The Argentina Fund, Inc.
Semiannual Report
April 30, 1995
A closed-end investment company seeking long-term capital appreciation through
investments in securities, primarily equity securities, of Argentine issuers.
<PAGE>
The Argentina Fund, Inc.
Investment objective and policies
o long-term capital appreciation through investment primarily in equity
securities of Argentine issuers
Investment characteristics
o investments in a broad spectrum of Argentine industries
o closed-end investment company
o a vehicle for international diversification through the participation in the
Argentine economy
General Information
Executive offices
The Argentina Fund, Inc.
345 Park Avenue
New York, NY 10154
Telephone:
For Fund information: 1-800-349-4281
Transfer Agent, Registrar and Dividend Reinvestment Plan Agent
State Street Bank and Trust Company
Telephone: 617-328-5000 ext. 6406
Legal counsel
Willkie Farr & Gallagher
Custodian
Brown Brothers Harriman & Co.
Independent Accountants
Coopers & Lybrand L.L.P.
New York Stock Exchange Symbol--AF
Contents
Letter to Shareholders 3
Investment Summary 6
Portfolio Summary 7
Investment Portfolio 8
Financial Statements 11
Financial Highlights 14
Notes to Financial Statements 15
Report of Independent Accountants 20
Dividend Reinvestment and Cash Purchase Plan 21
Investment Manager 23
Advisory Board Back cover
Directors and Officers Back cover
This report is sent to the shareholders of The Argentina Fund, Inc. for their
information. It is not a prospectus, circular, or representation intended for
use in the purchase or sale of the Fund or of any securities mentioned in the
report.
2
<PAGE>
Letter to Shareholders
Dear Shareholders:
We are pleased to provide you with the semiannual report of The Argentina
Fund, Inc. (the "Fund") for the period ended April 30, 1995. During the
six-month period the Fund's net asset value fell from $14.53 per share on
October 31, 1994 to $10.60 per share on April 30 and produced a total return of
- -22.53% (assuming the reinvestment of income and capital gains). The Fund's
total return was -19.48% for the 12 months ended April 30. The price of the Fund
as quoted on the New York Stock Exchange also fell during the six-month period,
from $14.625 on October 31, 1994 to $11.75 on April 30.
Recent Events and Developments in the Economy
The quarter measured from January 31 to April 30, 1995 was a difficult period
for the Argentine financial markets. Mexico's decision to devalue its currency
in December of 1994 provoked a concerted search for any other Latin American
country that might have economic policies similar to those of Mexico. As such,
Argentina's economic policies came under intense scrutiny in the months that
followed the devaluation. A liquidity squeeze ensued, accelerating downward
pressure on Argentine assets and in turn leading to further distressed sales of
stocks, bonds and non-financial assets. The flight of capital and virtual cutoff
of Argentina from the international capital markets also engendered concerns
regarding the government's debt amortization schedule in 1995.
The situation became increasingly troublesome in late February as Argentine
residents began to respond to the concerns of foreign investors as well as the
troubles in the Argentine banking system. Bank depositors, concerned about a
bank failure resulting from a contraction in liquidity, began to withdraw funds
from the banking system at an unprecedented rate. Statistics released by the
Argentine government indicate that roughly $7 billion left the Argentine
financial system during a six week period that ended in the middle of March.
This placed great strain on the financial system and heightened the fears of
devaluation and a collapse of the banking system.
Those that feared a devaluation during this time period had, however,
underestimated the government's resolve to avoid a devaluation at almost all
costs. The Menem government in its steadfast refusal to devalue was actually
acknowledging a political reality which lies at the core of our long term
optimism about Argentina. The reality is that the new Argentina much prefers
macroeconomic stability, even if it is achieved at some cost to the standard of
living, to the return of inflation. The memory of the hyper-inflationary period
in 1989 was much too fresh in Argentina's collective memory to even consider
devaluation and the resulting inflationary impact as a viable course of action.
Under Argentina's fixed exchange rate system known as the Convertibility Law,
the Central Bank does not have the power to act as a lender of last resort since
this might involve printing money that is not backed by international reserves.
The government, therefore, had a limited number of options available to stem the
banking crisis by supporting ailing financial institutions. The real risk to
Argentina, therefore, was not devaluation but a steep recession or even a
depression because of the threat of widespread bank failures in an environment
of rapidly decreasing financial system liquidity.
Fortunately the outflow of deposits eased after March 9, when Finance
Minister, Domingo Cavallo, announced a bold $12 billion package of fiscal cuts,
privatizations, and international and domestic loans. The package is anchored on
an IMF-supported program that requires 1995 primary and overall budget surpluses
of $6.1 billion and $2.0 billion, respectively.
By the end of April, the crisis had largely been contained and financial
markets were beginning to regain lost ground and anticipate a Menem victory in
the May presidential elections. Argentina clearly gained credibility in the
3
<PAGE>
international financial markets during this time period as a result of its
refusal to devalue and the government's prudent responses to various aspects of
the crisis.
The fall of bank deposits and credit so far in 1995 are a forerunner of
weakening domestic demand, exacerbated by the tough fiscal measures taken by the
administration of President Menem. There are two factors offsetting these
negative effects on output. First, net exports are turning positive in real
terms. Exports were up an average of 42% in the first quarter of 1995 over year
ago figures, while imports rose barely 1.5%. Exports, moreover, are being
boosted by a bumper crop and high grain prices. Exports to Brazil and Chile
continue to do well.
A second factor which helps offset the weak domestic demand is the return of
capital to Argentina after the decisive measures to defend the currency. This
has been accompanied, following the measures to guarantee deposits and replenish
bank capitalization, by a gradual build-up of deposits.
Industrial production was up 2.7% in the first three months of 1995 compared
with 3.8% in the period from October 1994 to December 1994. Inflation rose only
a subdued 1.3% in the first four months of 1995, reflecting lackluster demand as
well as gains in company productivity.
