment companies or series thereof in general, and not the Fund whose
proxy statement this is.)
This Proxy Statement, the Notice of Annual Meeting and the proxy card are
first being mailed to stockholders on or about November 6, 1998 or as soon as
practicable thereafter. Any stockholder giving a proxy has the power to revoke
it by mail prior to the Meeting (addressed to the Secretary at the principal
executive office of the Fund, c/o Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, New York 10154) or in person at the Meeting, by executing a
superseding proxy or by submitting a notice of revocation to the Fund. All
properly executed proxies received in time for the Meeting will be voted as
specified in the proxy or, if no specification is made, in favor of the
Proposals referred to in the Proxy Statement.
The presence at any stockholders' meeting, in person or by proxy, of the
holders of a majority of the shares entitled to be cast shall be necessary and
sufficient to constitute a quorum for the transaction of business. In the event
that the necessary quorum to transact business or the vote required to approve a
Proposal is not obtained at the Meeting, the persons named as proxies may
propose one or more adjournments of the Meeting in accordance with applicable
law, to permit further solicitation of proxies with respect to such Proposal.
Any such adjournment with respect to a Proposal will require the affirmative
vote of the holders of a majority of the Fund's shares present in person or by
proxy at the Meeting. If the necessary quorum is not obtained, the persons named
as proxies will vote in favor of adjournment. If the necessary quorum is
obtained, the persons named as proxies will vote in favor of such adjournment
those proxies which they are entitled to vote in favor of the Proposal and will
vote against any such adjournment those proxies to be voted against the
Proposal. For purposes of determining the presence of a quorum for transacting
business at the Meeting, abstentions and broker "non-votes" will be treated as
shares that are present but which have not been voted. Broker non-votes are
proxies received by the Fund from brokers or nominees when the broker or nominee
has neither received instructions from the beneficial owner or other
<PAGE> 7
persons entitled to vote nor has discretionary power to vote on a particular
matter. Accordingly, stockholders are urged to forward their voting instructions
promptly.
Proposal 1, which includes an amendment to the Fund's Articles of
Incorporation, requires the affirmative vote of a majority of the Fund's
outstanding shares of common stock (i.e., more than 50% of the outstanding
shares of the Fund). Abstentions and broker non-votes will have the effect of a
"no" vote for Proposal 1.
Proposal 2 requires the affirmative vote of a "majority of the outstanding
voting securities" of the Fund. The term "majority of the outstanding vote
securities" as defined in the Investment Company Act of 1940, as amended, (the
"1940 Act"), and as used in this proxy statement, means: the affirmative vote of
the lesser of (1) 67% of the voting securities of the Fund present at the
meeting if more than 50% of the outstanding shares of the Fund are present in
person or by proxy or (2) more than 50% of the outstanding shares of the Fund.
Abstentions will have the effect of a "no" vote for Proposal 2. Broker non-
votes will have the effect of a "no" vote for Proposal 2 if such vote is
determined on the basis of obtaining the affirmative vote of more than 50% of
the outstanding shares of the Fund. Broker non-votes will not constitute "yes"
or "no" votes and will be disregarded in determining the voting securities
"present" if such vote is determined on the basis of the affirmative vote of 67%
of the voting securities of the Fund present at the Meeting with respect to
Proposal 2.
Election of each of the nominees for Director pursuant to Proposal 3
requires the affirmative vote of a plurality of the votes cast at the Meeting in
person or by proxy. Ratification of the selection of independent accountants
pursuant to Proposal 4 requires the affirmative vote of a majority of the votes
cast at the Meeting in person or by proxy. Abstention and broker non-votes will
not be counted in favor of, but will have no other effect on, the vote for
Proposals 3 and 4.
Holders of record of the shares of the common stock of the Fund at the
close of business on October 9, 1998 (the "Record Date"), will be entitled to
one vote per share on all business of the Meeting. The number of shares
outstanding as of October 9, 1998 was 1,507,600.
The Board of Directors recommends that stockholders vote FOR each Proposal.
The Fund provides periodic reports to all of its stockholders which
highlight relevant information including investment results and a review of
portfolio changes. You may receive an additional copy of the most recent annual
report for the Fund, and a copy of any more recent semi-annual or quarterly
report, without charge, by calling 1-800-349-4281 or writing the Fund, c/o
Scudder Kemper Investments, Inc., 345 Park Avenue, New York, New York 10154.
2
<PAGE> 8
PROPOSAL 1: APPROVAL OF AMENDMENTS TO
THE ARTICLES OF INCORPORATION AND OF THE
PLAN OF DISSOLUTION, LIQUIDATION AND TERMINATION
OF THE FUND
The Fund proposes to liquidate its assets and dissolve pursuant to the
provisions of the Plan of Dissolution, Liquidation and Termination of the Fund
(the "Plan") as approved by the Board of Directors on October 28, 1998. The
Board has determined that the orderly liquidation of the Fund's assets is
advisable and has directed that the Plan be submitted for consideration of the
stockholders of the Fund. The Plan provides for the complete liquidation of all
of the assets of the Fund, the payment by the Fund of all known obligations,
including the expenses of the liquidation, and the receipt by stockholders of a
distribution equal to their net asset value per share, together with accrued and
unpaid dividends and distributions. If the Plan is approved by the affirmative
vote of a majority of the Fund's outstanding shares of common stock, Scudder
Kemper will undertake to liquidate the Fund's assets at market prices and on
such terms and conditions as Scudder Kemper shall determine to be reasonable and
in the best interests of the Fund and its stockholders. A copy of the Plan is
attached to this Proxy Statement as Exhibit A, and the description of the Plan
in this Proxy Statement is qualified in its entirety be reference to Exhibit A.
In the event the Plan is not approved by the requisite stockholder vote,
the Board of Directors will consider what other action, if any, should be taken.
This Proposal consists of two parts: (A) an amendment to the Articles of
Incorporation of the Fund; and (B) approval of the Plan.
A. AMENDMENT TO THE ARTICLES OF INCORPORATION
Approval of the Plan first includes approval of an amendment to the
Articles of Incorporation to reduce the necessary stockholder vote to approve a
liquidation and dissolution. The amendments to the Articles of Incorporation
require approval by the affirmative vote of a majority of the outstanding shares
of common stock of the Fund. If a majority of the outstanding shares of common
stock of the Fund is voted in favor of this Proposal 1, appropriate Articles of
Amendment (incorporating the amendment to the Articles of Incorporation set
forth below) will immediately be filed with the Maryland State Department of
Assessments and Taxation while the Meeting is in progress so that the amendment
will be effective with respect to the Fund before the time at the Meeting when
the Plan will be considered and voted upon. Thus, approval of this Proposal 1
will allow the approval of the Plan by the affirmative vote of a majority,
rather than two-thirds, of the outstanding shares of the Fund.
At a meeting of the Board of Directors of the Fund held on October 28,
1998, the Fund's Board of Directors approved and recommended to the stockholders
the adoption of an amendment to the Fund's Articles of Incorporation as follows
in order to permit dissolution of the Fund to be approved by the
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affirmative vote of a majority of the outstanding shares of common stock of the
Fund:
The Articles of Incorporation of the Corporation are hereby amended by
adding the following provision to Article FIFTH:
(3) Notwithstanding any provision of law requiring any action to be
taken or authorized by the affirmative vote of the holders of a greater
proportion of the votes of all classes or of any Class of stock of the
Corporation, the liquidation and dissolution of the Fund shall be effective
and valid if taken or authorized by the affirmative vote of a majority of
the total number of votes entitled to be cast thereon.
B. APPROVAL OF THE PLAN
Background
The Board of Directors has, over the years, discussed the significance of
the existence of the discount to net asset value at which the Fund's shares have
traded on the stock exchanges on which the Fund has been listed and the impact
to stockholders of the discount. The Board has discussed and considered various
alternative strategies to address the discount, including instituting share
repurchases, combining with other funds, converting to an open-end format, or
liquidating. The Board of Directors has, however, consistently concluded that it
was in the best interests of the Fund and its stockholders to maintain the
current closed-end format, because, in the view of the Board and of Scudder
Kemper, the closed-end format was an appropriate investment vehicle for
participating in the Spanish and Portuguese equities markets, respectively. In
Scudder Kemper's view, many attractive equity investment opportunities in Spain
and Portugal have been and continue to be found in the small-capitalization and
less liquid sectors of those markets.
In connection with the stockholders consideration in 1997 of a new advisory
agreement for the Fund in the context of a transaction involving the combination
of Scudder, Stevens & Clark, Inc. and Zurich Kemper Investments, Inc. to form
Scudder Kemper, certain large stockholders of the Fund expressed the view that
the Fund should take steps to allow them to realize net asset value on their
investment. Scudder Kemper also communicated with other stockholders of the
Fund, who voiced their continued support for the closed-end structure and
opposed proposals to convert to open-end status or to liquidate.
In culmination of this process, the Fund determined to pursue a business
combination that was designed to address the interests of the Fund and its
stockholders. The goal of the Board of Directors and Scudder Kemper was to
structure a transaction in the best interests of all stockholders, including
those who wished to realize net asset value on their investment as well as those
that wished to remain invested in the Fund. Accordingly, the Board of Directors
sought a transaction that, while allowing stockholders of the Fund to elect to
realize net asset value, would not penalize stockholders who desired to remain
4
<PAGE> 10
invested in the Fund. A major consideration in this process was the treatment of
potential tax liability. Because a significant percentage of the Fund's net
asset value consisted of unrealized capital gains, the Board of Directors
determined to structure the transaction so that neither the Fund nor the
remaining stockholders of the Fund would incur tax liability as a result of the
actions of redeeming stockholders.
The alternatives available to the Fund, including the full range of
alternatives that has been reviewed in the past discussions of the discount
issue, were considered at meetings of the Board of Directors held in the fourth
quarter of 1997 and in January, February, March and April 1998, including
meetings at which representatives of Scudder Kemper were not present. The
members of the Board of Directors not affiliated with the Fund or Scudder Kemper
were advised in this process by their own counsel. After consideration of the
alternatives, Scudder Kemper proposed, and the Board of Directors approved, a
merger of the Fund with The Growth Fund of Spain, Inc. ("GSP") in which the Fund
would be the surviving entity. The merger would be followed by an in-kind
redemption offer designed to permit a significant number of shares of the
combined fund to be redeemed at net asset value in exchange for Fund portfolio
securities. The Board of Directors of GSP also approved this merger. A press
release announcing the proposed merger was issued on April 16, 1998.
In fulfillment of the objective of the Board of Directors and Scudder
Kemper to minimize tax liability for both the Fund and non-redeeming
stockholders, the merger and subsequent in-kind redemption transaction was
designed to permit those stockholders who preferred to continue to remain
invested in a closed-end vehicle the opportunity to do so without suffering
adverse tax effects as a result of other the election of other stockholders to
realize net asset value on their investment in the Fund.
On May 1, 1998, the Fund and GSP filed a combined registration and proxy
statement with the Securities and Exchange Commission, and commenced to fulfill
the regulatory requirements in connection with the merger. However, in July
1998, after consideration of the viability of the proposed merger and
communications with certain large stockholders of GSP, and prior to the
commencement of solicitation of proxies, the Boards of Directors of the Fund and
GSP each determined that it was no longer practical to move ahead with the
proposed merger. The Fund issued a press release announcing the termination of
the merger agreement.
As an alternative to the merger, the Board of Directors of the Fund
approved a plan to offer stockholders the right to demand redemption of their
shares at net asset value in exchange for Fund portfolio securities (the
"Redemption Right"). Pursuant to the Redemption Right, stockholders of the Fund
were offered the opportunity to submit up to 4,883,365 shares of the Fund,
representing 75% of its outstanding shares, for redemption at net asset value in
exchange for a pro rata portion of the securities and cash held in the Fund's
5
<PAGE> 11
portfolio, subject to certain exclusions and adjustments for fractional shares,
and net of applicable expenses.
As with the merger proposal, the Redemption Right was designed to provide
stockholders who no longer wished to participate in a closed-end fund the
opportunity, to the extent consistent with the best interests of the Fund and
all of its stockholders, to demand the redemption of all of their shares in-kind
in order to elect to realize the net asset value of their investment. The Fund
requested and received a private letter ruling from the Internal Revenue Service
confirming that the Fund and the remaining stockholders would not suffer tax
liability as a result of the stockholder redemptions. The Fund further requested
and received an order of exemption from the Securities and Exchange Commission
to permit certain large stockholders (who could be deemed to be "affiliates" of
the Fund by virtue of their share ownership of the Fund) to participate in the
Redemption Right.
