<PAGE>
--------------------------------
The Portugal Fund, Inc.
..............................
ANNUAL REPORT
DECEMBER 31, 1999
--------------------------------
[PHOTO]
<PAGE>
CONTENTS
Letter to Shareholders .....................................................1
Portfolio Summary ..........................................................5
Schedule of Investments ....................................................6
Statement of Assets and Liabilities ........................................8
Statement of Operations ....................................................9
Statement of Changes in Net Assets ........................................10
Financial Highlights ......................................................11
Notes to Financial Statements .............................................12
Report of Independent Accountants .........................................16
Results of Annual Meeting of Shareholders .................................17
Tax Information ...........................................................19
Description of InvestLink-SM- Program .....................................20
Recent Developments .......................................................22
PICTURED ON THE COVER IS A SCENIC VIEW OF LISBON, PORTUGAL FROM THE MAR DE
PALHA.
- --------------------------------------------------------------------------------
<PAGE>
LETTER TO SHAREHOLDERS
January 31, 2000
DEAR SHAREHOLDER:
I am writing to report on the activities of The Portugal Fund, Inc. (the "Fund")
for the year ended December 31, 1999.
At December 31, 1999, the Fund's net assets were $78.6 million. Net asset value
("NAV") per share was $15.46, as compared to $18.31 at December 31, 1998.
PERFORMANCE: HELPED BY BEVERAGES/TOBACCO, INSURANCE AND UTILITIES
For the year ended December 31, 1999, the Fund's total return, based on NAV and
assuming reinvestment of dividends and distributions, was -0.9%, versus -8.5%
for the Morgan Stanley Capital International Portugal Index (the "Index")*.
From the commencement of investment operations on November 9, 1989 through
December 31, 1999, the Fund's annualized total return, based on NAV and assuming
reinvestment of dividends and distributions, was 8.7%. The Index's annualized
return was 7.2% during this same period.
I attribute the Fund's outperformance of its benchmark Index during 1999
primarily to my approach in three industry sectors:
BEVERAGES AND TOBACCO. The portfolio's holdings in beverages and tobacco
emphasized smaller companies that especially benefited from speculation
regarding possible corporate activity in the year's second half.
INSURANCE. Stock selection in the insurance sector was particularly effective.
This was mainly due to my longstanding position in the giant bank and insurer,
Seguros Mundial Confianca, S.A., the Fund's sixth-largest holding at December
31, whose share price gained on news of the acquisition of its corporate parent,
Portugal's Champalimaud Group conglomerate.
UTILITIES. I chose to underweight Electricidade de Portugal, S.A. ("EDP"),
Portugal's national electricity provider and the Fund's second-largest holding
at December 31, compared to the Index. I did so based on my concerns both about
EDP's Brazilian businesses and its tougher operating conditions at home in
Portugal. EDP shares significantly underperformed the Portuguese market as a
whole.
Results in two other sectors were most detrimental to relative performance.
These were banking, in which I did not own shares of the smaller banks that
rallied in response to talk of industry consolidation; and merchandising, which
was tarred with the brush of bad news by a prominent retailer in the fourth
quarter.
THE MARKET: MINUSES AND PLUSES
Many of the afflictions that beset Portugal for much of 1999 persisted into the
fourth quarter, notably a major shift by investors away from Portuguese stocks
and into those of their larger and more liquid European counterparts. The
weighting of international equities in Portuguese equity mutual funds, for
example, exceeded that of domestic equities in October 1999 for the first time.
- --------------------------------------------------------------------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
Other challenges during the year also worked to depress much of Portugal's stock
market. These included Brazil's devaluation of its currency in mid-January,
which hurt the stocks of Portuguese companies with Brazilian operations; and
Portugal's upgrade in many equity indices to developed-nation status from
emerging market status. As a consequence of the latter, previously enthusiastic
emerging markets fund managers looked elsewhere to invest, depriving Portuguese
equities of an important source of capital.
I note here that Portugal's attainment of developed-nation status has thus far
brought it disappointingly little. Contrary to expectations, investors both in
and out of Europe overwhelmingly ignored Portugal's comparatively small
companies in favor of their better-capitalized and more visible European
competitors.
Other aspects of the environment, though, were much more favorable. Consumer
consumption, the main driver of the Portuguese economy, remained very high; the
rate of inflation continued to drop and was expected to end the year at around
2.0%; mortgage and construction loans continued to soar; and unemployment fell,
once again, to a projected annualized rate of 4.5%.
In all, it was much like the rest of the world was saying "no," while the
Portuguese people were saying "yes." I would not be surprised to see the rest of
the world change in 2000.
PORTFOLIO STRUCTURE AND STRATEGY: POSITIONING FOR GAINS IN 2000
TOP 10 HOLDINGS, BY ISSUER*
<TABLE>
<CAPTION>
% OF
HOLDING SECTOR NET ASSETS
------- ------ ----------
<S> <C> <C>
1. Portugal Telecom Telecom. 21.4
2. EDP Electricity 18.9
3. Jeronimo Martins Food/Bev./Tobacco 7.3
4. Sonae Cnsmr. Pdcts. 5.8
5. Sumolis Food/Bev./Tobacco 5.5
6. Mundial Confianca Insurance 5.3
7. BCP Banking 5.0
8. BPI Banking 4.1
9. Cimpor Construction 4.0
10. Barbosa & Almeida Transportation 3.4
---
Total 80.7
----
----
</TABLE>
- --------------
* Company names and sectors are abbreviations of those found in the chart on
page 5.
SECTOR BREAKDOWN
(% of net assets)
<TABLE>
<S> <C>
Banking 11.66
Construction 7.17
Consumer Products 5.85
Electricity 18.91
Food/Bev./Tobacco 13.74
Insurance 7.12
Telecom. 21.38
Transportation 4.72
Other* 9.45
</TABLE>
- -----------------
* Other includes chemicals, crystal & giftware, forest products & paper,
non-metallic mineral products, retail trade, satellite telecommunications,
steel, wholesale and liabilities in excess of cash and other assets.
- --------------------------------------------------------------------------------
2
<PAGE>
LETTER TO SHAREHOLDERS
The following are the highlights of my current approach to managing the Fund:
- - I am widening exposure to the telecommunications sector by investing not only
in direct telecom plays, but also in other companies that have telecom
interests among their operations. My analysis suggests that the managements
of such companies may choose to realize the value of their telecom businesses
by publicly listing them in 2000, and I intend to position the Fund
accordingly ahead of time.
