<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
THE ARGENTINA FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Articles of Incorporation)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
LOGO September 1997
THE ARGENTINA FUND, INC.
IMPORTANT NEWS
FOR THE ARGENTINA FUND, INC. STOCKHOLDERS
While we encourage you to read the full text of the enclosed Proxy
Statement, here's a brief overview of some changes affecting your Fund which
require a stockholder vote.
Q & A: QUESTIONS AND ANSWERS
Q. WHAT IS HAPPENING?
A. Scudder, Stevens & Clark, Inc. ("Scudder"), your Fund's investment manager,
has agreed to form an alliance with Zurich Insurance Company ("Zurich").
Zurich is a leading international insurance and financial services
organization. As a result of the proposed alliance, there will be a change
in ownership of Scudder. In order for Scudder to continue to serve as
investment manager of your Fund, it is necessary for the Fund's stockholders
to approve a new investment management, advisory and administration
agreement. The following pages give you additional information on Zurich,
the proposed new investment management, advisory and administration
agreement and certain other matters. The most important matters to be voted
upon by you are approval of the new investment management, advisory and
administration agreement and the election of Directors. THE BOARD MEMBERS OF
YOUR FUND, INCLUDING THOSE WHO ARE NOT AFFILIATED WITH THE FUND OR SCUDDER,
RECOMMEND THAT YOU VOTE FOR THESE PROPOSALS.
Q. WHY AM I BEING ASKED TO VOTE ON THE PROPOSED
NEW INVESTMENT MANAGEMENT, ADVISORY AND
ADMINISTRATION AGREEMENT?
A. The Investment Company Act of 1940, which regulates investment companies
such as the Fund, requires a vote whenever there is a change in control of a
fund's investment manager. Zurich's alliance with Scudder will result in
such a change of control and requires stockholder approval of a new
investment management, advisory and administration agreement with the Fund.
Argentina
<PAGE> 3
Q. HOW WILL THE SCUDDER-ZURICH ALLIANCE AFFECT ME AS A
FUND STOCKHOLDER?
A. Your Fund and your Fund's investment objective will not change. You will
still own the same shares in the same Fund. As described in more detail in
the Proxy Statement, the investment management, advisory and administration
agreement that is currently in effect will be replaced, effective as of
November 1, 1997, by a new agreement to reduce the investment management
fees currently paid by the Fund under such agreement. The terms of the new
investment management, advisory and administration agreement are the same in
all material respects as the investment management, advisory and
administration agreement that will be in effect immediately prior to the
consummation of the alliance. Similarly, the other service arrangements
between you and Scudder will not be affected. You should continue to receive
the same level of services that you have come to expect from Scudder over
the years. If stockholders do not approve the new investment management,
advisory and administration agreement, the current investment management,
advisory and administration agreement will terminate upon the closing of the
transaction and the Board of Directors will take such action as it deems to
be in the best interests of your Fund and its stockholders.
Q. WHY HAS SCUDDER DECIDED TO ENTER INTO THIS ALLIANCE?
A. Scudder believes that the Scudder-Zurich alliance will enable Scudder to
enhance its capabilities as a global asset manager. Scudder further believes
that the alliance will enable it to enhance its ability to deliver the level
of services currently provided to you and your Fund and to fulfill its
obligations under the new investment management, advisory and administration
agreement consistent with current practices.
Q. WILL THE INVESTMENT MANAGEMENT FEES BE THE SAME?
A. The investment management fees paid by your Fund will remain the same as
those in effect in the investment management, advisory and administration
agreement that will replace the current agreement to give effect to the
reduction in investment management fees, effective as of November 1, 1997.
Q. WHAT OTHER MATTERS AM I BEING ASKED TO VOTE ON?
A. You are also being asked to vote for the approval of a new research and
advisory agreement and for the ratification of the Board's selection of the
Fund's accountants.
(continues on inside back cover)
<PAGE> 4
Q. HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND THAT
I VOTE?
A. After careful consideration, the Board members of your Fund, including those
who are not affiliated with the Fund or Scudder, recommend that you vote in
favor of all of the proposals on the enclosed proxy card.
Q. WHOM DO I CALL FOR MORE INFORMATION?
A. Please call Shareholder Communications Corporation, your Fund's information
agent, at 1-800-733-8481, ext. 488.
Q. WILL THE FUND PAY FOR THE PROXY SOLICITATION AND LEGAL COSTS ASSOCIATED WITH
THIS TRANSACTION?
A. No, Scudder will bear these costs. However, the Fund will bear the ordinary
costs incurred by the Fund in conducting an annual meeting.
ABOUT THE PROXY CARD
If you have more than one account in the Fund in your name at the same
address, you will receive separate proxy cards for each account, but only one
proxy statement for the Fund. Please vote all issues on each proxy card that you
receive.
THANK YOU FOR MAILING YOUR PROXY CARD(S) PROMPTLY.
<PAGE> 5
LOGO
For more information, please call Shareholder Communications Corporation, your
Fund's information agent, at 1-800-733-8481, ext. 488.
Argentina
<PAGE> 6
[SCUDDER LOGO]
345 Park Avenue
New York, New York 10154
THE ARGENTINA FUND, INC.
September 2, 1997
Dear Stockholder:
Scudder, Stevens & Clark, Inc. ("Scudder") entered into an agreement with
Zurich Insurance Company ("Zurich") pursuant to which Scudder and Zurich have
agreed to form an alliance. Under the terms of the agreement, Zurich will
acquire a majority interest in Scudder, and Zurich Kemper Investments, Inc., a
Zurich subsidiary, will become part of Scudder. Scudder's name will be changed
to Scudder Kemper Investments, Inc. As a result of this transaction, it is
necessary for the stockholders of each of the funds for which Scudder acts as
investment manager, including your Fund, to approve a new investment management
agreement.
The following important facts about the transaction are outlined below:
- The transaction has no effect on the number of shares you own or the value
of those shares.
- The advisory fees and expenses paid by your Fund will not increase as a
result of this transaction.
- The investment objective of your Fund will remain the same.
- The non-interested Directors of your Fund have carefully reviewed the
proposed transaction, and have concluded that the transaction should cause
no reduction in the quality of services provided to your Fund and should
enhance Scudder's ability to provide such services.
Stockholders are also being asked to approve certain other matters that have
been set forth in the Fund's Notice of Meeting. THE BOARD MEMBERS OF YOUR FUND
BELIEVE THAT EACH OF THE PROPOSALS SET FORTH IN THE NOTICE OF MEETING FOR YOUR
FUND IS IMPORTANT AND RECOMMEND THAT YOU READ THE ENCLOSED MATERIALS CAREFULLY
AND THEN VOTE FOR ALL PROPOSALS.
Since all of the funds for which Scudder acts as investment manager are
required to conduct stockholder meetings, if you own shares of more than one
fund, you will receive more than one proxy card. Please sign and return each
proxy card you receive.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your executed proxy card(s) after a reasonable amount of time you may receive a
telephone call from our proxy solicitor, Shareholder Communications Corporation,
reminding you to vote your shares.
Thank you for your cooperation and continued support.
Respectfully,
LOGO LOGO
Nicholas Bratt Edmond D. Villani
President Chairman of the Board
STOCKHOLDERS ARE URGED TO SIGN THE PROXY CARD(S) AND RETURN IT IN THE POSTAGE
PAID ENVELOPE SO AS TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.
<PAGE> 7
THE ARGENTINA FUND, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
The Argentina Fund, Inc.:
Please take notice that the Annual Meeting of Stockholders of The Argentina
Fund, Inc. (the "Fund") will be held at the offices of Scudder, Stevens & Clark,
Inc., 25th Floor, 345 Park Avenue (at 51st Street), New York, New York 10154, on
October 28, 1997, at 9:30 a.m., Eastern time, for the following purposes:
(1)(A) To approve or disapprove a new investment management, advisory
and administration agreement between the Fund and Scudder Kemper
Investments, Inc.;
(B) To approve or disapprove a new research and advisory agreement
between the Fund's investment manager and its Argentine adviser;
(2) To elect Directors; and
(3) To ratify or reject the selection of Coopers & Lybrand L.L.P. as
the independent accountants for the Fund for the Fund's current
fiscal year.
The appointed proxies will vote on any other business as may properly come
before the meeting or any adjournments thereof.
Holders of record of shares of common stock of the Fund at the close of business
on August 15, 1997 are entitled to vote at the meeting and at any adjournments
thereof.
In the event that the necessary quorum to transact business or the vote required
to approve or reject any proposal is not obtained at the meeting, the persons
named as proxies may propose one or more adjournments of the meeting, in
accordance with applicable law, to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of the holders of a majority
of the Fund's shares present in person or by proxy at the meeting. The persons
named as proxies will vote in favor of such adjournment those proxies which they
are entitled to vote in favor and will vote against any such adjournment those
proxies to be voted against that proposal.
By order of the Board of Directors,
Thomas F. McDonough, Secretary
September 2, 1997
IMPORTANT--WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN IT
IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS INTENDED FOR
YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S) MAY SAVE THE
NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM AT THE ANNUAL
MEETING. IF YOU CAN ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES IN PERSON AT
THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE> 8
THE ARGENTINA FUND, INC.
345 PARK AVENUE, NEW YORK, NEW YORK 10154
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of The Argentina Fund, Inc. (the
"Fund") for use at the Annual Meeting of Stockholders, to be held at the offices
of Scudder, Stevens & Clark, Inc. ("Scudder"), 25th Floor, 345 Park Avenue (at
51st Street), New York, New York 10154, on October 28, 1997, at 9:30 a.m.,
Eastern time, and at any and all adjournments thereof (the "Meeting"). (In the
descriptions of the various proposals below, the word "fund" is sometimes used
to mean investment companies or series thereof in general, and not the Fund
whose proxy statement this is.)
This Proxy Statement, the Notice of Annual Meeting and the proxy card are
first being mailed to stockholders on or about September 2, 1997 or as soon as
practicable thereafter. Any stockholder giving a proxy has the power to revoke
it by mail (addressed to the Secretary at the principal executive office of the
Fund, c/o Scudder, Stevens & Clark, Inc., 345 Park Avenue, New York, New York
10154) or in person at the Meeting, by executing a superseding proxy or by
submitting a notice of revocation to the Fund. All properly executed proxies
received in time for the Meeting will be voted as specified in the proxy or, if
no specification is made, in favor of each proposal referred to in the Proxy
Statement.
The presence at any stockholders' meeting, in person or by proxy, of the
holders of a majority of the shares entitled to be cast shall be necessary and
sufficient to constitute a quorum for the transaction of business. In the event
that the necessary quorum to transact business or the vote required to approve
or disapprove any proposal is not obtained at the Meeting, the persons named as
proxies may propose one or more adjournments of the Meeting in accordance with
applicable law, to permit further solicitation of proxies with respect to any
proposal which did not receive the vote necessary for its passage or to obtain a
quorum. With respect to those proposals for which there is represented a
sufficient number of votes in favor, actions taken at the Meeting will be
effective irrespective of any adjournments with respect to any other proposals.
Any such adjournment will require the affirmative vote of the holders of a
majority of the Fund's shares present in person or by proxy at the Meeting. The
persons named as proxies will vote in favor of such adjournment those proxies
which they are entitled to vote in favor and will vote against any such
adjournment those proxies to be voted against that proposal. For purposes of
determining the presence of a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" will be treated as shares that are present
but which have not been voted. Broker non-votes are proxies received by the Fund
from brokers or
<PAGE> 9
nominees when the broker or nominee has neither received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter. Accordingly, stockholders are urged to forward
their voting instructions promptly.