The Redemption Right expired on September 30, 1998. On October 15, 1998,
the Fund announced that the Fund had accepted all of the requests for
redemption, in conformity with the terms of the Redemption Right, representing
5,003,554.154 shares or approximately 76.63% of the outstanding shares of the
Fund. Pursuant to the terms of the Redemption Right, the shares of the Fund
presented for redemption were valued by the Fund at $12.11 per share, the net
asset value per share of the Fund as determined as of the close of the regular
trading session on the New York Stock Exchange on October 1, 1998.
Reasons for the Liquidation and Dissolution
The upper limit on the number of shares accepted for redemption by the Fund
was designed to provide all stockholders with a significant opportunity to
realize the net asset value of their investment in the Fund. In addition, at the
time the Redemption Right was offered, the Board of Directors and Scudder Kemper
believed that, based on then-current market conditions, the Fund would remain
viable after the Redemption Right was completed. However, intervening market
activity in Spain and Portugal during the period the Redemption Right was being
offered to stockholders caused a significant decline in the Fund's assets. On
September 1, 1998, the Fund had net assets of approximately $111,728,760. On
October 1, 1998, the valuation date for the Redemption Right, the Fund had net
assets of approximately $78,848,210, representing a reduction in value of net
assets of approximately 29.5%. As of November 2, 1998, the Fund had net assets
of approximately $ .
In light of the diminished asset level of the Fund and the resulting
increased expense ratio due both to the response to the Redemption Right as well
as to the downturn in the Spanish and Portuguese equity markets, a meeting of
the Board of Directors was held on October 28, 1998 at which the Board of
Directors determined that the continued operation of the Fund was not in the
best interests of the Fund's remaining stockholders. The Directors met for a
part of
6
<PAGE> 12
this meeting without Scudder Kemper present and were assisted by counsel to the
independent Directors.
Prior to the consummation of the Redemption Right and the market
difficulties in Spain and Portugal, the Fund had a net asset level which,
although low by industry standards, was sufficient to allow the Fund to pursue
its investment objective and carry out its operations efficiently. As of March
31, 1998, the Fund's annual expense ratio was 1.77%. Based on current asset
levels, Scudder Kemper has estimated that the Fund's annual expense ratio will
be 3.04%. In Scudder Kemper's view, this expense ratio significantly exceeds
market standards, and places the Fund at a competitive disadvantage in the
closed-end fund marketplace. Scudder Kemper has voluntarily agreed to limit the
Fund's annualized expense ratio to 2.00% of net assets beginning October 1, 1998
through March 31, 1999.
In addition to the problems posed by the Fund's high expense ratio, Scudder
Kemper has determined that the reduced asset level may not allow sufficient
flexibility in investment management to permit the continued pursuit of the
Fund's investment objective. Of most significant concern, the reduced asset
level may not permit sufficient diversification of the Fund's portfolio, thereby
hampering risk management. Further, because of the Fund's limited portfolio
capacity, the Fund will likely be unable to take advantage of new investment
opportunities that may arise in Spain and Portugal.
At the October 28 meeting, the Board considered various alternatives for
the Fund, including: (i) combining the Fund with another closed-end fund in the
Scudder Kemper family; (ii) combining the Fund with another open-end fund in the
Scudder Kemper family; (iii) increasing the size of the Fund by a secondary
offering of the Fund's common stock; (iv) liquidating the Fund; and (v)
continuing the Fund's independent existence without an attempt to increase its
asset level.
The Board has determined that combining the Fund with another open-end or
closed-end fund is not a realistic option. Due to the results of the Redemption
Right, any combination of the Fund with a closed-end or open-end fund where the
Fund would not be the surviving fund would likely be classified as a taxable
transaction by the Internal Revenue Service if such transaction were consummated
in the next two to three years. Accordingly, the Board has determined that the
prospects of such a transaction are doubtful and the costs of such a transaction
would likely outweigh any benefits. Similarly, although a business combination
in which an open-end or closed-end fund is acquired by the Fund could qualify
for tax-free status, the relatively small size of the Fund makes such a
transaction unlikely in the view of the Board of Directors.
Because the Fund's shares trade at a discount to net asset value, any
offering of Fund shares would have to be priced at a level below net asset value
in order to be successful. Under the Investment Company Act of 1940, a
closed-end fund may not offer its shares at a price less than net asset value
unless the offer is
7
<PAGE> 13
only to existing stockholders. Because of the reduced stockholder base of the
Fund, Scudder Kemper has advised the Board of Directors that the Fund could not
significantly increase the Fund's asset level through an offer of shares to
existing stockholders. Finally, the Board determined that continued independent
existence of the Fund absent some measure to increase assets is not advisable in
view of the Fund's diminished asset level and increased expense ratio.
Based upon the foregoing considerations and other relevant factors, and
despite the Fund's long-term performance record and their belief that the Fund
has offered stockholders a significant opportunity to participate in the Spanish
and Portuguese equity markets, the Directors unanimously concluded that a
liquidation and the subsequent dissolution of the Fund were advisable and in the
best interests of the Fund's stockholders.
The Board, including all of the Directors who are not "interested persons"
of the Fund (as that term is defined in the Investment Company Act), then
adopted resolutions approving the Plan, declaring the proposed liquidation and
dissolution pursuant to the provisions of the Plan advisable and directing that
the Plan be submitted to the stockholders of the Fund for their consideration.
In connection with the proposal, the Fund will bear the costs associated with
the liquidation of the Fund, which are expected to total approximately
$ .
As of November 2, 1998, the net asset value per share of the Fund's shares
was $ , whereas the price of the last reported trade of the Fund's
shares on the same date was $ . The market price of the Fund's shares
may increase or decrease prior to the distribution of the assets to the Fund's
stockholders. Stockholders are urged to obtain current market quotations for the
Fund's shares.
The liquidation of the assets and dissolution of the Fund will have the
effect of permitting the Fund's stockholders to invest the distributions to be
received by them upon the Fund's liquidation in investment vehicles of their own
choice. Investors who desire the continued use of a managed investment such as a
mutual fund may obtain prospectuses for other investment companies managed by
Scudder Kemper by calling, toll free, (800) .
Plan of Dissolution, Liquidation and Termination of the Fund
The Plan provides for the complete liquidation of the assets of the Fund,
distribution of the proceeds to stockholders and dissolution of the Fund. If the
Plan is approved, Scudder Kemper will undertake to liquidate the Fund's assets
at market prices and on such terms and conditions as Scudder Kemper, under the
supervision of the Board, shall determine to be reasonable and in the best
interests of the Fund and its stockholders. The Plan authorizes the Board to
abandon the Plan without stockholder approval at any time prior to the filing of
Articles of Dissolution with the State Department of Assessments and Taxation of
Maryland if the Board determines that such abandonment would be advisable and in
the best interests of the Fund's stockholders.
8
<PAGE> 14
Liquidation Value
If the Plan is adopted by the Fund's stockholders at the Meeting, as soon
as practicable after the consummation of the sale of all of the Fund's portfolio
securities and the payment of all of the Fund's known expenses, charges,
liabilities and other obligations, including those expenses incurred in
connection with the liquidation, each Fund stockholder will receive a
distribution in an amount equal to the net asset value per share, as determined
in accordance with the Fund's current registration statement, together with
accrued and unpaid dividends and distributions with respect to each of the
stockholder's shares of the Fund (the "Liquidation Distribution").
Federal Income Tax Consequences
The following summary provides general information with regard to the
federal income tax consequences to stockholders on receipt of the Liquidation
Distribution from the Fund pursuant to the provisions of the Plan. This summary
also discusses the effect of federal income tax provisions on the Fund resulting
from its liquidation and dissolution; however, the Fund has not sought a ruling
from the Internal Revenue Service (the "Service") with respect to the
liquidation and dissolution of the Fund. The statements below are, therefore,
not binding upon the Service, and there can be no assurance that the Service
will concur with this summary or that the tax consequences to any stockholder
upon receipt of a Liquidation Distribution will be as set forth below.
This summary is based on the tax laws and regulations in effect on the date
of this Proxy Statement, all of which are subject to change by legislative or
administrative action, possibly with retroactive effect.
The information below is only a summary of some of the federal tax
consequences generally affecting the Fund and its individual U.S. stockholders
resulting from the liquidation of the Fund. This summary does not address the
particular federal income tax consequences applicable to stockholders other than
U.S. individuals nor does it address state or local tax consequences. The tax
consequences discussed herein may affect stockholders differently depending on
their particular tax situations unrelated to the Liquidation Distribution, and
accordingly, this summary is not a substitute for careful tax planning on an
individual basis. Stockholders are encouraged to consult their personal tax
advisers concerning their particular tax situations and the impact thereon on
receiving the Liquidation Distribution as discussed herein. The receipt of the
Liquidation Distribution may result in tax consequences that are unanticipated
by stockholders.
As discussed above, pursuant to the Plan, the Fund will sell its assets,
pay or make provisions for the payment of all liabilities, distribute the
remaining proceeds to its stockholders and dissolve. The Fund anticipates that
the Fund will retain its qualification as a regulated investment company under
the Internal Revenue Code of 1986, as amended (the "Code"), during the
liquidation
9
<PAGE> 15
period and, therefore, will not be taxed on any of its net capital gains
realized from the sale of its assets.
For federal income tax purposes, a stockholder's receipt of the Liquidation
Distribution will be a taxable event and will be treated as a sale of the
stockholder's shares of the Fund in exchange for the Liquidation Distribution.
Each stockholder will recognize a gain or loss in an amount equal to the
difference between the adjusted tax basis in his or her shares and the
Liquidation Distribution he or she receives from the Fund. If the shares are
held as a capital asset, the gain or loss will generally be characterized as a
capital gain or loss. If the shares have been held for more than one year, any
gain will constitute a long-term capital gain taxable to individual stockholders
at a maximum rate of 20%, and any loss will constitute a long-term capital loss.
If the stockholder has held the shares for not more than one year, any gain or
loss will be a short-term capital gain or loss.
If a stockholder has failed to furnish a correct taxpayer identification
number or has failed to clarify that he or she has provided a correct taxpayer
identification number and that he or she is not subject to "backup withholding,"
the stockholder may be subject to a 31% backup withholding tax with respect to
any ordinary or capital gains dividends as well as the Liquidation Distribution.
An individual's taxpayer identification number is his or her social security
number. Certain stockholders specified in the Code may be exempt from backup
withholding. The backup withholding tax is not an additional tax and may be
credited against a taxpayer's federal income tax liability.
Stockholders will be notified of their respective shares of ordinary and
capital gains dividends for the Fund's final fiscal year in normal tax-reporting
fashion.
Liquidation Distribution
At present, the date on which the Fund will be liquidated and on which the
Fund will pay Liquidation Distributions to its stockholders is uncertain, but it
is anticipated that if the Plan is adopted by the stockholders such liquidation
would occur by December 31, 1998 (the "Liquidation Date"). There can be no
assurance, however, that the liquidation will occur by December 31, 1998.
Stockholders holding Fund shares in book-entry form as of the close of business
on the date immediately preceding the Liquidation Date will receive their
Liquidation Distribution on the Liquidation Date without any further action on
their part. Stockholders holding their Fund shares in certificated form
("Certificate Stockholders") will receive their Liquidation Distribution upon
receipt by the Fund of the certificates. Certificate Stockholders will receive
appropriate instructions for submission of their certificates prior to the
Liquidation Date.
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<PAGE> 16
REQUIRED VOTE
Approval of this Proposal requires the affirmative vote of a majority of
the Fund's outstanding shares of common stock. The Board recommends that the
stockholders vote FOR the proposed amendment to the Fund's Articles of
Incorporation and the proposed liquidation of assets and dissolution of the Fund
pursuant to the provisions of the Plan of Dissolution, Liquidation and
Termination.
