<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 2, 1998
INVESTMENT COMPANY ACT FILE NO. 811-5304
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
SCUDDER SPAIN AND PORTUGAL FUND, INC.
(NAME OF ISSUER)
SCUDDER SPAIN AND PORTUGAL FUND, INC.
(NAME OF PERSON(S) FILING STATEMENT)
SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
320532104
(CUSIP NUMBER OF CLASS OF SECURITIES)
BRUCE H. GOLDFARB, ESQ.
SCUDDER KEMPER INVESTMENTS, INC.
345 PARK AVENUE
NEW YORK, NY 10154
(212) 336-4654
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
WITH COPIES TO:
ROBERT W. HELM, ESQ.
DECHERT PRICE & RHOADS
1775 EYE STREET, N.W.
WASHINGTON, D.C. 20006
(202) 261-3300
SEPTEMBER 2, 1998
(DATE TENDER OFFER FIRST PUBLISHED,
SENT OR GIVEN TO SECURITY HOLDERS)
CALCULATION OF FILING FEE
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Transaction Valuation(a): $76,302,578 $15,261
----------- Amount of Filing Fee(b): -------
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</TABLE>
(a) Calculated as the maximum repurchase price paid for shares in the offer,
based upon the average of the high and low prices reported as of August 28,
1998.
(b) Calculated as 1/50th of 1% of the Transaction Valuation.
Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing. [ ]
<TABLE>
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Amount Previously Paid: Filing Party:
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Form or Registration No.: Date Filed:
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</TABLE>
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<PAGE> 2
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is Scudder Spain and Portugal Fund, Inc. (the
"Fund"), a non-diversified, closed-end management investment company. The
principal executive office of the Fund is 345 Park Avenue, New York, New York
10154.
(b) The Fund is offering to its shareholders the right to demand the
repurchase of their shares ("Redemption Right") in the amount of up to 4,883,365
of the 6,511,154 outstanding shares of its common stock, par value $.01 per
share (the "Shares"), in exchange for a pro rata portion of each of the
securities (other than short-term fixed income securities with maturities of
less than one year, securities with transfer restrictions and certain illiquid
securities) and any cash held by the Fund in the Fund's investment portfolio
("Portfolio Securities") on the Valuation Date, subject to adjustment for
fractional shares. Accordingly, the consideration for each Share will be equal
to 100% of the net asset value ("NAV") per Share, determined as of the close of
the regular trading session of the New York Stock Exchange on October 1, 1998,
unless the Redemption Right is extended. Redeeming Shareholders may request that
Portfolio Securities received as proceeds be liquidated for cash or may retain
ownership of such Portfolio Securities. A redeeming Shareholder will pay the
expenses associated with distributing to him/her the proceeds of the Redemption
Right and any costs incurred in liquidating Portfolio Securities after receipt
if the redeeming Shareholder chooses liquidation of Portfolio Securities.
Reference is made to the Cover Page, Section 1 -- "Price; Number of
Shares," Section 3 -- "Disposition of Portfolio Securities -- Liquidation
Option" and Section 10 -- "Interest of Certain Related Persons" of the
Redemption Right Statement, which are incorporated by reference.
(c) The principal market in which the Shares are traded is the New York
Stock Exchange. Reference is made to the Cover Page and Section 8 -- "Price
Range of Shares; Dividends" of the Redemption Right Statement, which are
incorporated by reference.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) See Section 1 -- "Price; Number of Shares," and Section 13 -- "Source
and Amount of Consideration" of the Redemption Right Statement, which are
incorporated by reference.
(b)(1) Not applicable.
(b)(2) Not applicable.
ITEM 3. PURPOSE OF THE OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
Reference is made to Section 7 -- "Purpose of the Redemption Right; Plans
or Proposals of the Fund," Section 8 -- "Price Range of Shares; Dividends,"
Section 11 -- "Certain Effects of the Redemption Right" and Section
13 -- "Source and Amount of Consideration" of the Redemption Right Statement,
which are incorporated by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
Reference is made to Section 10 -- "Interest of Certain Related Persons" of
the Redemption Right Statement, which is incorporated by reference. To the
Fund's knowledge, there have not been any transactions in Shares of the Fund
that were effected during the past 40 business days by the Fund, any executive
officer or director of the Fund, any person controlling the Fund, any executive
officer or director of any corporation ultimately controlling the Fund or by any
associate or subsidiary of the foregoing, including any officer or director of
the associates or subsidiaries.
<PAGE> 3
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
Reference is made to Section 2 -- "Procedure for Presenting Shares for
Redemption," Section 3 -- "Disposition of Portfolio Securities -- Liquidation
Option," Section 5 -- "Payment for Shares," Section 7 -- "Purpose of the
Redemption Right; Plans or Proposals of the Fund" and Section 13 -- "Source and
Amount of Consideration" of the Redemption Right Statement, which are
incorporated by reference.
Except as set forth in those sections or otherwise in the Redemption Right
Statement, the Fund does not know of any contract, arrangement, understanding or
relationship relating, directly or indirectly, to the Redemption Right between
(A) the Fund, any executive officer or director of the Fund, or any person
controlling the Fund or any executive officer or director of any corporation
ultimately in control of the Fund, and (B) any other person, with respect to any
securities of the Fund (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss, or the giving or
withholding of proxies, consents or authorizations).
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Fund has entered into a Depositary Agreement, dated as of August 31,
1998, with Boston EquiServe LP (the "Depositary") to provide certain depositary
and information agent services in connection with the Redemption Right. For its
services, the Depositary will receive a fee approximating $45,000, plus
expenses. The Depositary Agreement is filed as Exhibit (c)(1) to this statement
and is incorporated by reference.
Brown Brothers Harriman & Co. (the "Custodian") is providing certain
custodial services in connection with the Redemption Right and will receive an
estimated fee of $20,000, plus expenses. The Custodian's costs may fluctuate
upward or downward depending on the number of Shareholders who choose to
liquidate the Portfolio Securities received. Shareholder Communications
Corporation is acting as information agent in connection with the Redemption
Right (the "Information Agent") and for these services will receive a special
project fee approximating $15,000, plus expenses.
An Agreement between Scudder Investor Services, Inc. and the Custodian (on
behalf of the redeeming Shareholders electing liquidation) has also been entered
into to coordinate the liquidation of Portfolio Securities received by redeeming
Shareholders who request liquidation of their Portfolio Securities. The
Liquidating Agent Agreement is filed as Exhibit (c)(3) to this statement and is
incorporated by reference. Scudder Investor Services, Inc. will receive no
compensation for its services other than transactional fees and any customary
and ordinary brokerage fees and commissions.
The Fund will not be compensating either the Custodian or the Liquidating
Agent for the services provided by either in connection with the offering of the
Redemption Right. The costs and expenses of the Custodian will be paid by all
redeeming Shareholders out of their redemption proceeds and the costs and
expenses of the Liquidating Agent will be paid by redeeming Shareholders who
request liquidation of Portfolio Securities received.
No other persons have been employed or retained or are to be compensated by
or on behalf of the Fund to make solicitations or recommendations in connection
with the Redemption Right. The Fund will not pay to any broker or dealer,
commercial bank, trust company, or other person any solicitation fee for any
Shares repurchased pursuant to the Redemption Right. The Fund will reimburse
such persons for customary handling and mailing expenses incurred in forwarding
the Redemption Right Statement. No such broker, dealer, commercial bank or trust
company has been authorized to act as the agent of the Fund or the Depositary
for purposes of the Redemption Right.
ITEM 7. FINANCIAL INFORMATION
(a)(1) The Fund's audited financial statements for the fiscal years ended
September 30, 1996 and September 30, 1997 (the "Audited Financial Statements"),
together with the consent of Pricewaterhouse-
2
<PAGE> 4
Coopers LLP, the independent accountants of the Fund, are included as part of
Exhibit (a)(1) attached hereto, which is incorporated by reference in its
entirety.
(2) Unaudited financial statements for the six months ended March 31, 1998
and for the six months ended March 31, 1997, which were included in the Fund's
semi-annual report to Shareholders, and the period October 1, 1997 to July 31,
1998 (the "Unaudited Financial Statements") are also included as part of Exhibit
(a)(2) attached hereto, which is incorporated by reference in its entirety.
(3) A summary of selected financial information ratios for the twelve
months ended September 30, 1996 and September 30, 1997, the six months ended
March 31, 1997, and March 31, 1998 and ten months ended July 31, 1998 is set
forth in Section 9 -- "Selected Financial Information" of the Redemption Right
Statement, which is incorporated by reference in its entirety.
Certain ratios applicable to the Fund for the twelve months ended September
30, 1996 and September 30, 1997 are contained in the Audited Financial
Statements. Certain ratios applicable to the Fund for the six months ended March
31, 1997, March 31, 1998 and ten months ended July 31, 1998 are contained in the
Unaudited Financial Statements, which are included as part of Exhibit (a)(2) and
are incorporated by reference in its entirety.
(4) The range of the Fund's NAV per share from January 1996 through June
1998 is set forth in Section 8 -- "Price Range of Shares; Dividends" of the
Redemption Right Statement, which is incorporated by reference.
(b) Unaudited pro forma financial statements for the fiscal year ended
September 30, 1997 and the periods October 1, 1997 to March 31, 1998 and October
1, 1997 to July 31, 1998 (the "Pro Forma Financial Statements") are included as
part of Exhibit (a)(3) attached hereto, which is incorporated by reference in
its entirety.
ITEM 8. ADDITIONAL INFORMATION
(a) Not applicable.
(b) The Fund has received a private letter ruling from the Internal Revenue
Service concerning the tax effect to the Fund of the Redemption Right. Further,
the Fund has requested an exemptive order pursuant to Section 17(b) of the
Investment Company Act of 1940, as amended, to permit certain shareholders of
the Fund who are "affiliated persons" of the Fund to participate in the
Redemption Right. Reference is made to Section 6 -- "Certain Conditions of the
Redemption Right" and Section 14 -- "Regulatory Approvals" of the Redemption
Right Statement, which are incorporated by reference.
(c)-(d) Not applicable.
(e) The Redemption Right Statement, which is filed as Exhibit (a)(1)(ii),
is incorporated by reference in its entirety.
3
<PAGE> 5
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS:
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(a)(1)(i) Cover Letter to Shareholders.
(a)(1)(ii) Redemption Right Statement.
(a)(2)(i) Form of Letter of Transmittal.
(a)(2)(ii) Form of Notice of Guaranteed Delivery.
(a)(3)(i) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees.
(a)(3)(ii) Form of Letter to Clients of Brokers, Dealers, Commercial
Banks, Trust Companies and other Nominees.
(a)(3)(iii) Form of Letter to Shareholders who have requested
information.
(a)(3)(iv) DTC Delivery Election Form.
(a)(3)(v) W-8 Tax Form.
(a)(4) Text of Press Release dated September 2, 1998.
(b) Not applicable.
(c)(1) Depositary Agreement, dated as of August 31, 1998, between
the Fund and Boston EquiServe LP.
(c)(2) Investment Advisory, Management and Administrative Agreement
dated December 31, 1997 between the Fund and Scudder Kemper
Investments, Inc. (formerly Scudder, Stevens & Clark, Inc.).
(c)(3) Liquidating Agent Agreement, dated as of August 31, 1998,
between Scudder Investor Services, Inc. and Brown Brothers
Harriman & Co. (on behalf of redeeming Shareholders who
elect to liquidate Portfolio Securities).
(d) Not applicable.
(e) Not applicable.
</TABLE>
4
<PAGE> 6
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
SCUDDER SPAIN AND
PORTUGAL FUND, INC.
Date: September 2, 1998 /s/ Bruce H. Goldfarb
--------------------------------------
By: Bruce H. Goldfarb
Title: Vice President
5
<PAGE> 7
EXHIBIT INDEX
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(a)(1)(i) Cover Letter to Shareholders.
(a)(1)(ii) Redemption Right Statement.
(a)(2)(i) Form of Letter of Transmittal.
(a)(2)(ii) Form of Notice of Guaranteed Delivery.
(a)(3)(i) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees.
(a)(3)(ii) Form of Letter to Clients of Brokers, Dealers, Commercial
Banks, Trust Companies and other Nominees.
(a)(3)(iii) Form of Letter to Shareholders who have requested
information.
(a)(3)(iv) DTC Delivery Election Form.
(a)(3)(v) W-8 Tax Form.
(a)(4) Text of Press Release dated September 2, 1998.
(b) Not applicable.
(c)(1) Depositary Agreement, dated as of August 31, 1998, between
the Fund and Boston EquiServe LP.
(c)(2) Investment Advisory, Management and Administrative Agreement
dated December 31, 1997 between the Fund and Scudder Kemper
Investments, Inc. (formerly Scudder, Stevens & Clark, Inc.).
(c)(3) Liquidating Agent Agreement dated as of August 31, 1998,
between Scudder Investor Services, Inc. and Brown Brothers
Harriman & Co. (on behalf of redeeming Shareholders who
elect to liquidate Portfolio Securities).
(d) Not applicable.
(e) Not applicable.
</TABLE>
6
<PAGE> 1
SCUDDER SPAIN AND PORTUGAL FUND, INC.
345 PARK AVENUE
NEW YORK, NY 10154
SEPTEMBER 2, 1998
DEAR SHAREHOLDER:
You will be receiving with this letter, or through your broker, various
documents regarding a redemption right which Scudder Spain and Portugal Fund,
Inc. (the "Fund") is offering to its shareholders. We would like to take the
opportunity to answer in this letter some questions you may have regarding
aspects of the redemption right and the forms you will need to submit to
participate in the redemption right.
What is the redemption right?
The redemption right is an opportunity that is being offered to
shareholders of the Fund which permits them to demand that the Fund repurchase
their shares of the Fund at net asset value in exchange for securities in which
the Fund is currently invested (other than short-term fixed income securities
with maturities of less than one year, securities with transfer restrictions and
certain illiquid securities) and any cash held by the Fund. For those
shareholders who prefer to liquidate the securities they will receive as
proceeds from participation in the redemption right, the Fund has assisted with
the organization of a facility with Brown Brothers Harriman & Co. and Scudder
Investor Services, Inc. whereby Scudder Investor Services, Inc. will act as
liquidating agent and liquidate the securities received by redeeming
shareholders who so request on their behalf.
Why is the Fund offering the Redemption Right?
The Fund believes that there may be shareholders of the Fund who no longer
desire to participate in the closed-end investment company format offered by the
Fund. The redemption right permits these shareholders to exit the Fund at net
asset value. In addition, by giving shareholders who choose to demand redemption
of their shares portfolio securities of the Fund, the Fund and those
shareholders who do not participate in the redemption right will avoid
recognition of capital gains which could be incurred by the Fund in liquidating
its portfolio securities if the redeeming shareholders were to receive cash for
their shares of the Fund.
If I participate in the redemption right, what will I receive in return?
You will receive portfolio securities of the Fund and cash held by the
Fund. Except for short-term fixed income securities, securities with transfer
restrictions and certain illiquid securities in which the Fund is currently
invested, you will receive a pro rata portion of the securities in which the
Fund is invested as well as your pro rata portion of any cash in the Fund on the
expiration date of the redemption right. This means that you will receive stock
of Spanish and Portuguese issuers in which the Fund is invested at the time of
expiration of the redemption right as well as some cash which the Fund maintains
for liquidity purposes. The value of the portfolio securities and cash you
receive will be equal to the number of shares of the Fund you own multiplied by
the net asset value per share of the Fund. The net asset value per share of the
Fund will be determined as of the close of the regular trading session of the
New York Stock Exchange on the valuation date (which is October 1, 1998 unless
the redemption right is extended) and the value of the individual portfolio
securities will be based on their market value on that date.
What can I do with the portfolio securities I receive if I participate in
the redemption right?
You may retain ownership of the portfolio securities you receive from the
Fund. To do so you will be required to establish both cash and securities
accounts with a bank or broker in Spain and in Portugal. You will also need to
provide certain information regarding a U.S. bank or broker who can retain on
your behalf American Depository Receipts that may be included in the portfolio
securities you receive. The bank or broker does not need to operate in both
countries but you must have the accounts in both countries. This is necessary to
comply with market rules in those countries and to facilitate the reregistration
of portfolio securities.
<PAGE> 2
As an alternative, you can choose to liquidate the portfolio securities
received from the Fund. You can do this independently through your broker after
you have established the accounts mentioned in this paragraph. Scudder Investor
Services, Inc. has offered to act as Liquidating Agent to liquidate the
portfolio securities received by all redeeming shareholders who desire to
liquidate their portfolio securities. Scudder Investor Services, Inc. will
liquidate your portfolio securities on a best execution basis and will receive
no compensation for its services other than transactional expenses, including
usual and customary brokerage commissions. The Letter of Transmittal and
Redemption Right Statement describe the liquidation process in more detail and
contain the relevant information you would have to provide to have Scudder
Investor Services, Inc. liquidate your portfolio securities received or to
retain ownership of your portfolio securities. If you choose to have Scudder
Investor Services, Inc. liquidate the portfolio securities you receive, you
should know that the liquidation may take at least 30 days so as to prevent any
adverse effects on the market for the portfolio securities liquidated and that
during that time you will be subject to any market risk in the price of the
portfolio securities being liquidated. In addition, the costs and expenses
incurred to liquidate the portfolio securities you received from the redemption
right will be deducted from the proceeds of the liquidation.
Will I have to pay anything to participate in the redemption right?
The Fund is paying the costs of conducting the redemption right, which
includes the costs of printing and mailing materials to shareholders, certain
legal and filing fees and the costs of the Depositary and the Information Agent.
If you elect to demand redemption of your shares pursuant to the redemption
right, you will have to pay the costs associated with distributing your proceeds
of the redemption right, such as any costs associated with transferring the
portfolio securities you receive from the Fund to Brown Brothers Harriman & Co.,
which is acting as custodian for the redeeming shareholders, or to your own
account. If you also request that Scudder Investor Services, Inc. liquidate your
portfolio securities you will have to pay the costs of the liquidation. The
costs of distributing the portfolio securities will be deducted from your
proceeds of the redemption right. If you request liquidation, the additional
costs of liquidating your portfolio securities will be deducted from the cash
you would receive after liquidation of your portfolio securities. The actual per
share expenses of effecting the redemption request and of any liquidation of
portfolio securities received will depend on a number of factors including the
number of shares redeemed, the Fund's portfolio composition at the time and
market conditions prevailing during the liquidation process. Your broker, dealer
or other institution also may charge you a fee for processing your redemption
request and sending it to the Depositary.
Are there any restrictions or limits placed on participation in the
redemption right?
The Fund will accept for redemption up to 75% of the issued and outstanding
common stock of the Fund (4,883,365 shares). If you participate in the
redemption right, you must present for redemption all of your shares of the
Fund. If shareholders of the Fund as a whole demand redemption of more than
4,883,365 shares, the Fund will pro rate the shares accepted so that each
shareholder demanding redemption of shares is treated equally.
If 90% or more of the issued and outstanding shares of common stock of the
Fund are presented for redemption, the Board of Directors of the Fund will
suspend the redemption right. Under those circumstances the Board of Directors
currently intends to submit a proposal to all of the shareholders of the Fund to
liquidate the Fund.
To retain ownership of the portfolio securities you received from the Fund
on the valuation date (which will be October 1, 1998 unless the redemption right
is extended) you will need to have established cash and securities accounts with
banks or brokers in Spain and in Portugal.
How do I participate in the redemption right?
Review the Redemption Right Statement which describes in detail the
purpose, structure and procedures associated with the redemption right. You can
either complete and sign the Letter of Transmittal and other required documents
(which may include certain tax forms) and submit them to the Depositary
according to the instructions specified in the Redemption Right Statement or
request that your broker, dealer, commercial bank, trust company or other
nominee effect your request for redemption for you. If your shares are held by
or registered in the name of your broker, dealer, commercial bank, trust company
or other nominee, you must
<PAGE> 3
contact them to assist you in participating in the redemption right. To
participate in the redemption right, you must have properly presented your
request for redemption (i.e. all necessary forms completed correctly and
submitted) by no later than 5:00 p.m. Eastern Time on September 30, 1998.
Who do I contact if I have any questions about the redemption right and the
documents I have received?
Shareholder Communications Corporation is the Information Agent for the
Redemption Right. If you have any questions, please contact them at
1-800-733-8481, extension 426.
IF YOU DESIRE TO REMAIN INVESTED IN THE FUND, YOU NEED NOT COMPLETE OR
REVIEW ANY OF THE DOCUMENTS REGARDING THE REDEMPTION RIGHT. Thank you for
investing with us.
Sincerely,
SCUDDER SPAIN & PORTUGAL FUND, INC.
<PAGE> 1
SCUDDER SPAIN AND PORTUGAL FUND, INC.
RIGHT TO DEMAND THE REDEMPTION OF UP TO 4,883,365
OF ITS ISSUED AND OUTSTANDING SHARES AT
NET ASSET VALUE, IN EXCHANGE FOR PORTFOLIO
SECURITIES OF THE FUND
THE EXPIRATION DATE AND THE WITHDRAWAL
DEADLINE IS 5:00 P.M., EASTERN TIME,
ON SEPTEMBER 30, 1998, UNLESS EXTENDED.
To the Shareholders of
Scudder Spain and Portugal Fund, Inc.:
Scudder Spain and Portugal Fund, Inc. (the "Fund") is offering to its
shareholders the right to demand the repurchase of their shares (the "Redemption
Right") in an amount up to 4,883,365 shares (approximately 75%) of its common
stock, par value $.01 per share (the "Shares"), in exchange for a pro rata
portion of each of the securities (other than fixed income securities with
maturities of less than one year, securities with transfer restrictions and
certain illiquid securities) and cash held in the Fund's investment portfolio
("Portfolio Securities") on the Valuation Date (as defined herein), subject to
adjustment for fractional shares (the "Redemption"). Accordingly, the
consideration for each Share of the Fund presented for Redemption (hereafter
sometimes referred to as the "Repurchase Price") will be equal to 100% of the
net asset value ("NAV") per Share, determined as of the close of the regular
trading session of the New York Stock Exchange ("NYSE") on October 1, 1998,
unless the Redemption Right is extended (the "Valuation Date"). Redeeming
Shareholders will bear the costs and expenses of distributing the proceeds of
the Redemption Right. The Redemption Right is subject to the terms and
conditions set forth in this Redemption Right Statement dated September 2, 1998
and the related Letter of Transmittal. THE REDEMPTION RIGHT EXPIRES AT 5:00
P.M., EASTERN TIME, ON SEPTEMBER 30, 1998, UNLESS EXTENDED (THE "EXPIRATION
DATE"). If the Redemption Right is extended beyond September 30, 1998, Shares
will be repurchased at their NAV as determined as of the close of the regular
trading session of the NYSE on the Valuation Date, as extended.
The Shares are currently traded on the NYSE under the symbol "IBF." You can
obtain current NAV quotations as of the close of business on the previous
business day during the pendency of the Redemption Right by calling Shareholder
Communications Corporation, the Information Agent, at 1-800-733-8481, extension
426, between the hours of 9:00 a.m. and 5:00 p.m., Eastern Time, Monday-Friday
(except holidays).
Background and Purpose of the Redemption Right
The purpose of the Redemption Right is to provide Shareholders who may no
longer wish to participate in a closed-end investment vehicle, such as the Fund,
with the opportunity, to the extent consistent with the best interests of the
Fund and all of its shareholders, to demand the redemption of all of their
Shares in-kind (i.e., in exchange for Portfolio Securities) in order to elect to
realize the net asset value of their Shares. The proceeds of this in-kind
redemption will be paid in a pro rata portion of the Fund's Portfolio
Securities. Redeeming Shareholders will have the opportunity, if they have made
certain custodial and transfer arrangements, to retain the Portfolio Securities
distributed as the proceeds of the Redemption of their Shares, or they may
request that the Liquidating Agent liquidate the Portfolio Securities received
by them on their behalf. Moreover, although the Fund will pay its Shareholders a
cash distribution of all undistributed 1998 net investment income and
undistributed net realized capital gains prior to the Expiration Date, the Fund
will not attempt to realize or distribute unrealized capital gains prior to the
Expiration Date. Accordingly, a substantial portion of the net asset value of
the Fund as of the Expiration Date will consist of unrealized capital gains. As
of July 31, 1998, the Fund had approximately $57,092,818 of unrealized capital
gains, representing approximately 42.4% of its net asset value. The Redemption
Right also prevents Shareholders who choose not
<PAGE> 2
to redeem from bearing any portion of the unrealized capital gains which would
be realized if the Fund sold its Portfolio Securities in order to satisfy
redemption requests in cash.
THE REDEMPTION RIGHT AND THIS REDEMPTION RIGHT STATEMENT DO NOT CONSTITUTE
A SOLICITATION OF ANY PROXIES. ANY SUCH SOLICITATION SHOULD BE MADE ONLY
PURSUANT TO SEPARATE PROXY MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION
14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
The Redemption Right is being offered to all Shareholders of the Fund and
is not conditioned upon the redemption of any minimum number of the Fund's
outstanding Shares. HOWEVER, A SHAREHOLDER WISHING TO PARTICIPATE IN THE
REDEMPTION RIGHT MUST PRESENT FOR REDEMPTION ALL SHARES ACTUALLY OWNED OR
CONSTRUCTIVELY OWNED BY THE SHAREHOLDER, PURSUANT TO SECTION 318 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), AS OF THE DATE OF REPURCHASE OF
SHARES PURSUANT TO THE REDEMPTION RIGHT. Shareholders should consult their tax
advisers as to the application of the constructive ownership rules of Section
318. A Redemption of all Shares actually and constructively owned is designed to
minimize the risk of adverse tax consequences to Shareholders. To minimize the
impact and costs to Shareholders who choose not to present their Shares for
Redemption, redeeming Shareholders will bear the costs of distributing their
proceeds of Redemption (generally, certain transfer taxes and custodial
expenses) and such costs will be deducted from their proceeds. Redeeming
Shareholders who request that the Portfolio Securities received as proceeds of
the Redemption be liquidated for cash will also bear the expenses related to
that transaction (generally, custodial expenses, brokerage commissions, and any
other transaction expenses) as well as investment risk that the market value of
Portfolio Securities will have changed subsequent to the Valuation Date. As a
result, all redeeming Shareholders will bear the costs associated with the
special services provided by the Custodian and any transaction costs associated
with transferring the Portfolio Securities out of the Fund to the Custodian.
Redeeming Shareholders who choose to retain the Portfolio Securities received
will bear any costs of delivery and transfer and redeeming Shareholders who
request that their Portfolio Securities be liquidated for cash after they are
received will bear the additional costs associated with the liquidation. The
Fund will bear the expenses of offering the Redemption Right which includes the
costs of producing and mailing the Redemption Right Statement and other
documents, and other expenses of the Depositary and the Information Agent. The
division of costs and expenses is meant to allocate them fairly among the
participants in the Redemption Right and those who desire to remain in the Fund.
If more than 4,883,365 Shares, or 75% of the issued and outstanding Shares
of the Fund, are presented for Redemption prior to the expiration of the
Redemption Right, the Fund will repurchase Shares from redeeming Shareholders,
in accordance with the terms and conditions specified in this Redemption Right
Statement, on a pro rata basis and in accordance with the number of Shares
presented for Redemption by each Shareholder during the period the Redemption
Right remains open, unless the Fund determines not to repurchase any Shares. If
90% or more of the issued and outstanding Shares of the Fund are presented for
Redemption prior to the expiration of the Redemption Right, the Board of
Directors of the Fund will suspend the Redemption Right and currently intends,
under such circumstances, to submit a proposal to Shareholders to liquidate the
Fund. See Section 6.
Unless a redeeming Shareholder has made the required custodial and transfer
arrangements, Portfolio Securities received from the Fund as Redemption proceeds
will be liquidated by the Liquidating Agent, as agent for the redeeming
Shareholders, for cash. If a redeeming Shareholder does not make an election
either to retain Portfolio Securities received or to liquidate them, the
redeeming Shareholder will be deemed to have elected to liquidate the Portfolio
Securities received. See Sections 3 and 10. The required transfer and delivery
requirements are further detailed in the Letter of Transmittal.
To prevent federal income tax backup withholding equal to 31% of the gross
payments made pursuant to this Redemption Right: (1) each U.S. Shareholder must
have submitted to the Depositary a correct, completed, and signed Form W-9 or
Substitute Form W-9, or other confirmation of an exemption from backup
withholding requirements; and (2) each non-U.S. Shareholder must have submitted
to the Depositary
ii
<PAGE> 3
a correct, completed, and signed Form W-8. The Letter of Transmittal contains
both a Substitute Form W-9 and a Form W-8, to be completed as appropriate.
THIS REDEMPTION RIGHT IS SUBJECT TO CERTAIN CONDITIONS. SEE SECTION 6.
IMPORTANT
If you desire to present your Shares for Redemption, you should either: (1)
complete and sign the Letter of Transmittal and mail or deliver it to the
Depositary together with the Shares (in proper certificated or uncertificated
form), and any other documents required by the Letter of Transmittal; or (2)
request your broker, dealer, commercial bank, trust company or other nominee to
effect the transaction for you. IF YOUR SHARES ARE REGISTERED IN THE NAME OF A
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE, YOU MUST
CONTACT THAT FIRM IF YOU DESIRE TO PRESENT YOUR SHARES FOR REDEMPTION.
Shareholders are not required to pay a service charge to the Fund or the
Depositary in connection with the Redemption of Shares, but may be charged a fee
by a broker, dealer or other institution for processing the Redemption requested
and will bear certain expenses as described in this Redemption Right Statement.
IF YOU DO NOT WISH TO PRESENT YOUR SHARES FOR REDEMPTION,
YOU NEED NOT TAKE ANY ACTION.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO PRESENT SHARES FOR REDEMPTION. SHAREHOLDERS ARE
URGED TO EVALUATE CAREFULLY ALL INFORMATION IN THE REDEMPTION RIGHT STATEMENT,
CONSULT THEIR OWN INVESTMENT AND TAX ADVISERS AND MAKE THEIR OWN DECISIONS
WHETHER OR NOT TO PRESENT SHARES FOR REDEMPTION.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
FUND OR SCUDDER KEMPER INVESTMENTS, INC., THE INVESTMENT MANAGER OF THE FUND, AS
TO WHETHER SHAREHOLDERS SHOULD PRESENT THEIR SHARES FOR REDEMPTION PURSUANT TO
THE REDEMPTION RIGHT. ANY RECOMMENDATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND OR THE INVESTMENT MANAGER.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE REDEMPTION RIGHT OTHER THAN THOSE
CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, ANY
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND OR THE INVESTMENT MANAGER.
iii
<PAGE> 4
Questions and requests for assistance may be directed to the Information
Agent at the appropriate address and at the telephone number set forth below.
Requests for additional copies of this Redemption Right Statement and the Letter
of Transmittal may also be directed to the Depositary. Shareholders who do not
own Shares directly may also obtain such information and copies from their
broker, dealer, commercial bank, trust company or other nominee and, if they
decide to present their Shares for Redemption, are required to present their
Shares for Redemption through that firm.
September 2, 1998
SCUDDER SPAIN AND PORTUGAL FUND, INC.
345 PARK AVENUE
NEW YORK, NY 10154
SHAREHOLDER COMMUNICATIONS CORPORATION, Information Agent
17 State Street, Floors 27 & 28
New York, N.Y. 10004
Phone: 1-800-733-8481, extension 426
BOSTON EQUISERVE LP, Depositary
1-800-426-5523
<TABLE>
<S> <C> <C>
By First Class Mail: By Overnight Courier: By Hand:
State Street Bank & State Street Bank & Securities Transfer &
Trust Company Trust Company Reporting Services, Inc.
Corporate Reorganization Corporate Reorganization c/o Boston Equiserve LP
P.O. Box 9061 70 Campanelli Drive 1 Exchange Plaza
Boston, MA 02205-8686 Braintree, MA 02184 55 Broadway, 3rd Floor
New York, NY 10006
</TABLE>
iv
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<C> <S> <C>
1. PRICE; NUMBER OF SHARES..................................... 1
2. PROCEDURE FOR PRESENTING SHARES FOR REDEMPTION.............. 2
A. Proper Presentation of Shares for Redemption............ 2
B. Signature Guarantees and Method of Delivery............. 3
C. Dividend Reinvestment Plan.............................. 4
D. Book Entry Delivery..................................... 4
E. Guaranteed Delivery..................................... 4
F. Determination of Validity............................... 5
G. Federal Income Tax Withholding.......................... 5
3. DISPOSITION OF PORTFOLIO SECURITIES -- LIQUIDATION OPTION... 5
4. WITHDRAWAL RIGHTS........................................... 6
5. PAYMENT FOR SHARES.......................................... 7
6. CERTAIN CONDITIONS OF THE REDEMPTION RIGHT.................. 7
7. PURPOSE OF THE REDEMPTION RIGHT; PLANS OR PROPOSALS OF THE
FUND........................................................ 9
8. PRICE RANGE OF SHARES; DIVIDENDS............................ 9
9. SELECTED FINANCIAL INFORMATION.............................. 10
10. INTEREST OF CERTAIN RELATED PERSONS......................... 12
11. CERTAIN EFFECTS OF THE REDEMPTION RIGHT..................... 12
12. CERTAIN INFORMATION ABOUT THE FUND.......................... 13
13. SOURCE AND AMOUNT OF CONSIDERATION.......................... 13
14. REGULATORY APPROVALS........................................ 14
15. ADDITIONAL INFORMATION...................................... 15
16. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES................ 15
17. EXTENSION OF REDEMPTION PERIOD, TERMINATION, AMENDMENTS..... 18
18. MISCELLANEOUS............................................... 19
APPENDIX: GLOSSARY.......................................... 20
</TABLE>
Exhibit A-1: Audited Financial Statements of the Fund for the fiscal years
ended September 30, 1997 and September 30, 1996, together with the consent of
PricewaterhouseCoopers LLP, the independent accountants of the Fund.
Exhibit A-2: Unaudited Financial Statements of the Fund for the six months
ended March 31, 1998, and for the six months ended March 31, 1997 and the period
October 1, 1997 to July 31, 1998.
Exhibit A-3: Unaudited Pro Forma Financial Statements of the Fund for the year
ended September 30, 1997, the period October 1, 1997 to March 31, 1998, and the
period October 1, 1997 to July 31, 1998.
v
<PAGE> 6
1. PRICE; NUMBER OF SHARES.
Scudder Spain and Portugal Fund, Inc. (the "Fund") is offering to
Shareholders the right to demand the redemption of their shares of the Fund in
an amount up to 4,883,365 shares of the Fund's common stock, par value $.01 per
share (the "Shares"), in exchange for a pro rata portion of the Fund's Portfolio
Securities. Accordingly, the consideration for each Share will be equal to 100%
of the NAV per Share determined as of the close of the regular trading session
of the NYSE on October 1, 1998, unless the Redemption Right is extended (the
"Valuation Date"). This Redemption Right is subject to the terms and conditions
set forth in the Redemption Right Statement dated September 2, 1998 and the
related Letter of Transmittal. THE REDEMPTION RIGHT EXPIRES AT 5:00 P.M.,
EASTERN TIME, ON SEPTEMBER 30, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). If
the Redemption Right is extended beyond September 30, 1998, Shares will be
repurchased at their NAV as determined as of the close of the regular trading
session of the NYSE on the next business day following the Expiration Date, as
extended (the "Repurchase Price"). Redeeming Shareholders will bear the expenses
of distributing the proceeds of Redemption (generally, certain transfer taxes
and custodial expenses) which shall be deducted directly in a proportionate
amount from each redeeming Shareholder's proceeds of Redemption. Redeeming
Shareholders who request that the Portfolio Securities received as proceeds of
the Redemption be liquidated for cash will also bear the expenses related to
that transaction (generally, custodial expenses, brokerage commissions, and any
other transaction expenses) as well as investment risk that the market value of
the Portfolio Securities will have changed subsequent to the Valuation Date. As
a result, all redeeming Shareholders will bear the costs associated with the
special services provided by the Custodian and any transaction costs associated
with transferring the Portfolio Securities out of the Fund to the Custodian.
Redeeming Shareholders who choose to retain the Portfolio Securities received
will bear any related costs of delivery and transfer and redeeming Shareholders
who request that Portfolio Securities be liquidated for cash after they are
received will bear the additional costs and expenses of the liquidation. The
actual per share expenses for redeeming Shareholders of effecting the Redemption
and of any liquidation of Portfolio Securities will depend on a number of
factors including the number of Shares redeemed, the Fund's portfolio
composition at the time and market conditions prevailing during the liquidation
process. Based on information believed by it to be credible, the Fund believes
that the cost of Redemption and liquidation of Portfolio Securities received
should not exceed 1% of the Fund's NAV as of the Valuation Date, however; due to
the impact of factors and conditions discussed above, as well as other factors
and conditions then applicable, the cost of Redemption and liquidation of
Portfolio Securities received may exceed 1% of NAV of the Fund. The Fund gives
no assurances in this regard and redeeming Shareholders assume the risk that
expenses will be in excess of 1%. The Fund will bear the expenses of offering
the Redemption Right which includes the costs of producing and mailing the
Redemption Right Statement and other documents, and the costs of the Depositary
and the Information Agent.
In order to retain the Portfolio Securities distributed "in-kind" a
redeeming Shareholder must establish cash and securities accounts on his/her
behalf with a bank or broker in Portugal and Spain as further specified in the
Letter of Transmittal so that such bank or broker can reregister the Portfolio
Securities received. Certain information for a U.S. broker or bank also needs to
be provided so that such bank or broker can receive any American Depository
Receipts constituting part of the Portfolio Securities to be retained by the
Shareholder. Shareholders may also elect to have their in-kind proceeds
liquidated for cash, at their expense and risk. Redeeming Shareholders who
request that their Portfolio Securities be liquidated for cash will bear the
additional costs associated with the liquidation, including the costs of the
Liquidating Agent.
The Fund will not be obligated to repurchase Shares pursuant to the
Redemption Right under certain circumstances. The Fund reserves the right to
extend, terminate or amend the Redemption Right. IF 90% OR MORE OF THE SHARES
ARE PRESENTED FOR REDEMPTION, THE FUND WILL SUSPEND THE REDEMPTION RIGHT. IT IS
THE CURRENT INTENTION OF THE FUND'S BOARD OF DIRECTORS UNDER SUCH CIRCUMSTANCES
TO SUBMIT A PROPOSAL TO SHAREHOLDERS TO LIQUIDATE THE FUND. See Section 6.
Holders of Shares may deliver Shares presented for Redemption to the Depositary
or withdraw Shares previously delivered until expiration of the Redemption
Right. See Sections 2 and 4. The Fund will not pay interest on the Repurchase
Price under any circumstances.