Proposals 1(A) and 1(B) each require the affirmative vote of a "majority of
the outstanding voting securities" of the Fund. The term "majority of the
outstanding voting securities," as defined in the Investment Company Act of
1940, as amended (the "1940 Act"), and as used in this proxy statement, means:
the affirmative vote of the lesser of (1) 67% of the voting securities of the
Fund present at the Meeting if more than 50% of the outstanding shares of the
Fund are present in person or by proxy or (2) more than 50% of the outstanding
shares of the Fund. Proposals 2 and 3 each require the approval of a majority of
shares voted at the Meeting.
Abstentions will have the effect of a "no" vote on all proposals. Broker
non-votes will have the effect of a "no" vote for Proposals 1(A) and 1(B) if
such vote is determined on the basis of obtaining the affirmative vote of more
than 50% of the outstanding shares of the Fund. Broker non-votes will not
constitute "yes" or "no" votes and will be disregarded in determining the voting
securities "present" if such vote is determined on the basis of the affirmative
vote of 67% of the voting securities of the Fund present at the Meeting with
respect to Proposals 1(A) and 1(B) and a majority of the voting securities of
the Fund present at the Meeting with respect to Proposals 2 and 3.
Holders of record of the shares of the common stock of the Fund at the
close of business on August 15, 1997 (the "Record Date"), will be entitled to
one vote per share on all business of the Meeting. The number of shares
outstanding as of June 30, 1997 was 9,266,717.
The Fund provides periodic reports to all of its stockholders which
highlight relevant information including investment results and a review of
portfolio changes. You may receive an additional copy of the most recent annual
report for the Fund, and a copy of any more recent semi-annual report, without
charge, by calling 1-800-349-4281 or writing the Fund, c/o Scudder, Stevens &
Clark, Inc., 345 Park Avenue, New York, New York 10154.
PROPOSAL 1(A): APPROVAL OF NEW
INVESTMENT MANAGEMENT AGREEMENT
INTRODUCTION
Scudder acts as the investment adviser to and manager and administrator for
the Fund pursuant to an Investment Advisory, Management and Administration
Agreement dated November 1, 1996. The investment management, advisory and
administration agreement that is currently in effect will be replaced, effective
as of November 1, 1997, by an agreement that reduces the investment management
fees that the Fund pays to Scudder pursuant to such agreement
2
<PAGE> 10
from the current 1.20% per annum of the value of the Fund's average weekly
assets to 1.10% of such amount in order to take account of a reduction in the
fees that Scudder pays to the Fund's Argentine adviser. The new agreement, which
gives effect to the reduction of fees payable by the Fund to Scudder, shall be
referred to as the "Current Investment Management Agreement." (Scudder is
sometimes referred to in this proxy statement as the "Investment Manager.")
On June 26, 1997, Scudder entered into a Transaction Agreement (the
"Transaction Agreement") with Zurich Insurance Company ("Zurich") pursuant to
which Scudder and Zurich have agreed to form an alliance. Under the terms of the
Transaction Agreement, Zurich will acquire a majority interest in Scudder, and
Zurich Kemper Investments, Inc. ("ZKI"), a Zurich subsidiary, will become part
of Scudder. Scudder's name will be changed to Scudder Kemper Investments, Inc.
("Scudder Kemper"). The foregoing are referred to as the "Transactions." ZKI, a
Chicago-based investment adviser and the adviser to the Kemper funds, has
approximately $80 billion under management. The headquarters of Scudder Kemper
will be in New York. Edmond D. Villani, Scudder's Chief Executive Officer, will
continue as Chief Executive Officer of Scudder Kemper and will become a member
of Zurich's Corporate Executive Board.
Consummation of the Transactions would constitute an "assignment," as that
term is defined in the 1940 Act, of the Fund's Current Investment Management
Agreement with Scudder. As required by the 1940 Act, the Current Investment
Management Agreement provides for its automatic termination in the event of its
assignment. In anticipation of the Transactions, a new investment management,
advisory and administration agreement (the "New Investment Management
Agreement") between the Fund and Scudder Kemper is being proposed for approval
by stockholders of the Fund. A copy of the form of the New Investment Management
Agreement is attached hereto as Exhibit A. THE NEW INVESTMENT MANAGEMENT
AGREEMENT FOR THE FUND IS IN ALL MATERIAL RESPECTS ON THE SAME TERMS AS THE
CURRENT INVESTMENT MANAGEMENT AGREEMENT. Conforming changes are being
recommended to the New Investment Management Agreement in order to promote
consistency among all of the funds advised by Scudder and to permit ease of
administration. The material terms of the Current Investment Management
Agreement are described under "Description of the Current Investment Management
Agreement" below.
BOARD OF DIRECTORS RECOMMENDATION
On July 29, 1997 the Board of the Fund, including Directors who are not
parties to such agreement or "interested persons" (as defined under the 1940
Act) ("Non-interested Directors") of any such party, voted to approve the New
Investment Management Agreement and to recommend its approval to stockholders.
3
<PAGE> 11
For information about the Board's deliberations and the reasons for its
recommendation, please see "Board of Directors Evaluation" below.
The Board of the Fund recommends that stockholders vote in favor of the
approval of the New Investment Management Agreement.
BOARD OF DIRECTORS EVALUATION
On June 26 and 27, 1997, representatives of Scudder advised the Non-
interested Directors of the Fund, by means of a telephone conference call and
memorandum, that Scudder had entered into the Transaction Agreement. At that
time, Scudder representatives described the general terms of the proposed
Transactions and the perceived benefits for the Scudder organization and for its
investment advisory clients.
Scudder subsequently furnished the Non-interested Directors additional
information regarding the proposed Transactions, including information regarding
the terms of the proposed Transactions, and information regarding the Zurich and
ZKI organizations. In a series of subsequent telephone conference calls and
in-person meetings, the Non-interested Directors discussed this information
among themselves and with representatives of Scudder and Zurich. They were
assisted in their review of this information by their independent legal counsel.
In the course of these discussions, Scudder advised the Non-interested
Directors that it did not expect that the proposed Transactions would have a
material effect on the operations of the Fund or its stockholders. Scudder has
advised the Non-interested Directors that the Transaction Agreement, by its
terms, does not contemplate any changes in the structure or operations of the
Fund. Scudder representatives have informed the Non-interested Directors that
Scudder intends to maintain the separate existence of the funds that Scudder and
ZKI manage in their respective distribution channels. Scudder has also advised
the Non-interested Directors that, although it expects that various portions of
the ZKI organization would be combined with Scudder's operations, the senior
executives of Scudder overseeing those operations will remain largely unchanged.
It is possible, however, that changes in certain personnel currently involved in
providing services to the Fund may result from future efforts to combine the
strengths and efficiencies of both firms. In their discussions with the
Non-interested Directors, Scudder representatives also emphasized the strengths
of the Zurich organization and its commitment to provide the new Scudder Kemper
organization with the resources necessary to continue to provide high quality
services to the Fund and the other investment advisory clients of the new
Scudder Kemper organization.
The Board was advised that Scudder intends to rely on Section 15(f) of the
1940 Act, which provides a non-exclusive safe harbor for an investment adviser
to an investment company or any of the investment adviser's affiliated persons
(as defined under the 1940 Act) to receive any amount or benefit in connection
with a change in control of the investment adviser so long as two conditions are
4
<PAGE> 12
met. First, for a period of three years after the transaction, at least 75% of
the board members of the investment company must not be "interested persons" of
the investment company's investment adviser or its predecessor adviser. On or
prior to the consummation of the Transactions, the Board, assuming the election
of the nominees that you are being asked to elect in "Proposal 2: Election of
Directors," would be in compliance with this provision of Section 15(f). (See
"Proposal 2: Election of Directors.") Second, an "unfair burden" must not be
imposed upon the investment company as a result of such transaction or any
express or implied terms, conditions or understandings applicable thereto. The
term "unfair burden" is defined in Section 15(f) to include any arrangement
during the two-year period after the transaction whereby the investment adviser,
or any interested person of any such adviser, receives or is entitled to receive
any compensation, directly or indirectly, from the investment company or its
stockholders (other than fees for bona fide investment advisory or other
services) or from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company
(other than bona fide ordinary compensation as principal underwriter for such
investment company). No such compensation agreements are contemplated in
connection with the Transactions. Aside from the ordinary expenses incurred by
the Fund in conducting an annual meeting, Scudder has undertaken to pay the
costs of preparing and distributing proxy materials to, and of holding the
meeting of, the Fund's stockholders as well as other fees and expenses in
connection with the Transactions, including the fees and expenses of legal
counsel to the Fund and the Non-interested Directors.
During the course of their deliberations, the Non-interested Directors
considered a variety of factors, including the nature, quality and extent of the
services furnished by Scudder to the Fund; the necessity of Scudder maintaining
and enhancing its ability to retain and attract capable personnel to serve the
Fund; the investment record of Scudder in managing the Fund; the increased
complexity of the domestic and international securities markets; Scudder's
profitability from advising the Fund; possible economies of scale; comparative
data as to investment performance, advisory fees and other fees, including
administrative fees, and expense ratios; the risks assumed by Scudder; the
advantages and possible disadvantages to the Fund of having an adviser of the
Fund which also serves other investment companies as well as other accounts;
possible benefits to Scudder from serving as manager to the Fund and from
affiliates of Scudder serving the Fund in various other capacities; current and
developing conditions in the financial services industry, including the entry
into the industry of large and well-capitalized companies which are spending,
and appear to be prepared to continue to spend, substantial sums to engage
personnel and to provide services to competing investment companies; and the
financial resources of Scudder and the continuance of appropriate incentives to
assure that Scudder will continue to furnish high quality services to the Fund.
In addition to the foregoing factors, the Non-interested Directors gave
careful consideration to the likely impact of the Transactions on the Scudder
5
<PAGE> 13
organization. In this regard, the Non-interested Directors considered, among
other things, the structure of the Transactions which affords Scudder executives
substantial autonomy over Scudder's operations and provides substantial equity
participation and incentives for many Scudder employees; Scudder's and Zurich's
commitment to Scudder's paying compensation adequate to attract and retain top
quality personnel; Zurich's strategy for the development of its asset management
business through Scudder; information regarding the financial resources and
business reputation of Zurich; and the complementary nature of various aspects
of the business of Scudder and ZKI and the intention to maintain separate
Scudder and ZKI brands in the mutual fund business. Based on the foregoing, the
Non-interested Directors concluded that the Transactions should cause no
reduction in the quality of services provided to the Fund and believe that the
Transactions should enhance Scudder's ability to provide such services.
On July 29, 1997, the Directors of the Fund, including the Non-interested
Directors of the Fund, approved the New Investment Management Agreement.
INFORMATION CONCERNING THE TRANSACTIONS AND ZURICH
Under the Transaction Agreement, Zurich will pay $866.7 million in cash to
acquire two-thirds of Scudder's outstanding shares and will contribute ZKI to
Scudder for additional shares, following which Zurich will have a 79.1% fully
diluted equity interest in the combined business. Zurich will then transfer a
9.6% fully diluted equity interest in Scudder Kemper to a defined compensation
plan established for the benefit of Scudder and ZKI employees, as well as cash
and warrants on Zurich shares for award to Scudder employees, in each case
subject to five-year vesting schedules. After giving effect to the Transactions,
current Scudder stockholders will have a 29.6% fully diluted equity interest in
Scudder Kemper and Zurich will have a 69.5% fully diluted interest in Scudder
Kemper. Scudder's name will be changed to Scudder Kemper Investments, Inc.
