PRELMINARY
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities
Exchange Act of 1934 (Amendment No.__ )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
THE BRAZIL FUND, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identity the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
345 Park Avenue (at 51st Street)
New York, New York 10154
[LOGO] (800) 349 - 4281
THE BRAZIL FUND, INC. October [ ], 2005
To the Stockholders:
The Annual Meeting of Stockholders of The Brazil Fund, Inc. (the "Fund") is to
be held at [ ] , Eastern time, on Tuesday, December 13, 2005 at the offices of
Deutsche Investment Management Americas Inc., part of Deutsche Asset Management,
345 Park Avenue (at 51st Street), New York, New York 10154. Stockholders who are
unable to attend this meeting are strongly encouraged to vote by proxy, which is
customary in corporate meetings of this kind. A Proxy Statement regarding the
meeting, a proxy card for your vote at the meeting and an envelope -- postage
prepaid -- in which to return your proxy are enclosed.
At the Annual Meeting the stockholders will elect three Directors and vote on a
proposal to convert the Fund from a closed-end fund to an open-end fund. In
addition, the stockholders present will hear a report on the Fund. There will be
an opportunity to discuss matters of interest to you as a stockholder. All of
our independent directors plan to attend this meeting and look forward to
meeting interested stockholders. Your Fund's Directors recommend that you vote
in favor of the three nominees for Directors.
Respectfully,
/s/ Robert J. Callander
----------------------------
Robert J. Callander
Chairman of the Board
on behalf of the full Board
STOCKHOLDERS ARE URGED TO SIGN THE PROXY CARD AND MAIL IT IN THE ENCLOSED
POSTAGE - PREPAID ENVELOPE SO AS TO ENSURE A QUORUM AT THE MEETING. THIS IS
IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
2
THE BRAZIL FUND, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
The Brazil Fund, Inc.:
Please take notice that the Annual Meeting of Stockholders of The Brazil Fund,
Inc. (the "Fund") has been called to be held at the offices of Deutsche
Investment Management Americas Inc., part of Deutsche Asset Management, 345 Park
Avenue (at 51st Street), New York, New York 10154, on Tuesday, December 13, 2005
at [ ] a.m., Eastern time, for the following purposes:
(i) To elect one Class I Director of the Fund to hold office for a term of
three years and until his successors shall have been duly elected and
qualified and to elect two Class III Directors of the Fund to hold office
for a term of the remaining two years in a three year term and until their
successors shall have been duly elected and qualified.
(ii) To approve the conversion of the Fund from a closed-end fund to an
open-end fund.
The appointed proxies will vote on any other business as may properly come
before the meeting or any adjournments or postponements thereof.
Holders of record of the shares of common stock of the Fund at the close of
business on [October 21], 2005 are entitled to vote at the meeting and any
adjournments or postponements thereof.
By order of the Board of Directors,
/s/ Carole Coleman
---------------------------------------------
Carole Coleman, Vice President and Secretary
October [ ], 2005
IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT
IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS INTENDED FOR
YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD MAY SAVE THE
FUND THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM AT
THE ANNUAL MEETING. IF YOU CAN ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES
IN PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
------------------
3
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of The Brazil Fund, Inc., a Maryland corporation (the
"Fund"), for use at the Annual Meeting of Stockholders to be held at the offices
of Deutsche Investment Management Americas Inc. ("DeIM" or the "Investment
Manager"), part of Deutsche Asset Management, 345 Park Avenue (at 51st Street),
New York, New York 10154 , on Tuesday, December 13, 2005 at [ ] a.m., Eastern
time, and at any adjournments or postponements thereof (collectively, the
"Meeting").
This Proxy Statement, the Notice of Annual Meeting and the proxy card are first
being mailed to stockholders on or about [ ], 2005, or as soon as practicable
thereafter. Any stockholder giving a proxy has the power to revoke it prior to
the time the proxy is exercised by attending the Meeting and casting his or her
votes in person or by mail, by executing a superseding proxy or by submitting a
notice of revocation to the Fund (addressed to the Secretary at the principal
executive office of the Fund, 345 Park Avenue, New York, New York 10154). All
properly executed proxies received in time for the Meeting will be voted as
specified in the proxy or, if no specification is made, for each of the nominees
for director named in the Proxy Statement, for the proposal to convert the Fund
from a closed-end fund to an open-end fund (the "Open-Ending") and in the
discretion of the proxy holders on any other matter that may properly come
before the Meeting.
The presence at any stockholders' meeting, in person or by proxy, of
stockholders entitled to cast a majority of the votes entitled to be cast at the
Meeting shall be necessary and sufficient to constitute a quorum for the
transaction of business. For purposes of determining the presence of a quorum
for transacting business at the Meeting, abstentions and broker "non - votes"
will be treated as shares that are present but which have not been voted. Broker
non - votes are proxies received by the Fund from brokers or nominees when the
broker or nominee has neither received instructions from the beneficial owner or
other persons entitled to vote nor has discretionary power to vote on a
particular matter. Accordingly, stockholders are urged to forward their voting
instructions promptly.
With respect to the election of director nominees, abstentions and broker - non
- votes will have the same effect as a vote not to elect the nominees, because
election of a nominee requires the affirmative vote of a majority of the shares
present in person or by proxy and entitled to vote. See "Proposal 1: Election of
Directors -- Required Vote."
With respect to the conversion of the Fund to an open-end fund, abstentions and
broker - non - votes will have the same effect as a vote not to convert the Fund
to an open-end fund, because conversion of the Fund to an open-end fund requires
the affirmative vote of two-thirds of the shares present in person or by proxy
and entitled to vote. See "Proposal 2: Conversion From a Closed-End Fund to an
Open-End Fund -- Required Vote."
Holders of record of the common stock of the Fund at the close of business on
[October 21], 2005 (the "Record Date") will be entitled to one vote per share on
all business of the Meeting and any adjournments or postponements. There were
[ ] shares of common stock outstanding on the Record Date.
4
The Fund provides periodic reports to all stockholders which include relevant
information, including investment results and a review of portfolio changes. You
may receive an additional copy of the annual report for the fiscal year ended
June 30, 2005 and a copy of the semiannual report for the six - month period
ended December 31, 2004, without charge, by calling 800 - 349 - 4281 or 800 -
294 - 4366 or writing the Fund at 345 Park Avenue, New York, New York 10154.
PROPOSAL 1: ELECTION OF DIRECTORS
Persons named on the accompanying proxy card intend, in the absence of contrary
instructions, to vote all proxies for the election of the nominee listed below
as a Class I Director of the Fund to serve for a term of three years and until
his successor is duly elected and qualifies and for the election of the two
nominees listed below as Class III Directors of the Fund to serve for the
remaining two years of a three year term and until their respective successors
are duly elected and qualify. At the 2004 Annual Meeting of Stockholders, the
three Class III candidates for election as Directors (Mr. Vincent Esposito, Mr.
Ronaldo Nogueira and Ms. Susan Purcell) did not receive the requisite vote to
be re-elected (i.e., a majority of the outstanding shares) and, in accordance
with Maryland law and the Fund's bylaws, continued in office. On October 11,
2005, Mr. Esposito resigned as a Class III Director and Ms. Donna J. Hrinak was
elected to fill the Class III vacancy created. On the same date, the Board of
Directors voted to reduce the number of Directors of the Fund from seven to
five effective as of the annual meeting, reflecting a decision by Ms. Purcell
not to stand for re-election and the fact that Mr. William H. Luers, a current
Class II Director, would not be standing for re-election in accordance with the
Board's retirement policy. Accordingly, the Board has nominated Ms. Hrinak and
Mr. Nogueira for re-election as Class III Directors and has nominated Mr. Kesop
Yun, currently a Class II Director, for re-election as a Class II Director.
The nominees have consented to stand for election and to serve if elected. If
any such nominee should be unable to serve, an event not now anticipated, the
proxies will be voted for such person, if any, as shall be designated by the
Board of Directors to replace any such nominee.
INFORMATION CONCERNING NOMINEES
The following table sets forth certain information concerning each of the
nominees as a Director of the Fund. Each of the nominees is now a Director of
the Fund. Unless otherwise noted, each of the nominees has engaged in the
principal occupation listed in the following table for more than five years, but
not necessarily in the same capacity.
5
CLASS I -- NOMINEES TO SERVE UNTIL 2008 ANNUAL MEETING OF STOCKHOLDERS:
AGGREGATE DOLLAR
RANGE OF EQUITY
SECURITIES IN ALL
DOLLAR REGISTERED
RANGE INVESTMENT
OF COMPANIES
EQUITY OVERSEEN BY
SECURITIES DIRECTOR IN
IN FAMILY OF
NAME (AGE) PRESENT OFFICE WITH THE FUND, IF YEAR THE INVESTMENT
ADDRESS ANY; PRINCIPAL OCCUPATION OR FIRST FUND AS COMPANIES AS OF
INDEPENDENT EMPLOYMENT AND DIRECTORSHIPS IN BECAME A OF JUNE DECEMBER 31,
DIRECTOR** PUBLICLY HELD COMPANIES DIRECTOR 30, 2005(1) 2004(1)
-------------- ------------------------------------- -------- ----------- ----------------
Kesop Yun (60) Professor (formerly Dean, 1999-2001), 1994* None None
College of Business Administration,
Seoul National University, Seoul,
Korea; Director, The Korea
Liberalisation Fund, Inc. (U.K.)
(1996-1999); Visiting Professor of
London Business School (1997-1998);
President, Korea Securities & Economy
Institute (1994-1995) and Korea Tax
Association (1994-1995). [Mr. Yun
serves on the boards of three other
funds managed be DeIM.]
----------
* Mr. Yun previously served on the Board of the Fund from 1984 to 1988.
** Director considered by the Fund and its counsel not to be "interested
persons" of the Fund or of the Fund's investment manager, DeIM.