PROPOSAL 2: APPROVAL OF NEW
INVESTMENT MANAGEMENT AGREEMENT
INTRODUCTION
Scudder Kemper acts as the investment adviser to and manager for the Fund
pursuant to an Investment Advisory, Management and Administration Agreement
dated September 7, 1998 and currently in effect. The investment management
agreement in effect between the Fund and Scudder Kemper prior to the
consummation of the transaction between Zurich Insurance Company ("Zurich") and
B.A.T Industries p.l.c. ("B.A.T") (the "Zurich-B.A.T Transaction" or the
"Transaction"), which is described below, is referred to in this Proxy Statement
as the "Former Investment Management Agreement." The investment management
agreement currently in effect between the Fund and Scudder Kemper was executed
as of the consummation of the Zurich-B.A.T Transaction and is referred to in
this Proxy Statement as the "Current Investment Management Agreement." (Scudder
Kemper is sometimes referred to in this Proxy Statement as the "Investment
Manager.")
The information set forth in this Proxy Statement and the accompanying
materials concerning the Transaction, Scudder Kemper, Zurich, B.A.T and their
respective affiliates has been provided to the Fund by Scudder Kemper based upon
information that Scudder Kemper received from Zurich and its affiliates.
On June 26, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") entered into
an agreement with Zurich pursuant to which Scudder and Zurich agreed to form an
alliance. On December 31, 1997, Zurich acquired a majority interest in Scudder,
and Zurich Kemper Investments, Inc. ("Kemper"), a Zurich subsidiary, became part
of Scudder. Scudder's name was changed to Scudder Kemper Investments, Inc. The
transaction between Scudder and Zurich (the "Scudder-Zurich Transaction")
resulted in the termination of the Fund's investment management agreement with
Scudder. Consequently, the Former Investment Management Agreement between the
Fund and Scudder Kemper was approved by the Fund's Board on August 6, 1997 and
by stockholders on November 12, 1997.
The Zurich-B.A.T Transaction. On December 22, 1997, Zurich and B.A.T
entered into a definitive agreement (the "Merger Agreement") pursuant to which
businesses of Zurich (including Zurich's almost 70% ownership interest in
Scudder Kemper) were to be combined with the financial services businesses of
11
<PAGE> 17
B.A.T. On October 12, 1997, Zurich and B.A.T had confirmed that they were
engaged in discussions concerning a possible business combination; on October
16, 1997, Zurich and B.A.T announced that they had entered into an Agreement in
Principle, dated as of October 15, 1997 (the "Agreement in Principle") to merge
B.A.T's financial services businesses with Zurich's businesses. The Merger
Agreement superseded the Agreement in Principle.
In order to effect this combination, Zurich and B.A.T first reorganized
their respective operations. Zurich became a subsidiary of a new Swiss holding
company, Zurich Allied AG, and Zurich shareholders became Zurich Allied AG
shareholders. At the same time, B.A.T separated its financial services business
from its tobacco-related businesses by spinning off to its stockholders a new
British company, Allied Zurich p.l.c., 22 Arlington Street, London, England SW1A
1RW, United Kingdom, which held B.A.T's financial services businesses.
Zurich Allied AG then contributed its interest in Zurich, and Allied Zurich
p.l.c. contributed the B.A.T financial services businesses, to a jointly owned
company, Zurich Financial Services, in each case in exchange for shares of
Zurich Financial Services. These transactions were completed on September 7,
1998. As a result, upon the completion of the Transaction, the former Zurich
shareholders became the owners (through Zurich Allied AG) of 57% of the voting
stock of Zurich Financial Services, and former B.A.T shareholders initially
became the owners (through Allied Zurich p.l.c.) of 43% of the voting stock of
Zurich Financial Services. Zurich Financial Services now owns Zurich and the
financial services businesses previously owned by B.A.T.
12
<PAGE> 18
Below is a simplified chart showing the corporate structure of Zurich
Financial Services after these transactions:
[SCUDDER FLOW CHART]
Corporate Governance. At the closing of the Zurich-B.A.T Transaction, the
parties entered into a Governing Agreement that establishes the corporate
governance structure for Zurich Allied AG, Allied Zurich p.l.c. and Zurich
Financial Services.
The Board of Directors of Zurich Financial Services consists of ten
members, five of whom were initially selected by Zurich and five by B.A.T. Mr.
Rolf Huppi, Zurich's Chairman and Chief Executive Officer, became Chairman and
Chief Executive Officer of Zurich Financial Services. In addition to his vote by
virtue of
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<PAGE> 19
his position on the Board of Directors, as Chairman, Mr. Huppi will have a tie-
breaking vote on all matters except recommendations of the Audit Committee,
recommendations of the Remuneration Committee in respect of the remuneration of
the Chairman and the CEO, appointment and removal of the Chairman and CEO,
appointments to the Nominations, Audit and Remuneration Committees and
nominations to the Board of Directors not made through the Nominations
Committee.
The Group Management Board of Zurich Financial Services has been given
responsibility by the Board of Directors for the executive management of Zurich
Financial Services and has wide authority for such purpose. Of the 11 initial
members of the Group Management Board, eight were members of the Corporate
Executive Board of Zurich (including Mr. Edmond D. Villani, CEO of Scudder
Kemper, who is responsible for Global Asset Management for Zurich Financial
Services), and three were B.A.T executives.
The Board of Directors of Zurich Allied AG initially consists of 11
members, eight of whom were Zurich directors and three of whom were proposed by
B.A.T. The Board of Directors of Allied Zurich p.l.c. also initially consists of
11 members, eight of whom were B.A.T directors and three of whom were proposed
by Zurich. The parties have agreed that, as soon as possible, the Boards of
Directors of Zurich Financial Services, Zurich Allied AG and Allied Zurich
p.l.c. will have identical membership.
Shareholder resolutions of Zurich Financial Services in general require
approval by at least 58% of all shares outstanding.
The Governing Agreement also contains provisions relating to dividend
equalization and provisions intended to ensure equal treatment of Zurich Allied
AG and Allied Zurich p.l.c. shareholders in the event of a takeover bid for
either company.
The B.A.T financial services businesses, which, since the closing of the
Transaction, are owned by Zurich Financial Services, include: the Farmers Group
of Insurance companies; Eagle Star Reinsurance Company Ltd., UK ("Eagle Star")
(which Zurich Financial Services has agreed to sell to GE Capital); Allied-
Dunbar, one of the leading U.K. unit-linked life insurance and pensions
companies; and Threadneedle Asset Management, which was formed initially to
manage the investment assets of Eagle Star and Allied-Dunbar, and which, at
December 31, 1997, had $58.8 billion under management. Overall, at year-end
1997, the financial services businesses of B.A.T had $79 billion in assets under
management, including $18 billion in third party assets.
Zurich has informed the Funds that the financial services businesses of
B.A.T do not include any of B.A.T's tobacco businesses and that, after careful
review, Zurich has concluded that the tobacco-related liabilities connected with
B.A.T's tobacco business should not adversely affect Zurich or the present
Zurich subsidiaries, including Scudder Kemper.
14
<PAGE> 20
Governance arrangements that were put in place at the time of the
acquisition of Zurich's 70% interest in Scudder Kemper (which are discussed
below under "Investment Manager") remain unaffected by the Transaction. These
arrangements preclude the making of certain major decisions affecting Scudder
Kemper without the approval of Scudder Kemper directors elected by the
non-Zurich shareholders of Scudder Kemper.
Consummation of the Zurich-B.A.T Transaction may be deemed to have
constituted an "assignment," as that term is defined in the 1940 Act, of the
Fund's Former Investment Management Agreement with Scudder Kemper. As required
by the 1940 Act, the Former Investment Management Agreement provided for its
automatic termination in the event of its assignment. Accordingly, the Current
Investment Management Agreement between the Fund and Scudder Kemper was approved
by the Board members of the Fund and is now being proposed for approval by
stockholders of the Fund. Scudder Kemper has received an exemptive order from
the Securities and Exchange Commission (the "SEC" or the "Commission")
permitting the Fund to obtain stockholder approval of its Current Investment
Management Agreement within 150 days after the consummation of the Transaction,
which occurred on September 7, 1998, (and, consequently, within 150 days after
the termination of its Former Investment Management Agreement), instead of
before the consummation of the Transaction. Pursuant to the exemptive order, the
Fund's investment management fees are being held in escrow until the earlier of
stockholder approval of the Fund's Current Investment Management Agreement or
the expiration of the 150 day period. A copy of the form of the Current
Investment Management Agreement is attached hereto as Exhibit A. THE CURRENT
INVESTMENT MANAGEMENT AGREEMENT FOR THE FUND IS SUBSTANTIALLY IDENTICAL TO THE
FORMER INVESTMENT MANAGEMENT AGREEMENT, EXCEPT FOR THE DATES OF EXECUTION AND
TERMINATION. In addition, the portfolio managers for the Fund will not change as
a result of the Transaction. The material terms of the Current Investment
Management Agreement are described under "Description of the Investment
Management Agreement" below.
BOARD OF DIRECTORS' RECOMMENDATION
On July 23, 1998 the Board of the Fund, including Directors who are not
parties to such agreement or "interested persons" (as defined in the 1940 Act)
("Non-Interested Directors") of any such party, voted to approve the Current
Investment Management Agreement and to recommend its approval to stockholders.
For information about the Board's deliberations and the reasons for its
recommendation, please see "Board of Directors Evaluation" below.
If the stockholders do not approve the Current Investment Management
Agreement, the Current Investment Management Agreement will terminate and the
Board of Directors will take such action as they deem in the best interests of
stockholders.
15
<PAGE> 21
The Board of the Fund recommends that stockholders vote FOR approval of the
Current Investment Management Agreement.
BOARD OF DIRECTORS' EVALUATION
The Non-Interested Directors have been aware of the proposed Zurich-B.A.T
Transaction since the announcement of the Agreement in Principle on October 16,
1997. The Board members of the Fund were kept informed by Scudder Kemper of
significant subsequent developments regarding the Transaction, including the
execution of the Merger Agreement on December 22, 1997 and the receipt of
necessary regulatory approvals.
In the course of the annual review by the Non-Interested Directors of the
continuance of the Former Investment Management Agreement between the Fund and
Scudder Kemper, Scudder Kemper furnished the Board members with detailed
information regarding the proposed Transaction, including information provided
to the stockholders of Zurich and B.A.T and information regarding the structure
of the Transaction, the resulting ownership and governance arrangements of
Zurich and the investment management business of B.A.T expected to be acquired
by Scudder Kemper following completion of the Transaction. The Non-Interested
Board members had the opportunity to consider this information with the
assistance of their independent counsel and to ask questions of Scudder Kemper
representatives. In the course of these deliberations, Scudder Kemper advised
the Non-Interested Directors that the proposed Transaction would not have a
material effect on the operations of the Fund or on its stockholders.
During the course of their deliberations, the Non-Interested Directors
considered a variety of factors, including the nature, quality and extent of the
services furnished by Scudder Kemper to the Fund; the necessity of Scudder
Kemper's maintaining and enhancing its ability to retain and attract capable
personnel to serve the Fund; the increased complexity of the domestic and
international securities markets; the investment record of Scudder Kemper in
managing the Fund; Scudder Kemper's profitability with respect to the Fund and
the other investment companies managed by Scudder Kemper before marketing
expenses paid by Scudder Kemper; possible economies of scale; comparative data
as to investment performance, advisory fees and expense ratios; Scudder Kemper's
expenditures in developing worthwhile and innovative shareholder services for
the Fund; improvements in the quality and scope of the shareholder services
provided to the Fund's stockholders; the advantages and possible disadvantages
to the Fund of having an adviser which also serves other investment companies as
well as other accounts; possible benefits to Scudder Kemper from serving as
adviser and from affiliates of Scudder Kemper serving as fund accounting agent
and shareholder servicing agent of the Fund; current and developing conditions
in the financial services industry, including the entry into the industry of
large and well capitalized companies which are spending and appear to be
prepared to continue to spend substantial sums to engage personnel and to
provide services to competing investment companies; the
16
<PAGE> 22
financial resources of Scudder Kemper and the continuance of appropriate
incentives to assure that Scudder Kemper will continue to furnish high quality
services to the Fund; and various other factors.
The Board of the Fund was advised that Zurich intends to rely on Section
15(f) of the 1940 Act, which provides a non-exclusive safe harbor for an
investment adviser to an investment company or any of the investment adviser's
affiliated persons (as defined in the 1940 Act) to receive any amount or benefit
in connection with a change in control of the investment adviser so long as two
conditions are met. First, for a period of three years after the transaction, at
least 75% of the board members of the investment company must not be "interested
persons" of the investment company's investment adviser or its predecessor
adviser. Prior to the consummation of the Transaction, the Board was in
compliance with this provision of Section 15(f). Second, an "unfair burden" must
not be imposed upon the investment company as a result of such transaction or
any express or implied terms, conditions or understandings applicable thereto.