The purchase price for Scudder or for ZKI in the Transactions is subject to
adjustment based on the impact to revenues of non-consenting clients, and will
be reduced if the annualized investment management fee revenues (excluding the
effect of market changes, but taking into account new assets under management)
from clients at the time of closing, as a percentage of such revenues as of June
30, 1997 (the "Revenue Run Rate Percentage"), is less than 90%.
At the closing, Zurich and the other stockholders of Scudder Kemper will
enter into a Second Amended and Restated Security Holders Agreement (the "New
SHA"). Under the New SHA, Scudder stockholders will be entitled to designate
three of the seven members of the Scudder Kemper board and two of the four
members of an Executive Committee, which will be the primary management-level
committee of Scudder Kemper. Zurich will be entitled to designate the other four
members of the Scudder Kemper board and other two members of the Executive
Committee.
6
<PAGE> 14
The names, addresses and principal occupations of the initial Scudder-
designated directors of Scudder Kemper are as follows: Lynn S. Birdsong, 345
Park Avenue, New York, New York, Managing Director of Scudder; Cornelia M.
Small, 345 Park Avenue, New York, New York, Managing Director of Scudder; and
Edmond D. Villani, 345 Park Avenue, New York, New York, President, Chief
Executive Officer and Managing Director of Scudder.
The names, addresses and principal occupations of the initial Zurich-
designated directors of Scudder Kemper are as follows: Lawrence W. Cheng,
Mythenquai 2, Zurich, Switzerland, Chief Investment Officer for Investments and
Institutional Asset Management and the corporate functions of Securities and
Real Estate for Zurich; Steven M. Gluckstern, Mythenquai 2, Zurich, Switzerland,
responsible for Reinsurance, Structured Finance, Capital Market Products and
Strategic Investments, and a member of the Corporate Executive Board of Zurich;
Rolf Hueppi, Mythenquai 2, Zurich, Switzerland, Chairman of the Board and Chief
Executive Officer of Zurich; and Markus Rohrbasser, Mythenquai 2, Zurich,
Switzerland, Chief Financial Officer and member of the Corporate Executive Board
of Zurich.
The initial Scudder-designated Executive Committee members will be Messrs.
Birdsong and Villani (Chairman). The initial Zurich-designated Executive
Committee members will be Messrs. Cheng and Rohrbasser.
The New SHA requires the approval of a majority of the Scudder-designated
directors for certain decisions, including changing the name of Scudder Kemper,
effecting a public offering before April 15, 2005, causing Scudder Kemper to
engage substantially in non-investment management and related business, making
material acquisitions or divestitures, making material changes in Scudder
Kemper's capital structure, dissolving or liquidating Scudder Kemper, or
entering into certain affiliated transactions with Zurich. The New SHA also
provides for various put and call rights with respect to Scudder Kemper stock
held by current Scudder employees, limitations on Zurich's ability to purchase
other asset management companies outside of Scudder Kemper, rights of Zurich to
repurchase Scudder Kemper stock upon termination of employment of Scudder Kemper
personnel, and registration rights for stock held by continuing Scudder
stockholders.
The Transactions are subject to a number of conditions, including approval
by Scudder stockholders; the Revenue Run Rate Percentages of Scudder and ZKI
being at least 75%; Scudder and ZKI having obtained director and stockholder
approvals from U.S.-registered funds representing 90% of assets of such funds
under management as of June 30, 1997; the absence of any restraining order or
injunction preventing the Transactions, or any litigation challenging the
Transactions that is reasonably likely to result in an injunction or
invalidation of the Transactions; and the continued accuracy of the
representations and warranties contained in the Transaction Agreement. The
Transactions are expected to close during the fourth quarter of 1997.
7
<PAGE> 15
The information set forth above concerning the Transactions has been
provided to the Fund by Scudder, and the information set forth below concerning
Zurich has been provided to the Fund by Zurich.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services,
and have branch offices and subsidiaries in more than 40 countries throughout
the world. The Zurich Insurance Group is particularly strong in the insurance of
international companies and organizations. Over the past few years, Zurich's
global presence, particularly in the United States, has been strengthened by
means of selective acquisitions.
DESCRIPTION OF THE CURRENT INVESTMENT MANAGEMENT AGREEMENT
Under the Current Investment Management Agreement, Scudder provides the
Fund with continuing investment management services. The Investment Manager
makes investment decisions, prepares and makes available research and
statistical data and supervises the acquisition and disposition of securities by
the Fund, all in accordance with the Fund's investment objectives and policies
and in accordance with guidelines and directions from the Fund's Board of
Directors. The Investment Manager assists the Fund as it may reasonably request
in the conduct of the Fund's business, subject to the direction and control of
the Fund's Board of Directors. The Investment Manager is required to maintain or
cause to be maintained for the Fund all books, records and reports and any other
information required to be maintained under the 1940 Act to the extent such
books, records and reports and any other information are not maintained by the
Fund's custodian or other agents of the Fund. The Investment Manager also
supplies the Fund with office space in New York and furnishes clerical services
in the United States related to research, statistical and investment work. The
Investment Manager renders to the Fund administrative services such as preparing
reports to, and meeting materials for, the Fund's Board of Directors and reports
and notices to Fund stockholders, preparing and making filings with the
Securities and Exchange Commission and other regulatory and self-regulatory
organizations, including preliminary and definitive proxy materials and post-
effective amendments to the Fund's registration statement, providing assistance
in certain accounting and tax matters and investor public relations, monitoring
the valuation of portfolio securities, calculation of net asset value, and
overseeing arrangements with the Fund's custodian. The Investment Manager agrees
to pay reasonable salaries, fees and expenses of the Fund's officers and
employees and any fees and expenses of the Fund's directors who are directors,
officers or employees of the Investment Manager, except that the Fund bears
travel expenses (or an appropriate portion of those expenses) of directors and
officers of the Fund who are directors, officers or employees of the Investment
Manager
8
<PAGE> 16
to the extent that such expenses relate to attendance at meetings of the Board
of Directors or any committees of or advisors to the Board. During the Fund's
most recent fiscal year, no compensation, direct or otherwise (other than
through fees paid to the Investment Manager), was paid or became payable by the
Fund to any of its officers or Directors who were affiliated with the Investment
Manager.
Under the Current Investment Management Agreement, the Fund pays or causes
to be paid all of its other expenses, including, among others, the following:
organization and certain offering expenses (including out-of-pocket expenses,
but not including overhead or employee costs of the Investment Manager or of any
one or more organizations retained as an advisor or consultant to the Fund);
legal expenses; auditing and accounting expenses; telephone, facsimile, postage
and other communications expenses; taxes and governmental fees; stock exchange
listing fees; fees, dues and expenses incurred in connection with membership in
investment company trade organizations; fees and expenses of the Fund's
custodians, subcustodians, transfer agents and registrars, and accounting
agents; payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and other expenses in connection with the issuance, offering,
distribution, sale or underwriting of securities issued by the Fund; expenses of
registering or qualifying securities of the Fund for sale; expenses related to
investor and public relations; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of preparing and distributing reports, notices and
dividends to stockholders; expenses of the dividend reinvestment and cash
purchase plan (except for brokerage expenses paid by participants in such plan);
costs of stationery; any litigation expenses; and costs of stockholders' and
other meetings.
In return for the services provided by the Investment Manager as investment
manager, and the expenses it assumes under the Current Investment Management
Agreement (which takes into account the reduction in investment management fees
payable to the Investment Manager from 1.20% to 1.10% per annum of the value of
the Fund's average weekly net assets, effective as of November 1, 1997), the
Fund will pay the Investment Manager a monthly fee, which, on an annual basis,
is equal to 1.10% per annum of the value of the Fund's average weekly net
assets. This fee is higher than advisory fees paid by most other investment
companies, primarily because of the Fund's objective of investing in Argentine
securities, the additional time and expense required of the Investment Manager
in pursuing such objective and the need to enable the Investment Manager to
compensate the Argentine Adviser (as defined below) for its services. During the
fiscal year ended October 31, 1996, the fees paid to the Investment Manager,
pursuant to the investment management, advisory and administration agreement
dated November 1, 1996 (the agreement in effect prior to the reduction of
investment management fees), amounted to $1,501,434.
9
<PAGE> 17
Under the Current Investment Management Agreement, the Investment Manager
is permitted to provide investment advisory services to other clients, including
clients which may invest in securities of Argentine issuers and, in providing
such services, may use information furnished by advisors and consultants to the
Fund and others. Conversely, information furnished by others to the Investment
Manager in providing services to other clients may be useful to the Investment
Manager in providing services to the Fund.
Under the Current Investment Management Agreement, the Investment Manager
shall pay to any entity retained by the Investment Manager to provide
sub-advisory services with respect to Argentine securities, including the
Argentine Adviser, the fees required pursuant to the sub-advisory contract
relating to the Fund between Investment Manager and the Argentine Adviser. In
the event that the sub-advisory contract with the Argentine Adviser is
terminated, the Investment Manager is responsible for furnishing to the Fund the
services required to be performed by the Argentine Adviser or arranging for a
successor sub-investment adviser on terms and conditions acceptable to the Fund
and subject to the requirements of the 1940 Act.
The Current Investment Management Agreement may be terminated at any time
without payment of penalty by the Board of Directors, by vote of holders of a
majority of the outstanding voting securities of the Fund, or by the Investment
Manager on 60 days' written notice. The Current Investment Management Agreement
automatically terminates in the event of its assignment (as defined under the
1940 Act).
The Current Investment Management Agreement provides that the Investment
Manager is not liable for any act or omission, error of judgment or mistake of
laws or for any loss suffered by the Fund in connection with matters to which
the Investment Management Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Investment
Manager in the performance of its duties or from reckless disregard by the
Investment Manager of its obligations and duties under the Current Investment
Management Agreement.
Scudder has acted as the Investment Manager for the Fund since the Fund
commenced operations on August 16, 1991. The Current Investment Management
Agreement was last approved by the Board on July 29, 1997, at which meeting the
Board voted to reduce the fee paid to the Investment Manager as described above.
The Current Investment Management Agreement continues in effect until November
1, 1998. The investment management, advisory and administration agreement dated
November 1, 1996 (the agreement in effect prior to the reduction of investment
management fees) was last approved by the stockholders of the Fund on October
29, 1996. The purpose of the last submission to stockholders of such agreement
was to approve or disapprove a reduction in the fee paid to the Investment
Manager.
10
<PAGE> 18
THE NEW INVESTMENT MANAGEMENT AGREEMENT
The New Investment Management Agreement for the Fund will be dated as of
the date of the consummation of the Transactions, which is expected to occur in
the fourth quarter of 1997, but in no event later than February 28, 1998. The
New Investment Management Agreement will be in effect for an initial term ending
on the date which is one year from the date of its execution, and may continue
thereafter from year to year only if specifically approved at least annually by
the vote of "a majority of the outstanding voting securities" of the Fund, or by
the Board and, in either event, the vote of a majority of the Non-interested
Directors, cast in person at a meeting called for such purpose. In the event
that stockholders of the Fund do not approve the New Investment Management
Agreement, the Current Investment Management Agreement will remain in effect
until the closing of the Transactions, at which time it would terminate. In such
event, the Board of the Fund will take such action, if any, as it deems to be in
the best interest of the Fund and its stockholders. In the event the
Transactions are not consummated, Scudder will continue to provide services to
the Fund in accordance with the terms of the Current Investment Management
Agreement (which takes into account the reduction in investment management fees
payable to the Investment Manager from 1.20% to 1.10% per annum of the value of
the Fund's average weekly net assets, effective as of November 1, 1997) for such
periods as may be approved at least annually by the Board, including a majority
of the Non-interested Directors.
