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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
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. Logo)
345 Park Avenue
New York, New York 10154
(800) 349-4281
THE BRAZIL FUND, INC. April 12, 2006
--------------------------------------------------------------------------------
To the Stockholders of The Brazil Fund, Inc.:
A Special Meeting of Stockholders 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 stockholders.
On March 24, 2006, the Board of Directors of the Fund reached the decision to
liquidate in order to resolve long-standing stockholder 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 stockholders 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
stockholders. Recognizing that there appear to be irreconcilable differences
among the interests of major stockholders, 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 stockholders 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,
/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 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.
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,
/s/ John Millette
John Millette, Secretary
April 12, 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.
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 stockholder 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 stockholders 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 stockholders. Recognizing that there appear to be irreconcilable
differences among the interests of major stockholders, 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 stockholders
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."
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 stockholders 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
stockholder support for an extraordinary action by the Fund, such as a
liquidation, in order to provide liquidity to stockholders 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 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 April 3, 2006 was $1.047 billion. At such
date, the Fund had 16,241,288 shares outstanding. Accordingly, on April
3, 2006, the net asset value per share of the Fund was $64.49. The Fund's
net asset value may be lower at the time of the liquidation due to
various factors. In addition, the liquidation will involve transaction
costs to the Fund. 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."
WHAT FACTORS COULD CAUSE THE FUND'S NET ASSET VALUE TO BE LOWER AT THE TIME OF
LIQUIDATION?
- The Fund's net asset value at liquidation could decrease due to such
factors as: (i) the volatility of prices of Brazilian securities; (ii)
the overall effect on Brazilian securities resulting from the Fund's
liquidation; (iii) adverse effects on the sale price of particular
securities currently held by the Fund due to sale by the Fund of a large
percentage of the outstanding shares, or a large percentage of the
trading volume, of such securities; and (iv) adverse effects on the sale
price of certain securities due to special sale procedures for large
amounts of securities required by Brazilian laws.
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
stockholders will receive their proportionate cash interest of the net
distributable assets of the Fund upon liquidation within 90 days of
approval by stockholders of the liquidation proposal. 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?
- 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 stockholder 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?
- 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 Georgeson
Shareholder Communications Inc., Wall Street Station, PO Box 1100, New
York NY 10269-0646; 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 Communications
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.
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 12, 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.
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 16,241,288 shares, each entitled
to one vote.
THE BRAZIL FUND, INC. 1
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 stockholders 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, pursuant to the program, 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 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 stockholders 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.
In conjunction with its actions to lower the discount, the Fund began efforts in
2004 to change its classification in Brazil from an Annex III Investor into a
2689 Investor. This reclassification would allow the Fund to repatriate its
assets freely. On March 24, 2006, the Federal Revenue Office and the Ministry of
2 THE BRAZIL FUND, INC.
Finance of Brazil confirmed that the conversion of the Fund into a 2689 Investor
would not trigger taxes on the Fund. The Fund intends to complete the conversion
into a 2689 investor as soon as practicable.
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.
- The Fund has historically traded at a discount from net asset value, as is
often the case with closed-end funds. Upon liquidation, Fund stockholders
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 stockholders 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
stockholders 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.
THE BRAZIL FUND, INC. 3
- Disposition of the Fund's portfolio securities pursuant to the liquidation may
have an adverse effect on the prices of such securities.
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 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 stockholder support for an
extraordinary action by
4 THE BRAZIL FUND, INC.
the Fund, such as a liquidation, in order to provide liquidity to stockholders
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.
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 stockholder 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 BRAZIL FUND, INC. 5
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 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"). The Fund may pay the Liquidation
Distribution in more than one installment if appropriate to ensure the orderly
disposition of portfolio securities. Although no assurance can be given, the
Fund anticipates that payment of the Liquidation Distribution will be made
within 90 days of the Effective Date.
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 DWS Scudder Investments
Service Company. The transfer agent can be reached at (800) 294-4366. 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
6 THE BRAZIL FUND, INC.
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 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 April 3, 2006 was $1.047
billion. At such date, the Fund had 16,241,288 shares outstanding.