The NAV on September 1, 1998 was $17.16 per Share. The NAV can be expected
to vary with changes in the value of the investments held by the Fund. On the
Expiration Date, the NAV may be higher or lower
<PAGE> 7
than it was on September 1, 1998. During the pendency of the Redemption Right,
you may obtain current NAV quotations for the Fund as of the close of business
on the previous business day by calling the Information Agent at 1-800-733-8481,
extension 426 between the hours of 9:00 a.m. and 5:00 p.m., Eastern Time,
Monday-Friday (except holidays).
The Redemption Right is being made to all Shareholders of the Fund and is
not conditioned upon the Redemption of any minimum number of the Fund's
outstanding Shares. HOWEVER, A SHAREHOLDER WISHING TO PARTICIPATE IN THE
REDEMPTION RIGHT MUST PRESENT FOR REDEMPTION OR CAUSE THE DEMAND FOR REDEMPTION
TO BE MADE WITH RESPECT TO ALL OF THE SHARES ACTUALLY OWNED OR CONSTRUCTIVELY
OWNED BY THE SHAREHOLDER, PURSUANT TO SECTION 318 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE "CODE"), AS OF THE DATE OF REPURCHASE OF SHARES
PURSUANT TO THE REDEMPTION RIGHT. Shareholders should consult their tax advisers
as to the application of the constructive ownership rules of Section 318. A
Redemption of all Shares actually and constructively owned is designed to
minimize the risk of adverse tax consequences to Shareholders. See Section 16.
Proration. If more than 4,883,365 Shares are presented for Redemption, an
amount equivalent to 75% of the Fund's Shares issued and outstanding, the Fund
will repurchase Shares from redeeming Shareholders in accordance with the terms
and conditions specified in this Redemption Right Statement. Shares will be
repurchased on a pro rata basis in accordance with the number of Shares
presented for Redemption by each Shareholder during the period the Redemption
Right remains open, unless the Fund determines not to redeem any Shares. See
Section 6. In the event that proration of Shares presented for Redemption is
required, the Fund will determine the proration factor as soon as practicable
following the Expiration Date. Proration for each Shareholder who has presented
Shares for Redemption shall be based on the ratio of the number of Shares
presented for Redemption by the Shareholder to the total number of Shares
presented for Redemption by all Shareholders, subject to the conditions of the
Redemption Right described in Section 6. Because of the difficulty in
determining the number of Shares properly presented for Redemption (including
Shares presented for Redemption by guaranteed delivery procedures, as described
in Section 2E), the Fund does not expect that it will be able to announce the
final proration factor or to commence payment for any Shares repurchased
pursuant to the Redemption Right until approximately seven NYSE trading days
after the Expiration Date. The preliminary results of any proration, which may
change, will be announced by press release as promptly as practicable after the
Expiration Date. Shareholders may obtain preliminary information from the
Information Agent and may be able to obtain this information from their brokers.
On September 1, 1998 there were 6,511,154 shares issued and outstanding and
there were approximately 235 holders of record of shares. Certain of these
holders of record were nominees for brokers, dealers, commercial banks, trust
companies and other institutions that held Shares on behalf of multiple
beneficial owners.
2. PROCEDURE FOR PRESENTING SHARES FOR REDEMPTION.
A. PROPER PRESENTATION OF SHARES FOR REDEMPTION. For Shares to be properly
presented for Redemption pursuant to the Redemption Right, the Depositary must
receive at the appropriate address set forth on page iv of this Redemption Right
Statement, on or prior to the Expiration Date: (i) a properly completed and
executed Letter of Transmittal; (ii) all Shares owned or constructively owned by
the redeeming Shareholder pursuant to Section 318 of the Code (in proper
certificated or uncertificated form); and (iii) any other documents required by
the Letter of Transmittal. Letters of Transmittal and certificates representing
Shares presented for Redemption should NOT be sent or delivered to the Fund.
Shareholders who desire to present for Redemption Shares registered in the name
of a broker, dealer, commercial bank, trust company or other nominee should
contact that firm to effect a Redemption on their behalf.
Shareholders should indicate whether they prefer to retain their proceeds
from the Redemption Right in the form of Portfolio Securities or liquidate the
Portfolio Securities received for cash. If redeeming Shareholders request
liquidation of the Portfolio Securities received as proceeds, those Shareholders
will bear the transaction costs and related expenses of liquidating their
Portfolio Securities. If redeeming Shareholders desire to retain their proceeds
in-kind, such Shareholders must have submitted instructions as to custodial
2
<PAGE> 8
arrangements entered into with appropriate Spanish and Portuguese custodians
required in the transmittal documents. Otherwise, the Portfolio Securities will
be liquidated for cash.
Section 14(e) of the Securities Exchange Act of 1934 (the "Exchange Act")
and Rule 14e-4 promulgated thereunder prohibit both "short" redemption requests
and "hedged" redemption requests by any person, whether acting alone or in
concert with others. It is a violation of Rule 14e-4 under the Exchange Act for
a person to request redemption of Shares unless the person requesting redemption
(i) has a net long position equal to or greater than the amount as to which a
redemption request has been made in (a) Shares presented for Redemption or (b)
other securities immediately convertible into, or exercisable or exchangeable
for, the number of Shares which the person has presented for Redemption and the
persons will acquire these Shares for Redemption by conversion, exercise or
exchange of such other securities and (ii) will cause these Shares to be
delivered in accordance with the terms of the Redemption Right.
The acceptance of Shares by the Fund for repurchase will constitute a
binding agreement between the Shareholder requesting Redemption and the Fund
upon the terms and subject to the conditions of the Redemption Right, including
the redeeming Shareholder's representation that (i) the Shareholder has a net
long position in the Shares being presented for redemption within the meaning of
Rule 14e-4 under the Exchange Act and (ii) the presentation of the Shares for
Redemption complies with Rule 14e-4.
B. SIGNATURE GUARANTEES AND METHOD OF DELIVERY. No signature guarantee is
required on the Letter of Transmittal (a) if the Letter of Transmittal is signed
by the registered holder(s) (which includes any participant in the Depository
Trust Company ("DTC") book-entry transfer facility whose name appears on DTC's
security position listing as the owner of Shares) of Shares presented for
Redemption, unless the holder(s) has completed either the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions" in the
Letter of Transmittal or (b) if the Shares are presented for Redemption for the
account of a firm (an "Eligible Institution") which is a bank, broker, dealer,
credit union, savings association or other entity which is a member in good
standing of a Stock Transfer Association approved medallion program (such as
STAMP, SEMP or MSP). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5 of
the Letter of Transmittal.
If the Letter of Transmittal is signed by the registered holder(s) of the
Shares as to which Redemption is sought, the signature(s) must correspond with
the name(s) as written on the face of the certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Shares presented for Redemption are owned of record by two or
more joint owners, all such owners must sign the Letter of Transmittal.
If any of the Shares presented for Redemption are registered in different
names on several certificates, it will be necessary to complete, sign and submit
as many separate Letters of Transmittal as there are different registrations of
certificates.
If the Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, they
should so indicate when signing, and proper evidence satisfactory to the Fund of
their authority to act must be submitted. "Satisfactory" evidence is in the sole
discretion of the Fund.
If the Letter of Transmittal is signed by the registered holder(s) of the
Shares transmitted, no endorsements of certificates or separate stock powers are
required unless proceeds from the Redemption are to be sent to, or certificates
for Shares not purchased are to be issued in the name of, a person other than
the registered holder(s). Signatures on the certificates or stock powers must be
guaranteed by an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appears on the certificate(s)
for such Shares. Signatures on the certificates or stock powers must be
guaranteed by an Eligible Institution.
3
<PAGE> 9
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND
RISK OF THE SHAREHOLDER REQUESTING REDEMPTION. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
Shareholders have the responsibility to cause timely delivery of their Shares
(in proper certificated or uncertificated form), as well as the Letter of
Transmittal, and any other documents required by the Letter of Transmittal to be
delivered in a timely manner. See Section 2A. Timely delivery is a condition
precedent to acceptance of Shares for repurchase pursuant to the Redemption
Right and to payment of the Repurchase Price.
C. DIVIDEND REINVESTMENT PLAN. State Street Bank and Trust Company, as the
Fund's transfer agent, holds Shares in uncertificated form for certain
Shareholders pursuant to the Fund's dividend reinvestment plan. Shareholders
wishing to participate in the Redemption Right must present for Redemption all
uncertificated Shares as well as their certificated Shares. Shareholders may
present for Redemption uncertificated Shares by completing the appropriate
section of the Letter of Transmittal. Any Shares distributed as a result of the
reinvestment of a dividend to redeeming Shareholders who are participants in the
Fund's Dividend Reinvestment Plan ("DRIP") will be automatically considered as
presented for Redemption in the Redemption Right.
D. BOOK ENTRY DELIVERY. The Depositary will establish an account with
respect to the Shares at DTC for purposes of the Redemption Right within two
business days after the date of this Redemption Right Statement. Any financial
institution that is a participant in the DTC system may make book-entry delivery
of Shares by causing DTC to transfer the Shares into the Depositary's account at
DTC in accordance with DTC's transfer procedures. Although delivery of Shares
may be effected through book-entry transfer at DTC, a properly completed and
executed Letter of Transmittal or an Agent's Message completed by DTC, and any
other documents required by the Letter of Transmittal, must in any case be
received by the Depositary at one of its addresses set forth on page iv of this
Redemption Right Statement on or prior to the Expiration Date, or the redeeming
shareholder must comply with the guaranteed delivery procedures described below.
Delivery of documents to DTC in accordance with DTC's procedures does not
constitute delivery to the Depositary.
E. GUARANTEED DELIVERY. If a Shareholder desires to present Shares for
Redemption pursuant to the Redemption Right and the Share certificates are not
immediately available, or time will not permit all required documents to reach
the Depositary on or prior to the Expiration Date, or a Shareholder cannot
complete the procedures for delivery by book-entry transfer on a timely basis,
then the Shareholder's Shares may nevertheless be presented for Redemption,
provided that all of the following conditions are satisfied:
(a) the redemption is made by or through an Eligible Institution, as
defined above;
(b) a properly completed and executed Notice of Guaranteed Delivery,
substantially in the form provided by the Fund, is received by the
Depositary by the Expiration Date; and
(c) the Share certificates evidencing all Shares, in proper form for
transfer, or a Book-Entry Confirmation, together with the Letter of
Transmittal properly completed and executed with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message)
and any other documents required by the Letter of Transmittal, are received
by the Depositary within three NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution and a representation that the Shareholder
owns the Shares presented for Redemption within the meaning of, and that the
Redemption of the Shares complies with, Rule 14e-4 under the Exchange Act, each
in the form set forth in the Notice of Guaranteed Delivery.
Payment for Shares accepted for repurchase pursuant to the Redemption Right
will in all cases be made only after timely receipt by the Depositary of
Required Documents. Accordingly, payment may not be made
4
<PAGE> 10
to all redeeming Shareholders at the same time and will depend upon when Share
certificates are received by the Depositary or Book-Entry Confirmations of
Shares presented for Redemption are received in the Depositary's account at DTC.
The Fund will not pay interest on the Repurchase Price under any circumstances.
F. DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of Shares presented for
Redemption will be determined by the Fund, in its sole discretion, and the
determination shall be final and binding. The Fund reserves the absolute right
to reject any or all presentations for Redemption determined not to be in
appropriate form or to refuse to accept for payment, repurchase or pay for any
Shares if, in the opinion of the Fund's counsel, accepting, repurchasing or
paying for the Shares would be unlawful. The Fund also reserves the absolute
right to waive any of the conditions of the Redemption Right or any defect in
any redemption, whether generally or with respect to any particular Share(s) or
shareholder(s). The Fund's interpretations of the terms and conditions of the
Redemption Right shall be final and binding.
NONE OF THE FUND, THE INVESTMENT MANAGER, THE DEPOSITARY, THE INFORMATION
AGENT, THE CUSTODIAN OR ANY OTHER PERSON IS OR WILL BE OBLIGATED TO GIVE ANY
NOTICE OF DEFECTS OR IRREGULARITIES, OR WAIVERS OF DEFECTS OR IRREGULARITIES IN
A REDEMPTION REQUEST, AND NONE OF THEM WILL INCUR ANY LIABILITY FOR FAILURE TO
DO SO.
G. FEDERAL INCOME TAX WITHHOLDING. To prevent federal income tax backup
withholding equal to 31% of the gross payments made pursuant to the Redemption
Right, each U.S. Shareholder who has not previously submitted a correct,
completed and signed Form W-9 to the Fund or does not otherwise establish an
exemption from withholding must notify the Depositary of the Shareholder's
correct taxpayer identification number (or certify that the taxpayer is awaiting
a taxpayer identification number) and provide certain other information by
completing the Substitute Form W-9 included in the Letter of Transmittal.
Non-U.S. Shareholders who have not previously submitted a correct,
completed and signed Form W-8 to the Fund must submit a form to the Depositary
in order to avoid backup withholding. For those Shareholders, a copy of Form W-8
is included with the Letter of Transmittal.
For a discussion of certain other U.S. federal income tax consequences to
redeeming Shareholders, see Section 16.
3. DISPOSITION OF PORTFOLIO SECURITIES -- LIQUIDATION OPTION.
Redeeming Shareholders may direct that all of the Portfolio Securities
received as proceeds from the repurchase of Shares by the Fund be liquidated for
cash after they are received.
Redeeming Shareholders who elect to have Portfolio Securities liquidated
for cash will bear all of the expenses related to that transaction (generally,
custodial expenses, brokerage commissions, and any other transaction expenses)
which will be deducted before distribution of the cash proceeds. Scudder
Investor Services, Inc., in its capacity as the liquidating agent for redeeming
Shareholders who have requested liquidation of Portfolio Securities (the
"Liquidating Agent") will, following the Valuation Date, direct the liquidation
of the Portfolio Securities. The Liquidating Agent will use its best efforts to
cause the liquidation of the Portfolio Securities on a best execution basis and
will pay the cash proceeds to the redeeming Shareholders who requested
liquidation following complete liquidation of the Portfolio Securities and
accounting for the expenses of the liquidation. In order to prevent any
destabilizing effect on the Spanish and Portuguese markets in which the Fund is
invested and/or on the stock price of the Portfolio Securities, the liquidation
process is expected to be completed no earlier than thirty days following the
Expiration Date. Redeeming Shareholders who elect to liquidate Portfolio
Securities for cash will bear the risks associated with market fluctuations that
may affect the price of the Portfolio Securities being liquidated. Accordingly,
redeeming Shareholders who elect liquidation of Portfolio Securities received
may realize cash equal to a lesser or greater amount at the completion of the
liquidation process than the total value of the Portfolio Securities which they
received in the Redemption of their Shares.
5
<PAGE> 11
Redeeming Shareholders who desire to retain ownership of the Portfolio
Securities must complete the required transfer and delivery instructions in the
attached transmittal documents. In order to minimize transaction costs
associated with the transfer of beneficial ownership of Portfolio Securities and
to conform to regulations of the Spanish and Portuguese markets, redeeming
Shareholders receiving the Portfolio Securities must arrange for appropriate
custodial arrangements with Spanish and Portuguese custodians. This requires
that cash and securities accounts must be established by the redeeming
Shareholder or on his/her behalf with a bank or broker in the local Spanish and
Portuguese markets. Redeeming Shareholders desiring to retain ownership of the
Portfolio Securities will be required to advise the local bank or broker that
Portfolio Securities will be received from the following Spanish and Portuguese
counterparties: Securities Account Information: Banco Santander, Madrid, Account
Number: 15940185769PC; Cash Account Information: Banco de Santander, Madrid,
Account Number: 810578; and Securities Account Information: Banco Espirito Santo
Commercial de Lisboa, Lisbon, Account Number: 099507150006; Cash Account
Information: Banco Portuguese de Atlantico, Lisbon, Account Number:
530/03/022-881527. The United States counterparty settlement instructions are
Securities Account Information: Brown Brothers Harriman & Co., DTC Participant
Number: 10. Certain information for a U.S. broker or bank (specifically, the
name of the entity and the DTC Participant Number) also needs to be provided so
that such bank or broker can receive any American Depository Receipts
constituting part of the Portfolio Securities to be retained by the
Shareholders. REDEEMING SHAREHOLDERS WHO FAIL TO COMPLY WITH SUCH REQUIREMENTS
WILL BE TREATED AS HAVING MADE AN ELECTION TO LIQUIDATE THE PORTFOLIO SECURITIES
RECEIVED FOR CASH. THE REDEEMING SHAREHOLDERS WHO DO NOT MAKE ANY ELECTION WILL
ALSO BE DEEMED TO HAVE MADE AN ELECTION TO LIQUIDATE THE PORTFOLIO SECURITIES
RECEIVED FOR CASH.
4. WITHDRAWAL RIGHTS.
A request for Redemption of Shares made in exercise of the Redemption Right
may be withdrawn only as indicated in this Section 4. At any time during the
pendency of the Redemption Right on or prior to the Expiration Date (as it may
be extended from time to time), and, if the Shares have not yet been accepted
for payment by the Fund, at any time after 5:00 p.m., Eastern Time, on October
29, 1998, Shareholders may withdraw all, but not less than all, of the Shares
that they have presented for Redemption.
To be effective, a written or telegraphic notice of withdrawal must be
timely received by the Depositary at the appropriate address set forth on page
iv of this Redemption Right Statement. Shareholders may also send a facsimile
transmission notice of withdrawal, which must be timely received by the
Depositary at 781-794-6333, but the original notice of withdrawal must be
delivered to the Depositary by overnight courier or by hand the next day.
Any notice of withdrawal must specify the name of the person having
presented the Shares for Redemption to be withdrawn, and, if certificates
representing the Shares have been delivered or otherwise identified to the
Depositary, the name of the registered owner(s) of the Shares as set forth in
the certificates if different from the name of the person presenting the Shares
for Redemption. If certificates have been delivered to the Depositary, then,
prior to the release of the certificates, the certificate numbers shown on the
particular certificates evidencing the Shares must also be submitted and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Fund in its sole discretion, and
the determination shall be final and binding. Shares properly withdrawn shall
not thereafter be considered to have been presented for Redemption for purposes
of the Redemption Right. However, withdrawn Shares may be presented for
Redemption again by following the procedures described in Section 2 on or prior
to the Expiration Date.
NONE OF THE FUND, THE INVESTMENT MANAGER, THE CUSTODIAN, THE DEPOSITARY OR
ANY OTHER PERSON IS OR WILL BE OBLIGATED TO GIVE ANY NOTICE OF ANY DEFECTS OR
IRREGULARITIES, OR WAIVERS OF DEFECTS OR IRREGULARITIES, IN A REDEMPTION
REQUEST, OR IN ANY NOTICE OF WITHDRAWAL, AND NONE OF THEM WILL INCUR ANY
LIABILITY FOR FAILURE TO DO SO.
6
<PAGE> 12
5. PAYMENT FOR SHARES.
For purposes of the Redemption Right, the Fund will be deemed to have
redeemed Shares pursuant to the Redemption Right when, as and if it gives oral
or written notice to the Depositary of its acceptance of the Shares for
repurchase. Pursuant to a rule under the Exchange Act, the Fund is obligated to
pay for or return Shares presented for Redemption promptly after the
termination, expiration or withdrawal of the Redemption Right. Upon the terms
and subject to the conditions of the Redemption Right, the Fund will accept for
payment and will pay for all Shares validly presented for Redemption on or prior
to the Expiration Date and not withdrawn. On the Valuation Date, the Fund will
determine the net asset value per Share, and will calculate the number of
Portfolio Securities of each issuer attributable pro rata to each Share. For
each Share properly presented for Redemption and accepted for repurchase, the
Fund will exchange a pro rata portion of its Portfolio Securities. The Fund will
not pay interest on the Repurchase Price under any circumstances. If more than
4,883,365 Shares are presented for Redemption, the Fund will repurchase Shares
on a pro rata basis in accordance with the number of Shares properly presented
for Redemption and accepted by each Shareholder during the period the Redemption
Right remains open, unless the Fund determines not to repurchase any Shares. See
Section 1.
In all cases, payment for Shares repurchased pursuant to the Redemption
Right will be made only after timely receipt by the Depositary of: (a) a
properly completed and executed Letter of Transmittal, (b) the Shares (in proper
certificated or uncertificated form), and (c) any other documents required by
the Letter of Transmittal. Shareholders may be charged a fee by their broker,
dealer or other institution for processing the request for Redemption. A
redeeming Shareholder will also be charged with his/her proportionate share of
the expenses of the distribution of proceeds of the Redemption, which expenses
will be deducted from the Shareholder's proceeds of the Redemption. Certificates
representing Shares presented for Redemption but not repurchased will be
returned promptly following the termination, expiration or withdrawal of the
Redemption Right, without expense to the redeeming Shareholder. Redeeming
Shareholders who choose to liquidate Portfolio Securities received for cash will
further bear the costs of liquidation of such securities.
The Fund will pay any transfer taxes payable on the transfer to it of
Shares repurchased pursuant to the Redemption Right. The Fund should be entitled
to rebates or refunds of transfer taxes paid by the Fund on Shares repurchased
pursuant to the Redemption Right. However, if Shares presented for Redemption
are registered in the name of any person other than the person signing the
Letter of Transmittal, the amount of any taxes (whether imposed on the
registered owner or the other person) payable on account of the transfer to that
person of the Shares will be deducted from the purchase price unless
satisfactory evidence of the payment of the taxes, or exemption therefrom, is
submitted. The Fund will not pay any interest on the Repurchase Price under any
circumstances. The Fund may not be obligated to purchase Shares pursuant to the
Redemption Right under certain conditions. See Section 6.
Any redeeming Shareholder or other payee who has not previously submitted a
correct, completed and signed Form W-8 or Form W-9, as necessary, and who fails
to complete fully and sign either the Form W-8 or Substitute Form W-9 in the
Letter of Transmittal and provide that form to the Depositary, may be subject to
required federal income tax withholding of 31% of the gross proceeds paid to the
shareholder or other payee pursuant to the Redemption Right. See Section 16.
6. CERTAIN CONDITIONS OF THE REDEMPTION RIGHT.
Notwithstanding any other provision of the Redemption Right, the Fund shall
not be required to accept for payment or pay for any Shares, may (subject to
Rule 13e-4(f)(5) under the Exchange Act, relating to the Fund's obligation to
pay for or return Shares presented for Redemption after the termination or
withdrawal of the Redemption Right) postpone the acceptance for payment of, or
payment for, Shares presented for Redemption, and may, in its sole discretion,
terminate or amend the Redemption Right as to any Shares not then paid for if at
any time on or after September 2, 1998 and prior to the time of payment for any
of those Shares (whether any Shares have been accepted for payment, purchased or
paid for pursuant to the Redemption Right) any of the following events shall
have been determined to have occurred, that, in the Board's sole judgment in any
case and regardless of the circumstances giving rise thereto (including any
action or omission to act by the Fund), makes it inadvisable to proceed with the
Redemption Right or with
7
<PAGE> 13
acceptance for payment or payment: (1) such transactions, if consummated, would
(a) result in the delisting of the Fund's Shares from the NYSE, (b) impair the
Fund's status as a regulated investment company under the Code, or (c) result in
a failure to comply with applicable asset coverage requirements; (2) over 90% of
the Fund's outstanding Shares have been presented for Redemption; or (3) there
is, in the judgment of the Board, any material event or condition that would
have an adverse effect on the Fund or its shareholders if Shares were
repurchased under the Redemption Right, including, without limitation, the
occurrence of any of the following:
(a) there shall be threatened, instituted or pending any action,
proceeding or application before any court or governmental authority or
other regulatory or administrative agency or commission, domestic or
foreign, by any government or governmental authority or other regulatory or
administrative agency or commission, domestic or foreign, or by any other
person, domestic or foreign, challenging the acquisition by the Fund of the
Shares or seeking to restrain, delay or prohibit the making of the
Redemption Right, or the acceptance for payment, repurchase of, or payment
for, some or all of the Shares or resulting in a delay in, or restricting,
the ability of the Fund, or rendering the Fund unable, to accept for
payment, repurchase or pay for some or all of the Shares, or otherwise
directly or indirectly relating in any manner to or affecting the
Redemption Right;
(b) any statute, rule, regulation or order or injunction sought,
proposed, enacted, promulgated, entered, enforced or deemed or becomes
applicable to the Redemption Right or any other action shall have been
taken, proposed or threatened, by any government, governmental authority or
other regulatory or administrative agency or commission or court, or any
other person, domestic or foreign, that, in the sole judgment of the Board,
might, directly or indirectly, result in any of the consequences referred
to in paragraph (a) above;
(c) there shall have occurred (i) any general suspension of, or
limitation on times or prices for, trading in securities on any national
securities exchange or in the over-the-counter market or in any other
securities exchange or market on which a portion of the Fund's portfolio
securities are traded, (ii) a declaration of a banking moratorium or any
suspension of payments in respect to banks in the United States or any
other country in which the Fund's assets are invested, (iii) a commencement
of a war, armed hostilities or other international or national calamity
directly or indirectly involving or affecting the United States or any
other country in which the Fund's assets are invested, (iv) any limitation
(whether or not mandatory) by any governmental authority in the United
States or in any other country in which the Fund's assets are invested, or
any other event which, in the sole judgment of the Board, might affect the
extension of credit by banks or other lending institutions or foreign
currency transactions by such institutions or (v) in the case of any of the
foregoing existing at the time of the commencement of the Redemption Right,
in the sole judgment of the Board, a material acceleration or worsening
thereof; or
(d) any change (or any condition, event or development involving a
prospective change) shall have occurred or be threatened in the general
economic, financial, currency exchange or market conditions in the United
States or in any other country that, in the sole judgment of the Board, has
or may have a material adverse effect upon the value of the assets of the
Fund.
These conditions are for the Fund's sole benefit and may be asserted by the
Fund regardless of the circumstances (including any action or inaction of the
Fund), and any condition may be waived by the Fund, in whole or in part, at any
time and from time to time in its sole discretion. The Fund's failure at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
right; the waiver of any right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances; and each right shall be deemed an ongoing right which may be
asserted at any time and from time to time. Any determination by the Fund
concerning the events described in this Section 6 shall be final and shall be
binding.
The Fund reserves the right, at any time during the pendency of the
Redemption Right, to terminate, extend, or amend the Redemption Right in any
respect. See Section 17.
8
<PAGE> 14
7. PURPOSE OF THE REDEMPTION RIGHT; PLANS OR PROPOSALS OF THE FUND.
The purpose of the Redemption Right is to provide Shareholders who may no
longer wish to remain invested in the Fund with the opportunity, to the extent
consistent with the best interests of the Fund and all of its Shareholders, to
request Redemption of their Shares by the Fund in order to realize the net asset
value of their Shares. Moreover, although the Fund will pay its Shareholders a
cash distribution of all undistributed 1998 net investment income and
undistributed net realized net capital gains prior to the Expiration Date, the
Fund will not attempt to realize or distribute unrealized capital gains prior to
the Expiration Date. Accordingly, a substantial portion of the net asset value
of the Fund will consist of unrealized capital gains. As of July 31, 1998, the
Fund had approximately $57,092,818 of unrealized capital gains, representing
approximately 42.4% of its net asset value. In-kind payment of redemption
proceeds is designed to prevent the involuntary recognition and receipt by
non-redeeming Shareholders of any portion of the unrealized capital gains which
would be realized if the Fund sold Portfolio Securities in order to satisfy
redemption requests in cash.
If more than 75% of the issued and outstanding Shares of the Fund are
presented for Redemption prior to the expiration of the Redemption Right, the
Fund will repurchase Shares from redeeming Shareholders, in accordance with the
terms and conditions specified in this Redemption Right Statement, on a pro rata
basis. If Shares representing 90% or more of the outstanding Shares of the Fund
are presented for Redemption, the Fund currently intends to suspend the
Redemption Right and the Board of Directors, under such circumstances, currently
intends to submit a proposal to shareholders to liquidate the Fund. The
liquidation of the Fund would require the Fund to sell all of its assets and
distribute the proceeds to its shareholders, after making provision for the
payment of the costs of liquidation and dissolution of the Fund.
THE REDEMPTION RIGHT AND THIS REDEMPTION RIGHT STATEMENT DO NOT CONSTITUTE
A SOLICITATION OF ANY PROXIES. ANY SUCH SOLICITATIONS WILL BE MADE ONLY PURSUANT
TO SEPARATE PROXY MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
8. PRICE RANGE OF SHARES; DIVIDENDS.
The following tables set forth, for the periods indicated, the high and low
NAV per Share and the high and low sales prices per Share of the Fund as
reported by the NYSE Composite Tape and the amount of any income dividends and
distributions of realized capital gains paid per Share during each period.
Shares are traded on the NYSE under the symbol "IBF." Shareholders are urged to
obtain a current market quote for the Shares.
TABLE 1 -- MARKET PRICE AND NET ASSET VALUE OF FUND SHARES
<TABLE>
<CAPTION>
HIGH SALES NET ASSET PREMIUM LOW SALES NET ASSET PREMIUM
PERIOD PRICE VALUE (DISCOUNT) PRICE VALUE (DISCOUNT)
------ ---------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996
First Quarter............. $ 8.625 $10.81 (20.2)% $ 7.750 $10.36 (25.2)%
Second Quarter............ 9.000 11.02 (18.3)% 8.313 10.82 (23.2)%
Third Quarter............. 9.000 11.59 (22.3)% 8.313 11.15 (25.4)%
Fourth Quarter............ 11.125 13.76 (19.1)% 8.875 11.59 (23.4)%
1997
First Quarter............. 11.500 14.29 (19.5)% 10.500 14.04 (25.2)%
Second Quarter............ 14.000 16.90 (17.2)% 10.750 13.81 (22.2)%
Third Quarter............. 14.500 17.34 (16.4)% 12.313 15.75 (21.8)%
Fourth Quarter............ 15.813 17.28 (8.5)% 11.625 15.11 (23.1)%
1998
First Quarter............. 18.500 20.00 (7.5)% 13.063 14.87 (12.2)%
Second Quarter............ 19.500 21.17 (7.9)% 16.750 19.15 (12.5)%
</TABLE>
9
<PAGE> 15
TABLE 2 -- INCOME DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS PAID PER SHARE
<TABLE>
<CAPTION>
INCOME CAPITAL GAIN
PERIOD DIVIDENDS DISTRIBUTIONS
- ------ --------- -------------
<S> <C> <C>
1996
First Quarter............................................... 0 0
Second Quarter.............................................. 0 0
Third Quarter............................................... 0 0
Fourth Quarter.............................................. 0.090 0.180
1997
First Quarter............................................... 0 0
Second Quarter.............................................. 0 0
Third Quarter............................................... 0 0
Fourth Quarter.............................................. 0.030 2.645
1998
First Quarter............................................... 0 0
Second Quarter.............................................. 0 0
Third Quarter**............................................. 0 0
</TABLE>
- ---------------
** Through the period ending July 31, 1998.
During the pendency of the Redemption Right, you may obtain NAV quotations
for the Fund as of the close of business on the previous business day by calling
the Information Agent at 1-800-733-8481, extension 426, between the hours of
9:00 a.m. and 5:00 p.m., Eastern Time, Monday-Friday (except holidays).
9. SELECTED FINANCIAL INFORMATION.
Set forth below is a summary of selected financial information for the Fund
for the fiscal year ended September 30, 1996, for the fiscal year ended
September 30, 1997, for the six month period ended March 31, 1997, for the six
month period ended March 31, 1998, and for the ten month period ended July 31,
1998. More comprehensive financial information is included in the financial
statements, which are included as Exhibits A-1 and A-2 to this Redemption Right
Statement, and the summary of selected financial information set forth below is
qualified in its entirety by reference to those documents and the financial
information, the notes thereto and related matters contained therein.
SUMMARY OF SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
TEN MONTHS SIX MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
7/31/98+ 3/31/98+ 3/31/97+ 9/30/97 9/30/96
------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Investment income:
Interest, dividend and other
income (net of foreign
taxes withheld)............ $ 1,861,132 $ 710,039 $ 769,125 $ 2,144,257 $ 1,908,899
Expenses...................... (2,228,838) (961,687) (757,002) (1,638,765) (1,331,935)
------------ ------------ ----------- ------------ -----------
Net investment income
(loss)..................... $ (367,706) $ (251,648) $ 12,123 $ 505,492 $ 576,964
============ ============ =========== ============ ===========
</TABLE>
10
<PAGE> 16
<TABLE>
<CAPTION>
TEN MONTHS SIX MONTHS SIX MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
7/31/98+ 3/31/98+ 3/31/97+ 9/30/97 9/30/96
------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on
investments, foreign currency
transactions and forward
foreign currency contracts.... $ 18,962,170 $ 12,177,225 $ 8,068,169 $ 17,645,376 $ 5,880,465
Net unrealized appreciation on
investments and foreign
currency transactions and
forward foreign currency
contracts..................... $ 20,656,533 $ 21,327,188 $10,021,931 $ 21,389,505 $ 6,083,968
STATEMENT OF ASSETS AND
LIABILITIES (at end of period)
Total assets.................... $135,828,133 $128,951,816 $91,830,540 $114,274,826 $75,345,326
Total liabilities............... (1,084,773) (206,687) (359,123) (1,365,259) (218,132)
------------ ------------ ----------- ------------ -----------
Net assets...................... $134,743,360 $128,745,129 $91,471,417 $112,909,567 $75,127,194
============ ============ =========== ============ ===========
Net asset value per share......... $ 20.69 $ 19.77 $ 14.05 $ 17.34 $ 11.54
Shares of common stock
outstanding..................... 6,511,154 6,511,154 6,511,154 6,511,154 6,511,154
PER SHARE
Net investment income (loss).... $ (0.06) $ (0.04) $ 0.00 $ 0.08 $ 0.09
Net realized and unrealized gain
(loss)........................ 6.09 5.15 2.78 5.99 1.84
Dividends from net investment
income........................ (0.03) (0.03) (0.09) (0.09) (0.07)
Distribution from net realized
gains......................... (2.65) (2.65) (0.18) (0.18) (0.00)
RATIOS
Total expenses to average net
assets........................ 2.26%* 1.77%* 1.77%* 1.74% 1.92%
Net investment income (loss) to
average net assets............ (0.37)%* (0.46)%* 0.03%* 0.54% 0.83%
TOTAL RETURN***
Total investment return, market
value****..................... 56.68%** 49.00%** 28.38%** 67.33% 18.31%
Total investment return, net
asset value*****.............. 41.74%** 35.44%** 24.69%** 53.89% 20.19%
</TABLE>
- ---------------
+ Unaudited.
* Annualized.
** Not annualized.
*** Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each period reported. Dividends and distributions, if any, are assumed
for the purposes of this calculation to be reinvested at prices obtained
under the Fund's dividend reinvestment plan. Total investment return does
not reflect sales charges that would have been paid on purchases in the
initial public offering or brokerage commissions that would have been paid
in connection with secondary market transactions. Generally, total
investment return based on net asset value will be higher than total
investment return based on market value in periods where there is an
increase in the discount or a decrease in the premium of the market value
to the net asset value from the beginning to the end of such periods.
Conversely, total investment returns based on net asset value will be
lower than total investment returns based on market value in periods where
there is a decrease in the discount or an increase in the premium of the
market value to the net asset value from the
11
<PAGE> 17
beginning to the end of such periods. Investment return and principal
value will fluctuate with market conditions, currencies and the political,
social and economic climates of countries where investments are made. Past
performance is not predictive of future results. Total investment returns
for periods of less than one full year have not been annualized.
**** Based on the change in market price of a Share during the period and
assumes reinvestment of distributions at actual prices due to the Fund's
DRIP. The cumulative total return since inception (April 20, 1988) based
on market value at July 31, 1998 was 201.85%. (Unaudited)
***** Total investment returns reflect changes in net asset value per share
during each period and assume the dividends and capital gain
distributions, if any, were reinvested. These percentages are not an
indication of the performance of a Shareholder's investment based on
market price. The cumulative rate of return since inception (April 20,
1988) based on net asset value at July 31, 1998 is 251.13%. (Unaudited)
10. INTEREST OF CERTAIN RELATED PERSONS.
Pursuant to an Investment Advisory, Management and Administrative Agreement
dated December 31, 1997, the Fund employs Scudder Kemper Investments, Inc.
("Scudder Kemper") to manage the investment and reinvestment of the assets of
the Fund. Scudder Kemper (formerly Scudder, Stevens & Clark, Inc.) has been the
Fund's investment manager since April 1, 1992. The management and administrative
fee payable under the Investment Advisory, Management and Administration
Agreement effective December 31, 1997 is equal to an annual rate of 1.20% of the
value of the Fund's average weekly net assets, and is payable monthly. Prior to
December 31, 1997, the Fund had a management agreement whereby the Fund agreed
to pay Scudder, Stevens & Clark, Inc. a fee equal to an annual rate of 1% of the
Fund's average weekly net assets, computed weekly and payable monthly. The Fund
also had an administration agreement whereby the Fund agreed to pay Scudder,
Stevens & Clark, Inc. a fee equal to an annual rate of 0.20% of the Fund's
average weekly net assets, computed weekly and payable monthly. Effective
December 31, 1997, the administration agreement became part of the Management
Agreement.
Scudder Investor Services, Inc. will act as the liquidating agent for the
benefit of redeeming Shareholders who request that their Portfolio Securities be
liquidated for cash. Scudder Investor Services, Inc. will provide instructions
to the Custodian for the liquidation process and will not receive any
compensation for its services other than any customary and reasonable
transaction based expenses and brokerage fees and commissions. Such expenses
will be borne by redeeming Shareholders requesting liquidation of Portfolio
Securities received.
To the Fund's knowledge, there have not been any transactions in Shares of
the Fund that were effected during the past 40 business days by the Fund, any
member of the Board or executive officer of the Fund, any person controlling the
Fund, any executive officer or director of any corporation ultimately in control
of the Fund or by any associate or subsidiary of any of the foregoing, including
any officer or director of the associates or subsidiaries.
11. CERTAIN EFFECTS OF THE REDEMPTION RIGHT.
The repurchase of Shares pursuant to the Redemption Right will have the
effect of increasing the proportionate interest in the Fund of non-redeeming
Shareholders. All Shareholders remaining after the Redemption Right may be
subject to any increased risks associated with the reduction in the Fund's
aggregate assets, such as any greater volatility due to decreased
diversification and reduced liquidity and proportionately higher expenses. See
Sections 11 and 13 and Exhibit A-3. Additionally, a reduction in the number of
Shares issued and outstanding may reduce the liquidity and the depth of the
market for the Shares traded.