DIFFERENCES BETWEEN THE CURRENT AND NEW INVESTMENT MANAGEMENT AGREEMENTS
The New Investment Management Agreement is substantially the same as the
Current Investment Management Agreement in all material respects. The principal
changes that have been made are summarized below. The New Investment Management
Agreement reflects conforming changes that have been made in order to promote
consistency among all the funds advised by Scudder and to permit ease of
administration. For example, it is proposed that the New Investment Management
Agreement contain provisions that provide that Scudder Kemper shall use its best
efforts to seek the best overall terms available in executing transactions for
the Fund and selecting brokers and dealers and shall consider on a continuing
basis all factors it deems relevant, including the consideration of the
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) provided to the Fund and/or other accounts
over which Scudder Kemper or an affiliate exercises investment discretion. In
addition, with respect to the allocation of investment and sale opportunities
among the Fund and other accounts or funds managed by Scudder Kemper, it is
proposed that the New Investment Management Agreement provide that Scudder
Kemper shall allocate such opportunities in accordance with procedures believed
by Scudder Kemper to be equitable to each entity. It is proposed that the New
Investment Management Agreement will also clarify that such agreement supersedes
all prior agreements.
11
<PAGE> 19
INVESTMENT MANAGER
Scudder is one of the most experienced investment counsel firms in the
United States. It was established in 1919 as a partnership and was restructured
as a Delaware corporation in 1985. The principal source of Scudder's income is
professional fees received from providing continuing investment advice. Scudder
provides investment counsel for many individuals and institutions, including
insurance companies, endowments, industrial corporations and financial and
banking organizations.
Scudder is a Delaware corporation. Daniel Pierce* is the Chairman of the
Board of Scudder, Edmond D. Villani# is President and Chief Executive Officer of
Scudder, Stephen R. Beckwith#, Lynn S. Birdsong#, Nicholas Bratt#, E. Michael
Brown*, Mark S. Casady*, Linda C. Coughlin*, Margaret D. Hadzima*, Jerard K.
Hartman#, Richard A. Holt@, John T. Packard+, Kathryn L. Quirk#, Cornelia M.
Small# and Stephen A. Wohler* are the other members of the Board of Directors of
Scudder (see footnote for symbol key). The principal occupation of each of the
above named individuals is serving as a Managing Director of Scudder.
All of the outstanding voting and nonvoting securities of Scudder are held of
record by Stephen R. Beckwith, Juris Padegs#, Daniel Pierce, and Edmond D.
Villani in their capacity as the representatives of the beneficial owners of
such securities (the "Representatives"), pursuant to a Security Holders'
Agreement among Scudder, the beneficial owners of securities of Scudder and such
Representatives. Pursuant to the Security Holders' Agreement, the
Representatives have the right to reallocate shares among the beneficial owners
from time to time. Such reallocations will be at net book value in cash
transactions. All Managing Directors of Scudder own voting and nonvoting stock
and all Principals of Scudder own nonvoting stock.
Directors, officers and employees of Scudder from time to time may enter
into transactions with various banks, including the Fund's custodian bank. It is
Scudder's opinion that the terms and conditions of those transactions will not
be influenced by existing or potential custodial or other Fund relationships.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of Scudder,
computes net asset value and provides fund accounting services for the Fund.
Scudder Service Corporation ("SSC"), also a subsidiary of Scudder, is the
shareholding agent for the Fund. For the fiscal year ended October 31, 1996, the
fees paid to SFAC and SSC by the Fund were $89,292 and $15,000, respectively.
SFAC and SSC will continue to provide fund accounting and shareholding
- ------------------------------
* Two International Place, Boston, Massachusetts
# 345 Park Avenue, New York, New York
+ 101 California Street, San Francisco, California
@Two Prudential Plaza, 180 North Stetson, Suite 5400, Chicago, Illinois
12
<PAGE> 20
services to the Fund under the current arrangements if the New Investment
Management Agreement is approved.
Exhibit B sets forth the fees and other information regarding certain other
investment companies advised by Scudder.
BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS
To the maximum extent feasible, Scudder places orders for portfolio
transactions through Scudder Investor Services, Inc., Two International Place,
Boston, Massachusetts 02110 (the "Distributor") (a corporation registered as a
broker/dealer and a subsidiary of Scudder), which in turn places orders on
behalf of the Fund with issuers, underwriters or other brokers and dealers. In
selecting brokers and dealers with which to place portfolio transactions for the
Fund, Scudder will not consider sales of shares of funds currently advised by
ZKI, although it may place such transactions with brokers and dealers that sell
shares of funds currently advised by ZKI. The Distributor receives no
commissions, fees or other remuneration from the Fund for this service.
Allocation of portfolio transactions is supervised by Scudder.
REQUIRED VOTE
Approval of this Proposal requires the affirmative vote of a "majority of
the outstanding voting securities" of the Fund. The Directors recommend that the
stockholders vote in favor of this Proposal 1(A).
PROPOSAL 1(B): APPROVAL OR DISAPPROVAL OF
NEW RESEARCH AND ADVISORY AGREEMENT
Scudder has entered into a Research and Advisory Agreement with Sociedad
General de Negocios y Valores S.A. ("Sociedad General" or the "Argentine
Adviser") pursuant to which the Argentine Adviser furnishes information,
investment recommendations, advice and assistance to Scudder. The research and
advisory agreement that is currently in effect will be replaced, effective as of
November 1, 1997, by an agreement that reduces the fees that Scudder pays to
Sociedad General pursuant to such agreement from the current 0.26% per annum of
the average of the values of the net assets of the Fund on the last business day
of each week in the month for which the fee is computed to 0.16% of such amount.
The new agreement, which gives effect to the reduction of fees payable by
Scudder to Sociedad General, shall be referred to as the "Current Sub-Advisory
Agreement."
The Current Sub-Advisory Agreement provides that such agreement shall
automatically terminate in the event of the termination (due to assignment or
otherwise) of the Current Investment Management Agreement. As discussed in
Proposal 1(A), consummation of the Transactions will constitute an assignment of
the Current Investment Management Agreement and will therefore cause a
termination of the Current Sub-Advisory Agreement. (See Proposal 1(A) for
13
<PAGE> 21
more information regarding the Current Investment Management Agreement.) In
anticipation of the Transactions, a new research and advisory agreement (the
"New Sub-Advisory Agreement") between Scudder Kemper and Sociedad General is
being proposed for approval by stockholders of the Fund. THE NEW SUB-ADVISORY
AGREEMENT IS IN ALL MATERIAL RESPECTS ON THE SAME TERMS AS THE CURRENT
SUB-ADVISORY AGREEMENT. The material terms of the Current Sub-Advisory Agreement
are fully described under "The Current Sub-Advisory Agreement" below. A form of
the New Sub-Advisory Agreement is attached hereto as Exhibit C.
At its regularly scheduled, in-person meeting held on July 29, 1997, the
Board of the Fund, including a majority of the Non-interested Directors, voted
to approve the New Sub-Advisory Agreement. In considering whether to approve the
New Sub-Advisory Agreement, the Board considered similar factors to those it
considered in approving the New Investment Management Agreement, to the extent
applicable. (See Proposal 1(A) for more information regarding the Board of
Directors Evaluation.) In addition to the foregoing factors, the Board also
considered the Argentine Adviser's position as a leading firm in Argentina in
developing investment research capabilities; information submitted by the
Argentine Adviser as to revenues and expenses; information relating to the
execution of portfolio transactions for the Fund by an affiliate of the
Argentine Adviser; and various other factors.
THE CURRENT SUB-ADVISORY AGREEMENT
The Current Sub-Advisory Agreement provides that the Argentine Adviser
shall furnish Scudder such information, investment recommendations, advice and
assistance as Scudder shall from time to time reasonably request, although it
does not have authority to make investment decisions on behalf of the Fund.
Information from the Argentine Adviser is evaluated by Scudder's research
department and portfolio managers, in light of their own expertise and
information from other sources, in making investment decisions for the Fund.
In return for the services it renders under the Current Sub-Advisory
Agreement (which takes into account the reduction of fees payable to the
Argentine Adviser from 0.26% to 0.16% per annum of the average of the values of
the net assets of the Fund on the last business day of each week in the month
for which the fee is computed, effective as of November 1, 1997), the Argentine
Adviser will be paid by Scudder monthly compensation which, on an annual basis,
is equal to 0.16% per annum of the average of the values of the net assets of
the Fund on the last business day of each week in the month for which the fee is
computed. During the fiscal year ended October 31, 1996, the fees paid by
Scudder to the Argentine Adviser, pursuant to the research and advisory
agreement dated November 1, 1996 (the agreement in effect prior to the reduction
of fees), amounted to $415,760.
14
<PAGE> 22
The Current Sub-Advisory Agreement further provides that the Argentine
Adviser shall not be liable for any act or omission in the course of, connected
with or arising out of any services to be rendered under the Current
Sub-Advisory Agreement, except by reason of willful misfeasance, bad faith or
gross negligence on the part of the Argentine Adviser in the performance of its
duties or from reckless disregard by the Argentine Adviser of its obligations
and duties under the Current Sub-Advisory Agreement.
The Current Sub-Advisory Agreement may be terminated without penalty upon
sixty (60) days' written notice by either party, or by a majority vote of the
outstanding voting securities of the Fund, and, as stated above, automatically
terminates in the event of the termination of the Investment Management
Agreement or in the event of its assignment.
The Current Sub-Advisory Agreement was last approved by the Board on July
29, 1997, at which meeting the Board voted to reduce the fee paid to the
Argentine Adviser as discussed above. The Current Sub-Advisory Agreement
continues in effect until November 1, 1998. The research and advisory agreement
dated November 1, 1996 (the agreement in effect prior to the reduction of fees)
was last approved by the stockholders of the Fund on October 29, 1996. The
purpose of the last submission to stockholders of such agreement was to approve
or disapprove a reduction in the fee paid to the Argentine Sub-Adviser.
The New Sub-Advisory Agreement will be dated as of the date of the
consummation of the Transactions, which is expected to occur in the fourth
quarter of 1997, but in no event later than February 28, 1998. The New
Sub-Advisory Agreement will be in effect for an initial term ending on the date
which is one year from the date of its execution, and may continue thereafter
from year to year if specifically approved at least annually by the vote of "a
majority of the outstanding voting securities" of the Fund, or by the Board and,
in either event, the vote of a majority of the Directors who are not parties to
the agreement or interested persons of any such party, cast in person at a
meeting called for such purpose. In the event that stockholders of the Fund do
not approve the New Sub-Advisory Agreement, the Current Sub-Advisory Agreement
will remain in effect until the closing of the Transactions and the Board will
take such action, if any, as it deems to be in the best interests of the Fund
and its stockholders. In the event the Transactions are not consummated, the
Argentine Adviser will continue to provide services to Scudder in accordance
with the terms of the Current Sub-Advisory Agreement for such periods as may be
approved at least annually by the Board, including a majority of the Non-
interested Directors. The New Sub-Advisory Agreement will not be implemented
unless Proposal 1(A) is also approved by the stockholders of the Fund.
