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:
THE BRAZIL FUND, INC.
345 Park Avenue
New York, New York 10154
(800) 349-4281
[ ], 2006
To the Stockholders of The Brazil Fund, Inc.:
A Special Meeting of Shareholders of The Brazil Fund, Inc. (the "Fund") will be
held at 10 a.m., Eastern time, on [May 15,] 2006 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 (the "Meeting"). Stockholders
who are unable to attend this meeting are strongly encouraged to vote by proxy,
which is customary in corporate meetings of this kind.
At the Meeting, the stockholders will vote: (i) to amend the Articles of
Incorporation of the Fund to reduce from two-thirds to a majority the required
vote of the common stockholders necessary to approve the liquidation and
dissolution of the Fund (the "Amendment"); and (ii) to approve the liquidation
and dissolution of the Fund pursuant to the provisions of the Plan of
Liquidation and Dissolution of the Fund (the "Liquidation"). There will be an
opportunity to discuss matters of interest to you as a stockholder. Your Fund's
directors recommend that you vote in favor of the Amendment and the Liquidation,
which will provide complete liquidity for all shareholders.
On March 24, 2006, the Board of Directors of the Fund reached the decision to
liquidate in order to resolve long-standing shareholder demands for liquidity at
a price at or near net asset value. The Fund has been a strong vehicle for
investment in the Brazilian markets. However, as other vehicles for investment
in Brazil have emerged, Fund shareholders have become increasingly dissatisfied
with the discount to net asset value at which the Fund's shares have traded.
Following the failure of the Board's recent proxy solicitation to convert the
Fund to open-end status, in which 75% of outstanding shares were necessary to
pass the proposal and approximately 65% were voted to support open-ending, the
Board again considered all available alternatives and consulted with major
shareholders. Recognizing that there appear to be irreconcilable differences
among the interests of major shareholders, the Board concluded that the proposed
liquidation is responsive to the expressed desires of holders of a majority of
the Fund's shares for liquidity at net asset value, and is in the best interests
of the Fund's shareholders as a group.
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. We urge
you to review the enclosed materials thoroughly and then to complete, sign, date
and return the enclosed proxy card, vote by telephone or record your voting
instructions on the Internet. If you have any questions about the proposals,
please call Georgeson Shareholder Communications Inc., the Fund's proxy
solicitor, at (866) 729-6818, or contact your financial advisor.
Respectfully,
Robert J. Callander
Chairman of the Board
on behalf of the Full Board
STOCKHOLDER ARE URGED TO SIGN THE PROXY CARD AND MAIL IT IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE OR GRANT THEIR PROXY BY TELEPHONE OR THROUGH THE
INTERNET SO AS TO ENSURE A QUORUM AT THE MEETING. THIS IS IMPORTANT WHETHER YOU
OWN FEW OR MANY SHARES.
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THE BRAZIL FUND, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of The Brazil Fund, Inc.:
Please take notice that a Special Meeting of Stockholders of The Brazil Fund,
Inc. (the "Fund") will 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 [May 15], 2006 at 10:00 a.m., Eastern time
(the "Meeting"), to consider the following proposals:
Proposal 1: Approving an amendment to the Articles of Incorporation of the
Fund to reduce from two-thirds to a majority the required vote of
the common stockholders necessary to approve the liquidation and
dissolution of the Fund.
Proposal 2: Approving the liquidation and dissolution of the Fund pursuant to
the Plan of Liquidation and Dissolution of the 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 the shares of common stock of the Fund at the close of business on
April 3, 2006 are entitled to vote at the meeting and any adjournments or
postponements thereof.
By order of the Board of Directors,
John Millette
Secretary
[ ], 2006
IMPORTANT -- WE URGE YOU TO GRANT YOUR PROXY BY TELEPHONE, THROUGH THE INTERNET
OR 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 SPECIAL 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.
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Summary Term Sheet
This summary highlights important information concerning the attached
Proxy Statement of The Brazil Fund, Inc. (the "Fund"). To understand the Proxy
Statement fully and for a more complete discussion of the proposals to be voted
on, you should read carefully the entire Proxy Statement and the related
Exhibits.
WHAT IS THE PURPOSE OF THE PROXY SOLICITATION?
- The purpose of this proxy solicitation is to ask stockholders of the
Fund to vote on the proposals to: (i) amend the Articles of
Incorporation of the Fund to reduce from two-thirds to a majority
the required vote of the common stockholders necessary to approve
the liquidation and dissolution of the Fund; and (ii) approve the
liquidation and dissolution of the Fund pursuant to a Plan of
Liquidation and Dissolution. See "Proposal 1: Amendment to the
Fund's Articles of Incorporation" and "Proposal 2: Approval of
Liquidation and Dissolution."
WHY HAS A PROPOSAL TO LIQUIDATE THE FUND BEEN MADE?
- On March 24, 2006, the Board of Directors of the Fund decided to
propose liquidation in order to resolve long-standing shareholder
demands for liquidity at a price at or near net asset value. The
Fund has been a strong vehicle for investment in the Brazilian
markets. However, as other vehicles for investment in Brazil have
emerged, Fund shareholders have become increasingly dissatisfied
with the discount to net asset value at which the Fund's shares have
traded. Following the failure of the Board's recent proxy
solicitation to convert the Fund to open-end status, the Board again
considered all available alternatives and consulted with major
shareholders. Recognizing that there appear to be irreconcilable
differences among the interests of major shareholders, the Board
concluded that the proposed liquidation is responsive to the
expressed desires of holders of a majority of the Fund's shares for
liquidity at net asset value, and is in the best interests of the
Fund's shareholders as a group. See "Proposal 2: Approval of
Liquidation and Dissolution."
WHAT VOTE IS REQUIRED TO APPROVE THE LIQUIDATION?
- The approval of the liquidation and of the Plan of Liquidation and
Dissolution requires the affirmative vote of the holders of at least
two-thirds of the Fund's common stock, unless the amendment to the
Fund's Articles of Incorporation is approved, in which case a
majority of the holders of the Fund's common stock is required to
approve the liquidation. See "General."
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WHY HAS THE PROPOSAL TO AMEND THE FUND'S ARTICLES OF INCORPORATION BEEN MADE?
- The proposed amendment would reduce from two-thirds to a majority
the vote required from the Fund's stockholders to approve the
liquidation. On February 17, 2006, at a special meeting of
shareholders of the Fund, over 65% of the Fund's outstanding shares
were voted in favor of a proposal to open-end the Fund. The Fund's
Board of Directors believes that the high percentage of votes
submitted in favor of open-ending demonstrates strong shareholder
support for an extraordinary action by the Fund, such as a
liquidation, in order to provide liquidity to shareholders at a
price close to current net asset value. The proposed amendment would
decrease the likelihood that the liquidation will not obtain
requisite approval of the Fund's stockholders solely because a
substantial number of stockholders fail to cast any vote with
respect to the liquidation. See "Proposal 1: "Amendment to the
Fund's Articles of Incorporation."
WHAT VOTE IS REQUIRED TO APPROVE THE AMENDMENT TO THE FUND'S ARTICLES OF
INCORPORATION?
- The approval of the holders of a majority of the Fund's common stock
is required to adopt the proposed amendment. If the amendment to the
Articles of Incorporation is approved, the approval of a majority of
the holders of the Fund's common stock will be required to approve
the liquidation. See "General."