All Shares repurchased by the Fund pursuant to the Redemption Right will
remain authorized but unissued and will be available for issuance by the Fund
without further Shareholder action (except as required by applicable law or the
rules of the NYSE). If more than 4,883,365 Shares (which constitute as of
September 1, 1998, 75% of the outstanding shares of the Fund) are presented for
Redemption, they will be accepted on a pro rata basis. If 90% or more of the
outstanding shares of the Fund are presented for Redemption, the Redemption
Right will be suspended and, under such circumstances, it is the current
intention of the Board of Directors to submit a proposal to Shareholders to
liquidate the Fund.
12
<PAGE> 18
12. CERTAIN INFORMATION ABOUT THE FUND.
The Fund was organized as a Maryland corporation in 1987 and is registered
as a non-diversified, closed-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund's
investment objective is to seek long-term capital appreciation by investing in
the equity securities of Spanish and Portuguese companies. Under normal
conditions, the Fund invests at least 80% of its total assets in the equity
securities of Spanish and Portuguese issuers. Specifically, the Fund invests in
(i) securities traded principally on stock exchanges in Spain or Portugal, (ii)
securities of companies that derive more than 50% or more of their total revenue
from goods produced, sales made or services performed in Spain or Portugal,
(iii) securities (including American Depository Receipts) of companies organized
under the laws of Spain or Portugal, (iv) equity securities of Spanish or
Portuguese companies that are not listed or traded on a stock exchange, and (v)
securities of investment companies and trusts that invest principally in the
foregoing.
Any balance of the Fund's assets are invested in debt securities,
consisting of notes and debentures of companies, bank deposits, bills and bonds
of government or major governmental subdivisions of the United States, Spain and
Portugal, repurchase agreements with respect to securities in which the Fund may
invest or participation interests in bank loans. The Fund's investment in debt
securities and money market instruments is limited to obligations rated "A" or
better by Moody's Investors Services, Inc. ("Moody's") or Standard and Poor's
Corporation ("S&P"), or, if not rated, that are in the judgment of Scudder
Kemper of equivalent quality. Under normal circumstances, the Fund may invest up
to 15% of its total assets in unlisted equity securities.
Recent Developments.
The Redemption Right is the result of a process occurring over the last
several months during which the Board of Directors of the Fund has explored
means by which Shareholders could be provided the ability to elect to realize
the net asset value of their investment in the Fund. On January 28, 1998, the
Fund announced that it had approved in concept a tax-free merger with The Growth
Fund of Spain, Inc., a closed-end management investment company also managed by
Scudder Kemper, which would be followed by a one time in-kind redemption offer
for shares of the combined fund at net asset value. The merger was structured as
a federal income tax-free transaction for the stockholders of the two funds. On
April 16, 1998, the Fund announced that the merger of The Growth Fund of Spain,
Inc. into the Fund had been approved by the board of directors of each fund. On
July 23, 1998, following discussions with management concerning, among other
things, the likelihood that the requisite number of shareholders of both funds
would approve the merger plan, the boards of directors of both funds voted to
suspend the merger plan. On that same date, the Fund announced that the Board of
Directors of the Fund had voted to approve an offer by the Fund to allow its
shareholders to elect to realize the net asset value of their investment in the
Fund through an in-kind redemption.
Reference is made to Section 8 and Section 9 of this Redemption Right
Statement and the financial statements attached as Exhibit A-1 and A-2, which
are incorporated by reference.
The principal executive office of the Fund is 345 Park Avenue, New York, NY
10154.
13. SOURCE AND AMOUNT OF CONSIDERATION.
The total cost to the Fund of repurchasing 4,883,365 of its issued and
outstanding Shares pursuant to the Redemption Right would be approximately
$91,318,000 (based on a price per share of $18.70, the NAV as of August 24,
1998); the costs of preparing the materials for and conducting the Redemption
Right through the Expiration Date (which costs include the services of the
Depositary and Information Agent) would be approximately $271,000. The Fund will
not be responsible for the costs of distributing the proceeds of the Redemption
Right, including any transaction expenses and fees and the costs associated with
the services of the Custodian or Liquidating Agent (as pertains to distribution
of proceeds and liquidation of Portfolio Securities), which will be paid by
redeeming Shareholders.
13
<PAGE> 19
Upon the terms and subject to the conditions of the Redemption Right, the
Fund will repurchase the Shares presented for Redemption at a per Share
consideration which will be equal to the highest per Share consideration paid to
any other Shareholder during the pendency of the Redemption Right.
No fractional shares of Portfolio Securities will be transferred to
shareholders pursuant to the Redemption Right. Such fractional shares will be
valued at their closing market price as of the Valuation Date and payment
therefor will be made in cash to redeeming Shareholders. Upon effective transfer
of Portfolio Securities from the Fund to the Custodian, the Fund will have paid
the consideration owed by it to redeeming Shareholders. Redeeming Shareholders
who have elected to retain their Portfolio Securities (instead of liquidating
Portfolio Securities for cash) may experience a delay in the reregistration of
their Portfolio Securities due to the process of transferring title. Such
Shareholders are also required to provide information regarding cash and
securities accounts which they have established with a bank or broker in both
the local Spanish and Portuguese markets who will effect the reregistration of
Portfolio Securities and a U.S. bank or broker who can retain American
Depository Receipts that may be part of the Portfolio Securities received.
Shareholders who elect to liquidate Portfolio Securities received for cash will
receive cash within a reasonable time after the end of the liquidation process,
which is expected to last at least thirty days.
Shareholders who are not Fund Shareholders of record, but instead hold and
present for Redemption their Shares in the name of a broker, dealer, financial
institution or other nominee, will receive the Portfolio Securities to which
they are entitled in the name of their broker, dealer, financial institution or
other nominee. It will be the responsibility of such brokers, dealers, financial
institutions and other nominees to calculate and distribute or credit either
fractional shares or cash in respect of fractional shares, at their election, to
their clients' accounts.
The Portfolio Securities to which redeeming Shareholders are entitled
constitute, except for short-term fixed income securities with maturities of
less than one year, securities with transfer restrictions or certain illiquid
securities, a representative portion of the equity securities of Spanish and
Portuguese companies in which the Fund has invested and cash it holds. For more
information about the securities which may be included as Portfolio Securities,
Shareholders should refer to Exhibit A-2.
Under no circumstances will the Fund pay interest on the Repurchase Price
for the Shares, regardless of any delay in making payment therefor. Redeeming
Shareholders will not be obligated to pay brokerage commissions or fees in
connection with their demand to redeem Shares, although a redeeming
Shareholder's broker may charge a processing fee for assistance in transmitting
that redeeming Shareholder's Redemption demand to the Fund and all redemptions
effected by the Fund will bear the administrative costs and expenses incurred in
transferring Portfolio Securities from the Fund to the redeeming Shareholder
and, if applicable, in liquidating them.
14. REGULATORY APPROVALS.
Prior to the commencement of the proposed in-kind redemption right the Fund
received a private letter ruling from the Internal Revenue Service with respect
to the tax consequences of the Redemption Right to the Fund. In addition, the
Fund is seeking exemptive relief from the Securities and Exchange Commission
(the "SEC") from the provisions of Section 17(a) of the 1940 Act to permit
certain "affiliated persons" of the Fund who own 5% or more of the Fund's shares
to participate in the Redemption Right. The Fund currently has at least one such
5% Shareholder. Although the Fund currently expects to receive this exemptive
relief prior to the Expiration Date, such relief is not necessary for the Fund
to conduct the Redemption Right and the Fund will conduct the Redemption Right
without having received the requested exemptive order. The Fund is unable to
predict whether it would delay the acceptance for payment of, or payment for,
Shares presented for Redemption pursuant to the Redemption Right with respect to
any Shareholder pending the outcome of such matter. There can be no assurance
that any such approval or other action, if needed, will be obtained. The Fund's
obligations under the Redemption Right to accept for payment and pay for Shares
are subject to certain conditions. See Section 6.
14
<PAGE> 20
15. ADDITIONAL INFORMATION.
The Fund is subject to the information and reporting requirements of the
1940 Act and in accordance is obligated to file reports and other information
with the SEC relating to its business and financial condition and other matters.
The Fund has also filed an Issuer Tender Offer Statement on Schedule 13E-4 with
the SEC; the Schedule 13E-4 includes certain additional information relating to
the Redemption Right, which material may be inspected and copied at prescribed
rates at the SEC's public reference facilities at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and Seven World Trade Center, New York, New
York 10048. Copies of the Schedule 13E-4 may also be obtained by mail at
prescribed rates from the Public Reference Branch of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549.
16. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES.
The following discussion is a general summary of the U.S. federal income
tax consequences of a Redemption of Shares. The discussion is for general
information purposes only and does not purport to consider all aspects of U.S.
federal income taxation that might be relevant to beneficial owners of Shares.
The discussion is based upon current provisions of the Internal Revenue Code of
1986, as amended (the "Code"), existing regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all of which are subject to
change, which change could be retroactive. The discussion applies only to
beneficial owners of Shares in whose hands Shares are capital assets within the
meaning of Section 1221 of the Code, and may not apply to certain types of
beneficial owners of Shares (such as insurance companies, tax-exempt
organizations, and broker-dealers) who may be subject to special rules. Persons
who may be subject to tax in more than one country should consult the provisions
of any applicable tax treaty to determine the potential tax consequences to
them. You should consult your own tax adviser for a complete description of the
tax consequences to you of a sale of Shares pursuant to the Redemption Right,
including potential state, local and non-U.S. taxation by taxing jurisdictions
of which you are a resident or domiciliary.
As described above, redeeming Shareholders may elect to retain Portfolio
Securities received as proceeds from the Redemption Right or may elect to direct
that the Portfolio Securities received as proceeds from the Redemption Right be
liquidated for cash. In either case, the distribution of Portfolio Securities is
a taxable event to the redeeming Shareholder. The liquidation of Portfolio
Securities received for cash is an additional separate taxable event.
In view of the requirement of the Redemption Right that an electing
Shareholder submit or cause the submission of all of the Shares actually owned
and constructively owned by the Shareholder under Section 318 of the Code as of
the date of redemption of Shares pursuant to the Redemption Right, Shareholders
should consult their tax advisers regarding the application of the constructive
ownership rules of Section 318. In general, Section 318 provides that Shares
owned by certain family members of, and by entities treated by that section as
related to, the Shareholder are treated as owned by the Shareholder.
U.S. SHAREHOLDERS. This subsection will be relevant to individuals who are
citizens of the U.S. or resident aliens of the U.S., domestic corporations,
domestic partnerships, and certain estates and trusts treated as "U.S. persons"
under the U.S. federal tax law. Under current federal income tax law,
regulations and Internal Revenue Service rulings, the receipt of Portfolio
Securities for Shares pursuant to the Redemption Right will be a taxable
transaction. Shareholders who redeem their Shares receive either "exchange
treatment" or "dividend treatment" with respect to their redemption proceeds
(i.e., the Portfolio Securities).
If a redemption satisfies any of paragraphs (1), (2), (3), or (4) of Code
section 302(b), the redemption proceeds shall be treated as payment for the
stock that is redeemed, i.e., the redemption will be accorded exchange
treatment. If a redeeming Shareholder is entitled to exchange treatment, such
Shareholder would recognize gain or loss for U.S. federal income tax purposes
equal to the difference between: (i) the fair market value of the Portfolio
Securities he or she receives, and (ii) the Shareholder's adjusted tax basis in
the Shares redeemed. Such gain or loss would be capital gain or loss if the
Shares were a capital asset in the hands of the Shareholder. Under current law,
the maximum federal income tax rate applicable to most non-corporate taxpayers
on capital gain for assets held more than one year is 20%. Gain or loss must be
determined
15
<PAGE> 21
separately for each block of Shares (i.e., Shares acquired at the same cost in a
single transaction) sold pursuant to the Redemption Right.
On the other hand, if none of paragraphs (1), (2), (3), or (4) of section
302(b) applies, such redemption may be accorded dividend treatment. If so, Code
section 301 provides that redeeming Shareholders shall include the amount of
that distribution (i.e., the fair market value of the Portfolio Securities
received) as ordinary income to the extent of the Fund's earnings and profits.
Code section 302(b) provides, in pertinent part, that a redemption shall be
accorded exchange treatment if the redemption:
(1) is "not essentially equivalent to a dividend;"
(2) is "substantially disproportionate" with respect to the shareholder;
(3) is "in complete redemption" of all of the stock of the corporation
owned by the shareholder; or
(4) in the case of a non-corporate shareholder, is "in partial liquidation"
of the distribution of the distributing corporation.
A Shareholder who follows the redemption guidelines provided herein should
receive exchange treatment. Because a redeeming Shareholder will be required to
redeem all of his shares (determined by applying the attribution rules of Code
section 318), a redeeming Shareholder generally should qualify for exchange
treatment by virtue of Code section 302(b)(3), which accords exchange treatment
to a redeeming Shareholder "if the redemption is in complete redemption of all
of the stock owned by the shareholder." If more than 75% of the issued and
outstanding Shares of the Fund are presented for Redemption and the Fund
prorates its Redemption of the Shares, see Sections 1 and 6, the redeeming
Shareholder should nonetheless receive exchange treatment because such
Redemption would be "substantially disproportionate" with respect to such
redeeming Shareholder, pursuant to Code section 302(b)(2).
Nonetheless, it is possible that a redeeming Shareholder may violate the
terms of the Redemption Right. In that case, the redeeming Shareholder may
receive dividend treatment pursuant to Code sections 302(d) and 301. Any
Shareholder that chooses to violate the terms of the Redemption Right should
consult his own tax advisor regarding the tax consequences of the Redemption
Right.
In all cases, a redeeming Shareholder would take a tax basis in the
Portfolio Securities he or she receives that is equal to the fair market value
of those Portfolio Securities on the date of the exchange.
Under the "wash sale" rules, recognition of a loss on Shares sold pursuant
to the Redemption Right will ordinarily be disallowed to the extent a
Shareholder acquires either an option to purchase Shares or Shares within 30
days before or after the date Shares are redeemed pursuant to the Redemption
Right and, in that event, the basis and holding period of the Shares acquired
will be adjusted to reflect the disallowed loss.
Generally speaking, a one-time redemption does not have adverse tax
consequences on non-redeeming shareholders. Code section 305(a) provides that a
shareholder generally shall not include in gross income the amount of any
distribution of the stock of a corporation made by such corporation to its
shareholders with respect to its stock unless one of several exceptions applies.
Section 305(b)(2) provides one such exception: if the distribution (or series of
distributions of which such distribution is one) has the result of some
shareholders receiving property and other shareholders increasing their
proportionate interests in the assets or earnings and profits of the
corporation, section 305(a) shall not apply to the distribution and instead the
distribution shall be treated as a distribution of property to which section 301
applies.
Section 305(c) requires the Secretary of the Treasury to prescribe
regulations under which, among other things, "a redemption which is treated as a
distribution to which section 301 applies, or any transaction (including a
recapitalization) having a similar effect on the interest of any shareholder,"
will be treated as a distribution with respect to any shareholder (including a
non-redeeming shareholder) whose proportionate interest in the earnings and
profits or assets of the corporation is increased by such redemption.
Treas. Reg. sec. 1.305-7(a) provides that if any of those section 305(c)
situations arises, and if a non-redeeming shareholder's proportionate interest
in the earnings and profits or assets of the redeeming
16
<PAGE> 22
corporation increases, and if such distribution has the result described in
paragraphs (2), (3), (4), or (5) of section 305(b), such non-redeeming
shareholder will be treated as receiving a distribution to which section 305(b)
applies and consequently, to which section 301 applies, i.e., a constructive
dividend. Treas. Reg. sec. 1.305-3(b)(3) provides, however, among other things,
that a distribution of property "incident to an isolated redemption of stock
(for example, pursuant to a tender offer)" will not cause section 305(b)(2) to
apply even though the distribution is treated as a distribution of property to
which section 301 applies. Because the Fund has represented that it has not
previously redeemed its shares, the Redemption should constitute an "isolated
redemption" within the meaning of Treas. Reg. sec. 1.305-3(b)(3).
The federal income tax consequences of the Redemption will apply to
Shareholders regardless of whether they direct that the Portfolio Securities
received as proceeds from the Redemption of Shares pursuant to the Redemption
Right be liquidated for cash. For Shareholders who so elect, the liquidation of
the Portfolio Securities will be a separate taxable transaction, and electing
Shareholders will have gain or loss equal to the difference between the amount
received in exchange for the Portfolio Securities and their basis (that is, the
fair market value of the Portfolio Securities when distributed in the
Redemption).
The liquidation will be completed as soon as practicable following the
Redemption, but will not occur immediately. As a result, there will be an
intervening time period during which the fair market values of the Portfolio
Securities may increase or decrease. If there is no fluctuation in the value of
Portfolio Securities, Shareholders will have no gain or loss; otherwise, gain or
loss will be recognized to the Shareholders on the liquidation of the Portfolio
Securities and will be treated as short-term capital gain or loss.
The Depositary may be required to withhold 31% of the gross proceeds paid
to a Shareholder pursuant to the Redemption Right unless either: (a) the
Shareholder has completed and submitted to the Depositary the Substitute Form
W-9 included with the Transmittal Letter, providing the shareholder's taxpayer
identification number/social security number and certifying under penalties of
perjury: (i) that the number is correct, and (ii) either that (A) the
Shareholder is exempt from backup withholding, (B) the Shareholder has not been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding as a result of an underreporting interest or dividends or (C)
the Internal Revenue Service has notified the Shareholder that the Shareholder
is no longer subject to backup withholding; (b) the Shareholder is a
corporation; or (c) an exception applies under applicable law and Treasury
regulations to such Shareholders. A beneficial owner who does not provide a
correct TIN may be subject to penalties imposed by the IRS. Any amount paid as
backup withholding does not constitute an additional tax and will be creditable
against the beneficial owner's federal income tax liability. Each beneficial
owner of Shares should consult with his or her own tax adviser as to his or her
qualification for exemption from backup withholding and the procedure for
obtaining such exemption.
NON-U.S. SHAREHOLDERS. In general, a "Non-U.S. Shareholder" is any person
other than (1) a citizen or resident of the United States, (2) a corporation or
partnership created or organized in the United States under the laws of the
United States or any state, (3) an estate or trust that is subject or
potentially subject to U.S. federal income tax on its worldwide income on a net
basis or (4) a trust, the administration of which is subject to the primary
supervision of a U.S. court and the substantial decisions of which may be made
by U.S. persons. U.S. taxation of a "Non-U.S. Shareholder" depends on whether
the income from the Fund is "effectively connected" with a U.S. trade or
business carried on by the Non-U.S. Shareholder. Ordinarily, income from the
Fund will not be treated as "effectively connected" and, if that is the case,
any gain realized upon the redemption of Shares pursuant to the terms of the
Redemption will not ordinarily be subject to U.S. taxation. If, however, the
Non-U.S. Shareholder is treated as a non-resident alien individual but is
physically present in the United States for more than 182 days during the
taxable year, then, in certain circumstances, gain from the redemption of Shares
pursuant to the terms of the Redemption Right and gain from a liquidation of
Portfolio Securities will be subject to U.S. tax of 30% (or lower treaty rate).
If the income from the Fund is "effectively connected" with a U.S. trade or
business carried on by a Non-U.S. Shareholder, then any gain (or dividend
income) realized upon the sale of Shares of the Fund pursuant to the terms of
the Redemption Right will be subject to U.S. federal income tax at the graduated
rates applicable to U.S. taxpayers; this will also be true of gain resulting
from liquidation of Portfolio Securities if
17
<PAGE> 23
the liquidation proceeds are "effectively connected" with a U.S. trade or
business (see "Certain U.S. Federal Income Tax Consequences -- U.S.
Shareholders", above).
Non-U.S. Shareholders may be subject to dividend tax withholding at a 30%
rate or a lower applicable tax treaty rate on the gross proceeds of the
Redemption received by such Shareholder, if the proceeds are treated as a
"dividend" under the rules described above. In the event that the tax status of
the Redemption Right as a dividend is not clear to the Fund at the time of
payment, the Fund will withhold a portion of the proceeds as if the proceeds
constitute a dividend. In that case, the redeeming Shareholder may be eligible
to claim a refund of the withheld tax by filing a U.S. tax return if the
shareholder can demonstrate that the proceeds were not dividends. Non-U.S.
Shareholders should consult their tax advisers regarding application of these
withholding rules.
Non-U.S. Shareholders should provide the Depositary with a completed Form
W-8 in order to avoid 31% backup withholding. A copy of Form W-8 is provided
with the Letter of Transmittal for such Shareholders.
Non-U.S. Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of a redemption of Shares
pursuant to the Redemption.
17. EXTENSION OF REDEMPTION PERIOD, TERMINATION, AMENDMENTS.
The Fund expressly reserves the right, in its sole discretion, at any time
or from time to time, to extend the period of time during which the Redemption
Right is open by giving oral or written notice of extension to the Depositary
and the Custodian. During any extension, all Shares previously presented for
Redemption and not purchased or withdrawn will remain subject to the Redemption
Right, except to the extent that Shares may be withdrawn as set forth in Section
4. The Fund also expressly reserves the right, in its sole discretion, to
terminate the Redemption Right and not accept for repurchase or pay for any
Shares not accepted for repurchase or paid for or, subject to applicable law, to
postpone paying for Shares upon the occurrence of any of the conditions
specified in Section 6 by giving oral or written notice of termination or
postponement to the Depositary and the Custodian and making a public
announcement of that action. The Fund's right to delay payment for Shares which
it has accepted for repurchase is limited by Rule 13e-4(f)(5) promulgated under
the Exchange Act, which requires the Fund to either pay the consideration
offered or return the Shares redeemed promptly after termination or withdrawal
of a redemption offer. Subject to compliance with applicable law, the Fund
further reserves the right, in its sole discretion, to amend the Redemption
Right in any respect. Amendments to the Redemption Right may be made at any time
or from time to time effected by public announcement to be issued no later than
9:00 a.m., Eastern Time, on the next business day after the previously scheduled
Expiration Date. Any public announcement made pursuant to the Redemption Right
will be disseminated promptly to Shareholders in a manner reasonably designed to
inform shareholders of the change. Without limiting the manner in which the Fund
may choose to make a public announcement, except as required by applicable law,
the Fund will have no obligation to publish, advertise or otherwise communicate
any public announcement other than by making a release to the Dow Jones News
Service.
If the Fund materially changes the terms of the Redemption Right or the
information concerning the Redemption Right, the Fund will extend the Redemption
Right to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(2) promulgated
under the Exchange Act. These rules set forth the minimum period during which an
offer must remain open following material changes in the terms or information
concerning the offer. The materiality of the change depends on the facts and
circumstances, including the relative materiality of the terms or information.
If (i) the Fund increases or decreases the consideration offered for Shares
pursuant to the Redemption Right or the Fund increases the number of Shares
whose Redemption is offered by an amount exceeding 2% of the outstanding Shares,
or the Fund decreases the number of Shares whose Redemption is offered; and (ii)
the Redemption Right is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including, the
date that notice of increase or decrease is first published, sent or given, the
Redemption Right will be extended until the expiration of a period of ten
business days.
Except to the extent required by applicable law (including Rule 13e-4(f)(1)
promulgated under the Exchange Act), the Fund will have no obligation to extend
the Redemption Right. In the event that the Fund
18
<PAGE> 24
is obligated or elects to extend the Redemption Right, the purchase price for
Shares will be equal to the NAV determined as of the close of the regular
trading session of the NYSE on the first business day following the Expiration
Date, as extended. Between the previously scheduled Expiration Date and the new
Expiration Date, the rights of Shareholders (such as rights to demand redemption
and withdraw Shares) will remain unchanged. No Shares will be accepted for
payment until on or after the new Expiration Date. As NAV is determined on the
first business day following the last day of the Redemption Right, if the
Redemption Right is extended, NAV could be more or less than it would have been
on the original Expiration Date.
18. MISCELLANEOUS.
The Redemption Right is not being offered to, nor will the Fund accept
requests for Redemption from, owners of Shares in any jurisdiction in which the
Redemption Right or its acceptance would not comply with the securities or "blue
sky" laws of such jurisdiction. The Fund is not aware of any jurisdiction in
which the making of the Redemption Right or the acceptance of requests for
redemption of, repurchase of or payment for Shares would not be in compliance
with the laws of such jurisdiction. However, the Fund reserves the right to
exclude Shareholders in any jurisdiction in which it is asserted that the
Redemption Right cannot lawfully be made or Shares cannot lawfully be accepted,
purchased or paid for. So long as the Fund makes a good-faith effort to comply
with any state law deemed applicable to the Redemption Right, the Fund believes
that the exclusion of those holders is permitted under Rule 13e-4(f)(9)
promulgated under the Exchange Act. In any jurisdiction the securities or "blue
sky" laws of which require the Redemption Right to be made by a licensed broker
or dealer, the Redemption Right shall be deemed to be made on the Fund's behalf
by one or more registered brokers or dealers licensed under the laws of that
jurisdiction.
September 2, 1998
Scudder Spain and Portugal Fund, Inc.
345 Park Avenue
New York, NY 10154
19
<PAGE> 25
APPENDIX: GLOSSARY
1940 Act -- Investment Company Act of 1940, as amended.
Board -- The Board of Directors of the Fund.
Book-Entry Confirmation -- a confirmation of a book-entry transfer.
Code -- Internal Revenue Code of 1986, as amended.
Exchange Act -- Securities Exchange Act of 1934, as amended.
Expiration Date -- September 30, 1998 or as extended by the Fund.
Letter of Transmittal -- A properly completed and executed Letter of
Transmittal includes a photocopy or facsimile thereof bearing original
signature(s) and any required signature guarantees.
Net Asset Value (NAV) -- The value of a fund is determined by deducting the
fund's liabilities from the total assets of the portfolio. The net asset value
per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NYSE -- New York Stock Exchange.
Redemption Right -- This refers to valid presentment without withdrawal by
a shareholder of Shares.
Required Documents -- These include: (i) Share certificates evidencing the
Shares or a Book-Entry Confirmation of the delivery of the Shares (if
available); (ii) a properly completed and executed Letter of Transmittal or, in
the case of a book-entry transfer, an Agent's Message; and (iii) any other
documents required by the Letter of Transmittal.
SEC -- U.S. Securities and Exchange Commission.
Scudder Kemper -- Scudder Kemper Investments, Inc., the Fund's investment
adviser, manager and administrator.
Valuation Date -- The close of the regular trading session of the NYSE on
October 1, 1998 or the first business day following the Expiration Date.
20
<PAGE> 26
EXHIBIT A-1
SCUDDER SPAIN AND PORTUGAL FUND, INC.
AUDITED FINANCIAL STATEMENTS
21
<PAGE> 27
SCUDDER SPAIN AND PORTUGAL FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout each period (a) and other performance information derived from the
financial statements and market price data.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------------------
PER SHARE OPERATING PERFORMANCE 1997 1996 1995 1994 1993
- ------------------------------- ------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $11.54 $ 9.68 $9.01 $8.24 $7.27
------ ------ ----- ----- -----
Net investment income.......................... .08 .09 .07 .07 .22
Net realized and unrealized gain (loss) on
investment transactions................... 5.99 1.84 .60 .70 1.15
------ ------ ----- ----- -----
Total from investment operations................. 6.07 1.93 .67 .77 1.37
------ ------ ----- ----- -----
Less distributions from:
Net investment income....................... (.09) (.07) -- -- (.18)
Net realized gains on investment
transactions.............................. (.18) -- -- -- (.22)
------ ------ ----- ----- -----
Total distributions.............................. (.27) (.07) -- -- (.40)
------ ------ ----- ----- -----
Net asset value, end of period................... $17.34 $11.54 $9.68 $9.01 $8.24
====== ====== ===== ===== =====
Market value, end of period...................... $14.50 $ 8.88 $7.56 $7.50 $7.75
====== ====== ===== ===== =====
TOTAL INVESTMENT RETURN
Per share market value (%)..................... 67.33 18.31 .84 (3.23) 31.69
Per share net asset value (%)(b)............... 53.89 20.19 7.44 9.35 20.38
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions)......... 113 75 63 59 54
Ratio of operating expenses to average net
assets (%).................................. 1.74 1.92 1.99 2.02 2.38(d)
Ratio of net investment income to average net
assets (%).................................. .54 .83 .71 .77 2.87
Portfolio turnover rate (%).................... 115 66 43 31 29
Average commission rate paid(c)................ $.0694 $.0671 $ -- $ -- $ --
</TABLE>
- ---------------
(a) Based on monthly average of shares outstanding during the period.
(b) Total investment returns reflect changes in net asset value per share during
each period and assume that dividends and capital gains distributions, if
any, were reinvested. These percentages are not an indication of the
performance of a shareholder's investment in the Fund based on market price.
(c) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years ending on or after September 1, 1996.
(d) Ratio of operating expenses to average net assets excluding interest expense
was 2.31%.
22
<PAGE> 28
SCUDDER SPAIN AND PORTUGAL FUND, INC.
INVESTMENT PORTFOLIO AS OF SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE ($)
------- -----------
<S> <C> <C> <C>
COMMON STOCKS 100.0%
PORTUGAL 33.9%
CONSUMER DISCRETIONARY 2.8%
Specialty Retail 80,500 Sonae Investimentos, S.A. ............. 3,182,600
-----------
CONSUMER STAPLES 5.3%
Food & Beverage 6,950 Jeronimo Martins SA Warrants (expire
9/15/03)(b)............................ 198,914
75,300 Jeronimo Martins SA.................... 5,795,849
-----------
5,994,763
-----------
COMMUNICATIONS 5.3%
Telephone/Communications 138,500 Portugal Telecom SA.................... 6,007,516
-----------
FINANCIAL 9.5%
Banks 211,100 Banco Comercial Portugues.............. 4,458,042
82,000 Banco Espirito Santo................... 2,276,260
101,470 Banco Portugues do Investimento........ 2,310,340
79,000 Banco Totta e Acores................... 1,666,139
-----------
10,710,781
-----------
MEDIA 0.2%
Broadcasting & Entertainment 80,000 TVI Televisao Independente(b)(c)....... 204,513
-----------
MANUFACTURING 0.9%
Containers & Paper 30,200 Sociedade Portuguesa de Celulose,
S.A.(b)................................ 1,016,233
-----------
CONSTRUCTION 6.7%
Building Materials 4.5% 40,000 Corticeira Amorim, S.P.G.S. ........... 491,275
181,500 Semapa Cement SA....................... 4,464,371
-----------
4,955,646
-----------
Forest Products 1.3% 174,000 Portucel Industrial Empresa, SA........ 1,411,804
-----------
Miscellaneous 0.9% 62,000 Mota e Companhia, SA................... 1,026,442
-----------
UTILITIES 3.2%
Electric Utilities 10,000 Electricidade de Portugal(ADR)(b)...... 343,750
189,490 Electricidade de Portugal.............. 3,253,996
-----------
3,597,746
-----------
SPAIN 66.1%
CONSUMER DISCRETIONARY 4.4%
Department & Chain Stores 1.2% 21,849 Adolfo Dominguez SA(b)................. 765,527
-----------
27,500 Aldeasa S.A.(b)(c)..................... 602,432
-----------
1,367,959
-----------
Restaurants 2.2% 35,000 Tele Pizza, S.A.(b).................... 2,438,534
-----------
Specialty Retail 1.0% 25,800 Cortefiel, S.A......................... 1,094,085
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE> 29
SCUDDER SPAIN AND PORTUGAL FUND, INC.
INVESTMENT PORTFOLIO -- (CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE ($)
------- -----------
<S> <C> <C> <C>
CONSUMER STAPLES 2.8%
Alcohol & Tobacco 2.4% 80,000 Baron de Ley, S.A.(b).................. 1,586,387
16,300 Tabacalera, S.A. "A"................... 1,143,304
-----------
2,729,691
-----------
Food & Beverage 0.4% 10,800 Puleva Union Industrial Agro-Ganadera
SA(b).................................. 469,565
-----------
COMMUNICATIONS 5.8%
Telephone/Communications 207,900 Compania Telefonica Nacional de Espana
S.A. .................................. 6,532,130
-----------
FINANCIAL 19.3%
Banks 18.7% 198,600 Banco Bilbao Vizcaya SA................ 6,113,533
55,070 Banco Central de Espana................ 2,298,426
35,370 Banco Intercontinental Espana.......... 2,037,797
18,714 Banco Pastor SA........................ 1,335,192
37,400 Banco Popular Espanol.................. 2,405,306
176,300 Banco Santander SA..................... 5,775,487
47,640 Banco de Valencia SA................... 997,354
-----------
20,963,095
-----------
Real Estate 0.6% 22,550 Vallehermoso SA........................ 621,647
-----------
SERVICE INDUSTRIES 1.4%
Miscellaneous Commercial Services 126,000 Prosegur, Cia de Seguridad SA.......... 1,548,938
-----------
MANUFACTURING 3.8%
Containers & Paper 2.2% 44,600 Empresa Nacional de Celulosas SA....... 821,665
35,998 Vidrala SA............................. 1,651,948
-----------
2,473,613
-----------
Industrial Specialty 1.6% 14,500 Azkoyen SA............................. 1,795,136
-----------
ENERGY 4.1%
Oil Companies 107,730 Repsol SA.............................. 4,655,045
-----------
METALS & MINERALS 2.3%
Steel & Metals 13,600 Acerinox, S.A. ........................ 2,564,748
-----------
CONSTRUCTION 6.7%
Forest Products 0.4% 12,200 Miguel y Costas........................ 494,473
-----------
Homebuilding 3.4% 24,900 Fomento de Obras y Construcciones SA... 3,836,672
-----------
Miscellaneous 2.9% 21,500 Abengoa SA............................. 1,109,064
35,000 Gines Navarro Construcciones, S.A. .... 1,097,340
11,200 OCP Construcciones, S.A. .............. 1,077,457
-----------
3,283,861
-----------
UTILITIES 15.5%
Electric Utilities 13.3% 152,670 Cia Sevillana de Electricidad.......... 1,447,230
291,520 Empresa Nacional de Electricidad SA.... 6,220,213
24,000 Gas y Electricidad, S.A. .............. 1,625,511
35,600 Hidroelectrica del Cantabrico.......... 1,514,437
334,650 Iberdrola SA........................... 4,113,906
-----------
14,921,297
-----------
Natural Gas Distribution 2.2% 47,000 Gas Natural SDG, S.A. ................. 2,474,844
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE> 30
SCUDDER SPAIN AND PORTUGAL FUND, INC.
INVESTMENT PORTFOLIO -- (CONTINUED)
<TABLE>
<CAPTION>
MARKET
VALUE($)
-----------
<S> <C> <C> <C>
TOTAL COMMON STOCKS (Cost
$75,917,053)........................... 112,373,377
-----------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $75,917,053)(a).................. 112,373,377
===========
</TABLE>
- ---------------
(a) The cost for federal income tax purposes was $76,021,986. At September 30,
1997, net unrealized appreciation for all securities based on tax cost was
$36,351,391. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost of
$37,136,253 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $784,862.
(b) Non-income producing security.
(c) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $806,945 (0.72% of net assets). Their
values have been estimated by the Valuation Committee in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at September 30, 1997 aggregated $1,188,337. These securities may
also have certain restrictions as to resale.
The accompanying notes are an integral part of the financial statements.
25
<PAGE> 31
SCUDDER SPAIN AND PORTUGAL FUND, INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
<TABLE>
<S> <C> <C>
ASSETS
Investments, at market (identified cost $75,917,053)........ $112,373,377
Foreign currency holdings, at market (identified cost
$1,806,571)............................................... 1,800,067
Cash........................................................ 13,309
Receivable for foreign taxes recoverable.................... 86,836
Other assets................................................ 1,237
------------
Total assets...................................... 114,274,826
LIABILITIES
Payables:
Investments purchased..................................... $1,098,443
Accrued management fee.................................... 87,045
Accrued administrator's fee............................... 17,409
Other payables and accrued expenses....................... 162,362
----------
Total liabilities................................. 1,365,259
------------
Net assets, at market value................................. $112,909,567
============
NET ASSETS
Net assets consist of:
Undistributed net investment income....................... $ 159,742
Accumulated net realized gain............................. 17,112,305
Net unrealized appreciation (depreciation) on:
Investments............................................ 36,456,324
Foreign currency related transactions.................. (20,039)
Paid-in capital........................................... 59,201,235
------------
Net assets, at market value................................. $112,909,567
============
NET ASSET VALUE per share ($112,909,567/6,511,154 shares of
common stock issued and outstanding, $.01 par value,
200,000,000 of shares authorized)......................... $ 17.34
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE> 32
SCUDDER SPAIN AND PORTUGAL FUND, INC.
FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of
$353,426)............................................. $ 2,087,235
Interest............................................... 57,022
-----------
2,144,257
Expenses:
Management fee......................................... $ 940,480
Administrator's fee.................................... 188,095
Custodian and accounting fees.......................... 252,862
Directors' fees and expenses........................... 91,452
Auditing............................................... 42,250
Reports to shareholders................................ 45,451
Services to shareholders............................... 31,531
Legal.................................................. 33,602
Other.................................................. 13,042 1,638,765
----------- -----------
Net investment income..................................... 505,492
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) from:
Investments............................................ 17,889,178
Foreign currency related transactions.................. (243,802) 17,645,376
-----------
Net unrealized appreciation (depreciation) during the
period on:
Investments............................................ 21,406,657
Foreign currency related transactions.................. (17,152) 21,389,505
----------- -----------
Net gain on investment transactions....................... 39,034,881
-----------
Net increase in net assets resulting from operations........ $39,540,373
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE> 33
SCUDDER SPAIN AND PORTUGAL FUND, INC.
FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
---------------------------
1997 1996
------------ -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income..................................... $ 505,492 $ 576,964
Net realized gain from investment transactions............ 17,645,376 5,880,465
Net unrealized appreciation on investment transactions
during the period...................................... 21,389,505 6,083,968
------------ -----------
Net increase in net assets resulting from operations........ 39,540,373 12,541,397
------------ -----------
Distributions to shareholders from:
Net investment income..................................... (585,992) (455,778)
------------ -----------
Net realized gains on investment transactions............. (1,172,008) --
------------ -----------
INCREASE IN NET ASSETS...................................... 37,782,373 12,085,619
Net assets at beginning of period........................... 75,127,194 63,041,575
------------ -----------
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of $159,742 and $484,045,
respectively)............................................. $112,909,567 $75,127,194
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE> 34
SCUDDER SPAIN AND PORTUGAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
Scudder Spain and Portugal Fund, Inc. (the "Fund", formerly The First
Iberian Fund, Inc.) is registered under the Investment Company Act of 1940, as
amended, as a non-diversified, closed-end management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio securities which are traded on U.S. or
foreign stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the Nasdaq System, for which
there have been sales, are valued at the most recent sale price reported on such
system. If there are no such sales, the value is the most recent bid quotation.