ARGENTINE ADVISER
The Argentine Adviser, Sociedad General de Negocios y Valores S.A., an
investment adviser registered under the United States Investment Advisers Act of
1940, was organized in August 1991, and is 99% owned by Banco General
15
<PAGE> 23
de Negocios ("BGN"), an Argentine bank. The Adviser is located at Esmeralda 130,
7th Floor, Office "C" (1035) Buenos Aires, Argentina.
The Chairman of the Argentine Adviser is Armando Braun, the Vice Chairman
is Julio D. Barroero and the Director is Claudio G. Waidelich. Their business
address is Esmeralda 130, 7th Floor, Office "C", Buenos Aires, Argentina. The
Chairman of the Board of BGN is Jose E. Rohm and Carlos A. Rohm is the Vice
Chairman of the Board, each of whom is also located at the aforementioned
address. The directors of BGN are Rudolf W. Hug, Dr. Jose Maria Alvarez de
Toledo, Dr. Jose A. Martinez de Hoz, Dr. Carlos Felix Pando Casado, Hector E.
Puppo, Jorge E. Kalledey, Hansgeorg Hofmann, Adalbert Krieger Vasena, David C.
Mulford and Brian O'Neill. The Argentine stockholders of BGN are the Rohm,
Dodero and de Corral family interests, and the non-Argentine stockholders are
Credit Suisse First Boston, Chase International Limited, Dresdner Bank
Lateinamerika A.G. and Banca Nazionale del Lavoro SPA.
Orders for the purchase and sale of securities for the Fund's portfolio may
be placed with BGN and its affiliates as well as other Argentine brokers and
financial institutions.
REQUIRED VOTE
Approval of this Proposal requires the affirmative vote of a "majority of
the outstanding voting securities" of the Fund. The Directors recommend that the
stockholders vote in favor of this Proposal 1(B).
16
<PAGE> 24
PROPOSAL 2: ELECTION OF DIRECTORS
Persons named in the accompanying proxy card intend, in the absence of
contrary instructions, to vote all proxies in favor of the election of the two
nominees listed below as Nominees for Director of the Fund to serve for the
stipulated terms, or until their successors are duly elected and qualified. All
nominees have consented to stand for election and to serve if elected. If any
such nominee should be unable to serve, an event not now anticipated, the
proxies will be voted for such person, if any, as shall be designated by the
Board of Directors to replace any such nominee.
INFORMATION CONCERNING NOMINEES
The following table sets forth certain information concerning each of the
nominees as a Director of the Fund. Unless otherwise noted, each of the nominees
has engaged in the principal occupation listed in the following table for more
than five years, but not necessarily in the same capacity. For election of
Directors at the Meeting, the Board of Directors has approved the nomination of
the individuals listed below.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
OWNED AND %
PRESENT OFFICE WITH THE FUND, OF TOTAL
NAME (AGE) PRINCIPAL OCCUPATION OR DIRECTOR OUTSTANDING ON
----------- EMPLOYMENT AND DIRECTORSHIPS SINCE JUNE 30, 1997 (1)
---------------------------------- -------- -----------------
CLASS II NOMINEES TO SERVE UNTIL 2000 ANNUAL MEETING OF STOCKHOLDERS
<S> <C> <C> <C>
NICHOLAS BRATT* (49) President; Managing Director of -- 1,641
Scudder, Stevens & Clark, Inc.;
and Director, Korea Society
(private society). Mr. Bratt
serves on the boards of an
additional 15 funds managed by
Scudder.
JAVIER A. GONZALEZ FRAGA Chairman, Argentine Institute of 1996 --
(49) Capital Markets; Vice President,
Buenos Aires Stock Exchange.
</TABLE>
17
<PAGE> 25
INFORMATION CONCERNING CONTINUING DIRECTORS
The Board of Directors is divided into three classes with each Director
serving for a term of three years. The following table sets forth certain
information regarding the Directors. Unless otherwise noted, each Director has
engaged in the principal occupation listed in the following table for more than
five years, but not necessarily in the same capacity.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
OWNED AND %
PRESENT OFFICE WITH THE FUND, OF TOTAL
NAME (AGE) PRINCIPAL OCCUPATION OR DIRECTOR OUTSTANDING ON
----------- EMPLOYMENT AND DIRECTORSHIPS SINCE JUNE 30, 1997 (1)
---------------------------------- -------- -----------------
CLASS III NOMINEES TO SERVE UNTIL 1998 ANNUAL MEETING OF STOCKHOLDERS
<S> <C> <C> <C>
RONALDO A. DA FROTA NOGUEIRA Director and Chief Executive 1991 1,100
(58) Officer, IMF Editora Ltda.
(financial publisher). Mr.
Nogueira serves on the boards of
an additional three funds managed
by Scudder.
DR. SUSAN KAUFMAN PURCELL Vice President, Council of the 1991 200
(55) Americas; Vice President, Americas
Society; Director, Valero Energy
Corp. Dr. Purcell serves on the
boards of an additional two funds
managed by Scudder.
CLASS I DIRECTORS SERVING UNTIL 1999 ANNUAL MEETING OF STOCKHOLDERS
WILSON NOLEN (70) Consultant; Trustee, Cultural 1991 10,979
Institutions Retirement Fund,
Inc., New York Botanical Garden,
Skowhegan School of Painting &
Sculpture; Director, Ecohealth,
Inc. (biotechnology company)
(until 1996). Dr. Nolen serves on
the boards of an additional 16
funds managed by Scudder.
All Directors and Officers 24,920 (2)
as a Group
</TABLE>
- ------------------------------
* Director considered by the Fund and its counsel to be an "interested person"
(as defined in the 1940 Act) of the Fund or of its investment manager. Mr.
Bratt is deemed to be an interested person because of his affiliation with
the Fund's investment manager, Scudder, and because he is an officer of the
Fund.
(1) The information as to beneficial ownership is based on statements furnished
to the Fund by each Director. Unless otherwise noted, beneficial ownership
is based on sole voting and investment power. Each Director or Nominee's
individual shareholdings constitutes less than 1/4 of 1% of the shares
outstanding.
(2) As a group, the Directors, Nominees and Officers own 0.27% of the
outstanding shares of the Fund.
Kathryn L. Quirk and Edmond D. Villani, who are currently Directors of the
Fund, will each resign effective as of the date of the Meeting.
18
<PAGE> 26
To the best of the Fund's knowledge, as of June 30, 1997, no person owned
beneficially more than 5% of the outstanding shares of the Fund, except as set
forth in Exhibit D.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
and Section 30(h) of the 1940 Act, as applied to a fund, require the fund's
officers, directors, investment manager or adviser, affiliates of the investment
manager or adviser, and persons who beneficially own more than 10% of a
registered class of the fund's outstanding securities ("Reporting Persons"), to
file reports of ownership of the fund's securities and changes in such ownership
with the Securities and Exchange Commission and the New York Stock Exchange.
Such persons are required by Securities and Exchange Commission regulations to
furnish the fund with copies of all such filings.
Based solely upon its review of the copies of such forms received by it and
written representations from certain Reporting Persons that no year-end reports
were required for those persons, the Fund believes that during the fiscal year
ended December 31, 1996, all filing requirements applicable to its Reporting
Persons were complied with except that Forms 3 on behalf of Eduardo Herrera,
Diego Portela, Ignacio Goni and Eljandro Castro (officers of Sociedad General)
as well as the following subsidiaries of Scudder were filed late: Scudder Fund
Accounting Corporation; Scudder Realty Holdings Corporation; Scudder, Stevens &
Clark Asia Limited; Scudder Canada Investor Services L.T.D.; Scudder Defined
Contribution Services, Inc.; Scudder Capital Stock Corporation; SIS Investment
Corporation; SRV Investment Corporation; Scudder Cayman Ltd.; Scudder, Stevens &
Clark Australia Limited; and Scudder Realty Holdings (II) L.L.C.
HONORARY DIRECTOR
Jose E. Rohm serves as an Honorary Director of the Fund. Honorary Directors
are invited to attend all Board meetings and to participate in Board
discussions, but are not entitled to vote on any matter presented to the Board.
Mr. Rohm served as a Director of the Fund since 1991 and resigned from the Board
in 1997.
COMMITTEES OF THE BOARD -- BOARD MEETINGS
The Board of the Fund has both an Audit Committee and a Committee on
Independent Directors, the responsibilities of which are described below. The
Board of the Fund met four times during the Fund's most recently completed
fiscal year. Each then current Director attended at least 75% of the total
number of meetings of the Board and the committees of which they served as
regular members that were held during that period, except Mr. Fraga, who
attended 50% of the meetings of the Board of Directors and related committees on
which he serves.
19
<PAGE> 27
AUDIT COMMITTEE
The Board has an Audit Committee consisting of the Non-interested
Directors. The Audit Committee reviews with management and the independent
accountants for the Fund, among other things, the scope of the audit and the
controls of the Fund and its agents, reviews and approves in advance the type of
services to be rendered by independent accountants, recommends the selection of
independent accountants for the Fund to the Board and, in general, considers and
reports to the Board on matters regarding the Fund's accounting and bookkeeping
practices. The Audit Committee met once during the fiscal year ended October 31,
1996.
COMMITTEE ON INDEPENDENT DIRECTORS
The Board has a Committee on Independent Directors consisting of all the
Non-interested Directors. The Committee is charged with the duty of making all
nominations for Non-interested Directors and consideration of other related
matters. Stockholders' recommendations as to nominees received by management are
referred to the Committee for its consideration and action. The Committee met
once during the fiscal year ended October 31, 1996.
EXECUTIVE OFFICERS
In addition to Mr. Bratt, a Director who is also President of the Fund, the
following persons are Executive Officers of the Fund:
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE
FUND;
PRINCIPAL OCCUPATION OR YEAR FIRST BECAME
NAME (AGE) EMPLOYMENT(1) AN OFFICER(2)
- -------------------------- ------------------------- -----------------
<S> <C> <C>
Paul J. Elmlinger (39) Vice President and 1991
Assistant Secretary;
Managing Director of
Scudder, Stevens & Clark,
Inc.
Edmund B. Games, Jr. (59) Vice President; Managing 1991
Director of Scudder,
Stevens & Clark, Inc.
Jerard K. Hartman (64) Vice President, Managing 1991
Director of Scudder,
Stevens & Clark, Inc.
David S. Lee (63) Vice President, Managing 1991
Director of Scudder,
Stevens & Clark, Inc.
Luis R. Luis (53) Vice President, Managing 1991
Director of Scudder,
Stevens & Clark, Inc.
Thomas F. McDonough (50).. Vice President and 1991
Secretary; Principal of
Scudder, & Clark, Inc.
</TABLE>
20
<PAGE> 28
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE
FUND;
PRINCIPAL OCCUPATION OR YEAR FIRST BECAME
NAME (AGE) EMPLOYMENT(1) AN OFFICER(2)
- -------------------------- ------------------------- -----------------
<S> <C> <C>
Pamela A. McGrath (43) Vice President and 1991
Treasurer; Managing
Director of Scudder,
Stevens & Clark, Inc.
Edward J. O'Connell(52) Vice President and 1991
Assistant Treasurer;
Principal of Scudder,
Stevens & Clark, Inc.
Kathryn L. Quirk (44) Vice President and 1991
Assistant Secretary;
Managing Director of
Scudder, Stevens & Clark,
Inc.
</TABLE>
- ------------------------------
(1) Unless otherwise stated, all of the Executive Officers have been associated
with Scudder for more than five years, although not necessarily in the same
capacity.
(2) The President, Treasurer and Secretary each holds office until his or her
successor has been duly elected and qualified, and all other officers hold
offices in accordance with the By-laws of the Fund.
TRANSACTIONS WITH, AND REMUNERATION OF, DIRECTORS AND OFFICERS
The aggregate direct remuneration paid by the Fund to Non-interested
Directors was $69,431, including expenses, during the fiscal year ended October
31, 1996. Each Non-interested Director currently receives fees, paid by the
Fund, of $750 per regular Directors' meeting attended. Each Non-interested
Director currently receives an annual Director's fee of $6,000. Each
Non-interested Director also receives $250 per committee meeting attended (other
than Audit Committee meetings and meetings held for the purposes of considering
arrangements between the Fund and the Investment Manager or an affiliate of the
Investment Manager, for which such Non-interested Director receives a fee of
$750). Scudder supervises the Fund's investments, pays the compensation and
certain expenses of its personnel who serve as Directors and Officers of the
Fund and receives an investment management fee for its services. Certain of the
Fund's Officers and Directors are also Officers, Directors, employees or
stockholders of Scudder and participate in the fees paid to that firm, although
the Fund makes no direct payments to them other than for reimbursement of travel
expenses in connection with the attendance at Board of Directors and committee
meetings.
21
<PAGE> 29
The following Compensation Table provides in tabular form the following
data:
Column (1) All Directors who receive compensation from the Fund.
Column (2) Aggregate compensation received by each Director of the
Fund.
Columns (3) and (4) Pension or retirement benefits accrued or proposed
to be paid by the Fund.
Column (5) Total compensation received by each Director from funds
managed by Scudder (collectively, the "Fund Complex") during the calendar
year 1996.
Generally, compensation received by a Director for serving on the Board of
a closed-end fund is greater than the compensation received by a Director for
serving on the Board of an open-end fund.
COMPENSATION TABLE
for the year ended December 31, 1996
<TABLE>
<CAPTION>
(3) (4) (5)
(2) PENSION OR ESTIMATED TOTAL
AGGREGATE RETIREMENT ANNUAL COMPENSATION
(1) COMPENSATION BENEFITS ACCRUED BENEFITS FROM THE FUND
NAME OF PERSON, FROM THE AS PART OF FUND UPON AND FUND COMPLEX
POSITION FUND COMPLEX EXPENSES RETIREMENT PAID TO DIRECTOR
- ---------------------- ------------ ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
Javier A. Gonzalez $ 4,019 N/A N/A $ 4,019
Fraga, Director (1 fund)*
Ronaldo A. da Frota $ 10,775 N/A N/A $ 49,775
Nogueira, Director (4 funds)
Wilson Nolen, $ 12,250 N/A N/A $165,608
Director (17 funds)**
Dr. Susan Kaufman $ 12,500 N/A N/A $ 37,900
Purcell, Director (3 funds)
</TABLE>
- ------------------------------
* Mr. Fraga became a Director of the Fund on June 1, 1996.
** This does not include membership on the Boards of funds which commenced
operations in 1996.
REQUIRED VOTE
Election of each of the listed nominees for Director requires the
affirmative vote of a majority of the votes cast at the Meeting in person or by
proxy. The Directors of the Fund recommend that the stockholders vote in favor
of each of the nominees listed in this Proposal 2.
22
<PAGE> 30
PROPOSAL 3: RATIFICATION OR REJECTION
OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Fund, including a majority of the Non-
interested Directors, has selected Coopers & Lybrand L.L.P. to act as
independent accountants for the Fund for the Fund's current fiscal year ending
October 31, 1997. Coopers & Lybrand L.L.P. are independent accountants and have
advised the Fund that they have no direct financial interest or material
indirect financial interest in the Fund. One or more representatives of Coopers
& Lybrand L.L.P. are expected to be present at the Meeting and will have an
opportunity to make a statement if they so desire. Such representatives are
expected to be available to respond to appropriate questions posed by
stockholders or management.
REQUIRED VOTE
Ratification of the selection of independent accountants requires the
affirmative vote of a majority of the votes cast at the Meeting in person or by
proxy. The Directors recommend that the stockholders of the Fund vote in favor
of this Proposal 3.
ADDITIONAL INFORMATION
GENERAL
Aside from the ordinary expenses incurred by the Fund in conducting an
annual meeting, the cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement and all other costs incurred in
connection with the solicitation of proxies, including any additional
solicitation made by letter, telephone or telegraph, will be paid by Scudder. In
addition to solicitation by mail, certain officers and representatives of the
Fund, officers and employees of Scudder and certain financial services firms and
their representatives, who will receive no extra compensation for their
services, may solicit proxies by telephone, telegram or personally.
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies. As the Meeting date approaches, certain
stockholders of the Fund may receive a telephone call from a representative of
SCC if their vote has not yet been received. Authorization to permit SCC to
execute proxies may be obtained by telephonic or electronically transmitted
instructions from stockholders of the Fund. Proxies that are obtained
telephonically will be recorded in accordance with the procedures set forth
below. These procedures have been reasonably designed to ensure that the
identity of the stockholder casting the vote is accurately determined and that
the voting instructions of the stockholder are accurately determined.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each stockholder's full name, address, social security or
23
<PAGE> 31
employer identification number, title (if the stockholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned
and to confirm that the stockholder has received the Proxy Statement and card in
the mail. If the information solicited agrees with the information provided to
SCC, then the SCC representative has the responsibility to explain the process,
read the proposals listed on the proxy card, and ask for the stockholder's
instructions on each proposal. The SCC representative, although he or she is
permitted to answer questions about the process, is not permitted to recommend
to the stockholder how to vote, other than to read any recommendation set forth
in the Proxy Statement. SCC will record the stockholder's instructions on the
card. Within 72 hours, the stockholder will be sent a letter or mailgram to
confirm his or her vote and asking the stockholder to call SCC immediately if
his or her instructions are not correctly reflected in the confirmation.
If the stockholder wishes to participate in the Meeting, but does not wish
to give his or her proxy by telephone, the stockholder may still submit the
proxy card originally sent with the Proxy Statement or attend in person. Should
stockholders require additional information regarding the proxy or replacement
proxy cards, they may contact SCC toll-free at 1-800-733-8481, ext. 488. Any
proxy given by a stockholder, whether in writing or by telephone, is revocable.
PROPOSALS OF STOCKHOLDERS
Stockholders wishing to submit proposals to be presented at the 1998
meeting of stockholders of the Fund should send their written proposals to the
Secretary of the Fund, c/o Scudder, Stevens & Clark, Inc., 345 Park Avenue, New
York, New York 10154, within a reasonable time before the solicitation of
proxies for such meeting.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Directors of the Fund is not aware of any matters that will be
presented for action at the Meeting other than the matters set forth herein.
Should any other matters requiring a vote of stockholders arise, the proxy in
the accompanying form will confer upon the person or persons entitled to vote
the shares represented by such proxy the discretionary authority to vote the
shares as to any such other matters in accordance with their best judgment in
the interest of the Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Directors,
[Thomas F. McDonough signature]
Thomas F. McDonough
Secretary
24
<PAGE> 32
EXHIBIT A
FORM OF NEW
INVESTMENT ADVISORY, MANAGEMENT AND
ADMINISTRATION AGREEMENT
AGREEMENT, dated and effective as of between THE ARGENTINA FUND,
INC., a Maryland corporation (herein referred to as the "Fund"), and SCUDDER
KEMPER INVESTMENTS, INC., a Delaware corporation (herein referred to as the
"Manager").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed by the parties as follows:
1. The Manager hereby undertakes and agrees, upon the terms and
conditions herein set forth, (i) to make investment decisions for the Fund,
to prepare and make available to the Fund research and statistical data in
connection therewith and to supervise the acquisition and disposition of
securities by the Fund, including the selection of brokers or dealers to
carry out the transactions, all in accordance with the Fund's investment
objectives and policies and in accordance with guidelines and directions
from the Fund's Board of Directors; (ii) to assist the Fund as it may
reasonably request in the conduct of the Fund's business, subject to the
direction and control of the Fund's Board of Directors; (iii) to maintain
or cause to be maintained for the Fund all books, records, reports and any
other information required under the Investment Company Act of 1940, as
amended (the "1940 Act"), to the extent that such books, records and
reports and other information are not maintained or furnished by the
custodian or other agents of the Fund; (iv) to furnish at the Manager's
expense for the use of the Fund such office space and facilities as the
Fund may require for its reasonable needs in the City of New York and to
furnish at the Manager's expense clerical services in the United States
related to research, statistical and investment work; (v) to render to the
Fund administrative services such as preparing reports to and meeting
materials for the Fund's Board of Directors and reports and notices to
stockholders, preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory
organizations, including preliminary and definitive proxy materials and
post-effective amendments to the Fund's registration statement on Form N-2
under the Securities Act of 1933, as amended, and 1940 Act, as amended from
time to time, providing assistance in certain accounting and tax matters
and investor and public relations, monitoring the valuation of portfolio
securities, assisting in the calculation of net asset value and calculation
and payment of distributions to stockholders, and overseeing arrangements
with the Fund's custodian,
<PAGE> 33
including the maintenance of books and records of the Fund; and (vi) to pay
the reasonable salaries, fees and expenses of such of the Fund's officers
and employees (including the Fund's shares of payroll taxes) and any fees
and expenses of such of the Fund's directors as are directors, officers or
employees of the Manager; provided, however, that the Fund, and not the
Manager, shall bear travel expenses (or an appropriate portion thereof) of
directors and officers of the Fund who are directors, officers or employees
of the Manager to the extent that such expenses relate to attendance at
meetings of the Board of Directors of the Fund or any committees thereof or
advisers thereto. The Manager shall bear all expenses arising out of its
duties hereunder but shall not be responsible for any expenses of the Fund
other than those specifically allocated to the Manager in this paragraph 1.
In particular, but without limiting the generality of the foregoing, the
Manager shall not be responsible, except to the extent of the reasonable
compensation of such of the Fund's employees as are directors, officers or
employees of the Manager whose services may be involved, for the following
expenses of the Fund: organization and certain offering expenses of the
Fund (including out-of-pocket expenses, but not including overhead or
employee costs of the Manager or of any one or more organizations retained
as an advisor or consultant to the Fund); fees payable to the Manager and
to any advisor or consultants, including an advisory board, if applicable;
legal expenses; auditing and accounting expenses; telephone, telex,
facsimile, postage and other communication expenses; taxes and governmental
fees; stock exchange listing fees; fees, dues and expenses incurred by the
Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's custodians, subcustodians,
transfer agents and registrars; payment for portfolio pricing or valuation
services to pricing agents, accountants, bankers and other specialists, if
any; expenses of preparing share certificates and other expenses in
connection with the issuance, offering, distribution, sale or underwriting
of securities issued by the Fund; expenses of registering or qualifying
securities of the Fund for sale; expenses relating to investor and public
relations; freight, insurance and other charges in connection with the
shipment of the Fund's portfolio securities; brokerage commissions or other
costs of acquiring or disposing of any portfolio securities of the Fund;
expenses of preparing and distributing reports, notices and dividends to
stockholders; costs of stationery; costs of stockholders' and other
meetings; litigation expenses; or expenses relating to the Fund's dividend
reinvestment and cash purchase plan (except for brokerage expenses paid by
participants in such plan).
2. The Fund agrees to pay to the Manager in United States dollars, as
full compensation for the services to be rendered and expenses to be borne
by the Manager hereunder, a monthly fee which, on an annual basis, is equal
to 1.10% per annum of the value of the Fund's average weekly net assets.
Each payment of a monthly fee to the Manager shall be made within the ten
days next following the day as of which such payment is so
A-2
<PAGE> 34
computed. The Manager shall pay any entity retained by the Manager to
provide investment sub-advisory services with respect to Argentine
securities (the "Argentine Adviser") the fees required pursuant to the
sub-advisory contract with the Argentine Adviser. In the event that the
sub-advisory contract with the Argentine Adviser is terminated, the Manager
shall be responsible for furnishing to the Fund the services required to be
performed by the Argentine Adviser under these arrangements or arranging
for a successor sub-investment adviser on terms and conditions acceptable
to the Fund and subject to the requirements of the 1940 Act. Upon any
termination of this Agreement before the end of a month, the fee for such
part of that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon the date
of termination of this Agreement.
The value of the net assets of the Fund shall be determined pursuant
to the applicable provisions of the Articles of Incorporation and By-laws
of the Fund, as amended from time to time.
3. The Manager agrees that it will not make a short sale of any
capital stock of the Fund or purchase any share of the capital stock of the
Fund otherwise than for investment.
4. In executing transactions for the Fund and selecting brokers or
dealers, the Manager shall use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any Fund
transaction, the Manager shall consider on a continuing basis all factors
it deems relevant, including, but not limited to, breadth of the market in
the security, the price of the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of any
commission for the specific transaction. In selecting brokers or dealers to
execute a particular transaction and in evaluating the best overall terms
available, the Manager may consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) provided to the Fund and/or other accounts over which the Manager or
an affiliate exercises investment discretion.
5. Nothing herein shall be construed as prohibiting the Manager from
providing investment advisory services to, or entering into investment
advisory agreements with, other clients (including other registered
investment companies), including clients which may invest in securities of
Argentine issuers, or from utilizing (in providing such services)
information furnished to the Manager by advisors and consultants to the
Fund and others; nor shall anything herein be construed as constituting the
Manager as an agent of the Fund.
Whenever the Fund and one or more other accounts or investment
companies advised by the Manager have available funds for investment,
investments suitable and appropriate for each shall be allocated in accor-
A-3
<PAGE> 35
dance with procedures believed by the Manager to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by the Manager to be equitable. The Fund recognizes that in
some cases this procedure may adversely affect the size of the position
that may be acquired or disposed of for the Fund. In addition, the Fund
acknowledges that the persons employed by the Manager to assist in the
performance of the Manager's duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit
or restrict the right of the Manager or any affiliate of the Manager to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
6. The Manager may rely on information reasonably believed by it to be
accurate and reliable. Neither the Manager nor its officers, directors,
employees or agents shall be subject to any liability for any act or
omission, error of judgment or mistake of law, or for any loss suffered by
the Fund, in the course of, connected with or arising out of any services
to be rendered hereunder, except by reason of willful misfeasance, bad
faith, or gross negligence on the part of the Manager in the performance of
its duties or by reason of reckless disregard on the part of the Manager of
its obligations and duties under this Agreement. Any person, even though
also employed by the Manager, who may be or become an employee of the Fund
and paid by the Fund shall be deemed, when acting within the scope of his
employment by the Fund, to be acting in such employment solely for the Fund
and not as an employee or agent of the Manager.
7. This Agreement shall remain in effect until the date which is one
year from the day and year first written above, and shall continue in
effect thereafter, but only so long as such continuance is specifically
approved at least annually by the affirmative vote of (i) a majority of the
members of the Fund's Board of Directors who are not parties to this
agreement or interested persons of any party to this agreement, or of any
entity regularly furnishing investment advisory services with respect to
the Fund pursuant to an agreement with any party to this agreement, cast in
person at a meeting called for the purpose of voting on such approval, and
(ii) a majority of the Fund's Board of Directors or the holders of a
majority of the outstanding voting securities of the Fund. This Agreement
may nevertheless be terminated at any time without penalty, on 60 days'
written notice, by the Fund's Board of Directors, by vote of holders of a
majority of the outstanding voting securities of the Fund, or by the
Manager.
This Agreement shall automatically be terminated in the event of its
assignment, provided that an assignment to a corporate successor to all or
substantially all of the Manager's business or to a wholly-owned subsidiary
of such corporate successor which does not result in a change of actual
control or management of the Manager's business shall not be deemed to be
an assignment for the purposes of this Agreement. Any notice to the
A-4
<PAGE> 36
Fund or the Manager shall be deemed given when received by the
addressee.
8. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by either party hereto, except as permitted
under the 1940 Act or rules and regulations adopted thereunder. It may be
amended by mutual agreement, but only after authorization of such amendment
by the affirmative vote of (i) the holders of a majority of the outstanding
voting securities of the Fund, and (ii) a majority of the members of the
Fund's Board of Directors who are not parties to this Agreement or
interested persons of any party to this Agreement, or of any entity
regularly furnishing investment advisory services with respect to the Fund
pursuant to an agreement with any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval.
9. This Agreement shall be construed in accordance with the laws of
the State of New York, without giving effect to the conflicts of laws
principles thereof, provided, however, that nothing herein shall be
construed as being inconsistent with the 1940 Act. As used herein, the
terms "interested person," "assignment," and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the
1940 Act.
10. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for
more than one such counterpart.
11. This Agreement supersedes all prior investment advisory,
management, and/or administration agreements in effect between the Fund and
the Manager.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
officers thereunto duly authorized as of the day and year first written above.
THE ARGENTINA FUND, INC.
By:
Title: President
SCUDDER KEMPER INVESTMENTS, INC.
By:
Title:
A-5
<PAGE> 37
EXHIBIT B
INVESTMENT OBJECTIVES AND ADVISORY FEES
FOR CERTAIN FUNDS ADVISED BY SCUDDER, STEVENS & CLARK, INC.
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
GLOBAL GROWTH
Scudder Global Fund Long-term growth of capital 1.000% to $1,604,465,769
through investment in a $500 million
diversified portfolio of 0.950% next
marketable foreign and domestic $500 million
securities, primarily equity 0.900% thereafter
securities.
Institutional International Long-term growth of capital 0.900% of $ 17,897,508
Equity Portfolio primarily through a diversified net assets+
portfolio of marketable foreign
equity securities.
Scudder International Growth Long-term growth of capital and 1.000% of $ 25,631,898**
and Income Fund current income primarily from net assets+
foreign equity securities
Scudder International Fund Long-term growth of capital 0.900% to $2,583,030,686
primarily through a diversified $500 million
portfolio of marketable foreign 0.850% next
equity securities. $500 million
0.800% next
$1 billion
0.750% next
$1 billion
0.700% thereafter
Scudder Global Discovery Above-average capital 1.100% of $ 350,829,980
Fund appreciation over the long-term net assets
by investing primarily in the
equity securities of small
companies located throughout the
world.
Scudder Emerging Markets Long-term growth of capital 1.250% of $ 75,793,693
Growth Fund primarily through equity net assets+
investments in emerging markets
around the globe.
Scudder Greater Europe Long-term growth of capital 1.000% of $ 120,300,058
Growth Fund through investment primarily in net assets
the equity securities of European
companies.
Scudder Pacific Long-term growth of capital 1.100% of $ 329,391,540
Opportunities Fund primarily through investment in net assets
the equity securities of Pacific
Basin companies, excluding Japan.
Scudder Latin America Fund Long-term capital appreciation Effective 9/11/97: $ 621,914,690
through investment primarily in 1.250% to
the securities of Latin American $1 billion
issuers. 1.150% thereafter
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless otherwise indicated.
** Program assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
</TABLE>
<PAGE> 38
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
The Japan Fund, Inc. Long-term capital appreciation 0.850% to $ 385,963,962
through investment primarily in $100 million
equity securities of Japanese 0.750% next
companies. $200 million
0.700% next
$300 million
0.650% thereafter
CLOSED-END FUNDS
The Argentina Fund, Inc. Long-term capital appreciation Adviser: $ 117,596,046
through investment primarily in Effective 11/1/97:
equity securities of Argentine 1.100% of
issuers. net assets
Sub-Adviser:
Paid by Adviser.
0.160% of
net assets
The Brazil Fund, Inc. Long-term capital appreciation 1.200% to $ 417,981,869
through investment primarily in $150 million
equity securities of Brazilian 1.050% next
issuers. $150 million
1.000% thereafter
Effective 10/29/97:
1.200% to
$150 million
1.050% next
$150 million
1.000% next
$200 million
0.900% thereafter
Administrator:
Receives an annual
fee of $50,000
The Korea Fund, Inc. Long-term capital appreciation Adviser: $ 661,690,073
through investment primarily in 1.150% to
equity securities of Korean $50 million
companies. 1.100% next
$50 million
1.000% next
$250 million
0.950% next
$400 million
0.900% thereafter
Sub-Adviser -
Daewoo:
Paid by Adviser.
0.2875% to
$50 million
0.275% next
$50 million
0.250% next
$250 million
0.2375% next
$400 million
0.225% thereafter
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless otherwise indicated.
</TABLE>
B-2
<PAGE> 39
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder New Asia Fund, Inc. Long-term capital appreciation 1.250% to $ 133,363,686
through investment primarily in $75 million
equity securities of Asian 1.150% next
companies. $125 million
1.100% thereafter
Scudder New Europe Fund, Long-term capital appreciation 1.250% to $ 266,418,730
Inc. through investment primarily in $75 million
equity securities of companies 1.150% next
traded on smaller or emerging $125 million
European markets and companies 1.100% thereafter
that are viewed as likely to
benefit from changes and
developments throughout Europe.
Scudder Spain and Portugal Long-term capital appreciation Adviser: $ 75,127,194
Fund, Inc. through investment primarily in 1.000% of
(formerly The First equity securities of Spanish & net assets
Iberian Fund, Inc.) Portuguese issuers. Administrator:
0.200% of
net assets
Scudder World Income High income and, consistent 1.200% of $ 54,488,637
Opportunities Fund, Inc. therewith, capital appreciation. net assets
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless otherwise indicated.
</TABLE>
B-3
<PAGE> 40
EXHIBIT C
FORM OF NEW RESEARCH AND ADVISORY AGREEMENT
SCUDDER KEMPER INVESTMENTS, INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
, 1997
Sociedad General de Negocios y Valores S.A.
Esmeralda 120
Piso 7 "C"
Buenos Aires 1035, Republica Argentina
Dear Sirs,
Scudder Kemper Investments, Inc. (the "Investment Manager") has entered
into an Investment Advisory, Management and Administration Agreement dated
, 1997 with The Argentina Fund, Inc., a Maryland corporation (the
"Fund"), pursuant to which the Investment Manager is to act as investment
adviser to and manager of the Fund.
The Investment Manager wishes to avail itself of your investment advisory
services (the "Argentine Adviser"). Accordingly, the Investment Manager, with
the acceptance of the Fund, hereby agree with you as follows for the duration of
this agreement:
1. The Argentine Adviser upon the terms and conditions herein set
forth shall serve as the Fund's Argentine adviser and, as such, shall
furnish to the Investment Manager on behalf of the Fund such information,
investment recommendations, advice and assistance as the Investment Manager
shall from time to time reasonably request.
The Argentine Adviser agrees that neither the Investment Manager nor
the Fund shall be responsible for fees, salaries or other compensation due
to directors, officers or employees of the Argentine Adviser. The Argentine
Adviser undertakes to indemnify and hold the Investment Manager and the
Fund harmless against any potential claims by any such director, officer or
employee for fees, salaries or other compensation (and any related
expenses) based on services performed for the Fund or the Investment
Manager other than those that either the Fund or the Investment Manager
have agreed to bear.
2. The Investment Manager shall pay to the Argentine Adviser, as full
compensation for the services to be rendered and expenses to be borne by
the Argentine Adviser hereunder, a monthly fee payable in U.S. dollars
which, on an annual basis, shall be equal to 0.16 percent of the value of
the
<PAGE> 41
Fund's average weekly net assets. The Argentine Adviser shall have no right
to obtain compensation directly from the Fund for services provided
hereunder and agrees to look solely to the Investment Manager for payment
of fees due.
3. The Argentine Adviser agrees that it will not make a short sale of
any capital stock of the Fund, or purchase any share of the capital stock
of the Fund otherwise than for investment.
4. Nothing herein or in the agreement contemplated herein shall be
construed as prohibiting the Argentine Adviser from providing investment
advisory services to, or entering into investment advisory agreements with,
other clients (including other U.S. registered investment companies),
including clients which may invest in securities of Argentine issuers, or
from utilizing (in providing such services) information furnished to the
Investment Manager; nor shall anything herein be construed as constituting
the Argentine Adviser an agent of the Investment Manager.
5. The Argentine Adviser may rely on information reasonably believed
by it to be accurate and reliable. Neither the Argentine Adviser nor its
officers, directors, employees or agents shall be subject to any liability
for any act or omission, error of judgment or mistake of law, or for any
loss suffered by the Fund or the Investment Manager, in the course of,
connected with or arising out of any services to be rendered hereunder,
except by reason of willful misfeasance, bad faith or gross negligence on
the part of the Argentine Adviser in the performance of its duties or by
reason of reckless disregard on the part of the Argentine Adviser of its
obligations and duties under the agreement contemplated herein.
6. Neither this proposal or the agreement contemplated herein nor the
actions of the parties in the course of performance of the agreement
contemplated herein shall be deemed in any manner to create or impose a
joint venture, partnership or agency relationship between the parties
hereto. In all respects, the Argentine Adviser shall be acting solely as an
independent contractor to the Investment Manager in the course of supplying
the services contemplated by this proposal and the agreement contemplated
herein, and shall not be acting as an agent, servant or employee of either
the Fund or the Investment Manager.
7. Should this proposal be accepted, the agreement contemplated herein
shall remain in effect for a period of two years from the day and date
first written above, and shall continue in effect thereafter, but only so
long as such continuance is specifically approved at least annually by the
affirmative vote of (i) a majority of the members of the Fund's Board of
Directors who are not interested persons of the Fund, the Investment
Manager or the Argentine Adviser, cast in person at a meeting called for
the purpose of voting on such approval, and (ii) a majority of the Fund's
Board of Directors or the holders of a majority of the outstanding voting
securities
C-2
<PAGE> 42
of the Fund. The agreement contemplated herein may nevertheless be
terminated at any time without penalty, on 60 days' written notice to the
other parties, by the Fund's Board of Directors, by vote of holders of a
majority of the outstanding voting securities of the Fund or by the
Argentine Adviser. Any such notice shall be deemed given when received by
the addressee at the address indicated in Section 9 below. The agreement
contemplated herein shall automatically be terminated in the event of its
assignment or in the event of the termination of the Fund's investment
advisory agreement with the Investment Manager.
8. The agreement contemplated herein may not be transferred, assigned,
sold or in any manner hypothecated or pledged by either party hereto,
except as permitted under the U.S. Investment Company Act of 1940, as
amended (the "1940 Act"). It may be amended by mutual agreement, but only
after authorization of such amendment by the affirmative vote of (i) the
holders of a majority of the outstanding voting securities of the Fund and
(ii) a majority of the members of the Fund's Board of Directors who are not
interested persons of the Fund or of the Investment Manager, cast in person
at a meeting called for the purpose of voting on such approval.
9. Any notice given in connection with this proposal or under the
agreement contemplated herein to either party shall be in writing and shall
be deemed to have been duly given upon receipt at such party's address
specified below, or at such other address as such party shall have
designated to the party giving such notice.
The Investment Manager:
Scudder Kemper Investments, Inc.
c/o Legal Department
345 Park Avenue
New York, New York 10154
Fax: (212) 223-3127
The Argentine Adviser:
Sociedad General de
Negocios y Valores S.A.
Esmeralda 120
Piso 7 "C"
Buenos Aires 1035, Republica Argentina
Fax: (541) 322-8822
10. This proposal and the agreement contemplated herein shall be
construed in accordance with the laws of the State of New York, provided,
however, that nothing herein shall be construed as being inconsistent with
the 1940 Act. As used herein, the terms "interested person", "assignment",
C-3
<PAGE> 43
and "vote of a majority of the outstanding voting securities" shall have
the meanings set forth in the 1940 Act.
11. The Argentine Adviser irrevocably submits to the jurisdiction of
any New York State or U.S. Federal court sitting in the Borough of
Manhattan, The City of New York over any suit, action or proceeding arising
out of or relating to this proposal and the agreement contemplated herein.
The Argentine Adviser irrevocably waives, to the fullest extent permitted
by law, any objection which it may have to the laying of the venue of any
such suit, action or proceeding brought in such a court and any claim that
any such suit, action or proceeding brought in such a court has been
brought in an inconvenient forum. The Argentine Adviser agrees that final
judgment in any such suit, action or proceeding brought in such a court
shall be conclusive and binding upon the Argentine Adviser, and may be
enforced to the extent permitted by applicable law in any court of the
jurisdiction of which the Argentine Adviser is subject by a suit upon such
judgment, provided that service of process is effected upon the Argentine
Adviser in the manner specified in the following paragraph or as otherwise
permitted by law.
As long as the agreement contemplated herein remains in effect, the
Argentine Adviser will at all times have an authorized agent in the Borough
of Manhattan, The City of New York upon whom process may be served in any
legal action or proceeding in a New York State or U.S. Federal court
sitting in the Borough of Manhattan, The City of New York over any suit,
action or proceeding arising out of or relating to this proposal or the
agreement contemplated herein. The Argentine Adviser hereby appoints CT
Corporation System as its agent for such purpose, and covenants and agrees
that service of process in any such legal action or proceeding may be made
upon it at the office of such agent at 1633 Broadway, New York, New York
10019 (or at such other address in the Borough of Manhattan, The City of
New York, as said agent may designate by written notice to the Argentine
Adviser and the Investment Manager). The Argentine Adviser hereby consents
to the process being served in any suit, action or proceeding of the nature
referred to in the preceding paragraph by service upon such agent together
with the mailing of a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to the address of the Argentine Adviser
set forth above or to any other address of which the Argentine Adviser
shall have given written notice to the Investment Manager. The Argentine
Adviser irrevocably waives, to the fullest extent permitted by law, all
claim of error by reason of any such service (but does not waive any right
to assert lack of subject matter jurisdiction) and agrees that such service
(i) shall be deemed in every respect effective service of process upon the
Argentine Adviser in any suit, action or proceeding and (ii) shall, to the
fullest extent permitted by law, be taken and held to be valid personal
service upon and personal delivery to the Argentine Adviser.
C-4
<PAGE> 44
Nothing in this Section 11 shall affect the right of the Investment Manager
to serve process in any manner permitted by law or limit the right of the
Investment Manager to bring proceedings against the Argentine Adviser in
the courts of any jurisdiction or jurisdictions.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart hereof and return the same to us.
Yours sincerely,
SCUDDER KEMPER INVESTMENTS, INC.
By:
Title:
The foregoing agreement is hereby accepted as of the date first above
written.
SOCIEDAD GENERAL DE NEGOCIOS Y
VALORES, S.A.
By:
Title:
ACCEPTED:
THE ARGENTINA FUND, INC.
By:
Title:
C-5
<PAGE> 45
EXHIBIT D
HOLDERS OF 5% OR MORE BENEFICIAL INTERESTS
IN THE ARGENTINA FUND, INC.
According to filings made with the Securities and Exchange Commission on
Schedule 13G through June 30, 1997, the following are entities known to
beneficially own more than 5% of the outstanding shares of the Fund as of June
30, 1997:
(1) President and Fellows of Harvard College, c/o Harvard Management
Company, Inc., 600 Atlantic Avenue, Boston, Massachusetts 02210, reported
beneficial ownership of 930,400 shares, or 10.0% of the Fund's outstanding
shares, in Amendment No. 1 to its Schedule 13G, dated June 10, 1997.
(2) United Nations Joint Staff Pension Fund, United Nations, New York,
New York 10017, in Amendment No. 1 to its Schedule 13G, dated February 3,
1997, and its Investment Advisor, Fiduciary Trust Company International,
Two World Trade Center, New York, New York 10048, in Amendment No. 1 to its
Schedule 13G, dated January 31, 1997, each reported ownership of 575,000
shares, or 6.21% of the Fund's outstanding shares. As to these shares, the
United Nations Joint Staff Pension Fund shares voting and dispositive power
with its Investment Advisor.
<PAGE> 46
THE ARGENTINA FUND, INC.
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS -- OCTOBER 28, 1997
The undersigned hereby appoints Javier A. Gonzalez Fraga, Wilson Nolen and
Kathryn L. Quirk, and each of them, the proxies of the undersigned, with the
power of substitution to each of them, to vote all shares of The Argentina Fund,
Inc. (the "Fund") which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of the Fund to be held at the offices of Scudder,
Stevens & Clark, Inc., 25th Floor, 345 Park Avenue (at 51st Street), New York,
New York 10154, on Tuesday, October 28, 1997 at 9:30 a.m., Eastern time, and at
any adjournments thereof.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S VOTE
WILL BE CAST FOR EACH NUMBERED ITEM LISTED BELOW.
The Board members of your Fund, including those who are not affiliated with
the Fund or Scudder, recommend that you vote FOR each item.
1(A). To approve the new Investment Management, Advisory and Administration
Agreement between the Fund and Scudder Kemper Investments, Inc.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
1(B). To approve the new Research and Advisory Agreement between Scudder Kemper
Investments, Inc. and Sociedad General de Negocios y Valores S.A.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued on other side)
<PAGE> 47
2. The election of Directors;
[ ] FOR all nominees listed below
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed below
Nominees: Nicholas Bratt and Javier A. Gonzalez Fraga.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
------------------------------------------------------------
3. Ratification of the selection of Coopers & Lybrand L.L.P. as the Fund's
independent accountants.
[ ] FOR [ ] AGAINST [
] ABSTAIN
The proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments thereof.
Please sign exactly as your name or names
appear. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title as
such.
------------------------------------------
(Signature of Stockholder)
------------------------------------------
(Signature of joint owner, if any)
Dated, , 1997
---------------------------------------
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE
NO POSTAGE IS REQUIRED