The term "unfair burden" is defined in Section 15(f) to include any arrangement
during the two-year period after the transaction whereby the investment adviser,
or any interested person of any such adviser, receives or is entitled to receive
any compensation, directly or indirectly, from the investment company or its
stockholders (other than fees for bona fide investment advisory or other
services) or from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company
(other than bona fide ordinary compensation as principal underwriter for such
investment company). No such compensation agreements are contemplated in
connection with the Transaction. Zurich or its affiliates will pay the costs of
preparing and distributing proxy materials to, and of holding the meeting of,
the Fund's stockholders as well as other fees and expenses in connection with
the Transaction, including the fees and expenses of legal counsel and
consultants to the Fund and the Non-Interested Directors.
In addition to the foregoing factors, the Non-Interested Directors gave
careful consideration to the likely impact of the Transaction on the Scudder
Kemper organization. In this regard, the Non-Interested Directors considered,
among other things, the fact that the Transaction does not appear to alter in
any material respect the substantial autonomy afforded to Scudder Kemper
executives over Scudder Kemper's operations, the equity participation and
incentives for many Scudder Kemper employees, or Zurich's strategy for the
development of its asset management business through Scudder Kemper. Based on
the foregoing, the Non-Interested Directors concluded that the Transaction
should cause no reduction in the quality of services provided to the Fund and
believe that the Transaction should enhance Scudder Kemper's capabilities and
strengths.
17
<PAGE> 23
DESCRIPTION OF THE CURRENT INVESTMENT MANAGEMENT AGREEMENT
Except for the dates of execution and termination, the Current Investment
Management Agreement is substantially identical to the Former Investment
Management Agreement. Under the Current Investment Management Agreement, subject
to the supervision of the Board of Directors, Scudder Kemper provides the Fund
with continuing investment management services. The Investment Manager manages
the investment operations of the Fund and the composition of the Fund's
portfolio, including the purchase, retention and disposition of securities, in
accordance with the Fund's investment objective and policies. In so doing, the
Investment Manager agrees to: make available to the Fund research and
statistical data and provide supervision of the Fund's investments and determine
from time to time what investments or securities will be purchased, retained,
sold or loaned by the Fund, and what portion of the assets will be invested or
held uninvested in cash; act in conformity with the Fund's Articles of
Incorporation, By-Laws and with the instructions and directions of the Board of
Directors of the Fund and conform and comply with the requirements of the 1940
Act and all other applicable federal and state laws and regulations; maintain
all books and records required to be maintained under the 1940 Act provided such
books and records are not maintained or furnished by the custodian or other
agent of the Fund; render to the Board of Directors such periodic and special
reports as the Board may reasonably request; and provide to the Fund's custodian
and the Fund on each business day information relating to all transactions
concerning the Fund's assets.
Further, the Investment Manager determines the securities to be purchased
or sold by the Fund and places orders pursuant to its determinations with or
through such persons, brokers or dealers in conformity with the policy with
respect to brokerage as set forth in the Fund's Registration Statement and
Prospectus or as the Board of Directors may direct from time to time. In
providing the Fund with investment supervision, the Investment Manager agrees to
give primary consideration to securing the most favorable price and efficient
execution. Consistent with such policy, the Investment Manager may consider the
financial responsibility, research and investment information and other services
provided by brokers or dealers who may effect or be a party to any such
transaction. In addition, the Investment Manager is authorized to aggregate
securities to be sold or purchased in order to obtain the most favorable price
or lower brokerage commissions and efficient execution.
Under the Current Investment Management Agreement the Investment Manager
agrees to pay the salaries and expenses of all of its personnel and all expenses
incurred by it arising out of its duties under such agreement and any fees and
expenses of such of the Fund's directors as are directors, officers or employees
of the Investment Manager (with the exception of travel expenses of directors
and officers of the Fund who are directors, officers or employees of the
Investment Manager to the extent such expenses relate to attendance at meetings
of the Board or any committees thereof), and to furnish at the
18
<PAGE> 24
Investment Manager's expense for the use of the Fund office space and facilities
as the Fund may reasonably require in New York City and to furnish clerical
services in the United States related to research, statistical and investment
work. The Investment Manager also agrees to render administrative services to
the fund such as monitoring the valuation of portfolio securities and overseeing
the determination of the Fund's net asset value in accordance with the Fund's
policy as adopted from time to time by the Board of Directors, overseeing the
maintenance of the books and records of the Fund required under Rule 31a-1(b)(4)
under the 1940 Act, providing assistance in certain accounting and tax matters
and investor and public relations, preparing the Fund's federal, state and local
income tax returns, preparing the financial information for the Fund's proxy
statements and annual reports to stockholders, preparing the Fund's periodic
financial reports to the Commission and other regulatory and self-regulatory
organizations, preparing reports and notices to stockholders, and responding to,
or referring to the Fund's officers or transfer agent, stockholder inquiries
relating to the Fund.
Under the Current Investment Management Agreement, the Fund is responsible
for other expenses, including organization and certain offering expenses of the
Fund (including out-of-pocket expenses, but not including overhead or employee
costs of the Investment Manager or of any one or more organizations retained by
the Fund or by the Investment Manager as an advisor or consultant to the Fund);
fees payable to the Investment Manager and to any advisor or consultants,
including an advisory board, if applicable; legal expenses; auditing and
accounting expenses; telephone, telex, facsimile, postage and other
communication expenses; taxes and governmental fees; stock exchange listing
fees; fees, dues and expenses incurred by the Fund in connection with membership
in investment company trade organizations; fees and expenses of the Fund's
custodians, subcustodians, transfer agents and registrars; payment for portfolio
pricing or valuation services to pricing agents, accountants, bankers and other
specialists, if any; expenses of preparing share certificates and other expenses
in connection with the issuance, offering, distribution, sale or underwriting of
securities issued by the Fund; expenses of registering or qualifying securities
of the Fund for sale; expenses relating to investor and public relations;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; brokerage commissions or other costs of acquiring
or disposing of any portfolio securities of the Fund; expenses of preparing and
distributing reports, notices and dividends to stockholders; costs of
stationery; costs of stockholders' and other meetings; litigation expenses;
expenses relating to the Fund's dividend reinvestment and cash purchase plan
(except for brokerage expenses paid by participants in such plan); and other
expenses.
In return for the services provided by the Investment Manager as investment
manager and administrator, and the expenses it assumes under the Current
Investment Management Agreement, the Fund pays the Investment Manager a monthly
fee which, on an annual basis, is equal to 1.20% of the Fund's average weekly
net assets. This fee is higher than advisory fees paid by most other
19
<PAGE> 25
investment companies, primarily because of the Fund's policy of investing in
Spanish and Portuguese securities and the additional time and expense required
of the Investment Manager in executing such policy. During the fiscal year ended
September 30, 1998, the Fund paid investment management fees of $1,309,151. In
addition, prior to the consummation of the Scudder-Zurich Transaction, the Fund
had a separate administration agreement with Scudder pursuant to which it paid
Scudder a monthly fee at an annual rate of 0.20% of the Fund's average net
assets, based on the net asset value on the last business day of each week. This
administration agreement was incorporated, in all material respects, into the
Former Investment Management Agreement, and remains a part of the Current
Investment Management Agreement. For the fiscal year ended September 30, 1998,
the Fund paid administration fees to Scudder of $130,843. As of September 30,
1998, the Fund had net assets of $86,900,000.
Under the Current Investment Management Agreement, the Investment Manager
is permitted to provide investment advisory services to other clients, including
clients which may invest in Spanish and Portuguese issuers, and to utilize in
providing such services information furnished to the Investment Manager by
advisors and consultants to the Fund. The Current Investment Management
Agreement also provides that purchase and sale opportunities suitable for more
than one client of the Investment Manager will be allocated in an equitable
manner.
The Current Investment Management Agreement may be terminated at any time
without payment of penalty by the Board of Directors, by vote of holders of a
majority of the outstanding voting securities of the Fund, or by the Investment
Manager on 60 days' written notice. The Current Investment Management Agreement
automatically terminates in the event of its assignment (as defined under the
1940 Act). The Current Investment Management Agreement also provides that it
supersedes all prior investment management and administration agreements.
The Current Investment Management Agreement provides that the Investment
Manager is not liable for any error of judgment or any loss suffered by the
Fund, in connection with matters to which the Current Investment Management
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Investment Manager in the performance of
its duties or from reckless disregard by the Investment Manager of its
obligations and duties under the Current Investment Management Agreement.
The Current Investment Management Agreement identifies Scudder Kemper as
the exclusive licensee of the rights to use and sublicense the names "Scudder,"
"Scudder Kemper Investments, Inc." and "Scudder, Stevens & Clark, Inc."
(together the "Scudder Marks"). Under this license, the Fund has the
nonexclusive right to use the sublicense and Scudder name and mark as part of
its name, and to use the Scudder Marks in the Fund's investment products and
services. This license continues only as long as the Current Investment
Management Agreement is in place, and only as long as Scudder Kemper
20
<PAGE> 26
continues to be a licensee of the Scudder Marks from Scudder Trust Company,
which is the owner and licensor of the Scudder Marks. As a condition of the
license, the Fund undertakes certain responsibilities and agrees to certain
restrictions, such as agreeing not to challenge the validity of the Scudder
Marks or ownership by Scudder Trust Company and the obligation to use the name
within commercially reasonable standards of quality. In the event the agreement
is terminated, the Fund must not use a name likely to be confused with those
associated with the Scudder Marks.
The Current Investment Management Agreement provides that the Investment
Manager will not make a short sale of any capital stock of the Fund or purchase
any share of the capital stock of the Fund otherwise than for investment.
The Current Investment Management Agreement, pending stockholder approval,
will remain in effect through September 30, 1999, and may continue thereafter
from year to year only if specifically approved at least annually by the vote of
"a majority of the outstanding voting securities" of the Fund, or by the Board
and, in either event, the vote of a majority of the Non-Interested Directors,
cast in person at a meeting called for such purpose. Scudder Kemper or its
predecessor has acted as the Investment Manager for the Fund since April 1992.
INVESTMENT MANAGER
Scudder Kemper, an indirect subsidiary of Zurich which resulted from the
combination of the businesses of Scudder and Kemper in connection with the
Scudder-Zurich Transaction, is one of the largest and most experienced
investment counsel firms in the United States. Scudder was established in 1919
as a partnership and was restructured as a Delaware corporation in 1985. Scudder
launched its first fund in 1928. Kemper launched its first fund in 1948. Since
December 31, 1997, Scudder Kemper has served as investment adviser to both
Scudder and Kemper funds. As of August 31, 1998, Scudder Kemper has more than
$241.1 billion in assets under management. The principal source of Scudder
Kemper's income is professional fees received from providing continuing
investment advice. Scudder Kemper provides investment counsel for many
individuals and institutions, including insurance companies, endowments,
industrial corporations and financial and banking organizations.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office (and the home offices of Zurich
Financial Services and Zurich Allied AG) is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world.
21
<PAGE> 27
Zurich owns approximately 70% of the Investment Manager, with the balance owned
by certain of the Investment Manager's officers and employees.
As stated above, Scudder Kemper is a Delaware corporation. Rolf Huppi* is
the Chairman of the Board and Director, Edmond D. Villani(#) is the President,
Chief Executive Officer and Director, Stephen R. Beckwith(#) is the Treasurer
and Chief Financial Officer, Kathryn L. Quirk(#) is the General Counsel, Chief
Compliance Officer and Secretary, Lynn S. Birdsong(#) is a Corporate Vice
President and Director, Cornelia M. Small(#) is a Corporate Vice President and
Director, and Laurence Cheng*, Gunther Gose* and William H. Bolinder(+) are
Directors of the Investment Manager. The principal occupation of each of Edmond
D. Villani, Stephen R. Beckwith, Kathryn L. Quirk, Lynn S. Birdsong and Cornelia
M. Small is serving as a Managing Director of the Investment Manager; the
principal occupation of Rolf Huppi is serving as an officer of Zurich; the
principal occupation of Laurence Cheng is serving as a senior partner of Capital
Z Partners, an investment fund; the principal occupation of Gunther Gose is
serving as the Chief Financial Officer of Zurich Financial Services; the
principal occupation of William H. Bolinder is serving as a member of the Group
Executive Board of Zurich Financial Services.