Securities which are not quoted on the Nasdaq System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
If no sale occurred, the security is then valued at the mean between the most
recent bid and asked quotations. If there are no such bid and asked quotations
the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days
are valued by pricing agents approved by the officers of the Fund, which
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Money market instruments purchased with an original maturity of
sixty days or less are valued at amortized cost. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board of Directors.
Foreign Currency Translations. The books and records of the Fund are
maintained in U.S. dollars. Foreign currency transactions are translated into
U.S. dollars on the following basis:
(i) market value of investment securities, other assets and
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and
interest income and certain expenses at the rates of exchange prevailing on
the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
Federal Income Taxes. The Fund's policy is to comply with the requirements
of the Internal Revenue Code which are applicable to regulated investment
companies, and to distribute all of its taxable income to its shareholders. The
Fund accordingly paid no U.S. federal income taxes, and no federal income tax
provision was required.
Withholding taxes on foreign interest and dividends have been provided for
in accordance with Spanish and Portuguese tax rates.
Distribution of Income and Gains. Distributions of net investment income
are made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and therefore, will be distributed to
29
<PAGE> 35
SCUDDER SPAIN AND PORTUGAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
shareholders, annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. The differences
relate primarily to the deferral of certain losses for tax purposes. As a
result, net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial and federal income tax reporting
purposes.
Other. Investment security transactions are accounted for on a trade-date
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
For the year ended September 30, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $105,767,508 and
$107,643,344, respectively.
C. RELATED PARTIES
Under the Investment Management Agreement with Scudder, Stevens & Clark,
Inc. ("Scudder"), the Fund has agreed to pay Scudder a fee equal to an annual
rate of 1% of the Fund's average weekly net assets, computed weekly and payable
monthly. For the year ended September 30, 1997, the fee pursuant to such
agreement amounted to $940,480 of which $87,045 is unpaid at September 30, 1997.
Under the Administration Agreement with Scudder, the administration fee is
computed weekly and payable monthly at the annual rate of .20% of the Fund's
average weekly net assets. For the year ended September 30, 1997, the fee
pursuant to such agreement amounted to $188,095 of which $17,409 is unpaid at
September 30, 1997.
Pursuant to both agreements, the investment manager provides continuous
supervision of the investment portfolio and the administrator pays the
compensation of certain officers of the Fund and provides occupancy and certain
clerical services to the Fund. The Fund bears all other costs and expenses.
On June 26, 1997, Scudder entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in
Scudder, and Scudder will form a new global investment organization by combining
with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change its name to
Scudder Kemper Investments, Inc. Subject to the receipt of the required
regulatory and shareholder approvals, the transaction is expected to close in
the fourth quarter of 1997.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of Scudder, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
September 30, 1997, the amount charged to the Fund by SFAC aggregated $72,530 of
which $6,569 is unpaid at September 30, 1997.
The Fund pays each Director not affiliated with the Manager, $6,000
annually, plus specified amounts for attended board and committee meetings. For
the year ended September 30, 1997, Directors' fees and expenses aggregated
$91,452, of which $23,500 is unpaid at September 30, 1997.
30
<PAGE> 36
SCUDDER SPAIN AND PORTUGAL FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and the Shareholders of
Scudder Spain and Portugal Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Spain and Portugal Fund,
Inc. (the "Fund", formerly The First Iberian Fund, Inc.) at September 30, 1997,
the results of its operations, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1997 by correspondence with the
custodian and brokers, and the application of alternative procedures where
confirmations from brokers were not received, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 12, 1997
31
<PAGE> 37
SCUDDER SPAIN AND PORTUGAL FUND, INC.
TAX INFORMATION
The Fund paid distributions of $0.18 per share from net long-term capital
gains during its Fiscal year ended September 30, 1997. Pursuant to section 852
of the Internal Revenue Code, the Fund designates $9,396,999 as capital gain
dividends for its fiscal year ended September 30, 1997.
Pursuant to section 853 of the Internal Revenue Code, the Fund designates
$353,426 ($0.05 per share) as foreign taxes paid and $801,895 ($0.12 per share)
as foreign source income for the year ended September 30, 1997.
32
<PAGE> 38
THE FIRST IBERIAN FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout each period(a) and other performance information derived from the
financial statements and market price data.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------
1996 1995 1994 1993 1992(d)
------ ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period................. $ 9.68 $9.01 $8.24 $7.27 $ 9.31
------ ----- ----- ----- ------
Net investment income.............................. .09 .07 .07 .22 .27
Net realized and unrealized gain (loss) on
investment transactions......................... 1.84 .60 .70 1.15 (2.16)
------ ----- ----- ----- ------
Total from investment operations..................... 1.93 .67 .77 1.37 (1.89)
------ ----- ----- ----- ------
Less distributions from:
Net investment income.............................. (.07) -- -- (.18) (.15)
Net realized gains on investment transactions...... -- -- -- (.22) --
------ ----- ----- ----- ------
Total distributions.................................. (.07) -- -- (.40) (.15)
------ ----- ----- ----- ------
Net asset value, end of period....................... $11.54 $9.68 $9.01 $8.24 $ 7.27
====== ===== ===== ===== ======
Market value, end of period.......................... $ 8.88 $7.56 $7.50 $7.75 $ 6.25
====== ===== ===== ===== ======
Total Investment Return
Per share market value (%)......................... 18.31 .84 (3.23) 31.69 (20.40)
Per share net asset value (%)(b)................... 20.19 7.44 9.35 20.38 (20.43)
Ratios and Supplemental Data
Net assets, end of period ($ millions)............. 75 63 59 54 47
Ratio of operating expenses (excluding interest) to
average net assets (%).......................... 1.92 1.99 2.02 2.31 2.45
Ratio of net investment income to average net
assets (%)...................................... .83 .71 .77 2.87 3.05
Portfolio turnover rate (%)........................ 66 43 31 29 32
Average commission rate paid (c)................... $.0671 $ -- $ -- $ -- $ --
</TABLE>
- ---------------
(a) Based on monthly average of shares outstanding during the period.
(b) Total investment returns reflect changes in net asset value per share during
each period and assume that dividends and capital gains distributions, if
any, were reinvested. These percentages are not an indication of the
performance of a shareholder's investment in the Fund based on market price.
(c) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years ending on or after September 1, 1996.
(d) Scudder, Stevens & Clark, Inc. became investment adviser of the Fund on
April 1, 1992.
33
<PAGE> 39
THE FIRST IBERIAN FUND, INC.
INVESTMENT PORTFOLIO AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
------- ----------
<S> <C> <C> <C>
COMMON STOCKS 100.0%
PORTUGAL 25.0%
CONSUMER DISCRETIONARY 4.2%
Specialty Retail 109,000 Sonae Investimentos, SA........... 3,159,420
----------
CONSUMER STAPLES 6.9%
Alcohol & Tobacco 1.5% 60,000 Uniao Cervejaria, SA.............. 1,101,449
----------
Food & Beverage 5.4% 45,000 Jeronimo Martins SA............... 4,092,754
----------
COMMUNICATIONS 4.8%
Telephone/Communications 138,500 Portugal Telecom SA............... 3,559,517
----------
FINANCIAL 3.2%
Banks 0.3% 17,734 Banco Comercial Portugues......... 214,179
----------
Insurance 2.9% 110,000 Seguros Tranquilidade............. 2,132,689
----------
MEDIA 0.3%
Broadcasting & Entertainment 80,000 TVI Televisao
Independente(b)(c).............. 239,871
----------
CONSTRUCTION 5.6%
Building Materials 91,000 Corticeira Amorim, S.P.G.S........ 986,493
230,500 Semapa Cement SA.................. 3,221,804
----------
4,208,297
----------
SPAIN 75.0%
CONSUMER DISCRETIONARY 5.5%
Apparel & Shoes 1.7% 52,000 Cortefiel, SA..................... 1,297,066
----------
Department & Chain Stores 3.8% 40,000 Centros Comerciales Continente,
SA.............................. 829,637
81,500 Centros Comerciales (PRYCA) SA.... 1,988,501
----------
2,818,138
----------
COMMUNICATIONS 6.6%
Telephone/Communications 268,000 Compania Telefonica Nacional de
Espana SA....................... 4,974,551
----------
FINANCIAL 25.3%
Banks 22.6% 59,500 Argentaria Corporacion Bancaria de
Espana.......................... 2,463,538
119,500 Banco Bilbao Vizcaya, SA.......... 5,505,798
20,300 Banco Intercontinental Espanol
SA.............................. 2,338,236
6,850 Banco Popular Espanol SA.......... 1,258,152
73,000 Banco Santander, SA............... 3,795,159
100,000 Banco de Valencia SA.............. 1,587,672
----------
16,948,555
----------
Insurance 2.0% 3,961 Corporacion Mapfre SA (New)
(b)(c)(d)....................... 180,606
22,066 Mapfre Vida Seguros............... 1,305,172
----------
1,485,778
----------
Other Financial Companies 0.7% 210,000 Corporacion Financiera Reunida,
SA.............................. 554,051
----------
DURABLES 2.0%
Telecommunications Equipment 120,000 Amper SA (b)...................... 1,494,280
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE> 40
THE FIRST IBERIAN FUND, INC.
INVESTMENT PORTFOLIO -- (CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
------- ----------
<S> <C> <C> <C>
MANUFACTURING 3.3%
Containers & Paper 2.4% 35,000 Vidrala SA........................ 1,811,425
----------
Industrial Specialty 0.9% 8,708 Azkoyen SA........................ 639,766
----------
METALS & MINERALS 5.0%
Steel & Metals 17,800 Acerinox, SA...................... 2,071,056
250,000 Asturiana de Zinc SA (b).......... 1,731,652
----------
3,802,708
----------
ENERGY 5.1%
Oil & Gas Production 1.4% 35,000 Cia Espanola de Petroleos, SA..... 1,070,511
----------
Oil Companies 3.7% 84,100 Repsol SA......................... 2,762,098
----------
TRANSPORTATION 2.2%
Miscellaneous 114,050 Autopistas del Mare Nostrum SA.... 1,633,217
----------
UTILITIES 20.0%
Electric Utilities 12.6% 60,000 Electricidad Reunidas de Zaragoza
SA.............................. 1,583,003
75,750 Empresa Nacional de Electricidad
SA.............................. 4,456,923
347,000 Iberdrola SA...................... 3,362,246
----------
9,402,172
----------
Natural Gas Distribution 4.5% 19,000 Gas Natural SDG, SA............... 3,353,724
----------
Water Supply 2.9% 57,368 General de Aguas de Barcelona,
SA.............................. 2,167,652
781 General de Aguas de Barcelona, SA
(New)(c)........................ 29,510
----------
2,197,162
----------
Total Common Stocks (Cost
$59,903,711).................... 74,953,378
----------
Total Investment
Portfolio -- 100.0%
(Cost $59,903,711)(a)........... 74,953,378
==========
</TABLE>
- ---------------
(a) The cost for federal income tax purposes was $59,903,711. At September 30,
1996, net unrealized appreciation for all securities based on tax cost was
$15,049,667. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost of
$15,917,531 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $867,864.
(b) Non-income producing security.
(c) Securities valued in good faith by the valuation committee of the Board of
Directors. The cost of these securities at September 30, 1996 was $775,928
(Note A).
(d) New share issued during 1996, eligible for a pro rata share of 1996
dividends.
The accompanying notes are an integral part of the financial statements.
35
<PAGE> 41
THE FIRST IBERIAN FUND, INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
<TABLE>
<S> <C> <C>
ASSETS
Investments, at market (identified cost $59,903,711) (Note
A)........................................................ $74,953,378
Foreign currency holdings, at market (identified cost
$290,336) (Note A)........................................ 288,014
Cash........................................................ 8,359
Receivable for foreign taxes recoverable.................... 95,575
-----------
Total assets...................................... 75,345,326
LIABILITIES
Payables:
Accrued management fee (Note C)........................... $ 62,149
Accrued administrator fee (Note C)........................ 12,430
Other accrued expenses (Note C)........................... 143,553
--------
Total liabilities................................. 218,132
-----------
Net assets, at market value................................. $75,127,194
===========
NET ASSETS
Net assets consist of:
Undistributed net investment income....................... $ 484,045
Accumulated net realized gain............................. 395,135
Net unrealized appreciation (depreciation) on:
Investments............................................ 15,049,667
Foreign currency related transactions.................. (2,887)
Common Stock.............................................. 65,112
Additional paid-in capital................................ 59,136,122
-----------
Net assets, at market value................................. $75,127,194
===========
Net asset value per share ($75,127,194/6,511,154 shares of
common stock issued and outstanding, $.01 par value,
200,000,000 shares authorized)............................ $ 11.54
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE> 42
THE FIRST IBERIAN FUND, INC.
FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<S> <C> <C>
Investment income
Income:
Dividends (net of foreign taxes withheld of
$392,863)............................................. $ 1,906,251
Interest............................................... 2,648
-----------
1,908,899
Expenses:
Management fee (Note C)................................ $ 693,672
Administrator's fee (Note C)........................... 138,740
Custodian and accounting fees (Note C)................. 164,530
Directors' fees and expenses (Note C).................. 93,033
Auditing............................................... 76,550
Reports to shareholders................................ 52,989
Services to shareholders............................... 31,549
Legal.................................................. 14,531
Other.................................................. 66,341 1,331,935
---------- -----------
Net investment income..................................... 576,964
-----------
Net realized and unrealized gain (loss) on investment
transactions
Net realized gain (loss) from:
Investments............................................ 5,924,363
Foreign currency related transactions.................. (43,898) 5,880,465
----------
Net unrealized appreciation (depreciation) during the
period on:
Investments............................................ 6,142,078
Foreign currency related transactions.................. (58,110) 6,083,968
----------
Net gain on investment transactions....................... 11,964,433
-----------
Net increase in net assets resulting from operations........ $12,541,397
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE> 43
THE FIRST IBERIAN FUND, INC.
FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income..................................... $ 576,964 $ 427,668
Net realized gain (loss) from investment transactions..... 5,880,465 (423,473)
Net unrealized appreciation on investment transactions
during the period...................................... 6,083,968 4,398,730
----------- -----------
Net increase in net assets resulting from operations........ 12,541,397 4,402,925
----------- -----------
Distributions to shareholders from net investment income.... (455,778) --
----------- -----------
Increase in net assets...................................... 12,085,619 4,402,925
Net assets at beginning of period........................... 63,041,575 58,638,650
----------- -----------
Net assets at end of period (including undistributed net
investment income of $484,045 and 406,756,
respectively)............................................. $75,127,194 $63,041,575
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE> 44
THE FIRST IBERIAN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
The First Iberian Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, closed-end
management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio securities which are traded on U.S. or
foreign stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system. If
there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
If no sale occurred, the security is then valued at the mean between the most
recent bid and asked quotations. If there are no such bid and asked quotations
the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days
are valued by pricing agents approved by the officers of the Fund, which
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Short-term investments having a maturity of sixty days or less
are valued at amortized cost.
All other securities are valued at their fair value as determined in good
faith by the Valuation Committee of the Board of Directors. These securities
valued in good faith by the Valuation Committee of the Board of Directors
amounted to $449,987 (.60% of net assets) and have been noted in the investment
portfolio as of September 30, 1996.
Foreign Currency Translations. The books and records of the Fund are
maintained in U.S. dollars. Foreign currency transactions are translated into
U.S. dollars on the following basis:
(i) market value of investment securities, other assets and
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and
interest income and certain expenses at the rates of exchange prevailing on
the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
Federal Income Taxes. The Fund's policy is to comply with the requirements
of the Internal Revenue Code which are applicable to regulated investment
companies, and to distribute all of its taxable income to its shareholders. The
Fund accordingly paid no U.S. federal income taxes, and no federal income tax
provision was required. Withholding taxes on foreign interest and dividends have
been provided for in accordance with Spanish and Portuguese tax rates.
39
<PAGE> 45
THE FIRST IBERIAN FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Distribution of Income and Gains. Distributions of net investment income
are made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and therefore, will be distributed to
shareholders, annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. The differences
relate primarily to the deferral of certain losses for tax purposes. As a
result, net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial and federal income tax reporting
purposes.
Other. Investment security transactions are accounted for on a trade-date
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
For the year ended September 30, 1996, purchases and sales of investment
securities (excluding short-term investments) aggregated $46,723,958 and
$45,371,017, respectively.
C. RELATED PARTIES
Under the Investment Management Agreement with Scudder, Stevens & Clark,
Inc. ("Scudder"), the Fund has agreed to pay Scudder a fee equal to an annual
rate of 1% of the Fund's average weekly net assets, computed weekly and payable
monthly. For the year ended September 30, 1996, the fee pursuant to such
agreement amounted to $693,672 of which $62,149 is unpaid at September 30, 1996.
Under the Administration Agreement with Scudder, the administration fee is
computed weekly and payable monthly at the annual rate of .20% of the Fund's
average weekly net assets. For the year ended September 30, 1996, the fee
pursuant to such agreement amounted to $138,740 of which $12,430 is unpaid at
September 30, 1996.
Pursuant to both agreements, the investment manager provides continuous
supervision of the investment portfolio and the administrator pays the
compensation of certain officers of the Fund and provides occupancy and certain
clerical services to the Fund. The Fund bears all other costs and expenses.
Effective December 21, 1995, Scudder Fund Accounting Corporation ("SFAC"),
a subsidiary of the Adviser, assumed responsibility for determining the daily
net asset value per share and maintaining the portfolio and general accounting
records of the Fund. For the period December 21, 1995 to September 30, 1996, the
amount charged to the Fund by SFAC aggregated $43,734, of which $4,942 is unpaid
at September 30, 1996.
The Fund pays each Director not affiliated with the Manager, $6,000
annually, plus specified amounts for attended board and committee meetings. For
the year ended September 30, 1996, Directors' fees and expenses aggregated
$93,033 of which $14,340 is unpaid at September 30, 1996.
40
<PAGE> 46
THE FIRST IBERIAN FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and the Shareholders of
The First Iberian Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The First Iberian Fund, Inc. (the
"Fund") at September 30, 1996, the results of its operations, the changes in its
net assets and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1996 by
correspondence with the custodian and brokers, and the application of
alternative procedures where confirmations from brokers were not received,
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 6, 1996
41
<PAGE> 47
THE FIRST IBERIAN FUND, INC.
TAX INFORMATION
Pursuant to section 852 of the Internal Revenue Code, the Fund designates
$395,135 as capital gain dividends for its fiscal year ended September 30, 1996.
Pursuant to section 853 of the Internal Revenue Code, the Fund designates
$392,863 ($.06 per share) as foreign taxes paid and $967,179 ($.15 per share) as
foreign source income for the year ended September 30, 1996.
42
<PAGE> 48
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in Schedule 13E-4, ("Issuer Tender Offer
Statement") of our reports dated November 6, 1996 and November 12, 1997,
relating to the financial statements and financial highlights of Scudder Spain
and Portugal Fund, Inc. (formerly The First Iberian Fund, Inc.), which appear in
such Issuer Tender Offer Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 31, 1998
43
<PAGE> 49
EXHIBIT A-2
SCUDDER SPAIN AND PORTUGAL FUND, INC.
UNAUDITED FINANCIAL STATEMENTS
44
<PAGE> 50
SUMMARY OF SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
TEN MONTHS
ENDED
JULY 31, YEARS ENDED SEPTEMBER 30,
1998 ----------------------------------------
PER SHARE OPERATING PERFORMANCE (UNAUDITED) 1997 1996 1995 1994 1993
- ------------------------------- ----------- ------ ------ ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $17.34 $11.54 $ 9.68 $9.01 $8.24 $ 7.27
------ ------ ------ ----- ----- ------
Net investment income (loss)......................... (.06) .08 .09 .07 .07 .22
Net realized and unrealized gain (loss) on investment
transactions....................................... 6.09 5.99 1.84 .60 .70 1.15
------ ------ ------ ----- ----- ------
Total from investment operations....................... 6.03 6.07 1.93 .67 .77 1.37
------ ------ ------ ----- ----- ------
Less distributions from:
Net investment income.............................. (.03) (.09) (.07) -- -- (.18)
Net realized gains on investment transactions...... (2.65) (.18) -- -- -- (.22)
------ ------ ------ ----- ----- ------
Total distributions.................................... (2.68) (.27) (.07) -- -- (.40)
------ ------ ------ ----- ----- ------
Net asset value, end of period......................... $20.69 $17.34 $11.54 $9.68 $9.01 $ 8.24
====== ====== ====== ===== ===== ======
Market value, end of period............................ $19.13 $14.50 $ 8.88 $7.56 $7.50 $ 7.75
====== ====== ====== ===== ===== ======
TOTAL INVESTMENT RETURN
Per share market value (%)........................... 56.68** 67.33 18.31 .84 (3.23) 31.69
Per share net asset value (%)(b)..................... 41.74** 53.89 20.19 7.44 9.35 20.38
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions)............... 135 113 75 63 59 54
Ratio of operating expenses to average net assets
(%)................................................ 2.26* 1.74 1.92 1.99 2.02 2.38(c)
Ratio of net investment income (loss) to average net
assets (%)......................................... (.37)* .54 .83 .71 .77 2.87
Portfolio turnover rate (%).......................... 62* 115 66 43 31 29
</TABLE>
- ---------------
(a) Based on monthly average of shares outstanding during the period.
(b) Total investment returns reflect changes in net asset value per share during
each period and assume that dividends and capital gains distributions, if
any, were reinvested. These percentages are not an indication of the
performance of a shareholder's investment in the Fund based on market price.
(c) Ratio of operating expenses to average net assets excluding interest expense
was 2.31%.
* Annualized
** Not annualized
45
<PAGE> 51
SCUDDER SPAIN AND PORTUGAL FUND, INC.
INVESTMENT PORTFOLIO AS OF JULY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE ($)
------- -----------
<S> <C> <C> <C>
COMMON STOCKS 100.0%
PORTUGAL 35.40%
CONSUMER DISCRETIONARY 1.8%
Department & Chain Stores 1.4% 26,445 Modelo Continente -- SGPS, SA.......... 731,820
26,445 Modelo Continente -- SGPS, SA (New).... 705,684
17,818 Modelo Continente -- SGPS, SA (New).... 474,494
-----------
1,911,998
-----------
Hotels & Casinos 0.4% 47,000 Lusotur-Sociedade Financeira de
Turismo................................ 516,129
-----------
CONSUMER STAPLES 5.5%
Food & Beverage 4.0% 93,250 Jeronimo Martins SA.................... 4,909,673
6,950 Jeronimo Martins SA Warrants (expire
9/15/03)............................... 556,763
-----------
5,446,436
-----------
Alcohol & Tobacco 1.5% 92,600 Uniao Cerevejaria, S.A................. 2,033,768
-----------
COMMUNICATIONS 6.5%
Telephone/Communications 149,300 Portugal Telecom SA.................... 8,565,742
-----------
FINANCIAL 12.9%
Banks 10.3% 175,233 Banco Comercial Portugues.............. 5,636,321
92,830 Banco Espirito Santo................... 3,351,310
21,654 Banco Espirito Santo e Commercial
(New).................................. 758,291
50 Banco Portugues do Atlantico........... 1,235
104,680 Banco Portugues do Investimento........ 4,129,148
-----------
13,876,395
-----------
Insurance 2.6% 114,800 Cia. de Seguros Mundial Confiance,
SA..................................... 3,482,608
-----------
Real Estate 0.0% 120 Sonae Imobiliaria SA................... 1,911
-----------
MEDIA 0.0%
Broadcasting & Entertainment 20,000 TVI Televisao Independente............. 26,356
-----------
CONSTRUCTION 3.8%
Building Materials 3.8% 70,500 Cimentos de Portugal SA................ 2,550,968
91,060 Corticeira Amorim, S.P.G.S............. 1,809,950
29,200 Semapa Cement SA....................... 759,801
-----------
5,120,719
-----------
Miscellaneous 0.0% 4,500 Finpro................................. 24,708
-----------
TRANSPORTATION 1.0%
Miscellaneous 29,800 Brisa-Auto Estradas de Portugal, SA.... 1,304,082
-----------
UTILITIES 3.9%
Electric Utilities 207,290 Electricidade de Portugal.............. 4,871,386
10,000 Electricidade de Portugal (ADR)........ 460,000
-----------
5,331,386
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
46
<PAGE> 52
SCUDDER SPAIN AND PORTUGAL FUND, INC.
INVESTMENT PORTFOLIO -- (CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE ($)
------- -----------
<S> <C> <C> <C>
SPAIN 64.6%
CONSUMER DISCRETIONARY 6.8%
Department & Chain Stores 2.1% 60,849 Adolfo Dominguez SA.................... 1,842,140
27,500 Aldeasa SA............................. 1,051,813
-----------
2,893,953
-----------
Restaurants 3.8% 562,500 Tele Pizza, SA......................... 5,118,035
-----------
Specialty Retail 0.9% 51,600 Cortefiel, SA.......................... 1,181,419
-----------
CONSUMER STAPLES 4.2%
Alcohol & Tobacco 3.0% 67,000 Baron de Ley, SA....................... 2,261,117
81,500 Tabacalera, SA "A"..................... 1,798,587
-----------
4,059,704
-----------
Food & Beverage 1.2% 54,600 Campofrio Alimentacion, S.A............ 1,622,247
-----------
COMMUNICATIONS 7.5%
Telephone/Communications 208,254 Compania Telefonica Nacional de Espana
SA..................................... 10,156,379
-----------
FINANCIAL 25.0%
Banks 24.3% 150,000 Argentaria SA.......................... 3,647,763
496,800 Banco Bilbao Vizcaya SA................ 9,369,243
163,170 Banco Central Hispanoamericano SA...... 6,143,709
17,000 Banco Pastor SA........................ 1,034,939
49,900 Banco Popular Espanol.................. 4,011,944
295,600 Banco Santander SA..................... 8,352,382
295,600 Banco Santander SA Rights.............. 9,780
-----------
32,569,760
-----------
Other Financial Companies 0.7% 73,800 Corp. Financiera Reunida, SA........... 998,683
-----------
SERVICE INDUSTRIES 1.5%
Miscellaneous Commercial Services 150,908 Prosegur, Cia de Seguridad SA.......... 2,097,054
-----------
MANUFACTURING 1.3%
Industrial Specialty 619,600 Tubacex, SA............................ 1,726,122
-----------
ENERGY 1.8%
Oil Companies 44,515 Repsol SA.............................. 2,421,346
-----------
CONSTRUCTION 4.8%
Homebuilding 1.8% 49,700 Fomento de Construcciones y Contratas
SA..................................... 2,433,695
-----------
Miscellaneous 3.0% 64,500 Abengoa SA............................. 2,040,167
63,497 OCP Construcciones, SA................. 1,976,928
-----------
4,017,095
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
<PAGE> 53
SCUDDER SPAIN AND PORTUGAL FUND, INC.
INVESTMENT PORTFOLIO -- (CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE ($)
------- -----------
<S> <C> <C> <C>
UTILITIES 11.70%
Electric Utilities 9.6% 306,190 Empresa Nacional de Electricidad SA.... 6,747,040
256,000 Iberdrola SA........................... 4,048,703
134,500 Union Electrica Fenosa SA.............. 1,940,246
-----------
12,735,989
-----------
Natural Gas Distribution 2.2% 37,370 Gas Natural SDG, SA.................... 3,011,955
-----------
TOTAL COMMON STOCKS
(Cost $77,609,515)..................... 134,705,584
-----------
TOTAL INVESTMENT PORTFOLIO -- 100%
(Cost $77,609,515)..................... 134,705,584
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
48
<PAGE> 54
SCUDDER SPAIN & PORTUGAL FUND, INC.
STATEMENT OF ASSETS & LIABILITIES
JULY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investment securities, at value, (cost $77,610,755)......... $134,705,584
Cash........................................................ 350,735
Foreign currency, at value, (cost $728,431)................. 728,785
Dividends receivable........................................ 1,199
Foreign taxes recoverable................................... 41,087
Other assets................................................ 743
------------
Total assets...................................... 135,828,133
------------
LIABILITIES
Payable for investments purchased........................... 417,717
Unrealized depreciation on forward currency exchange
contracts................................................. 660
Accrued management fee...................................... 69,968
Other accrued expenses...................................... 596,428
------------
Total liabilities................................. 1,084,773
------------
Net assets, at value........................................ $134,743,360
============
NET ASSETS
Net assets consist of:
Accumulated net investment loss........................... $ (403,298)
Net unrealized appreciation (depreciation) on:
Investment securities.................................. 57,094,829
Foreign currency related transactions.................. (2,011)
Accumulated net realized gain............................. 18,852,605
Paid-in capital........................................... 59,201,235
------------
Net assets, at value...................................... $134,743,360
============
NET ASSETS VALUE
Net asset value, offering and redemption price per share
($134,743,360 [divided by] 6,511,154 shares of capital
stock outstanding $.01 par value, unlimited number of
shares authorized)........................................ $ 20.69
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
49
<PAGE> 55
SCUDDER SPAIN & PORTUGAL FUND, INC.
STATEMENT OF OPERATIONS
TEN MONTHS ENDED JULY 31, 1998 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $340,070)..... $ 1,850,912
Interest.................................................. 10,220
-----------
1,861,132
-----------
Expenses:
Management fee............................................ 987,835
Administrator's fee....................................... 197,951
Services to shareholders.................................. 27,471
Custodian and accounting fees............................. 239,420
Directors'/trustees' fees and expenses.................... 63,942
Reports to shareholders................................... 27,274
Auditing.................................................. 26,105
Reorganization............................................ 500,000
Legal..................................................... 72,345
Other..................................................... 86,495
-----------
Total..................................................... 2,228,838
-----------
Net investment loss....................................... (367,706)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investment securities....................................... 19,327,077
Foreign currency related transactions....................... (364,907)
-----------
18,962,170
-----------
Net unrealized appreciation during the period on:
Investment securities....................................... 20,638,505
Foreign currency related transactions....................... 18,028
-----------
20,656,533
-----------
Net gain on investment transactions......................... 39,618,703
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $39,250,997
===========
</TABLE>
The accompanying notes are an integral part of the financial statements
50
<PAGE> 56
SCUDDER SPAIN & PORTUGAL FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TEN MONTHS ENDED
JULY 31, 1998 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1997
---------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
OPERATIONS:
Net investment income (loss)............................... $ (367,706) $ 505,492
Net realized gain.......................................... 18,962,170 17,645,376
Net unrealized appreciation................................ 20,656,533 21,389,505
------------ ------------
Net increase in net assets resulting from operations....... 39,250,997 39,540,373
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................................. (195,334) (585,992)
------------ ------------
From net realized gains.................................... (17,221,870) (1,172,008)
------------ ------------
FUND SHARE TRANSACTIONS:
INCREASE IN NET ASSETS..................................... 21,833,793 37,782,373
Net assets at beginning of period.......................... 112,909,567 75,127,194
------------ ------------
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of ($403,298) and $159,742,
respectively)............................................ $134,743,360 $112,909,567
------------ ------------
OTHER INFORMATION
Shares outstanding at beginning of period.................. 6,511,154 6,511,154
------------ ------------
Shares outstanding at end of period........................ 6,511,154 6,511,154
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
51
<PAGE> 57
SCUDDER SPAIN AND PORTUGAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
A. SIGNIFICANT ACCOUNTING POLICIES
Scudder Spain and Portugal Fund, Inc. (the "Fund", formerly The First
Iberian Fund, Inc.) is registered under the Investment Company Act of 1940, as
amended, as a non-diversified, closed-end management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Portfolio securities which are traded on U.S. or
foreign stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the Nasdaq Stock Market, Inc.
("Nasdaq"), for which there have been sales, are valued at the most recent sale
price reported on Nasdaq. If there are no such sales, the value is the most
recent bid quotation. Securities which are not quoted on Nasdaq but are traded
in another over-the-counter market are valued at the most recent sale price on
such market. If no sale occurred, the security is then valued at the mean
between the most recent bid and asked quotations. If there are no such bid and
asked quotations the most recent bid quotation shall be used.
Portfolio debt securities other than money market instruments are valued by
pricing agents approved by the officers of the Fund, which quotations reflect
broker/dealer-supplied valuations and electronic data processing techniques. If
the pricing agents are unable to provide such quotations, the most recent bid
quotation supplied by a bona fide market maker shall be used. Money market
instruments purchased with an original maturity of sixty days or less are valued
at amortized cost. All other securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Directors.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are
maintained in U.S. dollars. Foreign currency transactions are translated into
U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities
at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and
interest income and certain expenses at the rates of exchange prevailing on
the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code, as amended, which are applicable to regulated
investment companies, and to distribute all of its taxable income to its
shareholders. The Fund accordingly paid no U.S. federal income taxes, and no
federal income tax provision was required. Withholding taxes on foreign interest
and dividends have been provided for in accordance with Spanish and Portuguese
tax rates.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income
are made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and therefore, will be distributed to
52
<PAGE> 58
SCUDDER SPAIN AND PORTUGAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) --(CONTINUED)
shareholders, annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. The differences
relate primarily to the deferral of certain losses for tax purposes. As a
result, net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial and federal income tax reporting
purposes.
OTHER. Investment security transactions are accounted for on a trade-date
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
For the ten months ended July 31, 1998, purchases and sales of investment
securities (excluding short-term investments) aggregated $63,238,871 and
$80,873,487, respectively.
C. RELATED PARTIES
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and
the The Zurich Insurance Company ("Zurich"), an international insurance and
financial services organization, formed a new global investment organization by
combining Scudder's business with that of Zurich's subsidiary, Zurich Kemper
Investments, Inc. As a result of the transaction, Scudder changed its name to
Scudder Kemper Investments, Inc. ("Scudder Kemper" or the "Adviser"). The
transaction between Scudder and Zurich resulted in the termination of the Fund's
Investment Management and Administration Agreements with Scudder. However, a new
Investment Management Agreement (the "Management Agreement") between the Fund
and Scudder Kemper was approved by the Fund's Board of Directors and by the
Fund's Shareholders. The Management Agreement, which was effective December 31,
1997, is the same in all material respects as the corresponding previous
Investment Management Agreement, except that Scudder Kemper is the new
investment adviser to the Fund. In addition, for ease of administration, the
Management Agreement incorporates, in all material respects, the terms of the
Administration Agreement, and the Administration Agreement terminated as a stand
alone document upon execution of the Management Agreement.
Under the Management Agreement between the Fund and Scudder, which was in
effect prior to December 31, 1997, the Fund agreed to pay Scudder a fee equal to
an annual rate of 1% of the Fund's average weekly net assets, computed weekly
and payable monthly. Effective December 31, 1997, the Fund agrees to pay Scudder
Kemper a fee equal to an annual rate of 1.2% of the Fund's average weekly net
assets, computed weekly and payable monthly, which is equal to the aggregate fee
rate paid under the previous Investment Management and Administration
Agreements. For the ten months ended July 31, 1998, the fee pursuant to these
agreements amounted to $1,131,145, of which $136,862 is unpaid at July 31, 1998.
Under the Administration Agreement between the Fund and Scudder, which was
in effect prior to December 31, 1997, the Fund agreed to pay Scudder a fee equal
to an annual rate of 0.2% of the Fund's average weekly net assets, computed
weekly and payable monthly. Effective December 31, 1997, this agreement became a
part of the Management Agreement. For the period September 30, 1997 to December
31, 1997, the fee pursuant to this agreement amounted to $54,641.
53
<PAGE> 59
SCUDDER SPAIN AND PORTUGAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) --(CONTINUED)
Pursuant to both agreements, the investment manager provides continuous
supervision of the investment portfolio and the administrator pays the
compensation of certain officers of the Fund and provides occupancy and certain
clerical services to the Fund. The Fund bears all other costs and expenses.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser,
is responsible for determining the daily net asset value per share and
maintaining the portfolio and general accounting records of the Fund. For the
ten months ended July 31, 1998, the amount charged to the Fund by SFAC
aggregated $71,534 of which $7,404 is unpaid at July 31, 1998.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, provides
shareholder communications services for the Fund. For the ten months ended July
31, 1998, the amount charged by SSC aggregated $12,500, of which $1,250 is
unpaid at July 31, 1998.
The Fund pays each Director not affiliated with the Adviser an annual
retainer, plus specified amounts for attended board and committee meetings. For
the ten months ended July 31, 1998, Directors' fees and expenses aggregated
$63,942 at July 31, 1998.
54
<PAGE> 60
SCUDDER SPAIN AND PORTUGAL FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout each period (a) and other performance information derived from the
Financial Statements and Market Price Data.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1998 ----------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------ ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period.... $17.34 $11.54 $ 9.68 $9.01 $ 8.24 $7.27
------ ------ ------ ----- ------ -----
Net investment income (loss).......... (.04) .08 .09 .07 .07 .22
Net realized and unrealized gain
(loss) on investment
transactions....................... 5.15 5.99 1.84 .60 .70 1.15
------ ------ ------ ----- ------ -----
Total from investment operations........ 5.11 6.07 1.93 .67 .77 1.37
------ ------ ------ ----- ------ -----
Less distributions from:
Net investment income................. (.03) (.09) (.07) -- -- (.18)
Net realized gains on investment
transactions....................... (2.65) (.18) -- -- -- (.22)
------ ------ ------ ----- ------ -----
Total distributions..................... (2.68) (.27) (.07) -- -- (.40)
------ ------ ------ ----- ------ -----
Net asset value, end of period.......... $19.77 $17.34 $11.54 $9.68 $ 9.01 $8.24
====== ====== ====== ===== ====== =====
Market value, end of period............. $18.19 $14.50 $ 8.88 $7.56 $ 7.50 $7.75
====== ====== ====== ===== ====== =====
Total Investment Return
Per share market value(%)............. 49.00** 67.33 18.31 .84 (3.23) 31.69
Per share net asset value(%)(b)....... 35.44** 53.89 20.19 7.44 9.35 20.38
Ratios and Supplemental Data
Net assets, end of period ($
millions).......................... 129 113 75 63 59 54
Ratio of operating expenses to average
net assets(%)...................... 1.77* 1.74 1.92 1.99 2.02 2.38(d)
Ratio of net investment income (loss)
to average net assets(%)........... (.46)* .54 .83 .71 .77 2.87
Portfolio turnover rate(%)............ 70* 115 66 43 31 29
Average commission rate paid(c)....... $.0710 $.0694 $.0671 $ -- $ -- $ --
</TABLE>
- ---------------
(a) Based on monthly average of shares outstanding during the period.
(b) Total investment returns reflect changes in net asset value per share during
each period and assume that dividends and capital gains distributions, if
any, were reinvested. These percentages are not an indication of the
performance of a shareholder's investment in the Fund based on market price.
(c) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years ending on or after September 1, 1996.
(d) Ratio of operating expenses to average net assets excluding interest expense
was 2.31%.
* Annualized
** Not annualized
55
<PAGE> 61
SCUDDER SPAIN AND PORTUGAL FUND, INC.