- - I am raising the Fund's allocation to the retail sector, which was badly hit
in the fourth quarter. I view the present as an opportune time to rebuild
retail exposure.
- - I am maintaining holdings in the shares of selected smaller-capitalization
companies in which the Fund invested in mid-1999. These stocks have done very
well, more so than even I had anticipated, principally due to corporate
activity. My sense is that this pattern should continue.
- - Based on the simple observation that Portugal is a small market in the
broader European context, I also continue to invest a healthy portion of the
portfolio in more liquid, large-capitalization stocks (E.G., utilities and
telecoms) that have a greater chance of being noticed on the European playing
field.
More generally, I expect industry consolidation to become more widespread in
Portugal during 2000. For some reason, the corporate sector sees substantial
value in Portuguese companies and is bidding up their share prices accordingly,
while stock market investors, on the other hand, have not yet caught on. My
sense is that this discrepancy could meaningfully decline.
I especially anticipate a boost from consolidation activity in the retail,
cement and electric utility sectors, and perhaps a major play in
telecommunications. The portfolio is well-positioned in these and other
industries that likely will consolidate further, and my hope is that the coming
year will see additional value created within them to the benefit of the Fund's
shareholders.
OUTLOOK: THE INVESTMENT ENVIRONMENT LOOKS GOOD
As I see it, the new year looks to be a time in which Portugal's recent economic
and market woes will likely recede for several reasons:
EUROPE. Current projections call for a significant improvement in pan-European
economic growth in 2000, with GDP growth in Euroland projected by some to reach
3.3%, a big advance over the 2.2% gain expected in 1999. Given that some 80% of
Portugal's exports go to the rest of Europe, Portugal should inevitably benefit
as Europe advances.
BRAZIL. Conditions in Brazil, a country in which companies representing nearly
half of Portugal's market capitalization have heavy investments, appear to be
getting better. Since many such companies were penalized when Brazil wobbled in
early 1999, a Brazilian recovery should provide a major boost to a number of
prominent Portuguese equities.
THE DOMESTIC ECONOMY. Portugal's own macroeconomic environment is improving. For
example: private consumption continues to grow; loan growth is expected to
remain strong; and infrastructure spending (both domestic and throughout Europe)
should grow appreciably in 2000.
- --------------------------------------------------------------------------------
3
<PAGE>
LETTER TO SHAREHOLDERS
VALUATION. As a consequence of Portugal's significant underperformance of other
European markets in 1999, Portuguese equity valuations (both on an absolute and
relative basis) are historically attractive.
Respectfully,
/s/Richard W. Watt
Richard W. Watt**
President and Chief Investment Officer
FROM CREDIT SUISSE ASSET MANAGEMENT, LLC:
I. Effective January 12, 1999, the Fund's investment adviser, BEA Associates,
changed its name to Credit Suisse Asset Management, LLC ("CSAM"). In making
the announcement, the firm said that it expected the new name to enhance
its recognition as a global asset manager. CSAM is the investment division
of Credit Suisse Group, one of the world's largest financial organizations,
with $600 billion in assets under management.
II. All business units of Credit Suisse Group have successfully completed their
year-end processing and reported ready for business without incident. In
addition, our systems have been incident-free with no material Y2K issues.
III. We wish to remind shareholders whose shares are registered in their own
name that they automatically participate in the Fund's dividend
reinvestment program which is known as the Investlink Program-SM- (the
"Program"). The Program can be of value to shareholders in maintaining
their proportional ownership interest in the Fund in an easy and convenient
way. A shareholder whose shares are held in the name of a broker/dealer or
nominee should contact the Fund's Transfer Agent for details about
participating in the Program. The Program also provides for additional
share repurchases. The Program is described in pages 20 through 22 of this
report.
- --------------------------------------------------------------------------------
* The Morgan Stanley Capital International Portugal Index is an unmanaged index
(with no defined investment objective) of Portuguese equities that includes
reinvestment of dividends, and is the exclusive property of Morgan Stanley
Capital International Inc.
** Richard W. Watt, who is a Managing Director of Credit Suisse Asset
Management, LLC ("CSAM"), is primarily responsible for management of the Fund's
assets. He joined CSAM on August 2, 1995. Mr. Watt formerly was associated with
Gartmore Investment Limited in London, where he was head of emerging markets
investments and research. Before joining Gartmore Investment Limited in 1992,
Mr. Watt was a Director of Kleinwort Benson International Investments in London,
where he was responsible for research, analysis and trading of equities in Latin
America and other regions. Mr. Watt is President and Chief Investment Officer of
the Fund. He is also President, Chief Investment Officer and a Director of The
Chile Fund, Inc., The Emerging Markets Infrastructure Fund, Inc., The Emerging
Markets Telecommunications Fund, Inc. and The First Israel Fund, Inc. He is
President and a Director of The Brazilian Equity Fund, Inc., The Latin America
Equity Fund, Inc. and The Latin America Investment Fund, Inc.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
THE PORTUGAL FUND, INC.
PORTFOLIO SUMMARY - AS OF DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
AS A PERCENT OF NET ASSETS
<TABLE>
<CAPTION>
December 31,1999 December 31, 1998
<S> <C> <C>
Banking 11.66 16.50
Construction & Public Works 7.17 7.82
Consumer Products 5.85 3.54
Electric-Integrated 18.91 15.07
Foodstuffs, Beverages & Tobacco 13.74 14.17
Forest Products & Paper 3.81 2.70
Insurance 7.12 12.07
Telecommunications 21.38 20.45
Transportation & Warehousing 4.72 6.48
Other 5.64 1.20
100.00 100.00
</TABLE>
TOP 10 HOLDINGS, BY ISSUER
<TABLE>
<CAPTION>
Percent of
Holding Sector Net Assets
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Portugal Telecom, S.A. Telecommunications 21.4
- -----------------------------------------------------------------------------------------------------------
2. Electricidade de Portugal, S.A. Electric-Integrated 18.9
- -----------------------------------------------------------------------------------------------------------
3. Jeronimo Martins S.G.P.S., S.A. Foodstuffs, Beverages & Tobacco 7.3
- -----------------------------------------------------------------------------------------------------------
4. Sonae, S.G.P.S., S.A. Consumer Products 5.8
- -----------------------------------------------------------------------------------------------------------
5. Sumolis-Companhia Industrial Foodstuffs, Beverages & Tobacco 5.5
de Frutas e Bebidas, S.A.