Slack economic activity and the on-going restructuring in the corporate and
banking sectors will imply continuing pressures on employment. The rate of
unemployment is now 12.2% and was an important campaign issue in the
presidential elections of May 14, 1995. Easing this problem means that labor
reform will become an important challenge for the next administration.
Portfolio Developments
During the period, we pursued two strategies designed to take advantage of
the steep decline in the price of equity securities while protecting part of the
portfolio against the risks of a collapse in the financial system. Critical to
our strategy was the belief that Argentina would not devalue its currency.
Viewed in this context, the sharp sell-off in the Argentine equity market
represented a unique opportunity to increase the Fund's exposure to Argentine
equities at prices unavailable, in some cases, since the summer of 1991. As of
April 30, the portfolio had 93.3% of its net assets invested in equity
securities, the highest level of investment in equity securities since the
Fund's launch. Two of the Fund's largest weightings remain in the
telecommunications and oil sectors, which are less vulnerable to an economic
slowdown.
We were concerned during the period about the rapid withdrawal of bank
deposits from the Argentine financial system and the risk of a severe recession.
As such, we hedged 10% of the portfolio against a further decline in prices
through the use of put and call options. The hedge expired on May 1, and was not
renewed as we believe that the worst of the financial crisis is over.
The Argentine stock market is still an immature market. Since the launch of
the Fund it has seldom reflected the true state of affairs among the
corporations that make up the market, the improvement in political stability,
and the growth achieved in the Argentine economy. This is best exemplified by
the fact that the Argentine stock market, as measured by the unmanaged IFC Index
in U.S. dollars, is trading at levels not seen since late 1992 and levels below
those present when the Fund was launched in 1991. The stock market is
essentially signalling that four years of strong economic growth, equally strong
growth in corporate profitability, low inflation, and political stability are
not worth much. We do not accept this premise, and view times like these as
unique buying opportunities.
We believe market volatility should be reduced over time as more domestic
institutional players from the nascent Argentine pension industry enter the
market. Security prices should then become less subject to the vagaries of
4
<PAGE>
foreign capital flows and should become more reflective of the long run
prospects of individual businesses. In the meantime, however, the Fund will
continue to utilize a strategy that is often contrary to market sentiment. We
will buy during periods of excess pessimism and sell during periods of excess
optimism.
A Team Approach to Investing
The Argentina Fund, Inc. is managed by a team of Scudder investment
professionals who each play an important role in the portfolio's management
process. Team members work together to develop investment strategies and select
securities for the portfolio. They are supported by Scudder's large staff of
economists, research analysts, traders, and other investment specialists who
work in Scudder offices across the United States and abroad. We believe our team
approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
William F. Truscott, Lead Portfolio Manager, sets Fund investment strategy
and oversees its daily operation. Mr. Truscott joined Scudder in 1992 and has 11
years of experience in the financial industry, including seven years
specifically focused on Latin American investments. Luis R. Luis, Portfolio
Manager, has been involved in foreign finance and investing for over 20 years,
and contributes special expertise in Latin American capital markets. Nicholas
Bratt, Portfolio Manager, has been a member of the portfolio team since 1991 and
helps set the Fund's general investment strategies. Mr. Bratt has over 20 years
of experience in worldwide investing and has been at Scudder since 1976.
Dividend Reinvestment and Cash Purchase Plan
The Fund invests with a long-term view. Capital gains distributions will vary
from year to year, depending on investment conditions and portfolio
considerations. Capital gains distributions become part of your capital and
amount to a withdrawal of capital if they are not reinvested.
The Fund's Dividend Reinvestment and Cash Purchase Plan offers you a
convenient way to have your dividends and capital gains distributions reinvested
in shares of the Fund. Your participation is automatic unless you or the bank,
broker, or other nominee holding shares beneficially owned by you specifies
otherwise. We believe this Plan is attractive for shareholders. Its features are
more fully described on page 21 of this report. Of particular interest is the
ability of Plan participants to reinvest their dividends and capital gains
distributions at up to a 5 percent discount to the Fund's share price on the New
York Stock Exchange (but not less than the net asset value) when the Fund's
shares are selling at a premium to net asset value.
Other Information
The Fund's NAV is published every Monday in The Wall Street Journal under the
heading "Closed End Funds." The Fund's NAV is also published in The New York
Times and Barron's.
As a service to overseas shareholders, the Fund's NAV is listed daily in The
Financial Times ("FT"). For your information the NAV of the Fund and other
Scudder managed closed-end funds can be found in the "FT Managed Funds Service"
section under the heading "Other Offshore Funds" below the Scudder, Stevens &
Clark, Inc. banner.
We are pleased that you are an investor in The Argentina Fund, Inc. We would
be happy to receive any questions or comments. You can reach us at
1-800-349-4281.
Respectfully,
/s/Nicholas Bratt /s/Edmond D. Villani
Nicholas Bratt Edmond D. Villani
President Chairman of the Board
5
<PAGE>
The Argentina Fund, Inc.
Investment Summary as of April 30, 1995
- --------------------------------------------------------------------------------
Historical
Information
Life of Fund
Total Return (%)
---------------------------------------------------------------
Market Value Net Asset Value(a) Index(b)
------------------- ------------------- -------------------
Average Average Average
Cumulative Annual Cumulative Annual Cumulative Annual
------------------- ------------------- -------------------
Current Quarter -3.09 -- -4.16 -- -9.89 --
Fiscal Year to Date -14.68 -- -22.53 -- -31.77 --
One Year -15.40 -15.40 -19.48 -19.48 -28.18 -28.18
Three Year -14.18 -4.97 -9.25 -3.18 -53.22 -22.41
Life of Fund* 6.85 1.90 5.35 1.49 -47.80 -16.87
- --------------------------------------------------------------------------------
Per Share Information and Returns (a)
Yearly periods ended April 30
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
<TABLE>
<S> <C> <C> <C> <C>
1992* 1993 1994 1995
-------------------------------
Net Asset Value... $12.68 $ 9.64 $13.98 $10.60
Income Dividends.. $ .06 $ .05 $ .14 $ .27
Capital Gains
Distributions $ -- $ .09 $ .02 $ .46
Total Return (%).. 13.81 -23.01 46.38 -19.48
</TABLE>
(a) Total return based on per share net asset value reflects the
effects of changes in net asset value on the performance of the Fund
during each period, and assumes dividends and capital gains distributions,
if any, were reinvested. These percentages are not an indication of the
performance of a shareholder's investment in the Fund based on market
value due to differences between the market price of the stock and the
net asset value of the Fund during each period.