INVESTMENT PORTFOLIO AS OF MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
------- -----------
<S> <C> <C> <C>
COMMON STOCKS 100.0%
PORTUGAL 42.1%
CONSUMER DISCRETIONARY 2.2%
Department & Chain Stores 1.6% 26,445 Modelo Continente --
SGPS, SA..................... 2,066,439
-----------
Hotels & Casinos 0.6% 47,000 Lusotur-Sociedade Financeira
de Turismo(b)................ 725,292
-----------
CONSUMER STAPLES 4.4%
Food & Beverage 126,250 Jeronimo Martins SA.......... 5,194,019
6,950 Jeronimo Martins SA Warrants
(expire 9/15/03)(b).......... 337,682
-----------
5,531,701
-----------
COMMUNICATIONS 6.5%
Telephone/Communications 158,300 Portugal Telecom SA.......... 8,235,613
-----------
FINANCIAL 15.9%
Banks 14.6% 146,300 Banco Comercial Portugues.... 4,724,713
146,300 Banco Comercial Portugues
Rights(b)(c)................. 468,347
66,630 Banco Espirito Santo......... 3,079,020
113,200 Banco Pinto & Sotto Mayor,
SA........................... 2,809,823
81,330 Banco Portugues do
Investimento................. 3,129,068
84,000 Banco Totta e Acores......... 3,114,233
48,000 Espirito Santo Financial
Holdings (ADR)............... 1,257,000
-----------
18,582,204
-----------
Insurance 1.3% 52,500 Cia. de Seguros Mundial
Confiance, SA................ 1,698,244
-----------
MEDIA 0.0%
Broadcasting & Entertainment 20,000 TVI Televisao
Independente(b)(c)........... 25,350
-----------
CONSTRUCTION 7.0%
Building Materials 4.9% 70,500 Cimentos de Portugal SA...... 2,484,906
91,060 Corticeira Amorim,
S.P.G.S. .................... 1,394,634
76,200 Semapa Cement SA............. 2,333,688
-----------
6,213,228
-----------
Miscellaneous 2.1% 177,620 Engil-SGPS................... 2,062,775
32,500 Mota e Companhia, SA......... 660,813
-----------
2,723,588
-----------
TRANSPORTATION 1.9%
Miscellaneous 53,000 Brisa-Auto Estradas de
Portugal, SA(b).............. 2,421,178
-----------
UTILITIES 4.2%
Electric Utilities 207,290 Electricidade de Portugal.... 4,811,405
10,000 Electricidade de Portugal
(ADR)(b)..................... 467,500
-----------
5,278,905
-----------
SPAIN 57.9%
CONSUMER DISCRETIONARY 8.9%
Department & Chain Stores 3.8% 60,849 Adolfo Dominguez SA(b)....... 2,066,819
</TABLE>
The accompanying notes are an integral part of the financial statements.
56
<PAGE> 62
SCUDDER SPAIN AND PORTUGAL FUND, INC.
INVESTMENT PORTFOLIO -- (CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
------- -----------
<S> <C> <C> <C>
27,500 Aldeasa SA................... 974,382
76,450 Centros Comerciales
Continente, SA............... 1,807,478
-----------
4,848,679
-----------
Home Furnishings 0.0% 120 Sonae Imobiliaria SA(b)...... 1,762
-----------
Restaurants 4.1% 35,000 Tele Pizza, SA(b)............ 5,152,307
-----------
Specialty Retail 1.0% 51,600 Cortefiel, SA................ 1,241,333
-----------
CONSUMER STAPLES 2.8%
Alcohol & Tobacco 67,000 Baron de Ley, SA(b).......... 1,671,584
16,300 Tabacalera, SA 'A'........... 1,830,270
-----------
3,501,854
-----------
COMMUNICATIONS 6.6%
Telephone/Communications 190,900 Compania Telefonica Nacional
de Espana SA................. 8,418,481
-----------
FINANCIAL 18.3%
Banks 147,300 Banco Bilbao Vizcaya SA...... 6,918,181
145,040 Banco Central
Hispanoamericano............. 4,649,192
145,040 Banco Central
Hispanoamericano Rights(b)... 114,612
49,900 Banco Popular Espanol........ 4,846,266
138,300 Banco Santander SA........... 6,892,085
-----------
23,420,336
-----------
SERVICE INDUSTRIES 0.6%
Miscellaneous Commercial Services 57,708 Prosegur, Cia de Seguridad
SA........................... 742,864
ENERGY 3.6%
Oil Companies 89,030 Repsol SA.................... 4,544,547
-----------
METALS & MINERALS 1.8%
Steel & Metals 13,600 Acerinox, SA................. 2,236,044
-----------
CONSTRUCTION 5.7%
Homebuilding 2.2% 53,600 Fomento de Construcciones y
Contratas SA................. 2,835,075
-----------
Miscellaneous 3.5% 21,500 Abengoa SA................... 1,918,175
69,197 OCP Construcciones, SA....... 2,509,119
-----------
4,427,294
-----------
UTILITIES 9.6%
Electric Utilities 7.7% 306,190 Empresa Nacional de
Electricidad SA.............. 7,365,965
45,000 Iberdrola SA................. 683,947
134,500 Union Electrica Fenosa SA.... 1,778,534
-----------
9,828,446
-----------
Natural Gas Distribution 1.9% 37,370 Gas Natural SDG, SA.......... 2,333,839
-----------
TOTAL COMMON STOCKS (Cost
$69,250,672)................. 127,034,603
-----------
TOTAL INVESTMENT
PORTFOLIO -- 100.0%
(Cost $69,250,672)(a)........ 127,034,603
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
57
<PAGE> 63
SCUDDER SPAIN AND PORTUGAL FUND, INC.
INVESTMENT PORTFOLIO -- (CONTINUED)
- ---------------
(a) The cost for federal income tax purposes was $69,355,605. At March 31, 1998,
net unrealized appreciation for all securities based on tax cost was
$57,678,998. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost of
$58,239,553 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $560,555.
(b) Non-income producing security.
(c) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $493,697 (0.39% of net assets). Their
values have been estimated by the Valuation Committee in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at March 31, 1998 aggregated $585,905. These securities may also
have certain restrictions as to resale.
The accompanying notes are an integral part of the financial statements.
58
<PAGE> 64
SCUDDER SPAIN AND PORTUGAL FUND, INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments, at market (identified cost $69,250,672)........ $127,034,603
Foreign currency holdings, at market (identified cost
$1,771,633)............................................... 1,753,513
Dividends receivable........................................ 127,459
Receivable for foreign taxes recoverable.................... 35,300
Other assets................................................ 941
------------
Total assets...................................... 128,951,816
LIABILITIES
Payables:
Accrued management fee.................................... $121,546
Other payables and accrued expenses....................... 85,141
--------
Total liabilities................................. 206,687
------------
Net assets, at market value................................. $128,745,129
============
NET ASSETS
Net assets consist of:
Accumulated net investment loss........................... $ (287,239)
Accumulated net realized gain............................. 12,067,660
Net unrealized appreciation (depreciation) on:
Investments............................................ 57,783,931
Foreign currency related transactions.................. (20,458)
Paid-in capital........................................... 59,201,235
------------
Net assets, at market value................................. $128,745,129
============
NET ASSET VALUE per share ($128,745,129 [divided by] 6,511,154
shares of common stock issued and outstanding, $.01 par
value, 200,000,000 shares authorized)..................... $ 19.77
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
59
<PAGE> 65
SCUDDER SPAIN AND PORTUGAL FUND, INC.
FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of
$127,400)............................................. $ 699,818
Interest............................................... 10,221
-----------
710,039
Expenses:
Management fee......................................... $ 598,210
Administrator's fee.................................... 54,641
Custodian and accounting fees.......................... 138,648
Directors' fees and expenses........................... 47,960
Auditing............................................... 12,075
Reports to shareholders................................ 14,098
Services to shareholders............................... 17,223
Legal.................................................. 61,242
Other.................................................. 17,590 961,687
----------- -----------
Net investment loss....................................... (251,648)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) from:
Investments............................................ 12,422,156
Foreign currency related transactions.................. (244,931) 12,177,225
----------- -----------
Net unrealized appreciation (depreciation) during the
period on:
Investments............................................ 21,327,607
Foreign currency related transactions.................. (419) 21,327,188
----------- -----------
Net gain on investment transactions....................... 33,504,413
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $33,252,765
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
60
<PAGE> 66
SCUDDER SPAIN AND PORTUGAL FUND, INC.
FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED
1998 SEPTEMBER 30,
(UNAUDITED) 1997
------------ -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss).............................. $ (251,648) $ 505,492
Net realized gain from investment transactions............ 12,177,225 17,645,376
Net unrealized appreciation on investment transactions
during the period...................................... 21,327,188 21,389,505
------------ ------------
Net increase in net assets resulting from operations........ 33,252,765 39,540,373
------------ ------------
Distributions to shareholders from:
Net investment income..................................... (195,333) (585,992)
------------ ------------
Net realized gains on investment transactions............. (17,221,870) (1,172,008)
------------ ------------
INCREASE IN NET ASSETS...................................... 15,835,562 37,782,373
Net assets at beginning of period........................... 112,909,567 75,127,194
------------ ------------
NET ASSETS AT END OF PERIOD (including accumulated net
investment loss of $287,239 and undistributed net
investment income of $159,742, respectively).............. $128,745,129 $112,909,567
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
61
<PAGE> 67
SCUDDER SPAIN AND PORTUGAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
A. SIGNIFICANT ACCOUNTING POLICIES
Scudder Spain and Portugal Fund, Inc. (the "Fund", formerly The First
Iberian Fund, Inc.) is registered under the Investment Company Act of 1940, as
amended, as a non-diversified, closed-end management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio securities which are traded on U.S. or
foreign stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the Nasdaq Stock Market, Inc.
("Nasdaq"), for which there have been sales, are valued at the most recent sale
price reported on Nasdaq. If there are no such sales, the value is the most
recent bid quotation. Securities which are not quoted on Nasdaq but are traded
in another over-the-counter market are valued at the most recent sale price on
such market. If no sale occurred, the security is then valued at the mean
between the most recent bid and asked quotations. If there are no such bid and
asked quotations the most recent bid quotation shall be used.
Portfolio debt securities other than money market instruments are valued by
pricing agents approved by the officers of the Fund, which quotations reflect
broker/dealer-supplied valuations and electronic data processing techniques. If
the pricing agents are unable to provide such quotations, the most recent bid
quotation supplied by a bona fide market maker shall be used. Money market
instruments purchased with an original maturity of sixty days or less are valued
at amortized cost. All other securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Directors.
Foreign Currency Translations. The books and records of the Fund are
maintained in U.S. dollars. Foreign currency transactions are translated into
U.S. dollars on the following basis:
(i) market value of investment securities, other assets and
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and
interest income and certain expenses at the rates of exchange prevailing on
the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
Federal Income Taxes. The Fund's policy is to comply with the requirements
of the Internal Revenue Code, as amended, which are applicable to regulated
investment companies, and to distribute all of its taxable income to its
shareholders. The Fund accordingly paid no U.S. federal income taxes, and no
federal income tax provision was required. Withholding taxes on foreign interest
and dividends have been provided for in accordance with Spanish and Portuguese
tax rates.
Distribution of Income and Gains. Distributions of net investment income
are made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and therefore, will be distributed to
62
<PAGE> 68
SCUDDER SPAIN AND PORTUGAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
shareholders, annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. The differences
relate primarily to the deferral of certain losses for tax purposes. As a
result, net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial and federal income tax reporting
purposes.
Other. Investment security transactions are accounted for on a trade-date
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
For the six months ended March 31, 1998, purchases and sales of investment
securities (excluding short-term investments) aggregated $38,998,955 and
$58,087,491, respectively.
C. RELATED PARTIES
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and
the The Zurich Insurance Company ("Zurich"), an international insurance and
financial services organization, formed a new global investment organization by
combining Scudder's business with that of Zurich's subsidiary, Zurich Kemper
Investments, Inc. As a result of the transaction, Scudder changed its name to
Scudder Kemper Investments, Inc. ("Scudder Kemper" or the "Adviser"). The
transaction between Scudder and Zurich resulted in the termination of the Fund's
Investment Management and Administration Agreements with Scudder. However, a new
Investment Management Agreement (the "Management Agreement") between the Fund
and Scudder Kemper was approved by the Fund's Board of Directors and by the
Fund's Shareholders. The Management Agreement, which was effective December 31,
1997, is the same in all material respects as the corresponding previous
Investment Management Agreement, except that Scudder Kemper is the new
investment adviser to the Fund. In addition, for ease of administration, the
Management Agreement incorporates, in all material respects, the terms of the
Administration Agreement, and the Administration Agreement terminated as a stand
alone document upon execution of the Management Agreement.
Under the Management Agreement between the Fund and Scudder, which was in
effect prior to December 31, 1997, the Fund agreed to pay Scudder a fee equal to
an annual rate of 1% of the Fund's average weekly net assets, computed weekly
and payable monthly. Effective December 31, 1997, the Fund agrees to pay Scudder
Kemper a fee equal to an annual rate of 1.2% of the Fund's average weekly net
assets, computed weekly and payable monthly, which is equal to the aggregate fee
rate paid under the previous Investment Management and Administration
Agreements. For the six months ended March 31, 1998, the fee pursuant to these
agreements amounted to $598,210, of which $121,546 is unpaid at March 31, 1998.
Under the Administration Agreement between the Fund and Scudder, which was
in effect prior to December 31, 1997, the Fund agreed to pay Scudder a fee equal
to an annual rate of 0.2% of the Fund's average weekly net assets, computed
weekly and payable monthly. Effective December 31, 1997, this agreement became a
part of the Management Agreement. For the period September 30, 1997 to December
31, 1997, the fee pursuant to this agreement amounted to $54,641.
63
<PAGE> 69
SCUDDER SPAIN AND PORTUGAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Pursuant to both agreements, the investment manager provides continuous
supervision of the investment portfolio and the administrator pays the
compensation of certain officers of the Fund and provides occupancy and certain
clerical services to the Fund. The Fund bears all other costs and expenses.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser,
is responsible for determining the daily net asset value per share and
maintaining the portfolio and general accounting records of the Fund. For the
six months ended March 31, 1998, the amount charged to the Fund by SFAC
aggregated $40,314 of which $7,356 is unpaid at March 31, 1998.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, provides
shareholder communications services for the Fund. For the six months ended March
31, 1998, the amount charged by SSC aggregated $7,500, of which $1,250 is unpaid
at March 31, 1998.
The Fund pays each Director not affiliated with the Adviser an annual
retainer, plus specified amounts for attended board and committee meetings. For
the six months ended March 31, 1998, Directors' fees and expenses aggregated
$47,960 at March 31, 1998.
64
<PAGE> 70
THE FIRST IBERIAN FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout each period (a) and other performance information derived from the
financial statements and market price data.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEARS ENDED SEPTEMBER 30,
1997 ------------------------------------------
PER SHARE OPERATING PERFORMANCE (UNAUDITED) 1996 1995 1994 1993 1992(D)
------------------------------- ----------- ------ ----- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $11.54 $ 9.68 $9.01 $ 8.24 $ 7.27 $ 9.31
------ ------ ----- ------ ------ -------
Net investment income.................... .00 .09 .07 .07 .22 .27
Net realized and unrealized gain (loss)
on investment transactions............ 2.78 1.84 .60 .70 1.15 (2.16)
------ ------ ----- ------ ------ -------
Total from investment operations........... 2.78 1.93 .67 .77 1.37 (1.89)
------ ------ ----- ------ ------ -------
Less distributions from:
Net investment income................. (.09) (.07) -- -- (.18) (.15)
Net realized gains on investment
transactions........................ (.18) -- -- -- (.22) --
------ ------ ----- ------ ------ -------
Total distributions........................ (.27) (.07) -- -- (.40) (.15)
------ ------ ----- ------ ------ -------
Net asset value, end of period............. $14.05 $11.54 $9.68 $ 9.01 $ 8.24 $ 7.27
====== ====== ===== ====== ====== =======
Market value, end of period................ $11.13 $ 8.88 $7.56 $ 7.50 $ 7.75 $ 6.25
====== ====== ===== ====== ====== =======
TOTAL INVESTMENT RETURN
Per share market value(%)................ 28.38** 18.31 .84 (3.23) 31.69 (20.40)
Per share net asset value(%)(b).......... 24.69** 20.19 7.44 9.35 20.38 (20.43)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions)... 91 75 63 59 54 47
Ratio of operating expenses (excluding
interest) to average net assets(%).... 1.77* 1.92 1.99 2.02 2.31 2.45
Ratio of net investment income to average
net assets(%)......................... .03* .83 .71 .77 2.87 3.05
Portfolio turnover rate(%)............... 76* 66 43 31 29 32
Average commission rate paid(c).......... $.0657 $.0671 $ -- $ -- $ -- $ --
</TABLE>
- ---------------
(a) Based on monthly average of shares outstanding during the period.
(b) Total investment returns reflect changes in net asset value per share during
each period and assume that dividends and capital gains distributions, if
any, were reinvested. These percentages are not an indication of the
performance of a shareholder's investment in the Fund based on market price.
(c) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years ending on or after September 1, 1996.
(d) Scudder, Stevens & Clark, Inc. became investment adviser of the Fund on
April 1, 1992.
* Annualized
** Not annualized
65
<PAGE> 71
THE FIRST IBERIAN FUND, INC.
INVESTMENT PORTFOLIO AS OF MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
------- ----------
<S> <C> <C> <C>
PREFERRED STOCKS 3.3%
PORTUGAL
MEDIA
Broadcasting & Entertainment 359,300 Lusomundo-SGPS, SA
(Cost $3,500,668).................. 2,758,410
----------
COMMON STOCKS 96.7%
PORTUGAL 35.5%
CONSUMER DISCRETIONARY 4.5%
Specialty Retail 110,100 Sonae Investimentos, SA.............. 3,717,688
----------
CONSUMER STAPLES 5.7%
Food & Beverage 83,400 Jeronimo Martins SA.................. 4,623,115
6,950 Jeronimo Martins SA Warrants (expires
9/15/03)........................... 123,242
----------
4,746,357
----------
COMMUNICATIONS 11.4%
Cellular Telephones 3.9% 39,500 Telecel-Comunicacoes Pessoais, SA.... 3,237,319
----------
Telephone/Communications 7.5% 167,000 Portugal Telecom SA.................. 6,216,338
----------
FINANCIAL 4.3%
Insurance 160,000 Seguros Tranquilidade SA............. 3,547,714
----------
MEDIA 0.2%
Broadcasting & Entertainment 80,000 TVI Televisao Independente (b)(c).... 219,348
----------
CONSTRUCTION 9.4%
Building Materials 140,000 Cimentos de Portugal SA.............. 2,920,665
70,300 Corticeira Amorim, S.P.G.S. ......... 745,866
194,500 Semapa Cement SA..................... 4,113,286
----------
7,779,817
----------
SPAIN 61.2%
CONSUMER DISCRETIONARY
6.7%
Department & Chain Stores 3.0% 11,000 Adolfo Dominguez SA.................. 429,800
109,000 Centros Comerciales (PRYCA) SA....... 2,044,594
----------
2,474,394
----------
Restaurants 3.7% 70,000 Tele Pizza, S.A. .................... 3,047,248
----------
COMMUNICATIONS 3.7%
Telephone/Communications 128,550 Compania Telefonica Nacional de
Espana SA.......................... 3,107,402
----------
CONSTRUCTION 2.3%
Building Materials 2.1% 300,000 Energia e Industrias Aragonesas...... 1,747,655
----------
Miscellaneous 0.2% 1,486 Cubiertas y MZOV, S.A. .............. 153,934
----------
CONSUMER STAPLES 2.7%
Alcohol & Tobacco 44,500 Tabacalera, SA "A"................... 2,236,418
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
66
<PAGE> 72
THE FIRST IBERIAN FUND, INC.
INVESTMENT PORTFOLIO -- (CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
------- ----------
<S> <C> <C> <C>
FINANCIAL 19.6%
Banks 17.6% 90,300 Banco Bilbao Vizcaya, SA............. 5,484,155
20,300 Banco Intercontinental Espanol SA.... 2,751,690
63,200 Banco Santander, SA.................. 4,361,706
100,000 Banco de Valencia SA................. 1,981,950
----------
14,579,501
----------
Insurance 2.0% 3,961 Corporacion Mapfre SA (New)(b)....... 217,852
22,066 Mapfre Vida Seguros.................. 1,413,536
----------
1,631,388
----------
MANUFACTURING 2.8%
Containers & Paper 35,000 Vidrala SA........................... 2,291,630
----------
METALS & MINERALS 2.3%
Steel & Metals 13,600 Acerinox, SA......................... 1,920,508
----------
ENERGY 5.5%
Oil Companies 109,910 Repsol SA............................ 4,590,119
----------
TRANSPORTATION 2.1%
Miscellaneous 130,000 Autopistas del Mare Nostrum SA....... 1,785,171
----------
UTILITIES 13.5%
Electric Utilities 9.7% 62,680 Empresa Nacional de Electricidad
SA................................. 4,050,741
360,650 Iberdrola SA......................... 3,982,403
----------
8,033,144
----------
Natural Gas Distribution 3.8% 14,400 Gas Natural SDG, SA.................. 3,148,583
----------
Water Supply 0.0% 589 General de Aguas de Barcelona, SA
(New)(c)........................... 22,034
----------
TOTAL COMMON STOCKS (Cost
$54,555,553)....................... 80,233,710
----------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $58,056,221)(a).............. 82,992,120
==========
</TABLE>
- ---------------
(a) The cost for federal income tax purposes was $58,056,221. At March 31, 1997,
net unrealized appreciation for all securities based on tax cost was
$24,935,899. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost of
$26,446,717 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $1,510,818.
(b) Non-income producing security.
(c) Securities valued in good faith by the valuation committee of the Board of
Directors. The cost of these securities at March 31, 1997 was $602,410 (Note
A).
The accompanying notes are an integral part of the financial statements.
67
<PAGE> 73
THE FIRST IBERIAN FUND, INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments, at market (identified cost $58,056,221)........ $82,992,120
Foreign currency holdings, at market (identified cost
$6,412,155)............................................... 6,516,303
Cash........................................................ 47,774
Receivable for investments sold............................. 2,191,474
Receivable for foreign taxes recoverable.................... 81,098
Other assets................................................ 1,771
-----------
Total assets...................................... 91,830,540
LIABILITIES
Payables:
Investments purchased..................................... $154,472
Accrued management fee.................................... 76,560
Accrued administrator fee................................. 15,312
Other accrued expenses.................................... 112,779
--------
Total liabilities................................. 359,123
-----------
Net assets, at market value................................. $91,471,417
===========
NET ASSETS
Net assets consist of:
Distributions in excess of net investment income.......... $ (89,824)
Accumulated net realized gain............................. 7,291,296
Net unrealized appreciation on:
Investments............................................ 24,935,899
Foreign currency related transactions.................. 132,812
Paid-in capital........................................... 59,201,234
-----------
Net assets, at market value................................. $91,471,417
===========
Net asset value per share ($91,471,417/6,511,154 shares of
common stock issued and outstanding, $.01 par value,
unlimited number of shares authorized).................... $ 14.05
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
68
<PAGE> 74
THE FIRST IBERIAN FUND, INC.
FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of
$130,616)............................................. $ 741,313
Interest............................................... 27,812
-----------
769,125
Expenses:
Management fee......................................... $ 430,652
Administrator's fee.................................... 86,130
Custodian and accounting fees.......................... 107,707
Directors' fees and expenses........................... 54,469
Auditing............................................... 34,875
Reports to shareholders................................ 16,644
Services to shareholders............................... 14,256
Legal.................................................. 12,269 757,002
---------- -----------
Net investment income..................................... 12,123
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) from:
Investments............................................ 8,274,021
Foreign currency related transactions.................. (205,852) 8,068,169
----------
Net unrealized appreciation during the period on:
Investments............................................ 9,886,232
Foreign currency related transactions.................. 135,699 10,021,931
---------- -----------
Net gain on investment transactions....................... 18,090,100
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $18,102,223
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
69
<PAGE> 75
THE FIRST IBERIAN FUND, INC.
FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED
1997 SEPTEMBER 30,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1996
- --------------------------------- ----------- -------------
<S> <C> <C>
Operations:
Net investment income..................................... $ 12,123 $ 576,964
Net realized gain from investment transactions............ 8,068,169 5,880,465
Net unrealized appreciation on investment transactions
during the period...................................... 10,021,931 6,083,968
----------- -----------
Net increase in net assets resulting from operations........ 18,102,223 12,541,397
----------- -----------
Distributions to shareholders from:
Net investment income..................................... (585,992) (455,778)
----------- -----------
Net realized gains on investment transactions............. (1,172,008) --
----------- -----------
INCREASE IN NET ASSETS...................................... 16,344,223 12,085,619
Net assets at beginning of period........................... 75,127,194 63,041,575
----------- -----------
NET ASSETS AT END OF PERIOD (including distributions in
excess of net investment income of $89,824 and
undistributed net investment income of $484,045).......... $91,471,417 $75,127,194
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
70
<PAGE> 76
THE FIRST IBERIAN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
A. SIGNIFICANT ACCOUNTING POLICIES
The First Iberian Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, closed-end
management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio securities which are traded on U.S. or
foreign stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system. If
there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
If no sale occurred, the security is then valued at the mean between the most
recent bid and asked quotations. If there are no such bid and asked quotations
the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days
are valued by pricing agents approved by the officers of the Fund, which
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Short-term investments having a maturity of sixty days or less
are valued at amortized cost.
All other securities are valued at their fair value as determined in good
faith by the Valuation Committee of the Board of Directors. These securities
valued in good faith by the Valuation Committee of the Board of Directors
amounted to $241,382 (.26% of net assets) and have been noted in the investment
portfolio as of March 31, 1997.
Foreign Currency Translations. The books and records of the Fund are
maintained in U.S. dollars. Foreign currency transactions are translated into
U.S. dollars on the following basis:
(i) market value of investment securities, other assets and
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and
interest income and certain expenses at the rates of exchange prevailing on
the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
Federal Income Taxes. The Fund's policy is to comply with the requirements
of the Internal Revenue Code which are applicable to regulated investment
companies, and to distribute all of its taxable income to its shareholders. The
Fund accordingly paid no U.S. federal income taxes, and no federal income tax
provision was required. Withholding taxes on foreign interest and dividends have
been provided for in accordance with Spanish and Portuguese tax rates.
71
<PAGE> 77
THE FIRST IBERIAN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Distribution of Income and Gains. Distributions of net investment income
are made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and therefore, will be distributed to
shareholders, annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. The differences
relate primarily to the deferral of certain losses for tax purposes. As a
result, net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial and federal income tax reporting
purposes.
Other. Investment security transactions are accounted for on a trade-date
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
For the six months ended March 31, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $31,817,324 and
$41,938,834, respectively.
C. RELATED PARTIES
Under the Investment Management Agreement with Scudder, Stevens & Clark,
Inc. ("Scudder"), the Fund has agreed to pay Scudder a fee equal to an annual
rate of 1% of the Fund's average weekly net assets, computed weekly and payable
monthly. For the six months ended March 31, 1997, the fee pursuant to such
agreement amounted to $430,652 of which $76,560 is unpaid at March 31, 1997.
Under the Administration Agreement with Scudder, the administration fee is
computed weekly and payable monthly at the annual rate of .20% of the Fund's
average weekly net assets. For the six months ended March 31, 1997, the fee
pursuant to such agreement amounted to $86,130 of which $15,312 is unpaid at
March 31, 1997.
Pursuant to both agreements, the investment manager provides continuous
supervision of the investment portfolio and the administrator pays the
compensation of certain officers of the Fund and provides occupancy and certain
clerical services to the Fund. The Fund bears all other costs and expenses.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser,
is responsible for determining the daily net asset value per share and
maintaining the portfolio and general accounting records of the Fund. For the
six months ended March 31, 1997, the amount charged to the Fund by SFAC
aggregated $31,645 of which $5,547 is unpaid at March 31, 1997.
The Fund pays each Director not affiliated with the Manager, $6,000
annually, plus specified amounts for attended board and committee meetings. For
the six months ended March 31, 1997, Directors' fees and expenses aggregated
$54,469 of which $8,350 is unpaid at March 31, 1997.
72
<PAGE> 78
EXHIBIT A-3
SCUDDER SPAIN AND PORTUGAL FUND, INC.
PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
73
<PAGE> 79
PRO FORMA BALANCE SHEET
(ASSUME 50% REDEMPTION)
JULY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS(1) PRO FORMA
------------ -------------- -----------
<S> <C> <C> <C>
Investments, at value......................... $134,705,584 (66,786,459)(2) $67,919,125
Cash and foreign currency, at value........... 1,079,520 (535,221)(2) 544,299
Other assets less liabilities................. (1,041,744) (100,000)(4) (1,141,744)
------------ -----------
Net Assets.................................... $134,743,360 $67,321,680
============ ===========
Shares Outstanding............................ 6,511,154 (3,255,577) 3,255,577
Net asset value per share..................... $20.69 $20.68
</TABLE>
PRO FORMA INCOME STATEMENT
FOR THE TEN MONTHS ENDING JULY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS(1) PRO FORMA
----------- -------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend Income................................. $ 1,850,912 $(925,456) $ 925,456
Interest Income................................. 10,220 (5,110) 5,110
----------- --------- -----------
Total Investment Income................. 1,861,132 (930,566) 930,566
EXPENSES
Management and Administrative fees.............. 1,185,786 (592,893) 592,893
All other expenses.............................. 1,043,052 (203,471)(3) 839,581
----------- --------- -----------
Total expenses.......................... 2,228,838 (796,364) 1,432,474
----------- --------- -----------
Net investment income............................. $ (367,706) $(134,202) $ (501,908)
----------- --------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) from investments and
foreign currency related transactions........ $18,962,170 $18,962,170
Net unrealized appreciation (depreciation) of
investments and foreign currency related
transactions................................. $20,656,533 $20,656,533
----------- --------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS...................................... $39,250,997 $(134,202) $39,116,795
=========== ========= ===========
</TABLE>
- ---------------
(1) For purposes of the Pro Forma Statements of Assets & Liabilities, it is
assumed that either 50% or 75% of the Fund's outstanding shares would be
presented for Redemption. The Pro Forma Statements of Assets & Liabilities
assume the Redemption Right is consummated as of the end of the pro forma
period at the net asset value as of that date (a "pro forma redemption
date"). The Pro Forma Statement of Operations assume the Redemption Right is
consummated at the beginning of the pro forma period.
(2) In exchange for Shares presented for Redemption, the redeeming Shareholder
will receive a pro rata portion of each of the securities (other than
short-term fixed income securities with maturities less than one year,
securities with transfer restrictions and certain illiquid securities) and
any cash held by the Fund in the Fund's investment portfolio ("Portfolio
Securities") on the Valuation Date.
(3) Estimated adjustment in expenses due to reduction in net assets.
(4) Assumes accrual of estimated reorganization related expenses.
74
<PAGE> 80
PRO FORMA BALANCE SHEET
(ASSUME 75% REDEMPTION)
JULY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO
ACTUAL ADJUSTMENTS(1) FORMA
------------ -------------- -----------
<S> <C> <C> <C>
Investments, at value......................... $134,705,584 (100,179,688)(2) 34,525,896
Cash and foreign currency, at value........... 1,079,520 (802,832)(2) 276,688
Other assets less liabilities................. (1,041,744) (100,000)(4) (1,141,744)
------------ -----------
Net Assets.................................... $134,743,360 $33,660,840
============ ===========
Shares Outstanding............................ 6,511,154 (4,883,365) 1,627,789
Net asset value per share..................... $ 20.69 $ 20.68
</TABLE>
PRO FORMA INCOME STATEMENT
FOR THE TEN MONTHS ENDING JULY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO
ACTUAL ADJUSTMENTS(1) FORMA
----------- -------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend Income.............................. $ 1,850,912 $(1,388,184) $ 462,728
Interest Income.............................. 10,220 (7,665) 2,555
----------- ----------- -----------
Total Investment Income.............. 1,861,132 (1,395,849) 465,283
EXPENSES
Management and Administrative fees........... 1,185,786 (889,339) 296,446
All other expenses........................... 1,043,052 (287,932)(3) 755,120
----------- ----------- -----------
Total expenses....................... 2,228,837 (1,177,271) 1,051,566
----------- ----------- -----------
Net investment income........................ $ (367,705) $ (218,578) $ (586,283)
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) from investments and
foreign currency related transactions..... $18,962,170 $18,962,170
Net unrealized appreciation (depreciation) of
investments and foreign currency related
transactions.............................. $20,656,533 $20,656,533
----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $39,250,998 $ (218,578) $39,032,420
=========== =========== ===========
</TABLE>
- ---------------
(1) For purposes of the Pro Forma Statements of Assets & Liabilities, it is
assumed that either 50% or 75% of the Fund's outstanding shares would be
presented for redemption. The Pro Forma Statements of Assets & Liabilities
assume the Redemption Right is consummated as of the end of the pro forma
period at the net asset value as of that date (a "pro forma redemption
date"). The Pro Forma Statement of Operations assume the Redemption Right is
consummated at the beginning of the pro forma period.
(2) In exchange for Shares presented for Redemption, the redeeming Shareholder
will receive a pro rata portion of each of the securities (other than
short-term fixed income securities with maturities less than one year,
securities with transfer restrictions and certain illiquid securities) and
any cash held by the Fund in the Fund's investment portfolio ("Portfolio
Securities") on the Valuation Date.
(3) Estimated adjustment in expenses due to reduction in net assets.
(4) Assumes accrual of estimated reorganization related expenses.
75
<PAGE> 81
PRO FORMA BALANCE SHEET
(ASSUME 50% REDEMPTION)
MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS(1) PRO FORMA
------------ -------------- -----------
<S> <C> <C> <C>
Investments, at value........................... $127,034,603 (63,200,185)(2) 63,834,418
Cash and foreign currency, at value............. 1,753,513 (872,379)(2) 881,134
Other assets less liabilities................... (42,987) (600,000)(4) (642,987)
------------ -----------
Net Assets...................................... $128,745,129 $64,072,565
============ ===========
Shares Outstanding.............................. 6,511,154 (3,255,577) 3,255,577
Net asset value per share....................... $19.77 $19.68
</TABLE>
PRO FORMA INCOME STATEMENT
FOR THE SIX-MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS(1) PRO FORMA
----------- -------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend Income.............................. $ 699,818 $ (349,909) $ 349,909
Interest Income.............................. 10,221 (5,111) 5,110
----------- ---------- -----------
Total Investment Income.............. 710,039 (355,020) 355,019
EXPENSES
Management and Administrative fees........... 652,851 (326,426) 326,425
All other expenses........................... 308,836 (115,715)(3) 193,121
----------- ---------- -----------
Total expenses....................... 961,687 (442,141) 519,546
----------- ---------- -----------
Net investment income........................ $ (251,648) $ 87,121 $ (164,527)
----------- ---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) from investments and
foreign currency related transactions..... $12,177,225 $12,177,225
Net unrealized appreciation (depreciation) of
investments and foreign currency related
transactions.............................. $21,327,188 $21,327,188
----------- ---------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................ $33,252,765 $ 87,121 $33,339,886
=========== ========== ===========
</TABLE>
- ---------------
(1) For purposes of the Pro Forma Statements of Assets & Liabilities, it is
assumed that either 50% or 75% of the Fund's outstanding shares would be
presented for Redemption. The Pro Forma Statements of Assets & Liabilities
assume the Redemption Right is consummated as of the end of the pro forma
period at the net asset value as of that date (a "pro forma redemption
date"). The Pro Forma Statement of Operations assume the Redemption Right is
consummated at the beginning of the pro forma period.
(2) In exchange for Shares presented for Redemption, the redeeming Shareholder
will receive a pro rata portion of each of the securities (other than
short-term fixed income securities with maturities less than one year,
securities with transfer restrictions and certain illiquid securities) and
any cash held by the Fund in the Fund's investment portfolio ("Portfolio
Securities") on the Valuation Date.
(3) Estimated adjustment in expenses due to reduction in net assets.
(4) Assumes accrual of estimated reorganization related expenses.
76
<PAGE> 82
PRO FORMA BALANCE SHEET
(ASSUME 75% REDEMPTION)
MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS(1) PRO FORMA
------------ -------------- -----------
<S> <C> <C> <C>
Investments, at value........................... $127,034,603 (94,800,278)(2) $32,234,325
Cash and foreign currency, at value............. 1,753,513 (1,308,569)(2) 444,944
Other assets less liabilities................... (42,987) (600,000)(4) (642,987)
------------ -----------
Net Assets...................................... $128,745,129 $32,036,282
============ ===========
Shares Outstanding.............................. 6,511,154 (4,883,365) 1,627,789
Net asset value per share....................... $19.77 $19.68
</TABLE>
PRO FORMA INCOME STATEMENT
FOR THE SIX-MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS(1) PRO FORMA
----------- -------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend Income................................ $ 699,818 $(524,864) $ 174,954
Interest Income................................ 10,221 (7,666) 2,555
----------- --------- -----------
Total Investment Income................ 710,039 (532,530) 177,509
EXPENSES
Management and Administrative fees............. 652,851 (489,638) 163,213
All other expenses............................. 308,836 (163,748)(3) 145,088
----------- --------- -----------
Total expenses......................... 961,687 (653,386) 308,301
----------- --------- -----------
Net investment income.......................... $ (251,648) $ 120,856 $ (130,792)
----------- --------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) from investments and
foreign currency related transactions....... $12,177,225 $12,177,225
Net unrealized appreciation (depreciation) of
investments and foreign currency related
transactions................................ $21,327,188 $21,327,188
----------- --------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS..................................... $33,252,765 $ 120,856 $33,373,621
=========== ========= ===========
</TABLE>
- ---------------
(1) For purposes of the Pro Forma Statements of Assets & Liabilities, it is
assumed that either 50% or 75% of the Fund's outstanding shares would be
presented for Redemption. The Pro Forma Statements of Assets & Liabilities
assume the Redemption Right is consummated as of the end of the pro forma
period at the net asset value as of that date (a "pro forma redemption
date"). The Pro Forma Statement of Operations assume the Redemption Right is
consummated at the beginning of the pro forma period.
(2) In exchange for Shares presented for Redemption, the redeeming Shareholder
will receive a pro rata portion of each of the securities (other than
short-term fixed income securities with maturities less than one year,
securities with transfer restrictions and certain illiquid securities) and
any cash held by the Fund in the Fund's investment portfolio ("Portfolio
Securities") on the Valuation Date.
(3) Estimated adjustment in expenses due to reduction in net assets.
