ARGENTINA FUND INC, N-30D, 1995-12-21

ARGENTINA FUND INC
N-30D, 1995-12-21

Previous: COLONIAL TRUST VII, 497, 1995-12-21

Next: MUNIYIELD FUND INC, N-30D, 1995-12-21

The Argentina Fund, Inc.
Annual Report

October 31, 1995

A closed-end investment company seeking long-term capital appreciation through
investments primarily in the equity securities of Argentine issuers.

<PAGE>
The Argentina Fund, Inc.
- --------------------------------------------------------------------------------

Investment objective and policies

* long-term capital appreciation through investment primarily in equity
securities of Argentine issuers

Investment characteristics

* investments in a broad spectrum of Argentine industries

* closed-end investment company

* 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

For Fund information: 1-800-349-4281

Transfer Agent, Registrar and Dividend
Reinvestment Plan Agent

For account information: 1-800-426-5523

State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200

Legal Counsel

Willkie Farr & Gallagher

Custodian

Brown Brothers Harriman & Co.

Independent Accountants

Coopers & Lybrand L.L.P.

New York Stock Exchange Symbol--AF

Contents
- --------------------------------------------------------------------------------
In Brief 3
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
Tax Information 21
Shareholder Meeting Results 22
Dividend Reinvestment and
Cash Purchase Plan 23
Investment Manager 25
Advisory Board 26
Directors and Officers 26

- --------------------------------------------------------------------------------
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>

In Brief
- --------------------------------------------------------------------------------

* Continued economic challenges and foreign investor apathy negatively
affected Argentine stock prices this year in the aftermath of the Mexican
peso devaluation. The Argentina Fund posted a -24.94% total return at net
asset value for the 12 months ended October 31, 1995, versus -25.84% for
the IFC Argentina Global Total Return Index.

* Adding to investor concerns, little progress has been made on economic
reform since President Menem's reelection in May -- partly due to
speculation about Domingo Cavallo's continued tenure as Finance Minister.

* With the decline in prices this year, Argentine stocks have provided very
attractive valuations. The market currently is trading at the lowest
trailing 12-month P/E ratio since August of 1992.

Letter to Shareholders
- --------------------------------------------------------------------------------

Dear Shareholders:

This report covers fiscal year 1995 of The Argentina Fund, Inc. (the "Fund").
During the 12-month period ended October 31, 1995, the Fund's net asset value
fell to $10.27 from $14.53 per share on October 31, 1994. The one-year total
return (assuming reinvestment of dividends and capital gain distributions) was
- -24.94%, versus -25.84% for the unmanaged IFC Argentina Global Total Return
Index. The price of the Fund as quoted on the New York Stock Exchange also fell
during the 12-month period to $10.13 on October 31, 1995, from $14.63 on October
31, 1994, a decline of 31%.

Recent Developments in the Argentine Economy

Paralysis is the best word to describe the Argentine political landscape
since President Menem's successful reelection in May of this year. While Menem's
victory was seen as an affirmation of the country's economic policies and the
continued need for reform, little has been done since May. Part of the blame
rests on the political system, because Menem and the new Congress do not
officially start their second term until December 10th. As such, the
May-to-December period is really a lame-duck session of Congress. However, the
lack of progress on key issues such as labor reform is largely due to
speculation about Domingo Cavallo's continued tenure as Finance Minister and
whether President Menem truly supports him. Carried to its extreme, the debate
about the Menem/Cavallo relationship turns into speculation about the outcome of
Presidential elections in 1999. This is clearly premature, given that Menem's
second term has not begun. The weak economic environment and an unemployment
rate in excess of 18% have not helped matters. In recent weeks the tumult has
subsided, and it appears that the President will support his Finance Minister
for now.

The recession this year is lasting longer than first thought, as confidence
in the government is undermined by internal disputes. Real GDP for the year is
expected to be three percentage points below that of 1994. The slump was
precipitated by the loss of nearly $8 billion in domestic financial assets in
the three months following the December 1994 Mexican peso devaluation, and by a
consequent fall in private credit. The drop in credit curtailed finance for
investment, consumption of goods, and also restrained finance for working
capital, providing an immediate shock on the supply side from which the economy
has not yet recovered.

3
<PAGE>

Data for the four months ended October 31 show a flat trend of industrial
production, and tax revenues remain stagnant. Only VAT receipts have shown some
growth following the rise in the tax rate to 21%. VAT receipts in the first 15
days of November accelerated, indicating some increase in private spending.