The outstanding voting securities of the Investment Manager are held of
record 36.63% by Zurich Holding Company of America ("ZHCA"), a subsidiary of
Zurich; 32.85% by ZKI Holding Corp. ("ZKIH"), a subsidiary of Zurich; 20.86% by
Stephen R. Beckwith, Lynn S. Birdsong, Kathryn L. Quirk, Cornelia M. Small and
Edmond D. Villani, in their capacity as representatives (the "Management
Representatives") of the Investment Manager's management holders and retiree
holders pursuant to a Second Amended and Restated Security Holders Agreement
(the "Security Holders Agreement") among the Investment Manager, Zurich, ZHCA,
ZKIH, the Management Representatives, the management holders, the retiree
holders and Edmond D. Villani, as trustee of Scudder Kemper Investments, Inc.
Executive Defined Contribution Plan Trust (the "Plan Trust"); and 9.66% by the
Plan Trust. There are no outstanding non-voting securities of the Investment
Manager.
In connection with the Scudder-Zurich Transaction (described above),
pursuant to which Zurich acquired a two-thirds interest in Scudder for $866.7
million in cash in December 1997, Daniel Pierce, a Director of the Fund, sold
85.4% of his holdings in Scudder to Zurich for cash.
Pursuant to the Security Holders Agreement (which was entered into in
connection with the Scudder-Zurich Transaction), the Board of Directors of the
- ------------------------------
* Mythenquai 2, Zurich Switzerland
(#) 345 Park Avenue, New York, New York
(+) 1400 American Lane, Schaumburg, Illinois
22
<PAGE> 28
Investment Manager consists of four directors designated by ZHCA and ZKIH and
three directors designated by Management Representatives.
The Security Holders Agreement requires the approval of a majority of the
Scudder-designated directors for certain decisions, including changing the name
of Scudder Kemper, effecting an initial public offering before April 15, 2005,
causing Scudder Kemper to engage substantially in non-investment management and
related business, making material acquisitions or divestitures, making material
changes in Scudder Kemper's capital structure, dissolving or liquidating Scudder
Kemper, or entering into certain affiliated transactions with Zurich. The
Security Holders Agreement also provides for various put and call rights with
respect to Scudder Kemper stock held by persons who were employees of Scudder at
the time of the Scudder-Zurich Transaction, limitations on Zurich's ability to
purchase other asset management companies outside of Scudder Kemper, rights of
Zurich to repurchase Scudder Kemper stock upon termination of employment of
Scudder Kemper personnel, and registration rights for stock held by stockholders
of Scudder continuing after the Scudder-Zurich Transaction.
Directors, officers and employees of Scudder Kemper from time to time may
enter into transactions with various banks, including the Fund's custodian bank.
It is Scudder Kemper's opinion that the terms and conditions of those
transactions will not be influenced by existing or potential custodial or other
Fund relationships.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of Scudder
Kemper, computes net asset value and provides fund accounting services for the
Fund for an annual asset based fee of 0.065% of weekly net assets on the first
$50 million of net assets, 0.04% of weekly net assets for the next $850 million,
and 0.020% of weekly net assets for amounts over $1 billion of net assets, plus
transaction and holding fees. For the fiscal year ended September 30, 1998, the
fees paid to SFAC by the Fund were $87,707. Scudder Service Corporation ("SSC"),
also a subsidiary of Scudder Kemper, acts as the shareholder servicing agent for
the Fund at no fee. SFAC and SSC will continue to provide fund accounting and
shareholding services to the Fund under the Current Investment Management
Agreement.
Exhibit C sets forth the fees and other information regarding certain other
investment companies advised by Scudder Kemper.
BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS
To the maximum extent feasible, Scudder Kemper places orders for portfolio
transactions through Scudder Investor Services, Inc. ("SIS"), Two International
Place, Boston, Massachusetts 02110, which in turn places orders on behalf of the
Fund with issuers, underwriters or other brokers and dealers. SIS is a
corporation registered as a broker/dealer and a subsidiary of Scudder Kemper.
SIS does not receive any commissions, fees or other remuneration from the Fund
23
<PAGE> 29
for this service. When it can be done consistently with the policy of obtaining
the most favorable net results, Scudder Kemper may place such orders with
brokers and dealers who supply research, market and statistical information to
the Fund or to Scudder Kemper. Scudder Kemper is authorized when placing
portfolio transactions for equity securities to pay a brokerage commission (to
the extent applicable) in excess of that which another broker might charge for
executing the same transaction on account of the receipt of research, market or
statistical information. In selecting brokers and dealers with which to place
portfolio transactions for the Fund, Scudder Kemper will not consider sales of
shares of funds currently advised by Scudder Kemper as a decision-making factor,
although it may place such transactions with brokers and dealers that sell
shares of funds currently advised by Scudder Kemper. Allocation of portfolio
transactions is supervised by Scudder Kemper.
REQUIRED VOTE
Approval of this Proposal requires the affirmative vote of a "majority of
the outstanding voting securities" of the Fund. The outcome of this Proposal is
important regardless of the outcome of the liquidation Proposal. The Directors
recommend that the stockholders vote FOR this Proposal 2.
PROPOSAL 3: ELECTION OF DIRECTORS OF THE FUND
At the Meeting, two individuals are nominated for re-election to the Board
of Directors of the Fund, to serve for a term of three years or until their
successors are duly elected and qualified. For election of Directors at the
Meeting, the Board of Directors has approved the nomination as Class III
Directors of Richard M. Hunt and Daniel Pierce, both current Directors of the
Fund. Messrs. Hunt and Pierce have consented to being nominated for re-election
and to serve if elected.
The persons named as proxies on the enclosed proxy card will vote for the
election of the nominees named above unless authority to vote for any or all of
the nominees is withheld in the proxy. If any nominee should be unable to serve,
an event not now anticipated, the proxies will be voted for such person, if any,
as shall be designated by the Board of Directors to replace such nominee.
24
<PAGE> 30
INFORMATION CONCERNING NOMINEES
Unless otherwise noted, each nominee has engaged in the principal
occupation listed in the following table for more than five years, but not
necessarily in the same capacity.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME (AGE) EMPLOYMENT AND DIRECTORSHIPS
- ---------- ----------------------------
<S> <C>
Daniel Pierce (64)*+ Managing Director of Scudder Kemper Investments, Inc.;
Director, Fiduciary Trust Company (bank and trust
company) and Fiduciary Company Incorporated (bank and
trust company). Mr. Pierce first became a Director of the
Fund in 1991. As of August 15, 1998, Mr. Pierce owned
7,414 shares of the Fund. Mr. Pierce serves on the boards
of 59 funds managed by Scudder Kemper with 153 fund
portfolios.
Richard M. Hunt (71) University Marshal and Senior Lecturer, Harvard
University; Vice Chairman, American Council on Germany;
Director, Council on the United States and Italy; Life
Trustee, American Field Service; and Partner, Elmhurst
Investment Trust (family investment firm). Mr. Hunt first
became a Director of the Fund in 1994. As of August 15,
1998, Mr. Hunt owned 3,500 shares of the Fund. Mr. Hunt
serves on the boards of 4 funds managed by Scudder Kemper
with 9 fund portfolios.
</TABLE>
INFORMATION CONCERNING CONTINUING DIRECTORS
Pursuant to the organizational documents of the Fund, the Board is divided
into three classes, each class having a term of three years. At the annual
meeting of stockholders in each year, the term of one class of Board members
expires. Accordingly, only those Board members in once class may be changed in
any one year, and it would require two years to change a majority of the Board.
This system of electing Board members may have the effect of maintaining the
continuity of management and, thus, make it more difficult for the Fund's
stockholders to change the majority of Board members. Pursuant to the Fund's
Articles of Incorporation, the number of Board members shall be apportioned
among the classes so as to maintain the classes as nearly equal in number as
possible. The term of the Class I, II and III Board members expires in the year
1999, 2000, and 1998, respectively. Those current Class I and Class II Directors
are not nominees at the Meeting. Messrs. Martin and Perez Llorca are Class I
Directors, and Mr. Nolen is a Class II Director.
25
<PAGE> 31
Class I -- Directors Serving until 1999 Annual Meeting of Stockholders:
Rogerio C.S. Martins Chairman of the Board, Atlas- Copco de Portugal (air
None(69) compressor equipment); Director, Credit Lyonnais
Portugal; Adviser to the Portuguese Minister of Economy.
Until 1996, Columnist, Publico (newspaper); Professor,
Institute Superior de Estudos Financeirose Fiscals;
Director, Ramalho Rosa (construction) and Lusotur
Sociedade Financeira de Turismo (tourism).
Jose Pedro Perez Attorney, Garcia Anoveros and Perez Llorca; President,
NoneLlorca (57) Atlantic Association (international relations
organization); and Director, Foster Wheeler Spain and NCR
Spain; and Consultant, 3M Espana.
Class II -- Director serving until 2000 Annual Meeting of Stockholders:
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE FUND, IF ANY; SHARES
PRINCIPAL OCCUPATION OR YEAR FIRST BENEFICIALLY
EMPLOYMENT AND DIRECTORSHIPS IN BECAME A OWNED AS OF
NAME (AGE) PUBLICLY HELD COMPANIES DIRECTOR AUGUST 15, 1998
- ---------- ------------------------------------- ---------- ---------------
<S> <C> <C> <C>
Wilson Nolen (71)+ Consultant; Trustee, Cultural 1992 10,000
Institutions Retirement Fund, Inc.,
New York Botanical Garden, Skowhegan
School of Painting and Sculpture;
Director, Ecohealth, Inc.
(biotechnology company) (until 1996);
and Director, Chattem, Inc. (drug and
chemical company) (until 1993). Mr.
Nolen serves on the boards of 9 funds
managed by Scudder Kemper with 24
fund portfolios.
</TABLE>
- ---------------
* Persons considered by the Fund and its counsel to be "interested persons"
(which as used in this Proxy Statement is as defined in the 1940 Act) of the
Fund or of Scudder Kemper. Mr. Pierce is deemed to be interested a person
because of his affiliation with Scudder Kemper.
+ Messrs. Pierce and Nolen are members of the Executive Committee of the Fund.
(1) The information as to beneficial ownership is based on statements furnished
to the Fund by the Directors. Unless otherwise noted, beneficial ownership
is based on sole voting and investment power.
26
<PAGE> 32
EXECUTIVE OFFICERS
In addition to Mr. Pierce, a Director who is also an officer of the Fund,
the following persons are Executive Officers of the Fund:
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE FUND;
NAME (AGE) PRINCIPAL OCCUPATION OR EMPLOYMENT(1)
- ---------- -------------------------------------
<S> <C>
Nicholas Bratt (50) President; Managing Director of Scudder
Kemper.
Paul J. Elmlinger (40) Vice President and Assistant Secretary;
Managing Director of Scudder Kemper.
Carol L. Franklin (45) Vice President; Managing Director of Scudder
Kemper.
Bruce H. Goldfarb (33) Vice President and Assistant Secretary;
Senior Vice President of Scudder Kemper
since 1997; previously practiced law with
the law firm of Cravath, Swaine & Moore.
Joan R. Gregory (53) Vice President; Vice President of Scudder
Kemper.
Judith A. Hannaway (46) Vice President; Vice President of Scudder
Kemper.
Ann M. McCreary ( ) Vice President and Assistant Treasurer;
Managing Director of Scudder Kemper.
Thomas F. McDonough (51) Vice President and Secretary; Senior Vice
President of Scudder Kemper.
Kathryn L. Quirk (46) Vice President and Assistant Secretary;
Managing Director of Scudder Kemper.
John R. Hebble (40) Treasurer; Senior Vice President of Scudder
Kemper.
Caroline Pearson (36) Assistant Secretary; Senior Vice President
of Scudder Kemper since 1997; previously
practiced law with the law firm of Dechert
Price & Rhoads.
</TABLE>
- ---------------
(1) Unless otherwise stated, all the Executive Officers have been associated
with Scudder Kemper for more than five years, although not necessarily in
the same capacity.
(2) The President, Treasurer and Secretary each hold office until his or her
successor has been duly elected and qualified, and all other officers hold
office in accordance with the By-Laws of the Fund.
