[LOGO]
The Argentina Fund, Inc.
Annual Report
October 31, 1999
A closed-end investment company seeking long-term capital appreciation through
investments primarily in the equity securities of Argentine issuers.
<PAGE>
[LOGO] The Argentina Fund, Inc.
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Investment objective and policies
o long-term capital appreciation through investment primarily in equity
securities of Argentine issuers
Investment characteristics
o investments in a broad spectrum of Argentine industries
o non-diversified closed-end investment company
o a vehicle for international diversification through participation in the
Argentine economy
General Information
- --------------------------------------------------------------------------------
Executive Offices
The Argentina Fund, Inc.
345 Park Avenue
New York, NY 10154
For Fund information: 1-800-349-4281
Transfer Agent, Registrar and Dividend
Reinvestment Plan Agent
For account information: 1-800-426-5523
EquiServe
Investor Relations Department
P.O. Box 8200
Boston, MA 02266-8200
Legal Counsel
Willkie Farr & Gallagher
Custodian
Brown Brothers Harriman & Co.
Independent Accountants
PricewaterhouseCoopers LLP
New York Stock Exchange Symbol -- AF
Contents
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In Brief .......................................... 3
Letter to Shareholders ............................ 3
Investment Summary ................................ 6
Portfolio Summary ................................. 7
Investment Portfolio .............................. 8
Financial Statements .............................. 11
Financial Highlights .............................. 14
Notes to Financial Statements ..................... 15
Report of Independent Accountants ................. 18
Tax Information ................................... 19
Dividend Reinvestment and
Cash Purchase Plan ................................ 20
Investment Manager ................................ 22
Directors and Officers ............................ 23
Net Asset Value
The Fund's net asset value is listed in the following publications:
The Wall Street Journal (Mondays)
The New York Times
Barron's
The Financial Times
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This report is sent to the shareholders of The Argentina Fund, Inc. for their
information. It is not a prospectus, circular, or representation intended for
use in the purchase or sale of the Fund or of any securities mentioned in the
report.
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2
<PAGE>
[LOGO] The Argentina Fund, Inc.
In Brief
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o The performance of Argentina's stock market was hampered by the country's
ongoing recession and the concerns that preceded October's presidential
elections.
o The Fund's investment strategy focused on rebalancing the portfolio
following the tender offer for YPF. We found attractive opportunities in
the energy, banking, and consumer staples sectors.
[LOGO] Letter to Shareholders
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Dear Shareholders:
The Argentine stock market has posted modest gains over the past year, with its
best performance coming in the first half of the reporting period. During that
time, stocks staged a powerful rally on the strength of a benign interest rate
environment, an improving macroeconomic outlook in the Mercosur region, and the
announcement of the tender offer for YPF shares at a substantial premium to
their market price. The Argentine market declined 2.2% in the second half of the
fiscal period, however, as political concerns, rising U.S. interest rates, and
Ecuador's sovereign debt concerns contributed to lackluster returns across the
entire region. Only a few stocks showed strength, and telecommunications shares
sold off quite sharply on fears that the opening of the sector to competition at
year-end will have a negative impact on earnings. In this environment, net asset
value of the fund returned 18.26% over the twelve-month period ended October 31,
1999, and the shares of The Argentina Fund, Inc., quoted on the New York Stock
Exchange returned 17.19%. The fund's discount to NAV stood at 26.75% as of
October 31.
Investment Environment
Political issues dominated the investment environment over the second half of
the reporting period as investors looked ahead to the October 24 presidential
elections. Since political transitions in Latin America have frequently been the
source of disruptions in the financial markets, the specter of the upcoming
elections was a cause for concern throughout much of the period. However, the
elections did not produce any indications that the new government is likely to
abandon the economic reform efforts that are already underway. An attempt by the
Peronist candidate Eduardo Duhalde to discuss the possibility of renegotiating
Argentina's sovereign debt frightened market participants and voters alike, and
appears to have been a significant factor in his defeat. The presidential
election campaign culminated in an overwhelming victory by the opposition
alliance candidate, Fernando de la Rua, which helped the opposition pick up
much-needed representation in Congress. While President-elect De la Rua has said
little about the priorities of his administration since he won the election,
investors are anticipating a continuation of the current economic regime and an
ongoing commitment to convertibility. However, it is likely that an increased
emphasis on the need to instill a greater level of confidence among consumers
and business leaders will be required in order to re-ignite economic growth. We
feel that the quiet passing of the elections is likely to have a positive impact
on stock prices by removing a degree of uncertainty from the markets.