(b) Merval Index
* The Fund commenced operations on October 22, 1991.
Past results are not necessarily indicative of future performance
of the Fund.
6
<PAGE>
The Argentina Fund, Inc.
Portfolio Summary as of April 30, 1995
- -----------------------------------------------------------------------------
Diversification
- -----------------------------------------------------------------------------
Equity Securities 93%
Debt Securities 6%
Cash Equivalents 1%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -----------------------------------------------------------------------------
Sectors
- -----------------------------------------------------------------------------
Sector breakdown of the Fund's equity securities
Energy 28%
Consumer Staples 19%
Communications 17%
Financial 10%
Construction 8%
Utilities 7%
Government 4%
Manufacturing 3%
Durables 3%
Other 1%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Ten Largest Equity Holdings
- --------------------------------------------------------------------------
1. Perez Companc S.A. "B"
2. YPF S.A. "D" (ADR)
3. Quilmes Industrial S.A.
4. Nortel Inversora Preferred (ADR)
5. Loma Negra Cia. S.A.
6. Astra CAPSA
7. Telefonica Prides (ADR)
8. Telefonica de Argentina "B"
9. Banco de Galicia y Beunos Aires "B"
10. Telecom de Argentina "B" (ADR)
7
<PAGE>
[ARGENTINA FUND, INC. LOGO]The Argentina Fund, Inc.
Investment Portfolio as of April 30, 1995
<TABLE>
<CAPTION>
=====================================================================================================================
Principal Market
Industry Amount (c) Value ($)
- ---------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT 1.0%
<S> <C> <C> <C>
964,000 Repurchase Agreement with Salomon Brothers
dated 4/28/95 at 5.92%, to be repurchased
at $964,476 on 5/1/95, collateralized by a
$980,000 U.S. Treasury Note, 3.875%, 10/31/95
(Cost $964,000)................................... 964,000
-------
- ---------------------------------------------------------------------------------------------------------------------
ARGENTINE DEBT SECURITIES 5.7%
835,200 Bonos del Tesoro, Floating Rate Bond, LIBOR,.......
6.188%, 9/1/97 738,836
4,000,000 Republic of Argentina, Par Bond, Series L, Step-Up
Coupon, 5%, 3/31/23.............................. 1,745,000
ARP 1,852,500 Republic of Argentina, Floating Rate Bond, BIC5,
26.775%, 5/1/01.................................. 1,714,257
1,053,880 Suma Huaico S.A. Promissory Note, 5/31/95.......... 1,041,456
500,000 Telefonica de Argentina, 8.375%, 10/1/00........... 410,000
---------
TOTAL ARGENTINE DEBT SECURITIES (Cost $6,676,177).. 5,649,549
---------
- ---------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS 5.1%
Shares
------
COMMUNICATIONS
Telephone/Communications 100,520 Nortel Inversora "A" Preferred (ADR)............... 899,654
254,000 Nortel Inversora "B" Preferred (ADR) (b)........... 4,095,750
---------
TOTAL PREFERRED STOCKS (COST $4,571,582)........... 4,995,404
---------
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 88.2%
CONSUMER DISCRETIONARY 0.3%
Specialty Retail 72,632 Grimoldi "B"....................................... 290,513
---------
CONSUMER STAPLES 18.5%
Alcohol & Tobacco 3.8% 235,014 Massalin Particulares.............................. 2,021,019
511,837 Nobleza Piccardo................................... 1,678,741
---------
3,699,760
---------
Consumer Specialties 0.1% 49,851 Longvie S.A. "B"* (b).............................. 47,356
---------
Food & Beverage 14.6% 941,379 Bagley y Cia Ltd. S.A. "B"......................... 2,117,997
85,900 Buenos Aires Embotelladora S.A. "B" (ADR).......... 2,362,250
273,109 Cinba S.A. (b)..................................... 409,643
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================
Market
Industry Shares Value ($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
225,036 Molinos Rio de la Plata "B"*.................... 1,125,124
436,000 Quilmes Industrial S.A.......................... 8,284,000
----------
14,299,014
----------
COMMUNICATIONS 10.8%
Telephone/Communications 71,616 Telecom de Argentina "B" (ADR).................. 3,133,200
80,000 Telefonica Prides (ADR)......................... 4,020,000
1,488,000 Telefonica de Argentina "B"..................... 3,496,625
----------
10,649,825
----------
FINANCIAL 9.6%
Banks 6.2% 437,310 Banco Frances del Rio de la Plata 2,776,780
769,190 Banco de Galicia y Buenos Aires "B"............. 3,153,521
23,692 Banco del Sud "B"............................... 139,776
----------
6,070,077
----------
Other Financial Companies 1.0% 1,000,000 BI S.A. "A" (b)*................................ 1,000,000
----------
Real Estate 2.4% 66,250 Inversiones y Representaciones S.A. (GDR)....... 1,556,875
35,000 Inversiones y Representaciones S.A. (GDS)*...... 822,500
----------
2,379,375
----------
DURABLES 2.7%
Automobiles 445,867 Compania Interamericana de Automoviles.......... 2,073,178
300,000 Mirgor Sacifia (ADR)............................ 618,750
----------
2,691,928
----------
MANUFACTURING 2.9%
Chemicals 1.3% 729,182 Atanor S.A. "D"................................. 1,290,588
----------
Diversified Manufacturing 1.6% 710,300 Comercial del Plata............................. 1,598,095
----------
ENERGY 27.8%
Oil & Gas Production 11.1% 2,658,705 Perez Companc S.A. "B".......................... 10,846,974
----------
Oil Companies 13.7% 2,647,100 Astra CAPSA..................................... 4,076,330
465,000 YPF S.A. "D" (ADR).............................. 9,416,250
----------
13,492,580
----------
Oil/Gas Transmission 3.0% 1,550,000 Transportadora de Gas del Sur "B"............... 2,975,851
----------
METALS AND MINERALS 1.2%
Steel & Metals 2,017,926 Dalmine Siderca................................. 1,204,642
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
[ARGENTINA FUND, INC. LOGO]The Argentina Fund, Inc.