6
CLASS III -- NOMINEES TO SERVE UNTIL 2007 ANNUAL MEETING OF STOCKHOLDERS:
AGGREGATE DOLLAR
RANGE OF
EQUITY SECURITIES
IN ALL REGISTERED
INVESTMENT
DOLLAR COMPANIES
RANGE OF OVERSEEN BY
EQUITY DIRECTOR IN
SECURITIES FAMILY OF
NAME (AGE) PRESENT OFFICE WITH THE FUND, IF ANY; IN THE INVESTMENT
ADDRESS PRINCIPAL OCCUPATION OR YEAR FIRST FUND AS OF COMPANIES AS
INDEPENDENT EMPLOYMENT AND DIRECTORSHIPS BECAME A JUNE 30, OF DECEMBER 31,
DIRECTORS** IN PUBLICLY HELD COMPANIES DIRECTOR 2005(1) 2004(1)
--------------------- -------------------------------------- ---------- ---------- -------------------
DONNA M. HRINAK [AGE] Senior Counselor, Steel Hector & Davis 2005 [ ] [ ]
c/o Deutsche (law firm); formerly Ambassador of the
Investment Management United States to Brazil (until 2004)
Americas Inc. (government); For Profit Corporate
345 Park Avenue Boards: America Online Latin America
New York, NY 10154 (information technologies) [dates];
Non-Profit Directorships: Partners of
the Americas [dates], National
Intelligence Council [dates], Women in
International Security [dates];
Founding Member: Women in International
Trade [dates]; Advisory Board Member:
Inter-American Dialogue [dates]. Ms.
Hrinak serves on the boards of [ ]
other funds managed by DeIM.
RONALDO A. DA FROTA Director and Chief Executive Officer, 2000 $50,001- Over $100,000
NOGUEIRA (67) IMF Editora Ltd. (financial publisher); $100,000
c/o Deutsche Chairman of the Certification Committee
Investment Management and Director, APIMEC Nacional
Americas Inc. (Brazilian Association of Investment
345 Park Avenue Professionals and Analysts); Member,
New York, NY 10154 Board of the Association of Certified
International Investment Analysts
(ACIIA). [Mr. Nogueira serves on the boards of three
other funds managed by DeIM.]
----------
** Director considered by the Fund and its counsel not to be "interested
persons" of the Fund or of the Fund's investment manager, DeIM.
(1) The information as to beneficial ownership is based on statements furnished
to the Fund by the Directors and nominees. Unless otherwise noted, beneficial
ownership is based on sole voting and investment power.
INFORMATION CONCERNING CONTINUING DIRECTORS
The Board of Directors is divided into three classes, with each Director serving
for a term of three years. The terms of the Class II Directors do not expire
this year. The following table sets forth certain information regarding the
Directors in such class. Unless otherwise noted, each Director has engaged in
the principal occupation listed in the following table for more than five years,
but not necessarily in the same capacity.
7
CLASS II -- DIRECTORS TO SERVE UNTIL 2006 ANNUAL MEETING OF STOCKHOLDERS:
AGGREGATE DOLLAR
RANGE OF EQUITY
SECURITIES IN ALL
DOLLAR REGISTERED
RANGE OF INVESTMENT
EQUITY COMPANIES
SECURITIES OVERSEEN BY
NAME (AGE) PRESENT OFFICE WITH THE FUND, IF ANY; IN THE DIRECTOR IN FAMILY
ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT YEAR FIRST FUND AS OF OF INVESTMENT
INDEPENDENT AND DIRECTORSHIPS IN PUBLICLY HELD BECAME A JUNE 30, COMPANIES AS OF
DIRECTORS** COMPANIES DIRECTOR 2005(1) DECEMBER 31, 2005(1)
------------------ ------------------------------------------ ---------- ---------- ------------------
Chairman (since 2004) of the Board of the 2000 $10,001- Over $100,000
ROBERT J. Fund; Retired Vice Chairman, Chemical $50,000
CALLANDER (74) Banking Corporation; Directorships:
c/o Deutsche ARAMARK Corporation (food service);
Investment Member, Council on Foreign Relations;
Management Previously Visiting Professor/Executive -
Americas Inc. in - Residence, Columbia University
345 Park Avenue Business School; Formerly, Director,
New York, NY 10154 Barnes Group, Inc. (manufacturing) (until
April 2001); Omnicon Group, Inc.
(Advertising) (until May 2002) and
Managing Director, Metropolitan Opera
Association (retired). [Mr. Callander
serves on the boards of three other funds
managed by DeIM.]
KENNETH C. Clinical Professor of Finance, NYU Stern 1997 $10,001- Over $100,000
FROEWISS (59) School of Business; (1997 - present) $50,000
c/o Deutsche Member, Finance Committee, Association for
Investment Asian Studies; (2002 - present); Managing
Management Director, J.P. Morgan (investment banking
Americas Inc. firm) (1984 - 1996); Director, Mitsui
345 Park Avenue Sumitomo Insurance Group (U.S.)
New York, NY 10154 (2004-present). [Mr. Froewiss serves on the
boards of 46 other funds managed by DeIM
or its affiliates.]
ALL DIRECTORS AND OFFICERS AS A GROUP [ ] Less than 1%
Shares of Shares of the Fund
----------
** Director considered by the Fund and its counsel not to be "interested
persons" of the Fund or of the Fund's investment manager, DeIM.
(1) The information as to beneficial ownership is based on statements
furnished to the Fund by the Directors and nominees. Unless otherwise
noted, beneficial ownership is based on sole voting and investment power.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Section 30(h) of the Investment Company Act of 1940, as amended (the
"Investment
8
Company Act"), as applied to a closed-end management investment company, require
the Fund's Officers and Directors, investment manager, investment advisor,
affiliates of the Fund's investment manager and investment advisor, and persons
who beneficially own more than ten percent of a registered class of the Fund's
outstanding securities ("Reporting Persons"), to file reports of ownership of
the Fund's securities and changes in such ownership with the Securities and
Exchange Commission (the "SEC"). Such persons are required by SEC regulations to
furnish the Fund with copies of all such filings.
Based on a review of reports filed by the Fund's directors and executive
officers, the Investment Manager, officers and directors of the Investment
Manager, affiliated persons of the Investment Manager and beneficial holders of
10% or more of the Fund's outstanding stock, and written representations by the
Reporting Persons that no year - end reports were required for such persons, all
filings required by Section 16(a) of the Exchange Act for the fiscal year ended
June 30, 2005 were timely, except that Michael Colon, a director of the fund's
investment manager, filed a Form 3 two days late. Mr. Colon has since corrected
his omission by making the necessary filing. As a convenience to the directors,
the Investment Manager assists the directors in making their Section 16 filings.
According to filings made with the SEC between February and October 2005, the
following owned beneficially more than 5% of the Fund's outstanding stock:
Schedule 13G, President & Fellows of Harvard College, c/o Harvard Management
Company Inc., 600 Atlantic Avenue, Boston, MA 02110, reported beneficial
ownership as of December 31, 2004 of 3,540,400 shares, or 21.8% of the Fund's
shares.
Schedule 13G/A, City of London Investment Group, PLC, c/o City of London
Investment Management Company Limited, 10 Eastcheap, London, EC3M ILX, England,
reported beneficial ownership as of August 31, 2005 of 984,400 shares, or 6.06%
of the Fund's shares.
Schedule 13D, Carrousel Capital Ltd., 203-205 Brompton Road, London SW3 1LA,
reported beneficial ownership as of September 8, 2005 of 850,185 shares or 5.2%
of the Fund's shares, of which 424,600 shares, or 2.6% of the Fund's shares, is
held through its control of The Carrousel Fund Ltd., Walker House, P.O. Box 265
GT, Mary Street, George Town, Grand Cayman, Cayman Islands, and 425,400 shares,
or 2.6% of the Fund's shares, is held through its control of The Carrousel Fund
II Limited, Walker House, P.O. Box 265 GT, Mary Street, George Town, Grand
Cayman, Cayman Islands.
Schedule 13G, QVT Financial LP, and QVT Financial GP LLC, its General Partner,
527 Madison Avenue, 8th Floor, New York, New York, 10022, reported beneficial
ownership as of October 10, 2005 of 869,660 shares, or 5.35% of the Fund's
shares, all of which are held through their role as investment advisor to QVT
Fund LP, QVT Overseas Ltd. and QVT Associates LP.
Except as noted above, to the best of the Fund's knowledge, as of October 17,
2005, no other person owned beneficially more than 5% of the Fund's outstanding
stock.
COMMITTEES OF THE BOARD -- BOARD MEETINGS
The Board of Directors of the Fund met nine times during the fiscal year ended
June 30, 2005. Each Director attended at least 75% of the total number of
meetings of the Board of Directors and of all committees of the Board on which
he or she served as a regular member.
9
The Board of Directors seeks to have at least a majority of its members present
at annual stockholder meetings. At the Fund's last annual stockholder meeting on
July 7, 2004, all Directors were in attendance.
The Board of Directors, in addition to an Executive Committee, has an Audit
Committee, a Valuation Committee and a Committee on Independent Directors.
AUDIT COMMITTEE
The Board has an Audit Committee, consisting of those Directors who are not
interested persons of the Fund or of the Investment Manager ("Independent
Directors"), as defined in the 1940 Act, which met three times during the fiscal
year ended June 30, 2005. The members of the Audit Committee are independent, as
independence is defined in the listing standards of the New York Stock Exchange.
The Audit Committee reviews with management and the independent accountants for
the Fund, among other things, the scope of the audit and the controls of the
Fund and its agents, reviews and discusses with management the Fund's annual
audited financial statements, reviews the auditor's required communications
regarding the scope and results of the audit that may assist the Audit Committee
in overseeing management's financial reporting and disclosure process, reviews
and approves in advance the type of services to be rendered by independent
accountants, approves and recommends to the Board for its approval the selection
of independent accountants for the Fund, reviews matters related to the
independence of the Fund's independent accountants and in general considers and
reports to the Board on matters regarding the Fund's accounting and bookkeeping
practices.
Audit Committee's Pre - Approval Policies and Procedures. The Audit Committee
must approve the engagement of the independent accountants to provide audit or
non-audit services to the Fund and non - audit services to DeIM or its control
affiliates that relate directly to the Fund's operations and financial reporting
prior to the commencement of any such engagement. In addition, the independent
accountants must notify the Fund's Audit Committee not later than the Audit
Committee's next meeting if the independent accountants enter into an engagement
to provide audit or non - audit - related services to DeIM or its control
affiliates that are not for services to the Fund or services that relate
directly to the Fund's operations and financial reporting whose projected fees
are in excess of $25,000. Such notification must include a general description
of the services awarded, the entity that is to be the recipient of such
services, the timing of the engagement, the entity's reason for selecting the
independent accountants, and the projected fees.
The Board of Directors has adopted a written charter for the Audit Committee,
which is attached to this Proxy Statement as Appendix A.