Another contributing factor to the stock market's lackluster performance over
the second half of the fund's fiscal period was Argentina's inability to pull
itself out of the depths of its recession. Industrial production continued to
decline throughout 1999, and it appears that the economy is only now beginning
to turn upward. Unlike virtually all of its Latin neighbors,
3
<PAGE>
[LOGO] The Argentina Fund, Inc.
Letter to Shareholders
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Argentina has suffered from deflation all year. While some might argue that the
link of the peso to the U.S. dollar has hurt Argentine competitiveness, it is
virtually impossible to conclude that any movement away from convertibility
would be productive. Over 50% of Argentine exports are commodities and are
therefore dollar-based. A full 35% of exports come from the agricultural sector,
which has seen no improvement in the pricing environment. While almost half of
Argentina's exports go to Latin America, almost 37% of all trade is with Europe,
Asia, and the United States, and is comprised of different goods than that which
the country trades with its Latin American competitors. As a result, any
devaluation would be unlikely to have the same impact on the export sector as it
did in Brazil in 1999 and Mexico in 1995. A devaluation would also have an
immediate negative effect on the domestic sector, given the large number of
contracts that are linked to dollars as well as the high level of
dollar-denominated debt at many corporations.
We believe that the solution to Argentina's economic difficulties is an
expansion of credit. While this did not occur in 1999 due to the political and
economic uncertainties mentioned above, there are reasons to believe that a
recovery could be quite fast and robust. The financial sector is well
capitalized and backed in many cases by foreign ownership. Sovereign debt rates
have come down to their lowest levels all year, and domestic rates are following
suit. Economic activity in Brazil and Chile is picking up, with year 2000 GDP
growth forecast at 3.5% and 5%, respectively. Some economists are predicting
Argentina's 2000 GDP growth at as much as 5%, although the more conservative
consensus view is 2.5%-3%. We believe that these trends support our view that
the country's economic cycle has bottomed and that the coming year will offer a
more favorable environment for business.
Portfolio Strategy
The tender offer for YPF, which was the largest holding in the fund at 22% of
net assets before the announcement of the tender in April, resulted in a
substantial repositioning of the fund over the final six months of the fiscal
year. We increased our holdings in financials, food and beverages,
telecommunications, steel, and cement, while some of the fund's oil and gas
weighting was added back with purchases of Petrobras and Petrobras
Distribuidora. We also made significant additions in the banking sector,
including Banco de Galicia y Buenos Aires, Banco Frances, and Banco Rio in
Argentina, as well as Banco Itau in Brazil. In addition, we established
positions in Empresa Nacional de Electricidad (Chile); Capex (Argentina); the
cement producer Juan Minetti y Cia (Argentina); and the beverage companies
Cervecerias Unidas (Chile), and Cervejaria Brahma (Brazil).
We focused our sales in some of our smaller holdings as we sought to reduce the
number of companies in the portfolio and concentrate on those stocks in which we
hold a higher level of conviction. We also looked to realize taxable losses in
holdings in which we have a lower level of conviction, including LanChile, the
Chilean airline operator; Atanor, the agrochemicals company; Mirgor, the auto
parts manufacturer; Cinba, the beverage producer; and Grimoldi, the footwear
maker.
We believe that the changes we implemented in the portfolio over the period will
enable the fund to fully participate in the improved economic environment that
we see developing in the Mercosur region in the coming year.
Outlook
Looking ahead, we are cautiously optimistic on the outlook for Argentine
equities. While valuations appear expensive when compared to other markets in
Latin America, this is due in part to the increasing strength of the Argentine
pension fund system. This has provided underlying support to the market despite
the volatility that has been a factor for most of the year. With the
presidential elections behind us and President-elect De la Rua beginning to
specify his economic priorities, we
4
<PAGE>
[LOGO] The Argentina Fund, Inc.
Letter to Shareholders
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believe that the country may be entering a period of better cooperation among
political parties. We feel that this change could lead to substantial progress
on much-needed structural reforms. In addition, the ongoing strength of the
banking sector should allow for increased expansion of credit as the
long-awaited economic recovery begins to take shape. As always, a note of
caution is in order as Argentina's sovereign debt levels remain particularly
high, meaning that a benign global interest rate environment is necessary to
ensure continued economic stability.
In summary, we remain confident that Argentina's economy will be able to turn
the corner in early 2000. Regardless of external developments, however, we
intend to maintain our strategy of using intensive fundamental research and a
long-term view to invest in Argentina's best companies. While we urge investors
to remain prepared for continued volatility, we remain confident that our
strategy of investing in well-managed companies with the ability to maintain
earnings growth in any environment will lead to outperformance over time.
Sincerely,
/s/Nicholas Bratt
Nicholas Bratt
Chairman of the Board
and President
5
<PAGE>
[LOGO] The Argentina Fund, Inc.