Accordingly, on April 3, 2006, the net asset value per share of the Fund was
$64.49. The Fund's net asset value may be lower as of the liquidation due to
factors such as: (i) the volatility of prices of Brazilian securities; (ii)
the overall effect on the Brazilian securities markets of the Fund's
liquidation; (iii) adverse effects on the sale price of particular securities
currently held by the Fund due to sale by the Fund of a large percentage of
the outstanding shares, or a large percentage of the trading volume, of such
securities; and (iv) 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 the expenses
of the Fund in connection with the liquidation and portfolio transaction costs
and certain Brazilian taxes, as well as any costs incurred in resolving any
claims that may arise against the Fund. Liquidation expenses and the Fund's
remaining portfolio transaction costs (including amounts allocated for dealer
markup on securities traded over the counter) are estimated to be
approximately $400,000 to $800,000 (or approximately $0.02 to $0.05 per share
outstanding on April 3, 2006). 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 Brazilian taxes payable upon sale of the Fund's portfolio securities
may vary due to changes in the market value of the Fund's assets, or the
imposition of a different tax rate. 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).
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.
THE BRAZIL FUND, INC. 7
- 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 stockholder 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 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.
8 THE BRAZIL FUND, INC.
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. stockholder, 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 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. In that event, 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 are exempt from Brazilian taxation.
THE BRAZIL FUND, INC. 9
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 equity. Such IRF is assessed upon the sale by the Fund of
its portfolio securities. With respect to the Provisional Contribution on
Financial Transactions ("CPMF"), the Brazilian administrator is obliged, under
local regulations, to keep two separate accounts for the Fund: (i) one related
to transactions subject to CPMF (Taxable Account) and (ii) another related to
transactions exempt from CPMF (Non-Taxable Account). Thus, depending on the
account in which the assets are currently registered, they would be entitled
or not to the CPMF exemption. If any fixed-rate investment is sold within 30
days of the Fund's acquisition of such investment, the earnings accrued will
be subject to Tax on Financial Transactions ("IOF").
GENERAL
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
According to SEC Schedule 13F, 13G and 13D/A filings made in February, March and
April 2006, the following owned beneficially more than 5% of the Fund's
outstanding stock:
AMOUNT AND NATURE OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT 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 02210
Common Stock City of London Investment Group, PLC 1,497,600 shares(2) 9.22%
and City of London Investment
Management Company Limited
10 Eastcheap, London EC3M ILX,
England
Common Stock Carrousel Capital Ltd. 949,485 shares(3) 5.85%
and Bruno Sangle-Ferriere
203-205 Brompton Road
London SW3 1LA
England
Common Stock QVT Financial LP and QVT Financial 942,360 shares(4) 5.80%
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) 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
10 THE BRAZIL FUND, INC.
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.
(4) QVT Financial LP is the investment manager for QVT Overseas Ltd., which
beneficially owns 479,967 shares of common stock, and for QVT Associates
LP, which beneficially owns 462,393 shares of common stock. QVT Financial
LP has the power to direct the vote and disposition of the shares of common
stock held by QVT Overseas Ltd. and QVT Associates LP. Accordingly, QVT
Financial LP may be deemed to be the beneficial owner of an aggregate
amount of 942,360 shares of common stock, consisting of the shares owned by
QVT Overseas Ltd. and QVT Associates LP. QVT Financial GP LLC, as General
Partner of QVT Financial LP, may be deemed to beneficially own the same
number of shares of common stock reported by QVT Financial LP.
Except as noted above, to the best of the Fund's knowledge, as of April 11,
2006, no other person owned beneficially more than 5% of the Fund's outstanding
stock.
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
As of March 29, 2006, the Fund's Directors and officers together owned less than
1/4 of 1% of the outstanding capital stock of the Fund.
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 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 $9,500 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
THE BRAZIL FUND, INC. 11
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 April 12, 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 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 May 15, 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 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
12 THE BRAZIL FUND, INC.
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.