WHEN AND WHERE WILL THE VOTE OCCUR?
- A special meeting of stockholders will be held at 345 Park Avenue
(at 51st Street), New York, New York 10154, on [May 15], 2006 at
10:00 a.m., Eastern time, and at any adjournments or postponements
thereof. See "General."
WILL OTHER PROPOSALS BE CONSIDERED FOR ACTION AT THE SPECIAL MEETING?
- The proposals to amend the Fund's Articles of Incorporation and to
liquidate the Fund are the only proposals that may properly be
considered at the upcoming special meeting. See "General."
HOW WOULD APPROVAL OF THE LIQUIDATION AFFECT ME?
- If the liquidation is approved by the requisite stockholder vote,
the Plan of Liquidation and Dissolution of the Fund will be
implemented pursuant to which the Fund's assets will be liquidated
at market prices and net proceeds
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distributed to stockholders. See "Proposal 2: Approval of
Liquidation and Dissolution -- General."
WHEN WILL THE PLAN OF LIQUIDATION AND DISSOLUTION OF THE FUND BECOME
EFFECTIVE IF ADOPTED?
- The Plan of Liquidation and Dissolution of the Fund will become
effective only upon: (i) its adoption and approval by the holders of
a requisite number of the outstanding shares of the Fund; and (ii)
the satisfactory resolution in the sole discretion of the Board of
any and all possible claims pending against the Fund and/or the
Board. See "Proposal 2: Approval of Liquidation and Dissolution --
Summary of Plan of Liquidation and Dissolution."
WHAT WILL I RECEIVE IF THE FUND IS LIQUIDATED AND DISSOLVED?
- The Fund's net asset value on [ ], 2006 was $[ ]. At such date, the
Fund had [ ] shares outstanding. Accordingly, on [ ], 2006, the net
asset value per share of the Fund was $[ ]. The Fund's net asset
value may be lower at the time of the liquidation due to various
factors. The Fund will distribute the liquidated cash proceeds less
liabilities to stockholders of record as of the close of business on
the date of the liquidation. See "Proposal 2: Approval of
Liquidation and Dissolution -- Summary of Plan of Liquidation and
Dissolution."
IF THE FUND IS LIQUIDATED, WHEN WILL I RECEIVE MY SHARE OF THE FUND'S
LIQUIDATED ASSETS?
- Although no assurance can be given, the Fund anticipates that
shareholders will receive their proportionate cash interest of the
net distributable assets of the Fund upon liquidation by [ ]. See
"Proposal 2: Approval of Liquidation and Dissolution -- Summary of
Plan of Liquidation and Dissolution."
IF THE FUND IS LIQUIDATED AND DISSOLVED, WHO WILL BEAR THE EXPENSES OF THE
LIQUIDATION AND DISSOLUTION?
- All of the expenses incurred by the Fund in carrying out the
liquidation and dissolution will be borne by the Fund. See "Proposal
2: Approval of Liquidation and Dissolution -- Summary of Plan of
Liquidation and Dissolution."
WILL I HAVE TO PAY TAXES AS A RESULT OF THE LIQUIDATION?
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- Proceeds of the liquidation received by stockholders will be taxable
depending upon the stockholders' individual circumstances. See
"Proposal 2: Approval of Liquidation and Dissolution -- Tax
Consequences of the Plan" for a general summary of the U.S. federal
tax income consequences, including the possibility that different
tax treatments may apply; the differing rules for U.S. and non-U.S.
stockholders; and the imposition of withholding taxes on
stockholders who have not completed and returned certain required
Internal Revenue Service forms. Stockholders should consult their
own tax advisers with respect to the tax consequences of the
liquidation, including potential tax consequences in jurisdictions
where the shareholder is a citizen, resident or domiciliary. See
"Proposal 2: Approval of Liquidation and Dissolution -- Tax
Consequences of the Plan."
WHAT WILL HAPPEN TO THE FUND AFTER THE LIQUIDATION?
- After the liquidation, Articles of Dissolution stating that the
dissolution has been authorized will in due course be executed,
acknowledged and filed with the Maryland State Department of
Assessments and Taxation, and will become effective in accordance
with Maryland General Corporation Law. Upon the effective date of
the Articles of Dissolution, the Fund will be legally dissolved, but
thereafter the Fund will continue to exist for the purpose of
paying, satisfying, and discharging any existing debts or
obligations, collecting and distributing assets, and doing all other
acts required to liquidate and wind up its business and affairs, but
not for the purpose of continuing the business for which the Fund
was organized. See "Proposal 2: Approval of Liquidation and
Dissolution -- Summary of Plan of Liquidation and Dissolution."
WHAT WILL HAPPEN IF THE LIQUIDATION IS NOT APPROVED?
- If the liquidation (including the Plan of Liquidation and
Dissolution) is not approved, the Fund will continue to exist as a
closed-end registered investment company in accordance with its
stated investment objective and policies. Please note that if the
amendment to the Fund's Articles of Incorporation is approved by
Fund stockholders, the amendment will become effective regardless of
whether the liquidation is approved.
WHO IS ENTITLED TO VOTE?
- Stockholders of record at the close of business on April 3, 2006
will be entitled to vote at the upcoming special meeting. See
"General."
HOW DO I VOTE MY SHARES?
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- You can vote in any one of four ways: (i) through the Internet, by
going to the website listed on your proxy card; (ii) by telephone,
with a toll-free call to the number listed on your proxy card; (iii)
by mail, by sending the enclosed proxy card, signed and dated, to
[ ]; or (iv) in person, by attending the upcoming special meeting.
See "Notice of Special Meeting of Stockholders."
MAY I REVOKE MY PROXY?
- Any proxy given by a stockholder is revocable until voted at the
upcoming special meeting.
HOW DOES THE BOARD RECOMMEND THAT I VOTE?
- The Board recommends that Fund stockholders vote FOR approval of
the amendment and FOR the liquidation.
HOW DO I OBTAIN MORE INFORMATION?
- Stockholders requiring additional information regarding the proxy or
a replacement proxy card may contact Georgeson Shareholder
Communication Inc. toll-free at (800)366-2167. Additionally,
stockholders may receive a copy of the most recent annual report for
the Fund, and a copy of any more recent semi-annual or quarterly
report, without charge, by calling (800) 349-4281 or writing the
Fund at 345 Park Avenue, New York, New York 10154.
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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 a Special 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 [Monday, May 15], 2006 at 10:00 a.m., Eastern time,
and at any adjournments or postponements thereof (collectively, the "Meeting").
This Proxy Statement, the Notice of Special Meeting and the proxy card are first
being mailed to stockholders on or about [April 10], 2006, 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 the
proposals to amend the Articles of Incorporation of the Fund to reduce from
two-thirds to a majority the required vote of the common stockholders necessary
to approve the liquidation and dissolution of the Fund (the "Amendment") and to
approve the liquidation and dissolution of the Fund pursuant to the provisions
of the Plan of Liquidation and Dissolution of the Fund (the "Liquidation") 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.
Proposal 1, for the amendment of the Fund's Articles of Incorporation, requires
the affirmative vote of a majority of the Fund's outstanding shares of common
stock. Abstentions and broker non-votes will have the effect of a "no" vote for
Proposal 1.
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Proposal 2, for the approval of the Plan of Liquidation and Dissolution (the
"Plan") and the liquidation and dissolution of the Fund, requires the
affirmative vote of the holders of two-thirds of the Fund's common stock, unless
the amendment to the Fund's Articles of Incorporation is approved, in which case
a majority of the holders of the Fund's common stock is required to approve the
liquidation. Abstentions and broker non-votes will have the effect of a "no"
vote for Proposal 2.
These proposals are the only proposals that may properly be considered for
action at the Meeting.
Stockholders of record at the close of business on April 3, 2006 (the "Record
Date") will be entitled to vote at the Meeting. On the Record Date, the Fund had
outstanding and entitled to vote at the Meeting [ ] shares, each entitled to one
vote.
The Fund provides periodic reports to all of its stockholders which highlight
relevant information including investment results and a review of portfolio
changes. You may receive an additional copy of the most recent annual report for
the Fund, and a copy of any more recent semi-annual or quarterly report, without
charge, by calling (800) 349-4281 or writing the Fund at 345 Park Avenue, New
York, New York 10154.
The Proposals
The Board of Directors of the Fund 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, and
efforts to increase publicity about the Fund and its excellent performance.
On December 15, 2004, the Fund announced its approval, subject to fiduciary and
other applicable requirements and regulatory approvals, of a program of in-kind
repurchase offers, including a repurchase of 50% of outstanding shares at a
price equal to 98% of the NAV per share as of the day after the date such offer
expires. The Fund also announced its approval of a plan to conduct six
subsequent semi-annual repurchase offers in accordance with section 23(c)(2)
under the Investment Company Act of 1940 (the "1940 Act") and rule 13e-4 under
Securities Exchange Act of 1934, each for 10% of the then outstanding shares at
a price equal to 98% of NAV per share as of the day after the date each such
offer expires, if shares trade on the NYSE at an average weekly discount from
NAV greater than 5% during a 13-week measuring period ending the last day of the
preceding half-year (the "Repurchase Program"). Payment for any shares
repurchased pursuant to the Repurchase Program would be made in-kind through a
pro rata
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distribution of securities from the Fund's portfolio on the day after
the date such offer expires.
Pursuant to the Repurchase Program, on July 28, 2005, the Fund offered to
repurchase approximately 50% of its issued and outstanding shares of common
stock in exchange for portfolio securities of the Fund. However, during the
offer, the Fund's Brazilian administrator indicated its belief that
implementation of the transaction as proposed would require the imposition of a
withholding tax equal to 15% of the amount by which the fair market value of the
portfolio securities to be distributed exceeds the Fund's basis in those
securities. Although the Fund had previously received the advice of its
Brazilian counsel to the effect that the Fund's distribution of equity
securities pursuant to the repurchase offer should be exempt from Brazilian
capital gains taxation, the Fund was unable to persuade the Brazilian
administrator to change its position. Because of these issues, the Fund believed
that completion of the offer would no longer serve the best interests of all
Fund shareholders and terminated the offer. On August 25, 2005, the Fund
announced that it had terminated this repurchase offer.
On September 22, 2005, the Board announced that it had approved the conversion
of the Fund from a closed-end investment company to an open-end investment
company. At a special meeting of stockholders of the Fund held February 17,
2006, the proposal to convert the Fund into an open-end investment company
received the affirmative vote of holders of over 65% of the Fund's outstanding
shares (representing over 79% of the shares voted at the meeting), but below the
75% needed for approval.
The Board announced on February 17, 2006 that it would initiate a review of
alternatives. During two special meetings, the Board considered various
alternatives for the Fund, including the possibility of: (i) continuing as a
closed-end fund without taking further action; (ii) conducting a cash repurchase
offer; (iii) reviving efforts to implement an in-kind repurchase offer; (iv)
declaring a one-time special cash dividend; (v) liquidating the Fund; and (vi)
converting the Fund into an interval fund.
In determining to recommend approval of the Liquidation, the Directors of the
Fund considered the following factors, among others:
- The Brazilian securities market is currently more liquid and less volatile
than it was at the inception of the Fund in 1988. The processing of
Brazilian securities transactions is more efficient and the Brazilian
securities market has diversified. The Fund's investment adviser believes
that the closed-end structure is no longer required in order to take
advantage of investment opportunities in the Brazilian market.
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- The Fund has historically traded at a discount from net asset value, as is
often the case with closed-end funds. Upon liquidation, Fund shareholders
would receive cash equal to the net asset value of their shares (after
making proper allowance for any remaining expenses and liabilities of the
Fund).
- The 65.18% vote in favor of the open-ending proposal, as well as
discussions with major stockholders, indicated to the Board that holders
of a substantial majority of the Fund's shares sought increased liquidity
for their shares.
- The Board does not believe it is feasible in the near term to implement
other means of enabling shareholders to receive a price at or near net
asset value for a substantial portion of Fund shares for the following
reasons:
- Further analysis of the current tax position of the Fund
demonstrated that a cash tender offer sufficiently large to meet the
liquidity demands of major shareholders would force a liquidation of
the Fund in the very near future in order to avoid unfair tax
treatment of certain investors and the risk that the Fund might be
unable to meet its tax obligations. This situation is caused by the
fact that, as a result of recent appreciation in the Fund's
portfolio holdings, unrealized capital gains currently represent
approximately 82% of the Fund's net assets. The sale of holdings to
finance a cash tender offer would result in a realization of these
gains, which would in turn require further sales of portfolio
holdings to meet tax distribution requirements, which in turn would
result in realization of additional gains requiring additional tax
distributions in a continuing cycle referred to as a "Tax Cascade."
- Although an in-kind tender offer would avoid the Tax Cascade, recent
consultation with Brazil counsel and informal meetings with
Brazilian revenue authorities indicate that legislative change in
Brazil would likely be required as a practical matter to avoid
taxation of an in-kind tender offer in Brazil given the Brazilian
administrator's tax withholding position. The Board considered the
prospects of any such legislative change to be highly uncertain in
the present political and regulatory environment of Brazil.
The Board also considered factors that weighed against the proposed
Liquidation, including:
- Liquidation would end what has been a strong vehicle for investing in the
Brazilian markets.
- Liquidation will involve expenses, including tax costs, which would not be
borne if the Fund continued in its present form.
- Disposition of the Fund's portfolio securities pursuant to the liquidation
may have an adverse effect on the prices of such securities.
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After careful deliberation, the Board adopted and approved the Plan of
Liquidation and Dissolution. One director, Ronaldo Nogueira, voted against the
Liquidation because he believed that the Fund should continue to pursue the
alternative of an in-kind repurchase offer, which might enable the Fund to
continue operations. For the reasons stated above, a majority of the Directors
concluded that this was not a viable option. Following the meeting at which the
Liquidation was approved, Mr. Nogueira resigned as a director of the Fund.
YOUR BOARD RECOMMENDS THAT FUND STOCKHOLDERS VOTE FOR APPROVAL OF THE
AMENDMENT OF THE FUND'S ARTICLES OF INCORPORATION AND FOR ADOPTION AND APPROVAL
OF THE PLAN OF LIQUIDATION AND DISSOLUTION AND THE LIQUIDATION AND DISSOLUTION
OF THE FUND.
Proposal 1: Amendment to the Fund's Articles of Incorporation
Background
It is proposed that the Fund amend its Articles of Incorporation to reduce the
vote necessary for stockholders to approve the liquidation of the Fund.
The amendment provides that a liquidation of the Fund may be approved by the
holders of a majority of the outstanding common stock. A copy of the amendment
to the Funds' Articles of Incorporation is attached to this proxy statement as
Exhibit A.
General
The Fund's Articles of Incorporation do not specify the vote required by the
holders of common stock to authorize a liquidation of the Fund. As a result,
this requirement is determined by Section 3-403 of the Maryland General
Corporation Law which provides that the Liquidation must be approved by the
affirmative vote of two-thirds of all the votes entitled to be cast on the
matter. Section 2-104(b)(5) of the Maryland General Corporation Law, however,
permits the articles of incorporation of a Maryland corporation to allow for a
lesser vote requirement, provided that such required vote is not less than a
majority. The Fund's Articles of Incorporation may be amended by vote of holders
of a majority of the Fund's outstanding common stock.
To decrease the likelihood that the liquidation will not obtain requisite
approval of common stockholders because a substantial number of Fund common
stockholders fail to cast any vote with respect to the liquidation, which has
the same effect as a vote against the liquidation, the Fund's Board of Directors
is proposing to amend the Fund's Articles of Incorporation to reduce the
requisite vote on the liquidation from two-thirds to a majority. The Board
believes the proposed amendment will reduce the likelihood that the
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outcome of the stockholder vote may be determined by common stockholders who
fail to return a proxy for reasons that may not relate to the merits of the
transaction.
At a special meeting of stockholders of the Fund, held on February 17, 2006 a
proposal to convert the Fund from a closed-end investment company to an open-end
investment company was not approved. Proxies representing 65.18% of the Fund's
outstanding shares (representing 79.34% of the shares represented at the
meeting) were submitted in favor of the conversion. Deutsche Investment
Management Americas, Inc., the Fund's investment adviser, informed the Board
that it believed that the high percentage of votes submitted in favor of the
conversion at the special meeting indicates strong shareholder support for an
extraordinary action by the Fund, such as a liquidation, in order to provide
liquidity to shareholders at a price close to current net asset value. Please
note that if the amendment to the Articles of Incorporation is approved by Fund
stockholders, the amendment will become effective regardless of whether the
liquidation is approved.
THE DIRECTORS OF THE FUND, INCLUDING THE INDEPENDENT DIRECTORS, RECOMMEND
APPROVAL OF THE AMENDMENT OF THE ARTICLES OF INCORPORATION.
Proposal 2: Approval of Liquidation and Dissolution
Background
The Board has adopted a Plan of Liquidation and Dissolution of the Fund (the
"Plan"), subject to approval of the Fund's stockholders, which is described
below.
General
If the Plan is approved by the requisite stockholder vote, then the Fund's
assets will be liquidated at market prices and on such terms and conditions as
determined to be reasonable and in the best interests of the Fund and its
stockholders in light of the circumstances in which they are sold, and the Fund
will file Articles of Dissolution with the State of Maryland. Stockholders will
receive their proportionate cash interest of the net distributable assets of the
Fund upon liquidation.
In the event that a majority of the outstanding shares of capital stock of the
Fund are not voted in favor of the Plan, with the result that the Plan is not
approved, the Fund will continue to exist as a registered investment company in
accordance with its stated investment objective and policies. In the event the
Plan is not approved, the Board of Directors presently intends to meet to
consider what, if any, steps to take in the best interests of the Fund and its
stockholders, including the possibility of resubmitting the Plan or another plan
of liquidation and dissolution to stockholders for future consideration. In the
event that a quorum is not present, the Meeting may be adjourned.
14
Summary of Plan of Liquidation and Dissolution
The following summary does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference to,
the Plan which is attached hereto as Exhibit B. Stockholders are urged to read
the Plan in its entirety.
- EFFECTIVE DATE OF THE PLAN AND CESSATION OF THE FUND'S ACTIVITIES AS AN
INVESTMENT COMPANY. The Plan will become effective only upon: (i) its
adoption and approval by the holders of a requisite number of the
outstanding shares of the Fund; and (ii) the satisfactory resolution in the
sole discretion of the Board of Directors of any and all possible claims
pending against the Fund and/or its Board of Directors (the "Effective
Date"). Following these two events, the Fund: (i) will cease to invest its
assets in accordance with its investment objective and, to the extent
necessary, will, as soon as reasonable and practicable after the Effective
Date, complete the sale of the portfolio securities it holds in order to
convert its assets to cash or cash equivalents, provided, however, that
after shareholder approval of the Plan, the Board of Directors may
authorize the commencement of the sale of portfolio securities and the
investment of the proceeds of such sale in investment grade short-term debt
securities denominated in U.S. dollars; (ii) will not engage in any
business activities except for the purpose of paying, satisfying, and
discharging any existing debts and obligations, collecting and distributing
its assets, and doing all other acts required to liquidate and wind up its
business and affairs; and (iii) will dissolve in accordance with the Plan
and will file Articles of Dissolution with the State of Maryland (Plan,
Sections 1-2, 5 and 12). The Fund will, nonetheless, seek to continue to
meet the source of income, asset diversification and distribution
requirements applicable to regulated investment companies through the last
day of its final taxable year ending on liquidation.
- CLOSING OF BOOKS AND RESTRICTION ON TRANSFER OF SHARES. The proportionate
interests of stockholders in the assets of the Fund will be fixed on the
basis of their holdings on the Effective Date. On such date, the books of
the Fund will be closed. Thereafter, unless the books of the Fund are
reopened because the Plan cannot be carried into effect under the laws of
the State of Maryland or otherwise, the stockholders' respective interests
in the Fund's assets will not be transferable by the negotiation of share
certificates and the Fund's shares will cease to be traded on the NYSE
(Plan, Section 3).
- LIQUIDATION DISTRIBUTION. As soon as practicable after the Effective Date,
the Fund will liquidate and distribute to stockholders of record as of the
close of business on the Effective Date, pro rata in accordance with their
proportionate interests in the Fund, all of the assets of the Fund
remaining after payment and
15
discharge of liabilities and obligations of the Fund, less any amounts
retained or set aside in a reserve fund as referred to below, in complete
cancellation and redemption of the outstanding shares of the Fund (the
"Liquidation Distribution"). Although no assurance can be given, the Fund
anticipates that payment of the Liquidation Distribution will be made by
[ ].
From the proceeds of the liquidation of assets, the Fund may retain, set
aside in a reserve fund or otherwise provide for an amount necessary to
discharge any unpaid liabilities on the Fund's books as of the date of the
Liquidation Distribution and to pay or otherwise provide for such
contingent or unascertained liabilities as the Board shall reasonably deem
to exist against the assets of the Fund. The Fund may make one or more
subsequent distributions to stockholders. Cash or other assets retained in
a reserve fund for the payment of contingent or unascertained liabilities
in accordance with the Plan in excess of the amounts ultimately required
for payment or discharge of the Fund's liabilities and obligations will be
distributed to stockholders at the time and under the conditions
established with respect to such reserve fund or other arrangements
providing for such payment.