With fiscal policy neutralized by the currency board arrangements in
Argentina, which require a balanced budget, economic recovery will depend on the
external sector. The adjustment in the balance of payments this year has been
swift, helped by strong exports and fewer imports (compressed by the recession
and the lack of external finance). As a result, the current account deficit this
year is expected to be $2.8 billion, compared with $10.2 billion in 1994.

The export surge has been impressive. Merchandise exports in the first three
quarters of 1995 averaged 38% above the same period in 1994. Manufacturing
exports have also been strong, boosted by higher grain and oilseed prices, with
sales to other Mercosur market countries (Brazil, Uruguay, and Paraguay) showing
the largest gains. The recent slowdown in Brazil has affected Argentine
shipments in the past few months, but overall exports still grew at an
annualized rate of 22% last quarter.

Export growth of 18% in 1996 is feasible and, together with some revival in
domestic consumption and investment, should produce quarter-to-quarter economic
growth of close to 1%, starting in the first quarter. A swift revival of
confidence and a boost to capital inflows and credit expansion could accelerate
this rate. Another run on banks and the currency or an external shock in Latin
America could produce the opposite result -- that is, capital flight and a
slowdown or contraction of economic activity.

Market Valuations Indicate Opportunities

Despite some encouraging signs, the Argentine stock market has performed
poorly. Political paralysis, continued economic challenges, and weak foreign
capital flows due to foreign investor apathy have negatively affected common
stock valuations. Clearly, the Fund's disappointing performance reflects the
country's weak stock market showing this year. While stock markets can be
efficient discounting mechanisms, a contrarian view suggests that the Argentine
stock market offers tremendous value at today's levels despite the negative news
and sentiment. Below are some points worth considering with regard to stock
market valuations and investor sentiment:

1) According to data obtained from the IFC Emerging Markets Database, the
Argentine stock market is trading at the lowest trailing 12-month P/E ratio
since August of 1992. (From the launch of the Fund to August 1992, the market's
P/E ratio was negative, reflecting the widespread losses suffered by Argentine
corporations prior to and just after the return of financial stability.)

2) According to the Fund's sub-advisor, Sociedad General de Negocios y Valores,
average monthly trading volumes on the Buenos Aires Stock Exchange have
decreased substantially. October's volume of $171.3 million was the lowest since
July 1991. This figure is even more astonishing given that large-capitalization
stocks such as YPF, Telecom Argentina, and Telefonica Argentina were not listed
on the stock exchange in July 1991. Low trading volume is one of the key
indicators of poor investor sentiment.

3) We analyzed the cumulative profits of 43 leading representative Argentine
companies from 1992 to the second quarter of 1995. Annual profits in 1993 grew
by 89.3% over the previous year, after adjusting for companies not listed on the
stock exchange in 1992. 1994 profits, after adjusting for companies not listed
on the stock exchange in 1993, grew by 18.6%. First- and second-quarter 1995
profits also showed increases over profits seen one year ago. The third and
fourth quarters of this year are likely to reveal the adverse effects of a
declining economy through lower profit growth or perhaps a decline.

4
<PAGE>

Nevertheless, we reject the notion that the Argentine stock market should fall
back to levels that existed prior to the launch of the Fund as a result of the
current economic situation.

4) Dividend yields have risen dramatically as prices have fallen. One example is
Massalin Particulares, a cigarette manufacturer in the Fund's portfolio. This
company increased its 1992-1994 profits at a compound annual rate of 48.8%. The
stock, which sold at $8.70 at the end of October, just paid a dividend of $0.82,
which equalled a yield of just under 10%. This stock is characteristic of many
in the portfolio. It has reasonable long-term growth prospects, an attractive
dividend, and a low price, in our view.

Portfolio Developments

Portfolio strategy remains largely unchanged since the July quarterly letter,
reflecting our continued commitment to the long-term potential of the Fund's
holdings. Given the attractive valuations in the Argentine equity market, the
Fund has invested approximately 94% of its assets in equity securities, with the
balance in bonds and cash. As a percentage of net assets, this is the most
substantial commitment to equity securities the Fund has made since inception.