(4) Assumes accrual of estimated reorganization related expenses.
77
<PAGE> 83
PRO FORMA BALANCE SHEET
(ASSUME 50% REDEMPTION)
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS(1) PRO FORMA
------------ -------------- ------------
<S> <C> <C> <C>
Investments, at value.......................... $112,373,377 (55,263,001)(2) $ 57,110,376
Cash and foreign currency, at value............ 1,813,376 (891,782)(2) 921,594
Other assets less liabilities.................. (1,277,186) (600,000)(4) (1,877,186)
------------ ------------
Net Assets..................................... $112,909,567 $ 56,154,784
============ ============
Shares Outstanding............................. 6,511,154 (3,255,577) 3,255,577
Net asset value per share...................... $17.34 $17.25
</TABLE>
PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS(1) PRO FORMA
------------ -------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend Income.............................. $ 2,087,235 $(1,043,618) $ 1,043,617
Interest Income.............................. 57,022 (28,511) 28,511
------------ ----------- ------------
Total Investment Income.............. 2,144,257 (1,072,129) 1,072,128
EXPENSES
Management and Administrative fees........... $ 1,128,575 $ (564,288) $ 564,287
All other expenses........................... 510,190 (191,158)(3) 319,032
------------ ----------- ------------
Total expenses....................... 1,638,765 (755,446) 883,319
------------ ----------- ------------
Net investment income.......................... 505,492 (316,683) 188,809
------------ ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) from investments and
foreign currency related transactions..... $ 17,645,376 $ 17,645,376
Net unrealized appreciation (depreciation) of
investments and foreign currency related
transactions.............................. $ 21,389,505 $ 21,389,505
------------ ----------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 39,540,373 $ (316,683) $ 39,223,690
============ =========== ============
</TABLE>
- ---------------
(1) For purposes of the Pro Forma Statements of Assets & Liabilities, it is
assumed that either 50% or 75% of the Fund's outstanding shares would be
presented for Redemption. The Pro Forma Statements of Assets & Liabilities
assume the Redemption Right is consummated as of the end of the pro forma
period at the net asset value as of that date (a "pro forma redemption
date"). The Pro Forma Statement of Operations assume the Redemption Right is
consummated at the beginning of the pro forma period.
(2) In exchange for Shares presented for Redemption, the redeeming Shareholder
will receive a pro rata portion of each of the securities (other than
short-term fixed income securities with maturities less than one year,
securities with transfer restrictions and certain illiquid securities) and
any cash held by the Fund in the Fund's investment portfolio ("Portfolio
Securities") on the Valuation Date.
(3) Estimated adjustment in expenses due to reduction in net assets.
(4) Assumes accrual of estimated reorganization related expenses.
78
<PAGE> 1
LETTER OF TRANSMITTAL
TO ACCOMPANY SHARES OF COMMON STOCK $0.01 PAR VALUE OF
SCUDDER SPAIN AND PORTUGAL FUND, INC.
PRESENTED FOR REDEMPTION PURSUANT TO THE REDEMPTION RIGHT
DATED SEPTEMBER 2, 1998
THE REDEMPTION RIGHT AND WITHDRAWAL RIGHTS WILL EXPIRE ON
SEPTEMBER 30, 1998, AT 5:00 P.M., EASTERN TIME, UNLESS THE
REDEMPTION RIGHT IS EXTENDED
BOSTON EQUISERVE LP, DEPOSITARY:
PHONE 1-800-426-5523
INFORMATION REGARDING REDEMPTION BY MAIL, COURIER, OR BY HAND
<TABLE>
<S> <C> <C>
By Hand: By First Class Mail: By Overnight Certified or
Securities Transfer & State Street Bank & Express Mail Delivery:
Reporting Services, Inc. Trust Company State Street Bank &
c/o Boston EquiServe LP Corporate Reorganization Trust Company
1 Exchange Plaza P.O. Box 9061 Corporate Reorganization
55 Broadway, 3rd Floor Boston, MA 02205-8686 70 Campanelli Drive
New York, NY 10006 Braintree, MA 02184
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN THOSE LISTED
ABOVE IS NOT A VALID DELIVERY TO THE DEPOSITARY. YOU MUST ALSO SIGN THE LETTER
OF TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED BELOW AND COMPLETE THE
SUBSTITUTE FORM W-9 OR W-8, AS APPLICABLE, SET FORTH BELOW. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used (a) if you desire to present your
Shares for Redemption yourself, (b) if you intend to request your broker,
dealer, commercial bank, trust company or other nominee to present your Shares
for Redemption for you and your Shares are not registered in the name of such
broker, dealer, commercial bank, trust company or other nominee, and (c) by a
broker, dealer, commercial bank, trust company or other nominee presenting for
Redemption the Shares as a registered owner or on behalf of a registered owner.
To participate in the Redemption Right, a properly completed and executed Letter
of Transmittal (or photocopy bearing original signature(s) and any required
signature guarantees), any certificates representing Shares presented for
Redemption, and any other documents required by this Letter of Transmittal
should be mailed or delivered to the Depositary at the appropriate address set
forth above and must be received by the Depositary prior to 5:00 p.m., Eastern
Time, on September 30, 1998, or such later time and date to which the Redemption
Right is extended, unless the party presenting Shares for Redemption has
satisfied the conditions for guaranteed delivery described in Section 2 of the
Redemption Right Statement dated September 2, 1998. Shareholders are not
required to pay a service charge to the Fund or the Depositary in connection
with presenting Shares for Redemption, but may be charged a fee by a broker,
dealer or other institution for processing their request to redeem their Shares,
although they will be charged the expenses of distributing the proceeds of their
Redemption of Shares. Delivery of documents to a book-entry transfer facility
does not constitute delivery to the Depositary.
<PAGE> 2
Ladies and Gentlemen:
The person(s) signing this Letter of Transmittal (the "Signor" or
"Shareholder") hereby expresses a desire to participate in the Redemption Right
and hereby demands the redemption by Scudder Spain and Portugal Fund, Inc. (the
"Fund") of the shares of common stock described below in "Description of Shares
Presented for Redemption," par value $0.01 per share (the "Shares") of the Fund,
in exchange for a pro rata portion of each of the securities (other than short-
term fixed income securities with maturities of less than one year, securities
with transfer restrictions and certain illiquid securities) and cash held in the
Fund's investment portfolio ("Portfolio Securities") on the Valuation Date,
subject to adjustments for fractional shares. The consideration to be paid for
each Share of the Fund presented for Redemption (the "Repurchase Price") will be
equal to the net asset value ("NAV") per Share determined as of the close of the
regular trading session of the New York Stock Exchange on October 1, 1998 (or,
if the Redemption Right is extended, on the first business day following the
Expiration Date as defined in the Redemption Right Statement). This Letter of
Transmittal is subject to the terms and conditions described in the Redemption
Right Statement dated September 2, 1998 (which Redemption Right Statement and
Letter of Transmittal together are referred to in these documents as the
"Redemption Right"). Receipt of the Redemption Right Statement is acknowledged
by the Signor.
The shares of common stock described below in "Description of Shares
Presented for Redemption" constitute all Shares actually or constructively owned
by the Signor. Any Shares received pursuant to a dividend by the Fund or the
Signor's participation in the Fund's Dividend Reinvestment Plan shall also be
deemed part of the Signor's request for Redemption.
If the Signor(s) elects to have all of the Portfolio Securities the Signor
received as proceeds from the Redemption of Shares liquidated for cash, the
Signor should select Option A. The liquidation of Portfolio Securities is a
separate taxable event apart from the Redemption Right and may result in a
taxable gain or loss for the Signor.
If the Signor desires to retain ownership of the Portfolio Securities
received the Signor should select Option B and complete and submit the required
transfer instructions. Failure to adequately comply with the transfer
requirements will result in the liquidation of Signor's Portfolio Securities for
cash.
The Signor should recognize that the Signor will bear the expenses of
distributing the proceeds of the Signor's redemption request (generally, certain
transfer taxes and custodial expenses) and that the Signor will also bear the
additional costs and expenses of liquidating Portfolio Securities received if
the Signor elects Option A. The actual per Share expenses for the Signor of
effecting the Redemption and of any liquidation process (if so elected) will
depend on a number of factors, including the number of Shares redeemed, the
Fund's portfolio composition at the time and market conditions prevailing during
the liquidation process.
Subject to, and effective upon, acceptance for payment of, or payment for,
Shares presented for Redemption by the Signor in accordance with the terms and
subject to the conditions of the Redemption Right (including, if the Redemption
Right is extended or amended, the terms or conditions of any extension or
amendment), the Signor hereby sells, assigns and transfers to, or upon the order
of, the Fund all right, title and interest in and to all of the Shares that are
being presented for Redemption as described below under "Description of Shares
Presented for Redemption" that may be purchased by the Fund pursuant to the
Redemption Right and the Signor constitutes and appoints Boston EquiServe LP
(the "Depositary") as attorney-in-fact of the Signor with respect to such
Shares, with full power of substitution (such power of attorney being deemed to
be an irrevocable power coupled with an interest), to (a) present certificate(s)
for such Shares, if any, for cancellation and transfer on the Fund's books and
(b) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares, subject to the succeeding paragraph, all in accordance
with the terms and conditions set forth in the Redemption Right.
The Signor represents and warrants that (a) the Signor, if a broker,
dealer, commercial bank, trust company or other nominee, has obtained the
Shareholder's instructions to present the Shares for Redemption pursuant to the
terms and conditions of this Redemption Right in accordance with the letter from
the Fund to brokers, dealers, commercial banks, trust companies and other
nominees; (b) when and to the extent the Fund accepts the Shares for repurchase,
the Fund will acquire good, marketable and unencumbered title to the Shares,
free and clear of all security interests, liens, restrictions, charges,
encumbrances, conditional sales agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim; (c) on request,
the Signor will execute and deliver any additional documents that the Depositary
or the Fund deems necessary or desirable to complete the assignment, transfer
and purchase of the Shares presented for Redemption; and (d) the Signor has read
and agrees to all of the terms and conditions of the Redemption Right.
The name(s) and address(es) of the registered owner(s) should be printed as
they appear on the registration of the Shares. If the Shares presented for
Redemption are in certificate form, the certificate(s) representing such Shares
must be returned together with this Letter of Transmittal.
<PAGE> 3
The Signor recognizes that, under certain circumstances set forth in the
Redemption Right Statement, the Fund may terminate or amend the Redemption Right
or may not be required to repurchase any of the Shares presented for Redemption.
In any such event, the Signor understands that certificate(s) for the Shares not
repurchased, if any, will be returned to the Signor at its registered address
unless otherwise indicated under the Special Delivery Instructions below. The
Signor recognizes that the Fund has no obligation, pursuant to the Special
Payment Instructions, to transfer any Shares from the name of the registered
owner if the Fund purchases none of such Shares.
The Signor understands that acceptance of Shares by the Fund for payment
represents a binding agreement between the Signor and the Fund upon the terms
and conditions of the Redemption Right.
If the Signor desires to retain ownership of the Portfolio Securities under
Option B, the Portfolio Securities representing the Shares repurchased will be
titled on an interim basis in the name of the Custodian for the benefit of the
redeeming Shareholder. The Signor must have established cash and securities
accounts with a bank or broker in both Spain and Portugal and provide this
information at the time the Shares are presented for Redemption. The bank or
broker will be responsible for reregistration of Portfolio Securities in the
Signor's name. The Signor must also provide the name of a broker or bank in the
United States and its DTC Participant Number so as to retain ownership of any
Portfolio Securities that are American Depository Receipts. If the Signor has
requested that Portfolio Securities received be liquidated for cash a check
representing the liquidation amount minus the costs of liquidation will be
issued to the order of the Signor and mailed to the address indicated in the box
titled Special Payment Instructions or the box titled Special Delivery
Instructions. The Fund will not pay interest on the Repurchase Price under any
circumstances.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death or incapacity of the Signor and all
obligations of the Signor under this Letter of Transmittal shall be binding upon
the heirs, personal representatives, successors and assigns of the Signor.
Except as stated in the Redemption Right Statement, the Shareholder's
presentment of Shares for Redemption is irrevocable.
Unless otherwise indicated under "Special Payment Instructions," please
make payment of cash proceeds from the liquidation of Portfolio Securities
received (if liquidation is elected) and/or return any Share certificates not
accepted for repurchase in the name(s) of the registered holder(s) appearing
under "Description of Shares Presented for Redemption." Similarly, unless
otherwise indicated under "Special Delivery Instructions," please return any
Share certificates not accepted for payment (and accompanying documents, as
appropriate) and/or any cash proceeds from the liquidation of Portfolio
Securities received (if liquidation is requested) to the address(es) of the
registered holder(s) appearing under "Description of Shares Presented for
Redemption." In the event that both the Special Payment Instructions and the
Special Delivery Instructions are completed, please pay the proceeds from
liquidation of Portfolio Securities (if liquidation is elected) and/or return
any Share certificates not accepted for payment in the name of, and deliver such
documents and/or return any such Share certificates to, the person(s) indicated
in those sections. The Signor recognizes that the Fund has no obligation under
the Special Payment Instructions to transfer any Shares from the name of the
registered holder of such Shares if the Fund does not accept for payment any of
the Shares presented for Redemption.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES PRESENTED FOR REDEMPTION
(SEE INSTRUCTIONS 3 AND 4)
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
CERTIFICATE(S) PRESENTED FOR REDEMPTION
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S). (PLEASE INCLUDE SHARES HELD IN DIVIDEND REINVESTMENT PLAN)
PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE. (ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
SHARES CERTIFICATE OF SHARES REPRESENTED
NUMBER(S)* BY CERTIFICATES*
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
Total Shares Presented for Redemption
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Book-Entry Shareholders.
[ ] If any of your certificates have been mutilated, lost, stolen or destroyed,
check here and return this Letter of Transmittal to the Depositary, P.O.
Box 9061, Boston, MA 02205 or call them at 1-800-426-5523. They will advise
you of the requirements for receiving payment.
<PAGE> 4
OPTIONS REGARDING
DISPOSITION OF PORTFOLIO SECURITIES
OPTION A: [ ] I elect to have all of the Portfolio Securities received from
repurchase of the Total Shares Presented for Redemption
indicated above to be liquidated for cash.
OPTION B: [ ] I elect to retain ownership of the Portfolio Securities received
upon repurchase of the Total Shares Presented for Redemption.
IF OPTION B IS ELECTED, YOU MUST PROVIDE THE INFORMATION REQUESTED BELOW.
FAILURE TO FURNISH THE INFORMATION REQUESTED REGARDING ACCOUNT INFORMATION WILL
RESULT IN LIQUIDATION OF THE PORTFOLIO SECURITIES. THE LIQUIDATION OF PORTFOLIO
SECURITIES FOR CASH IS A TAXABLE EVENT IN ADDITION TO THE REDEMPTION OF SHARES
AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO THE SHAREHOLDER.
<PAGE> 5
IF OPTION B IS ELECTED:
Your Name:
- --------------------------------------------------------------------------------
Local Account Information:
SPAIN
Name of Account (if different):
- --------------------------------------------------------------------------------
Bank or Broker Name (in Spain):
- --------------------------------------------------------------------------------
Bank or Broker Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Securities Account No.:
- --------------------------------------------------------------------------------
Cash Account No:
- --------------------------------------------------------------------------------
PORTUGAL
Name of Account (if different):
- --------------------------------------------------------------------------------
Bank or Broker Name (in Portugal):
- --------------------------------------------------------------------------------
Bank or Broker Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Securities Account No.:
- --------------------------------------------------------------------------------
Cash Account No:
- --------------------------------------------------------------------------------
UNITED STATES (FOR AMERICAN DEPOSITORY RECEIPTS THAT ARE PART OF THE PORTFOLIO
SECURITIES.)
Broker Name:
- --------------------------------------------------------------------------------
DTC Participant Number:
- --------------------------------------------------------------------------------
IN ADDITION, IN ORDER TO RECEIVE PORTFOLIO SECURITIES UNDER ELECTION B, YOU MUST
ADVISE THE ABOVE-NAMED BANK(S) OR BROKER(S) THAT SHARES WILL BE RECEIVED FOR
YOUR ACCOUNT(S) FROM THE FOLLOWING COUNTERPARTIES:
Counterparty Settlement Instructions:
SPAIN
<TABLE>
<S> <C>
Securities Account Information: Banco Santander, Madrid
Account Number: 15940185769PC
Cash Account Information: Banco Santander, Madrid
Account Number: 810578
</TABLE>
<PAGE> 6
PORTUGAL
Securities Account Information: Banco Espirito Santo Comercial de Lisboa, Lisbon
Account Number: 099507150006
Cash Account Information: Banco Portuguese de Atlantico, Lisbon
Account Number: 530/03/002-881527
UNITED STATES
Securities Account Information: Brown Brothers Harriman & Co.
DTC Participant Number: 010
PORTFOLIO SECURITIES WHOSE OWNERSHIP IS RETAINED UNDER OPTION B WILL BE
REGISTERED IN THE NOMINEE NAME OF THE DELIVERING PARTY. THE SIGNOR, IN
CONJUNCTION WITH THE LOCAL BANK/BROKER, SHALL BE RESPONSIBLE FOR REREGISTERING
THE PORTFOLIO SECURITIES.
THE SIGNOR PRESENTS FOR REDEMPTION ALL UNCERTIFICATED SHARES THAT MAY BE HELD IN
THE NAME(S) OF THE REGISTERED OWNER(S) BY THE FUND'S TRANSFER AGENT PURSUANT TO
THE FUND'S DIVIDEND REINVESTMENT PLAN.
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
- --------------------------------------------------------------------------------
Window Ticket Number (if any):
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
- --------------------------------------------------------------------------------
Name of Eligible Institution which Guaranteed Delivery:
- --------------------------------------------------------------------------------
DTC Participant Number (if delivered by book-entry transfer):
- --------------------------------------------------------------------------------
<PAGE> 7
NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW.
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if (i) Share certificates not accepted for
repurchase or (ii) proceeds from liquidation of Portfolio Securities
received from the Redemption Right are to be made payable, in the name of
someone other than the Signor.
Issue: [ ] Check [ ] Certificate(s) to:
Name(s):
------------------------------------------------
(PLEASE TYPE OR PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
(PLEASE INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO., IF APPLICABLE)
(SEE SUBSTITUTE FORM W-9 BELOW.)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if (i) Share certificates not accepted for
repurchase or (ii) check representing the proceeds of liquidation of
Portfolio Securities received from the Redemption Right are to be sent to
someone other than the Signor, or to the Signor at an address other than
that shown above.
Mail: [ ] Check [ ] Certificate(s) to:
Name(s):
------------------------------------------------
(PLEASE TYPE OR PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
(PLEASE INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO., IF APPLICABLE)
(SEE SUBSTITUTE FORM W-9 BELOW.)
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE REDEMPTION RIGHT
1. Guarantee of Signatures. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) of Shares presented for Redemption (including, for purposes
of this document, any participant in the book-entry transfer facility of The
Depository Trust Company ("DTC") whose name appears on DTC's security position
listing as the owner of Shares), unless such holder(s) has completed either the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" above, or (b) if such Shares are presented for Redemption
for the account of a firm (an "Eligible Institution") which is a bank, broker,
dealer, credit union, savings association or other entity which is a member in
good standing of a Stock Transfer Association approved medallion program (such
as STAMP, SEMP or MSP). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Certificates. This Letter of
Transmittal is to be used (a) if Shares are to be forwarded with this Letter of
Transmittal, (b) if uncertificated Shares held by the Fund's transfer agent
pursuant to the Fund's dividend reinvestment plan are to be presented for
Redemption, or (c) if transfers of Shares presented for Redemption are to be
made by book-entry transfer to the account maintained by the Depositary
according to the procedure set forth in Section 2 of the Redemption Right
Statement. If transfers of Shares presented for Redemption are to be made by
book-entry transfer and the redeeming Shareholder desires to retain ownership of
the Portfolio Securities received, the Shareholder must also complete the DTC
Delivery Election Form included with the materials.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL,
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE SHAREHOLDER PRESENTING
SHARES FOR REDEMPTION. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE
TIMELY DELIVERY.
Delivery will be deemed made only when actually received by the Depositary.
If delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. Shareholders have the responsibility to cause their
Shares (in proper certificated or uncertificated form), this Letter of
Transmittal (or a photocopy bearing original signature(s) and any required
signature guarantees), and any other documents required by this Letter of
Transmittal to be delivered in accordance with the Redemption Right.
The Fund will not accept any alternative, conditional or contingent
redemption requests. All shareholders, brokers, dealers, commercial banks, trust
companies and other nominees, by execution of this Letter of Transmittal (or
photocopy hereof), waive any right to receive any notice of the acceptance of
their request for Redemption.
3. Inadequate Space. If the space provided in any of the above boxes is
inadequate, the necessary information should be listed on a separate schedule
signed by all of the required signatories and attached to the Letter of
Transmittal.
4. Presentment of all Shares Held by the Shareholder. A SHAREHOLDER
WISHING TO PARTICIPATE IN THE REDEMPTION RIGHT MUST PRESENT FOR REDEMPTION ALL
SHARES ACTUALLY OWNED OR CONSTRUCTIVELY OWNED BY THE SHAREHOLDER PURSUANT TO
SECTION 318 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AS OF THE DATE OF
PURCHASE OF SHARES PURSUANT TO THE REDEMPTION RIGHT. Shareholders should consult
their tax advisers as to the application of the constructive ownership rules of
Section 318. Shares presented for Redemption shall include any shares received
by Shareholders pursuant to a dividend by the Fund or participation in the
Fund's Dividend Reinvestment Plan. The Fund will purchase no more than 4,883,365
Shares from Shareholders, in accordance with the terms and conditions specified
in the Redemption Right Statement. In the event that more than 4,883,365 Shares
are presented for Redemption by Shareholders, the Fund will repurchase Shares
from redeeming Shareholders on a pro rata basis. If 90% or more of the issued
and outstanding Shares of the Fund are presented for Redemption prior to the
expiration of the Redemption Right, the Board of Directors of the Fund will
suspend the Redemption Right and currently intends, under such circumstances, to
submit a proposal to Shareholders to liquidate the Fund. Certificates
representing Shares presented for Redemption but not repurchased will be
returned promptly following the termination, expiration or withdrawal of the
Redemption Right, without expense to the Shareholder who had presented the
Shares for Redemption. Receipt of the Portfolio Securities by a redeeming
Shareholder is a taxable event.
Redeeming Shareholders have the option to direct that all of the Portfolio
Securities received from participation in the Redemption Right be liquidated for
cash. The liquidation of Portfolio Securities is also a taxable event and may
result in taxable gain or loss to the Signor.
5. Signatures on Letter of Transmittal, Authorizations, and
Endorsements. If this Letter of Transmittal is signed by the registered
holder(s) of the Shares presented for Redemption, the signature(s) must
correspond with the name(s) as written on the face of the certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Shares presented for Redemption are owned of record by two or
more joint owners, all of the owners must sign this Letter of Transmittal. If
any of the Shares presented for Redemption are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or stock powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to the
Fund of their authority to act in such a fiduciary or representative capacity
must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares transmitted, no endorsements of certificates or separate stock powers are
required unless payment is to be made to, or certificates for Shares not
purchased
<PAGE> 9
are to be issued in, the name of a person other than the registered holder(s).
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appears on the certificate(s)
for such Shares. Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. Transfer Taxes on Shares. The Fund will pay any transfer taxes payable
on the transfer to it of Shares repurchased pursuant to the Redemption Right.
If, however, (a) payment of the Repurchase Price is to be made to, or (in the
circumstances permitted by the Redemption Right) unpurchased Shares are to be
registered in the name(s) of, any person(s) other than the registered owner(s),
or (b) if any certificate(s) presented for Redemption are registered, or the
Shares presented for Redemption are otherwise held, in the name(s) of any
person(s) other than the registered owner, the amount of any transfer taxes
(whether imposed on the registered owner(s) or such other person(s)) payable on
account of the transfer to such person(s) will be deducted from the Repurchase
Price unless satisfactory evidence of the payment of such taxes, or exemption
therefrom, is submitted. Payment by the Fund of transfer taxes for which the
Shareholder is liable may be deemed to result in taxable income to the
Shareholder equal in amount to the transfer taxes paid.
7. Special Payment and Delivery Instructions. If (i) certificate(s) for
unpurchased Shares or (ii) a check representing the proceeds from the
liquidation of Portfolio Securities received is to be made payable to the name
of a person other than the registered owner(s) or if such certificate(s),
share(s), and/or check are to be sent to someone other than the registered
owner(s) or to the registered owner(s) at a different address, the captioned
boxes "Special Payment Instructions" and/or "Special Delivery Instructions" on
this Letter of Transmittal must be completed.
8. Irregularities. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of Shares presented for Redemption
will be determined by the Fund, in its sole discretion, and the Fund's
determination shall be final and binding. The Fund reserves the absolute right
to reject any or all Shares presented for Redemption determined not to be in
appropriate form or to refuse to accept for payment, repurchase or pay for any
Shares if, in the opinion of the Fund's counsel, accepting, repurchasing or
paying for the Shares would be unlawful. The Fund also reserves the absolute
right to waive any of the conditions of the Redemption Right or any defect in
any redemption request, whether generally or with respect to any particular
Share(s) or Shareholder(s). Unless waived, any defects or irregularities in
connection with a redemption request must be cured within such time as the Fund
shall determine. Redemption requests will not be deemed to have been made until
all defects and irregularities have been cured or waived. The Fund's
interpretations of the terms and conditions of the Redemption Right (including
these instructions) shall be final and binding.
NONE OF THE FUND, THE FUND'S INVESTMENT MANAGER, THE DEPOSITARY, THE
INFORMATION AGENT, OR ANY OTHER PERSON IS OR WILL BE OBLIGATED TO GIVE ANY
NOTICE OF DEFECTS IN REDEMPTION REQUESTS, AND NONE OF THEM SHALL INCUR ANY
LIABILITY FOR FAILURE TO GIVE ANY SUCH NOTICE.
9. Questions and Requests for Assistance and Additional Copies. Questions
and requests for assistance may be directed to the Information Agent at the
mailing address provided above or by telephoning 1-800-733-8481, extension 426.
Requests for additional copies of the Redemption Right Statement and this Letter
of Transmittal may also be directed to the Information Agent. Shareholders who
do not own Shares directly may also obtain such information and copies from
their broker, dealer, commercial bank, trust company or other nominee.
Shareholders who do not own Shares directly are required to present their Shares
for Redemption through their broker, dealer, commercial bank, trust company or
other nominee and should NOT submit this Letter of Transmittal to the
Depositary.
10. Restriction on Short Sales. Section 14(e) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and Rule 14e-4 promulgated
thereunder make it unlawful for any person, acting alone or in concert with
others, to present Shares for Redemption in a partial redemption for such
person's own account unless at the time of the request for redemption, and at
the time the Shares are accepted for payment, the person presenting Shares for
Redemption has a net long position equal to or greater than the amount presented
for Redemption in (i) Shares, and will deliver or cause to be delivered such
Shares for the purpose of redemption to the person permitting the Redemption
Right within the period specified in the Redemption Right, or (ii) an equivalent
security and, upon acceptance of his or her request for redemption, will acquire
Shares by conversion, exchange, or exercise of such equivalent security to the
extent required by the terms of the Redemption Right, and will deliver or cause
to be delivered the Shares so acquired for the purpose of participating in the
Redemption Right to the Fund prior to or on the Expiration Date. Section 14(e)
and Rule 14e-4 provide a similar restriction applicable to the redemption or
guarantee of a redemption on behalf of another person. The acceptance of Shares
by the Fund for payment will constitute a binding agreement between the
redeeming Shareholder and the Fund, upon the terms and subject to the conditions
of the Redemption Right, including such Shareholder's representation that (i)
such Shareholder has a net long position in the Shares being presented for
Redemption within the meaning of Rule 14e-4 promulgated under the Exchange Act;
and (ii) the redemption of such Shares complies with Rule 14e-4.
11. Backup Withholding Tax. Each U.S. Shareholder presenting Shares for
Redemption who has not already submitted a correct, completed and signed Form
W-9 to the Fund, or does not otherwise establish an exemption from withholding,
must notify the Depositary of his/her/its correct taxpayer identification number
("TIN") (or certify that he/she/it is awaiting a TIN) and provide certain other
information by completing and providing to the Depositary the Substitute Form
W-9 provided under "Important Tax Information" below. Failure either to provide
the information on the form or to check the box in Part 2 of the form may
subject the Shareholder presenting Shares for Redemption to 31% federal income
tax backup withholding on the payments made to the Shareholder (or other payee)
with respect to Shares repurchased pursuant to the Redemption Right. The box in
Part 2 of the form may be checked if the Shareholder
<PAGE> 10
presenting Shares for Redemption has not been issued a TIN and has applied for a
TIN or intends to apply for a TIN in the near future. If the box in Part 2 is
checked and the Depositary is not provided with a TIN within sixty (60) days,
the Depositary will withhold 31% on all payments until a TIN is provided to the
Depositary.
Each non-U.S. Shareholder presenting Shares for Redemption who has not
already submitted a correct, completed and signed Form W-8 to the Fund should
complete the Form W-8 included with this Letter of Transmittal and provide it to
the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL, OR FACSIMILE HEREOF BEARING ORIGINAL
SIGNATURE(S), PROPERLY COMPLETED AND DULY EXECUTED, TOGETHER WITH ANY REQUIRED
SIGNATURE GUARANTEES, SHARES (IN PROPER CERTIFICATED OR UNCERTIFICATED FORM),
AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR A
PROPERLY COMPLETED AND EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED
BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE.
THE ACCEPTANCE OF SHARES BY THE FUND FOR PAYMENT WILL CONSTITUTE A BINDING
AGREEMENT BETWEEN THE REDEEMING SHAREHOLDER AND THE FUND, UPON THE TERMS AND
CONDITIONS OF THE REDEMPTION RIGHT, INCLUDING THE SHAREHOLDER'S REPRESENTATION
THAT THE SHARES BEING PRESENTED FOR REDEMPTION REPRESENT AND WILL REPRESENT ALL
SHARES ACTUALLY OWNED BY SUCH SHAREHOLDER AS OF THE DATE OF REPURCHASE OF SHARES
PURSUANT TO THE REDEMPTION RIGHT, AND ALL SHARES CONSTRUCTIVELY OWNED BY SUCH
SHAREHOLDER AS OF SUCH DATE UNDER SECTION 318 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, HAVE BEEN OR WILL BE PRESENTED FOR REDEMPTION PURSUANT TO THE
REDEMPTION RIGHT.
IMPORTANT TAX INFORMATION
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. IT MAY NOT BE APPLICABLE TO NON-U.S. SHAREHOLDERS. ALL
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE REDEMPTION RIGHT.
<PAGE> 11
SUBSTITUTE FORM W-9 OR FORM W-8
Under the U.S. federal income tax laws, the Depositary may be required to
withhold 31% of the amount of any payment made to certain holders pursuant to
the Redemption Right. In order to avoid such backup withholding, each redeeming
U.S. Shareholder must provide the Depositary with such Shareholder's correct TIN
by completing the Substitute Form W-9 set forth below. In general, if a
Shareholder is an individual, the TIN is the Social Security number of such
individual. If the Depositary is not provided with the correct TIN, the
Shareholder may be subject to a penalty imposed by the Internal Revenue Service.
Certain Shareholders (including, among others, all corporations) are not subject
to these backup withholding and reporting requirements, but should nonetheless
complete a Substitute Form W-9 to avoid possible erroneous backup withholding.
For further information regarding backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a TIN if you do not
have one and how to complete the Substitute Form W-9 if Shares are held in more
than one name), consult the enclosed Guidelines for Certification of Taxpayer
Identification Number.
In order for a non-U.S. Shareholder to avoid 31% backup withholding, the
Shareholder must submit a statement to the Depositary signed under penalties of
perjury attesting that he/she/it is a non-U.S. Shareholder. Form W-8 and
instructions for such statement are enclosed for non-U.S. Shareholders.
CONSEQUENCES OF FAILURE TO FILE SUBSTITUTE FORM W-9 OR FORM W-8
Failure to complete Substitute Form W-9 or Form W-8 will not, by itself,
cause the Shares to be deemed invalidly presented for Redemption but may require
the Depositary to withhold 31% of the amount of any payments made pursuant to
the Redemption Right. Backup withholding is not an additional federal income
tax. Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, the Shareholder may claim a refund from the
Internal Revenue Service.
<PAGE> 12
IMPORTANT -- SIGN BELOW AND COMPLETE SUBSTITUTE FORM W-9 (BELOW) OR
FORM W-8 (ENCLOSED) AS APPLICABLE
Under penalty of perjury, I certify (1) that the number set forth
below is my correct Social Security Number or Taxpayer Identification
Number and (2) that I am not subject to backup withholding either because
I have not been notified that I am subject to backup withholding as a
result of failure to report all interest or dividends, or the Internal
Revenue Service ("IRS") has notified me that I am no longer subject to
backup withholding. INSTRUCTION: You must strike out the language in (2)
above if you have been notified that you are subject to backup withholding
due to underreporting and you have not received a notice from the IRS that
backup withholding has been terminated.
The Signor recognizes that, under certain circumstances set forth in
the Redemption Right Statement, the Fund may not be required to repurchase
the Shares presented for Redemption. The Signor understands that
certificate(s) for Shares not repurchased will be returned to the Signor
at the address indicated above. In the case of Shares not evidenced by
certificate, Boston EquiServe LP will cancel the redemption demand as to
any Shares not repurchased by the Fund.
The Portfolio Securities representing the repurchase price for such of
the Shares presented for Redemption as are repurchased should be issued to
the Signor and mailed to the address indicated above unless Signor has
elected liquidation of the Portfolio Securities in which case the check
should be made payable to Signor and mailed to the address indicated
above.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death or incapacity of the Signor and any
obligation of the Signor under this Letter of Transmittal shall be binding
upon the heirs, personal representatives, successors and assigns of the
Signor. Except as stated in the Redemption Right Statement, the
Shareholder's presentment of Shares for Redemption is irrevocable.
The Redemption Right is hereby accepted in accordance with its terms.
--------------------------------------------------------------------------
(SIGNATURE(S) OF SHAREHOLDER(S))
Dated:
------------------------------------------ , 1998
(Must be signed by the registered holder(s) exactly as name(s)
appear(s) on the Share certificates or on a security position listing or
by person(s) authorized to become registered holder(s) by certificates and
documents transmitted under this Letter of Transmittal. If signature is by
trustees, executors, administrators, guardians, attorneys-in-fact, agents,
officers of corporations or others acting in a fiduciary or representative
capacity, please provide the following information. See Instruction 5.)
Name(s):
--------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Capacity (Full Title):
--------------------------------------------------------------------------
(See Instruction 5)
Address:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Codes and Telephone Numbers:
Home: Business:
------------------------------------ -------------------------
Taxpayer Identification or Social Security No. (if applicable):
--------------------------------------------------------------------------
(COMPLETE SUBSTITUTE FORM W-9 BELOW OR FORM W-8 (ENCLOSED), AS APPLICABLE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
--------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Title:
--------------------------------------------------------------------------
Name of Firm:
--------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Tel. No.: Dated:
----------------- -------------------------
<PAGE> 13
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME:
- ---------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN (FOR INDIVIDUAL, PART 2--Awaiting TIN [ ]
FORM W-9 SOCIAL SECURITY NUMBER) AND CERTIFY BY SIGNING AND
DATING BELOW: Please see below.
---------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE CERTIFICATION -- UNDER PENALTIES OF
PERJURY, I CERTIFY THAT: (1) THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER IS COMPLETE AND (2) I AM NOT SUBJECT
TO BACKUP WITHHOLDING EITHER BECAUSE I AM EXEMPT FROM BACKUP WITHHOLDING OR I HAVE NOT
BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (THE "IRS") THAT I AM SUBJECT TO BACKUP
WITHHOLDING AS A RESULT OF UNDER-REPORTING INTEREST OR DIVIDENDS OR THE IRS HAS NOTIFIED
ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. (YOU MUST CROSS OUT ITEM (2) ABOVE
IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING BECAUSE
OF UNDER-REPORTING INTEREST OR DIVIDENDS ON YOUR RETURN. HOWEVER, IF AFTER BEING NOTIFIED
BY THE IRS THAT YOU WERE SUBJECT TO BACKUP WITHHOLDING YOU RECEIVED ANOTHER NOTIFICATION
FROM THE IRS THAT YOU ARE NO LONGER SUBJECT TO BACKUP WITHHOLDING, DO NOT CROSS OUT ITEM
(2).)
---------------------------------------------------------------------------------------
Signature: _________________________________________ Date: ____________________________
Name:___________________________________________________________________________________
(PLEASE PRINT)
Address:_______________________________________________________________________________
(INCLUDE ZIP CODE)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF
SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a Taxpayer Identification Number to the payer, 31% of all
reportable payments due to me pursuant to the Redemption Right will be withheld
until I provide a Taxpayer Identification Number to the payer and that, if I do
not provide my Taxpayer Identification Number within 60 days, such retained
amounts shall be remitted to the IRS as backup withholding.
Signature: __________________________________ Date: ___________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER" FOR
ADDITIONAL DETAILS.
<PAGE> 14
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the Payer.
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: NAME AND
SOCIAL SECURITY
NUMBER OF--
- ------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S> <C>
1. Individual The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, the
first individual on
the account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-
trust (grantor is also trustee) trustee(1)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under state law
5. Sole proprietorship The owner(3)
- ------------------------------------------------------------
- ------------------------------------------------------------
GIVE THE NAME AND
FOR THIS TYPE OF ACCOUNT: EMPLOYER
IDENTIFICATION
NUMBER OF--
- ------------------------------------------------------------
6. Sole proprietorship The owner(3)
7. A valid trust, estate or pension The legal entity
trust (Do not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(4)
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or
nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school district,
or prison) that receives
agricultural program payments
- ------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a SSN, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
employment identification number (if you have one).
(4) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 15
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Card, or Form SS-4,
Application for Employer Identification Number (for businesses and all other
entities), or Form W-7 for Individual Taxpayer Identification Number (for alien
individuals required to file U.S. tax returns), at an office of the Social
Security Administration or the Internal Revenue Service.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on all payments include the
following:
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
political subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
Payees that may be exempted from backup withholding:
- A corporation.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident alien partner.
- Payments of patronage dividends where the amount receive is not paid in
money.
- Payments made by certain foregoing organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A, and 6050N, and their regulations.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest
or other payments to give taxpayer identification numbers to payers who must
report the payments to the IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. Payers must be
given the numbers whether or not recipients are required to file tax returns.