27
<PAGE> 33
TRANSACTIONS WITH AND REMUNERATION OF DIRECTORS AND OFFICERS
The aggregate direct remuneration by the Fund of Directors not affiliated
with Scudder was $47,200, including expenses, during the fiscal year ended
September 30, 1998. Each such unaffiliated Director currently receives fees paid
by the Fund of $750 per Directors' meeting attended and an annual Director's fee
of $6,000. Each Director also receives $250 per committee meeting attended
(other than the Audit Committee meetings and meetings held for the purposes of
considering arrangements between the Fund and Scudder Kemper or an affiliate of
Scudder Kemper, for which such Director receives a fee of $750). Several of the
Fund's officers and Directors are also officers, directors, employees or
stockholders of Scudder Kemper and participate in the fees paid to that firm,
although the Fund makes no direct payments to them other than for reimbursement
of travel expenses in connection with the attendance of Directors' and committee
meetings.
The following Compensation Table, provides in tabular form, the following
data:
Column (1) All Directors of the Fund who receive compensation from the
Fund.
Column (2) Aggregate compensation received by a Director of the Fund from
the Fund.
Columns (3) and (4) Pension or retirement benefits accrued or proposed to
be paid by the Fund. The Fund does not pay its Directors such benefits.
Column (5) Total compensation received by a Director from the Fund, plus
compensation received from all funds managed by Scudder Kemper for which a
Director serves. The total number of funds from which a Director receives such
compensation is also provided in column (5). In some cases, compensation
received by a Director for serving on the Board of a closed-end fund is greater
than the compensation received by a Director for serving on the Board of an
open-end fund.
28
<PAGE> 34
COMPENSATION TABLE FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
(1) (2) (4) (5)
(3) TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM THE FUND
BENEFITS AND FUND
ACCRUED ESTIMATED COMPLEX PAID
AGGREGATE AS PART OF ANNUAL BENEFITS TO DIRECTOR
COMPENSATION FUND UPON (CALENDAR
NAME OF PERSON, POSITION FROM THE FUND EXPENSES RETIREMENT YEAR 1997)
- ------------------------ ------------- ---------- --------------- -------------
<S> <C> <C> <C> <C>
Richard M. Hunt, $13,000 N/A N/A $26,471
Director (4 funds)
Jose Pedro Perez Llorca, $ 9,600 N/A N/A $9,600
Director (1 fund)
Rogerio C.S. Martins, $11,350 N/A N/A $11,350
Director (1 fund)
Dr. Wilson Nolen, $13,250 N/A N/A $189,548
Director (24 funds)
</TABLE>
Committees of the Board -- Board Meetings. The Board of Directors of the
Fund met 12 times during the fiscal year ended September 30, 1998. Each Director
attended at least 75% of the total number of meetings of the Board of Directors
and of all committees of the Board on which he served as a regular member.
The Board of Directors, in addition to an Executive Committee, has an Audit
Committee, a Valuation Committee and a Committee on Independent Directors. The
Executive and Valuation Committees consist of regular members, allowing
alternates.
Audit Committee. The Board has an Audit committee consisting of those
Directors who are not interested persons of the Fund or of Scudder Kemper
("Non-Interested Directors") as defined in the 1940 Act, which met on January
15, 1998. the Audit Committee reviews with management and the independent
accountants for the Fund, among other things, the scope of the audit and the
controls of the Fund and its agents, reviews and approves in advance the type of
services to be rendered by independent accountant, recommends the selection of
independent accountants for the Fund to the Board and in general considers and
reports to the Board on matters regarding the Fund's accounting and bookkeeping
practices.
Committee on Independent Directors. The Board has a Committee on
Independent Directors consisting of the Non-Interested Directors. The Committee
is charged with the duty of making all nominations for Non-Interested Directors
and consideration of other related matters. Stockholders' recommendations as to
nominees received by management are referred to the Committee for its
consideration and action. The Committee met on March 18, 1998, to consider and
nominate the nominees set forth above who, upon election to the Board, would be
Non-Interested Directors of the Fund.
29
<PAGE> 35
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of
the Securities Exchange Act of 1934 and Section 30(h) of the 1940 Act, as
applied to a fund, requires the fund's officers and directors, investment
manager, affiliates of the investment manager, and persons who beneficially own
more than ten percent of a registered class of the fund's outstanding securities
("Reporting Persons"), to file reports of ownership of the fund's securities and
changes in such ownership with the Commission and the New York Stock Exchange.
Such persons are required by Commission regulations to furnish the Fund with
copies of all such filings.
Based solely upon its review of the copies of such forms received by it and
written representations from certain Reporting Persons, the Fund believes that
during the fiscal year ended September 30, 1998, its Reporting Persons complied
with all applicable filing requirements.
REQUIRED VOTE
Election of each of the nominees for Director requires the affirmative vote
of a plurality of the votes cast at the Meeting in person or by proxy. The
Directors of the Fund recommend that the stockholders vote FOR each of the
nominees listed in this Proposal 3.
PROPOSAL 4: RATIFICATION OF INDEPENDENT ACCOUNTANTS
At a meeting held on April 14, 1998, the Board of Directors of the Fund,
including a majority of the Non-Interested Directors, recommended to
stockholders the selection of PricewaterhouseCoopers LLP to act as independent
accountants for the Fund for the fiscal year ending September 30, 1998.
PricewaterhouseCoopers LLP are independent accountants and have advised the Fund
that they have no direct financial interest or material indirect financial
interest in the Fund. One or more representatives of PricewaterhouseCoopers LLP
are expected to be present at the Meeting and will have an opportunity to make a
statement if they so desire. Such representatives are expected to be available
to respond to appropriate questions posed by stockholders and management.
The Fund's financial statements for the fiscal year ended September 30,
1997 were audited by Price Waterhouse LLP, a predecessor of
PricewaterhouseCoopers LLP. In connection with its audit services, Price
Waterhouse LLP reviewed the financial statements included in the Fund's
semiannual and annual reports and its filings with the Commission.
REQUIRED VOTE
Ratification of the selection of independent accountants requires the
affirmative vote of a majority of the votes cast at the Meeting in person or by
proxy. The Directors of the Fund recommend that stockholders vote FOR
ratification of the selection of PricewaterhouseCoopers LLP as independent
accountants.
30
<PAGE> 36
ADDITIONAL INFORMATION
GENERAL
The cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement and all other costs incurred in
connection with the solicitation of proxies, including any additional
solicitation made by letter, telephone or telegraph, will be paid by Zurich or
its affiliates. In addition to solicitation by mail, certain officers and
representatives of the Fund, officers and employees of Scudder Kemper and
certain financial services firms and their representatives, who will receive no
extra compensation for their services, may solicit proxies by telephone,
telegram or personally.
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies. As the Meeting date approaches, certain
stockholders of the Fund may receive a telephone call from a representative of
SCC if their vote has not yet been received. Authorization to permit SCC to
execute proxies may be obtained by telephonic or electronically transmitted
instructions from stockholders of the Fund. Proxies that are obtained
telephonically will be recorded in accordance with the procedures set forth
below. These procedures have been reasonably designed to ensure that the
identity of the stockholder casting the vote is accurately determined and that
the voting instructions of the stockholder are accurately determined.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each stockholder's full name, address, social security or
employer identification number, title (if the stockholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned
and to confirm that the stockholder has received the proxy statement and card 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 listed on the proxy card, and ask for the stockholder's
instructions on each proposal. The SCC representative, although he or she is
permitted to answer questions about the process, is not permitted to recommend
to the stockholder how to vote, other than to read any recommendation set forth
in the proxy statement. SCC will record the stockholder's instructions on the
card. Within 72 hours, the stockholder will be sent a letter or mailgram to
confirm his or her vote and asking the stockholder to call SCC immediately if
his or her instructions are not correctly reflected in the confirmation.
If the stockholder wishes to participate in the Meeting, but does not wish
to give his or her proxy by telephone, the stockholder may still submit the
proxy card originally sent with the proxy statement or attend in person. Should
stockholders require additional information regarding the proxy or replacement
proxy cards, they may contact SCC toll-free at 1-800-733-8481. Any proxy given
by a stockholder, whether in writing or by telephone, is revocable until the
Meeting.
31
<PAGE> 37
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
According to filings made with the Securities and Exchange Commission, as
of September 30, 1998, 514,050, 787,853 and 632,550 shares, representing 7.9%,
12.1% and 9.7% of the outstanding shares of the Fund as of that same date,
respectively, were beneficially owned by Bankgesellschaft Berlin AG,
Alexanderplatz, 2D-10178, Berlin, Germany, Deep Discount Advisors, Inc. and Ron
Olin Investment Management Company, both of One West Park Square, Suite 777,
Asheville, NC 28801, respectively. A holder of 5% or more of the outstanding
voting securities of the Fund is an affiliated person of the Fund for purposes
of the 1940 Act.
On October 7, 1998, the Fund completed an in-kind redemption offer to all
stockholders (the "Redemption Right"), pursuant to which the Fund accepted
5,003,554.154 shares for redemption. The figures presented above as of September
30, 1998 do not reflect the Redemption Right. Any of the stockholders identified
above may have participated in the Redemption Right and therefore may no longer
hold 5% or more of the Fund's outstanding shares.
Except as noted above, to the best of the Fund's knowledge, as of September
30, 1998, no other person owned beneficially more than 5% of the outstanding
shares of the Fund.
As of August 15, 1998 the Fund's Directors and officers as a group
beneficially owned less than 1% of the outstanding shares of the Fund.
PROPOSALS OF STOCKHOLDERS
Stockholders wishing to submit proposals to be presented at the 1999 Annual
Meeting of Stockholders of the Fund and included in the Fund's proxy materials
should send their written proposals to the Secretary of the Fund, c/o Scudder
Kemper Investments, Inc., 345 Park Avenue, New York, New York 10154, not later
than February 15, 1999, which has been calculated to be a reasonable time before
the Fund will begin to print and mail the proxy materials for the 1999 Annual
Meeting of Stockholders. The timely submission of a proposal does not guarantee
its inclusion.
Stockholders wishing to present proposals at the 1999 Annual Meeting of
Stockholders of the Fund not to be included in the Fund's proxy materials should
send written notice to the Secretary of the Fund of such proposals by the later
of the close of business 60 days prior to the Meeting or fourteen days following
the date such Meeting is first publicly announced or disclosed.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Directors of the Fund is not aware of any matters that will be
presented for action at the Meeting other than the matters set forth herein.
Should any other matters requiring a vote of stockholders arise, the proxy in
the accompanying form will confer upon the person or persons entitled to vote
the
32
<PAGE> 38
shares represented by such proxy the discretionary authority to vote the shares
as to any such other matters in accordance with their best judgment in the
interests of the Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Directors,
/s/ Thomas F. McDonough
Thomas F. McDonough
Secretary
33
<PAGE> 39
EXHIBIT A
PLAN OF DISSOLUTION, LIQUIDATION AND TERMINATION
OF SCUDDER SPAIN AND PORTUGAL FUND, INC.
Scudder Spain and Portugal Fund, Inc., a Maryland corporation (the
"Company"), shall proceed to a complete liquidation of the Company according to
the procedures set forth in this Plan of Dissolution, Liquidation and
Termination (the "Plan"). The Plan has been approved by the Board of Directors
of the Company (the "Board") as being advisable and in the best interests of the
Company's stockholders. The Board has directed that this Plan be submitted to
the holders of the outstanding voting shares of the Company (each a
"Stockholder" and, collectively, the "Stockholders") for their adoption or
rejection at the annual meeting of Stockholders and has authorized the
distribution of a Proxy Statement (the "Proxy Statement") in connection with the
solicitation of proxies for such meeting. Upon Stockholder approval of the Plan,
the Company shall voluntarily dissolve and completely liquidate in accordance
with the requirements of the Investment Company Act of 1940, as amended (the
"1940 Act"), the Maryland General Corporation Law (the "MGCL") and the Internal
Revenue Code of 1986, as amended (the "Code"), as follows:
1. Adoption of Plan. The effective date of the Plan (the "Effective
Date") shall be the date on which the Plan is adopted by the Stockholders.
2. Liquidation and Distribution of Assets. As soon as practicable
after the Effective Date and by December 13, 1998 (the "Liquidation
Period"), or as soon thereafter as practicable depending on market
conditions and consistent with the terms of this Plan, the Company and the
Company's investment adviser, Scudder Kemper Investments, Inc., under the
supervision of the Board, shall have the authority to engage in such
transactions as may be appropriate for the Company's liquidation and
dissolution, including, without limitation, the consummation of the
transactions described in the Proxy Statement.
3. Provisions for Liabilities. The Company shall pay or discharge or
set aside a reserve fund for, or otherwise provide for the payment or
discharge of, any liabilities and obligations, including, without
limitation, contingent liabilities.