By order of the Board of Directors,
/s/ John Millette
John Millette
Secretary
345 Park Avenue
New York, New York 10154
April 12, 2006
THE BRAZIL FUND, INC. 13
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 stockholders 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
14 THE BRAZIL FUND, INC.
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 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
THE BRAZIL FUND, INC. 15
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 DISTRIBUTION. The Fund's assets are expected to be distributed by
cash payment(s) in complete cancellation of all the outstanding shares of
capital stock of the Fund. The distribution of the Fund's assets 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 date of the first
distribution, and (b) liabilities as the Board of Directors shall reasonably
deem to exist against the assets of the Fund. A final distribution, if
necessary, 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 liquidation distribution(s) and
any other miscellaneous income to the Fund.
All stockholders will receive information concerning the sources of the
liquidating distribution(s).
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, 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.
16 THE BRAZIL FUND, INC.
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 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.
THE BRAZIL FUND, INC. 17
Please fold and detach card at perforation before mailing.
------------------------------------------------------------------
PROXY PROXY
THE BRAZIL FUND, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Special Meeting of Stockholders - May 15, 2006
The undersigned hereby appoints Patricia Defilippis, Elisa Metzger and
Patricia Rosch, and each of them, the proxies of the undersigned, with full
power of substitution in each of them, to represent the undersigned and to vote
all shares of The Brazil Fund, Inc. which the undersigned is entitled to vote at
the Special Meeting of Stockholders of The Brazil Fund, Inc. 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
Monday, May 15, 2006 at 10:00 a.m., Eastern time, and at any adjournment or
postponement thereof. The undersigned acknowledges receipt of the Notice of
Special Meeting of Stockholders and accompanying Proxy Statement and revokes any
proxy previously given with respect to the meeting.
(continued on other side)
Instructions for Voting Your Proxy
The Brazil Fund offers stockholders of record three alternative ways of
authorizing proxies to vote their shares:
o By Telephone
o Through the Internet (using a browser)
o By Mail (traditional method)
Your telephone or Internet instructions authorize the named proxies to
vote your shares in the same manner as if you had mailed your proxy card. We
encourage you to use these cost effective and convenient ways of voting.
- ---------
Telephone Available only until 4:00 p.m. Eastern time on May 14, 2006.
- ---------
o Call TOLL-FREE: 1-800-732-4052 on any touch-tone telephone to
authorize voting of your shares. You may call 24 hours a day, 7 days
a week. You will be prompted to follow simple instructions.
o Your voting instructions will be confirmed and shares voted as you
directed.
- ---------
Internet Available only until 4:00 p.m. Eastern time on May 14, 2006.
- ---------
o Visit the Internet voting Website at http://proxy.georgeson.com
o Enter the COMPANY NUMBER AND CONTROL NUMBER shown below and follow
the instructions on your screen.
o Your voting instructions will be confirmed and shares voted as you
directed.
o You will incur only your usual Internet charges.
- -------
By Mail
- -------
o Simply sign and date your proxy card and return it in the
postage-paid envelope.
-------------- --------------
COMPANY NUMBER CONTROL NUMBER
2
-------------- --------------
Please fold and detach card at perforation before mailing.
- -------------------------------------------------------------
This proxy, if properly executed, will be voted in the manner directed. If
no instructions are indicated on a properly executed proxy, the undersigned's
vote will be cast "FOR" Proposal One.
To vote, mark blocks below in blue or black ink as follows: /X/
The Board of Directors of the Fund recommends that Stockholders vote "FOR"
Proposal 1 and Proposal 2.
(1) To vote on the Fund's proposal that the Fund 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.
FOR AGAINST ABSTAIN
(2) To vote on the Fund's proposal that the Fund liquidate and dissolve
pursuant to the provisions of the Plan of Liquidation and
Dissolution of the Fund.
FOR AGAINST ABSTAIN
The Proxies are authorized to vote in their discretion on any other
business which may properly come before the meeting and any adjournments or
postponements thereof.
Please sign exactly as your name or names appear. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title as such.
- ---------------------------------------------------------------
(Signature of Stockholder)
- ---------------------------------------------------------------
(Signature of joint owner, if any)
3
Date _______________________________________________________ , 2006
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
4