Stockholders holding stock certificates as of the Effective Date should
consider arranging with the Fund's transfer agent a return of their
certificates in advance of any liquidating distributions in order to
facilitate payments to them. The transfer agent is the Depository Trust
Company. The transfer agent can be reached at [ ]. All stockholders will
receive information concerning the sources of the liquidating distribution
(Plan, Section 7). All monies not paid due to non-surrender of stock
certificates will reside in a non-interest bearing account and will
eventually be escheated to the State of Maryland.
- EXPENSES OF LIQUIDATION AND DISSOLUTION. All of the expenses incurred by
the Fund in carrying out the Plan will be borne by the Fund (Plan, Section
8).
- CONTINUED OPERATION OF THE FUND. The Plan provides that the Board of
Directors has the authority to authorize such non-material variations from
or non-material amendments of the provisions of the Plan (other than the
terms of the liquidating distributions) at any time without stockholder
approval, if the Board of Directors determines that such action would be
advisable and in the best interests of the Fund and its stockholders, as
may be necessary or appropriate to effect the marshalling of Fund assets
and the dissolution, complete liquidation and termination of existence of
the Fund, and the distribution of its net assets to stockholders in
accordance with the laws of the State of Maryland and the purposes to be
accomplished by the Plan. In addition, the Board of Directors may abandon
the Plan, with stockholder approval, prior to the filing of Articles of
Dissolution with the State Department of Assessments and Taxation of
Maryland if the Board of Directors
16
determines that such abandonment would be advisable and in the best
interests of the Fund and its stockholders (Plan, Sections 9 and 10).
However, it is the Board of Directors' current intention to liquidate and
dissolve the Fund as soon as practicable following the settlement of all
possible claims pending against the Fund and/or the Board of Directors.
- DISTRIBUTION AMOUNTS. The Fund's net asset value on [], 2006 was $[ ]. At
such date, the Fund had [ ] shares outstanding. Accordingly, on [ ], 2006,
the net asset value per share of the Fund was $[ ]. The Fund's net asset
value may be lower as of the liquidation due to factors such as: (i) the
relative volatility of the Brazilian securities markets; (ii) the adverse
effect a sale of all of the Fund's portfolio securities could have on the
Brazilian securities markets, which have a relatively small market
capitalization; and (iii) the adverse effect the special procedures
required by Brazilian laws and regulations for "block trades" may have on
the prices of the Fund's portfolio securities. The amounts to be
distributed to stockholders of the Fund upon liquidation will be reduced by
any remaining expenses of the Fund, [including any Brazilian taxes payable
on the net long-term capital gains realized by the Fund upon the
liquidation of its assets in Brazil], the expenses of the Fund in
connection with the liquidation and portfolio transaction costs, as well as
any costs incurred in resolving any claims that may arise against the Fund.
Liquidation expenses are estimated to be approximately $[ ] (or
approximately $[ ] per share outstanding on [ ], 2006). The Fund's
remaining portfolio transaction costs (including amounts allocated for
dealer markup on securities traded over the counter) are estimated to be
approximately $[ ], although actual portfolio transaction costs will depend
upon the composition of the portfolio and the timing of the sale of
portfolio securities. Actual liquidation expenses and portfolio transaction
costs may vary. The Fund estimates that Brazilian net long-term capital
gains taxes payable upon sale of the Fund's portfolio securities at the
value as of [ ], 2006 would be approximately $[ ], based on an assumed tax
rate of [ ]%, although changes in the market value of the Fund's assets, or
the imposition of a different tax rate, could increase or decrease that
amount. See "Tax Consequences of the Plan -- Brazilian Tax Consequences."
Any such tax costs will be funded from the cash assets of the Fund and will
reduce the amount available for distribution to stockholders.
- IMPACT OF THE PLAN ON THE FUND'S STATUS UNDER THE 1940 ACT. On the
Effective Date, the Fund will cease doing business as a registered
investment company and, as soon as practicable, will apply for
deregistration under the 1940 Act. It is expected that the Securities and
Exchange Commission (the "Commission") will issue an order approving the
deregistration of the Fund if the Fund is no longer doing business as an
investment company. Accordingly, the Plan provides for the eventual
cessation of the Fund's activities as an investment company and its
deregistration under the 1940 Act, and a vote in favor of the Plan will
constitute a vote in favor of such a course of action (Plan, Sections 1, 2,
9 and 11).
17
Until the Fund's withdrawal as an investment company becomes effective, the
Fund, as a registered investment company, will continue to be subject to
and will comply with the 1940 Act.
- PROCEDURE FOR DISSOLUTION UNDER MARYLAND LAW. After the Effective Date,
pursuant to the Maryland General Corporation Law and the Fund's Articles of
Incorporation and Amended and Restated Bylaws, if at least a majority of
the Fund's aggregate outstanding shares of capital stock are voted for the
proposed liquidation and dissolution of the Fund, Articles of Dissolution
stating that the dissolution has been authorized will in due course be
executed, acknowledged and filed with the Maryland State Department of
Assessments and Taxation, and will become effective in accordance with such
law. Upon the effective date of such Articles of Dissolution, the Fund will
be legally dissolved, but thereafter the Fund will continue to exist for
the purpose of paying, satisfying, and discharging any existing debts or
obligations, collecting and distributing its assets, and doing all other
acts required to liquidate and wind up its business and affairs, but not
for the purpose of continuing the business for which the Fund was
organized. The Fund's Board of Directors will be the trustees of its assets
for purposes of liquidation after the acceptance of the Articles of
Dissolution, unless and until a court appoints a receiver. The
Director-trustees will be vested in their capacity as trustees with full
title to all the assets of the Fund (Plan, Sections 2 and 12).
- APPRAISAL RIGHTS. Stockholders will not be entitled to appraisal rights
under Maryland law in connection with the Plan (Plan, Section 14).
Tax Consequences of the Plan
- U.S. FEDERAL INCOME TAX CONSEQUENCES IF THE PLAN IS ADOPTED. The following
discussion is a general summary of certain U.S. federal income tax
consequences of the Liquidation to the Fund and its stockholders, based on
current U.S. federal income tax law, including the Internal Revenue Code
(the "Code"), applicable Treasury regulations and IRS rulings. Different
rules may apply to particular stockholders depending upon their individual
circumstances. Stockholders should consult their own tax advisers with
respect to the tax consequences of receipt of the Liquidation
Distribution(s), including potential tax consequences in jurisdictions
where the shareholder is a citizen, resident or domiciliary.
The Fund currently qualifies, and expects to continue to qualify during the
liquidation period, as a regulated investment company under the Code. As a
result, the Fund should not be required to pay U.S. federal income tax on
any of its income or capital
18
gains realized from the sale of its assets pursuant to the Liquidation, by
reason of the special dividends-paid deduction available to regulated
investment companies under the Code. If the Plan is adopted, Liquidation
Distributions(s) made after the adoption of the Plan should qualify for the
dividends paid deduction.
Liquidation Distribution(s) received by a stockholder who is (i) an
individual U.S. citizen or resident; (ii) a corporation, partnership or
other entity created or organized under the laws of the U.S., any state
thereof or the District of Columbia or (iii) an estate or trust, the income
of which is subject to U.S. federal income taxes regardless of its source
(a "U.S. stockholder") should be treated as payment in exchange for such
stockholder's shares of the Fund. Each such U.S. stockholder would
recognize a gain or loss in an amount equal to the difference between the
adjusted tax basis in the stockholder's shares and the Liquidation
Distribution(s) he or she received from the Fund. If the shares are held as
a capital asset, such gain or loss would generally be characterized as a
capital gain or loss. If the shares have been held for more than one year,
any gain would constitute long-term capital gain, taxable to individual
stockholders at a maximum rate of 15%, and any loss would constitute a
long-term capital loss. If the U.S. stockholder has held the shares for one
year or less, any gain or loss would be short-term capital gain or loss.
The U.S. federal income taxation of a stockholder that is not a U.S.
stockholder (a "non-U.S. stockholder") receiving Liquidation
Distribution(s) depends on whether such transaction is "effectively
connected" with a trade or business carried on in the United States by the
non-U.S. stockholder. If receipt of the Liquidation Distribution(s) is not
effectively connected and gives rise to taxable gain, any gain realized by
a non-U.S. stockholder will not be subject to U.S. federal income tax,
provided, however, that such a gain will be subject to U.S. federal income
tax at the rate of 30% (or such lower rate as may be applicable under a tax
treaty) if the non-U.S. stockholder is a non-resident alien individual who
is physically present in the United States for more than 182 days during
the taxable year of the sale. If the non-U.S. stockholder's gain on receipt
of the Liquidation Distribution(s) is effectively connected income, such
income would be subject to U.S. tax at rates applicable to a U.S.
Shareholder, as well as any applicable branch profits tax.
It is possible that the Fund might be required to designate some portion of
the Liquidation Distributions payable to stockholders as ordinary income
dividends or capital gains distributions in order to maintain the Fund's
status in liquidation as a registered investment company under the Code. In
that event, for U.S. federal income tax purposes, the Liquidation
Distribution(s) received by a stockholder could consist of three elements:
(i) a capital gain dividend to the extent of any net long-term capital
gains earned during the Fund's final tax year; (ii) an ordinary income
dividend to the extent of the Fund's ordinary income and short-term capital
gains earned during the final tax year (over and above expenses) that have
not
19
previously been distributed; and (iii) a distribution treated as payment
for the stockholder's shares, taxable as described above. The Fund will
notify stockholders as to the portion, if any, of the Liquidation
Distribution(s) which constitutes a capital gain dividend and that which
constitutes an ordinary income dividend (as well as any amounts qualifying
for a credit or deduction against foreign taxes paid by the Fund) in the
normal tax-reporting fashion for dividends and distributions paid by the
Fund. Any Liquidation Distribution described in (i) or (ii), above, would
be taxed in the same manner as any other distribution of the Fund.
Accordingly, such amounts would be treated as ordinary income or capital
gains, if so designated.
Under the U.S. backup withholding rules, the Fund will be required to
withhold 28% of the Liquidation Distribution(s) paid to any U.S.
stockholder that is not a tax-exempt person unless either: (a) such
stockholder has completed and submitted to the Depositary an IRS Form W-9,
providing such stockholder's employer identification number or social
security number, as applicable, and certifying under penalties of perjury
that: (i) such number is correct; (ii) either (A) such stockholder is
exempt from backup withholding, (B) such stockholder has not been notified
by the Internal Revenue Service that such stockholder is subject to backup
withholding as a result of an under-reporting of interest or dividends, or
(C) the Internal Revenue Service has notified such stockholder that such
stockholder is no longer subject to backup withholding; or (b) an exception
applies under applicable law. Non-U.S. stockholders may also be subject to
U.S. backup withholding and should provide to the Fund an IRS Form W-8BEN
or another type of Form W-8 appropriate to the particular non-U.S.
stockholder. Form W-9 and the various Forms W-8 can be found on the IRS
website at www.irs.gov/formspubs/index.html. The backup withholding tax is
not an additional tax and may be credited against a taxpayer's federal
income tax liability.
- BRAZILIAN TAX CONSEQUENCES. Upon liquidation, the Fund will sell all of its
assets held in Brazil, resulting in certain tax consequences to the Fund.
Generally, the Fund's sales of shares of Brazilian publicly-traded
companies within the Brazilian stock exchange or on an organized
over-the-counter market are exempt from Brazilian taxation.
Other earnings (such as interest) of the Fund may be subject to Brazilian
withholding income tax ("IRF"): (i) at 10%, when arising from investments
in floating-income funds, swaps and other futures transactions off the
stock exchanges; and (ii) at 15% in other cases, including fixed-income
investments and interest on net worth. Such IRF is assessed upon the sale
by the Fund of its portfolio securities. Moreover, upon liquidation of any
fixed-rate investments held by the Fund, or, under certain circumstances,
of shares of publicly-traded companies within the Brazilian stock exchange
or an organized over-the-counter market, Provisional Contribution on
Financial Transactions ("CPMF") will be imposed at a 0.38% rate. Certain
fixed-rate investment holdings of the Fund may be exempt from the CPMF. If
any fixed-rate investment is sold within 30 days of the Fund's acquisition
of such investment,
20
the earnings accrued will be subject to Tax on Financial Transactions
("IOF") at a 1% rate per day. The IOF base (upon which the 1% IOF is
calculated) would be a percentage of the earnings, depending on the number
of days the Fund held such investment, ranging from 96% to 0%.
General
Security Ownership of Certain Beneficial Owners and Management
According to SEC Schedule [ ] and filings made in [ ], the following
owned beneficially more than 5% of the Fund's outstanding stock:
Amount and
Nature of
Beneficial Percent
Title of Class Name and Address of Beneficial Owner Ownership of Class
------------------------------------------------------------------------------------------------------
Common Stock President & Fellows of Harvard College [3,540,400 shares(1)] [21.8%]
c/o Harvard Management Company Inc.
600 Atlantic Avenue
Boston, Massachusetts 02110
Common Stock City of London Investment Group, PLC [1,223,900 shares(2)] [7.54%]
c/o City of London Investment
Management Company Limited
10 Eastcheap, London EC3M ILX,
England
Common Stock Lazard Asset Management LLC [987,900 shares(3)] [6.1%]
30 Rockefeller Plaza
New York, New York 10112
Common Stock Carrousel Capital Ltd. [949,485 shares(4)] [5.85%]
203-205 Brompton Road
London SW3 1LA
England
Common Stock QVT Financial LP and QVT Financial [869,660 shares(5)] [5.35%]
GP LLC
527 Madison Avenue, 8th Floor
New York, New York 10022
--------------------------------------------------------------------------------
1 President and Fellows of Harvard College held sole voting power and sole
investment power with respect to the above number of shares.
2 City of London Investment Group, PLC held sole voting power and sole
investment power with respect to the above number of shares. City of London
Investment Group, PLC held the above number of shares through its control of
City of London Investment Management Company Limited.
3 Lazard Asset Management LLC held sole voting power and sole investment power
with respect to the above number of shares.
21
4 Carrousel Capital Ltd. and Bruno Sangle-Ferriere (i) have sole voting and
dispositive power with respect to 185 shares of common stock; (ii) share
voting and dispositive power with respect to 478,900 shares of common stock
with the Carrousel Fund Ltd., Walker House, P.O. Box 265 GT, Mary Street,
George Town, Grand Cayman, Cayman Islands; and (iii) share voting and
dispositive power with respect to 470,400 shares of common stock with The
Carrousel Fund II Limited, Walker House, P.O. Box 265 GT, Mary Street, George
Town, Grand Cayman, Cayman Islands. Accordingly, Carrousel Capital Ltd. and
Bruno Sangle-Ferriere have voting power and dispositive power over an
aggregate of 949,485 shares of common stock, constituting approximately 5.85%
of the issued and outstanding shares of common stock.
5 QVT Financial LP is the investment manager for QVT Fund LP, which
beneficially owns 127,100 shares of common stock, QVT Overseas Ltd., which
beneficially owns 371,280 shares of common stock, and for QVT Associates LP,
which beneficially owns 371,280 shares of common stock. QVT Financial has the
power to direct the vote and disposition of the shares of common stock held
by each of the Fund, QVT Overseas Ltd. and QVT Associates LP. Accordingly,
QVT Financial may be deemed to be the beneficial owner of an aggregate amount
of 869,660 shares of common stock, consisting of the shares owned by the
Fund, QVT Overseas Ltd. and QVT Associates LP.
Except as noted above, to the best of the Fund's knowledge, as of [ ], no
other person owned beneficially more than 5% of the Fund's outstanding stock.
The following table sets forth the beneficial ownership of the Fund's
outstanding capital stock as of March 29, 2006 by each of the Fund's directors
and all of the Fund's directors and executive officers as a group:
Amount and Nature of
Directors Beneficial Ownership Percent of Class
-------------------------------------------------------------------------------------------------------
Robert J. Callander 2000 shares *
Kenneth C. Froewiss 1000 shares *
Donna J. Hrinak [0 shares] *
William H. Luers [322 shares] *
Ronaldo A. da Frota Nogueira(1) [4,016 shares] *
Susan K. Purcell 150 shares *
Kesop Yun [ shares] *
-------------------------------------------------------------------------------------------------------
All Directors and Executive Less than 1% of shares of
Officers (16 persons) [7488 shares] the Fund
-------------------------------------------------------------------------------------------------------
*Less than 1% of shares of the Fund.
(1) Mr. Nogueira resigned as a director on March 24, 2006.
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
22
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 DWS 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.
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, and no other matters
may be brought before the Meeting by stockholders of the Fund. The appointed
proxies will vote on any other business that may properly 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.
Solicitation of proxies is being made primarily by the mailing of this Proxy
Statement with its enclosures on or about [ ], 2006. 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
23
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.
In the event that sufficient votes in favor of the proposal set forth in the
Notice of this Meeting are not received by [ ], 2006, 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.
Stockholder Proposals
Stockholders wishing to submit proposals for inclusion in the Fund's proxy
statement for the next annual meeting of stockholders of the Fund should send
their written proposals to John Millette, Secretary of the Fund, c/o Deutsche
Investment Management Americas Inc., at 345 Park Avenue, New York, New York
10154. In the event that the Liquidation is not approved, proposals for
inclusion in the Fund's proxy statement for the next annual meeting should have
been submitted by April 1, 2006. In the event that the Liquidation is approved,
the Fund does not intend to convene an annual meeting. The timely submission of
a proposal does not guarantee its inclusion.
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
24
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 Fund may exercise discretionary voting authority with respect to stockholder
proposals for the next 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.
Incorporation by Reference
The Fund hereby incorporates by reference into this proxy statement the
financial statements contained in the Fund's annual report for the year ended
June 30, 2005, which was filed with the SEC as part of the Fund's certified
shareholder report on Form N-CSR for the year ended June 30, 2005 and in the
Fund's semi-annual report for the six month period ending December 31, 2005,
which was filed with the SEC as part of the Fund's certified shareholder report
on Form N-CSRS. The Fund's annual report was mailed to shareholders of the Fund
on or about August 29, 2005. The Fund's semi-annual report was mailed to
shareholders of the Fund on or about March 10, 2006. Copies of these reports may
be received without charge upon request from the Fund by calling (800) 349-4281
or writing the Fund at 345 Park Avenue, New York, New York 10154.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this proxy statement to the extent that a statement contained herein, or in any
other subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this proxy statement.
By order of the Board of Directors,
John Millette
Secretary
345 Park Avenue
New York, New York 10154
[ ], 2006
25
Exhibit A
ARTICLES OF AMENDMENT OF THE BRAZIL FUND, INC.
The Brazil Fund, Inc., a Maryland corporation (which is hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland (which is hereinafter referred to as the "SDAT") that:
FIRST: The Articles of Incorporation of the Corporation are hereby amended by
adding to the Articles of Incorporation the following new Article TWELFTH:
"TWELFTH: Notwithstanding any provision of law requiring any action to
be taken or authorized by the affirmative vote of the holders of a
greater proportion of the votes of all classes or of any Class of stock
of the Corporation, the liquidation and dissolution of the Corporation
shall be effective and valid if taken or authorized by the affirmative
vote of a majority of the total number of votes entitled to be cast
thereon."
SECOND: The Board of Directors of the Corporation, pursuant to and in accordance
with the Articles of Incorporation of the Corporation and the Maryland General
Corporation Law, duly advised the foregoing amendments and the shareholders of
the Corporation entitled to vote on the foregoing amendment, pursuant to and in
accordance with the Articles of Incorporation and Bylaws of the Corporation and
the Maryland General Corporation Law, duly approved the foregoing amendment.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be
signed in its name and on its behalf by a President and attested to by its
Secretary as of this [ ] day of [ ], 2006; and its President acknowledges that
these Articles of Amendment are the act of the Corporation, and he further
acknowledges that, as to all matters or facts set forth herein which are
required to be verified under oath, such matters and facts are true in all
material respects to the best of his knowledge, information and belief, and that
this statement is made under the penalties for perjury.
ATTEST: THE BRAZIL FUND, INC.
__________________________________ By__________________________________(SEAL)
Secretary President
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Exhibit B
THE BRAZIL FUND, INC.
PLAN OF LIQUIDATION AND DISSOLUTION
The following Plan of Liquidation and Dissolution (the "Plan") of The Brazil
Fund, Inc. (the "Fund"), a corporation organized and existing under the laws of
the State of Maryland, which has operated as a closed-end, management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), is intended to accomplish the complete liquidation and dissolution
of the Fund in conformity with the provisions of the Fund's Articles of
Incorporation.
WHEREAS, the Fund's Board of Directors, at a special meeting of the Board of
Directors held on March 24, 2006, has deemed that in its judgment it is
advisable to liquidate and dissolve the Fund, has adopted this Plan as the
method of liquidating and dissolving the Fund and has directed that this Plan be
submitted to stockholders of the Fund for approval;
NOW, THEREFORE, the liquidation and dissolution of the Fund shall be carried out
in the manner hereinafter set forth:
1. EFFECTIVE DATE OF PLAN. The Plan shall be and become effective only upon (a)
the adoption and approval of the Plan by the affirmative vote of the holders of
the requisite number of the outstanding shares of capital stock of the Fund at a
meeting of stockholders called for the purpose of voting upon the Plan and (b)
the satisfactory resolution in the sole discretion of the Board of Directors of
any and all claims pending against the Fund and its Board of Directors. The date
of such adoption and approval of the Plan by stockholders and resolution of all
pending claims is hereinafter called the "Effective Date."
2. CESSATION OF BUSINESS. After the Effective Date of the Plan, the Fund shall
cease its business as an investment company and shall not engage in any business
activities except for the purpose of paying, satisfying, and discharging any
existing debts and obligations, collecting and distributing its assets, and
doing all other acts required to liquidate and wind up its business and affairs
and will dissolve in accordance with the Plan.
3. RESTRICTION OF TRANSFER AND REDEMPTION OF SHARES. The proportionate interests
of stockholders in the assets of the Fund shall be fixed on the basis of their
respective stockholdings at the close of business on the Effective Date. On the
Effective Date, the books of the Fund shall be closed. Thereafter, unless the
books of the Fund are reopened because the Plan cannot be carried into effect
under the laws of the State of Maryland or otherwise, the stockholders'
respective interests in the Fund's assets shall not be
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transferable by the negotiation of share certificates and the Fund's shares will
cease to be traded on the New York Stock Exchange, Inc.
4. NOTICE OF LIQUIDATION. As soon as practicable after the Effective Date, the
Fund shall mail notice to the appropriate parties that this Plan has been
approved by the Board of Directors and the stockholders and that the Fund will
be liquidating its assets. Specifically, upon approval of the Plan, the Fund
shall mail notice to its known creditors at their addresses as shown on the
Fund's records, to the extent such notice is required under the Maryland General
Corporation Law (the "MGCL").
5. LIQUIDATION OF ASSETS. After the event in clause (a) in Section 1 hereof, the
Board of Directors may authorize the commencement of the sale of portfolio
securities and the investment of the proceeds of such sale in investment grade
short-term debt securities denominated in U.S. dollars. As soon as is reasonable
and practicable after the Effective Date of the Plan, or as soon thereafter as
practicable depending on market conditions and consistent with the terms of the
Plan, all portfolio securities of the Fund not already converted to U.S. cash or
U.S. cash equivalents shall be converted to U.S. cash or U.S. cash equivalents.
6. PAYMENTS OF DEBTS. As soon as practicable after the Effective Date of the
Plan, the Fund shall determine and shall pay, or set aside in U.S. cash or U.S.
cash equivalents, the amount of all known or reasonably ascertainable
liabilities of the Fund incurred or expected to be incurred prior to the date of
the liquidating distribution provided for in Section 7, below.
7. LIQUIDATING DISTRIBUTIONS. The Fund's assets are expected to be distributed
by up to two cash payments in complete cancellation of all the outstanding
shares of capital stock of the Fund. The first distribution of the Fund's assets
(the "First Distribution") is expected to consist of cash representing
substantially all the assets of the Fund, less an estimated amount necessary to
(a) discharge any unpaid liabilities and obligations of the Fund on the Fund's
books on the First Distribution date, and (b) liabilities as the Board of
Directors shall reasonably deem to exist against the assets of the Fund. A
second distribution (the "Second Distribution"), if necessary, is anticipated to
be made within 90 days after the First Distribution and will consist of cash
from any assets remaining after payment of and provision for expenses and other
liabilities, the proceeds of any sale of assets of the Fund under the Plan not
sold prior to the First Distribution and any other miscellaneous income to the
Fund.
All stockholders will receive information concerning the sources of the
liquidating distribution.
8. EXPENSES OF THE LIQUIDATION AND DISSOLUTION. The Fund shall bear all of the
expenses incurred by it in carrying out this Plan including, but not limited to,
all printing,
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mailing, legal, accounting, custodian and transfer agency fees, and the expenses
of any reports to or meeting of stockholders whether or not the liquidation
contemplated by this Plan is effected.
9. POWER OF BOARD OF DIRECTORS. The Board of Directors and, subject to the
direction of the Board of Directors, the Fund's officers shall have authority to
do or authorize any or all acts and things as provided for in the Plan and any
and all such further acts and things as they may consider necessary or desirable
to carry out the purposes of the Plan, including, without limitation, the
execution and filing of all certificates, documents, information returns, tax
returns, forms, and other papers which may be necessary or appropriate to
implement the Plan or which may be required by the provisions of the 1940 Act,
MGCL or any other applicable laws.
The death, resignation or other disability of any director or any officer of the
Fund shall not impair the authority of the surviving or remaining directors or
officers to exercise any of the powers provided for in the Plan.
10. AMENDMENT OR ABANDONMENT OF PLAN. The Board of Directors shall have the
authority to authorize such non-material variations from or non-material
amendments of the provisions of the Plan (other than the terms of the
liquidating distributions) at any time without stockholder approval, if the
Board of Directors determines that such action would be advisable and in the
best interests of the Fund and its stockholders, as may be necessary or
appropriate to effect the marshalling of Fund assets and the dissolution,
complete liquidation and termination of existence of the Fund, and the
distribution of its net assets to stockholders in accordance with the laws of
the State of Maryland and the purposes to be accomplished by the Plan. If any
variation or amendment appears necessary and, in the judgment of the Board of
Directors, will materially and adversely affect the interests of the Fund's
stockholders, such variation or amendment will be submitted to the Fund's
stockholders for approval. In addition, the Board of Directors may abandon this
Plan, with stockholder approval, prior to the filing of the Articles of
Dissolution if it determines that abandonment would be advisable and in the best
interests of the Fund and its stockholders.
11. DE-REGISTRATION UNDER THE 1940 ACT. As soon as practicable after the
liquidation and distribution of the Fund's assets, the Fund shall prepare and
file a Form N-8F with the Securities and Exchange Commission in order to
de-register the Fund under the 1940 Act. The Fund shall also file, if required,
a final Form N-SAR (a semi-annual report) with the SEC.
12. ARTICLES OF DISSOLUTION. Consistent with the provisions of the Plan, the
Fund shall be dissolved in accordance with the laws of the State of Maryland and
the Fund's Articles of Incorporation. As soon as practicable after the Effective
Date and pursuant to the MGCL, the Fund shall prepare and file Articles of
Dissolution with and for acceptance by
29
the Maryland State Department of Assessments and Taxation. After the
effectiveness of the Articles of Dissolution:
(a) The Fund's Board of Directors shall be the trustees of its assets
for purposes of liquidation after the acceptance of the Articles of Dissolution,
unless and until a court appoints a receiver. The Director-trustees will be
vested in their capacity as trustees with full title to all the assets of the
Fund.
(b) The Director-trustees shall (i) collect and distribute any
remaining assets, applying them to the payment, satisfaction and discharge of
existing debts and obligations of the Fund, including necessary expenses of
liquidation; and (ii) distribute the remaining assets among the stockholders.
(c) The Director-trustees may (i) carry out the contracts of the Fund;
(ii) sell all or any part of the assets of the Fund at public or private sale;
(iii) sue or be sued in their own names as trustees or in the name of the Fund;
and (iv) do all other acts consistent with law and the Articles of Incorporation
of the Fund necessary or proper to liquidate the Fund and wind up its affairs.
13. POWER OF THE DIRECTORS. Implementation of this Plan shall be under the
direction of the Board of Directors, who shall have full authority to carry out
the provisions of this Plan or such other actions as they deem appropriate
without further stockholder action.
14. APPRAISAL RIGHTS. Under Maryland law, stockholders will not be entitled to
appraisal rights in connection with the Plan.
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