- -----------------------------------------------------------------------------------------------------------
6. Seguros Mundial Confianca, S.A. Insurance 5.3
- -----------------------------------------------------------------------------------------------------------
7. Banco Comercial Portugues, S.A. Banking 5.0
- -----------------------------------------------------------------------------------------------------------
8. BPI-S.G.P.S., S.A. Banking 4.1
- -----------------------------------------------------------------------------------------------------------
9. Cimpor-Cimentos de Portugal, S.G.P.S., S.A. Construction & Public Works 4.0
- -----------------------------------------------------------------------------------------------------------
10. Fabrica de Vidros Barbosa & Almeida, S.A. Transportation & Warehousing 3.4
- -----------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
THE PORTUGAL FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-100.40%
<S> <C> <C>
BANKING-11.66%
Banco Comercial Portugues, S.A.,
(Registered) ................................ 158,500 $ 878,881
Banco Comercial Portugues, S.A.,
Series A .................................... 29,000 3,016,000
Banco Espirito Santo, S.A.,
(Registered) ................................ 72,635 2,039,385
BPI-S.G.P.S., S.A., (Registered) .............. 759,090 3,231,340
-----------
9,165,606
-----------
CHEMICALS & PETROLEUM PRODUCTS-0.89%
Corporacao Industrial do Norte, S.A.,
(Bearer) .................................... 28,471 697,958
-----------
CONSTRUCTION & PUBLIC WORKS-7.17%
Cimpor-Cimentos de Portugal,
S.G.P.S., S.A. .............................. 188,548 3,130,797
Semapa-Sociedade de Investimento
e Gestao S.G.P.S., S.A. ..................... 144,900 2,503,731
-----------
5,634,528
-----------
CONSUMER PRODUCTS-5.85%
Sonae, S.G.P.S., S.A. ......................... 87,200 4,598,295
-----------
CRYSTAL & GIFTWARE-1.11%
Atlantis-Cristais de Alcobaca, S.A. ........... 99,751 873,344
-----------
ELECTRIC-INTEGRATED-18.91%
Electricidade de Portugal, S.A. ............. 852,450 14,866,767
-----------
FOODSTUFFS, BEVERAGES & TOBACCO-13.74%
Jeronimo Martins S.G.P.S., S.A. ............... 225,409 5,761,745
Sumolis-Companhia Industrial
de Frutas e Bebidas, S.A. ................... 321,346 4,313,977
Unicer-Uniao Cervejeira, S.A.,
(Registered) ................................ 36,500 $ 722,881
-----------
10,798,603
-----------
FOREST PRODUCTS & PAPER-3.81%
Corticeira Amorim S.G.P.S. S.A. ............... 171,312 1,682,622
Portucel Industrial-Empresa
Produtora de Celulose, S.A. ................. 191,400 1,315,563
-----------
2,998,185
-----------
INSURANCE-7.12%
Companhia de Seguros
Tranquilidade ............................... 46,594 1,425,452
Seguros Mundial Confianca, S.A.+ .............. 80,200 4,170,248
-----------
5,595,700
-----------
NON-METALLIC MINERAL PRODUCTS-0.81%
Fabrica de Porcelana da
Vista Alegre, S.A. .......................... 55,226 637,465
-----------
RETAIL TRADE-0.72%
Ibersol S.G.P.S., S.A. ........................ 10,300 563,774
-----------
SATELLITE TELECOMMUNICATIONS-0.85%
PT Multimedia- Servicos
de Telecomunicacoes e
Multimedia, S.G.P.S.+ ....................... 11,800 670,577
-----------
STEEL-0.62%
F. Ramada Acos e Industrias, S.A. ............. 38,247 486,897
-----------
TELECOMMUNICATIONS-21.38%
Portugal Telecom, S.A. ADR .................... 795,305 8,648,942
Portugal Telecom, S.A. (Registered) ........... 744,555 8,159,691
-----------
16,808,633
-----------
- --------------------------------------------------------------------------------
6 See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
THE PORTUGAL FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1999 (CONTINUED)
- --------------------------------------------------------------------------------
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION & WAREHOUSING-4.72%
Colep Portugal-Embalagens,
Produtos, Enchimentos e
Equipamentos+ ............................... 132,158 $1,067,968
Fabrica de Vidros
Barbosa & Almeida, S.A.+ .................... 162,900 2,639,344
-----------
3,707,312
-----------
WHOLESALE-1.04%
SIVA-S.G.P.S., S.A. ........................... 58,475 $ 821,495
-----------
TOTAL INVESTMENTS-100.40%
(Cost $71,279,006) (Notes A,D) ........................ 78,925,139
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS-(0.40)% .................................. (315,558)
-----------
NET ASSETS-100.00% ...................................... $78,609,581
-----------
-----------
- ---------------------------------------------------------------------------
</TABLE>
+ Security is non-income producing.
ADR American Depositary Receipts.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements. 7
<PAGE>
- --------------------------------------------------------------------------------
THE PORTUGAL FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost $71,279,006) (Note A) .................................. $78,925,139
Cash (Note A) ...................................................................... 56,445
Prepaid expenses ................................................................... 5,090
-----------
Total Assets ....................................................................... 78,986,674
-----------
LIABILITIES
Payables:
Investment advisory fees (Note B) ................................................ 196,250
Administration fees (Note B) ..................................................... 6,286
Other accrued expenses ........................................................... 174,557
-----------
Total Liabilities .................................................................. 377,093
-----------
NET ASSETS (applicable to 5,084,216 shares of common stock outstanding) (Note C) ... $78,609,581
-----------
-----------
NET ASSET VALUE PER SHARE ($78,609,581 DIVIDED BY 5,084,216) ....................... $15.46
-----------
-----------
NET ASSETS CONSIST OF
Capital stock, $0.001 par value; 5,084,216 shares issued and outstanding
(100,000,000 shares authorized) .................................................. $ 5,084
Paid-in capital .................................................................... 70,512,513
Undistributed net investment income ................................................ 3,315
Accumulated net realized gain on investments and foreign currency
related transactions ............................................................. 442,487
Net unrealized appreciation in value of investments and translation
of other assets and liabilities denominated in foreign currency .................. 7,646,182
-----------
Net assets applicable to shares outstanding ........................................ $78,609,581
-----------
-----------
</TABLE>
- --------------------------------------------------------------------------------
8 See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
THE PORTUGAL FUND, INC.