Investment Portfolio (continued)
<TABLE>
<CAPTION>
=============================================================================================================
Market
Industry Shares Value ($)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSTRUCTION 7.3%
Building Materials 6.9% 232,043 Corporacion Cementera Argentina "B"*.......... 1,148,555
356,167 Juan Minetti y Cia "B"........................ 1,139,677
150,624 Loma Negra Cia. S.A. (b)...................... 4,518,720
----------
6,806,952
----------
Miscellaneous 0.4% 558,068 Colorin S.A. "B".............................. 161,832
262,240 Guillermo Decker S.A. *(b).................... 212,404
----------
374,236
----------
UTILITIES 7.1%
Electric Utilities 4.9% 169,000 Capex S.A. "A"................................ 1,258,987
749,400 Central Costanera "B"......................... 2,173,151
77,143 Electricidad Argentina S.A. "A"*(ADR) (b)..... 1,350,003
----------
4,782,141
----------
Natural Gas Distribution 2.2% 214,000 MetroGas S.A. "B" (ADR)....................... 2,113,250
----------
Total Common Stocks (Cost $97,648,308)........ 86,613,157
----------
- -------------------------------------------------------------------------------------------------------------
PURCHASED OPTIONS 0.0%
Contracts
---------
23,195 Put on Argentine Burcap, strike price
ARP 431.14, expiration date 5/1/95
(Cost $878,956)............................. --
----------
- -------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $110,739,023) (a)..................... 98,222,110
==========
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $110,752,019. At April 30,
1995, net unrealized depreciation for all securities based on tax cost was
$12,529,909. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $6,268,036 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$18,797,945.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors (Note A). The cost of these securities at April 30, 1995
aggregated $12,257,585. These securities have certain restrictions as to
resale.
(c) Principal amount is stated in U.S. dollars unless otherwise specified.
At April 30, 1995 the outstanding written option was as follows (Note A):
<TABLE>
<CAPTION>
Expiration Market
Call Option Contracts Date Strike Price Value ($)
- ----------------------------------- ----------------------------------------------------------
<S> <C> <C> <C> <C>
Argentine Burcap
(Premium received $578,947)....... 23,195 5/1/95 474.25 2,016,109
ARP - Argentine Peso
</TABLE>
See page 7 for sector diversification.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
[ARGENTINA FUND, INC. LOGO]The Argentina Fund, Inc.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
=======================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $110,739,023) (Note A)........................ $ 98,222,110
Cash.................................................................................. 439,783
Receivable on forward foreign currency exchange contracts to sell (Notes A and D)..... 290,484
Other receivables:
Investments sold................................................................... 1,451,493
Dividends and interest............................................................. 384,859
Deferred organization expenses, net of accumulated amortization of $125,736
(Note A)........................................................................... 52,745
Other assets.......................................................................... 27,659
-------------
Total assets.................................................................... 100,869,133
LIABILITIES
Payables:
Investments purchased.............................................................. $ 350,000
Payable for foreign currency exchange contracts to sell, at market
(identified cost $290,484) (Notes A and D)...................................... 290,557
Accrued management fee (Note C).................................................... 103,186
Other accrued expenses (Note C).................................................... 115,165
Written option, at market (premium received $578,947).............................. 2,016,109
-------------
Total liabilities................................................................ 2,875,017
-------------
Net assets, at market value........................................................... $ 97,994,116
=============
NET ASSETS
Net assets consist of:
Undistributed net investment income................................................ $ 979,115
Net unrealized depreciation on:
Investments...................................................................... (12,516,913)
Options.......................................................................... (1,437,162)
Argentine peso related transactions.............................................. (221)
Accumulated net realized loss...................................................... (2,734,044)
Common stock....................................................................... 92,449
Additional paid-in capital......................................................... 113,610,892
-------------
Net assets, at market value........................................................... $ 97,994,116
=============
NET ASSET VALUE per share ($97,994,116 / 9,244,879 shares of common stock
issued and outstanding, $.01 par value, 100,000,000 shares authorized)............. $10.60
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
[ARGENTINA FUND, INC. LOGO]The Argentina Fund, Inc.
FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
========================================================================================================
- --------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends.......................................................... $ 1,739,304
Interest........................................................... 1,157,220
-------------
2,896,524
Expenses:
Management fee (Note C).............................................. $ 681,226
Directors' fees and expenses (Note C)................................ 19,370
Advisory Board fees and expenses (Note C)............................ 18,436
Custodian fees....................................................... 155,504
Reports to shareholders.............................................. 35,250
Auditing............................................................. 34,575
Amortization of organization expenses (Note A)....................... 17,702
Services to shareholders............................................. 24,441
Legal................................................................ 53,263
Other................................................................ 19,699 1,059,466
------------- -------------
Net investment income.................................................. 1,837,058
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized loss from:
Investments........................................................ (2,704,905)
Argentine peso related transactions................................ (13,887) (2,718,792)
-------------
Net unrealized appreciation (depreciation) during the period on:
Investments........................................................ (27,264,360)
Options............................................................ (1,437,162)
Argentine peso related transactions................................ 737 (28,700,785)
------------- -------------
Net loss on investment transactions.................................. (31,419,577)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $ (29,582,519)
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
- -----------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED OCTOBER 31,
INCREASE (DECREASE) IN NET ASSETS APRIL 30, 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income..................................................... $ 1,837,058 $ 1,691,966
Net realized gain (loss) from investment transactions..................... (2,718,792) 4,177,499
Net unrealized appreciation (depreciation) on investment
transactions during the period.......................................... (28,700,785) 5,781,814
------------ -------------
Net increase (decrease) in net assets resulting from operations............. (29,582,519) 11,651,279
------------ -------------
Distributions to shareholders from:
Net investment income ($.27 and $.14 per share, respectively)............. (2,484,734) (787,763)
------------ -------------
Net realized gains from investment transactions
($.46 and $.02 per share, respectively)................................. (4,187,237) (87,529)
------------ -------------
Fund share transactions:
Proceeds of shares issued in connection with the Fund's
second tranche offering, net of underwriting commissions
of $2,635,000 and offering costs of $742,911............................ -- 49,322,089
Reinvestment of distributions............................................. 493,154 118,921
------------ -------------
Net increase in net assets from Fund share transactions..................... 493,154 49,441,010
------------ -------------
INCREASE (DECREASE) IN NET ASSETS (35,761,336) 60,216,997
Net assets at beginning of period........................................... 133,755,452 73,538,455
------------ -------------
NET ASSETS AT END OF PERIOD (including undistributed net investment
income of $979,115 and $1,626,791, respectively).......................... $ 97,994,116 $ 133,755,452
============ =============
OTHER INFORMATION
INCREASE IN FUND SHARES
Shares outstanding at beginning of period................................... 9,202,718 5,795,644
------------ -------------
Shares issued in connection with the Fund's second tranche offering....... -- 3,400,000
Shares issued to shareholders in reinvestment of distributions............ 42,161 7,074
------------ -------------
Net increase in Fund shares................................................. 42,161 3,407,074
------------ -------------
Shares outstanding at end of period......................................... 9,244,879 9,202,718
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
[ARGENTINA FUND, INC. LOGO]The Argentina Fund, Inc.
Financial Highlights
<TABLE>
<CAPTION>
==========================================================================================================
- ----------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS AND MARKET PRICE DATA.
- ----------------------------------------------------------------------------------------------------------
FOR THE PERIOD
SIX MONTHS OCTOBER 22,
ENDED YEARS ENDED OCTOBER 31, 1991(B)
APRIL 30, -------------------------- TO OCTOBER 31,
1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period............ $ 14.53 $ 12.69 $ 9.35 $ 10.99 $ 10.98(c)
------- ------- ------- ------- -------
Income from investment operations:
Net investment income (a)..................... .20 .21 .05 .09 .01
Net realized and unrealized gain (loss) on
investment transactions..................... (3.40) 1.83 3.43 (1.67) --
------- ------- ------- ------- -------
Total from investment operations................ (3.20) 2.04 3.48 (1.58) .01
------- ------- ------- ------- -------
Less distributions from:
Net investment income......................... (.27) (.14) (.05) (.06) --
Net realized gains on investment
transactions................................ (.46) (.02) (.09) -- --
------- ------- ------- ------- -------
Total distributions............................. (.73) (.16) (.14) (.06) --
------- ------- ------- ------- -------
Antidilution resulting from offering of
second tranche................................ -- .04 -- -- --
------- ------- ------- ------- -------
Second tranche offering costs................... -- (.08) -- -- --
------- ------- ------- ------- -------
Net asset value, end of period.................. $ 10.60 $ 14.53 $ 12.69 $ 9.35 $ 10.99
======= ======= ======= ======= =======
Market value, end of period..................... $ 11.75 $ 14.63 $ 14.00 $ 9.63 $ 14.63
======= ======= ======= ======= =======
TOTAL RETURN
Per share market value (%)...................... (14.68)** 5.45 47.41 (33.90) 21.88**
Per share net asset value (%) (d)............... (22.53)** 15.58 37.55 (14.55) .09**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions).......... 98 134 74 54 63
Ratio of operating expenses to average
net assets (%)................................ 2.04* 1.87 2.37 2.24 2.55*
Ratio of net investment income to average
net assets (%)................................ 3.54* 1.48 .48 .81 2.54*
Portfolio turnover rate (%)..................... 39.2* 16.7 32.5 26.5 --
</TABLE>
* Annualized
** Not annualized
(a) Based on monthly average of shares outstanding during the period.
(b) Commencement of operations
(c) Beginning per share amount reflects $12.00 initial public offering price
net of underwriting discount and offering expenses ($1.02 per share).
(d) Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of the Fund during each
period, and assumes dividends and capital gains distributions, if any,
were reinvested. These percentages are not an indication of the
performance of a shareholder's investment in the Fund based on market
value due to differences between the market price of the stock and the net
asset value of the Fund during each period.
14
<PAGE>
[ARGENTINA FUND, INC. LOGO]THE ARGENTINA FUND, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
A. SIGNIFICANT ACCOUNTING POLICIES
The Argentina Fund, Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as amended, as a non-diversified, closed-end management investment
company. The policies described below are followed consistently by the Fund in
the preparation of its financial statements in conformity with generally
accepted accounting principles.
SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. 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 calculated 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. Securities valued in good
faith by the Valuation Committee of the Board of Directors at fair value
amounted to $11,633,876 (11.9% of net assets) and have been noted in the
investment portfolio as of April 30, 1995.
OPTIONS. The Fund may write (sell) exchange- listed and over-the-counter call
options on securities. When the Fund writes a call, it gives the purchaser of
the call option the right to buy the underlying security at the price specified
in the option (the "exercise price") at any time during the option period,
generally ranging up to nine months.
If the option expires unexercised, the Fund will realize income, in the form of
a capital gain, to the extent of the amount received for the option (the
"premium"). If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security to the option holder or
purchase the underlying security from the option holder at the exercise price.