Payers must generally withhold 31% of taxable interest, dividend and certain
other payments to a payee who does not furnish a taxpayer identification number
to a payer. Certain penalties must also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
REGARDING THE RIGHT TO DEMAND THE
REDEMPTION OF UP TO 4,883,365 OF THE ISSUED AND
OUTSTANDING SHARES OF
SCUDDER SPAIN AND PORTUGAL FUND, INC.
AT NET ASSET VALUE PER SHARE,
IN EXCHANGE FOR PORTFOLIO SECURITIES OF THE FUND
This form must be used to participate in the Redemption Right (as defined
below) if a Shareholder's certificates for Shares are not immediately available
or if time will not permit the Letter of Transmittal and other required
documents to reach the Depositary on or before the Expiration Date. Terms used
in this form that are not otherwise defined in this form shall have the meanings
specified in the Redemption Right Statement, dated September 2, 1998. This form
may be delivered by hand, overnight courier or mail or facsimile transmission to
the Depositary at the appropriate address set forth below. Redemption requests
using this form may be made only by or through a member firm of a registered
national securities exchange, or a commercial bank or trust company having an
office, branch or agency in the United States.
BOSTON EQUISERVE LP, DEPOSITARY:
PHONE 1-800-426-5523
Facsimile Copy Number:
(781) 794-6333
Confirm By Telephone:
(781) 794-6388
<TABLE>
<S> <C> <C>
By Hand: By First Class Mail: By Overnight Certified or
Securities Transfer & State Street Bank & Express Mail Delivery:
Reporting Services, Inc. Trust Company State Street Bank &
c/o Boston EquiServe LP Corporate Reorganization Trust Company
1 Exchange Plaza P.O. Box 9061 Corporate Reorganization
55 Broadway, 3rd Floor Boston, MA 02205-8686 70 Campanelli Drive
New York, NY 10006 Braintree, MA 02184
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS
OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE VALID DELIVERY.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby demands the redemption by Scudder Spain and Portugal
Fund, Inc. (the "Fund"), upon the terms and conditions set forth in its
Redemption Right Statement dated September 1, 1998 and the related Letter of
Transmittal (which together constitute the "Redemption Right"), receipt of which
are hereby acknowledged, of the number of Shares specified below and all Shares
that may be held in the name(s) of the registered holder(s) by the Fund's
transfer agent under the Fund's dividend reinvestment plan according to the
guaranteed delivery procedures set forth in Section 2 of the Redemption Right
Statement.
Number of Shares Presented for Redemption:
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
Certificate Nos. (if available) Name(s) of Record Holder(s)
- -------------------------------------------------------- --------------------------------------------------------
- -------------------------------------------------------- --------------------------------------------------------
Address: -----------------------------------------------
--------------------------------------------------------
</TABLE>
If Shares will be presented for Redemption by book-entry transfer to the
Depository Trust Company, please check box*: [ ]
*Please complete the DTC Delivery Election Form included with your materials and
submit it with this Notice of Guaranteed Delivery if you desire to retain
ownership of the Portfolio Securities received.
DTC Participant Number: ---------- Area Code and Telephone Number: ------------
The undersigned also presents for Redemption all uncertificated Shares that
may be held in the name(s) of the registered holder(s) by the Fund's transfer
agent as part of the Fund's dividend reinvestment plan.
If the undersigned is the beneficial owner of the Shares being presented
for Redemption, the undersigned represents and warrants that such Shares
represent all Shares actually owned by the undersigned as of the date of
purchase of Shares pursuant to the Redemption Right, and all Shares
constructively owned by the undersigned as of such date under Section 318 of the
Internal Revenue Code of 1986, as amended, have been or will be presented for
Redemption pursuant to the Redemption Right.
Dated: ---------------, 1998 Signature: -------------------------------
GUARANTEE
The undersigned, a member firm of a registered national securities
exchange, or a commercial bank or trust company having an office, branch or
agency in the United States, hereby: (a) represents that the above named
person(s) "own(s)" the Shares presented for Redemption within the meaning of
Rule 14e-4 under the Securities Exchange Act of 1934, as amended; (b) represents
that the Redemption Request of such Shares complies with Rule 14e-4; and (c)
guarantees to deliver to the Depositary certificates representing the Shares
presented for Redemption, in proper form for transfer (or to present Shares for
Redemption Shares pursuant to the procedure for book-entry transfer into the
Depositary's account at The Depository Trust Company if so specified on the
foregoing page), together with a properly completed and executed Letter of
Transmittal with any required signature guarantees, and any other required
documents, within five New York Stock Exchange trading days after the date of
receipt hereof by the Depositary.
Name of Firm:
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Authorized Signature:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Title:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Dated:
- ------------------, 1998
<PAGE> 1
FORM OF LETTER TO BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES
REGARDING THE REDEMPTION RIGHT BY
SCUDDER SPAIN AND PORTUGAL FUND, INC.
TO REPURCHASE UP TO 4,883,365 OF ITS ISSUED AND OUTSTANDING
SHARES AT NET ASSET VALUE PER SHARE IN
EXCHANGE FOR PORTFOLIO SECURITIES OF THE FUND
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Pursuant to your request, we are enclosing the material listed below
relating to the offer by Scudder Spain and Portugal Fund, Inc. (the "Fund") to
its shareholders to permit them to demand the repurchase of their shares in an
amount up to 4,883,365 of the Fund's issued and outstanding shares of common
stock, par value $.01 per share (the "Shares") in exchange for a pro rata
portion of each of the securities (other than short-term fixed income securities
with maturities of less than one year, securities with transfer restrictions and
certain illiquid securities) and cash held in the Fund's investment portfolio
representing consideration equal to the Shares' net asset value ("NAV")
determined as of the close of the regular trading session of the New York Stock
Exchange ("NYSE") on October 1, 1998, subject to the terms and conditions set
forth in the Redemption Right Statement dated September 2, 1998 and the related
Letter of Transmittal (which together constitute the "Redemption Right"). THE
REDEMPTION RIGHT EXPIRES AT 5:00 P.M., EASTERN TIME, ON SEPTEMBER 30, 1998,
UNLESS EXTENDED (THE "EXPIRATION DATE"). If the Redemption Right is extended
beyond September 30, 1998, the repurchase price for Shares will be their NAV
determined as of the close of the regular trading session of the NYSE on the
first business day following the Expiration Date, as extended.
The following documents are enclosed:
(1) REDEMPTION RIGHT STATEMENT DATED SEPTEMBER 2, 1998;
(2) LETTER OF TRANSMITTAL TO BE USED TO PRESENT SHARES FOR REDEMPTION;
(3) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER;
(4) NOTICE OF GUARANTEED DELIVERY;
(5) DTC DELIVERY ELECTION FORM; AND
(6) LETTER TO CLIENTS, WHICH MAY BE SENT UPON ANY REQUEST FOR INFORMATION
BY YOUR CLIENTS FOR WHOSE ACCOUNT YOU HOLD SHARES REGISTERED IN YOUR
NAME (OR IN THE NAME OF YOUR NOMINEE) WITH SPACE PROVIDED FOR OBTAINING
SUCH CLIENTS' INSTRUCTIONS WITH REGARD TO THE REDEMPTION RIGHT.
PLEASE NOTE THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 5:00 P.M.,
EASTERN TIME, ON SEPTEMBER 30, 1998, UNLESS EXTENDED.
No fees or commissions will be payable to brokers, dealers or other persons
under the terms of the Redemption Right, although redeeming Shareholders may be
obligated to pay a processing fee to their broker for assistance in transmitting
a Redemption demand. The Fund will pay all transfer taxes on its repurchase of
Shares, subject to Instruction 6 of the Letter of Transmittal. Backup tax
withholding at a 31% rate may be required unless an exemption is proved or
unless the required taxpayer identification information is or has previously
been provided. Certain withholdings may also apply with respect to payments to
non-U.S. Shareholders. See Instruction 11 of the Letter of Transmittal.
The Redemption Right is not being made to (nor will redemption requests be
accepted from or on behalf of) Shareholders residing in any jurisdiction in
which the making of the Redemption Right or its acceptance would not be in
compliance with the laws of such jurisdiction. To the extent that the securities
laws of any jurisdiction would require the Redemption Right to be made by a
licensed broker or dealer, the Redemption Right shall be deemed to be made on
the Fund's behalf by one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
If a client instructs you by telephone to present your Shares for
Redemption, please record the telephone conversation (in accordance with
applicable law) and ask the client to affirm that the Shares presented for
Redemption represent all Shares actually and constructively owned by the client
as of the date of repurchase of Shares under the terms of the Redemption Right
and Section 318 of the Internal Revenue Code of 1986, as amended.
<PAGE> 2
Additional copies of the enclosed material may be obtained from Boston
EquiServe LP, the Depositary, at the appropriate addresses and telephone numbers
set forth in the Redemption Right Statement. Any questions you have with respect
to the Redemption Right should be directed to Shareholder Communications
Corporation at 1-800-733-8481, extension 426.
Very truly yours,
SCUDDER SPAIN AND PORTUGAL FUND, INC.
NOTHING CONTAINED IN THIS LETTER OR IN THE ENCLOSED DOCUMENTS SHALL
CONSTITUTE YOU OR ANY OTHER PERSON AS THE AGENT OF EITHER THE FUND OR THE
DEPOSITARY OR AUTHORIZE YOU OR ANY OTHER PERSON (A) TO MAKE ANY STATEMENTS WITH
RESPECT TO THE REDEMPTION RIGHT, OTHER THAN THE STATEMENTS SPECIFICALLY SET
FORTH IN THE REDEMPTION RIGHT STATEMENT AND THE LETTER OF TRANSMITTAL, OR (B) TO
DISTRIBUTE ANY MATERIAL WITH RESPECT TO THE REDEMPTION RIGHT OTHER THAN AS
SPECIFICALLY AUTHORIZED.
<PAGE> 1
FORM OF LETTER TO CLIENTS OF BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES
REGARDING THE REDEMPTION RIGHT BY
SCUDDER SPAIN AND PORTUGAL FUND, INC.
TO REPURCHASE FOR CASH UP TO 4,883,365 OF ITS
ISSUED AND OUTSTANDING SHARES
AT NET ASSET VALUE PER SHARE
TO OUR CLIENTS:
Pursuant to your request, enclosed for your consideration are the
Redemption Right Statement dated September 1, 1998 of Scudder Spain and Portugal
Fund, Inc. (the "Fund") and the related Letter of Transmittal by which the Fund
is offering to its Shareholders the right to demand the repurchase of their
shares in an amount up to 4,883,365 shares of the Fund's issued and outstanding
common stock, par value $0.01 per share (the "Shares") in exchange for a pro
rata portion of each of the securities (other than short-term fixed income
securities with maturities of less than one year, securities with transfer
restrictions and certain illiquid securities) and cash held in the Fund's
investment portfolio ("Portfolio Securities") at a price equal to the Shares'
net asset value ("NAV") determined as of the close of the regular trading
session of the New York Stock Exchange ("NYSE") on October 1, 1998 subject to
the terms and conditions set forth in the Redemption Right Statement dated
September 2, 1998 and the related Letter of Transmittal (which together
constitute the "Redemption Right"). THE REDEMPTION RIGHT EXPIRES AT 5:00 P.M.,
EASTERN TIME, ON SEPTEMBER 30, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). If
the Redemption Right is extended beyond September 30, 1998, the repurchase price
for Shares will be their NAV determined as of the close of the regular trading
session of the NYSE on the first business day following the Expiration Date, as
extended.
The purpose of the Redemption Right is to provide Shareholders who may no
longer wish to participate in a closed-end investment vehicle, such as the Fund,
with the opportunity, to the extent consistent with the best interests of the
Fund and all of its Shareholders, to demand the redemption of all of their
Shares in-kind (i.e., in exchange for Portfolio Securities) in order to realize
the net asset value of their Shares. The proceeds of this in-kind redemption
will be paid in a pro rata portion of the Fund's Portfolio Securities.
Shareholders who present their Shares for Redemption will have the opportunity
to retain the Portfolio Securities distributed as the proceeds of the redemption
of their Shares or to request that the Portfolio Securities received be
liquidated for cash. Moreover, although the Fund will pay its Shareholders a
cash distribution of all undistributed 1998 net investment income and
undistributed net realized capital gains prior to the Expiration Date, the Fund
will not attempt to realize or distribute unrealized capital gains prior to the
Expiration Date. Accordingly, a substantial portion of the net asset value of
the Fund will consist of unrealized capital gains. As of July 31, 1998, the Fund
had approximately $57,092,818 of unrealized capital gains, representing
approximately 42.4% of its net asset value. The Redemption Right also prevents
Shareholders who choose not to redeem from bearing any portion of the unrealized
capital gains which would be realized if the Fund sold its Portfolio Securities
in order to satisfy redemption requests in cash.
The Redemption Right Statement and the Letter of Transmittal are being
forwarded to you as the beneficial owner of Shares held by us for your account
but not registered in your name. We are sending you the Letter of Transmittal
for your information only; you cannot use it to present Shares we hold for your
account for Redemption. A redemption request of your Shares can be made only by
us as the holder of record and only according to your instructions.
Your attention is called to the following:
1. The purchase price is the NAV determined as of the close of the regular
trading session of the NYSE on October 1, 1998, subject to the terms and
conditions of the Redemption Right Statement dated September 2, 1998 and the
related Letter of Transmittal. THE REDEMPTION RIGHT EXPIRES AT 5:00 P.M.,
EASTERN TIME, ON SEPTEMBER 30, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). If
the Redemption Right is extended beyond September 30, 1998, the purchase price
for Shares will be their NAV determined as of the close of the regular trading
session of the NYSE on the first business day following the Expiration Date, as
extended.
2. The Redemption Right is for up to 4,883,365 of the issued and
outstanding Shares of the Fund and is not conditioned upon any minimum number of
outstanding Shares being presented for Redemption, but is subject to certain
conditions set forth in the Redemption Right Statement. Under the conditions
described in the Redemption Right Statement, the Fund can terminate or amend the
Redemption Right or can postpone the acceptance for payment of, payment for or
repurchase of any Shares.
<PAGE> 2
3. A SHAREHOLDER WISHING TO ACCEPT THE REDEMPTION RIGHT MUST PRESENT FOR
REDEMPTION ALL SHARES ACTUALLY OR CONSTRUCTIVELY OWNED BY THE SHAREHOLDER,
PURSUANT TO SECTION 318 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AS OF
THE DATE OF PURCHASE OF SHARES PURSUANT TO THE REDEMPTION RIGHT. Shareholders
should consult their tax advisers as to the application of the constructive
ownership rules of Section 318. Shares presented for Redemption shall include
any shares received by Shareholders pursuant to a dividend by the Fund or
participation in the Fund's Dividend Reinvestment Plan. Shareholders may retain
ownership of Portfolio Securities or may elect to have the Portfolio Securities
received liquidated for cash. If a Shareholder elects to retain ownership of the
Portfolio Securities in-kind the Shareholder must establish securities and cash
accounts with a bank or broker dealer in the Spanish and Portuguese markets. The
Shareholder must also provide U.S. broker information which is necessary for
transfer of American Depository Receipts. If this requirement is not met or no
election is made, the Portfolio Securities received will be liquidated for cash.
4. If more than 4,883,365 Shares are validly presented for Redemption
prior to the expiration of the Redemption Right, the Fund will repurchase Shares
from redeeming Shareholders in accordance with the terms and conditions
specified in the Redemption Right Statement, on a pro rata basis and in
accordance with the number of Shares presented for Redemption by each
Shareholder during the period the Redemption Right remains open and not
withdrawn, unless the Fund determines not to repurchase any Shares. If 90% or
more of the issued and outstanding Shares of the Fund are presented for
Redemption prior to the expiration of the Redemption Right, the Board of
Directors of the Fund will suspend the Redemption Right and, under such
circumstances, currently intends to submit a proposal to Shareholders to
liquidate the Fund.
5. Redeeming Shareholders will not be obligated to pay brokerage
commissions or, subject to Instruction 6 of the Letter of Transmittal, transfer
taxes on the repurchase of Shares by the Fund pursuant to the Redemption Right;
however, a broker, dealer or other person may charge a fee for processing the
transactions on behalf of Shareholders. Redeeming Shareholders will bear the
expenses of distributing to them their proceeds of the Redemption Right
(generally certain transfer taxes and any other transaction expenses), and such
costs shall be deducted from their proceeds. Redeeming Shareholders who request
that the Portfolio Securities received as proceeds of the Redemption Right be
liquidated for cash will also bear the expenses related to that transaction
(generally custodial expenses, brokerage commissions, and any other transaction
expenses) as well as investment risk that the market value of Portfolio
Securities will have changed subsequent to the Valuation Date. As a result, all
redeeming Shareholders will bear the costs associated with the special services
provided by the Custodian and any transaction costs associated with transferring
the Portfolio Securities out of the Fund to the Custodian. Redeeming
Shareholders who choose to retain the Portfolio Securities received will bear
any related costs of delivery and transfer and redeeming Shareholders who
request that their Portfolio Securities be liquidated for cash after they are
received will bear the additional costs and expenses of the liquidation. The
actual per share expenses for redeeming Shareholders of effecting the Redemption
and of any liquidation of Portfolio Securities will depend on a number of
factors, including the number of Shares redeemed, the Fund's portfolio
composition at the time and market conditions prevailing during the liquidation
process. The Fund will bear the expenses of offering the Redemption Right which
includes the costs of producing and mailing the Redemption Right Statement and
other documents, and other expenses of the Depositary and the Information Agent.
If you wish to have us present your Shares for Redemption, please instruct
us by completing, signing and returning to us the instruction form on the
opposite side.
YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO
PRESENT YOUR SHARES FOR REDEMPTION ON YOUR BEHALF ON OR BEFORE THE EXPIRATION OF
THE REDEMPTION RIGHT. THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 5:00
P.M., EASTERN TIME, ON, SEPTEMBER 30, 1998, UNLESS EXTENDED.
The Redemption Right is not being made to (nor will redemption requests be
accepted from or on behalf of) owners of Shares in any jurisdiction in which the
Redemption Right or its acceptance would violate the laws of that jurisdiction.
To the extent that the securities laws of any jurisdiction would require the
Redemption Right to be made by a licensed broker or dealer, the Redemption Right
shall be deemed to be made on the Fund's behalf by one or more registered
brokers or dealers licensed under the laws of that jurisdiction.
Very truly yours,
SCUDDER SPAIN AND PORTUGAL FUND, INC.
<PAGE> 3
INSTRUCTIONS REGARDING THE RIGHT TO DEMAND THE REDEMPTION OF
UP TO 4,883,365 OF THE ISSUED AND OUTSTANDING SHARES OF
THE SCUDDER SPAIN AND PORTUGAL FUND, INC. AT NET ASSET VALUE
IN EXCHANGE FOR PORTFOLIO SECURITIES OF THE FUND
THIS FORM IS NOT TO BE USED TO PRESENT SHARES FOR REDEMPTION DIRECTLY TO
THE DEPOSITARY. IT SHOULD BE SENT TO YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST
COMPANY OR OTHER NOMINEE ONLY IF THAT FIRM IS THE HOLDER OF RECORD OF YOUR
SHARES AND WILL BE PRESENTING THE SHARES FOR REDEMPTION ON YOUR BEHALF. THE
DEPOSITARY MUST RECEIVE YOUR SHARES NO LATER THAN 5:00 P.M., EASTERN TIME, ON
SEPTEMBER 30, 1998.
DO NOT COMPLETE THIS FORM IF YOU HAVE DECIDED NOT TO PRESENT YOUR SHARES
FOR REDEMPTION.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Redemption Right Statement, dated September 2, 1998 and the related Letter of
Transmittal (which together are described as the "Redemption Right") in
connection with the offer to shareholders by Scudder Spain and Portugal Fund,
Inc. (the "Fund") of the right to demand the repurchase of up to 4,883,365
shares of its issued and outstanding common stock, par value $0.01 per share
(the "Shares") at the net asset value per Share as of the close of the regular
trading session of the New York Stock Exchange on October 1, 1998 (or, if the
Redemption Right is extended, on the new Expiration Date), on the terms and
subject to the conditions of the Redemption Right.
The undersigned instructs you to present for Redemption to the Fund all
Shares that are held by you for the account of the undersigned, including all
Shares held by you and all uncertificated Shares that may be held for the
account of the undersigned by the Fund's transfer agent under the Fund's
dividend reinvestment plan, upon the terms and conditions of the Redemption
Right.
The undersigned represents and warrants that: (i) the Shares which you are
being instructed to present for Redemption represent and will represent all
Shares actually owned by the undersigned as of the date of purchase of Shares
pursuant to the Redemption Right, and all Shares constructively owned by the
undersigned as of such date under Section 318 of the Internal Revenue Code of
1986, as amended, have been or will be presented for Redemption pursuant to the
Redemption Right; (ii) the undersigned has a net long position in the Shares
being presented for Redemption within the meaning of Rule 14e-4 promulgated
under the Securities Exchange Act of 1934, as amended; and (iii) the redemption
of such Shares complies with Rule 14e-4.
[ ] The undersigned elects to retain ownership of Portfolio Securities received
and has established securities and cash accounts with a bank or broker in
Spain and Portugal and provided them with the counterparty information
specified below. The account information is as follows:
Local Account Information:
SPAIN
Name of Account (if different):
- --------------------------------------------------------------------------------
Bank or Broker Name (in Spain):
- --------------------------------------------------------------------------------
Bank or Broker Address:
- --------------------------------------------------------------------------------
Securities Account No.:
- --------------------------------------------------------------------------------
<PAGE> 4
PORTUGAL
Name of Account (if different):
- --------------------------------------------------------------------------------
Bank or Broker Name (in Portugal):
- --------------------------------------------------------------------------------
Bank or Broker Address:
- --------------------------------------------------------------------------------
Securities Account No.:
- --------------------------------------------------------------------------------
Cash Account No:
- --------------------------------------------------------------------------------
UNITED STATES (FOR AMERICAN DEPOSITORY RECEIPTS THAT ARE PART OF THE PORTFOLIO
SECURITIES)
Broker Name:
- --------------------------------------------------------------------------------
DTC Participant Number:
- --------------------------------------------------------------------------------
Counterparty Settlement Instructions:
SPAIN
<TABLE>
<S> <C>
Securities Account Information: Banco Santander, Madrid
Account Number: 15940185769PC
Cash Account Information: Banco Santander, Madrid
Account Number: 810578
</TABLE>
PORTUGAL
<TABLE>
<S> <C>
Securities Account Information: Banco Espirito Santo Commercial de Lisboa, Lisbon
Account Number: 099507150006
Cash Account Information: Banco Portuguese de Atlantico, Lisbon
Account Number: 530/03/002-881527
</TABLE>
UNITED STATES
<TABLE>
<S> <C>
Securities Account Information: Brown Brothers Harriman & Co.
DTC Participant Number: 010
</TABLE>
[ ] The undersigned requests that the Portfolio Securities received be
liquidated for cash.
Account Number:
- --------------------------------------------------------------------------------
Tax Identification or Social Security Number:
-----------------------------------------------------------------------------
Name(s) of Beneficial Owner(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
(SIGNATURE OF BENEFICIAL OWNER)
- --------------------------------------------------------------------------------
(SIGNATURE OF ADDITIONAL BENEFICIAL OWNER, IF ANY)
Date:
- ------------------------------------------------------
<PAGE> 1
FORM OF LETTER TO
SHAREHOLDERS WHO HAVE
REQUESTED INFORMATION
SCUDDER SPAIN AND PORTUGAL FUND, INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
Dear Shareholder:
As you requested, we are enclosing a copy of the Scudder Spain and Portugal
Fund, Inc.'s (the "Fund") Redemption Right Statement permitting Shareholders to
demand the repurchase of up to 4,883,365 shares of its issued and outstanding
common stock, par value $0.01 per share (the "Shares"), in exchange for a pro
rata portion of each of the securities (other than short-term fixed income
securities with maturities of less than one year, securities with transfer
restrictions and certain illiquid securities) and cash held in the Fund's
investment portfolio ("Portfolio Securities") at a price equal to the Shares'
net asset value ("NAV") determined as of the close of the regular trading
session of the New York Stock Exchange on October 1, 1998, subject to the terms
and conditions set forth in the Redemption Right Statement dated September 2,
1998 and the related Letter of Transmittal (which together constitute the
"Redemption Right"). THE REDEMPTION RIGHT EXPIRES AT 5:00 P.M., EASTERN TIME, ON
SEPTEMBER 30, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). In the event that
more than 4,883,365 Shares are presented for Redemption, the Fund will
repurchase Shares from redeeming Shareholders on a pro rata basis and in
accordance with the terms and conditions specified in the Redemption Right
Statement. If the Redemption Right is extended beyond September 30, 1998, the
purchase price for Shares will be their NAV determined as of the close of the
regular trading session of the NYSE on the first business day following the
Expiration Date, as extended.
If, after reviewing the information set forth in the Redemption Right
Statement and Letter of Transmittal, you wish to present your Shares for
repurchase by the Fund, please contact your broker, dealer or other nominee to
present your Shares for Redemption for you or, if you are the record owner of
the Shares, you may follow the instructions contained in the Redemption Right
Statement and Letter of Transmittal to present your Shares for Redemption. YOU
MUST PRESENT FOR REDEMPTION ALL SHARES ACTUALLY OR CONSTRUCTIVELY OWNED BY YOU
PURSUANT TO SECTION 318 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AS OF
THE DATE OF PURCHASE OF SHARES PURSUANT TO THE REDEMPTION RIGHT. You should
consult your tax adviser as to the application of the constructive ownership
rules of Section 318. Shares presented for Redemption shall include any shares
received by Shareholders pursuant to a dividend by the Fund or participation in
the Fund's Dividend Reinvestment Plan. You may elect to present your Shares for
Redemption and retain ownership of Portfolio Securities received or request that
the Portfolio Securities received be liquidated for cash. However, to retain
ownership of the Portfolio Securities you must make arrangements to establish
cash and securities accounts on your behalf with a bank or broker in Spain and
Portugal and provide certain information regarding a U.S. broker which can
retain American Depositary Receipts on your behalf. You will bear the expenses
of distributing your proceeds of the Redemption Right (generally certain
transfer taxes and any other transaction expenses) and such costs shall be
deducted from your proceeds. If you request that the Portfolio Securities
received as proceeds of the Redemption Right be liquidated for cash, you will
also bear the expenses related to that transaction (generally custodial
expenses, brokerage commissions, and any other transaction expenses) as well as
investment risk that the market value of Portfolio Securities will have changed
subsequent to the Valuation Date. The actual per share expenses for redeeming
Shareholders of effecting the Redemption and of any liquidation of Portfolio
Securities will depend on a number of factors including the number of Shares
redeemed, the Fund's portfolio composition at the time and market conditions
prevailing during the liquidation process. The Fund will bear the expenses of
offering the Redemption Right which include the costs of producing and mailing
the Redemption Right Statement and other documents, and the other expenses of
the Depositary and the Information Agent.
Neither the Fund nor its Board of Directors is making any recommendation to
you or any holder of Shares as to whether to demand Redemption of your Shares.
You are urged to consult your broker, investment adviser or tax adviser before
deciding whether to demand Redemption of your Shares.
The Fund's NAV on September 1, 1998 was $17.16 per Share. The NAV can be
expected to vary with changes in the value of the investments held by the Fund.
On September 2, 1998 the NAV may be higher or lower than it was on September 1,
1998. The Fund publishes its NAV each week in THE WALL STREET JOURNAL under the
heading "Closed End Funds." The Fund's NAV is also published in THE NEW YORK
TIMES and BARRON'S.
During the pendency of the Redemption Right, you may obtain current NAV
quotations for the Fund by calling Shareholder Communications Corporation, the
Information Agent at 1-800-733-8481, extension 426 between the hours of 9:00
a.m. and 5:00 p.m., Eastern Time, Monday-Friday (except holidays). Requests for
additional copies of the Redemption Right Statement, the Letter of Transmittal
and any other Redemption Right documents may also be directed to the Information
Agent.
Should you have any other questions on the enclosed material, please do not
hesitate to contact your broker, dealer or other nominee, or call the
Information Agent at the number set forth immediately above.
Yours truly,
SCUDDER SPAIN AND PORTUGAL FUND, INC.
<PAGE> 1
DTC DELIVERY ELECTION FORM
THIS FORM MUST BE COMPLETED AND SUBMITTED IF SHARES WILL BE PRESENTED FOR
REDEMPTION BY BOOK-ENTRY TRANSFER TO THE DEPOSITORY TRUST COMPANY AND THE
SHAREHOLDER DESIRES TO RETAIN OWNERSHIP OF THE PORTFOLIO SECURITIES RECEIVED.
PLEASE FAX THIS FORM TO THE DEPOSITARY AT THE NUMBER INDICATED BELOW PRIOR TO
5:00 P.M. EASTERN TIME ON THE SAME DAY SHARES ARE PRESENTED FOR REDEMPTION.
FACSIMILE COPY NUMBER: (781) 794-6333
CONFIRM BY TELEPHONE: (781) 794-6388
OPTIONS REGARDING
DISPOSITION OF PORTFOLIO SECURITIES
TO RETAIN OWNERSHIP OF PORTFOLIO SECURITIES RECEIVED, YOU MUST PROVIDE THE
INFORMATION REQUESTED BELOW. FAILURE TO FURNISH THE INFORMATION REQUESTED
REGARDING ACCOUNT INFORMATION WILL RESULT IN LIQUIDATION OF THE PORTFOLIO
SECURITIES. THE LIQUIDATION OF PORTFOLIO SECURITIES FOR CASH IS A TAXABLE EVENT
AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO THE SHAREHOLDER.
Your Name:
- --------------------------------------------------------------------------------
DTC -- VOl Number:
- --------------------------------------------------------------------------------
DTC Participant Number:
- --------------------------------------------------------------------------------
Date of Entry:
- --------------------------------------------------------------------------------
Number of Shares Presented for Redemption:
- --------------------------------------------------------------------
Local Account Information:
SPAIN
Name of Account (if different):
- --------------------------------------------------------------------------------
Bank or Broker Name (in Spain):
- --------------------------------------------------------------------------------
Bank or Broker Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Securities Account No.:
- --------------------------------------------------------------------------------
Cash Account No:
- --------------------------------------------------------------------------------
PORTUGAL
Name of Account (if different):
- --------------------------------------------------------------------------------
Bank or Broker Name (in Portugal):
- ------------------------------------------------------------------------------
Bank or Broker Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Securities Account No.:
- --------------------------------------------------------------------------------
Cash Account No:
- --------------------------------------------------------------------------------
UNITED STATES (FOR AMERICAN DEPOSITORY RECEIPTS THAT ARE PART OF THE PORTFOLIO
SECURITIES)
Broker Name:
- --------------------------------------------------------------------------------
DTC Participant Number:
- --------------------------------------------------------------------------------
IN ADDITION, IN ORDER TO RETAIN PORTFOLIO SECURITIES RECEIVED, YOU MUST ADVISE
THE ABOVE-NAMED BANK(S) OR BROKER(S) THAT SHARES WILL BE RECEIVED FOR YOUR
ACCOUNT(S) FROM THE FOLLOWING COUNTERPARTIES LISTED ON THE OPPOSITE SIDE OF THIS
FORM:
<PAGE> 2
<TABLE>
<S> <C>
Counterparty Settlement Instructions:
SPAIN
Securities Account Information: Banco Santander, Madrid
Account Number: 15940185769PC
Cash Account Information: Banco Santander, Madrid
Account Number: 810578
PORTUGAL
Securities Account Information: Banco Espirito Santo Commercial de Lisboa, Lisbon
Account Number: 099507150006
Cash Account Information: Banco Portuguese de Atlantico, Lisbon
Account Number: 530/03/002-881527
UNITED STATES
Securities Account Information: Brown Brothers Harriman & Co.
DTC Participant Number: 10
</TABLE>
PORTFOLIO SECURITIES RETAINED UNDER OPTION B WILL BE REGISTERED IN THE NOMINEE
NAME OF THE DELIVERING PARTY ON AN INTERIM BASIS. THE SIGNOR, IN CONJUNCTION
WITH THE LOCAL BANK/BROKER, WILL BE RESPONSIBLE FOR REREGISTERING THE PORTFOLIO
SECURITIES.
<PAGE> 1
<TABLE>
<S> <C>
Form W-8 CERTIFICATE OF FOREIGN STATUS
(Rev. November 1992)
Department of the Treasury
Internal Revenue Service
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
NAME OF OWNER (if joint account, also give joint owner's
name.) (See SPECIFIC INSTRUCTIONS.) U.S. TAXPAYER
IDENTIFICATION NUMBER (if any)
------------------------------------------------------------
PLEASE PERMANENT ADDRESS (See SPECIFIC INSTRUCTIONS.) (Include apt.
PRINT or suite no.)
OR
TYPE ------------------------------------------------------------
City, province or state, postal code, and country
------------------------------------------------------------
CURRENT MAILING ADDRESS, if different from permanent address
(include apt. or suite no., or P.O. box if mail is not
delivered to street address.)
------------------------------------------------------------
City, town or post office, state, and ZIP code (if foreign
address, enter city, province or state, postal code, and
country.)
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
List account information Account number Account type Account number
here (Optional, see
Specific Instructions.)
[ARROW]
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
NOTICE OF CHANGE IN STATUS. -- To notify the payer, mortgage
interest recipient, broker, or barter exchange that you no
longer qualify for exemption, check here.................... [ARROW] [ ]
IF YOU CHECK THIS BOX, REPORTING WILL BEGIN ON THE
ACCOUNT(S) LISTED.
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
PLEASE CERTIFICATION -- (Check applicable box(es)). Under penalties
SIGN of perjury, I certify that:
HERE [ ] For INTEREST PAYMENTS, I am not a U.S. citizen or
resident (or I am filing for a foreign corporation,
partnership, estate, or trust).
[ ] For DIVIDENDS, I am not a U.S. citizen or resident (or I
am filing for a foreign corporation, partnership, estate, or
trust).
[ ] For BROKER TRANSACTIONS or BARTER EXCHANGES, I am an
exempt foreign person as defined in the instructions below.
------------------------------------------------------------
SIGNATURE DATE
- ------------------------------------------------------------------------------------------------------------
</TABLE>
GENERAL INSTRUCTIONS
(Section references are to the Internal Revenue Code unless otherwise noted.)
PURPOSE
Use Form W-8 or a substitute form containing a substantially similar statement
to tell the payer, mortgage interest recipient, middleman, broker, or barter
exchange that you are a nonresident alien individual, foreign entity, or exempt
foreign person not subject to certain U.S. information return reporting or
backup withholding rules.
CAUTION: Form W-8 does not exempt the payee from the 30% (or lower treaty)
nonresident withholding rates.
NONRESIDENT ALIEN INDIVIDUAL
For income tax purposes, "nonresident alien individual" means an individual who
is neither a U.S. citizen nor resident. Generally, an alien is considered to be
a U.S. resident if:
- - The individual was a lawful permanent resident of the United States at any
time during the calendar year, that is, the alien held an immigrant visa (a
"green card"), or
- - The individual was physically present in the United States on:
(1) at least 31 days during the calendar year, and
(2) 183 days or more during the current year and the 2 preceding calendar
years (counting all the days of physical presence in the current year, one-third
the number of days of presence in the first preceding year, and only one-sixth
of the number of days in the second preceding year).
See PUB. 519, U.S. Tax Guide for Aliens, for more information on resident and
nonresident alien status.
NOTE: If you are a nonresident alien individual married to a U.S. citizen or
resident and have made an election under section 6013(g) or (h), you are treated
as a U.S. resident and MAY NOT use Form W-8.
EXEMPT FOREIGN PERSON
For purposes of this form, you are an "exempt foreign person" for a calendar
year in which:
1. You are a nonresident alien individual or a foreign corporation,
partnership, estate, or trust,
2. You are an individual who has not been, and plans not to be, present in the
United States for a total of 183 days or more during the calendar year, and
3. You are neither engaged, nor plan to be engaged during the year, in a U.S.
trade or business that has effectively connected gains from transactions with a
broker or barter exchange.
If you do not meet the requirements of 2 or 3 above, you may instead certify
on FORM 1001, Ownership, Exemption, or Reduced Rate Certificate, that your
country has a tax treaty with the United States that exempts your transactions
from U.S. tax.
FILING INSTRUCTIONS
WHEN TO FILE.--File Form W-8 or substitute form before a payment is made.
Otherwise, the payer may have to withhold and send part of the payment to the
Internal Revenue Service (see BACKUP WITHHOLDING below). This certificate
generally remains in effect for three calendar years. However, the payer may
require you to file a new certificate each time a payment is made to you.
WHERE TO FILE.--File this form with the payer of the qualifying income who is
the withholding agent (see WITHHOLDING AGENT on page 2). Keep a copy for your
own records.
BACKUP WITHHOLDING
A U.S. taxpayer identification number or Form W-8 or substitute form must be
given to the payers of certain income. If a taxpayer identification number or
Form W-8 or substitute form is not provided or the wrong taxpayer identification
number is provided, these payers may have to withhold 20% of each payment or
transaction. This is called backup withholding.
NOTE: On January 1, 1993, the backup withholding rate increases from 20% to 31%.
Reportable payments subject to backup withholding rules are:
- - Interest payments under section 6049(a).
- - Dividend payments under sections 6042(a) and 6044.
- - Other payments (i.e., royalties and payments from brokers and barter
exchanges) under sections 6041, 6041A(a), 6045, 6050A, and 6050N.
If backup withholding occurs, an exempt foreign person who is a nonresident
alien individual may get a refund by filing FORM 1040NR, U.S. Nonresident Alien
Income Tax Return, with the Internal Revenue Service Center, Philadelphia, PA
19255, even if filing the return is not otherwise required.
<PAGE> 2
Form W-8 (Rev. 11-92) Page 2
- --------------------------------------------------------------------------------
U.S. TAXPAYER IDENTIFICATION NUMBER
The Internal Revenue law requires that certain income be reported to the
Internal Revenue Service using a U.S. taxpayer identification number (TIN). This
number can be a social security number assigned to individuals by the Social
Security Administration or an employer identification number assigned to
businesses and other entities by the Internal Revenue Service.
Payments to account holders who are foreign persons (nonresident alien
individuals, foreign corporations, partnerships, estates, or trusts) generally
are not subject to U.S. reporting requirements. Also, foreign persons are not
generally required to have a TIN, nor are they subject to any backup withholding
because they do not furnish a TIN to a payer or broker.
However, foreign persons with income effectively connected with a trade or
business in the United States (income subject to regular (graduated) income
tax), must have a TIN. To apply for a TIN, use FORM SS-4, Application for
Employer Identification Number, available from local Internal Revenue Service
offices, or FORM SS-5, Application for a Social Security Card, available from
local Social Security Administration offices.