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends ........................................................................ $ 2,434,616
Interest ......................................................................... 165,939
Less: Foreign taxes withheld ..................................................... (310,795)
------------
Total Investment Income .......................................................... 2,289,760
------------
Expenses:
Investment advisory fees (Note B) ................................................ 996,351
Audit and legal fees ............................................................. 350,920
Printing ......................................................................... 168,288
Custodian fees ................................................................... 147,595
Administration fees (Note B) ..................................................... 89,303
Accounting fees .................................................................. 60,147
Directors' fees .................................................................. 42,920
Transfer agent fees .............................................................. 33,262
NYSE listing fees ................................................................ 16,136
Insurance ........................................................................ 9,856
Other ............................................................................ 26,305
------------
Total Expenses ................................................................... 1,941,083
Less: Fee waivers (Note B) ....................................................... (152,056)
------------
Net Expenses ................................................................... 1,789,027
------------
Net Investment Income ............................................................ 500,733
------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments ....................................................................... 6,443,960
Foreign currency related transactions ............................................. (199,960)
Net change in unrealized appreciation in value of investments and translation
of other assets and liabilities denominated in foreign currency ................... (11,560,816)
------------
Net realized and unrealized loss on investments and foreign
currency related transactions ..................................................... (5,316,816)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ $ (4,816,083)
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements. 9
<PAGE>
- --------------------------------------------------------------------------------
THE PORTUGAL FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1999 1998
--------------------------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations:
Net investment income ................................................... $ 500,733 $ 658,477
Net realized gain on investments and foreign currency related
transactions ........................................................... 6,244,000 30,502,891
Net change in unrealized appreciation in value of investments and
translation of other assets and liabilities denominated in
foreign currency ....................................................... (11,560,816) (6,670,819)
------------ ------------
Net increase/(decrease) in net assets resulting from operations ...... (4,816,083) 24,490,549
------------ ------------
Dividends and distributions to shareholders (Note A):
Net investment income ................................................... (423,895) (394,077)
Net realized gain on investments ........................................ (10,785,025) (30,071,072)
------------ ------------
Total dividends and distributions to shareholders .................... (11,208,920) (30,465,149)
------------ ------------
Capital share transactions (Note C):
Proceeds from 36,140 shares issued in reinvestment of
dividends and distributions ........................................... -- 614,394
Cost of 271,200 shares repurchased (Note F) ............................ (3,448,980) --
------------ ------------
Net increase/(decrease) in net assets resulting from capital
share transactions .................................................. (3,448,980) 614,394
------------ ------------
Total decrease in net assets ......................................... (19,473,983) (5,360,206)
------------ ------------
NET ASSETS
Beginning of year ......................................................... 98,083,564 103,443,770
------------ ------------
End of year (including undistributed net investment income of
$3,315 and $126,437, respectively) ....................................... $ 78,609,581 $ 98,083,564
------------ ------------
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
10 See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
THE PORTUGAL FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
OPERATING
PERFORMANCE
Net asset value, beginning
of year ....................... $18.31 $19.45 $17.43 $13.29 $14.33 $12.52 $8.90 $10.77 $10.96 $13.79
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income .......... 0.09# 0.12 0.05 0.11 0.17 0.06 0.07 0.11 0.13 0.16
Net realized and unrealized
gain/(loss) on investments
and foreign currency
related transactions .......... (0.90) 4.43+ 6.11+ 4.11 (1.03) 1.81 3.55 (1.92) (0.21) (2.87)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase/(decrease) in
net assets resulting from
operations .................... (0.81) 4.55 6.16 4.22 (0.86) 1.87 3.62 (1.81) (0.08) (2.71)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Dividends and distributions
to shareholders:
Net investment income ........ (0.08) (0.07) (0.01) (0.08) (0.15) (0.06) -- (0.06) (0.11) (0.12)
Net realized gain on
investments and foreign
currency related
transactions ................ (2.08) (5.62) (4.13) -- (0.03) -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total dividends and
distributions to
shareholders .................. (2.16) (5.69) (4.14) (0.08) (0.18) (0.06) -- (0.06) (0.11) (0.12)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Anti-dilutive effect due to
capital shares repurchased .... 0.12 -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year ... $15.46 $18.31 $19.45 $17.43 $13.29 $14.33 $12.52 $8.90 $10.77 $10.96
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Market value, end of year ...... $13.063 $15.625 $15.813 $13.750 $11.125 $13.875 $14.125 $8.000 $9.750 $9.250
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total investment return (a) .... (1.84)% 32.56% 43.21% 24.28% (18.65)% (1.35)% 76.56% (17.34)% 6.58% (44.91)%
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
RATIOS/
SUPPLEMENTAL
DATA
Net assets, end of year
(000 omitted) ................. $78,609 $98,084 $103,444 $92,399 $70,431 $75,908 $66,351 $47,134 $57,036 $58,084
Ratio of expenses to
average net assets,
net of fee waivers ............ 2.10% 1.50% 1.56% 1.62% 1.58% 1.41% 1.97% 1.92% 1.96% 2.04%
Ratio of expenses to average
net assets, excluding fee
waivers ....................... 2.28% 1.66% 1.73% 1.81% 1.76% 1.59% 2.00% -- -- --
Ratio of net investment
income to average net assets .. 0.59% 0.51% 0.23% 0.75% 1.18% 0.43% 0.66% 1.07% 1.20% 1.38%
Portfolio turnover rate ........ 39.60% 48.52% 72.25% 35.94% 35.73% 15.47% 24.47% 39.07% 13.31% 10.09%
</TABLE>
- --------------------------------------------------------------------------------
+ Includes $0.02 and $0.01 per share decrease to the Fund's net asset value
resulting from the dilutive impact of shares issued pursuant to the Fund's
Dividend Reinvestment Plan in 1998 and 1997, respectively.
# Based on average shares outstanding.
(a) Total investment return at market value is based on the changes in market
price of a share during the period and assumes reinvestment of dividends
and distributions, if any, at actual prices pursuant to the Fund's dividend
reinvestment program. Total investment return does not reflect brokerage
commissions and has not been annualized.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements. 11
<PAGE>
- --------------------------------------------------------------------------------
THE PORTUGAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A. SIGNIFICANT ACCOUNTING POLICIES
The Portugal Fund, Inc. (the "Fund") was incorporated in Maryland on August 11,
1989 and commenced investment operations on November 9, 1989. The Fund is
registered under the Investment Company Act of 1940, as amended, as a
closed-end, non-diversified management investment company. Significant
accounting policies are as follows:
MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make certain
estimates and assumptions that may affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All securities for which market quotations are readily
available are valued at the closing price quoted for the securities prior to the
time of determination (but if bid and asked quotations are available, at the
mean between the current bid and asked prices). Securities that are traded
over-the-counter are valued at the mean between the last current bid and the
asked prices, if available. All other securities and assets are valued as
determined in good faith by the Board of Directors. Short-term investments
having a maturity of 60 days or less are valued on the basis of amortized cost.
The Board of Directors has established general guidelines for calculating fair
value of non-publicly traded and/or non-readily marketable securities. At
December 31, 1999, the Fund held no securities valued in good faith by the Board
of Directors. The net asset value per share of the Fund is calculated on each
business day with the exception of those days on which the New York Stock
Exchange is closed.
CASH: Deposits held at Brown Brothers Harriman & Co., the Fund's custodian, in a
variable rate account are classified as cash. At December 31, 1999, the interest
rate was 3.50% which resets on a daily basis. Amounts on deposit are generally
available on the same business day.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.
TAXES: No provision is made for U.S. federal income or excise taxes as it is the
Fund's intention to continue to qualify as a regulated investment company and to
make the requisite distributions to its shareholders which will be sufficient to
relieve it from all or substantially all U.S. federal income and excise taxes.
The Fund may be subject to Portuguese corporate income tax at a maximum rate of
17.50% on dividends received from Portuguese corporations. Capital gains
realized by the Fund on the sale of securities are exempt from Portuguese tax.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The Fund does not isolate that portion of gains and losses in investments in
equity securities which is due
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
THE PORTUGAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
to changes in the foreign exchange rates from that which is due to changes in
market prices of equity securities. Accordingly, realized and unrealized foreign
currency gains and losses with respect to such securities are included in the
reported net realized and unrealized gains and losses on investment transactions
balances.
Net currency gains from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation/depreciation in value of investments, and translation of
other assets and liabilities denominated in foreign currency.
Net realized foreign exchange losses represent foreign exchange gains and losses
from transactions in foreign currency and forward foreign currency contracts,
exchange gains or losses realized between the trade date and settlement date on
security transactions, and the difference between the amounts of interest and
dividends recorded on the Fund's books and the U.S. dollar equivalent of the
amounts actually received.
DISTRIBUTIONS OF INCOME AND GAINS: The Fund distributes at least annually to
shareholders, substantially all of its net investment income and net realized
short-term capital gains, if any. The Fund determines annually whether to
distribute any net realized long-term capital gains in excess of net realized
short-term capital losses, including capital loss carryovers, if any. An
additional distribution may be made to the extent necessary to avoid the payment
of a 4% U.S. federal excise tax. Dividends and distributions to shareholders are
recorded by the Fund on the ex-dividend date.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.
At December 31, 1999, the Fund reclassified within the composition of net assets
permanent book/tax differences from accumulated realized loss on investments and
foreign currency related transactions relating to foreign currency losses of
$199,960 to undistributed net investment income.
OTHER: Securities denominated in currencies other than U.S. dollars are subject
to changes in value due to fluctuations in exchange rates.
Repatriation of both investment income and capital from Portugal is controlled
under regulations, including, in some cases, the need for certain advance
government notification or authority. Foreign investment in Portugal by the Fund
may be subject to the prior authorization from the Minister of Finance, from the
Bank of Portugal or the Portuguese Foreign Trade Institute, depending on the
type of investment or subject to the rules concerning public trade offers.
The Portuguese securities markets are substantially smaller, less liquid and
more volatile than the major securities markets in the United States.
Consequently, acquisition and disposition of securities by the Fund may be
inhibited. A high proportion of the shares of some Portuguese listed companies
are held by a limited number of persons, which may limit the number of shares
available for acquisition by the Fund. Restrictions on foreign ownership could
also restrict the Fund's ability to acquire shares in certain companies.
NOTE B. AGREEMENTS
Credit Suisse Asset Management, LLC ("CSAM"), formerly known as BEA Associates,
serves as the Fund's investment adviser with respect to all investments. As
compensation for its advisory services, CSAM receives
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
THE PORTUGAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
from the Fund an annual fee, calculated weekly and paid quarterly, equal to
1.20% of the first $50 million of the Fund's average weekly net assets, 1.15% of
the next $50 million and 1.10% of amounts over $100 million. CSAM has agreed to
waive its portion of the advisory fee previously payable to the Fund's former
sub-adviser. For the year ended December 31, 1999, CSAM earned $996,351 for
advisory services, of which CSAM waived $152,056. CSAM also provides certain
administrative services to the Fund and is reimbursed by the Fund for costs
incurred on behalf of the Fund (up to $20,000 per anum). For the year ended
December 31, 1999, CSAM was reimbursed $12,980 for administrative services
rendered to the Fund.
Bear Stearns Funds Management Inc. ("BSFM") serves as the Fund's administrator.
The Fund pays BSFM a monthly fee that is computed weekly at an annual rate of
0.09% of the Fund's average weekly net assets. For the year ended December 31,
1999, BSFM earned $76,323 for administrative services.
NOTE C. CAPITAL STOCK
The authorized capital stock of the Fund is 100,000,000 shares of common stock,
$0.001, par value. Of the 5,084,216 shares outstanding at December 31, 1999,
CSAM owned 7,206 shares. Two companies affiliated with Ronald G. Olin, a
director of the Fund, reported in a public filing beneficial ownership as of
December 31, 1999 of 33.2% of the outstanding shares of the Fund.
NOTE D. INVESTMENT IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at December
31, 1999 was $71,985,543. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currency) of
$6,939,596 was composed of gross appreciation of $13,136,266 for those
investments having an excess of value over cost and gross depreciation of
$6,196,670 for those investments having an excess of cost over value.
For the year ended December 31, 1999, purchases and sales of securities, other
than short-term investments, were $32,783,761 and $46,782,196, respectively.
NOTE E. CREDIT AGREEMENTS
The Fund, along with 10 other U.S. regulated investment companies for which CSAM
serves as investment adviser, had a credit agreement with BankBoston, N.A. The
agreement provided that each fund was permitted to borrow an amount equal to the
lesser of $25,000,000 or 25% of the net assets of the fund. However, at no time
was the aggregate outstanding principal amount of all loans to any of the 11
funds to exceed $25,000,000. The line of credit bore interest at (i) the greater
of the bank's prime rate or the Federal Funds Effective Rate plus 0.50% or (ii)
the Adjusted Eurodollar Rate plus 1.50%. The above credit agreement was
terminated as of June 30, 1999.
Effective December 15, 1999, the Fund, together with other funds advised by
CSAM, established a $250 million committed, unsecured, line of credit facility
("Credit Facility") with Deutsche Bank AG as administrative agent, State Street
Bank and Trust Company as operations agent, Bank of Nova Scotia as syndication
agent as well as certain other lenders, for temporary or emergency purposes.
Under the terms of the Credit Facility, the funds with access to the Credit
Facility pay an aggregate commitment fee at a rate of 0.075% per annum on the
average daily balance of the Credit Facility that is undisbursed and uncancelled
during the preceding quarter allocated among the participating funds in such
manner as is determined by the governing Boards of the various funds. In
addition, the participating funds will pay interest on borrowing at the Federal
Funds rate plus 0.50%. At December 31, 1999 and during the year ended December
31, 1999, the Fund had no borrowings under the credit agreements.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
THE PORTUGAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE F. SHARE REPURCHASE PROGRAM
On October 21, 1998, the Fund announced that its Board of Directors had
authorized the repurchase of up to 15% of the Fund's outstanding common stock,
for purposes of enhancing shareholder value. The Fund's Board authorized
management of the Fund to repurchase such shares in open market transactions at
prevailing market prices from time to time in a manner consistent with the Fund
continuing to seek to achieve its investment objectives. The Board's actions
were taken in light of the significant discounts at which the Fund's shares were
trading. It is intended both to provide additional liquidity to those
shareholders that elect to sell their shares and to enhance the net asset value
of the shares held by those shareholders that maintain their investment. The
repurchase program is subject to review by the Board of Directors of the Fund.
Effective October 22, 1999, the Fund committed to engage in an enhanced and
aggressive repurchase program of the Fund's shares whenever those shares trade
at more than a nominal discount to net asset value. Shares will be repurchased
in open market transactions at prevailing market prices from time to time in a
manner consistent with the Fund continuing to seek its investment objective.
From October 21, 1998 to December 31, 1998, the Fund did not repurchase any of
its shares. For the year ended December 31, 1999, the Fund repurchased 271,200
of its shares for a total cost of $3,448,980 at a weighted average discount of
16.14% from net asset value. The discount of the individual repurchases ranged
from 10.20% - 20.34%.
- --------------------------------------------------------------------------------
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of The Portugal Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Portugal Fund, Inc. (the
"Fund") at December 31, 1999, the results of its operations for the year then
ended, 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 ten years in the period
then ended, in conformity with accounting principles generally accepted in the
United States. 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 auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 15, 2000
- --------------------------------------------------------------------------------
16
<PAGE>
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On October 15, 1999, the annual meeting of shareholders (the "Meeting") of The
Portugal Fund, Inc. (the "Fund") was held and the following matters were voted
upon:
- - At the Meeting, the votes cast for, against and abstaining from voting with
respect to Proposal 1(a) to convert the Fund from a closed-end investment
company to an open-end investment company, and to amend and restate the
Fund's Articles of Incorporation to provide for such conversion, were as
follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
--------- ----------- --------- -----------
<S> <C> <C> <C>
825,500 1,664,171 637,540 2,201,105
</TABLE>
Proposal 1(a) did not receive the requisite vote for approval and several
related proposals dependent upon the holders of either a majority or
two-thirds of the Fund's shares voting in favor of the open-ending proposal
were not adopted.
- - At the Meeting, the votes cast on Proposal 2(a) to elect two Directors of the
Fund for a three year term in the event that Proposal 1(a) is not approved
were as follows:
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD NON-VOTES
- ------- ----------- ---------- -----------
<S> <C> <C> <C>
James J. Cattano 451,698 45,664 4,830,954
Richard W. Watt 451,876 45,486 4,830,954
Ronald G. Olin 2,616,897 12,848 2,698,571
Ralph W. Bradshaw 2,616,697 13,048 2,698,571
</TABLE>
As Messrs. Olin and Bradshaw received a plurality of the votes cast, they
were elected as directors of the Fund.
- - At the Meeting, the ratification of the selection of PricewaterhouseCoopers
LLP as the Fund's independent public accountants for the fiscal year ending
December 31, 1999 was approved by the following vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
--------- ----------- --------- -----------
<S> <C> <C> <C>
2,925,304 27,077 174,722 2,201,215
</TABLE>
- - Shareholders presented a number of additional proposals for consideration
that had not been included in any proxy statement circulated prior to the
meeting. The proposals, and the votes for, against and abstaining from voting
on such proposals were as follows:
Proposal 5(a)--"Any By-law(s) providing that in order to bring business
before a meeting of Stockholders or to nominate a person for election as a
Director, a shareholder must notify the Secretary of the Fund prior to the
meeting, shall be repealed"
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
--------- ----------- --------- -----------
<S> <C> <C> <C>
48,300 3,078,924 -- 2,201,092
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED) (CONTINUED)
Proposal 5(b)--"Article 2.3 of the By-laws shall be amended by inserting `By any
shareholder who has presented a proposal that was approved at the Company's last
annual meeting of Stockholders,' after the words `may be called' in the first
sentence"
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
--------- ----------- --------- -----------
<S> <C> <C> <C>
48,300 3,078,924 -- 2,201,092
</TABLE>
Proposal 5(c)--"The following By-law shall be adopted: `As soon as possible
after the 1999 annual meeting of Stockholders, the Company shall conduct a
self-tender offer for the maximum number of shares legally permitted at a price
not less that 99% of net asset value per share'"
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
--------- ----------- --------- -----------
<S> <C> <C> <C>
48,300 3,078,924 -- 2,201,092
</TABLE>
None of these proposals, as well as other proposals that were dependent upon
approval of Proposal 5(c), received the requisite vote of shareholders, and thus
were not adopted.
Proposal 6--"Resolved: That (i) the first sentence of Article 3.2 of the By-laws
of the Fund be amended to read in its entirety as follows: `The Board of
Directors shall consist of nine (9) directors, and (ii) that the number of
directors be increased to nine (9)'"
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
--------- ----------- --------- -----------
<S> <C> <C> <C>
2,628,562 451,662 -- 2,248,092
</TABLE>
Proposal 7--"Resolved: That the following persons be nominated to fill the
vacancies created by the increase in the number of Directors for the terms set
forth by their names"
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD TERM NON-VOTES
- ------- --------- ---------- ------ -----------
<S> <C> <C> <C> <C>
William A. Clark ........... 2,628,562 451,662 2000 2,248,092
Gary A. Bentz .............. 2,628,562 451,662 2001 2,248,092
Glenn W. Wilcox, Sr. ....... 2,628,562 451,662 2002 2,248,092
</TABLE>
Proposal 8--"Resolved: That all By-law amendments or restatements since the
original By-laws of the Fund, in the form attached to this ballot, be repealed;
including, without limitation, the Amended and Restated By-laws of the Fund
dated April 21, 1999"
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
--------- ----------- --------- -----------
<S> <C> <C> <C>
2,629,862 450,362 -- 2,048,092
</TABLE>
None of Proposals 6, 7 or 8 received the requisite vote for approval by the
shareholders.
CT Corporation System served as Inspector of Election at the Meeting.
- --------------------------------------------------------------------------------
18
<PAGE>
TAX INFORMATION (UNAUDITED)
The Fund is required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise its shareholders within 60 days of the Fund's year end
(December 31, 1999) as to the U.S. federal tax status of dividends and
distributions received by the Fund's shareholders in respect of such year. Of
the $2.16 per share distribution paid in respect of such year, $0.17 was derived
from ordinary income and $1.99 was derived from net-realized long-term capital
gains. There were no distributions which qualified for the dividend received
deduction available to corporate shareholders.
SOURCES OF DIVIDENDS AND DISTRIBUTIONS
(PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ORDINARY INCOME
-------------------------
NET APPLICABLE TOTAL FOREIGN
DIVIDEND INVESTMENT SHORT-TERM LONG-TERM FOREIGN REPORTABLE SOURCE
DECLARATION DATES INCOME CAPITAL GAINS CAPITAL GAINS TAXES DIVIDEND INCOME
- ----------------- ---------- ------------- ------------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
July 27, 1999 ........... $0.02 $0.09 $0.82 $0.01 $0.94 $0.02
December 8, 1999 ........ 0.06 -- 1.17 0.05 1.28 0.15
----- ----- ----- ----- ----- -----
Totals .................. $0.08 $0.09 $1.99 $0.06 $2.22 $0.17
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
</TABLE>
The Fund has made an election under Section 853 to pass through foreign taxes
paid by the Fund to its shareholders. The total amount of foreign taxes that
were passed through to shareholders for the year ending December 31, 1999 were
$310,795, equal to $0.06 per share. This information is given to meet certain
requirements of the Internal Revenue Code of 1986, as amended. Shareholders
should refer to their Form 1099-DIV to determine the amount includable on their
respective tax returns for 1999.
Notification for calendar year 1999 was mailed in January 2000. The notification
along with Form 1099-DIV reflects the amount to be used by calendar year
taxpayers on their U.S. federal income tax returns.
Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of their distribution. They will generally not be entitled to a foreign
tax credit or deduction for the withholding taxes paid by the Fund.
In general, distributions received by tax-exempt recipients (e.g., IRAs and
Keoghs) need not be reported as taxable income for U.S. federal income tax
purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7)
plans) may need this information for their annual information reporting.
Shareholders are advised to consult their own tax advisers with respect to the
tax consequences of their investments in the Fund.
- --------------------------------------------------------------------------------
19
<PAGE>
DESCRIPTION OF INVESTLINK-SM-* PROGRAM
The InvestLink Program is sponsored and administered by BankBoston, N.A., not by
The Portugal Fund, Inc. (the "Fund"). BankBoston, N.A. will act as program
administrator (the "Program Administrator") of the InvestLink Program (the
"Program"). The purpose of the Program is to provide interested investors with a
simple and convenient way to invest funds and reinvest dividends in shares of
the Fund's common stock ("Shares") at prevailing prices, with reduced brokerage
commissions and fees.
An interested investor may join the Program at any time. Purchases of Shares
with funds from a participant's cash payment or automatic account deduction will
begin on the next day on which funds are invested. If a participant selects the
dividend reinvestment option, automatic investment of dividends generally will
begin with the next dividend payable after the Program Administrator receives
his enrollment form. Once in the Program, a person will remain a participant
until he terminates his participation or sells all Shares held in his Program
account, or his account is terminated by the Program Administrator. A
participant may change his investment options at any time by requesting a new
enrollment form and returning it to the Program Administrator.
A participant will be assessed certain charges in connection with his
participation in the Program. First-time investors will be subject to an initial
service charge which will be deducted from their initial cash deposit. All
optional cash deposit investments will be subject to a service charge. Sales
processed through the Program will have a service fee deducted from the net
proceeds, after brokerage commissions. In addition to the transaction charges
outlined above, participants will be assessed per share processing fees (which
include brokerage commissions). Participants will not be charged any fee for
reinvesting dividends.
The number of Shares to be purchased for a participant depends on the amount of
his dividends, cash payments or bank account or payroll deductions, less
applicable fees and commissions, and the purchase price of the Shares. The
Program Administrator uses dividends and funds of participants to purchase
Shares of the Fund's common stock in the open market. Such purchases will be
made by participating brokers as agent for the participants using normal cash
settlement practices. All Shares purchased through the Program will be allocated
to participants as of the settlement date, which is usually three business days
from the purchase date. In all cases, transaction processing will occur within
30 days of the receipt of funds, except where temporary curtailment or
suspension of purchases is necessary to comply with applicable provisions of the
Federal Securities laws or when unusual market conditions make prudent
investment impracticable. In the event the Program Administrator is unable to
purchase Shares within 30 days of the receipt of funds, such funds will be
returned to the participants.
The average price of all Shares purchased by the Program Administrator with all
funds received during the time period from two business days preceding any
investment date up to the second business day preceding the next investment date
shall be the price per share allocable to a participant in connection with the
Shares purchased for his account with his funds or dividends received by the
Program Administrator during such time period. The average price of all Shares
sold by the Program Administrator pursuant to sell orders received during such
time period shall be the price per share allocable to a participant in
connection with the Shares sold for his account pursuant to his sell orders
received by the Program Administrator during such time period.
BankBoston, N.A., as Program Administrator, administers the Program for
participants, keeps records, sends statements of account to participants and
performs other duties relating to the Program.