Certain options will require cash settlement by the Fund if the option is
exercised. By writing a call option, the Fund foregoes, in exchange for the
premium less the commission ("net premium"), the opportunity to profit during
the option period from an increase in the market value of the underlying
security above the exercise price.
The liability representing the Fund's obligation under an exchange traded
written call is valued at the last sale price or, in the absence of a sale, the
mean between the closing bid and asked quotations or at the most recent asked
quotation if no bid and asked
15
<PAGE>
[ARGENTINA FUND, INC. LOGO]THE ARGENTINA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
quotations are available. Over the counter written options are valued at the
most recent asked quotation.
In addition, the Fund may purchase, singly and in combination, call and put
options on securities, securities indices, currencies and other financial
instruments. Exchange traded purchased options are valued at the last sales
price or, in the absence of a sale, the mean between the closing bid and asked
quotations or at the most recent bid quotation if no bid and asked quotations
are available. Over-the-counter purchased options are valued at the most recent
bid quotation.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and domestic or foreign broker/dealers whereby the Fund, through
its custodian, receives delivery of the underlying securities, the amount of
which at the time of purchase and each subsequent business day is required to be
maintained at such a level that the market value, depending on the maturity of
the repurchase agreement and the underlying collateral, is equal to at least
100.5% of the resale price.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Argentine peso transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities at
the daily rate of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the daily rate of exchange prevailing on
the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments. Net realized and
unrealized gain (loss) from foreign currency related transactions includes gains
and losses between trade and settlement dates on securities transactions, gains
and losses arising from the sale of Argentine pesos, and gains and losses
between the ex and payment dates on dividends and interest. At April 30, 1995
the exchange rate for the Argentine peso was U.S. $1 to 1.00005 Argentine peso.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. In connection with portfolio
purchases and sales of securities denominated in Argentine pesos, the Fund may
enter into forward foreign currency exchange contracts ("contracts").
Additionally, the Fund may enter into contracts to hedge certain other Argentine
peso denominated assets. Contracts are recorded at market value. Certain risks
may arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts. Realized and unrealized
gains and losses arising from such transactions are included in net realized and
unrealized gain (loss) from Argentine peso related transactions.
TAXATION. The Fund's policy is to comply with the requirements of the Internal
Revenue Code which are applicable to regulated investment companies, and to
distribute substantially all of its investment company taxable income to its
shareholders. Accordingly, the Fund paid no U.S. federal income taxes, and no
federal income tax provision was required. Under Argentine tax laws, the Fund is
not subject to withholding taxes on dividends.
16
<PAGE>
================================================================================
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, which would
be taxable to the Fund if not distributed, 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. These
differences primarily relate to investments in foreign denominated securities
and certain securities sold at a loss. 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.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization have been deferred and are being amortized on a straight-line basis
over a five-year period.
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. All
discounts are accreted for both tax and financial reporting purposes.
B. PURCHASES AND SALES OF SECURITIES
During the six months ended April 30, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $35,264,921 and
$19,630,487, respectively.
During the six months ended April 30, 1995, the Fund wrote 23,195 option
contracts on Argentine Burcap (premium received $578,947).
C. RELATED PARTIES
Under the Fund's Investment Advisory, Management and Administration Agreement
(the "Management Agreement") with Scudder, Stevens & Clark, Inc. (the
"Manager"), the Manager directs the investments of the Fund in accordance with
the Fund's investment objectives, policies, and restrictions and under the
direction and control of the Fund's Board of Directors. In addition to portfolio
management services, the Manager provides certain administrative services in
accordance with the Management Agreement. The Fund pays to the Manager a monthly
fee at an annualized rate of 1.30% of the Fund's average weekly net assets. For
the six months ended April 30, 1995, the fee pursuant to such agreement
aggregated $681,226.
The Manager has entered into a Sub-Advisory Contract (the "Sub-Advisory
Contract") with Sociedad General de Negocios y Valores S.A. (the "Argentine
Adviser") whereby the Argentine Adviser provides such information, investment
recommendations and assistance as the Manager may from time to time reasonably
request. Under the Sub-Advisory Contract, the Manager pays the Argentine Adviser
a monthly fee, equal to an annualized rate of 0.36% of the Fund's average weekly
net assets.
17
<PAGE>
[ARGENTINA FUND, INC. LOGO]THE ARGENTINA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
The Fund pays each Director not affiliated with the Manager or the Argentine
Adviser $6,000 annually, plus specified amounts for attended board and committee
meetings. For the six months ended April 30, 1995, Directors' fees and expenses
aggregated $19,370.
The Fund's Board of Directors has a board of independent advisors ("Advisory
Board"). Each member of the Advisory Board receives from the Fund an annual fee
of $7,000. The Fund also reimburses Advisory Board members for travel and
out-of-pocket expenses incurred in connection with Advisory Board meetings. For
the six months ended April 30, 1995, Advisory Board fees and expenses aggregated
$18,436.
For the six months ended April 30, 1995, brokerage commissions on investment
transactions amounting to $18,864 were paid by the Fund to Banco General de
Negocios, the parent company of the Argentine Adviser.
D. COMMITMENTS
As of April 30, 1995, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized depreciation of $73.
<TABLE>
<CAPTION>
NET UNREALIZED
SETTLEMENT DEPRECIATION
CONTRACTS TO DELIVER IN EXCHANGE FOR DATE (U.S.$)
- ------------------------ --------------------- ---------- --------------
<S> <C> <C> <C>
Argentine Pesos 219,333 U.S. Dollars 219,267 5/3/95 (55)
Argentine Pesos 71,238 U.S. Dollars 71,217 5/3/95 (18)
---
(73)
===
</TABLE>
E. FOREIGN INVESTMENT AND EXCHANGE CONTROLS IN
ARGENTINA
Investing in Argentina may involve considerations not typically associated with
investing in securities issued by U.S. companies such as more volatile prices
and less liquid securities.
Foreign investment in Argentina is regulated by the Foreign Investment Law and
the Economic Emergency Law. In general, there are currently no restrictions on
the movement of funds into and out of Argentina and repatriation of income and
capital gains by the Fund is permitted at any time. Foreign enterprises may
obtain domestic credit with the same rights and under the same conditions as
domestic enterprises. Generally, there are few restrictions on the Fund's
ability, as a foreigner, to invest in Argentine companies. There can be no
guarantee, however, that restrictions would not be imposed in the future if
governmental authorities determine that financial and economic circumstances
justify such restrictions.
18
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================
F. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (000 OMITTED)
NET INCREASE
(DECREASE)
NET GAIN (LOSS) IN NET ASSETS
QUARTER INVESTMENT NET INVESTMENT ON INVESTMENT RESULTING
ENDED INCOME INCOME (LOSS) TRANSACTIONS FROM OPERATIONS
- ------- ---------- -------------- -------------- ---------------
PER PER PER PER
1995 TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
- ---- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31, $ 1,700 $ .18 $ 1,130 $ .12 $ (26,471) $ (2.86) $ (25,341) $ (2.74)
April 30, 1,197 .13 707 .08 (4,949) (.54) (4,242) (.46)
------- ----- ------- ----- --------- ------- --------- -------
Totals $ 2,897 $ .31 $ 1,837 $ .20 $ (31,420) $ (3.40) $ (29,583) $ (3.20)
======= ===== ======= ===== ========= ======= ========= =======
<CAPTION>
PER PER PER PER
1994 TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
- ---- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31, $ 465 $ .08 $ 47 $ .01 $ 20,448 $ 3.53 $ 20,495 $ 3.54
April 30, 533 .07 32 -- (13,956) (2.05) (13,924) (2.05)
July 31, 1,548 .18 930 .12 1,201 (0.45) 2,131 (0.33)
October 31, 1,278 .15 683 .08 2,266 0.80 2,949 0.88
------- ----- ------- ----- --------- ------- --------- -------
Totals $ 3,824 $ .48 $ 1,692 $ .21 $ 9,959 $ 1.83 $ 11,651 $ 2.04
======= ===== ======= ===== ========= ======= ========= =======
</TABLE>
19
<PAGE>
[ARGENTINA FUND, INC. LOGO]THE ARGENTINA FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF THE ARGENTINA FUND, INC.:
We have audited the accompanying statement of assets and liabilities of The
Argentina Fund, Inc. including the investment portfolio, as of April 30, 1995,
and the related statement of operations for the six-month period then ended, the
statements of changes in net assets for the six-month period then ended and for
the year ended October 31, 1994, and the financial highlights for the six-month
period ended April 30, 1995, for each of the three years in the period ended
October 31, 1994 and for the period October 22, 1991 (commencement of
operations) to October 31, 1991. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Argentina Fund, Inc. as of April 30, 1995, the results of its operations for the
six-month period then ended, the changes in its net assets for the six-month
period then ended and for the year ended October 31, 1994, and the financial
highlights for the six-month period ended April 30, 1995, for each of the three
years in the period ended October 31, 1994 and for the period October 22, 1991
(commencement of operations) to October 31, 1991 in conformity with generally
accepted accounting principles.
As explained in Note A, the financial statements include securities valued at
$11,633,876 (11.9% of net assets), whose values have been estimated by the Board
of Directors in the absence of readily ascertainable market values. We have
reviewed the procedures used by the Board of Directors in arriving at their
estimate of value of such securities and have inspected underlying
documentation, and, in the circumstances, we believe the procedures are
reasonable and the documentation appropriate. 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.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
June 19, 1995
20
<PAGE>
Dividend Reinvestment and Cash Purchase Plan
The Plan
The Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers
you an automatic way to reinvest your dividends and capital gains distributions
in shares of the Fund. The Plan also provides for cash investments in Fund
shares of $100 to $3,000 semiannually through State Street Bank and Trust
Company, the Plan Agent.
Automatic Participation
Each shareholder of record is automatically a participant in the Plan unless
the shareholder has instructed the Plan Agent in writing otherwise. Such a
notice must be received by the Plan Agent not less than 10 days prior to the
record date for a dividend or distribution in order to be effective with respect
to that dividend or distribution. A notice which is not received by that time
will be effective only with respect to subsequent dividends and distributions.
Shareholders who do not participate in the Plan will receive all
distributions in cash paid by check in dollars mailed directly to the
shareholder by State Street Bank and Trust Company, as dividend paying agent.
Shares Held by a Nominee
If your shares are held in the name of a brokerage firm, bank, or other
nominee as the shareholder of record, please consult your nominee (or any
successor nominee) to determine whether it is participating in the Plan on your
behalf. Many nominees are generally authorized to receive cash dividends unless
they are specifically instructed by a client to reinvest. If you would like your
nominee to participate in the Plan on your behalf, you should give your nominee
instructions to that effect as soon as possible.
Pricing of Dividends and Distributions
If the market price per share on the payment date for the dividend or
distribution (the "Valuation Date") equals or exceeds net asset value per share
on that date, the Fund will issue new shares to participants at the greater of
the following on the Valuation Date: (a) net asset value, or (b) 95% of the
market price. The Valuation Date will be the dividend or distribution payment
date or, if that date is not a New York Stock Exchange trading date, the next
preceding trading date. If the net asset value exceeds the market price of Fund
shares at such time, participants in the Plan are considered to have elected to
receive shares of stock from the Fund, valued at market price, on the Valuation
Date. In either case, for Federal income tax purposes, the shareholder receives
a distribution equal to the market value on Valuation Date of new shares issued.
State and local taxes may also apply. If the Fund should declare an income
dividend or net capital gains distribution payable only in cash, the Plan Agent
will, as agent for the participants, buy Fund shares in the open market, on the
New York Stock Exchange or elsewhere, for the participants' account on, or
shortly after, the payment date.
Voluntary Cash Purchases
Participants in the Plan have the option of making additional cash payments
to the Plan Agent, semiannually, in any amount from $100 to $3,000, for
investment in the Fund's shares. The Plan Agent will use all such monies
received from participants to purchase Fund shares in the open market on or
about February 15 and August 15. Any voluntary cash payments received more than
30 days prior to these dates will be returned by the Plan Agent, and interest
will not be paid on any uninvested cash payments. To avoid unnecessary cash
accumulations, and also to allow ample time for receipt and processing by the
Plan Agent, it is suggested that participants send in voluntary cash payments to
be received by the Plan Agent approximately ten days before February 15, or
August 15, as the case may be. A participant may withdraw a voluntary cash
payment by written notice, if the notice is received by the Plan Agent not less
than 48 hours before such payment is to be invested.
21
<PAGE>
Participant Plan Accounts
The Plan Agent maintains all participant accounts in the Plan and furnishes
written confirmation of all transactions in the account, including information
needed by participants for personal and tax records. Shares in the account of
each plan participant will be held by the Plan Agent in non-certificated form in
the name of the participant, and each participant will be able to vote those
shares purchased pursuant to the Plan at a shareholder meeting or by proxy.
No Service Fee to Reinvest
There is no service fee charged to participants for reinvesting dividends or
distributions from net realized capital gains. The Plan Agent's fees for the
handling of the reinvestment of dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage commissions with respect to
shares issued directly by the Fund as a result of dividends or capital gains
distributions payable either in stock or in cash. However, participants will pay
a pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of any
dividends or capital gains distributions payable only in cash.
Costs for Cash Purchases
With respect to purchases of Fund shares from voluntary cash payments, the
Plan Agent will charge $0.75 for each such purchase for a participant. Each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases of Fund shares in connection
with voluntary cash payments made by the participant.
Brokerage charges for purchasing small amounts of stock for individual
accounts through the Plan are expected to be less than the usual brokerage
charges for such transactions, because the Plan Agent will be purchasing stock
for all participants in blocks and pro-rating the lower commission thus
attainable.
Amendment or Termination
The Fund and the Plan Agent each reserve the right to terminate the Plan.
Notice of the termination will be sent to the participants of the Plan at least
30 days before the record date for a dividend or distribution. The Plan also may
be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by giving at least 30 days' written notice to participants in
the Plan.
A participant may terminate his account under the Plan by written notice to
the Plan Agent. If the written notice is received 10 days before the record day
of any distribution, it will be effective immediately. If received after that
date, it will be effective as soon as possible after the reinvestment of the
dividend or distribution.
If a participant elects to sell his shares before the Plan is terminated, the
Plan Agent will deduct a $2.50 fee plus brokerage commissions from the sale
transaction.
Plan Agent Address and Telephone Number
You may obtain more detailed information by requesting a copy of the Plan
from the Plan Agent. All correspondence (including notifications) should be
directed to: The Argentina Fund, Inc. Dividend Reinvestment and Cash Purchase
Plan, c/o State Street Bank and Trust Company, P.O. Box 8200, Boston, MA
02266-8200, (617) 328-5000, ext. 6406.
22
<PAGE>
The Argentina Fund, Inc.
Investment Manager
The investment manager of The Argentina Fund, Inc. (the "Fund") is Scudder,
Stevens & Clark, Inc., one of the most experienced investment management and
investment counsel firms in the United States. Established in 1919, the firm
provides investment counsel for individuals and institutions. Scudder has
offices throughout the U.S. and in London and Tokyo.
Scudder has been active in international investment management for over 40
years. It manages Scudder International Fund, which was initially incorporated
in Canada in 1953 as the first foreign investment company registered with the
United States Securities and Exchange Commission. Scudder's investment company
clients include seven other open-end investment companies which invest
worldwide.
In addition to the Fund, Scudder also manages the assets of seven other
closed-end investment companies which invest in foreign securities: The Brazil
Fund, Inc. (investing primarily in equity securities of Brazilian issuers), The
First Iberian Fund, Inc. (investing primarily in Spanish and Portuguese equity
securities), The Korea Fund, Inc. (investing in a broad spectrum of Korean
companies), The Latin America Dollar Income Fund, Inc. (investing principally in
Latin American debt instruments), Scudder New Asia Fund, Inc. (investing in a
broad spectrum of Asian companies), Scudder World Income Opportunities Fund,
Inc. (investing in global income, and to a limited extent, equity securities),
and Scudder New Europe Fund, Inc. (investing in equity securities traded in
smaller or emerging European securities markets).
23
<PAGE>
Advisory Board
The Board of Directors has established an advisory board consisting of the
following outside, independent advisors with which the Fund's manager and Board
of Directors consult on economic and political trends and developments affecting
Argentina.
RICARDO H. ARRIAZU
JORGE ESTEBAN KALLEDEY
CHRISTOPHER J. KENNAN
ARNALDO T. MUSICH
MARTIN LAGOS
Directors and Officers
EDMOND D. VILLANI*
Chairman of the Board and Director
NICHOLAS BRATT*
President
RONALDO A. DA FROTA NOGUEIRA
Director
WILSON NOLEN
Director
JURIS PADEGS*
Vice President and Director
SUSAN KAUFMAN PURCELL
Director
JOSE E. ROHM
Director
ADALBERT KRIEGER VASENA
Director
EDMUND B. GAMES, JR.*
Vice President
JERARD K. HARTMAN*
Vice President
DAVID S. LEE*
Vice President
LUIS R. LUIS*
Vice President
WILLIAM F. TRUSCOTT*
Vice President
PAUL J. ELMLINGER*
Vice President and Assistant Secretary
PAMELA A. McGRATH*
Vice President and Assistant Treasurer
KATHRYN L. QUIRK*
Vice President and Assistant Secretary
THOMAS F. McDONOUGH*
Secretary
EDWARD J. O'CONNELL*
Treasurer
COLEEN DOWNS DINNEEN*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