Investment Summary as of October 31, 1999
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Historical
Information Total Return (%)
Life of Fund ---------------------------------------------------------------
Market Value Net Asset Value (a) Index (b)
------------------- -------------------- -------------------
Average Average Average
Cumulative Annual Cumulative Annual Cumulative Annual
------------------- -------------------- -------------------
Current Quarter 11.76 -- 6.81 -- 11.71 --
One Year 17.19 17.19 18.26 18.26 24.43 24.43
Three Year 2.78 .92 27.06 8.31 31.14 9.46
Five Year -11.95 -2.51 20.99 3.88 31.18 5.58
Life of Fund* 10.53 1.26 64.91 6.43 64.59 6.42
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Per Share Information and Returns (a)
Yearly Periods Ended October 31
A CHART IN THE FORM OF A BAR GRAPH APPEARS HERE, ILLUSTRATING THE FUND TOTAL
RETURN (%) WITH THE EXACT DATA POINTS LISTED IN THE TABLE BELOW.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1991* 1992 1993 1994 1995 1996 1997 1998 1999
------------------------------------------------------------------------
Net Asset Value... $10.99 $ 9.35 $12.69 $14.53 $10.27 $12.70 $14.60 $13.02 $14.59
Income Dividends.. $ -- $ .06 $ .05 $ .14 $ .27 $ .33 $ .33 $ .25 $ .45
Capital Gains
Distributions..... $ -- $ -- $ .09 $ .02 $ .46 $ -- $ -- $ -- $ --
Total Return (%).. .09 -14.55 37.55 15.58 -24.94 26.86 17.94 -8.90 18.26
</TABLE>
(a) Total investment returns reflect changes in net asset value per
share during each period and assume that dividends and capital gains
distributions, if any, were reinvested. These percentages are not an
indication of the performance of a shareholder's investment in the
Fund based on market price.
(b) IFC Argentina Global Total Return Index U.S.$.
* The Fund commenced operations on October 22, 1991. Index return begins
on October 31, 1991.
Past results are not necessarily indicative of future performance of the Fund.
6
<PAGE>
[LOGO] The Argentina Fund, Inc.
Portfolio Summary as of October 31, 1999
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Diversification
Equity Securities 93% THE ORIGINAL DOCUMENT CONTAINS A PIE
Cash Equivalents 7% CHART HERE REFLECTING THE INFORMATION
---- TO THE LEFT.
100%
====
- --------------------------------------------------------------------------------
Sectors
Sector breakdown of the Fund's equity securities
Financial 23% THE ORIGINAL DOCUMENT CONTAINS A PIE
Communications 20% CHART HERE REFLECTING THE INFORMATION
Energy 17% TO THE LEFT.
Consumer Staples 16%
Metals & Minerals 10%
Utilities 9%
Construction 5%
----
100%
====
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Ten Largest Equity Holdings (60% of Portfolio)
1. Telecom Argentina S.A.
2. Perez Companc S.A.
3. Banco de Galicia y Buenos Aires
4. Telefonica de Argentina S.A.
5. Petroleo Brasileiro S.A.
6. Banco Frances del Rio de la Plata
7. Inversiones y Representaciones S.A.
8. Dalmine Siderca
9. Siderar SAIC
10. Massalin Particulares S.A.
7
<PAGE>
[LOGO] The Argentina Fund, Inc.
Investment Portfolio as of October 31, 1999
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<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin and Jenrette dated 10/29/1999, at
5.2%, to be repurchased at $5,670,456 on 11/1/1999, collateralized by a $5,674,000
U.S. Treasury Inflationary Index Note, 3.625%, 1/15/2008 (Cost $5,668,000) .......................... 5,668,000 5,668,000
----------
- ----------------------------------------------------------------------------------------------------------------------------------
Short Term Notes 2.9%
Federal Home Loan Mortgage Corp., 5.234%**, 11/1/1999 (Cost $4,000,000) ............................... 4,000,000 4,000,000
----------
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Shares
------
Preferred Stocks 1.4%
Communications
Telephone/Communications
Nortel Inversora "A" (ADR) (b) ........................................................................ 46,837 587,275
Nortel Inversora "B" (ADR) ............................................................................ 88,685 1,341,361
----------
Total Preferred Stocks (Cost $1,635,371) .............................................................. 1,928,636
----------
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stocks 91.5%
Consumer Staples 14.5%
Alcohol & Tobacco 13.9%
Companhia Cervecerias Unidas S.A. (ADR) (d) ........................................................... 161,300 3,518,356
Companhia Cervejaria Brahma (pfd.) (ADR) (c) .......................................................... 257,500 3,218,750
Massalin Particulares S.A ............................................................................. 574,972 5,177,129
Nobleza Piccardo S.A .................................................................................. 950,919 1,807,578
Quilmes Industrial S.A ................................................................................ 569,250 4,625,156
Quilmes Industrial S.A. (ADR) ......................................................................... 20,000 208,750
Vina Concha y Toro S.A. (ADR) (d) ..................................................................... 10,000 345,000
----------
18,900,719
----------
Food & Beverage 0.6%
Cresud S.A. Comercial ................................................................................. 400,217 412,413
Molinos Rio de la Plata "B" ........................................................................... 79,675 163,409
Quimica Estrella "B"* (b) ............................................................................. 227,160 181,812
----------
757,634
----------
</TABLE>
The accompanying notes are in integral part of the financial statements.