- --------------------------------------------------------------------------------
20
<PAGE>
DESCRIPTION OF INVESTLINK-SM-* PROGRAM (CONTINUED)
Each participant in the Program will receive a statement of his account
following each purchase of Shares. The statements will also show the amount of
dividends credited to such participant's account (if applicable), as well as the
fees paid by the participant. In addition, each participant will receive copies
of the Fund's annual and semi-annual reports to shareholders, proxy statements
and, if applicable, dividend income information for tax reporting purposes.
If the Fund is paying dividends on the Shares, a participant will receive
dividends through the Program for all Shares held on the dividend record date on
the basis of full and fractional Shares held in his account, and for all other
Shares of the Fund registered in his name. The Program Administrator will send
checks to the participants for the amounts of their dividends that are not to be
automatically reinvested at no cost to the participants.
Shares of the Fund purchased under the Program will be registered in the name of
the accounts of the respective participants. Unless requested, the Fund will not
issue to participants certificates for Shares of the Fund purchased under the
Program. The Program Administrator will hold the Shares in book-entry form until
a Program participant chooses to withdraw his Shares or terminate his
participation in the Program. The number of Shares purchased for a participant's
account under the Program will be shown on his statement of account. This
feature protects against loss, theft or destruction of stock certificates.
A participant may withdraw all or a portion of the Shares from his Program
account by notifying the Program Administrator. After receipt of a participant's
request, the Program Administrator will issue to such participant certificates
for the whole Shares of the Fund so withdrawn or, if requested by the
participant, sell the Shares for him and send him the proceeds, less applicable
brokerage commissions, fees, and transfer taxes, if any. If a participant
withdraws all full and fractional Shares in his Program account, his
participation in the Program will be terminated by the Program Administrator. In
no case will certificates for fractional Shares be issued. The Program
Administrator will convert any fractional Shares held by a participant at the
time of his withdrawal to cash.
Participation in any rights offering, dividend distribution or stock split will
be based upon both the Shares of the Fund registered in participants' names and
the Shares (including fractional Shares) credited to participants' Program
accounts. Any stock dividend or Shares resulting from stock splits with respect
to Shares of the Fund, both full and fractional, which participants hold in
their Program accounts and with respect to all Shares registered in their names
will be automatically credited to their accounts.
All Shares of the Fund (including any fractional share) credited to his account
under the Program will be voted as the participant directs. The participants
will be sent the proxy materials for the annual meetings of shareholders. When a
participant returns an executed proxy, all of such Shares will be voted as
indicated. A participant may also elect to vote his Shares in person at the
Shareholders' meeting.
A participant will receive tax information annually for his personal records and
to help him prepare his U.S. federal income tax return. The automatic
reinvestment of dividends does not relieve him of any income tax which may be
payable on dividends. For further information as to tax consequences of
participation in the Program, participants should consult with their own tax
advisors.
The Program Administrator in administering the Program will not be liable for
any act done in good faith or for any good faith omission to act. However, the
Program Administrator will be liable for loss or damage due to error caused by
its negligence, bad faith or willful misconduct. Shares held in custody by the
Program
- --------------------------------------------------------------------------------
21
<PAGE>
DESCRIPTION OF INVESTLINK-SM-* PROGRAM (CONTINUED)
Administrator are not subject to protection under the Securities Investors
Protection Act of 1970.
The participant should recognize that neither the Fund nor the Program
Administrator can provide any assurance of a profit or protection against loss
on any Shares purchased under the Program. A participant's investment in Shares
held in his Program account is no different than his investment in directly held
Shares in this regard. The participant bears the risk of loss and the benefits
of gain from market price changes with respect to all of his Shares. Neither the
Fund nor the Program Administrator can guarantee that Shares purchased under the
Program will, at any particular time, be worth more or less than their purchase
price. Each participant must make an independent investment decision based on
his own judgment and research.
While the Program Administrator hopes to continue the Program indefinitely, the
Program Administrator reserves the right to suspend or terminate the Program at
any time. It also reserves the right to make modifications to the Program.
Participants will be notified of any such suspension, termination or
modification in accordance with the terms and conditions of the Program. The
Program Administrator also reserves the right to terminate any participant's
participation in the Program at any time. Any question of interpretation arising
under the Program will be determined in good faith by the Program Administrator
and any such good faith determination will be final.
Any interested investor may participate in the Program. To participate in the
Program, an investor who is not already a registered owner of the Shares must
make an initial investment of at least $250.00. All other cash payments or bank
account deductions must be at least $100.00, up to a maximum of $100,000.00
annually. An interested investor may join the Program by reading the Program
description, completing and signing the enrollment form and returning it to the
Program Administrator. The enrollment form and information relating to the
Program (including the terms and conditions) may be obtained by calling the
Program Administrator at one of the following telephone numbers: First Time
Investors--(800) 337-8571; Current Shareholders--(800) 730-6001. All
correspondence regarding the Program should be directed to:
BankBoston, N.A., InvestLink Program, P.O. Box 8040, Boston, MA 02266-8040.
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* InvestLink is a service mark of Boston EquiServe Limited Partnership.
RECENT DEVELOPMENTS (UNAUDITED)
In April 1999, the By-laws of the Fund were amended and restated to conform to
the substance of the By-laws of the other closed-end equity funds managed by
CSAM. The Fund's By-laws are on file with the SEC and are accessible through the
SEC web site (www.sec.gov) or may be obtained from the Secretary of the Fund
upon request.
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22
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DIRECTORS AND CORPORATE OFFICERS
Dr. Enrique R. Arzac Director
Ralph W. Bradshaw Director
Jonathan W. Lubell Director
Ronald G. Olin Director
Martin M. Torino Director
William W. Priest, Jr. Chairman of the Board of
Directors
Richard W. Watt President and Chief Investment Officer
Hal Liebes Senior Vice President
Michael A. Pignataro Chief Financial Officer and
Secretary
Rocco A. Del Guercio Vice President
Robert M. Rizza Treasurer
INVESTMENT ADVISER
Credit Suisse Asset Management, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022
ADMINISTRATOR
Bear Stearns Funds Management Inc.
575 Lexington Avenue
New York, NY 10022
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
SHAREHOLDER SERVICING AGENT
BankBoston, N.A.
P.O. Box 1865
Mail Stop 45-02-62
Boston, MA 02105
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA 19103
LEGAL COUNSEL
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
This report, including the financial statements herein, is sent
to the shareholders of the Fund for their information. It is not [NYSE LOGO]
a prospectus, circular or representation intended for use in the
purchase or sale of shares of the Fund or of any securities
mentioned in this report.
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3912-AR-99