4. Distribution to Stockholders. As soon as practicable after the
Effective Date and in accordance with section 331 of the Internal Revenue
Code of 1986, as amended, the Company shall liquidate and distribute pro
rata on the date of liquidation (the "Liquidation Date") to its
stockholders of record as of the close of business on the date immediately
preceding the Liquidation Date all of the remaining assets of the Company
in complete cancellation and redemption of all the outstanding shares of
the Company, except for cash, bank deposits or cash equivalents in an
estimated amount necessary to (i) discharge any unpaid liabilities and
obligations of the
A-1
<PAGE> 40
Company on the Company's books on the Liquidation Date, including, but not
limited to, income dividends and capital gains distributions, if any,
payable through the Liquidation Date, and (ii) pay or provide for the
payment of such contingent liabilities as the Board shall reasonably deem
to exist against the assets of the Company on the Company's books.
5. Notice of Liquidation. As soon as practicable after the Effective
Date, the Company shall mail notice to the appropriate parties that this
Plan has been approved by the Board and the Stockholders and that the
Company will be liquidating its assets, to the extent such notice is
required under the MGCL.
6. Filings. As soon as practicable after the Liquidation Date, the
Company shall prepare and file Articles of Dissolution, Form N-8F under the
1940 Act and any other documents as are necessary to effect the dissolution
and/or de-registration of the Company and its shares in accordance with the
requirements of the Articles of Incorporation of the Company, the MGCL, the
Code, the 1940 Act and any other applicable securities laws, and any rules
and regulations of the Securities and Exchange Commission or any state
securities commission, including, without limitation, withdrawing any
qualification to conduct business in any state in which the Company is so
qualified, as well as the preparation and filing of any tax returns, and
the filing of materials with the New York Stock Exchange.
7. Amendment or Abandonment of Plan. The Board may modify or amend
this Plan at any time without stockholder approval if it determines that
such action would be advisable and in the best interests of the Company and
its Stockholders. If any amendment or modification appears necessary and in
the judgment of the Board will materially and adversely affect the
interests of the Stockholders, such an amendment or modification will be
submitted to the Stockholders for approval. In addition, the Board may
abandon this Plan without stockholder approval at any time prior to the
filing of the Articles of Dissolution if it determines that abandonment
would be advisable and in the best interests of the Stockholders.
8. Powers of Board and Officers. The Board and the officers of the
Company are authorized to approve such changes to the terms of any of the
transactions referred to herein, to interpret any of the provisions of this
Plan, and to make, execute and deliver such other agreements, conveyances,
assignments, transfers, certificates and other documents and take such
other action as the Board and the officers of the Company deem necessary or
desirable in order to carry out the provisions of this Plan and effect the
complete liquidation and dissolution of the Company in accordance with the
Code and the MGCL, including, without limitation, filing of a Form N-8F
with the Securities and Exchange Commission, withdrawing any state
registrations of the Company and/or its shares, withdrawing any
qualification to conduct business in any state in which the Company is so
qualified and the
A-2
<PAGE> 41
preparation and filing of any tax returns, and the filing of materials with
the New York Stock Exchange.
9. Termination of Business Operations. As soon as practicable upon
adoption of this Plan, the Company shall cease to conduct business except
as shall be necessary in connection with the effectuation of its
liquidation and dissolution.
10. Expenses. The expenses of carrying out the terms of this Plan
shall be borne by the Company, whether or not the liquidation contemplated
by this Plan is effected.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this
Plan to be executed by the Company as of this 28th day of October, 1998.
SCUDDER SPAIN AND
PORTUGAL FUND, INC.
By:
----------------------------------
Nicholas Bratt
President
A-3
<PAGE> 42
EXHIBIT B
INVESTMENT ADVISORY,
MANAGEMENT AND ADMINISTRATION AGREEMENT
AGREEMENT, dated and effective as of September 7, 1998 between SCUDDER
SPAIN AND PORTUGAL FUND, INC., a Maryland corporation (herein referred to as the
"Fund"), and SCUDDER KEMPER INVESTMENTS, INC., a Delaware corporation (herein
referred to as the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed by the parties as follows:
1. The Manager hereby undertakes and agrees, upon the terms and conditions
herein set forth, (i) to make investment decisions for the Fund, to prepare and
make available to the Fund research and statistical data in connection therewith
and to supervise the acquisition and disposition of securities by the Fund,
including the selection of brokers or dealers to carry out the transactions, all
in accordance with the Fund's investment objectives and policies and in
accordance with guidelines and directions from the Fund's Board of Directors;
(ii) to assist the Fund as it may reasonably request in the conduct of the
Fund's business, subject to the direction and control of the Fund's Board of
Directors; (iii) to maintain or cause to be maintained for the Fund all books,
records, reports and any other information required under the Investment Company
Act of 1940, as amended, (the "1940 Act") to the extent that such books, records
and reports and other information are not maintained or furnished by the
custodian or other agents of the Fund; (iv) to furnish at the Manager's expense
for the use of the Fund such office space and facilities as the Fund may require
for its reasonable needs in the City of New York and to furnish at the Manager's
expense clerical services in the United States related to research, statistical
and investment work; (v) to render to the Fund administrative services such as
preparing reports to and meeting materials for the Fund's Board of Directors and
reports and notices to stockholders, preparing and making filings with the
Securities and Exchange Commission (the "SEC") and other regulatory and self-
regulatory organizations, including preliminary and definitive proxy materials
and post-effective amendments to the Fund's registration statement on Form N-2
under the Securities Act of 1933, as amended, and 1940 Act, as amended from time
to time, providing assistance in certain accounting and tax matters and investor
and public relations, monitoring the valuation of portfolio securities,
assisting in the calculation of net asset value and calculation and payment of
distributions to stockholders, and overseeing arrangements with the Fund's
custodian, including the maintenance of books and records of the Fund; and (vi)
to pay the reasonable salaries, fees and expenses of such of the Fund's officers
and employees (including the Fund's shares of payroll taxes) and any
B-1
<PAGE> 43
fees and expenses of such of the Fund's directors as are directors, officers or
employees of the Manager; provided, however, that the Fund, and not the Manager,
shall bear travel expenses (or an appropriate portion thereof) of directors and
officers of the Fund who are directors, officers or employees of the Manager to
the extent that such expenses relate to attendance at meetings of the Board of
Directors of the Fund or any committees thereof or advisers thereto. The Manager
shall bear all expenses arising out of its duties hereunder but shall not be
responsible for any expenses of the Fund other than those specifically allocated
to the Manager in this paragraph 1. In particular, but without limiting the
generality of the foregoing, the Manager shall not be responsible, except to the
extent of the reasonable compensation of such of the Fund's employees as are
directors, officers or employees of the Manager whose services may be involved,
for the following expenses of the Fund: organization and certain offering
expenses of the Fund (including out-of-pocket expenses, but not including
overhead or employee costs of the Manager or of any one or more organizations
retained by the Fund or by the Manager as an advisor or consultant to the Fund);
fees payable to the Manager and to any advisor or consultants, including an
advisory board, if applicable; legal expenses; auditing and accounting expenses;
telephone, telex, facsimile, postage and other communication expenses; taxes and
governmental fees; stock exchange listing fees; fees, dues and expenses incurred
by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's custodians, subcustodians,
transfer agents and registrars; payment for portfolio pricing or valuation
services to pricing agents, accountants, bankers and other specialists, if any;
expenses of preparing share certificates and other expenses in connection with
the issuance, offering, distribution, sale or underwriting of securities issued
by the Fund; expenses of registering or qualifying securities of the Fund for
sale; expenses relating to investor and public relations; freight, insurance and
other charges in connection with the shipment of the Fund's portfolio
securities; brokerage commissions or other costs of acquiring or disposing of
any portfolio securities of the Fund; expenses of preparing and distributing
reports, notices and dividends to stockholders; costs of stationery; costs of
stockholders' and other meetings; litigation expenses; or expenses relating to
the Fund's dividend reinvestment and cash purchase plan (except for brokerage
expenses paid by participants in such plan).
2. As exclusive licensee of the rights to use and sublicense the use of
the "Scudder" and "Scudder Kemper Investments, Inc."/"Scudder, Stevens & Clark"
trademarks (together, the "Scudder Marks"), the Manager hereby grants the Fund a
nonexclusive right and sublicense to use (i) the "Scudder" name and mark as part
of the Fund's name (the "Fund Name"), and (ii) the Scudder Marks in connection
with the Fund's investment products and services, in each case only for so long
as this Agreement, any other investment management agreement between the Fund
and the Manager (or any organization which shall have succeeded to the Manager's
business as investment manager (the "Manager's Successor")), or any extension,
renewal or amendment hereof or thereof
B-2
<PAGE> 44
remains in effect, and only for so long as the Manager is a licensee of the
Scudder Marks, provided, however, that the Manager agrees to use its best
efforts to maintain its license to use and sublicense the Scudder Marks. The
Fund agrees that it shall have no right to sublicense or assign rights to use
the Scudder Marks, shall acquire no interest in the Scudder Marks other than the
rights granted herein, that all of the Fund's uses of the Scudder Marks shall
inure to the benefit of Scudder Trust Company as owner and licensor of the
Scudder Marks (the "Trademark Owner"), and that the Fund shall not challenge the
validity of the Scudder Marks or the Trademark Owner's ownership thereof. The
Fund further agrees that all services and products it offers in connection with
the Scudder Marks shall meet commercially reasonable standards of quality, as
may be determined by the Manager or the Trademark Owner from time to time,
provided that the Manager acknowledges that the services and products the Fund
rendered during the one-year period preceding the date of this Agreement are
acceptable. At your reasonable request, the Fund shall cooperate with the
Manager and the Trademark Owner and shall execute and deliver any and all
documents necessary to maintain and protect (including but not limited to in
connection with any trademark infringement action) the Scudder Marks and/or
enter the Fund as a registered user thereof. At such time as this Agreement or
any other investment management agreement shall no longer be in effect between
the Manager (or the Manager's Successor) and the Fund, or the Manager no longer
is a licensee of the Scudder Marks, the Fund shall (to the extent that, and as
soon as, it lawfully can) cease to use the Fund Name or any other name
indicating that it is advised by, managed by or otherwise connected with the
Manager (or the Manager's Successor) or the Trademark Owner. In no event shall
the Fund use the Scudder Marks or any other name or mark confusingly similar
thereto (including, but not limited to, any name or mark that includes the name
"Scudder") if this Agreement or any other investment advisory agreement between
the Manager (or the Manager's Successor) and the Fund is terminated.
3. The Fund agrees to pay to the Manager in United States dollars, as full
compensation for the services to be rendered and expenses to be borne by the
Manager hereunder, a monthly fee which, on an annual basis, is equal to 1.20%
per annum of the value of the Fund's average weekly net assets. Each payment of
a monthly fee to the Manager shall be made within the ten days next following
the day as of which such payment is so computed. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement.
The value of the net assets of the Fund shall be determined pursuant to the
applicable provisions of the Articles of Incorporation and By-laws of the Fund,
as amended from time to time.
B-3
<PAGE> 45
4. The Manager agrees that it will not make a short sale of any capital
stock of the Fund or purchase any share of the capital stock of the Fund
otherwise than for investment.
5. In executing transactions for the Fund and selecting brokers or
dealers, the Manager shall use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any Fund
transaction, the Manager shall consider on a continuing basis all factors it
deems relevant, including, but not limited to, breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of any commission for
the specific transaction. In selecting brokers or dealers to execute a
particular transaction and in evaluating the best overall terms available, the
Manager may consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the
Fund and/or other accounts over which the Manager or an affiliate exercises
investment discretion.
6. Nothing herein shall be construed as prohibiting the Manager from
providing investment advisory services to, or entering into investment advisory
agreements with, other clients (including other registered investment
companies), including clients which may invest in securities of Spanish or
Portuguese issuers, or from utilizing (in providing such services) information
furnished to the Manager by advisors and consultants to the Fund and others; nor
shall anything herein be construed as constituting the Manager as an agent of
the Fund.