8
<PAGE>
[LOGO] The Argentina Fund, Inc.
Investment Portfolio
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Market
Shares Value ($)
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Communications 17.6%
Telephone/Communications
Telecom Argentina S.A. "B" (ADR) ........ 526,232 14,471,380
Telefonica de Argentina S.A. "B" ........ 2,698,000 6,910,059
Telefonica de Argentina S.A. "B" (ADR) .. 100,000 2,562,500
-----------
23,943,939
-----------
Financial 21.0%
Banks 16.1%
Banco de Galicia y Buenos Aires "B" ..... 1,815,072 9,587,991
Banco Frances del Rio de la Plata ....... 887,382 6,445,358
Banco Itau S.A. (pfd.) (c) .............. 68,600,000 3,944,148
Banco Rio de la Plata S.A. (ADR) ........ 143,200 1,843,700
-----------
21,821,197
-----------
Other Financial Companies 0.6%
BI S.A. "A" (b) ......................... 1,000,000 750,000
-----------
Real Estate 4.3%
Inversiones y Representaciones S.A. (GDR) 195,647 5,906,094
-----------
Energy 15.4%
Oil & Gas Production
Perez Companc S.A. "B" .................. 1,762,872 10,617,373
Petrobras Distribuidora S.A. (pfd.) (c) . 165,600,000 1,502,982
Petroleo Brasileiro S.A. (pfd.) (c) ..... 55,000,000 8,766,684
-----------
20,887,039
-----------
Metals & Minerals 9.2%
Steel & Metals
Acindar ................................. 530,000 848,390
Dalmine Siderca ......................... 2,920,505 5,580,732
Gerdau S.A. (c) ......................... 26,400,000 478,398
Siderar SAIC "A" ........................ 1,460,361 5,493,484
-----------
12,401,004
-----------
Construction 5.0%
Building Materials
Juan Minetti y Cia "B" .................. 827,239 2,242,849
Loma Negra Cia. S.A. (b) ................ 150,624 4,518,720
-----------
6,761,569
-----------
The accompanying notes are in integral part of the financial statements.
9
<PAGE>
[LOGO] The Argentina Fund, Inc.
Investment Portfolio
<TABLE>
<CAPTION>
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Market
Shares Value ($)
- -------------------------------------------------------------------------------------
<S> <C> <C>
Utilities 8.8%
Electric Utilities 2.8%
Capex S.A. "A"* ........................................... 560,224 2,241,927
Empresa Nacional de Electricidad (ADR) (d) ................ 124,849 1,591,825
-----------
3,833,752
-----------
Natural Gas Distribution 6.0%
Gas Natural Ban S.A. "B" .................................. 615,184 1,144,769
MetroGas S.A. "B" (ADR) ................................... 377,475 3,633,197
Transportadora de Gas del Sur "B" ......................... 1,956,215 3,327,096
-----------
8,105,062
-----------
Total Common Stocks (Cost $108,145,996) ................... 124,068,009
-----------
- -------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $119,449,367) (a) 135,664,645
===========
- -------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Annualized yield at time of purchase, not a coupon rate.
(a) The cost for federal income tax purposes was $119,649,090. At October 31,
1999, net unrealized appreciation for all securities based on tax cost was
$16,015,555. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $22,223,611, and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$6,208,056.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $6,037,807 (4.46% of net assets).
Their values have been estimated by the Valuation Committee in the absence
of readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of
these securities at October 31, 1999 aggregated $6,092,375. These
securities may also have certain restrictions as to resale.
(c) Investments in Brazilian companies aggregating $17,910,962 (13.23% of net
assets).
(d) Investments in Chilean companies aggregating $5,455,181 (4.03% of
net assets).
The accompanying notes are in integral part of the financial statements.
10
<PAGE>
[LOGO] The Argentina Fund, Inc.
Financial Statements
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Statement of Assets and Liabilities
October 31, 1999
- ------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments, at market (identified cost $119,449,367) .................... $ 135,664,645
Cash ..................................................................... 1,442
Dividends and interest receivable ........................................ 16,439
-------------
Total assets 135,682,526
-------------
LIABILITIES
Accrued management fee ................................................... 111,963
Other payables and accrued expenses ...................................... 156,590
-------------
Total liabilities ........................................................ 268,553
-------------
Net assets, at market value .............................................. $ 135,413,973
=============
NET ASSETS
Net assets consist of:
Undistributed net investment income ...................................... 1,676,843
Net unrealized appreciation depreciation) from:
Investments .......................................................... 16,215,278
Foreign currency related transactions ................................ (788)
Accumulated net realized gain (loss) ..................................... 3,371,099
Paid-in capital .......................................................... 114,151,541
-------------
Net assets, at market value .............................................. $ 135,413,973
=============
Net asset value per share ($135,413,973 / 9,284,370 shares of common stock
issued and outstanding, $.01 par value, 100,000,000 shares
authorized) .......................................................... $14.59
=============
</TABLE>
The accompanying notes are in integral part of the financial statements.
11
<PAGE>
[LOGO] The Argentina Fund, Inc.
Financial Statements
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Statement of Operations
Year Ended October 31, 1999
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment Income
Income:
Dividends (net of foreign taxes withheld of $35,313) .......................... $ 4,929,039
Interest ...................................................................... 439,869
------------
5,368,908
------------
Expenses:
Management fee ................................................................ 1,279,618
Custodian and accounting fees ................................................. 273,168
Directors' fees and expenses .................................................. 66,544
Reports to shareholders ....................................................... 50,821
Auditing ...................................................................... 75,261
Services to shareholders ...................................................... 33,059
Legal ......................................................................... 20,567
Other ......................................................................... 15,558
------------
1,814,596
------------
Net investment income ......................................................... 3,554,312
------------
Net realized and unrealized gain (loss) on investment transactions
Net realized gain (loss) from:
Investments ................................................................... 5,421,969
Foreign currency related transactions (including CPMF tax of $17,776) ......... (59,421)
------------
5,362,548
------------
Net unrealized appreciation (depreciation) during the period on:
Investments ................................................................... 9,823,270
Foreign currency related transactions ......................................... (452)
------------
9,822,818
------------
Net gain (loss) on investment transactions .................................... 15,185,366
------------
Net increase (decrease) in net assets resulting from operations ............... $ 18,739,678
============
</TABLE>
The accompanying notes are in integral part of the financial statements.
12
<PAGE>
[LOGO] The Argentina Fund, Inc.
Financial Statements
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------------------
Years Ended October 31,
Increase (Decrease) in Net Assets 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................... $ 3,554,312 $ 3,656,073
Net realized gain (loss) from investment transactions ............... 5,362,548 (2,022,234)
Net unrealized appreciation (depreciation) on investment transactions
during the period ............................................... 9,822,818 (13,962,864)
------------- -------------
Net increase (decrease) in net assets resulting from operations ..... 18,739,678 (12,329,025)
------------- -------------
Distributions to shareholders from net investment income ............ (4,172,863) (2,316,679)
------------- -------------
Net asset value of shares issued to shareholders in reinvestment
of distributions ................................................ 92,168 73,374
------------- -------------
Increase (decrease) in net assets ................................... 14,658,983 (14,572,330)
Net assets at beginning of period ................................... 120,754,990 135,327,320
------------- -------------
Net assets at end of period (including undistributed net investment
income of $1,676,843 and $2,354,816, respectively) .............. $ 135,413,973 $ 120,754,990
============= =============
Other Information
Increase (decrease) in Fund Shares
Shares outstanding at beginning of period ........................... 9,273,029 9,266,717
Shares issued to shareholders in reinvestment of distributions ...... 11,341 6,312
------------- -------------
Shares outstanding at end of period ................................. 9,284,370 9,273,029
============= =============
</TABLE>
The accompanying notes are in integral part of the financial statements.
13
<PAGE>
[LOGO] The Argentina Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements and market price data.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended October 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period ..................... $13.02 $14.60 $12.70 $10.27 $14.53
------- ------- ------- ------- ------
Income (loss) from investment operations:
Net investment income (a) .............................. .38 .39 .30 .26 .31
Net realized and unrealized gain (loss)
on investment transactions ............................ 1.64 (1.72) 1.93 2.50 (3.84)
------- ------- ------- ------- ------
Total from investment operations ......................... 2.02 (1.33) 2.23 2.76 (3.53)
------- ------- ------- ------- ------
Less distributions from:
Net investment income .................................. (.45) (.25) (.33) (.33) (.27)
Net realized gains on investment
transactions .......................................... -- -- -- -- (.46)
------- ------- ------- ------- ------
Total distributions ...................................... (.45) (.25) (.33) (.33) (.73)
------- ------- ------- ------- ------
Net asset value, end of period ........................... $14.59 $13.02 $14.60 $12.70 $10.27
======= ======= ======= ======= ======
Market value, end of period .............................. $10.69 $ 9.63 $12.31 $11.50 $10.13
======= ======= ======= ======= ======
Total Return
Per share market value (%) ............................... 17.19 (20.15) 9.84 16.52 (26.48)
Per share net asset value (%) (b) ........................ 18.26 (8.90) 17.94 26.86 (24.94)
Ratios and Supplemental Data
Net assets, end of period ($ millions) ................... 135 121 135 118 95
Ratio of operating expenses to average
net assets (%) ......................................... 1.47 1.48 1.71 1.90 1.98
Ratio of net investment income to
average net assets (%) ................................. 2.88 2.75 1.96 2.11 2.71
Portfolio turnover rate (%) .............................. 40.9 14.1 32.0 19.0 25.0
</TABLE>
(a) Based on monthly average shares outstanding during the period
(b) Total investment returns reflect changes in net asset value per share
during each period and assume that dividends and capital gains
distributions, if any, were reinvested. These percentages are not an
indication of the performance of a shareholder's investment in the Fund
based on market price.
14
<PAGE>
[LOGO] The Argentina Fund, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
A. Significant Accounting Policies
-------------------------------
The Argentina Fund, Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as a closed-end, non-diversified
management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. Securities which are traded
on U.S. or foreign stock exchanges are valued at the most recent sale price
reported on the exchange on which the security is traded most extensively. If no
sale occurred, the security is then valued at the calculated mean between the
most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation is used. Securities quoted on the
Nasdaq Stock Market ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are not quoted on Nasdaq but are
traded in another over-the-counter market are valued at the most recent sale
price, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Fund, whose
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Money market instruments purchased with an original maturity of
sixty days or less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
securities. At October 31, 1999, the exchange rates were U.S. $ 1 to .9998
Argentine peso and U.S. $1 to 1.9490 Brazilian real.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities,
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[LOGO] The Argentina Fund, Inc.
Notes to Financial Statements
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the amount of which at the time of purchase and each subsequent business day is
required to be maintained at such a level that the market value is equal to at
least the principal amount of the repurchase price plus accrued interest.
Taxation. The Fund's policy is to comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to regulated investment companies
and to distribute all of its income to its shareholders. Accordingly, the Fund
paid no U.S. federal income taxes and no federal income tax provision was
required. Under Argentine tax laws, the Fund is not subject to withholding taxes
on dividends.
The Fund is subject to a .38% Contribuicao Provisoria sobre Movimentacao
Financiera (CPMF) tax which is applied to foreign exchange transactions
representing capital inflows or outflows to the Brazilian market. This tax has
been reported as part of the net realized gain (loss) from foreign currency
related transactions.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made annually. Net realized gains from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed, and, therefore, will be distributed to shareholders at least
annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences primarily relate to investments in foreign denominated securities,
passive foreign investment companies, and certain securities sold at a loss. As
a result, net investment income (loss) and net realized gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Certain dividends
from foreign securities may be recorded subsequent to the ex-dividend date as
soon as the Fund is informed of such dividends. Realized gains and losses from
investment transactions are recorded on an identified cost basis.
B. Purchases and Sales of Securities
---------------------------------
During the year ended October 31, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $47,064,034 and
$48,231,397, respectively.
C. Related Parties
---------------
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Manager"), the Manager directs the
investments of the Fund in accordance with its investment objectives, policies,
and restrictions. The Manager determines the securities, instruments, and other
contracts relating to investments to be purchased, sold, or entered into by the
Fund. In addition to portfolio management services, the Manager provides certain
administrative services in accordance with the agreement. The management fee
payable under the agreement is equal to an annual rate of 1.04% of the Fund's
average weekly
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[LOGO] The Argentina Fund, Inc.
Notes to Financial Statements
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net assets and payable monthly. For the year ended October 31, 1999, the fee
pursuant to the Agreement amounted to $1,279,618.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Manager, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
October 31, 1999, the amount charged to the Fund by SFAC aggregated $89,248, of
which $16,032 is unpaid at October 31, 1999.
Scudder Service Corporation ("SSC"), a subsidiary of the Manager, provides
shareholder communications services for the Fund. For the year ended October 31,
1999 the amount charged to the Fund by SSC aggregated $14,482, of which $1,250
is unpaid at October 31, 1999.
The Fund pays each Director not affiliated with the Manager an annual retainer,
plus specified amounts for attended board and committee meetings. For the year
ended October 31, 1999, Directors' fees and expenses aggregated $66,544.
D. Investing in Emerging Markets
-----------------------------
Investing in emerging markets may involve special risks and considerations not
typically associated with investing in the United States. These risks include
revaluation of currencies, high rates of inflation, repatriation restrictions on
income and capital, and future adverse political and economic developments.
Moreover, securities issued in these markets may be less liquid, subject to
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United Sates.
E. Line of Credit
--------------
The Fund and several Scudder Funds (the "Participants") share in a $850 million
revolving credit facility for temporary or emergency purposes, that otherwise
might require the untimely disposition of securities. The Participants are
charged an annual commitment fee which is allocated pro rata among each of the
Participants. Interest is calculated based on the market rates at the time of
the borrowing. The Fund may borrow up to a maximum of 25 percent of its net
assets under the agreement.
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[LOGO] The Argentina Fund, Inc.
Report of Independent Accountants
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To the Board of Directors and the Shareholders of The Argentina Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Argentina Fund, Inc. (the
"Fund") at October 31, 1999, the results of its operations, the changes in its
net assets, and the financial highlights for the periods indicated therein, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 10, 1999
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[LOGO] The Argentina Fund, Inc.
Tax Information
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Pursuant to section 852 of the Internal Revenue Code, the Fund designates
$3,928,000 as capital gains dividends for its year ended October 31, 1999, of
which 100% represents 20% rate gains.
The Fund paid foreign taxes of $35,313 and earned $3,250,280 of foreign source
income during the year ended October 31, 1999. Pursuant to section 853 of the
Internal Revenue Code, the Fund designates $0.004 per share as foreign taxes
paid and $0.35 per share as income earned from foreign sources for the year
ended October 31, 1999.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-621-1048.
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[LOGO] The Argentina Fund, Inc.
Dividend Reinvestment and Cash Purchase Plan
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The Plan
The Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers
you an automatic way to reinvest your dividends and capital gains distributions
in shares of the Fund. The Plan also provides for cash investments in Fund
shares of $100 to $3,000 semiannually through State Street Bank and Trust
Company, the Plan Agent.
Automatic Participation
Each shareholder of record is automatically a participant in the Plan
unless the shareholder has instructed the Plan Agent in writing otherwise. Such
a notice must be received by the Plan Agent not less than 10 days prior to the
record date for a dividend or distribution in order to be effective with respect
to that dividend or distribution. A notice which is not received by that time
will be effective only with respect to subsequent dividends and distributions.
Shareholders who do not participate in the Plan will receive all
distributions in cash paid by check in dollars mailed directly to the
shareholder by State Street Bank and Trust Company, as dividend paying agent.
Shares Held by a Nominee
If your shares are held in the name of a brokerage firm, bank, or other
nominee as the shareholder of record, please consult your nominee (or any
successor nominee) to determine whether it is participating in the Plan on your
behalf. Many nominees are generally authorized to receive cash dividends unless
they are specifically instructed by a client to reinvest. If you would like your
nominee to participate in the Plan on your behalf, you should give your nominee
instructions to that effect as soon as possible.
Pricing of Dividends and Distributions
If the market price per share on the payment date for the dividend or
distribution or, if that date is not a New York Stock Exchange trading date, the
next preceding trading date (the "Valuation Date") equals or exceeds net asset
value per share on that date, the Fund will issue new shares to participants at
the greater of the following on the Valuation Date: (a) net asset value, or (b)
95% of the market price. If the net asset value exceeds the market price of Fund
shares at such time, participants in the Plan are considered to have elected to
receive shares of stock from the Fund, valued at market price, on the Valuation
Date. In either case, for Federal income tax purposes, the shareholder receives
a distribution equal to the market value on Valuation Date of new shares issued.
State and local taxes may also apply. If the Fund should declare an income
dividend or net capital gains distribution payable only in cash, the Plan Agent
will, as agent for the participants, buy Fund shares in the open market, on the
New York Stock Exchange or elsewhere, for the participants' account on, or
shortly after, the payment date.
Voluntary Cash Purchases
Participants in the Plan have the option of making additional cash payments
to the Plan Agent, semiannually, in any amount from $100 to $3,000, for
investment in the Fund's shares. The Plan Agent will use all such monies
received from participants to purchase Fund shares in the open market on or
about February 15 and August 15. Any voluntary cash payments received more than
30 days prior to these dates will be returned by the Plan Agent, and interest
will not be paid on any uninvested cash payments. To avoid unnecessary cash
accumulations, and also to allow ample time for receipt and processing by the
Plan Agent, it is suggested that participants send in voluntary cash payments to
be received by the Plan Agent approximately ten days before February 15, or
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[LOGO] The Argentina Fund, Inc.
Dividend Reinvestment and Cash Purchase Plan
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August 15, as the case may be. A participant may withdraw a voluntary cash
payment by written notice, if the notice is received by the Plan Agent notless
than 48 hours before such payment is to be invested.
Participant Plan Accounts
The Plan Agent maintains all participant accounts in the Plan and furnishes
written confirmation of all transactions in the account, including information
needed by participants for personal and tax records. Shares in the account of
each plan participant will be held by the Plan Agent in non-certificated form in
the name of the participant, and each participant will be able to vote those
shares purchased pursuant to the Plan at a shareholder meeting or by proxy.
No Service Fee to Reinvest
There is no service fee charged to participants for reinvesting dividends
or distributions from net realized capital gains. The Plan Agent's fees for the
handling of the reinvestment of dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage commissions with respect to
shares issued directly by the Fund as a result of dividends or capital gains
distributions payable either in stock or in cash. However, participants will pay
a pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of any
dividends or capital gains distributions payable only in cash.
Costs for Cash Purchases
With respect to purchases of Fund shares from voluntary cash payments, the
Plan Agent will charge $0.75 for each such purchase for a participant. Each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases of Fund shares in connection
with voluntary cash payments made by the participant.
Brokerage charges for purchasing small amounts of stock for individual
accounts through the Plan are expected to be less than the usual brokerage
charges for such transactions, because the Plan Agent will be purchasing stock
for all participants in blocks and pro-rating the lower commission thus
attainable.
Amendment or Termination
The Fund and the Plan Agent each reserve the right to terminate the Plan.
Notice of the termination will be sent to the participants of the Plan at least
30 days before the record date for a dividend or distribution. The Plan also may
be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by giving at least 30 days' written notice to participants in
the Plan.
A participant may terminate his account under the Plan by written notice to
the Plan Agent. If the written notice is received 10 days before the record day
of any distribution, it will be effective immediately. If received after that
date, it will be effective as soon as possible after the reinvestment of the
dividend or distribution.
If a participant elects to sell his shares before the Plan is terminated,
the Plan Agent will deduct a $2.50 fee plus brokerage commissions from the sale
transaction.
Plan Agent Address and Telephone Number
You may obtain more detailed information by requesting a copy of the Plan
from the Plan Agent. All correspondence (including notifications) should be
directed to: The Argentina Fund, Inc. Dividend Reinvestment and Cash Purchase
Plan, c/o EquiServe, P.O. Box 8209, Boston, MA 02266-8209, 1-800-426-5523.
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[LOGO] The Argentina Fund, Inc.
Investment Manager
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The investment manager of The Argentina Fund, Inc., is Scudder Kemper
Investments Inc. ("the Manager"), one of the most experienced investment
management firms in the world. Established in 1919, the firm manages investments
for institutional and corporate clients, retirement and pension plans, insurance
companies, mutual fund investors, and individuals. The Manager has offices
throughout the United States and has subsidiaries in London, Switzerland, and
Tokyo.
The Manager has been a leader in international investment management for
over 40 years. It manages Scudder International Fund, which was originally
incorporated in Canada in 1953 as the first foreign investment company
registered with the United States Securities and Exchange Commission. The
Manager's clients which invest primarily in foreign securities include thirty
open-end investment companies as well as portfolios for institutional investors.
The Manager also manages the assets of four other closed-end investment
companies which invest primarily in foreign securities: The Brazil Fund, Inc.,
The Korea Fund, Inc., Scudder Global High Income Fund, Inc., and Scudder New
Asia Fund, Inc.
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[LOGO] The Argentina Fund, Inc.
Directors and Officers
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NICHOLAS BRATT*
Chairman of the Board, President, and Director
JAVIER A. GONZALEZ FRAGA
Director
KENNETH C. FROEWISS
Director
Ronaldo A. da Frota Nogueira
Director
DR. SUSAN KAUFMAN PURCELL
Director
JOSE E. ROHM
Honorary Director
JUDITH A. HANNAWAY*
Vice President
ANN M. MCCREARY*
Vice President
PAUL H. ROGERS*
Vice President
JOHN MILLETTE*
Vice President and Secretary
BRUCE H. GOLDFARB*
Vice President and Assistant Secretary
PAUL J. ELMLINGER*
Vice President and Assistant Secretary
KATHRYN L. QUIRK*
Vice President and Assistant Secretary
JOHN R. HEBBLE*
Treasurer
CAROLINE PEARSON*
Assistant Secretary
* Scudder Kemper Investments, Inc.
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