At a meeting held on April 4, 2005, the Board of Directors of the Fund,
including a majority of the Independent Directors, selected
PricewaterhouseCoopers LLP to act as independent accountants for the Fund for
the fiscal year ending June 30, 2006. The Fund's financial statements for the
fiscal years ended June 30, 2005 and June 30, 2004 and for the six - month
periods ended December 31, 2003 were audited by PricewaterhouseCoopers LLP. The
following table sets forth the aggregate fees billed for professional services
rendered by PricewaterhouseCoopers LLP:
AUDIT - RELATED FEES ALL OTHER FEES
-------------------- ----------------------
FISCAL YEAR DEIM - DEIM -
ENDED AUDIT FEES(1) TAX FEES FUND RELATED FUND RELATED
------------- ------------- -------- ----- -------- ---- -----------
June 30, 2004 $99,000 $13,100 $185 $807,051 $0 $1,722,293
June 30, 2005 $62,000 $22,200 $225 $264,200 $0 $ 89,635
10
----------
(1) The aggregate audit fees billed by PricewaterhouseCoopers LLP to all funds
managed by DeIM - related entities for each of the Fund's last two fiscal
years were $4,738,759 for the fiscal year ended June 30, 2004 and
$4,931,900 for the fiscal year ended June 30, 2005.
The fees disclosed in the table above under the caption "Audit Fees" are the
aggregate fees billed for each of the last two fiscal years for professional
services rendered for the audits of the Fund's annual and semi-annual financial
statements and review of financial statements included in the registrant's N -
CSR for services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years. The fees
disclosed under the caption "Audit-Related Fees" are the aggregate fees billed
in each of the last two fiscal years for assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements and are not reported under "Audit Fees." "Tax Fees" are the
aggregate fees billed in each of the last two fiscal years for professional
services rendered for tax compliance and tax return preparation. "All Other
Fees" are the aggregate fees billed in each of the last two fiscal years for
products and services provided, other than the services described above. "All
Other Fees" were billed for services in connection with risk management, tax
services and process improvement/integration initiatives for DeIM and other
related entities that provide support for the operations of the Fund.
DeIM-Related Fees include fees billed for services, if any, in each of the last
two fiscal years to DeIM and all entities controlling, controlled by, or under
common control with DeIM that provide services to the Fund. For engagements
entered into on or after May 6, 2003, the Audit Committee pre-approved all
non-audit services that PricewaterhouseCoopers LLP provided to DeIM and DeIM -
related entities that related directly to the Fund's operations and financial
reporting.
The aggregate non - audit fees billed by PricewaterhouseCoopers LLP to the Fund,
DeIM and entities controlling, controlled by or under common control with DeIM
that provide services to the Fund for each of the Fund's last two fiscal years
were $1,722,293 for the fiscal year ended June 30, 2004 and $89,635 for the
fiscal year ended June 30, 2005. The Fund's Audit Committee gave careful
consideration to the non - audit related services provided by
PricewaterhouseCoopers LLP to the Fund, DeIM and entities controlling,
controlled by or under common control with DeIM that provide services to the
Fund, and, based in part on certain representations and information provided by
PricewaterhouseCoopers LLP, determined that the provision of these services was
compatible with maintaining PricewaterhouseCoopers LLP's independence.
Representatives of PricewaterhouseCoopers LLP are not expected to be present at
the Meeting, but will be available by telephone to respond to appropriate
questions and to make a statement if they wish to do so.
AUDIT COMMITTEE REPORT
In connection with the audited financial statements as of and for the fiscal
year ended June 30, 2005 included in the Fund's Annual Report for the fiscal
year ended June 30, 2005 (the "Annual Report"), at a meeting held on August 18,
2005, the Audit Committee reviewed and discussed the annual audited financial
statements with management and the independent accountants, and discussed the
audit of such financial statements with the independent accountants.
11
The Audit Committee also discussed with the independent accountants the matters
required to be discussed by Statement On Auditing Standards No. 61
(Communications with Audit Committees). The independent accountants provided to
the committee the written disclosure and the letter required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
and the Audit Committee discussed with representatives of the independent
accountants their firm's independence.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not employed by the Fund for
accounting, financial management or internal control. Moreover, the Audit
Committee relies on and makes no independent verification of the facts presented
to it or representations made by management or the independent accountants.
Accordingly, the Audit Committee's oversight does not provide an independent
basis to determine that management has maintained appropriate accounting and
financial reporting principles or policies, or internal controls and procedures,
designed to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, the Audit Committee's considerations and discussions
referred to above do not provide assurance that the audit of the Fund's
financial statements has been carried out in accordance with auditing standards
generally accepted in the United States of America or that the financial
statements are presented in accordance with accounting principles generally
accepted in the United States of America.
Based on its consideration of the audited financial statements and the
discussions referred to above with management and the independent accountants
and subject to the limitation on the responsibilities and role of the Audit
Committee set forth in the Audit Committee's Charter and those discussed above,
the Audit Committee of the Fund recommended to the Board of Directors of the
Fund that the audited financial statements be included in the Fund's Annual
Report.
The Audit Committee currently consists of Messrs. Froewiss (Chairman), Luers,
Nogueira and Yun and Dr. Purcell.
COMMITTEE ON INDEPENDENT DIRECTORS
The Committee on Independent Directors consists of all the Independent
Directors. The members of the Committee are independent, as independence is
defined in the listing standards of the New York Stock Exchange, Inc. applicable
to closed-end funds. The Committee met once during the fiscal year ended June
30, 2005 and held a subsequent meeting on October 11, 2005 to recommend the
nominees for Independent Directors presented in this Proxy Statement.
The primary purposes and responsibilities of the Committee are (i) to identify
individuals qualified to become members of the Board in the event that a
position is vacated or created; (ii) to recommend for the Board's selection the
Director nominees for the next annual meeting of stockholders; (iii) to set any
necessary standards or qualifications for service on the Board; (iv) to review
and evaluate the compensation practices of the Independent Directors and to
recommend any changes thereto to the Board; (v) to determine the policies
governing retirement of all Independent Directors; (vi) to perform periodic
evaluations of the effectiveness of the Independent Directors; and (vii) to
consider such other matters of special relevance to the Independent Directors.
12
The Committee requires that Director candidates have a college degree or
equivalent business experience. The Committee may take into account a wide
variety of factors in considering Director candidates, including (but not
limited to): (i) availability and commitment of a candidate to attend meetings
and perform his or her responsibilities on the Board, (ii) relevant industry and
related experience, (iii) educational background, (iv) financial expertise, (v)
an assessment of the candidate's ability, judgment and expertise and (vi)
overall diversity of the Board's composition.
The Board of Directors has adopted a written charter for the Committee on
Independent Directors, which was included as an appendix to the Fund's Proxy
Statement for the 2004 Annual Stockholder Meeting.
The Committee will consider and evaluate nominee candidates properly submitted
by stockholders on the same basis as it considers and evaluates candidates
recommended by other sources. Appendix A to the charter, as it may be amended
from time to time by the Committee, sets forth procedures that must be followed
by stockholders to properly submit a nominee candidate to the Committee.
Recommendations not properly submitted in accordance with Appendix A will not be
considered by the Committee. In order to be considered by the Committee for the
2006 annual meeting, submission should be made by [ ], 2006.
EXECUTIVE COMMITTEE
The Executive Committee is empowered, and the Directors have delegated to such
Committee, all of the powers of the Directors that are not otherwise delegated
and that may lawfully be exercised by an executive committee. The Executive
Committee is authorized to act when the full Board of Directors is not in
session. Messrs. Callander and Froewiss are the members of the
Executive Committee of the Fund. The Executive Committee did not meet during the
fiscal year ended June 30, 2005.
VALUATION COMMITTEE
The Valuation Committee monitors the valuation of portfolio securities and other
investments and, as required by the Fund's valuation policies when the full
Board is not in session, determines the fair value of illiquid and other
portfolio holdings after consideration of all relevant factors, which
determinations are reported to the full Board. Messrs. Froewiss and [ ] are
the members of the Valuation Committee, with Messrs. Callander and Luers as
alternates. The Valuation Committee met [ ] times during the fiscal year ended
June 30, 2005.
STOCKHOLDER COMMUNICATIONS WITH DIRECTORS
The Fund has established procedures for stockholders to send communications to
the Board of Directors. Communications should be sent in writing to the Board of
Directors of The Brazil Fund, Inc., c/o Carole Coleman, Vice President and
Secretary to the Fund, 345 Park Avenue, Mailstop NYC 20-2799, New York, New York
10154. The Secretary of the Fund then will promptly forward copies of all
written correspondence to the Directors.
EXECUTIVE OFFICERS
The following persons are Executive Officers of the Fund:
13
YEAR FIRST
PRESENT OFFICE WITH THE FUND; BECAME
NAME (AGE) PRINCIPAL OCCUPATION OR EMPLOYMENT(1) AN OFFICER(2)
--------------------------- ---------------------------------------------------------- -------------
Julian F. Sluyters (45) President and Chief Executive Officer; Managing Director, 2004
Deutsche Asset Management (since May 2004); President
and Chief Executive Officer of The Brazil Fund, Inc.,
Scudder Global High Income Fund, Inc. and Scudder New
Asia Fund, Inc. (since May 2004); Chief Executive Officer
of the Scudder Funds [203] funds); President and Chief
Executive Officer, UBS Fund Services (2001 - 2003); Chief
Administrative Officer (1998 - 2001) and Senior Vice
President and Director of Mutual Fund Operations (1991 -
1998) UBS Global Asset Management.
Paul H. Schubert (42) Treasurer and Chief Financial Officer; Managing Director, 2004
Deutsche Asset Management (since July 2004); formerly,
Executive Director, Head of Mutual Fund Services and
Treasurer for UBS Family of Funds at UBS Global Asset
Management (1994 - 2004).
Carole Coleman (35) Vice President and Secretary; Director of Deutsche Asset 2005
Management (2005 - present); Associate General Counsel of
Fred Alger & Company, Inc. (April 2002 - June 2005).
Associate Attorney, Charpie & Associates (October 1995 -
March 2002).
Tara C. Kenney (44) Vice President, Managing Director of Deutsche Asset 2000
Management.
Paul H. Rogers (49) Vice President, Managing Director of Deutsche Asset 1998
Management.
Scott M. McHugh (33) Assistant Treasurer, Director of Deutsche Asset 2005
Management.
Kathleen Sullivan D'Eramo Assistant Treasurer; Director of Deutsche Asset 2003
(46) Management.
John Millette (41) Assistant Secretary; Director of Deutsche Asset 1999
Management.
Caroline Pearson (42) Assistant Secretary; Managing Director of Deutsche Asset 1998
Management.
14
(1) Unless otherwise stated, all Executive Officers have been associated with
DeIM, Deutsche Asset Management, or predecessor organizations for more
than five years, although not necessarily in the same capacity. Messrs.
Rogers, Millette, Schubert and Sluyters and Mses. D'Eramo,
Kenney and Pearson own securities of Deutsche Bank A.G.
(2) The President, Treasurer and Secretary each hold office until the next
annual meeting of the Board of Directors and until his successor has been
duly elected and qualifies, and all other officers hold office in
accordance with the bylaws of the Fund.
TRANSACTIONS WITH AND REMUNERATION OF DIRECTORS AND OFFICERS
The aggregate direct remuneration incurred by the Fund for payment to
Independent Directors was $[140,357], including expenses, for the fiscal year
ended June 30, 2005. Each such Independent Director currently receives fees,
paid by the Fund, of $750 per Directors' meeting attended and an annual
Director's fee of $6,000, except for Mr. Nogueira who as a Resident Brazilian
Director receives an annual fee of $12,000, and except the Chairman of the Board
(currently Mr. Callander), who receives an annual fee of $18,000 effective May
10, 2004. Prior to May 10, 2004, Mr. Callander received an annual Director's fee
of $6,000 plus an additional $2,500 annual fee for having served as the Lead
Independent Director of the Independent Directors. The Chairman of the Audit
Committee (currently Mr. Froewiss) receives an additional $2,500 annual fee for
serving in that capacity. Each Director also receives $250 per committee meeting
attended (other than audit committee meetings and meetings held for the purpose
of considering arrangements between the Fund and the Investment Manager or an
affiliate of the Investment Manager, for which such Director receives a fee of
$750). DeIM supervises the Fund's investments, pays the compensation and certain
expenses of its personnel who serve as Directors and Officers of the Fund, and
receives a management fee for its services. Several of the Fund's Officers and
Directors are also officers, directors or employees of DeIM and participate in
the fees paid to that firm (see "Investment Manager"), although the Fund makes
no direct payments to them.
The following Compensation Table provides, in tabular form, the following data:
Column (1) All Directors who receive compensation from the Fund.
Column (2) Aggregate compensation received by a Director from the Fund.
Columns (3) and (4) Pension or retirement benefits accrued or proposed to be
paid by the Fund. The Fund does not pay such benefits to its Directors.
Column (5) Total compensation received by a Director from the Fund, plus
compensation received from all funds managed by DeIM for which a Director
serves. The total number of funds from which a Director receives such
compensation is also provided in column (5). Generally, compensation received by
a Director for serving on the Board of a closed - end fund is greater than the
compensation received by a Director for serving on the Board of an open - end
fund.
15
COMPENSATION TABLE FOR THE YEAR ENDED DECEMBER 31, 2004
(1) (2) (3) (4) (5)
AGGREGATE
AGGREGATE PENSION OR ESTIMATED COMPENSATION AS A
COMPENSATION RETIREMENT BENEFITS ANNUAL DIRECTOR/TRUSTEE OF
NAME OF PERSON, FROM THE ACCRUED AS PART OF BENEFITS UPON THE FUND AND OTHER
POSITION FUND FUND EXPENSES RETIREMENT SCUDDER FUNDS*
---------------------- ----------- ------------------- ------------- -------------------
Robert J. Callander, $27,357 N/A N/A $ 115,520
Director [5 funds]
Kenneth C. Froewiss, $21,000 N/A N/A $ 87,364
Director [5 funds]
Donna J. Hrinak [ ] [ ] [ ] [ ]
Director
William H. Luers, $18,500 N/A N/A $ 77,114
Director** [5 funds]
Ronaldo A. da Frota $24,500 N/A N/A $ 83,114
Nogueira, Director [5 funds]
Susan Kaufman Purcell, $18,500 N/A N/A $ 75,060
Director** [5 funds]
Kesop Yun, $15,250 N/A N/A $ 64,864
Director [5 funds]
----------
* The Board members were appointed Board members of Scudder Global
Commodities Stock Fund, Inc. on July 7, 2004.
** In accordance with the Fund's retirement policy, Mr. Luers is not standing
for reelection. Ms. Purcell will also not be standing for reelection.
REQUIRED VOTE
Election of each of the listed nominees for Director requires the affirmative
vote of the holders of a majority of the shares present in person or by proxy
and entitled to vote thereon. If a nominee does not receive the required vote,
the director holding over shall continue as a director until his or her
successor is elected and qualifies. Your Fund's Directors recommend
that stockholders vote FOR each of the listed nominees.
THE INVESTMENT MANAGER
Under the supervision of the Board of Directors of the Fund, DeIM, with
headquarters at 345 Park Avenue, New York, New York, makes the Fund's investment
decisions, buys and sells securities for the Fund and conducts research that
leads to these purchase and sales decisions. DeIM and its predecessors have more
than 80 years of experience managing mutual funds. DeIM provides a full range of
investment advisory services to institutional and retail clients. The Investment
Manager is also responsible for selecting brokers and dealers and for
negotiating brokerage commissions and dealer charges.
Deutsche Asset Management is the marketing name in the US for the asset
management activities of Deutsche Bank AG, DeIM, Deutsche Asset Management Inc.,
Deutsche Asset Management Investment Services Ltd., Deutsche Bank Trust Company
Americas and Scudder Trust Company. Deutsche Asset Management is a global asset
management organization that offers a wide range of investing expertise and
resources, including hundreds of portfolio managers and analysts and an office
network that reaches the world's major investment centers. DeIM is an indirect
wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global
banking institution that is engaged in a wide range of financial services,
including investment management, mutual funds, retail, private and commercial
banking, investment banking and insurance.
Appendix D contains information regarding each director and principal executive
officer of Deutsche Investment Management Americas Inc.
PROPOSAL 2: CONVERSION FROM A CLOSED-END FUND TO AN OPEN-END
16
FUND
The Board of Directors believes that the Fund should be converted from a
closed-end fund into an open-end fund, often referred to as a "mutual fund."
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR PROPOSAL 2.
BACKGROUND OF THE PROPOSAL
The Fund was organized in 1987 as a closed-end investment company. The Fund was
the first non-Brazilian fund to be authorized to invest in Brazilian securities.
At the time of the Fund's organization, Brazilian securities were generally
thinly traded, relatively illiquid and subject to much greater volatility than
most United States securities. At that time, the Brazilian securities markets
were relatively small in comparison to the securities markets of more developed
countries. The closed-end format was chosen as appropriate in light of these
factors to enable the Fund to achieve its investment objective of seeking
long-term capital appreciation from investment in Brazilian securities. The
Fund's results during the subsequent 18 years have supported the conclusion that
this decision was well founded.
In the Fund's early years, when there were few alternative means for foreigners
to invest in the Brazilian markets, shares of the Fund generally traded at a
premium over net asset value. However, as restrictions on foreign investment in
Brazil have been relaxed and alternative vehicles for investment in Brazilian
securities have become available, the Fund's shares, like those of most
closed-end funds, have frequently sold at a discount from net asset value. The
chart set forth below presents the average, high and low discount or premium of
the Fund's shares for each year during the period from 1991 through September
30, 2005:
PREMIUM OR DISCOUNT AS A PERCENTAGE
-----------------------------------------------
YEAR AVERAGE HIGH LOW
------------------------------------- ------- -------------------------- ----------
1991................................. 10.41 31.14 (8/30/91) -9.07 (2/15/91)
1992................................. 2.98 15.22 (7/2/92) -13.04 (12/17/92)
1993................................. -6.70 3.86 (2/4/93) -12.66 (12/16/93)
1994................................. -0.79 12.68 (4/21/94) -13.31 (3/31/94)
1995................................. 1.41 14.17 (3/16/95) -14.66 (12/7/95)
1996................................. -9.43 10.87 (2/11/96) -20.44 (10/24/96)
1997................................. -18.29 -13.28 (1/16/97) -25.87 (11/20/97)
1998................................. -22.90 -15.83 (2/21/98) -35.27 (9/10/98)
1999................................. -16.56 -8.07 (5/12/99) -27.60 (1/12/99)
2000................................. -25.99 -19.82 (2/14/00) -30.87 (10/16/00)
2001................................. -20.37 -15.40 (8/2/01) -24.60 (1/12/01)
2002................................. -15.17 -9.21 (7/29/02) -20.05 (1/14/02)
2003................................. -15.20 -12.37 (1/7/03) -22.91 (4/24/03)
2004................................. -14.45 -5.93 (12/27/04) -18.72 (5/11/04)
2005 through September 30, 2005...... -6.20 -3.52 (2/25/05) -9.07 (3/29/05)
17
The Board for many years has sought to address the discount to NAV at which
shares of the Fund have traded in ways consistent with the best interests of
shareholders and applicable regulatory requirements. The Board has considered a
wide variety of strategies to address the discount. Past actions taken by the
Board have included a market share buy-back program, purchases of shares
pursuant to the Fund's dividend reinvestment plan, efforts to increase publicity
about the Fund, and an effort to implement an in-kind tender offer that was not
implemented due to issues arising from Brazilian capital gains tax treatment.
These measures did not affect the closed-end status of the Fund.
In December 2004, the Board of Directors authorized a repurchase program in
which the Fund would offer to repurchase up to 50% of its outstanding shares at
a price equal to 98% of the NAV per share and conduct six subsequent semi-annual
repurchase offers, each for 10% of the then outstanding shares at a price equal
to 98% of NAV per share, if the shares traded at an average weekly discount from
NAV greater than 5% during a measuring period. Payment for any shares
repurchased pursuant to this repurchase program would be made in-kind through a
pro rata distribution of securities from the Fund's portfolio on the day after
the date such offer expires. In July 2005, the Fund made an offer to repurchase
up to 50% of its shares in exchange for portfolio securities of the Fund. The
repurchase offer and repurchase program were terminated, however, when the
Fund's Brazilian administrator raised questions as to whether the offer would
subject the Fund to Brazilian capital gains taxation.
After termination of the in-kind repurchase offer, the Board met on a number of
occasions to consider structural and transactional alternatives for the Fund to
address the discount, including repurchases of shares, merger of the Fund with
another entity, or liquidation of the Fund. During its deliberations, the Board
considered the likelihood of various options being successfully implemented, the
expected time that would be required to implement them, the tax impact of these
options on the Fund and its stockholders, and the amounts that might be expected
to be realized by stockholders in the various transactions being considered. The
Board also considered the expressed expectations of a number of large Fund
stockholders that further significant action would be taken to reduce the
discount in light of the termination of the in-kind repurchase offer.
At a meeting held on September 20, 2005, the Board of Directors of the Fund
approved conversion of the Fund into an open-end fund as the most effective way
of eliminating the discount and offering more liquidity to shareholders in their
investments in Brazilian securities.
The Board believes that recent developments have mitigated various concerns that
previously led it to oppose open ending: (i) the growth of the Brazilian
securities markets have resulted in increased liquidity and decreased volatility
of Brazilian securities in recent years; (ii) a number of open-end "country"
funds investing in stock markets outside the U.S. have been successfully
established and managed; and (iii) direct investment in Brazilian securities is
more readily available today to investors outside
18
Brazil through relaxation of Brazilian restrictions on foreign investment as
well as broader information and listing and trading of Brazilian securities on
U.S. exchanges, such as through American Depositary Receipts on the New York
Stock Exchange.
For the reasons discussed above, the Board of Directors approved a proposal to
convert the Fund into an open-end fund and recommends conversion to
stockholders.
CHANGES IN FUND OPERATIONS AS A RESULT OF CONVERSION TO AN OPEN-END FUND
The Fund is currently registered as a "closed-end" investment company under the
Investment Company Act. Closed-end investment companies neither redeem their
outstanding stock nor engage in the continuous sale of new securities, and thus
operate with a relatively fixed capitalization. The stock of closed-end
investment companies is normally bought and sold in securities markets; the
Fund's shares are currently traded on the New York Stock Exchange. The Fund's
shares would be de-listed upon the conversion.
Some of the legal and practical differences between the Fund's present operation
as a closed-end investment company and its operation as a mutual fund are as
follows:
- RIGHT TO REDEEM. Open-end investment companies, commonly referred to as
"mutual funds," issue redeemable securities. The holders of redeemable
securities have the right to surrender those securities to the mutual fund
and receive an amount equal to the net asset value of the shares (less any
redemption fee). Many mutual funds also continuously issue new shares of
stock to investors based on the net asset value of such shares next
computed after receipt of a valid purchase order.
- ACQUISITION AND DISPOSITION OF SHARES; REDEMPTION FEE. Stockholders of
closed-end funds pay brokerage commissions in connection with the purchase
and sale of fund shares. [If the Fund converts into a mutual fund,
investors wishing to acquire shares of the Fund would be able to purchase
them either through selected financial intermediaries or directly from
Scudder Distributors, Inc., the Fund's proposed distributor (the
"Distributor"). If the financial intermediary is a broker-dealer, the
financial intermediary must have a signed dealer agreement with the
Distributor. Such shares would be purchased at their net asset value,
subject to any applicable fees or sales loads.] Stockholders desiring to
realize the value of their shares would be able to do so by presenting
their shares for redemption at net asset value less any applicable
redemption fee.
The Fund will impose a redemption fee of 2% of the value of the shares
sold on shares redeemed within six months after the conversion. The
redemption fee will be paid to the Fund and is intended to offset some of
the costs to the Fund associated with the Open-Ending. (Please refer to
"Expenses; Potential Net Redemptions," below.)
19
- VOTING RIGHTS. If the conversion to open-end format takes place,
stockholders will have less frequent opportunities to vote on particular
issues because, under the law of Maryland (the state in which the Fund is
incorporated), an open-end fund is not required to hold an annual
stockholder meeting in any year in which the election of directors is not
required to be acted on under the 1940 Act. Although the Fund's current
By-Laws require the Fund to hold annual meetings, upon conversion the
Fund's By-Laws will be amended (the "Amended By-Laws") to provide that the
Fund will not be required to hold an annual meeting in any year in which
the election of directors is not required to be acted upon under the 1940
Act. The Fund does not intend to hold annual meetings in any year in which
it is not required to do so. By not holding annual stockholder meetings,
the Fund would save the costs of preparing proxy materials and soliciting
stockholders' votes on the usual proposals contained in the proxy
statement.
Nevertheless, the Fund would be required to hold a meeting of stockholders
when stockholder approvals are necessary under the 1940 Act or Maryland
law. Under the 1940 Act, the Fund would be required to hold a stockholder
meeting if the number of Directors elected by stockholders was less than a
majority of the total number of Directors, if a change were sought in the
fundamental investment policies of the Fund, in an investment advisory
agreement, or in a distribution plan adopted pursuant to Rule 12b-1 under
the 1940 Act (if the change involved a material increase in Fund
expenses). Under Maryland law and the Fund's Amended By-Laws (and subject
to the conditions set forth in Maryland law and the Fund's Amended
By-laws), a special meeting of stockholders must be called upon request of
the stockholders only when requested in writing by stockholders entitled
to cast not less than a majority of all the votes entitled to be cast at
such special meeting.
Stockholders will continue to have one vote per share on each matter
submitted to a vote of stockholders if the Open-Ending takes place.
- [AVAILABILITY OF CAPITAL LOSSES.]
- DETERMINATION OF NET ASSET VALUE. SEC regulations generally require
open-end investment companies to value their assets on each business day
in order to determine the current net asset value at which shares may be
purchased or redeemed. The net asset values of most open-end investment
companies are
20
published daily by leading financial publications; the Fund will continue
to publish its net asset value on a daily basis at www.thebrazilfund.com.
- EXPENSES; POTENTIAL NET REDEMPTIONS.
The Fund's expenses may increase as a result of open-ending, either as a
result of the cost of additional stockholder services available to
stockholders of a mutual fund or otherwise. The Open-Ending is expected to
result in immediate, substantial redemptions and, consequently, a marked
reduction in the size of the Fund. In addition, the Fund might be required
to sell portfolio securities in order to meet net redemptions, thereby
resulting in realization of gains that would normally be distributed to
all stockholders and would thus be taxable to them. An asset base of
decreased size is likely to result in an increased expense ratio.
Significant net redemptions could also render the Fund an uneconomical
venture by virtue of its diminished size. These results may eventually be
mitigated by new sales of shares and the reinvestment of dividends and
capital gain distributions in shares of the Fund, but there can be no
assurance that new sales of shares will replace Fund assets paid in
redemption of shares. In an effort to mitigate these potential additional
costs, the Fund will impose a 2% redemption fee for the first [6] months
after the Open-Ending, which may (i) reduce the impact of initial
redemptions upon the Fund and (ii) reduce the direct and indirect costs,
such as brokerage costs, attributable to liquidation of portfolio
investments (and the potential related restructuring of the portfolio), as
well as other possible expenses associated with such redemptions.
The following table compares the fees and expenses of the Fund for the
fiscal year ended [ ] to the estimated pro forma fees and expenses of the
Fund following the Open-Ending. The post-conversion expenses in Column 2
assume no decrease in the assets following the Open-Ending. The
post-conversion expenses in Column 3 are based on the assumption that the
Fund's assets would decrease by 50% following the conversion. This
assumption is an estimate. The actual decrease (or increase) may be
significantly more or less than 50%.
Pro Forma Post- Pro Forma Post-
Conversion Assuming Conversion Assuming
No Reduction in 50% Reduction in
Pre-Conversion Assets Assets
-------------- ------------------- -------------------
Shareholder Fees [ ] [ ] [ ]
Redemption Fee None 2.00% 2.00%
Annual Fund
Operating Expenses [ ] [ ] [ ]
Management Fee [ ] [ ] [ ]
[12b-1 Fee]
Other Expenses [ ] [ ] [ ]
Total Operating Expenses [ ] [ ] [ ]
[Expense Reimbursement]
Net Operating Expenses [ ] [ ] [ ]
21
- ELIMINATION OF DISCOUNT. The fact that stockholders who wish to realize
the net asset value of their Fund shares will be able to do so by
presenting their shares for redemption will eliminate any market discount
from net asset value. If the Open-Ending is approved by stockholders, the
discount may narrow prior to the date of the Open-Ending to the extent
purchasers of shares in the open market are willing to accept less of a
discount in anticipation of the prospective open-ending.
- DIVIDEND REINVESTMENT. [The Fund intends to continue to provide the
opportunity for stockholders to receive dividends and capital gains
distributions in cash or, at no charge to stockholders, in shares of the
Fund. If the Open-Ending occurs, such reinvestments in shares would be
made at net asset value. [At the time of the Open-Ending, the current
dividend reinvestment plan and privilege will terminate. All stockholders
will have their dividends and distributions automatically reinvested
unless they request that they receive cash.]]
- PORTFOLIO MANAGEMENT. Unlike open-end funds, closed-end funds are not
subject to pressures to sell portfolio securities at disadvantageous times
in order to meet stockholder redemption requests. Most open-end investment
companies maintain adequate reserves of cash or cash equivalents in order
to meet net redemptions as they arise. Because closed-end investment
companies do not have to meet redemption requests, their cash reserves can
be substantial or minimal, depending primarily on management's perception
of market conditions and on decisions to use fund assets to repurchase
shares. The larger reserves of cash or cash equivalents required to
operate prudently as an open-end fund when net redemptions are anticipated
could reduce the Fund's investment flexibility and the scope of its
investment opportunities, and could detract from Fund performance. The
Fund may have to sell portfolio securities in order to accommodate the
need for larger reserves of cash or cash equivalents, resulting in an
increase in transaction costs and portfolio turnover.
- ILLIQUID SECURITIES. An open-end investment company is subject to the SEC
requirement that no more than 15% of its net assets may be invested in
securities that are not readily marketable. [The Board has approved a
modification
22
of the Fund's investment policy so that upon the conversion the Fund will
be subject to such limitation.]
- SENIOR SECURITIES AND BORROWINGS. The 1940 Act prohibits open-end funds
from issuing "senior securities" representing indebtedness (that is,
bonds, debentures, notes and other similar securities), other than
indebtedness to banks where there is an asset coverage of at least 300%
for all borrowings. Closed-end investment companies, on the other hand,
are permitted to issue senior securities representing indebtedness to any
lender if the 300% asset coverage is met. In addition, closed-end
investment companies may issue preferred stock, whereas open-end
investment companies may not issue preferred stock. This greater ability
to issue senior securities may give closed-end investment companies more
flexibility than open-end investment companies in "leveraging" their
investments. [The Fund currently has no indebtedness to banks, and has no
authorized class of senior securities or any plan for issuing any such
securities.]
- STOCKHOLDER SERVICES. If the Open-Ending is approved, various services
will be made available to stockholders. [These may include the use of the
Fund for retirement plans, participation in an automatic investment plan
and the privilege to effect redemption and additional purchase
transactions by telephone.] The cost of these services will normally be
borne by the Fund rather than by particular stockholders.
- BROKERAGE COMMISSIONS ON PURCHASE AND SALE OF THE FUND'S SHARES.
Shareholders currently pay brokerage commissions in connection with the
purchase and sale of the Fund's shares on the New York Stock Exchange. If
the Open-Ending proposal is adopted and the Fund becomes a mutual fund,
the Fund's shares will be issued and redeemed by the Fund. In addition to
the above-mentioned redemption fee the first six months after the Fund
becomes a mutual fund, the following chart shows the charges applicable to
the various classes of shares: [ ]
- PRINCIPAL UNDERWRITER. Mutual fund shares are normally purchased and
redeemed through a "principal underwriter" (as such term is defined in the
Investment Company Act). In connection with the conversion of the Fund to
open-end status, the Board of Directors will select a principal
underwriter of the
23
shares of common stock of the Fund and will cause the Fund to enter into
an underwriting agreement with such principal underwriter upon such terms
and subject to such conditions as the Board deems advisable in its sole
business judgment.
[[ ] has indicated its willingness to enter into such an underwriting
agreement with the Fund. While the Board of Directors intends to make such
further investigation as it deems appropriate in this regard, the Board
currently expects that [ ] will be selected as principal underwriter of
the Fund's shares.]
- FREQUENT TRADING. Unlike closed-end investment companies, open-end funds
may be subject to adverse effects from market timing and other frequent
trading activities. Market timing is defined as effecting frequent trades
into or out of a fund in an effort to anticipate or time market movements.
Due to the frequent and disruptive nature of this activity, it can
adversely impact the ability of the Fund's investment adviser to invest
assets, in an orderly, long term manner, which in turn, may adversely
impact the performance of the Fund. [If the conversion occurs, the Fund
will implement policies including: a [2]% redemption fee on Fund shares
held for less than a specified holding period (subject to certain
exceptions); the reservation of the Fund's right to reject or cancel a
purchase or exchange order for any reason when, in the opinion of the
Advisor, there appears to be a pattern of short-term or excessive trading
activity by a shareholder or any other trading activity deemed harmful or
disruptive to the Fund; and certain fair valuation practices reasonably
designed to protect the Fund from "time zone arbitrage" with respect to
its foreign securities holdings and other trading practices that seek to
exploit variations in portfolio valuation that arise from the nature of
the securities held by the Fund. There is no assurance that these
policies and procedures will be effective in limiting short-term and
excessive trading in all cases. For example, the Advisor may not be able
to effectively monitor, detect or limit short-term or excessive trading by
underlying shareholders that occurs through omnibus accounts maintained by
broker-dealers or other financial intermediaries. Depending on the amount
of Fund shares held in such omnibus accounts (which may represent most of
the Fund's shares) short-term and/or excessive trading of fund shares
could adversely affect long-term shareholders in the Fund. It is important
to note that shareholders that invest through omnibus accounts also may be
subject to the policies and procedures of their financial intermediaries
with respect to short-term and excessive trading in the Fund. The Fund's
policies and procedures may be modified or terminated at any time.
24
- QUALIFICATION AS A REGULATED INVESTMENT COMPANY. The Fund intends to
continue to qualify for treatment as a regulated investment company under
the Internal Revenue Code after the conversion. Such qualification will
allow the Fund to continue to be relieved of federal income tax on that
part of its investment company taxable income and net capital gain that
are distributed to its stockholders.
- TAXES/CAPITAL GAINS. If the Fund were to experience substantial
redemptions of its shares following the Open-Ending, it would likely be
required to sell portfolio securities. If the Fund's basis in the
portfolio securities sold is less than the sale price obtained, net
capital gain will be realized. U.S. tax law imposes both an income tax and
an excise tax on net capital gain realized by closed-end and open-end
funds that do not distribute their net capital gain to shareholders. Fund
shareholders are subject to tax on such distributions. As of [Date], the
Fund had $[ ] in unrealized capital gains. As an alternative to actually
distributing all the gains to shareholders, the Internal Revenue Code
permits the Fund to: (1) retain all or part of the net long term capital
gains; (2) pay federal income tax on such retained amount; and (3) make a
federal income tax election to deem the retained amount (including U.S.
tax paid by the Fund) to have been distributed to shareholders and
recontributed (net of the tax amount) to the Fund. Such an election would
mitigate the negative cash impact the Fund would experience in connection
with the additional distribution requirements caused by substantial
redemptions following the Open-Ending. Shareholders would be required to
include the "deemed" distribution in income, but (i) could credit their
share of the taxes paid by the Fund against their own tax liability (and,
if their share of the taxes paid by the Fund exceed their own U.S. federal
tax liability, claim a refund of the excess amount from the U.S.
Treasury), and (ii) would increase their basis in their Fund shares by the
net amount deemed distributed (i.e., the gross retained amount, less the
taxes paid by the Fund). The Fund does not have any way of accurately
predicting the precise level of shareholder redemption activity, if any,
and the resulting tax consequences, should the Fund Open-End.
- BRAZILIAN TAX ASPECTS. If the Fund were to experience substantial
redemptions of its shares following the Open-Ending, it would likely be
required to sell assets. There are two different types of assets held by
the Fund, subject to different tax regimes, namely: (i) shares of
Brazilian publicly-traded companies; and (ii) fixed-rate investments. As
to the shares of Brazilian publicly-traded companies, capital gains
accrued by investment vehicles such as the Fund resulting from
transactions performed in the stock, commodities, futures and similar
exchange are exempt from withholding income tax (IRF). Thus, assuming that
usual sales of shares of Brazilian publicly-traded companies by the Fund
as an open-end fund would be carried out within the stock exchange
(BOVESPA), any capital gain accrued in such sale of shares would be exempt
from IRF. With
25
regard to Provisional Contribution on Financial Transactions ("CPMF"), the
sale of the shares of Brazilian publicly-traded companies within a stock
exchange or an organized over-the-counter market is exempt from CPMF.
Hence, usual sales of shares of Brazilian publicly-traded companies by the
Fund as an open-end fund within the stock exchange (BOVESPA) would be
exempt from CPMF. The Brazilian administrator is obliged to keep two
separate accounts for the Fund: (i) one related to transactions subject to
CPMF and (ii) another related to transactions exempt from CPMF. Thus,
depending on the account in which the assets are registered, they may or
may not be entitled to the CPMF exemption. As to fixed-rate investments,
income accrued from such investments are subject to IRF at a 15% rate.
Moreover, at the remittance of the proceeds related to the liquidation of
the fixed-rate investments held by the Fund, there would be CPMF at a
0.38% rate upon the amount of the proceeds remitted. If the fixed-rate
investments are liquidated before 30 days as of the investment, the
earnings accrued will be subject to Tax on Financial Transactions ("IOF")
at a 1% rate per day. The IOF base will be a percentage of the earnings,
depending on the number of days invested, ranging from 96% to 0%.
- OPERATION AS AN OPEN-END FUND IN BRAZIL. The Fund is currently registered
under Brazil's Annex III Regulations to Resolution No. 1289/87, which
subject it to certain restrictions. Brazilian Securities Commission
("CVM") Instruction No. 67/87 and Deliberation No. 51/87 provide that the
Fund must be capitalized with proceeds resulting from public offerings of
shares, that the Fund's shares must be traded on a stock exchange, and
that all issuances of new shares by the Fund must be previously approved
by the CVM. The Fund will require relief from these regulations in order
to complete the Open-Ending.
To enable the Fund to operate as an open-end fund under Brazilian
regulations, the Fund is currently: (i) petitioning the CVM to modify its
rulings regarding capitalization through public offerings, mandatory
trading of shares on a stock exchange and the pre-approval of the
issuances of new shares; and (ii) seeking approvals from Brazil's National
Monetary Council and the Federal Revenue Office to convert the Fund from
an Annex III vehicle to a 2,689 Investor, an entity not subject to the
Annex III restrictions. The Fund's Brazilian counsel believes the
modifications of CVM rulings referred to in item (i) may be received
within three (3) months of the date of this Proxy Statement, and the
approvals from Brazil's National Monetary Council and the Federal Revenue
Office may be received within nine (9) months of the date of this Proxy
Statement, although there can be no assurance that the requisite approvals
will be obtained in a timely manner or at all.
- STOCK CERTIFICATES. [If the conversion occurs, each certificate
26
representing shares of the Fund as a closed-end investment company will
automatically represent the [U.S. dollar value of shares of the Fund as an
open-end fund]. All shares of the Fund issued after the conversion will be
maintained in book-entry form by the Fund's transfer agent. Stockholders
holding stock certificates as of the conversion date will have the right
to surrender their certificates and have their shares maintained in
book-entry form by the Fund's transfer agent. Stockholders who wish to
redeem shares will be required to surrender their stock certificates to
the Fund's transfer agent before they can redeem any shares represented by
those certificates. All stockholders are encouraged to surrender their
certificates immediately after the conversion is approved regardless of
whether they intend to redeem shares after the conversion. If the
conversion is approved, stockholders will receive a letter with
instructions for delivering their certificates to the transfer agent.]
CONVERTING THE FUND TO AN OPEN-END INVESTMENT COMPANY
If Proposal 2 is approved, the Board will cause the Fund to take such actions as
are necessary to effect the conversion of the Fund to open-end status. The
conversion of the Fund to an open-end investment company will be accomplished
by: (i) amending the Fund's Articles of Incorporation to authorize the issuance
of redeemable securities at net asset value (as defined) and to provide that the
Fund's outstanding common stock will be redeemable at the option of the
stockholder; and (ii) changing the Fund's subclassification under the Investment
Company Act from a closed-end investment company to an open-end investment
company. In connection with the amendments to the Fund's Articles of
Incorporation, the Board of Directors will make necessary conforming changes to
the By-Laws of the Fund. The amendment of the Articles of Incorporation, a copy
of which is attached as Exhibit [ ], will be effective upon the filing thereof
in Maryland. However, such filing will not be made until a registration
statement under the Securities Act of 1933, as amended, covering the offering of
the shares of the Fund has become effective, which is expected to occur within [
] after Proposal 2 is approved.
Although management will use all practicable measures to keep costs at a
minimum, there have been and will continue to be substantial costs (many of them
non-recurring) in connection with the proposal to change from a closed-end to an
open-end investment company, including the preparation of this proxy statement,
the seeking of necessary regulatory approvals, the preparation of a registration
statement and prospectus (including printing and mailing) as required by the
Securities Act of 1933 and the payment of necessary filing fees. The Fund
currently estimates that these costs, [which would be paid by the Fund],
will range from $[ ] to $[ ], or [ ] cents to [ ] cents per share.
Neither the Fund nor its stockholders should realize any gain or loss for
federal income tax purposes upon the Open-Ending and the Open-Ending should not
affect a
27
stockholder's holding period or adjusted tax bases in the stockholder's shares
of the Fund. A stockholder who redeems shares of the Fund after the Open-Ending
would recognize a gain or loss to the extent that the redemption proceeds are
greater or less than the stockholder's adjusted tax basis in the shares
redeemed. In addition, if the Fund were to experience substantial redemptions of
its shares following the Open-Ending, it would likely be required to sell
portfolio securities, which could generate substantial capital net gain to the
Fund which would increase the amount that the Fund would be required to
distribute to shareholders to avoid the imposition of income and excise taxes on
the Fund.
VOTING REQUIREMENT
Maryland law requires the affirmative vote of the holders of two-thirds of the
outstanding shares of common stock of the Fund for the adoption of Proposal 2 to
convert the Fund from a closed-end investment company to an open-end investment
company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF PROPOSAL 2
PROVIDING FOR THE CONVERSION OF THE FUND TO AN OPEN-END INVESTMENT COMPANY.
OTHER NOMINATIONS
Carrousel Capital Ltd. ("Carrousel") has written the Fund that it intends to
nominate four persons for election as directors of the Fund at the Annual
Meeting. Information about these persons is set forth in Appendix C.
The Board believes its nominees, Mr. Yun, Ms. Hrinak and Mr. Nogueira, are well
qualified to promote the objectives of the Fund as a vehicle to invest for
long-term capital appreciation in Brazilian securities. Each of the directors
who is being proposed for election by the Fund has the necessary depth of
experience to represent the best interest of the Fund's shareholders. The Board
therefore urges you to vote FOR THE BOARD'S NOMINEES.
OTHER MATTERS
The Board of Directors does not know of any matters to be brought before the
Meeting other than those mentioned in this Proxy Statement. The appointed
proxies will vote on
28
any other business that may come before the Meeting or any adjournment or
postponement thereof in their discretion.
MISCELLANEOUS
Proxies will be solicited by mail and may be solicited in person or by telephone
by Officers of the Fund or personnel of DeIM. [The Fund has retained Georgeson
Shareholder Communications Inc. ("Georgeson"), 17 State Street, New York, New
York 10004 to assist in the proxy solicitation. The cost of Georgeson's services
is estimated at [ ] plus expenses. The costs and expenses connected with
the solicitation of the proxies and with any further proxies which may be
solicited by the Fund's Officers[ or Georgeson], in person or by telephone, will
be borne by the Fund. The Fund will reimburse banks, brokers, and other persons
holding the Fund's shares registered in their names or in the names of their
nominees, for their expenses incurred in sending proxy material to and obtaining
proxies from the beneficial owners of such shares.
Certain information about the employees of the Investment Manager who will be
soliciting proxies on the Fund's behalf is set forth in Appendix D. Appendix E
sets forth certain other information relating to the Directors and executive
officers of the Fund and these employees (collectively, the "Participants").
Solicitation of proxies is being made primarily by the mailing of this Proxy
Statement with its enclosures on or about October [ ], 2005. [As mentioned
above, Georgeson will assist in the solicitation of proxies. As the meeting date
approaches, certain stockholders may receive a telephone call from a
representative of Georgeson if their proxies have not been received.
Authorization to permit Georgeson to execute proxies may be obtained by
telephonic or electronically transmitted instructions from stockholders of the
Fund. If proxies are obtained telephonically, they will be recorded in
accordance with procedures that are consistent with applicable law and that the
Fund believes are reasonably designed to ensure that both the identity of the
stockholder casting the vote and the voting instructions of the stockholder are
accurately determined.]
If a stockholder wishes to participate in the Meeting, but does not wish to give
a proxy by telephone or electronically, the stockholder may still submit the
proxy card originally sent with this proxy statement. Should stockholders
require additional information regarding the proxy or a replacement proxy card,
they may contact Georgeson toll-free at 800 - 366 - 2167. Any proxy given by a
stockholder is revocable until voted at the Meeting. See "Proxy Statement --
General."
In the event that sufficient votes in favor of the proposal set forth in the
Notice of this Meeting are not received by December 13, 2005, the persons named
as appointed proxies on the enclosed proxy card may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of the votes cast on
the matter at the session of the meeting to be adjourned. The persons named as
appointed proxies on the enclosed proxy card will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of the
proposal for which further solicitation of proxies is to be made. They will vote
against any such adjournment those proxies required to be voted against such
proposal. The costs of any such additional solicitation and of any adjourned
session will be borne by the Fund.
29
STOCKHOLDER PROPOSALS
Stockholders wishing to submit proposals for inclusion in the Fund's proxy
statement for the 2006 meeting of stockholders of the Fund should send their
written proposals to Carole Coleman, Secretary of the Fund, c/o Deutsche
Investment Management Americas Inc., at 345 Park Avenue, Mailstop NYC 20-2799,
New York, New York 10154.
For nominations of candidates for election as Directors (other than nominations
made by or at the recommendation of the Directors) or other business to be
properly brought before the annual meeting by a stockholder, the stockholder
must comply with the Fund's bylaws, which, among other things, require that the
stockholder must give timely notice thereof in writing to the Secretary of the
Fund, the stockholder must be a stockholder of record, and the notice must
contain the information about the nomination or other business that is required
by the Fund's bylaws. To be timely, any such notice must be delivered to or
mailed by certified mail, return receipt requested, and received at the
principal executive offices of the Fund not later than 90 days nor more than 120
days prior to the date of the meeting; provided, however, that if less than 100
days' notice or prior public disclosure is given or made to stockholders, any
such notice by a stockholder to be timely must be so received not later than the
close of business on the 10th day following the earlier of the day on which such
notice of the date of the annual or special meeting was given or such public
disclosure was made. The timely submission of a proposal does not guarantee its
inclusion.
The Fund may exercise discretionary voting authority with respect to stockholder
proposals for the 2006 meeting of stockholders which are not included in the
proxy statement and form of proxy, if notice of such proposals is not received
by the Fund at the above address within the time frame indicated above. Even if
timely notice is received, the Fund may exercise discretionary voting authority
in certain other circumstances. Discretionary voting authority is the ability to
vote proxies that stockholders have executed and returned to the Fund on matters
not specifically reflected on the form of proxy.
By order of the Board of Directors,
/s/ Carole Coleman
Carole Coleman
Vice President and Secretary
345 Park Avenue
New York, New York 10154
October [ ], 2005
30
APPENDIX A
THE BRAZIL FUND, INC.
AUDIT COMMITTEE CHARTER
ADOPTED APRIL 7, 2004
This document constitutes the Charter of the Audit Committee (the "Committee")
of the Board of Directors of The Brazil Fund, Inc. (the "Fund"). The Board of
Directors of the Fund (the "Board") established the Committee to provide
oversight with respect to the Fund's accounting and financial reporting policies
and practices.
(1) Organization. The Committee shall be composed of three or more members of
the Board who are not "interested persons" (as defined in the Investment
Company Act of 1940) of the Fund, who do not directly or indirectly
receive consulting, advisory or other compensatory fees from the Fund or
from the Fund's investment adviser or its affiliates, except fees from the
Fund for services as a Director, and who satisfy any independence or
expertise requirements of the exchange(s) on which the Fund's shares are
traded.
(2) Meetings. The Committee shall meet on a regular basis as necessary or
appropriate, and is empowered to hold special meetings as circumstances
warrant.
(3) Committee Purposes. The purposes of the Committee are as follows:
(a) To oversee the Fund's accounting and financial reporting policies
and practices, the Fund's internal controls (including disclosure
controls and procedures) and, as appropriate, the internal controls
of certain Fund service providers;
(b) To oversee the quality and objectivity of the Fund's financial
statements and the independent audit thereof;
(c) To exercise direct responsibility for the appointment, compensation,
retention and oversight of the work performed by the Fund's
independent auditors for the purpose of preparing or issuing an
audit report or performing other audit, review or attest services
for the Fund;
(d) To act as a liaison between the Fund's independent auditors and the
Board;
(e) To oversee the Fund's compliance with legal and regulatory
requirements; and
(f) To prepare an audit committee report as required by Item 306 of
Regulation S - K to be included in the Fund's annual proxy statement
relating to the election of directors, or, if the Fund does not file
a proxy statement, in the Fund's annual report filed with the
Securities and Exchange Commission.
The function of the Audit Committee is oversight; it is management's
responsibility to maintain or arrange for the maintenance of appropriate
systems for accounting and internal controls (including disclosure
controls and procedures), and the auditor's responsibility to plan and
carry out a proper audit.
(4) Duties and Powers. To carry out the purposes specified in Paragraph 3
above, the Committee shall have the following duties and powers:
(a) To approve the selection, retention, compensation and termination of
the Fund's independent auditors, and, in connection therewith, to
evaluate and determine the terms of any engagement of the auditors
(including fees) by or on behalf of the Fund, as well as to set
clear hiring policies relating to the hiring by entities within
31
the Fund's investment complex1 of employees or former employees of
the independent auditors;
(b) To consider whether the provision of non - audit services rendered
by the independent auditors to the Fund and the Fund's investment
adviser and its affiliates, or any other circumstances which may
arise, impair the independence of independent auditors;
(c) To: (i) at least annually, obtain and review a report by the
independent auditor describing: the firm's internal quality-control
procedures; any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any
inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or more
independent audits carried out by the firm, and any steps taken to
deal with any such issues; and (to assess the auditor's
independence) all relationships between the independent auditor and
the Funds; (ii) discuss the annual audited financial statements and
any interim financial statements with management and the independent
auditor, including the Fund's disclosures under "Portfolio
Management Review"; and (iii) discuss policies with respect to risk
assessment and risk management;
(d) To meet with the Fund's independent auditors, including private
meetings as necessary or appropriate: (i) to review the arrangements
for and scope of the Fund's annual audit and any special audits;
(ii) to discuss any matters of concern relating to the Fund's
financial statements, including any adjustments to such statements
recommended by the auditors, regulatory and tax compliance matters
considered in the preparation of the financial statements, or other
results of said audit(s); (iii) to consider the auditors' comments
with respect to the Fund's financial policies and procedures,
internal accounting controls and disclosure controls and procedures,
and management's responses thereto; (iv) to review the form of the
opinion the auditors propose to render to the Board and Fund
stockholders; and (v) to review any other reports, representations
or communications from the auditors regarding matters within the
Committee's scope of responsibilities under this Charter;
-------------------
(1) "Investment company complex" includes:
-- the Fund and its investment adviser or sponsor;
-- any entity controlling, controlled by or under common control with the
investment adviser or sponsor, if the entity (i) is an investment adviser
or sponsor or (ii) is engaged in the business of providing administrative,
custodian, underwriting or transfer agent services to any investment
company, investment adviser or sponsor; and
-- any investment company, hedge fund or unregistered fund that has an
investment adviser included in the definition set forth in either of the
sections above.
32
(e) To meet regularly with the Fund's chief financial and accounting
officers, the Fund's Treasurer and the Fund's investment adviser's
internal auditors, in each case to discuss any matters the Committee
or such parties believe necessary or appropriate to raise, and to
review and consider any reports or communications from any such
parties relating to the operations of the Fund;
(f) To review such other matters or information that the Committee
believes may be relevant to the auditors, the audit engagement, or
the Fund's financial policies and procedures, internal accounting
controls or disclosure controls and procedures;
(g) To establish procedures for the receipt, retention and treatment of
complaints that the Fund receives regarding Fund accounting,
internal accounting controls or auditing matters, and for the
confidential, anonymous submissions by Fund officers or employees of
Fund service providers of concerns regarding suspected fraud of any
type related to the Fund, including without limitation questionable
accounting or auditing matters;
(h) To establish procedures for the prospective approval of the
engagement of the independent auditors to provide: (i) audit or
permissible non-audit services to the Fund, and (ii) non-audit
services to the Fund's investment advisers (or any entity
controlling, controlled by or under common control with a Fund
investment adviser that provides ongoing services to the Fund) that
relate directly to the Fund's operations and financial reporting;
(i) To establish guidelines pursuant to which the independent auditors
are required to keep the Committee apprised of any proposed new
relationships between the independent auditors and the Fund's
investment advisers (and their affiliates); and
(j) To report its activities to the Board on a regular basis and to make
such recommendations with respect to the above and other matters as
the Committee may deem necessary or appropriate.
(5) Role of Independent Auditors. The Fund's independent auditors are
ultimately accountable to the Committee, and must report directly to the
Committee.
(6) Resources and Authority. The Committee shall have the resources and
authority necessary or appropriate for purposes of discharging its
responsibilities under this Charter, including the authority to consult
with counsel and/or to retain, at the Fund's expense, such other experts
or consultants as the Committee deems necessary or appropriate to fulfill
its responsibilities.
(7) Periodic Review of Charter. The Committee shall review this Charter at
least annually and recommend any changes to the Board.
33
APPENDIX B
COMMITTEE ON INDEPENDENT DIRECTORS
CHARTER
ADOPTED APRIL 7, 2004 (AND REVISED AS OF APRIL 2005)
This document constitutes the Charter of the Committee on Independent
Directors (the "Committee") of the Board of Directors of the above-referenced
Scudder Closed-End Funds (each, a "Fund" and collectively, the "Funds"). The
Board of Directors of the Funds (the "Board") has adopted this Charter to govern
the activities of the Committee.
1. Statement of Purposes and Responsibilities. The primary purposes and
responsibilities of the Committee are: (i) to identify individuals
qualified to become members of the Board in the event that a position is
vacated or created; (ii) to recommend for the Board's selection the
Director nominees for the next annual meeting of shareholders if any is to
be held; (iii) to set any necessary standards or qualifications for
service on the Board; (iv) to review and evaluate the compensation
practices of the Directors who are not "interested persons" of the Funds,
as defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended ("Independent Directors"), and to recommend any changes thereto to
the Board; (v) to determine the policies governing retirement of all
Independent Directors; (vi) to perform periodic evaluations of the
effectiveness of the Independent Directors; and (vii) to consider such
other matters of special relevance to Independent Directors.
2. Organization and Governance. The Committee shall be comprised of all of
the Independent Directors and shall not include any members who are not
Independent Directors.
A member of the Committee may be designated by the Board as the
Committee's chair (the "Lead Independent Director"). The Committee may
delegate any portion of its authority or responsibilities to a
sub-committee of one or more members.
The Committee will not have regularly scheduled meetings. Committee
meetings shall be held as and when the Committee or the Board determines
necessary or appropriate in accordance with the Funds' By-Laws. The Chair
of the Board, the Lead Independent Director or a majority of the members
of the Committee are authorized to call a meeting of the Committee and
send notice thereof.
A majority of the members of the Committee shall constitute a quorum for
the transaction of business at any meeting of the Committee. The action of
a majority of the members of the Committee present at a meeting at which a
quorum is present shall be the action of the Committee. The Committee may
also take
34
action by written consent of a majority of the Committee members. The
Committee may meet by means of a telephone conference circuit or similar
communications equipment by means of which all persons participating in
the meeting can hear each other.
3. Qualifications for Director Nominees. The Committee requires that Director
candidates have a college degree or equivalent business experience. The
Committee may take into account a wide variety of factors in considering
Director candidates, including (but not limited to): (i) availability and
commitment of a candidate to attend meetings and perform his or her
responsibilities on the Board, (ii) relevant industry and related
experience, (iii) educational background, (iv) financial expertise, (v) an
assessment of the candidate's ability, judgment and expertise and (v)
overall diversity of the Board's composition.
4. Identification of Nominees. In identifying potential nominees for the
Board, the Committee may consider candidates recommended by one or more of
the following sources: (i) the Funds' current Directors, (ii) the Funds'
officers, (ii) the Funds' investment adviser(s), (iv) the Funds'
shareholders (see below) and (v) any other source the Committee deems to
be appropriate. The Committee may, but is not required to, retain a third
party search firm at the Funds' expense to identify potential candidates.
5. Consideration of Candidates Recommended By Shareholders. The Committee
will consider and evaluate nominee candidates properly submitted by
shareholders on the same basis as it considers and evaluates candidates
recommended by other sources. Appendix A to this Charter, as it may be
amended from time to time by the Committee, sets forth procedures that
must be followed by shareholders to properly submit a nominee candidate to
the Committee (recommendations not properly submitted in accordance with
Appendix A will not be considered by the Committee).
35
Appendix A
PROCEDURES FOR SHAREHOLDERS TO SUBMIT NOMINEE CANDIDATES
Adopted April 7, 2004 (and Revised as of April 2005)
A Fund shareholder must follow the following procedures in order to properly
submit a nominee recommendation for the Committee's consideration.
1. The shareholder must submit any such recommendation (a "Shareholder
Recommendation") in writing to the relevant Fund, to the attention of the
Secretary, at the address of the principal executive offices of the Fund.
2. Shareholder Recommendations must be delivered to, or mailed by certified
mail, return receipt requested to and received at, the principal executive
offices of the Fund at least one hundred twenty (120) calendar days before
the anniversary of the date that the Fund's proxy statement was released
to shareholders in connection with the previous year's annual meeting.
3. The Shareholder Recommendation must include:
(a) a statement in writing setting forth (i) the name, age, date of
birth, business address, residence address, principal occupation or
employment, and nationality of the person recommended by the
shareholder (the "candidate"); (ii) the class or series and number
of all shares of the Fund owned of record or beneficially by the
candidate, as reported to such shareholder by the candidate; (iii)
any other information regarding the candidate called for with
respect to director nominees by paragraphs (a), (d), (e) and (f) of
Item 401 of Regulation S-K or paragraph (b) of Item 22 of Rule
14a-101 (Schedule 14A) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), adopted by the Securities and Exchange
Commission (or the corresponding provisions of any regulation or
rule subsequently adopted by the Securities and Exchange Commission
or any successor agency applicable to the Fund); (iv) any other
information regarding the candidate that would be required to be
disclosed if the candidate were a nominee in a proxy statement or
other filing required to be made in connection with solicitation of
proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder;
and (v) whether the recommending shareholder believes that the
candidate is or will be an "interested person" of the Fund (as
defined in the Investment Company Act of 1940, as amended) and, if
not an "interested person," information regarding the candidate that
will be sufficient for the Fund to make such determination;
(b) the written and signed consent of the candidate to be named as a
nominee and to serve as a Director if elected;
(c) the recommending shareholder's name and address as they appear on
the Fund's books;
36
(d) the class or series and number of all shares of the Fund owned
beneficially and of record by the recommending shareholder; and
(e) a description of all arrangements or understandings between the
recommending shareholder and the candidate and any other person or
persons (including their names) pursuant to which the recommendation
is being made by the recommending shareholder. In addition, the
Committee may require the candidate to furnish such other
information as it may reasonably require or deem necessary to
determine the eligibility of such candidate to serve on the Board.
37
APPENDIX C
INFORMATION AS TO CARROUSEL
The following information as to persons Carrousel may seek to nominate at the
Meeting has been furnished to the Fund by Carrousel. THE FUND HAS NOT VERIFIED
THE TRUTH OR ACCURACY OF THIS INFORMATION.
Information as to the persons named in Carrousel's letter to the Fund is as
follows:
NUMBER OF SHARES OF PRINCIPAL BUSINESS
THE FUND BENEFICIALLY OCCUPATIONS DURING THE
NAME AND BUSINESS ADDRESS AGE OWNED LAST FIVE YEARS
------------------------------------------------ --- --------------------- -------------------------
Francis Rupert Chad Lea 47 None Financial Consultant, MSS
Age: 68 Capital Ltd
Business Address: 1 Bow Churchyard, London
EC4M 9DQ, England
Residence Address: Duxford Mill, Mill Lane,
Duxford, Cambridge CB2 4PT, UK
John Le Prevost 53 None Managing Director, Anson
Business Address: Anson House, Havilland Street, Group Limited
St Peter Port, Guernsey GY1 3GF Channel Islands
Residence Address: Highbanks, Les Fauconnaires,
St Peter Port, Guernsey GY6 8UG, Channel
Islands
James Best 57 None Financial Consultant,
Business Address: 63 Chandos Place, London Best & Company
WC2, England
Residence Address: Rossie Priory, Inchture,
Pershire PH14 9SG, Scotland
Gordon Muir-Carby 49 None Chairman, Muir & Co Ltd
Business Address: 1 Berkeley Street, London, W1J
8DS
Residence Address: 711 Spice Quay, London,
England
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APPENDIX D
DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS OF DEUTSCHE
INVESTMENT MANAGEMENT AMERICAS INC.
The name, address and principal occupation of each director and principal
executive officer of Deutsche Investment Management Americas Inc. is set forth
below.
Michael Colon, Chief Operating Officer and Director
Axel Schwarzer, President, Chief Executive Officer and Director
William A. Gagliardi, Chief Financial Officer, Treasurer and Director
A. Thomas Smith, Secretary and Chief Legal Officer
Mark Cullen, Executive Vice President
Leo P. Grohowski, Executive Vice President
Pierre de Weck, Executive Vice President
Phillip W. Gallo, Chief Compliance Officer
The address of all directors and officers, except Mr. de Weck, is 345 Park
Avenue, New York, New York 10154. Mr. de Weck's address is Winchester House, 1
Great Winchester Street, London, United Kingdom EC2N 2DB.
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