Whenever the Fund and one or more other accounts or investment companies
advised by the Manager have available funds for investment, investments suitable
and appropriate for each shall be allocated in accordance with procedures
believed by the Manager to be equitable to each entity. Similarly, opportunities
to sell securities shall be allocated in a manner believed by the Manager to be
equitable. The Fund recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Fund. In addition, the Fund acknowledges that the persons employed by the
Manager to assist in the performance of the Manager's duties hereunder will not
devote their full time to such service and nothing contained herein shall be
deemed to limit or restrict the right of the Manager or any affiliate of the
Manager to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
7. The Manager may rely on information reasonably believed by it to be
accurate and reliable. Neither the Manager nor its officers, directors,
employees or agents shall be subject to any liability for any act or omission,
error of judgment or mistake of law, or for any loss suffered by the Fund, in
the course of, connected with or arising out of any services to be rendered
hereunder, except by reason of willful misfeasance, bad faith, or gross
negligence on the part of the Manager in the performance of its duties or by
reason of reckless disregard on the part of the Manager of its obligations and
duties under this
B-4
<PAGE> 46
Agreement. Any person, even though also employed by the Manager, who may be or
become an employee of the Fund and paid by the Fund shall be deemed, when acting
within the scope of his employment by the Fund, to be acting in such employment
solely for the Fund and not as an employee or agent of the Manager.
8. This Agreement shall remain in effect for an initial period ending
September 30, 1999, and shall continue in effect from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
by the affirmative vote of (i) a majority of the members of the Fund's Board of
Directors who are not parties to this Agreement or interested persons of any
party to this Agreement, or of any entity regularly furnishing investment
advisory services with respect to the Fund pursuant to an agreement with any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) a majority of the Fund's Board of Directors or
the holders of a majority of the outstanding voting securities of the Fund. This
Agreement may nevertheless be terminated at any time without penalty, on 60
days' written notice, by the Fund's Board of Directors, by vote of holders of a
majority of the outstanding voting securities of the Fund, or by the Manager.
This Agreement shall automatically be terminated in the event of its
assignment, provided that an assignment to a corporate successor to all or
substantially all of the Manager's business or to a wholly-owned subsidiary of
such corporate successor which does not result in a change of actual control or
management of the Manager's business shall not be deemed to be an assignment for
the purposes of this Agreement. Any notice to the Fund or the Manager shall be
deemed given when received by the addressee.
9. This Agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged by either party hereto, except as permitted under the
1940 Act or rules and regulations adopted thereunder. It may be amended by
mutual agreement, but only after authorization of such amendment by the
affirmative vote of (i) the holders of a majority of the outstanding voting
securities of the Fund, and (ii) a majority of the members of the Fund's Board
of Directors who are not parties to this Agreement or interested persons of any
party to this Agreement, or of any entity regularly furnishing investment
advisory services with respect to the Fund pursuant to an agreement with any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval.
10. This Agreement shall be construed in accordance with the laws of the
State of New York, without giving effect to the conflicts of laws principles
thereof, provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act. As used herein, the terms "interested person,"
"assignment," and "vote of a majority of the outstanding voting securities"
shall have the meanings set forth in the 1940 Act.
B-5
<PAGE> 47
11. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
12. This Agreement supersedes all prior investment advisory, management,
and/or administration agreements in effect between the Fund and the Manager.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
officers thereunto duly authorized as of the day and year first written above.
SCUDDER SPAIN AND PORTUGAL FUND, INC.
By:
------------------------------------------------------------
President
SCUDDER KEMPER INVESTMENTS, INC.
By:
------------------------------------------------------------
B-6
<PAGE> 48
EXHIBIT C
INVESTMENT OBJECTIVES AND ADVISORY FEES
FOR CERTAIN OTHER FUNDS ADVISED BY
SCUDDER KEMPER INVESTMENTS, INC.
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
SCUDDER FUNDS
GLOBAL GROWTH
Global Discovery Fund Above-average capital 1.100% of net assets $ 349,121,954
appreciation over the long
term by investing primarily in
the equity securities of small
companies located throughout
the world.
Scudder Emerging Markets Long term growth of capital 1.25% of net assets+ $ 219,624,481
Growth Fund primarily through equity
investment in emerging markets
around the globe.
Scudder Global Fund Long term growth of capital 1.000% to $500 million $1,766,207,742
through a diversified 0.950% next $500 million
portfolio of marketable 0.900% next $500 million
securities, primarily equity 0.850% over $1.5 billion
securities, including common
stock, preferred stocks and
debt securities convertible
into common stocks.
Scudder Greater Europe Growth Long term growth of capital 1.00% to $1 billion $ 195,514,335
Fund through investments primarily 0.90% thereafter*
in the equity securities of
European companies.
Scudder International Fund Long term growth of capital 0.900% to $500 million $2,884,919,345
primarily from foreign equity 0.850% next $500 million
securities. 0.800% next $1 billion
0.750% next $1 billion
0.700% thereafter
Scudder International Growth Long term growth of capital 1.000% of net assets+ $ 48,880,164
and Income Fund and current income primarily
from foreign equity
securities.
Scudder International Growth Long term capital appreciation 1.000% of net assets N/A**
Fund through investment primarily
in the equity securities of
foreign companies with high
growth potential.
Scudder International Value Long term capital appreciation 1.000% of net assets N/A**
Fund through investment primarily
in undervalued foreign equity
securities.
Scudder Latin America Fund Long term capital appreciation 1.250% to $1 billion $ 882,555,049
through investment primarily 1.150% thereafter
in the securities of Latin
American issuers.
Scudder Pacific Opportunities Long term growth of capital 1.100% of net assets $ 147,276,692
Fund primarily through investment
in the equity securities of
Pacific Basin companies,
excluding Japan.
</TABLE>
C-1
<PAGE> 49
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
The Japan Fund, Inc. Long term capital appreciation 0.850% to $100 million $ 265,181,931
through investment primarily 0.750% next $200 million
in equity securities, 0.700% next $300 million
(including American Depository 0.650% thereafter
Receipts of Japanese
companies).
CLOSED-END FUNDS
The Argentina Fund, Inc. Long term capital appreciation Adviser: $ 135,327,320
through investment primarily 1.100% of net assets
in equity securities of Sub-Adviser:
Argentine issuers. Paid by Adviser.
0.100% of net assets
The Brazil Fund, Inc. Long term capital appreciation 1.200% to $150 million $ 429,429,751
through investment primarily 1.050% next $150 million
in equity securities of 1.000% next $200 million
Brazilian issuers. 0.900% thereafter
Administrator: Receives
an annual fee of $50,000
The Korea Fund, Inc. Long term capital appreciation Adviser: $ 406,244,000
through investment primarily 1.150% to $50 million
in equity securities of Korean 1.100% next $50 million
companies. 1.000% next $250 million
0.950% next $400 million
0.900% thereafter
Sub-Adviser -- Daewoo:
Paid by Adviser.
0.2875% to $50 million
0.275% next $50 million
0.250% next $250 million
0.2375% next $400
million
0.225% thereafter
Scudder New Asia Fund, Inc. Long term capital appreciation 1.250% to $75 million $ 98,866,168
through investment primarily 1.150% next $125 million
in equity securities of Asian 1.100% thereafter
companies.
Scudder New Europe Fund, Inc. Long term capital appreciation 1.250% to $75 million $ 320,293,393
through investment primarily 1.150% next $125 million
in equity securities of 1.100% thereafter
companies traded on smaller or
emerging European markets and
companies that are viewed as
likely to benefit from changes
and developments throughout
Europe.
AARP FUNDS
AARP Global Growth Fund Long term capital growth, 0.350% to $2 billion $ 148,029,373
consistent with a share price 0.330% next $2 billion
more stable than other global 0.300% next $2 billion
funds, through investment 0.280% next $2 billion
primarily in common stocks of 0.260% next $3 billion
established corporations in a 0.250% next $3 billion
wide variety of developed 0.240% thereafter
countries. INDIVIDUAL FUND FEE
0.550% of net assets
AARP International Growth and Long term capital growth, 0.350% to $2 billion $ 20,259,062
Income Fund consistent with a share price 0.330% next $2 billion
more stable than other 0.300% next $2 billion
international mutual funds, 0.280% next $2 billion
through investment primarily 0.260% next $3 billion
in a diversified portfolio of 0.250% next $3 billion
foreign common stocks with 0.240% thereafter+
above-average dividend yields INDIVIDUAL FUND FEE
and foreign securities 0.600% of net assets
convertible into common
stocks.
</TABLE>
C-2
<PAGE> 50
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
KEMPER FUNDS
GLOBAL AND INTERNATIONAL FUNDS
Kemper Asian Growth Fund Long-term capital growth by 0.850% to $250 million $ 6,398,000
investing in a diversified 0.820% next $750 million
portfolio of Asian equity 0.800% next $1.5 billion
securities. 0.780% next $2.5 billion
0.750% next $2.5 billion
0.740% next $2.5 billion
0.730% next $2.5 billion
0.720% thereafter+
Kemper Europe Fund Long-term capital growth by 0.750% to $250 million $ 23,910,000
investing in a diversified 0.720% next $750 million
portfolio of European equity 0.700% next $1.5 billion
securities. 0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper International Fund Total return, a combination of 0.750% to $250 million $ 588,069,000
capital growth and income, 0.720% next $750 million
principally through an 0.700% next $1.5 billion
internationally diversified 0.680% next $2.5 billion
portfolio of equity 0.650% next $2.5 billion
securities. 0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper Emerging Markets Long-term growth of capital 1.250% of net assets+ $ 1,147,000+
Growth Fund primarily through equity
investment in emerging markets
around the globe.
Kemper Global Blue Chip Fund Long-term growth of capital 1.000% to $250 million $ 3,663,000+
through a diversified 0.950% next $750 million
worldwide portfolio of 0.900% thereafter+
marketable securities,
primarily equity securities.
Kemper International Growth Long-term growth of capital 1.000% of net assets+ $ 1,556,000@
and Income Fund and income, primarily from
foreign equity securities.
Kemper Latin America Fund Long-term capital appreciation 1.250% to $250 million $ 1,441,000@
through investment primarily 1.200% next $750 million
in the securities of Latin 1.150% thereafter+
American issuers.
CLOSED-END FUNDS
The Growth Fund of Spain, Long-term capital appreciation 1.000% of net assets $ 315,059,000
Inc. by investing primarily in
equity securities of Spanish
companies.
</TABLE>
- ------------------------------
+ Subject to waivers and/or expense limitations.
* The addition of this breakpoint is effective 10/1/98.
** Commenced operations on 9/1/98.
+ As of 3/31/98.
@ As of 4/30/98.
Assets shown in this Exhibit are as of the respective Fund's most recent fiscal
year end.
C-3
<PAGE> 51
PROXY SCUDDER SPAIN AND PORTUGAL FUND, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS -- DECEMBER , 1998
The undersigned hereby appoints Daniel Pierce, Nicholas Bratt, Bruce H.
Goldfarb and Wilson Nolen and each of them, the proxies of the undersigned, with
the power of substitution to each of them, to vote all shares of Scudder Spain
and Portugal Fund, Inc. (the "Fund") which the undersigned is entitled to vote
at the Annual Meeting of Stockholders 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, on Tuesday, December 1, 1998 at 10:30 a.m., eastern
time, and at any adjournments thereof. Each item below is a Proposal of the
Fund.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S VOTE
WILL BE CAST FOR EACH NUMBERED ITEM LISTED BELOW.
The Board members of your Fund, including those who are not affiliated with
the Fund or Scudder Kemper, recommend that you vote FOR each item.
1. (A) To approve an amendment to the Fund's Articles of Incorporation to permit
liquidation and dissolution of the Fund to be approved by the affirmative
vote of a majority of the Fund's outstanding shares of common stock and (B)
to approve the liquidation and dissolution of the Fund pursuant to the
provisions of the Plan of Dissolution, Liquidation and Termination of the
Fund;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To approve the current Investment Management, Advisory and Administration
Agreement between the Fund and Scudder Kemper Investments, Inc.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Election of Directors;
[ ] FOR all nominees listed below
(except as marked to the contrary).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
Nominees: Richard M. Hunt and Daniel Pierce
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the name of that nominee below.)
--------------------------------------------------------------------
4. To ratify the selection of PricewaterhouseCoopers LLP as the Fund's
independent accountants for the fiscal year ended September 30, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 52
The proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments thereof.
Please sign exactly as your name
or names appear. When signing as
attorney, executor, administrator,
trustee or guardian, please give
your full title as such.
-----------------------------------
(Signature of Shareholder)
-----------------------------------
(Signature of joint owner, if any)
Dated _______ , 1998
PLEASE SIGN AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED.