SPECIAL RULES
MORTGAGE INTEREST.--For purposes of the reporting rules, mortgage interest is
interest paid on a mortgage to a person engaged in a trade or business
originating mortgages in the course of that trade or business. A mortgage
interest recipient is one who receives interest on a mortgage that was acquired
in the course of a trade or business.
Mortgage interest is not subject to backup withholding rules, but is subject
to reporting requirements under section 6050H. Generally, however, the reporting
requirements do not apply if the payer of record is a nonresident alien
individual who pays interest on a mortgage not secured by real property in the
United States. Use Form W-8 or substitute form to notify the mortgage interest
recipient that the payer is a nonresident alien individual.
PORTFOLIO INTEREST.--Generally, portfolio interest paid to a nonresident alien
individual or foreign partnership, estate, or trust is not subject to backup
withholding rules. However, if interest is paid on portfolio investments to a
beneficial owner that is neither a financial institution nor a member of a
clearing organization, Form W-8 or substitute form is required.
REGISTERED OBLIGATIONS NOT TARGETED TO FOREIGN MARKETS qualify as portfolio
interest not subject to 30% withholding, but require the filing of Form W-8 or
substitute form. See INSTRUCTIONS TO WITHHOLDING AGENTS on this page for
reporting rules.
See PUB. 515, Withholding of Tax on Nonresident Aliens and Foreign
Corporations, for REGISTERED OBLIGATIONS TARGETED TO FOREIGN MARKETS and when
Form W-8 or substitute form is not required on these payments.
BEARER OBLIGATIONS.--The interest from bearer obligations targeted to foreign
markets is treated as portfolio interest and is not subject to 30% withholding.
Form W-8 or substitute form is not required.
DIVIDENDS.--Any distribution or payment of dividends by a U.S. corporation sent
to a foreign address is subject to the 30% (or lower treaty) withholding rate,
but is not subject to backup withholding. Also, there is no backup withholding
on dividend payments made to a foreign person by a foreign corporation. However,
the 30% withholding (or lower treaty) rate applies to dividend payments made to
a foreign person by a foreign corporation if:
- - 25% or more of the foreign corporation's gross income for the three preceding
taxable years was effectively connected with a U.S. trade or business, and
- - The corporation was not subject to the branch profits tax because of an income
tax treaty (see section 884(e)).
If a foreign corporation makes payments to another foreign corporation, the
recipient must be a qualified resident of its country of residence to benefit
from that country's tax treaty.
BROKER OR BARTER EXCHANGES.--Income from transactions with a broker or barter
exchanges is subject to reporting rules and backup withholding unless Form W-8
or substitute form is filed to notify the broker or barter exchange that you are
an exempt foreign person as defined on page 1.
SPECIFIC INSTRUCTIONS
NAME OF OWNER.--If Form W-8 is being filed for portfolio interest, enter the
name of the beneficial owner.
U.S. TAXPAYER IDENTIFICATION NUMBER.--If you have a U.S. taxpayer identification
number, enter your number in this space (see the discussion earlier).
PERMANENT ADDRESS.--Enter your complete address in the country where you reside
permanently for income tax purposes.
<TABLE>
<S> <C>
IF YOU ARE: SHOW THE ADDRESS
OF:
An individual Your permanent
residence
A partnership or Principal office
corporation
An estate or trust Permanent residence
or principal office
of any fiduciary
</TABLE>
Also show your current mailing address if it differs from your permanent
address.
ACCOUNT INFORMATION (OPTIONAL).--If you have MORE THAN ONE ACCOUNT (savings,
certificate of deposit, pension, IRA, etc.) with the same payer, list all
account numbers and types on one Form W-8 or substitute form unless your payer
requires you to file a separate certificate for each account.
If you have MORE THAN ONE PAYER, file a separate Form W-8 with each payer.
SIGNATURE.--If only one foreign person owns the account(s) listed on this form,
that foreign person should sign the Form W-8.
If each owner of a joint account is a foreign person, EACH should sign a
separate Form W-8.
NOTICE OF CHANGE IN STATUS.--If you become a U.S. citizen or resident after you
have filed Form W-8 or substitute form, or you cease to be an exempt foreign
person, you must notify the payer in writing within 30 days of your change in
status.
To notify the payer, you may check the box in the space provided on this form
or use the method prescribed by the payer.
Reporting will then begin on the account(s) listed and backup withholding may
also begin unless you certify to the payer that:
(1) The U.S. taxpayer identification number you have given is correct, AND
(2) The Internal Revenue Service has not notified you that you are subject to
backup withholding because you failed to report certain income.
You may use FORM W-9, Request for Taxpayer Identification Number and
Certification, to make these certifications.
If an account is no longer active, you do not have to notify a payer of your
change in status unless you also have another account with the same payer that
is still active.
FALSE CERTIFICATE.--If you file a false certificate when you are not entitled to
the exemption from withholding or reporting, you may be subject to fines and/or
imprisonment under U.S. perjury laws.
INSTRUCTIONS TO
WITHHOLDING AGENTS
WITHHOLDING AGENT.--Generally, the person responsible for payment of the items
discussed above to a nonresident alien individual or foreign entity is the
withholding agent (see Pub. 515).
RETENTION OF STATEMENT.--Keep Form W-8 or substitute form in your records for at
least four years following the end of the last calendar year during which the
payment is paid or collected.
PORTFOLIO INTEREST.--Although registered obligations NOT targeted to foreign
markets are not subject to 30% withholding, you must file FORM 1042S, Foreign
Person's U.S. Source Income Subject to Withholding, to report the interest
payment. Both Form 1042S and a copy of Form W-8 or substitute form must be
attached to FORM 1042, Annual Withholding Tax Return for U.S. Source Income of
Foreign Persons.
<PAGE> 1
Exhibit (a)(4)
SCUDDER SPAIN AND PORTUGAL FUND, INC.
345 Park Avenue
New York, New York 10154
Tel: 212-326-6753
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
SCUDDER SPAIN AND PORTUGAL FUND, INC.
OFFERS RIGHT TO DEMAND REDEMPTION OF SHARES
New York, New York, September 2, 1998 - Scudder Spain and Portugal
Fund, Inc. announced today that it is offering its shareholders the right to
demand the redemption of their shares of the Fund at net asset value, in an
aggregate amount of up to 4,883,365 shares of the outstanding common stock of
the Fund, representing 75% of its outstanding shares (the "Redemption Right").
Redeeming shareholders will receive a pro rata portion of each of the
securities (other than short-term fixed income securities with maturities of
less than one year, securities with transfer restrictions, and certain illiquid
securities) and cash held in the Fund's investment portfolio, subject to
adjustment for fractional shares and certain expenses relating to distribution
of proceeds. The consideration for each share redeemed (before expenses) will
be equal to the net asset value per share determined as of the close of the
regular trading session of the New York Stock Exchange on October 1, 1998, the
valuation date, unless the Redemption Right is extended. The portfolio
securities distributed in such redemption will be valued as of that valuation
date. On September 1, 1998, the net asset value of a share of the Fund was
$17.16 per share. The redemption right and withdrawal rights will expire at
5:00 P.M., Eastern Time, on September 30, 1998, unless the redemption right is
extended. If the offer is extended beyond September 30, 1998, the purchase
price for the shares and the value of the portfolio securities distributed will
be determined as of the close of the regular trading session of the New York
Stock Exchange on the first business day following the expiration date, as
extended. If more than 4,883,365 shares are presented for redemption and not
withdrawn prior to the expiration date of the redemption right, the Fund will
repurchase shares on a pro rata basis, in accordance with the number of shares
presented for redemption.
The purpose of this redemption right is to provide shareholders who may
no longer wish to participate in this closed-end investment vehicle with the
opportunity to demand the redemption of all of their shares in-kind in order to
elect to realize the net asset value of their shares.
While the Fund will distribute portfolio securities as consideration
for shares redeemed, each of the redeeming shareholders may elect to retain or
to liquidate the portfolio securities that such shareholder will receive. A
facility to liquidate portfolio securities will be made available as
<PAGE> 2
a convenience to the Fund's shareholders, although shareholders electing
liquidation will bear the costs of liquidating the portfolio securities, as well
as the market risks associated with the securities pending liquidation and
distribution of proceeds.
The terms and conditions of the Redemption Right are set forth in the
Fund's Redemption Right Statement, dated September 2, 1998, and the related
Letter of Transmittal. Questions and requests for assistance or for copies of
the Redemption Right Statement, Letter of Transmittal, and any other Redemption
Right documents should be directed to the Information Agent, Shareholder
Communications Corporation, 17 State Street, Floors 27 and 28, New York, NY
10004, or 1-800-733-8481, extention 426.
The Fund is a non-diversified, closed-end U.S. registered management
investment company. Its investment manager is Scudder Kemper Investments, Inc.
and its lead portfolio manager is Joan R. Gregory.
This announcement is not an offer to purchase or solicitation of an
offer to sell shares of the Fund. The offer of the Redemption Right is made only
by the Redemption Right Statement and the related Letter of Transmittal. The
Redemption Right is not being offered to, nor will redemption requests be
accepted from or on behalf of, holders of shares in any jurisdiction in which
offering or participating in the Redemption Right would violate that
jurisdiction's laws.
-2-
<PAGE> 1
DEPOSITARY AGREEMENT
Date: August 31, 1998
Boston EquiServe LP
1 Exchange Plaza
55 Broadway, 3rd Floor
New York, NY 10006
Gentlemen:
Scudder Spain and Portugal Fund, Inc., a closed-end management
investment company (the "Purchaser"), is offering to its shareholders the right
to demand the repurchase of their shares (the "Redemption Right") in an amount
of up to 4,883,365 of the Purchaser's issued and outstanding Common Stock, $.01
par value (the "Shares"), in exchange for a pro rata portion of each of the
securities, including any cash (other than short-term fixed income securities
with maturities of less than one year, securities with transfer restrictions and
certain illiquid securities) held in the Purchaser's investment portfolio
("Portfolio Securities")(the "Redemption Right"), with each share being equal to
its net asset value ("NAV") determined as of the close of the regular trading
session of the New York Stock Exchange ("NYSE") on the first business day
following the Expiration Date (the "Valuation Date"), unless the Redemption
Right is extended, subject to the terms and conditions set forth in its
Redemption Right Statement dated September 2, 1998 (the "Redemption Right
Statement") and in the related Letter of Transmittal (which shall include the
Internal Revenue Service Form W-8 or Form W-9 and the DTC Delivery Election
Form), copies of which are attached hereto as Exhibits A and B, respectively,
and which together, as they may be amended from time to time, constitute the
"Redemption Right Documents." The "Expiration Date" for the Redemption Right
shall be 5:00 P.M. Eastern Time, on September 30, 1998, unless and until the
Purchaser shall have extended the period of time for which the Redemption Right
is open, in which event the term "Expiration Date" shall mean the latest time
and date at which the Redemption Right, as so extended by the Purchaser from
time to time, shall expire. All terms not defined herein shall have the same
meaning as in the Redemption Right Documents.
The Purchaser hereby agrees with you as follows:
1) Subject to the terms and conditions of this Agreement, you will act
as Depositary in connection with the Redemption Right, and in such capacity are
authorized and directed to accept Shares presented for Redemption.
<PAGE> 2
2) (a) Shares are properly presented for Redemption only if they have
been presented in compliance with the procedures as set forth in Section 2 of
the Redemption Right Statement. Shares shall be considered validly presented for
Redemption to you only if:
(i) you receive prior to the Expiration Date (x) certificates for
such Shares (or a Confirmation (as defined in paragraph (b) below) relating to
such Shares), and (y) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) or an Agent's Message (as defined in
paragraph (b) below) relating thereto; or
(ii) you receive (x) a Notice of Guaranteed Delivery (as defined in
paragraph (b) below) relating to such Shares from an Eligible Institution (as
defined in paragraph (b) below) prior to the Expiration Date and (y)
certificates for such Shares (or a Confirmation relating to such Shares) and
either a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) or an Agent's Message relating thereto at or prior to 5:00
P.M., Eastern Time, on the third New York Stock Exchange, Inc. (the "NYSE")
trading day after the date of execution of such Notice of Guaranteed Delivery;
and
(iii) in the case of either clause (i) or (ii) above, a final
determination of the adequacy of the items received, as provided in Section 4
hereof, has been made by Purchaser.
(b) For the purpose of this Agreement: (i) a "Confirmation" shall be
a confirmation of book-entry transfer of Shares into your account at The
Depository Trust Company, (hereinafter referred to as "DTC") to be established
and maintained by you in accordance with Section 3 hereof; (ii) a "Notice of
Guaranteed Delivery" shall be a notice of guaranteed delivery substantially in
the form attached as Exhibit C hereto or a telegram, telex, facsimile
transmission or letter substantially in such form, or if sent by DTC, a message
transmitted through electronic means in accordance with the usual procedures of
DTC and the Depositary, substantially in such form; provided, however, that if
such notice is sent by DTC through electronic means, it must state that DTC has
received an express acknowledgment from the participant on whose behalf such
notice is given that such participant has received and agrees to become bound by
the form of such notice; (iii) an "Eligible Institution" shall be a firm which
is a bank, broker, dealer, credit union, savings association or other entity
which is a member in good standing of a Stock Transfer Association approved
medallion program (such as STAMP, SEMP or MSP); and (iv) an "Agent's Message"
shall be a message from DTC transmitted to, and received by, the Depositary
forming a part of a timely Confirmation, which states that (a) DTC has received
an express acknowledgment from the DTC participant presenting the Shares for
Redemption that are the subject of the Confirmation, (b) the DTC participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
(c) the Purchaser may enforce the agreement against the DTC participant. The
term Agent's Message shall also include any hard copy printout evidencing such
message generated by a computer terminal maintained at the Depositary's office.
(c) We acknowledge that in connection with the Redemption Right you
may enter into agreements or arrangements with DTC which, among other things,
provide that (i) delivery of an Agent's Message will satisfy the terms of the
Redemption Right with respect to the Letter of Transmittal, (ii) such agreements
or arrangements are enforceable against the Purchaser by DTC or participants
therein and (iii) you, as Depositary, are authorized to enter
2
<PAGE> 3
into such agreements or arrangements on behalf of the Purchaser. Without
limiting any other provision of this Agreement, you are expressly authorized to
enter into any such agreements or arrangements on behalf of the Purchaser and to
make any necessary representations or warranties in connection therewith, and
any such agreement or arrangement shall be enforceable against the Purchaser.
3) You shall take steps to establish and, subject to such
establishments, maintain an account at DTC for book-entry transfers of Shares,
as set forth in the Letter of Transmittal and Section 2 of the Redemption Right
Statement, and you shall comply with the provisions of Rule 17Ad-14 under the
Securities Exchange Act of 1934, as amended.
4) (a) You are authorized and directed to examine any certificate
representing Shares, Letter of Transmittal (or facsimile thereof), Notice of
Guaranteed Delivery or Agent's Message and any other document required by the
Letter of Transmittal received by you to determine whether you believe any
request for Redemption may be defective. In the event you conclude that any
Letter of Transmittal, Notice of Guaranteed Delivery, Agent's Message or other
document has been improperly completed, executed or transmitted, any of the
certificates for Shares is not in proper form for transfer (as required by the
aforesaid instructions) or if some other irregularity in connection with the
request for Redemption of Shares exists, you are authorized subject to Section
4(b) hereof to advise the redeeming stockholder, or DTC, or the Information
Agent, as the case may be, of the existence of the irregularity, but you are not
authorized to accept any request for Redemption of fractional Shares, any
Request for Redemption not in accordance with the terms and subject to the
conditions set forth in the Redemption Right Statement, or any other redemption
request which you deem to be defective, unless you shall have received from the
Purchaser the Letter of Transmittal which was surrendered (or if the request for
Redemption was made by means of a Confirmation containing an Agent's Message, a
written notice), duly dated and signed by an authorized officer of the
Purchaser, indicating that any defect or irregularity in such request for
Redemption has been cured or waived and that such request for redemption has
been accepted by the Purchaser.
(b) Promptly upon your concluding that any Request for Redemption is
defective, you shall, after consultation with and on the written instructions of
the Purchaser, use reasonable efforts in accordance with your regular procedures
to notify the person requesting redmeption of such Shares, or DTC transmitting
the Agent's Message, as the case may be, of such determination and, when
necessary, return the certificates involved to such person in the manner
described in Section 11 hereof. The Purchaser shall have full discretion to
determine whether any request for redemption is complete and proper and shall
have the absolute right to reject any or all requests for redemption of any
particular Shares determined by it not to be in proper form and to determine
whether the acceptance of or payment for such request for redemption may, in the
opinion of counsel for the Purchaser, be unlawful; it being specifically agreed
that you shall have neither discretion nor responsibility with respect to these
determinations. To the extent permitted by applicable law, the Purchaser also
reserves the absolute right to waive any of the conditions of the Redemption
Right or any defect or irregularity with respect to the request for redemption
of any particular Shares. The interpretation by the Purchaser of the terms and
conditions of the Redemption Right Statement, the Letter of Transmittal and the
instructions thereto, a Notice of Guaranteed Delivery or an Agent's Message
(including without limitation the
3
<PAGE> 4
determination of whether any request for redemption is complete and proper)
shall be final and binding.
(c) If less than all of the Shares validly presented for Redemption
pursuant to the Redemption Right are to be accepted because the Redemption Right
is oversubscribed by the Expiration Date, the Purchaser shall provide you with
instructions regarding proration as soon as practicable. You agree to maintain
accurate records as to all Shares presented for Redemption prior to or on the
Expiration Date.
5) You are authorized and directed to return to any person seeking
Redemption of Shares, in the manner described in Section 11 hereof, any
certificates representing Shares presented for Redemption by such person but
duly withdrawn pursuant to the Redemption Right Statement. To be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal must
be received by you within the time period specified for withdrawal in the
Redemption Right Statement at your address set forth on the back page of the
Redemption Right Statement. Any notice of withdrawal must specify the name of
the person having deposited the Shares to be withdrawn, the number of Shares to
be withdrawn and, if the certificates representing such Shares have been
delivered or otherwise identified to you, the name of the registered holder(s)
of such Shares as set forth in such certificates. If the certificates have been
delivered to you, then prior to the release of such certificates the stockholder
presenting Shares for Redemption must also submit the serial numbers shown on
the particular certificates evidencing such Shares and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution. You are
authorized and directed to examine any notice of withdrawal to determine whether
you believe any such notice may be defective. In the event you conclude that any
such notice is defective you shall, after consultation with and on the
instructions of the Purchaser, use reasonable efforts in accordance with your
regular procedures to notify the person delivering such notice of such
determination. All questions as to the form and validity (including time of
receipt) of notices of withdrawal will be determined by the Purchaser in its
sole discretion, whose determination shall be final and binding. Any Shares so
withdrawn shall no longer be considered to be properly presented for Redemption
unless such Shares are re-presented for Redemption prior to the Expiration Date
pursuant to the Redemption Right.
6) Subject to Sections 18 and 25 hereof, any amendment to or extension
of the Redemption Right, as the Purchaser shall from time to time determine,
shall be effective upon notice to you from the Purchaser given prior to the time
the Redemption Right would otherwise have expired, and shall be promptly
confirmed by the Purchaser in writing; provided that you may rely on and shall
be authorized and protected in acting or failing to act upon any such notice
even if such notice is not confirmed in writing or such confirmation conflicts
with such notice. If at any time the Redemption Right shall be terminated as
permitted by the terms thereof, the Purchaser shall promptly notify you of such
termination.
7) At 11:00 A.M. Eastern Time, or as promptly as practicable thereafter
on each business day, or more frequently if reasonably requested to tally major
figures, you shall advise each of the parties named below by facsimile
transmission your preliminary review (and at all times subject to final
determination by Purchaser), as of the close of business on the preceding
business day or the most recent practicable time prior to such request, as the
case may be: (i) the number of Shares properly presented for Redemption on such
day; (ii)
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<PAGE> 5
the number of Shares properly presented for Redemption represented by
certificates physically held by you on such day; (iii) the number of Shares
represented by Notices of Guaranteed Delivery on such day; (iv) the number of
Shares withdrawn on such day; (v) the number of requests for liquidation of
Portfolio Securities; (vi) the number of requests for receipt of Portfolio
Securities by redeeming Shareholders and (vii) the cumulative totals of Shares
in categories (i) thru (vi) above through 12:00 Noon, Eastern Time, on such day:
(a) Bruce H. Goldfarb, Esq.
(b) Judith A. Hannaway
(c) Jim Kirchner
You shall also furnish to each of the above-named persons a written report
confirming the above information which has been communicated orally on the day
following such oral communication. You shall furnish to the Purchaser, such
reasonable information, to the extent such information has been furnished to
you, on the redeeming stockholders as may be requested from time to time.
You shall furnish to the Purchaser, upon request, master lists of Shares
presented for Redemption, including an A-to-Z list of the redeeming
stockholders.
You are also authorized and directed to provide the persons listed
above or any other persons approved by the Purchaser with such other information
relating to the Shares, Redemption Right Statement, Letters of Transmittal,
Agent's Messages or Notices of Guaranteed Delivery as the Purchaser may
reasonably request from time to time.
8) Letters of Transmittal, Notices of Guaranteed Delivery, Agent's
Messages, telegrams, telexes, facsimile transmissions, notices and letters
submitted to you pursuant to the Redemption Right Statement shall be stamped by
you to indicate the date and time of the receipt thereof and these documents, or
copies thereof, shall be preserved by you for a reasonable time not to exceed
one year or the term of this Agreement, whichever is longer, and thereafter
shall be delivered by you to the Purchaser. Thereafter, any inquiries relating
to or requests for any of the foregoing shall be directed solely to the
Purchaser and not the Depositary.
9) At such time as you shall be notified by the Purchaser, you shall
request the transfer agent for the Shares to effect the transfer of all Shares
repurchased pursuant to the Redemption Right, in accordance with written
instructions from the Purchaser, and upon your receipt thereof notify the
Purchaser. At such time as you shall be notified by Scudder Investor Services,
Inc. as liquidating agent for the redeeming stockholders requesting liquidation
of proceeds received from the Redemption Right, you shall issue checks to such
stockholders representing the proceeds of liquidation.
10) (a) You will prepare and mail to each redeeming stockholder whose
Shares were accepted for repurchase, other than stockholders who demonstrate
their status as nonresident aliens in accordance with United States Treasury
Regulations ("Foreign Stockholders"), a Form 1099-B reporting the repurchase of
Shares as of the date such Shares are accepted for payment. You will also
prepare and file copies of such Forms 1099-B by magnetic tape with the Internal
Revenue Service in accordance with Treasury Regulations on or before
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<PAGE> 6
February 28th of the year following the year in which the Shares are accepted
for payment. You will also prepare and mail to each redeeming stockholder who
elects to liquidate their Portfolio Securities received for cash, a Form 1099-B
reporting the liquidation of the Portfolio Securities. You will also prepare and
file copies of such Forms 1099-B by magnetic tape with the Internal Revenue
Service in accordance with Treasury Regulations.
(b) You will deduct and withhold 31% backup withholding tax from the
repurchase price payable with respect to Shares presented for Redemption by any
stockholder, other than a Foreign Stockholder, who has not properly provided you
with his taxpayer identification number, in accordance with Treasury
Regulations.
(c) Should any issue arise regarding federal income tax reporting or
withholding, you will take such action as the Purchaser instructs you in
writing.
11) If, pursuant to the terms and conditions of the Redemption Right,
the Purchaser has notified you that it does not accept certain of the Shares
presented for Redemption or purported to be presented for Redemption or a
stockholder withdraws any Shares presented for Redemption, you shall promptly
return the deposited certificates for such Shares, together with any other
documents received, to the person who deposited the same, without expense to
such person. Certificates for such unpurchased Shares shall be forwarded by you,
at your option, by: (i) first class mail under a blanket surety bond protecting
you and the Purchaser from losses or liabilities arising out of the non-receipt
or nondelivery of such Shares; or (ii) registered mail insured separately for
the value of such Shares. If any such Shares were presented for Redemption or
purported to be presented for Redemption by means of a Confirmation containing
an Agent's Message, you shall notify DTC of the Purchaser's decision not to
accept the Shares.
12) You shall take all reasonable action with respect to the Redemption
Right as may from time to time be requested by the Purchaser or the Information
Agent. You are authorized to cooperate with and furnish information to the
Purchaser and the Information Agent, any of its representatives or any other
organization (or its representatives) designated from time to time by the
Purchaser, in any manner reasonably requested by any of them in connection with
the Redemption Right and requests for Redemption thereunder.
13) Any instructions given to you orally, as permitted by any provision
of this Agreement, shall be confirmed in writing by the Purchaser or Information
Agent, as the case may be, as soon as practicable. You shall be fully authorized
and protected for acting, or failing to act, in accordance with any oral
instructions which do not conform with the written confirmation received in
accordance with this Section.
14) Whether or not any Shares are presented for Redemption or the
Redemption Right is consummated, for your services as Depositary hereunder we
shall pay to you compensation in accordance with the fee schedule attached as
Schedule 1 hereto, together with reimbursement for out-of-pocket expenses,
including reasonable fees and disbursements of your counsel. Such additional
out-of-pocket expenses must be approved by the Purchaser prior to being
incurred.
15) In the event any question or dispute arises with respect to the
proper interpretation of this Agreement or your duties hereunder or the rights
of the Purchaser or of any stockholders surrendering certificates for Shares
pursuant to the Redemption Right, you
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<PAGE> 7
shall not be required to act and shall not be held liable or responsible for
your refusal to act until the question or dispute has been judicially settled
(and you may, if you in your sole discretion deem it advisable, but shall not be
obligated to, file a suit in interpleader or for a declaratory judgment for such
purpose) by final judgment rendered by a court of competent jurisdiction,
binding on all stockholders and parties interested in the matter which is no
longer subject to review or appeal, or settled by a written document in form and
substance satisfactory to you and executed by the Purchaser and each such
stockholder and party. In addition, you may require for such purpose, but shall
not be obligated to require, the execution of such written settlement by all the
stockholders and all other parties that may have an interest in the settlement.
16) As Depositary hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth herein, or in Schedule 1 and Exhibits A, B, and C hereto,
or as may subsequently be agreed to in writing by you and the Purchaser;
(b) shall have no obligation to make payment for any Shares unless
the Purchaser shall have provided the necessary Portfolio Securities
representing the full amounts due and payable with respect thereto;
(c) shall be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value, or genuineness of any
certificates or the Shares represented thereby deposited with you or presented
for Redemption through an Agent's Message hereunder and will not be required to
and will make no representations as to or be responsible for the validity,
sufficiency, value, or genuineness of the Redemption Right;
(d) shall not be obligated to take any legal action hereunder; if,
however, you determine to take any legal action hereunder, and, where the taking
of such action might in your judgment subject or expose you to any expense or
liability, you shall not be required to act unless you shall have been furnished
with an indemnity satisfactory to you;
(e) may rely on and shall be authorized and protected in acting upon
any certificate, instrument, opinion, notice, letter, telegram, telex, facsimile
transmission, Agent's Message or other document or security delivered to you and
believed by you to be genuine and to have been signed by the proper party or
parties;
(f) may rely on and shall be authorized and protected in acting upon
the written, telephonic, electronic and oral instructions, with respect to any
matter relating to your actions as Depositary covered by this Agreement (or
supplementing or qualifying any such actions) of officers of the Purchaser;
(g) may consult counsel satisfactory to you, and the advice of such
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered, or omitted by you hereunder in good faith and in
accordance with the advice of such counsel;
(h) shall not be called upon at any time to advise any person
presenting Shares for Redemption or considering presenting Shares for Redemption
pursuant to the Redemption Right as to the wisdom of making the request for
redemption or as to the market value of any security presented for Redemption
thereunder;
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<PAGE> 8
(i) may perform any of your duties hereunder either directly or by
or through agents or attorneys and you shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed with
reasonable care by you hereunder;
(j) shall not be liable or responsible for any recital or statement
contained in the Redemption Right or any other documents relating thereto;
(k) shall not be liable or responsible for any failure of the
Purchaser to comply with any of its obligations relating to the Redemption
Right, including without limitation obligations under applicable securities
laws;
(l) are not authorized, and shall have no obligation, to pay any
brokers, dealers, or soliciting fees to any person, including, without
limitation, the Information Agent;
(m) shall not be liable or responsible for any delay, failure,
malfunction, interruption or error in the transmission or receipt of
communications or messages through electronic means to or from DTC, or for the
actions of any other person in connection with any such message or
communication; and
(n) shall take all other actions necessary or appropriate as
Depositary under the terms of the Redemption Right and under the customs and
practices reasonably applied to transactions of this type.
17) The Purchaser covenants to indemnify and hold you and your
officers, directors, employees, agents, contractors, subsidiaries and affiliates
harmless from and against any loss, liability, damage or expense (including
without limitation any loss, liability, damage or expense incurred for
submitting for transfer Shares presented for Redemption without a signature
guarantee pursuant to the Letter of Transmittal, or in connection with any
communication or message transmitted or purported to be transmitted through
electronic means to or from DTC, and the fees and expenses of counsel) incurred
without negligence or intentional misconduct as a result of your acting or
failing to act upon the instructions of the Purchaser arising out of or in
connection with the Redemption Right, this Agreement or the administration of
your duties hereunder, including, without limitation, the costs and expenses of
defending and appealing against any action, proceeding, suit or claim in the
premises. You shall promptly notify the Purchaser of any action, proceeding,
suit or claim by letter or telex or facsimile transmission confirmed by letter.
The Purchaser shall be entitled to participate at its own expense in the defense
of any such action, proceeding, suit or claim. Anything in this agreement to the
contrary notwithstanding, in no event shall you be liable for special, indirect
or consequential loss or damage of any kind whatsoever (including but not
limited to lost profits), even if you have been advised of the likelihood of
such loss or damage and regardless of the form of action.
18) Unless terminated earlier by the parties hereto, this Agreement
shall terminate upon (a) Purchaser's termination or withdrawal of the Redemption
Right, (b) if Purchaser does not terminate or withdraw the Redemption Right, the
date which is two (2) months after the delivery of the proceeds of the
liquidation of Portfolio Securities to those redeeming Shareholders electing
liquidation or (c) if not terminated or withdrawn earlier, the date which is
three (3) months after the date of this Agreement. Upon any termination of this
Agreement, you shall promptly deliver to the Purchaser any certificates, funds
or property then held by you as Depositary under this Agreement, and after such
time any party
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<PAGE> 9
entitled to such certificates, funds or property shall look solely to the
Purchaser and not the Depositary therefore, and all liability of the Depositary
with respect thereto shall cease, provided, however, that the Depositary, before
being required to make such delivery to the Purchaser, may mail to each person
who has presented Shares for Redemption but not received payment, or both,
notice that such certificates, funds or property remain unclaimed and that after
a date specified therein, which shall not be less than 30 days from the date of
publication or mailing, any unclaimed balance of such certificates, funds or
property will be delivered to the Purchaser. Sections 14, 16 and 17 hereof shall
survive any termination of this Agreement.
19) In the event that any claim of inconsistency between this Agreement
and the terms of the Redemption Right arise, as they may from time to time be
amended, the terms of the Redemption Right shall control, except with respect to
the duties, liabilities and rights, including without limitation compensation
and indemnification, of you as Depositary, which shall be controlled by the
terms of this Agreement.
20) If any provision of this Agreement shall be held illegal, invalid,
or unenforceable by any court, this Agreement shall be construed and enforced as
if such provision had not been contained herein and shall be deemed an Agreement
among us to the full extent permitted by applicable law.
21) Purchaser represents and warrants that (a) it is each duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (b) the making and consummation of the Redemption
Right and the execution, delivery and performance of all transactions
contemplated thereby (including without limitation this Agreement) have been
duly authorized by all necessary corporate action; (c) this Agreement has been
duly executed and delivered by the Purchaser and constitutes the legal, valid,
binding and enforceable obligation of it, (d) the Redemption Right will comply
in all material respects with all applicable requirements of law and (e) to the
best of its knowledge, there is no litigation pending or threatened as of the
date hereof in connection with the Redemption Right.
22) Set forth in Exhibit D hereto is a list of the names and specimen
signatures of the persons authorized to act for the Purchaser under this
Agreement. The Secretary of the Purchaser may, from time to time, certify to you
the names and signatures of any other persons authorized to act for the
Purchaser, as the case may be, under this Agreement.
23) Except as expressly set forth elsewhere in this Agreement, all
notices, instructions and communication under this Agreement shall be in
writing, shall be effective upon receipt and shall be addressed, if to the
Purchaser, to its address set forth beneath its signature to this Agreement, or,
if to the Depositary, to Barbara Cummings, Boston EquiServe LP, 150 Royall
Street, Canton, MA 02021, or to such other address as a party hereto shall
notify the other parties.
24) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to conflict of
laws rules or principles, and shall inure to the benefit of and be binding upon
the successors and assigns of the parties hereto; provided that this Agreement
may not be assigned by any party without the prior written consent of all other
parties.
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25) No provision of this Agreement may be amended, modified or waived,
except in a writing signed by all of the parties hereto.
Please acknowledge receipt of this Letter, the Redemption Right Statement, the
Letter of Transmittal, and the Notice of Guaranteed Delivery, and confirm the
arrangements herein provided by signing and returning the enclosed copy hereof,
whereupon this Agreement and your acceptance of the terms and conditions herein
provided shall constitute a binding Agreement among us.
Very truly yours,
Scudder Spain and Portugal Fund, Inc.
By:
----------------------
Name: Bruce H. Goldfarb
Title: Vice President
Address for notices: 345 Park Avenue,
New York, NY 10154
TEL: 212-336-4654
Accepted as of the date above first
written.
Boston EquiServe LP as Depositary
By:
----------------------
Name:
Title:
TEL:
FAX:
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Exhibit A Redemption Right Statement
Exhibit B Letter of Transmittal
Exhibit C Notice of Guaranteed Delivery
Exhibit D Specimen Signatures
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<PAGE> 1
EXHIBIT C-2
INVESTMENT ADVISORY,
MANAGEMENT AND ADMINISTRATION AGREEMENT
AGREEMENT, dated and effective as of December 31, 1997 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 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 and shall not be responsible for any expenses assumed by the
administrator of the Fund pursuant to the Administration Agreement. In
<PAGE> 2
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 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
2
<PAGE> 3
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 1.00% 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.
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
3
<PAGE> 4
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 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 until the date which
is one year from the day and year first written above, and shall continue in
effect 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
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<PAGE> 5
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.
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: _________________________
5
<PAGE> 1
EXHIBIT C-3
LIQUIDATING AGENT AGREEMENT
This Agreement is made this 31st day of August, 1998 by and between
Scudder Investor Services, Inc. (the "Liquidating Agent") and Brown Brothers
Harriman & Co. (the "Custodian").
W I T N E S S E T H:
WHEREAS, pursuant to a Redemption Right Statement dated September 1,
1998, Scudder Spain and Portugal Fund, Inc. (the "Fund") has offered to its
shareholders the right to demand the repurchase of their shares in the amount of
up to 4,883,365 of the 6,511,154 outstanding shares of its common stock in
exchange for a pro rata portion of the Fund's assets, including each of the
securities (other than short-term fixed income securities with maturities of
less than one year or securities with transfer restrictions and certain illiquid
securities) held in the Fund's investment portfolio (the "Portfolio
Securities"), including any cash held by the Fund (the "Redemption Right"); and
WHEREAS, the Fund has appointed the Custodian to serve as custodian on
behalf of the shareholders of the Fund who have elected to exercise the
Redemption Right; and
WHEREAS, pursuant to such Redemption Right, redeeming shareholders may
direct that all of the Portfolio Securities received as proceeds from the
repurchase of shares of the Fund be liquidated; and
WHEREAS, the Custodian has established a separate account for the
liquidation of the Portfolio Securities (the "Liquidating Account"); and
WHEREAS, the Fund has designated Scudder Investor Services, Inc. to
serve as Liquidating Agent on behalf of those shareholders who have directed the
liquidation of their proceeds of the Redemption Right;
NOW THEREFORE, in consideration of the premises and the terms and
provisions hereinafter set forth, and for other good and valuable consideration,
the parties hereto agree as follows:
1. DUTIES OF THE LIQUIDATING AGENT.
(A) The Liquidating Agent, in liquidating the Liquidating Account,
shall effect trades in open-market transactions using executing brokers selected
in its absolute discretion; provided that the Liquidating Agent shall seek best
execution.
(B) During the term of the liquidation, the Liquidating Agent shall
have the authority to vote all proxies solicited by or with respect to the
issuers of securities in which assets of the
<PAGE> 2
Liquidating Account may be invested. The Liquidating Agent shall use its best
good faith judgment to vote such proxies in a manner which best serves the
interests of the Liquidating Shareholders. In acting upon any rights offerings
involving Portfolio Securities to be liquidated which expire during the
liquidation process, the Liquidating Agent shall sell the right to the extent
possible. Any dividends paid with respect to Portfolio Securities to be
liquidated during the liquidation process shall be credited to the benefit of
shareholders who have requested liquidation of such Portfolio Securities
received.
(C) The Liquidating Agent agrees that it shall sell the Portfolio
Securities in the Liquidating Account so as to prevent, to the extent possible,
any negative effect on the market for such Portfolio Securities and shall have
liquidated all Portfolio Securities in the Liquidating Account by no later than
November 30, 1998.
2. COMPENSATION AND EXPENSES. For it services hereunder, the
Liquidating Agent shall be entitled to reimbursement for all transactional fees
related the disposition of the Liquidating Account and any customary brokerage
commissions. Such expenses shall be deducted from the Liquidating Account and
forwarded to the Liquidating Agent by the Custodian upon the completion of the
liquidation.
3. DUTIES OF THE CUSTODIAN. The Custodian shall segregate on its books
and hold pursuant to the terms of this Agreement a Liquidating Account to
facilitate the liquidation of Portfolio Securities.
(A) Except as specifically set forth in this Agreement, the Custodian shall
perform its duties as custodian under the terms set forth in the
Custodian Agreement governing custody of the Fund ("Custodian
Agreement").
(B) Notwithstanding Section 3(A) the Liquidating Account shall not be a
part of the Fund, but shall be held for benefit of the shareholders
that have elected to demand the repurchase of their shares in the Fund.
(C) In the performance of its duties with respect to the Liquidating
Account, the Custodian shall be entitled to rely on the Instructions of
the Liquidating Agent.
The Custodian shall be entitled to compensation for its services in accordance
with the fee schedule established under the Custodian Agreement.
4. LIMITATION ON LIABILITY
Neither the Custodian nor the Liquidating Agent shall be liable in the
absence of gross negligence or intentional misconduct in the performance of
their duties under this Agreement.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
SCUDDER INVESTOR SERVICES, INC.
By: _______________________________
Name:
Title:
BROWN BROTHERS HARRIMAN & CO.
By: _______________________________
Name:
Title:
