[LOGO]
Argentina Fund, Inc.
Annual Report
October 31, 2000
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
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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: 1-800-621-1048
Kemper Service Company
P.O. Box 219153
Kansas City, MO 64121-9153
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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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
Stockholder Meeting Results.......................... 22
Investment Manager................................... 23
Directors and Officers............................... 24
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
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[LOGO] The Argentina Fund, Inc.
Letter to Shareholders
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Dear Shareholders:
Stocks in Argentina declined over the past year, as the benefits of
improved global growth were counteracted by growing fears about the country's
ability to meet its debt payments. Argentina's stagnant economy, combined with
the government's apparent inability to enact effective fiscal reforms, led to a
deterioration of confidence among consumers, businesses, and international
investors. As a result, the fund's benchmark -- the IFC Argentina Index --
declined 14.69% over the twelve months ended October 31, 2000, while the Merval
Index fell 16.51% in the same period. Despite this challenging environment, the
fund's net asset value return outperformed the benchmark for the period with a
gain of 2.54%. Meanwhile, its share price -- quoted on the NYSE -- returned
3.43% to close at $10.44 per share, representing a discount of 26.06% to NAV.
As we stated in the third quarter letter to shareholders, the fund's
outperformance was largely due to our decision to take advantage of the
prospectus guideline that enables us to invest a significant portion of net
assets outside of Argentina. The fund currently holds only 66% of net assets in
Argentina, very close to the minimum level allowed by prospectus. The remainder
of the fund's assets are in companies that do a significant portion of their
business in Argentina, including firms located in Spain, Chile, and Brazil. The
strong showing of our holdings in these areas, which are all benefiting from a
better investment backdrop than Argentina, was a key factor in the fund's
outperformance during the past twelve months.
Investment Backdrop
Argentina is in the second year of economic stagnation, a problem that has
been compounded by weak agricultural prices and a loss of competitiveness with
its major trading partner, Brazil, following that country's currency devaluation
at the beginning of last year. The fiscal situation is not improving, as the
country's debt load continues to grow and its leaders have taken few meaningful
steps to alleviate the problem. The government has maintained high tax rates and
cut spending under the aegis of a fiscal austerity plan that was designed to
improve the country's balance sheet. However, this combination has helped stifle
growth and kept the debt-to-GDP ratio high. These issues have raised concerns
that Argentina will have difficulty rolling over its external debt obligations,
which should total close to $19 billion in the coming year alone. Since it has
been unclear how the government will raise the financing necessary to pay this
sum, investors' perceptions of country risk have increased significantly. Bond
yields have remained high as a result, and foreign investors have avoided the
country's stock market.
Difficulties on the political front have also led to increased instability
in the Argentine market. The election of President Fernando de la Rua in 1999
prompted many investors to believe that the new government would bring about
much-needed change in the country. These hopes have not been realized, however,
and the resulting crisis in confidence has caused de la Rua to lose credibility.
Recently, a bribery scandal in Congress compounded the problem by prompting the
resignation of Vice President Carlos Alvarez and weakening the country's
coalition government.
In the weeks immediately following the close of the reporting period, some
relief was provided to the market by the news that Argentina was negotiating an
agreement with the International Monetary Fund (IMF). This accord, if finalized,
would provide short-term relief for the country's debt crisis by making a
financial support package available. While this news had not become official as
of the publication of this report, it served to calm the bond market and provide
a measure
3
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[LOGO] The Argentina Fund, Inc.
Letter to Shareholders
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of stability to equities. With the Argentine economy beginning to show signs of
a possible bottoming, this could provide a catalyst for a stronger short-term
performance from the country's stock market by soothing fears that the
Convertibility Program (which links the Argentine peso to the dollar) is in
jeopardy.
Portfolio Strategy
We continue to focus on fundamentals and invest on a company-by-company
basis. Most important, we look at the ability of individual companies to grow
their operations using cash flows that are generated internally, rather than
businesses that depend on external sources for the cash necessary to finance
growth. A company that throws off strong cash flows and does not have to use the
money for expenses or interest payments is free to plow the money back into the
business. This means that it can invest in growth opportunities or buy back its
own stock, either of which can lead to improved returns for shareholders. As a
result, a common theme among all companies in the portfolio is a demonstrated
ability to generate cash, invest it wisely, and gain an attractive return from
the investment. The greater a company's free cash flow and the better its
return, the greater the likelihood that the company will outperform its peers.
The fund's top sector holdings reflect this approach. We currently hold 30%
of net assets in the financial sector, where we have found several companies
that are strong financially and therefore offer an attractive risk profile. We
believe that banks will be among the first to benefit from an economic recovery,
since stronger growth would lead to an increased demand for loans. We also hold
18% of net assets in oil and gas stocks, which offer strong dollar revenues that
are not directly tied to the health of Argentina's economy. A top performer in
this area was Brazil-based Petrobras, which we trimmed as it rallied and grew to
become too large a position within the portfolio. We also have substantial
holdings in telecoms and food/beverage stocks, which tend to generate strong,
reliable cash flows. Our top holdings in these sectors are Telecom Argentina and
Quilmes, respectively. During the year we invested in two Argentine technology
IPOs -- El Sitio, an Internet portal, and Impsat, an Internet service provider
-- for a brief time to take advantage of the frenzy in the markets, which helped
the fund's performance. Both positions have since been sold, as the longer-term
prospects for Internet companies in Latin America remain unclear.
Going forward, we will look to increase the fund's positions in Argentine
equities, while decreasing its holdings outside of the country. While we are not
yet convinced that a recovery is at hand, we believe that the time is right to
begin taking advantage of the country's attractive valuations. Recent purchases
in Argentina include Banco Galicia, Banco Frances, PC Holdings (oil), and Irsa
(real estate).
Outlook
Argentina remains mired in a vicious cycle that is proving difficult to
escape. While there is no short-term solution to the country's debt problem, a
key step will be increased fiscal discipline on both the provincial and federal
levels. We believe that positive action on the part of the government will go a
long way toward restoring confidence both within Argentina and overseas.
Argentina's economy, while not yet growing, is showing some signs of
improvement. For example, construction spending is on the rise, mortgages are
increasing, and exports are growing. Improved confidence could provide some
momentum to the economy, and increase the potential for a positive cycle to
develop. We are therefore positioning the portfolio defensively, but are
focusing on companies that stand to benefit when the economy ultimately picks up
steam. Valuations are extremely attractive, with many
4
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[LOGO] The Argentina Fund, Inc.
Letter to Shareholders
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companies trading at their lowest levels in many years. An additional positive
is that dedicated investors (i.e., institutions focused exclusively on the
region, such as Latin America funds) are underweight in Argentina, meaning that
signs of a recovery or improved stability on the political front could lead to
significant inflows into the Argentine market. While the year ahead is likely to
bring additional market volatility as Argentina tries to develop effective
solutions to its fiscal crisis, the country continues to hold potential for
investors who are willing to stay invested during the long-term process of
Argentina's recovery.
We are pleased to remind our shareholders that information about the fund's
holdings and performance is available on the Internet at www.cefa.com, and will
soon be available on a Scudder Closed End Fund Web site that is currently under
construction.
Sincerely,
/s/ Nicholas Bratt
Nicholas Bratt
Chairman of the Board
and President
5
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[LOGO] The Argentina Fund, Inc.
Investment Summary as of October 31, 2000
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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 .02 -- -6.05 -- -10.51 --
One Year 3.43 3.43 2.54 2.54 -14.69 -14.69
Three Year -3.21 -1.08 10.47 3.38 -7.91 -2.71
Five Year 23.87 4.37 65.28 10.57 50.61 8.53
Life of Fund* 14.32 1.49 69.10 5.99 40.42 3.84
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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> <C> <C>
1991* 1992 1993 1994 1995 1996 1997 1998 1999 2000
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Net Asset Value... $10.99 $ 9.35 $12.69 $14.53 $10.27 $12.70 $14.60 $13.02 $14.59 $14.12
Income Dividends.. $ -- $ .06 $ .05 $ .14 $ .27 $ .33 $ .33 $ .25 $ .45 $ .31
Capital Gains
Distributions..... $ -- $ -- $ .09 $ .02 $ .46 $ -- $ -- $ -- $ -- $ .39
Total Return (%).. .09 -14.55 37.55 15.58 -24.94 26.86 17.94 -8.90 18.26 2.54
</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.$.
* The Fund commenced operations on October 22, 1991. Index return begins
on October 31, 1991.
Past results are not necessarily indicative of future performance of the Fund.
6
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[LOGO] The Argentina Fund, Inc.
Portfolio Summary as of October 31, 2000
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Diversification
Equity Securities 97% THE ORIGINAL DOCUMENT CONTAINS A PIE
Cash Equivalents 3% CHART HERE REFLECTING THE INFORMATION
---- TO THE LEFT.
100%
====
--------------------------------------------------------------------------------
Sectors
Sector breakdown of the Fund's equity securities
Financial 32% THE ORIGINAL DOCUMENT CONTAINS A PIE
Consumer Staples 16% CHART HERE REFLECTING THE INFORMATION
Communications 14% TO THE LEFT.
Energy 12%
Utilities 11%
Metals & Minerals 10%
Construction 5%
----
100%
====
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Ten Largest Equity Holdings (60% of Portfolio)
1. Petroleo Brasileiro S.A.
2. Telecom Argentina S.A.
3. Grupo Financiero Galicia
4. PC Holdings S.A.
5. Banco Frances del Rio de la Plata
6. Dalmine Siderca
7. Companhia Telefonica Nacional de Espana S.A.
8. Companhia de Bebidas das Americas
9. Quilmes Industrial S.A.
10. Banco Itau S.A.
7
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[LOGO] The Argentina Fund, Inc.
Investment Portfolio as of October 31, 2000
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<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Investments 2.6%
Student Loan Marketing Association, 6.45%**, 11/1/2000 (Cost $3,467,000)...... 3,467,000 3,467,000
----------------------------------------------------------------------------------------------------------
Preferred Stocks 1.2%
Shares
-------
Communications 1.2%
Telephone/Communications
Nortel Inversora "A" (ADR) (b)................................................ 40,983 514,439
Nortel Inversora "B" (ADR).................................................... 88,685 1,064,220
----------
Total Preferred Stocks (Cost $1,597,238)...................................... 1,578,659
----------
----------------------------------------------------------------------------------------------------------
Common Stocks 96.2%
Consumer Staples 15.9%
Alcohol & Tobacco 3.4%
Massalin Particulares S.A. (b)................................................ 574,972 4,485,724
----------
Food & Beverage 12.5%
Companhia de Bebidas das Americas (pfd.) (ADR) (c)............................ 257,500 5,809,844
Companhia Cervecerias Unidas S.A. (ADR) (d)................................... 161,300 3,115,106
Molinos Rio de la Plata "B"*.................................................. 954,047 1,660,390
Quilmes Industrial S.A ...................................................... 569,250 4,554,000
Quilmes Industrial S.A. (ADR)................................................. 130,000 1,072,500
Quimica Estrella "B"* (b)..................................................... 227,160 193,127
----------
16,404,967
----------
Communications 12.6%
Telephone/Communications
Telefonica S.A. (ADR)* (e..................................................... 107,666 6,237,899
Telecom Argentina S.A. "B" (ADR).............................................. 596,232 10,247,738
----------
16,485,637
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The accompanying notes are an integral part of the financial statements.
8
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[LOGO] The Argentina Fund, Inc.
Investment Portfolio
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Shares Value ($)
----------------------------------------------------------------------------------------------------------
Financial 30.9%
Banks 19.4%
Banco Frances del Rio de la Plata............................................. 1,107,382 8,008,054
Banco Itau S.A. (pfd.) (c).................................................... 68,600,000 5,361,632
Banco Santander S.A. (ADR) (e)................................................ 258,857 2,637,104
Grupo Financiero Galicia S.A. "B"*............................................ 5,745,558 8,562,679
Grupo Financiero Galicia S.A. "B" (ADR)....................................... 60,000 873,750
----------
25,443,219
----------
Other Financial Companies 7.5%
BI S.A. "A" (b)............................................................... 1,000,000 750,000
PC Holdings S.A. "B" (ADR).................................................. 631,030 9,071,056
----------
9,821,056
----------
Real Estate 4.0%
Inversiones y Representaciones S.A. (GDR)..................................... 252,918 5,263,856
----------
Energy 11.9%
Oil Companies
Petrobras Distribuidora S.A. (pfd.) (c)*...................................... 165,600,000 2,742,859
Petroleo Brasileiro S.A. (pfd.) (c)........................................... 480,000 12,785,684
----------
15,528,543
----------
Metals & Minerals 9.6%
Steel & Metals
Acindar*...................................................................... 730,000 653,487
Dalmine Siderca............................................................... 3,120,505 6,772,918
Gerdau S.A. (pfd.) (c)........................................................ 92,800,000 976,842
Siderar SAIC "A".............................................................. 1,552,796 4,115,774
----------
12,519,021
----------
Construction 5.1%
Building Materials
Juan Minetti y Cia "B"*....................................................... 1,272,239 1,832,409
Loma Negra Cia. S.A. (b)...................................................... 448,653 4,816,739
----------
6,649,148
----------
Utilities 10.2%
Electric Utilities 4.0%
Capex S.A. "A"*............................................................... 768,830 3,937,236
Empresa Nacional de Electricidad Chile (ADR)* (d)............................. 124,849 1,310,915
----------
5,248,151
----------
The accompanying notes are an integral part of the financial statements.
9
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[LOGO] The Argentina Fund, Inc.
Investment Portfolio
----------------------------------------------------------------------------------------------------------
Shares Value ($)
----------------------------------------------------------------------------------------------------------
Natural Gas Distribution 6.2%
Gas Natural Ban S.A. "B"...................................................... 665,184 1,237,502
MetroGas S.A. "B" (ADR)....................................................... 377,475 3,515,236
Transportadora de Gas del Sur "B"............................................. 1,956,215 3,424,095
-----------
8,176,833
-----------
Total Common Stocks (Cost $112,824,443)....................................... 126,026,155
-----------
----------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $117,888,681) (a).................. 131,071,814
-----------
-----------
----------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Annualized yield at time purchase, not a coupon rate (unaudited).
(a) The cost for federal income tax purposes was $118,088,404. At October 31,
2000, net unrealized appreciation for all securities based on tax cost was
$12,983,410. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of value over tax cost of
$21,850,062, and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value of
$8,866,652.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $10,760,029 (8.2% 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, 2000 aggregated $10,081,829. These
securities may also have certain restrictions as to resale.
(c) Investments in Brazilian companies aggregating $27,676,861 (21.1% of net
assets).
(d) Investments in Chilean companies aggregating $4,426,021 (3.4% of net
assets).
(e) Investments in Spanish companies aggregating $8,875,003 (6.8% of net
assets).
The accompanying notes are an integral part of the financial statements.
10
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[LOGO] The Argentina Fund, Inc.
Financial Statements
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--------------------------------------------------------------------------------
Statement of Assets and Liabilities
October 31, 2000
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<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $117,888,681)........................ $ 131,071,814
Cash........................................................................... 739
Receivable for investments sold................................................ 566,217
Dividends receivable........................................................... 46,857
-------------------
Total assets................................................................... 131,685,627
-------------------
LIABILITIES
Payable for subscribed shares.................................................. 208,620
Accrued management fee......................................................... 110,321
Other accrued expenses and payables............................................ 114,473
-------------------
Total liabilities.............................................................. 433,414
-------------------
Net assets, at value........................................................... $ 131,252,213
===================
NET ASSETS
Net assets consist of:
Undistributed net investment income (loss)..................................... 1,593,679
Net unrealized appreciation (depreciation) on:
Investments................................................................. 13,183,133
Foreign currency related transactions....................................... (513)
Accumulated net realized gain (loss)........................................... 2,194,145
Paid-in capital................................................................ 114,281,769
-------------------
Net assets, at value........................................................... $ 131,252,213
===================
Netasset value per share ($131,252,213 / 9,295,304 shares of common stock
issued and outstanding, $.01 par value, 100,000,000 shares authorized)..... $14.12
=========
</TABLE>
The accompanying notes are an integral part of the financial statement.
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11
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[LOGO] The Argentina Fund, Inc.
Financial Statements
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--------------------------------------------------------------------------------
Statement of Operations
Year Ended October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income
Dividends (net of foreign taxes withheld of $111,624).......................... $ 4,634,325
Interest....................................................................... 261,338
-------------------
Total income................................................................... 4,895,663
-------------------
Expenses:
Management fee................................................................. 1,509,998
Custodian and accounting fees.................................................. 309,379
Auditing....................................................................... 65,651
Legal.......................................................................... 10,393
Directors' fees and expenses................................................... 62,288
Services to shareholders....................................................... 39,263
Reports to shareholders........................................................ 43,229
Other.......................................................................... 24,273
-------------------
2,064,474
-------------------
Net investment income (loss)................................................... 2,831,189
-------------------
Realized and unrealized gain (loss) on investment transactions
Net realized gain (loss) from:
Investments.................................................................... 2,443,950
Foreign currency related transactions (including CPMF tax of $8,506)........... (36,198)
-------------------
2,407,752
-------------------
Net unrealized appreciation (depreciation) during the period on:
Investments.................................................................... (3,032,145)
Foreign currency related transactions.......................................... 275
-------------------
(3,031,870)
-------------------
Net gain (loss) on investment transactions..................................... (624,118)
-------------------
Net increase (decrease) in net assets resulting from operations................ $ 2,207,071
===================
</TABLE>
The accompanying notes are an integral part of the financial statements.
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12
<PAGE>
[LOGO] The Argentina Fund, Inc.
Financial Statements
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Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Years Ended October 31,
Increase (Decrease) in Net Assets 2000 1999
--------------------------------------------------------------------------------------------------------------------
Operations:
Net investment income (loss)........................................... $ 2,831,189 $ 3,554,312
Net realized gain (loss) on investment transactions.................... 2,407,752 5,362,548
Net unrealized appreciation (depreciation) on investment transactions
during the period................................................... (3,031,870) 9,822,818
------------------- -------------------
Net increase (decrease) in net assets resulting from operations........ 2,207,071 18,739,678
------------------- -------------------
Distributions to shareholders from:
Net investment income............................................... (2,878,155) (4,172,863)
Net realized gains.................................................. (3,620,904) --
------------------- -------------------
Total distributions.................................................... (6,499,059) (4,172,863)
------------------- -------------------
Reinvestment of distributions.......................................... 130,228 92,168
------------------- -------------------
Increase (decrease) in net assets...................................... (4,161,760) 14,658,983
Net assets at beginning of period...................................... 135,413,973 120,754,990
------------------- -------------------
Net assets at end of period (including undistributed net investment
income (loss) of $1,593,679 and $1,676,843, respectively)........... $ 131,252,213 $ 135,413,973
=================== ===================
Other Information
Shares outstanding at beginning of period.............................. 9,284,370 9,273,029
Shares issued to shareholders in reinvestment of distributions......... 10,934 11,341
------------------- -------------------
Shares outstanding at end of period.................................... 9,295,304 9,284,370
=================== ===================
</TABLE>
The accompanying notes are an integral part of the financial statements.
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13
<PAGE>
[LOGO] The Argentina Fund, Inc.
Financial Highlights
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--------------------------------------------------------------------------------
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>
<S> <C> <C> <C> <C> <C>
Years Ended October 31,
--------------------------------------------------------
2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance
Net asset value, beginning of period.................. $ 14.59 $ 13.02 $ 14.60 $ 12.70 $ 10.27
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income (loss) (a).................... .30 .38 .39 .30 .26
Net realized and unrealized gain (loss)
on investment transactions......................... (.07) 1.64 (1.72) 1.93 2.50
------- ------- ------- ------- -------
Total from investment operations...................... .23 2.02 (1.33) 2.23 2.76
------- ------- ------- ------- -------
Less distributions from:
Net investment income............................... (.31) (.45) (.25) (.33) (.33)
Net realized gains on investment
transactions....................................... (.39) -- -- -- --
------- ------- ------- ------- -------
Total distributions................................... (.70) (.45) (.25) (.33) (.33)
------- ------- ------- ------ ------
Net asset value, end of period........................ $ 14.12 $ 14.59 $ 13.02 $ 14.60 $ 12.70
======= ======= ======= ======= =======
Market value, end of period........................... $ 10.44 $ 10.69 $ 9.63 $ 12.31 $ 11.50
======= ======= ======= ======= =======
Total Return
Per share market value (%)............................ 3.43 17.19 (20.15) 9.84 16.52
Per share net asset value (%) (b)..................... 2.54 18.26 (8.90) 17.94 26.86
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)................ 131 135 121 135 118
Ratio of expenses (%)................................. 1.43 1.47 1.48 1.71 1.90
Ratio of net investment income (loss) (%)............. 1.95 2.88 2.75 1.96 2.11
Portfolio turnover rate (%)........................... 13 41 14 32 19
</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.
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14
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[LOGO] The Argentina Fund, Inc.
Notes to Financial Statements
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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 accounting
principles generally accepted in the United States of America 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.
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, 2000, the exchange rates were U.S. $1 to 0.9998
Argentine peso and U.S. $1 to 1.9000 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, 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.
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[LOGO] The Argentina Fund, Inc.
Notes to Financial Statements
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Taxes. The Fund's policy is to comply with the requirements of the Internal
Revenue Code of 1986, 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. However, under Brazilian, Chilean and Spanish tax laws, the
Fund is subject to withholding taxes on dividends ranging from 15% to 35%.
The Fund was subject to a 0.38% Contribuicao Provisoria sobre Movimentacao
Financiera (CPMF) tax which is applied to foreign exchange transactions
representing capital inflows or outflows to the Brazilian market until June 17,
2000. Effective June 18, 2000 the CPMF tax is 0.30%.
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 accounting principles generally accepted in the United
States of America. 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, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $20,053,577 and
$17,857,213, respectively.
C. Related Parties
---------------
Under the Investment 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 net assets and payable monthly. For the year ended October 31,
2000, the fee pursuant to the Agreement amounted to $1,509,998.
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[LOGO] The Argentina Fund, Inc.
Notes to Financial Statements
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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, 2000, the amount charged to the Fund by SFAC aggregated $100,331, of
which $32,168 is unpaid at October 31, 2000.
Scudder Service Corporation ("SSC"), a subsidiary of the Manager, provides
shareholder communications services for the Fund. For the year ended October 31,
2000, the amount charged to the Fund by SSC aggregated $15,000, of which $5,000
is unpaid at October 31, 2000. Effective November 17, 2000, Kemper Service
Company, a wholly owned subsidiary of the Manager, is the shareholder service
agent of the Fund.
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, 2000, Directors' fees and expenses aggregated $73,288.
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 States.
E. Line of Credit
--------------
The Fund and several Scudder Funds (the "Participants") share in a $1 billion
revolving credit facility with Chase Manhattan Bank, 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, 2000, the results of its operations, the changes in its
net assets and the financial highlights for each of the periods indicated
therein, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America 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, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 8, 2000
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[LOGO] The Argentina Fund, Inc.
Tax Information (Unaudited)
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The Fund paid distributions of $0.39 per share from net long-term capital gains
dividends during its year ended October 31, 2000, of which 100% represents 20%
rate gains.
Pursuant to section 852 of the Internal Revenue Code, the Fund
designates $981,000 as capital gains dividends for its year ended October 31,
2000, of which 100% represents 20% rate gains.
The Fund paid foreign taxes of $111,624 and earned $1,496,347 of foreign source
income during the year ended October 31, 2000. Pursuant to section 853 of the
Internal Revenue Code, the Fund designates $0.012 per share as foreign taxes
paid and $0.161 per share as income earned from foreign sources for the year
ended October 31, 2000.
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
--------------------------------------------------------------------------------
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 Kemper Service 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 Kemper Service 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
--------------------------------------------------------------------------------
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
Kemper Service Company, P.O. Box 219153, Kansas City, MO 64121-9153 ,
1-800-621-1048.
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[LOGO] The Argentina Fund, Inc.
Stockholder Meeting Results (Unaudited)
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The Annual Meeting of Stockholders of The Argentina Fund, Inc. (the "Fund") was
held on Thursday, July 6, 2000, at the offices of Scudder Kemper Investments,
Inc., 345 Park Avenue, New York, New York. The two matters voted upon by
Stockholders and the resulting votes for each matter are presented below.
1. To elect two Directors of the Fund to hold office for a term of three
years or until their respective successors have been duly elected and
qualified.
Director (Class II): Number of Votes:
-------------------- ---------------
Broker
------
For Withheld Non-Votes*
--- -------- ---------
Nicholas Bratt 6,222,408 80,747 0
Robert J. Callander 6,208,456 94,699 0
2. To ratify or reject the action taken by the Board of Directors in
selecting PricewaterhouseCoopers LLP as the Fund's independent
accountant for the fiscal year ending October 31, 2000.
Number of Votes:
---------------
Broker
------
For Against Abstain Non-Votes*
--- ------- ------- ---------
6,269,874 23,837 9,444 0
--------------------------------------------------------------------------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
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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 the United Kingdom,
Switzerland, Hong Kong, and Japan.
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 that invest primarily in foreign securities include 21
open-end investment companies as well as portfolios for institutional investors.
The Manager also manages the assets of 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
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.
24