The Fund continues to emphasize stocks that have dollar revenue streams by
contract or business line. Oil companies, for example, sell their product in
dollars, while many of their costs are peso denominated. The telephone
companies, electric utilities, and gas transmission/distribution companies have
tariff systems denominated in U.S. dollars and costs largely in pesos. In our
estimation, this is a natural way to hedge against a peso devaluation -- even
though we believe a devaluation is highly unlikely. As the Fund's outperformance
relative to the IFC Index indicates, this group of companies also has been less
sensitive to the recession in Argentina than some cyclical industries in the
Index.

As always, if you have any questions about the Fund, please contact us at
1-800-349-4281. Thank you for your continued interest in The Argentina Fund.

Respectfully,

/s/Nicholas Bratt /s/Edmond D. Villani
Nicholas Bratt Edmond D. Villani
President Chairman of the Board

5
<PAGE>

The Argentina Fund
Investment Summary as of October 31, 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 -14.74 -- -10.70 -- -9.78 --
ONE YEAR -26.48 -26.48 -24.94 -24.94 -25.84 -25.84
THREE YEAR 14.28 4.55 19.33 6.07 33.56 10.13
LIFE OF FUND* -7.93 -2.03 2.07 0.51 -8.76 -2.27

- -----------------------------------------------------------------------------
PER SHARE INFORMATION AND RETURNS (a)
YEARLY PERIODS ENDED OCTOBER 31

A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.

1991* 1992 1993 1994 1995
---------------------------------------
NET ASSET VALUE... $10.99 $ 9.35 $12.69 $14.53 $10.27
INCOME DIVIDENDS.. $ -- $ .06 $ .05 $ .14 $ .27
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ -- $ .09 $ .02 $ .46
TOTAL RETURN (%).. .09 -14.55 37.55 15.58 -24.94

(a) Total investment returns reflect changes in net asset value per share
during each period and assumes that dividends and capital gains
distributions, if any, were reinvested. These percentages are not an
indication of the performance of a shareholder's investment in the Fund
based on market.

(b) IFC Argentina Global Total Return Index U.S. $

* The Fund commenced operations on October 22, 1991. Index return
begins on October 31, 1991.

PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE OF
THE FUND.

6
<PAGE>

The Argentina Fund, Inc.
Portfolio Summary as of October 31, 1995
- -------------------------------------------------------------------------
DIVERSIFICATION

Equity Securities 94%
Debt Securities 4%
Cash Equivalents 2%
----
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 Argentine securities

Energy 29%
Consumer Staples 18%
Communications 15%
Financial 11%
Utilities 8%
Construction 7%
Durables 4%
Manufacturing 3%
Government 3%
Other 2%
----
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. 6. NORTEL INVERSORA PREFERRED

2. YPF S.A. 7. TELEFONICA PRIDES

3. QUILMES INDUSTRIAL S.A. 8. BANCO FRANCES DEL RIO DE LA PLATA

4. LOMA NEGRA CIA. S.A. 9. TELEFONICA DE ARGENTINA

5. ASTRA CAPSA 10. TELECOM DE ARGENTINA

<PAGE>

THE ARGENTINA FUND, INC.
INVESTMENT PORTFOLIO AS OF OCTOBER 31, 1995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Industry Amount Value ($)
- ----------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C>
REPURCHASE AGREEMENT 1.7%
1,597,000 Repurchase Agreement with Donaldson, Lufkin
& Jenrette dated 10/31/95 at 5.875%, to be
repurchased at $1,597,261 on 11/1/95,
collateralized by a $1,602,000 U.S. Treasury
Note, 4.625%, 2/15/96 (Cost $1,597,000)................ 1,597,000
----------
- ----------------------------------------------------------------------------------------------------------------------
ARGENTINE DEBT SECURITIES 4.0%
1,000,000 Banco de Galicia y Buenos Aires, Convertible
Bond, 7%, 8/1/02....................................... 800,000
662,400 Bonos del Tesoro, Floating Rate Bond, LIBOR,
5.90625%, 9/1/97....................................... 638,491
4,000,000 Republic of Argentina, Par Bond, Series L,
Step-up-Coupon, 5%, 3/31/23............................ 1,902,480
500,000 Telefonica de Argentina, 8.375%, 10/1/00................. 433,750
----------
TOTAL ARGENTINE DEBT SECURITIES (Cost $4,147,285)....... 3,774,721
----------
- ----------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS 7.4%
Shares
------
COMMUNICATIONS

TELEPHONE/COMMUNICATIONS 100,520 Nortel Inversora "A" Preferred (ADR) (b)................. 791,092
244,000 Nortel Inversora "B" Preferred (ADR) (b)................. 2,806,000
80,000 Telefonica Prides (convertible).......................... 3,460,000
----------
TOTAL PREFERRED STOCKS (Cost $8,401,582)................. 7,057,092
- ----------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 86.9%

CONSUMER DISCRETIONARY 0.4%

SPECIALTY RETAIL 93,732 Grimoldi "B" (b)......................................... 398,341
----------

CONSUMER STAPLES 17.9%

ALCOHOL & TOBACCO 4.3% 240,014 Massalin Particulares.................................... 2,088,017
511,837 Nobleza Piccardo......................................... 1,970,474
----------
4,058,491
----------
FOOD & BEVERAGE 13.6% 1,067,404 Bagley y Cia Ltd. S.A."B"................................ 2,156,048
75,900 Buenos Aires Embotelladora S.A. "B" (ADR)................ 1,736,213
273,109 Cinba S.A. (b)........................................... 368,679
152,058 Molinos Rio de la Plata "B".............................. 950,315
441,000 Quilmes Industrial S.A................................... 7,761,600
----------
12,972,855
----------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

</TABLE>

8
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Industry Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C>
COMMUNICATIONS 6.6%

TELEPHONE/COMMUNICATIONS 81,616 Telecom de Argentina "B" (ADR)........................... 3,132,014
1,488,000 Telefonica de Argentina "B".............................. 3,139,523
----------
6,271,537
----------
FINANCIAL 10.2%

BANKS 6.4% 447,310 Banco Frances del Rio de la Plata........................ 3,251,781
569,190 Banco de Galicia y Buenos Aires "B"...................... 2,686,442
23,692 Banco del Sud "B"*....................................... 118,454
---------
6,056,677
---------
OTHER FINANCIAL COMPANIES 1.1% 1,000,000 BI S.A. "A" (b).......................................... 1,053,000
---------
REAL ESTATE 2.7% 121,250 Inversiones y Representaciones S.A. (GDR)*............... 2,546,250
---------

DURABLES 3.7%

AUTOMOBILES 811,154 Compania Interamericana de Automoviles*.................. 2,960,564
300,000 Mirgor Sacifia (ADR)..................................... 562,500
----------
3,523,064
----------
MANUFACTURING 3.0%

CHEMICALS 1.5% 729,182 Atanor S.A. "D"*......................................... 1,385,377
----------

DIVERSIFIED MANUFACTURING 1.5% 710,300 Comercial del Plata*..................................... 1,434,734
----------

ENERGY 28.2%

OIL & GAS PRODUCTION 11.7% 2,526,715 Perez Companc S.A. "B"................................... 11,142,256
----------
OIL COMPANIES 13.2% 2,917,100 Astra CAPSA.............................................. 4,317,092
485,000 YPF S.A. "D" (ADR)....................................... 8,305,625
----------
12,622,717
----------
OIL/GAS TRANSMISSION 3.3% 1,550,000 Transportadora de Gas del Sur "B"........................ 3,130,843
----------
METALS & MINERALS 2.2%

STEEL & METALS 2,817,926 Dalmine Siderca.......................................... 2,113,339
----------
CONSTRUCTION 6.5%

BUILDING MATERIALS 6.3% 140,718 Corporacion Cementera Argentina "B"*..................... 605,057
379,400 Juan Minetti y Cia. "B".................................. 929,484
150,624 Loma Negra Cia. S.A. (b)................................. 4,518,720
----------
6,053,261
----------
MISCELLANEOUS 0.2% 262,240 Guillermo Decker S.A.* (b).............................. 191,426
----------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

</TABLE>

9
<PAGE>

THE ARGENTINA FUND, INC.
INVESTMENT PORTFOLIO (CONTINUED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Market
Industry Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C>
UTILITIES 8.2%

ELECTRIC UTILITIES 5.8% 211,000 Capex S.A. "A"* (b)...................................... 1,360,882
768,400 Central Costanera S.A. "B".............................. 2,128,361
226,690 Central Puerto S.A. "B".................................. 691,370
77,143 Electricidad Argentina S.A."A" (ADR) (b)................. 1,350,003
----------
5,530,616
----------
NATURAL GAS DISTRIBUTION 2.4% 264,000 MetroGas S.A. "B" (ADR).................................. 2,244,000
----------

TOTAL COMMON STOCKS (Cost $95,821,634)................... 82,728,784
----------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $109,967,501) (a)............................... 95,157,597
----------
----------
- -----------------------------------------------------------------------------------------------------------------------

NOTES TO INVESTMENT PORTFOLIO
* Non-income producing security.

(a) The cost for federal income tax purposes was $110,020,501. At October 31, 1995, net unrealized depreciation for all
securities based on tax cost was $14,862,904. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of $6,145,387 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over market value of $21,008,291.

(b) Securities valued in good faith by the Valuation Committee of the Board of Directors at fair value amounted to
$12,838,143 (13.5% of net assets). The cost of these securities at October 31, 1995 aggregated $15,202,115. These
securities may also have certain restrictions as to resale.

- -----------------------------------------------------------------------------------------------------------------------

</TABLE>
OTHER INFORMATION

See page 7 for sector diversification.

Transactions in written call options during the year ended October 31,
1995 were:

NUMBER OF PREMIUMS
CONTRACTS RECEIVED($)
--------- ------------
Outstanding at
October 31, 1994............... -- --
Contracts written.............. 23,195 578,947
Contracts closed............... (23,195) (578,947)
------- --------
Outstanding at
October 31, 1995 -- --
------- --------
------- --------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

<PAGE>

THE ARGENTINA FUND, INC.
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments, at market (identified cost $109,967,501) (Note A).... $95,157,597
Cash.............................................................. 195
Dividends and interest receivable................................. 243,607
Deferred organization expenses, net of accumulated amortization of
$143,731 (Note A)................................................. 34,750
-----------
Total assets................................................ 95,436,149

LIABILITIES
Payables:
Investments purchased........................................... $329,275
Accrued management fee (Note C)................................. 106,983
Other accrued expenses (Note C)................................. 91,876
--------
Total liabilities........................................... 528,134
-----------
Net assets, at market value....................................... $94,908,015
-----------
-----------
NET ASSETS
Net assets consist of:
Undistributed net investment income....................... $ 2,006,039
Net unrealized depreciation on investments................ (14,809,904)
Accumulated net realized loss............................. (5,991,461)
Common stock.............................................. 92,449
Additional paid-in capital................................ 113,610,892
-----------
Net assets, at market value....................................... $94,908,015
-----------
-----------
NET ASSET VALUE per share ($94,908,015 divided by 9,244,879)
shares of common stock issued and outstanding, $.01 par value,
100,000,000 shares authorized)................................. $10.27
-----------
-----------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

</TABLE>
11

<PAGE>

THE ARGENTINA FUND, INC.
FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
Dividends......................................... $3,309,895
Interest.......................................... 1,573,688
-----------
4,883,583
Expenses:
Management fee (Note C)........................... $1,354,299
Directors' fees and expenses (Note C)............. 57,270
Advisory Board fees and expenses (Note C)......... 33,250
Custodian and accounting fees (Note C)............ 279,599
Reports to shareholders........................... 79,273
Auditing.......................................... 72,339
Amortization of organization expenses (Note A).... 35,697
Services to shareholders.......................... 33,121
Legal............................................. 69,567
Other............................................. 44,329 2,058,744
---------- ---------
Net investment income .............................. 2,824,839
---------

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized loss from:
Investments...................................... (3,193,851)
Options.......................................... (2,735,484)
Argentine peso related transactions.............. (7,731) (5,937,066)
---------- ----------
Net unrealized appreciation (depreciation) during
the period on:
Investments...................................... (29,557,351)
Argentine peso related transactions.............. 958 (29,556,393)
----------- ------------
Net loss on investment transactions................. (35,493,459)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS. $(32,668,620)
------------
------------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income............................... $2,824,839 $ 1,691,966
Net realized gain (loss) from investment
transactions....................................... (5,937,066) 4,177,499
Net unrealized appreciation (depreciation)
on investment transactions during the period....... (29,556,393) 5,781,814
------------ ----------
Net increase (decrease) in net assets resulting
from operations...................................... (32,668,620) 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.................... (38,847,437) 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 $2,006,039 and $1,626,791,
respectively)...................................... $ 94,908,015 $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.

<PAGE>

THE ARGENTINA FUND, INC.
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

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.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 22,
YEARS ENDED OCTOBER 31, 1991(b)
----------------------------------------- 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)....................... .31 .21 .05 .09 .01
Net realized and unrealized gain (loss) on
investment transactions....................... (3.84) 1.83 3.43 (1.67) --
------ ------ ----- ------ ------
Total from investment operations.................. (3.53) 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.................... $10.27 $14.53 $12.69 $ 9.35 $10.99
------ ------ ----- ------ ------
------ ------ ----- ------ ------
Market value, end of period....................... $10.13 $14.63 $14.00 $ 9.63 $14.63
------ ------ ----- ------ ------
------ ------ ----- ------ ------
TOTAL RETURN
Per share market value (%)........................ (26.48) 5.45 47.41 (33.90) 21.88**
Per share net asset value (%) (d)................. (24.94) 15.58 37.55 (14.55) .09**

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions)............ 95 134 74 54 63
Ratio of operating expenses to average
net assets (%)................................... 1.98 1.87 2.37 2.24 2.55*
Ratio of net investment income to average
net assets (%).................................. 2.71 1.48 .48 .81 2.54*
Portfolio turnover rate (%)...................... 25.0 16.7 32.5 26.5 --

* 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 investment returns reflect changes in net asset value per share during each period and assumes
that dividends and capital gains distributions, if any, were reinvested. These percentages are not an
indication of the performance of a shareholder's investment in the Fund based on market.

</TABLE>

14
<PAGE>
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.

OPTIONS. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or
sell to (put option), the writer a designated instrument at a specified price
within a specified period of time. Certain options, including options on
indices, will require cash settlement by the Fund if the option is exercised.
During the period, the Fund purchased put options and wrote call options on
financial instruments as a hedge against potential adverse price movements in
the value of portfolio assets.

If the Fund writes an option and 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 Fund elects to close
out the option it would recognize a gain or loss based on the difference
between the cost of closing the option and the initial premium received. If
the Fund purchased an option and allows the option to expire it would realize
a loss to the extent of the premium paid. If the Fund elects to close out the
option it would recognize a gain or loss equal to the difference between the
cost of acquiring the option and the amount realized upon the sale of the
option.

The gain or loss recognized by the Fund upon the exercise of a written call
or purchased put option is adjusted for the amount of option premium. If a
written put or purchased call option is exercised the

<PAGE>

THE ARGENTINA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Fund's cost basis of the acquired security or currency would be the exercise
price adjusted for the amount of the option premium.

The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and
asked price or at the most recent asked price (bid for purchased options) if
no bid and asked price are available. Over-the-counter written or purchased
options are valued using dealer supplied quotations.

When the Fund writes a covered call option, the Fund foregoes, in exchange
for the premium, the opportunity to profit during the option period from an
increase in the market value of the underlying security or currency above the
exercise price. When the Fund writes a put option it accepts the risk of a
decline in the market value of the underlying security or currency below the
exercise price. Over-the-counter options have the risk of the potential
inability of counterparties to meet the terms of their contracts. The Fund's
maximum exposure to purchased options is limited to the premium initially
paid. In addition, certain risks may arise upon entering into option
contracts including the risk that an illiquid secondary market will limit the
Fund's ability to close out an option contract prior to the expiration date
and, that a change in the value of the option contract may not correlate
exactly with changes in the value of the securities or currencies hedged.

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 October 31,
1995 the exchange rate for the Argentine peso was U.S. $1 to 1.00005 Argentine
peso.

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

<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
withholding taxes on dividends. At October 31, 1995, the Fund had a net tax
basis capital loss carryforward of approximately $5,938,000, which may be
applied against any realized net taxable capital gains of each succeeding
year until fully utilized or until October 31, 2003, whichever occurs first.

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 year ended October 31, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $41,632,074 and
$25,019,241, respectively.

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 year ended October 31, 1995, the fee pursuant to
such agreement aggregated $1,354,299.

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

<PAGE>

monthly fee, equal to an annualized rate of 0.36% of the Fund's average weekly
net assets.

Effective June 13, 1995, Scudder Fund Accounting Corporation ("SFAC"), a
wholly-owned subsidiary of the Adviser, assumed responsibility for
determining the daily net asset value per share and maintaining the portfolio
and general accounting records of the Fund. For the year ended October 31,
1995, the amount charged to the Fund by SFAC aggregated $29,227, of which
$6,259 is unpaid at October 31, 1995.

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 year ended October 31, 1995, Directors' fees and
expenses aggregated $57,270.

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 year ended October 31, 1995, Advisory Board fees and expenses
aggregated $33,250.

For the year ended October 31, 1995, brokerage commissions on investment
transactions amounting to $26,152 were paid by the Fund to Banco General de
Negocios, the parent company of the Argentine Adviser.

D. 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.

<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

E. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (000 OMITTED)
--------------------------------------------------------
<TABLE>
<CAPTION>
NET INCREASE
(DECREASE)
NET GAIN (LOSS) IN NET ASSETS
QUARTER INVESTMENT NET INVESTMENT ON INVESTMENT RESULTING
ENDED INCOME INCOME 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)
July 31, 1,007 .11 486 .05 7,833 .85 8,319 .90
October 31, 980 .11 502 .06 (11,907) (1.29) (11,405) (1.23)
--------- ------ -------- ------ -------- ------ -------- -------
Totals $ 4,884 $ .53 $ 2,825 $ .31 $(35,494) $(3.84) $(32,669) $ (3.53)
--------- ------ -------- ------ -------- ------ -------- -------
--------- ------ -------- ------ -------- ------ -------- -------

PER PER PER PER
1994 TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
- ---- ----- ----- ----- ----- ----- ----- ----- -----
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>

<PAGE>

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 October 31,
1995, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the four years in the
period then ended 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 October 31, 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 October 31, 1995, 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 four years in the period then ended 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 b to the Investment Portfolio, the financial statements
include securities valued at $12,838,143 (13.5% 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 its 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 differences could be
material.

Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 7, 1995

<PAGE>

THE ARGENTINA FUND, INC.
TAX INFORMATION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

For its fiscal year ended October 31, 1995, the total amount of income
received by the Fund from sources within foreign countries and possessions
of the United States was $.29 per share (representing a total of $2,697,438).

Please consult a tax adviser if you have questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call State Street Bank and
Trust Company at 1-800-426-5523.

<PAGE>

Shareholder Meeting Results
- --------------------------------------------------------------------------------

The Annual Meeting of Shareholders of The Argentina Fund, Inc. was held on Tuesday, July
25, 1995, at the offices of Scudder, Stevens & Clark, Inc., 25th Floor, 345 Park Avenue,
New York, New York. The four matters voted upon by Shareholders and the resulting votes for
each matter are presented below.

1. The election of three Directors to hold office for a term of three years or until
their respective successors shall have been duly elected and qualified.

Director: Number of Votes:
--------- ----------------
For Withheld Broker Non-Votes*
--- -------- -----------------
<S> <C> <C> <C>
Jose E. Rohm 6,330,582 177,735 0
Ronaldo A. da Frota Nogueira 6,356,872 151,445 0
Dr. Susan Kaufman Purcell 6,343,442 164,876 0

2. Ratification or rejection of the action taken by the Board of Directors in selecting
Coopers & Lybrand L.L.P. as independent accountants for the fiscal year ending
October 31, 1995.

Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
6,310,272 131,271 66,774 0

3. Approval or disapproval of the continuance of the Investment Advisory, Management
and Administration Agreement between the Fund and Scudder, Stevens & Clark, Inc.

Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
6,273,197 119,650 115,470 0

4. Approval or disapproval of the continuance of the Sub-Advisory Contract between
Scudder, Stevens & Clark, Inc. and the Sociedad General de Negocios y Valores S.A.

Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
6,299,013 93,243 116,061 0

- -------------------------------------------------------------------------------------------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
</TABLE>

22
<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 notless
than 48 hours before such payment is to be invested.

23
<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, 1-800-426-5523.

24
<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., The First Iberian Fund, Inc., The Korea Fund, Inc., The Latin
America Dollar Income Fund, Inc., Scudder New Asia Fund, Inc., Scudder World
Income Opportunities Fund, Inc., and Scudder New Europe Fund, Inc.

25
<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

DR. WILSON NOLEN
Director

JURIS PADEGS*
Vice President and Director

DR. SUSAN KAUFMAN PURCELL
Director

JOSE E. ROHM
Director

DR. 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*
Treasurer

KATHRYN L. QUIRK*
Vice President and Assistant Secretary

THOMAS F. McDONOUGH*
Secretary

EDWARD J. O'CONNELL*
Vice President and Assistant Treasurer

COLEEN DOWNS DINNEEN*
Assistant Secretary

* Scudder, Stevens & Clark, Inc.