<PAGE>
[LOGO] THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
February 26, 1996
Dear Shareholders:
We are pleased to report on the activities of The Chile Fund, Inc. (the "Fund")
for the year ended December 31, 1995.
At December 31, 1995, the Fund had invested $373.5 million in equity
investments, of which $369.4 million were listed principally on the Bolsa de
Comercio de Santiago and $4.1 million in private placements, as compared to
$359.4 million in listed securities at December 31, 1994. In addition, at
December 31, 1995, the Fund had invested $9.3 million in short-term obligations,
as compared to $14.9 million at December 31, 1994. Net asset value per share at
December 31, 1995 was $26.45 per share, as compared to $26.26 per share at
December 31, 1994. Per share amounts have been restated to reflect the
two-for-one stock split effective July 17, 1995.
For the year ended December 31, 1995, the IGPA index, an unmanaged index of
listed Chilean equities, gained 5.6% in U.S. dollar terms. The Fund's total
return, assuming reinvestment of dividends and distributions, based on net asset
value and market value per share was 4.2% and 16.7%, respectively, for the same
period. In light of this performance, the Lipper Closed-End Fund Service has
recently indicated that the Fund was the best-performing fund in their Latin
American fund universe for the year ended 1995.
MARKET DEVELOPMENTS
The year ended 1995 was a difficult and dramatic one for the Latin American
markets, with the first several months of the year dominated by the fallout from
Mexico's economic crisis. However, as 1996 begins, we are cheered by the
markedly improving tone of the region's equity markets. January 1996 was the
third consecutive positive month for the region, something that had not occurred
since mid-summer. It now appears to us that the "Tequila Effect" -- the
simultaneous decline of virtually the entire region's markets in sympathy with
Mexico's crisis -- is effectively a thing of the past.
Of course, throughout the year the "Tequila Effect" has had less impact on Chile
than on virtually any other market in the region. During the course of the
Mexican crisis, the extent to which markets declined in sympathy to Mexico's
largely depended upon two variables, which, as it turns out, often go hand in
hand. The first is the importance, within each market, of foreign investors,
which depends upon both the domestic savings rate and the restrictions imposed
upon foreign investment. As Mexico's troubles drained liquidity out of the
emerging markets, the BOLSAS that are dominated by foreigners felt substantially
more selling pressure than those where domestic investors control the
preponderance of shares. The second factor is the country's similarity, in
economic terms, to Mexico.
Of the major regional markets, the chief beneficiary of this calculus was Chile,
where the savings rate is high, foreign investment is strictly regulated, the
currency is fairly valued, the current account balance is healthy, and economic
reform has been a sterling success. As a result, Chilean equities experienced
relatively little diminution of value during the early months of 1995.
The strong performance of the Chilean stock market during the first half of
1995, relative to other Latin American markets, came in spite of a brief
political crisis that was the worst since the re-establishment of democracy in
1990.
The conviction of two senior military figures for involvement in the
assassination of a political opposition figure in 1976 led to what threatened to
be a major confrontation between the civilian government and the military
establishment, led by General Pinochet, former president and still head of the
country's armed
1
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
forces. This political crisis focused on questions of whether the military would
allow the generals to be jailed, and raised concerns once again about the
military's role in the Chilean polity. During late June, however, the crisis
began to ease, as the military handed over one of the convicted generals while
the other resorted to the court system in order to seek a medical reprieve from
a prison sentence. Although Pinochet made some defiant statements during the
course of the confrontation, the upshot of this crisis is likely to be a
strengthening of the country's democratic structure. These remaining concerns
dissipated during the fourth quarter, and Chile's essentially democratic
political structure remains firmly in place.
During the course of 1995, Chile continued to experience high rates of economic
activity, resulting in renewed concerns over inflation and a poorer performance
in the trade account. The Chilean central bank has responded firmly to the
possibility of economic overheating, resulting in a trend toward rising interest
rates. The Chilean economy remains fundamentally the strongest in Latin America,
and the model which other nations are striving to emulate. It is worth noting
that many of the policies with which the Zedillo government is attempting to
restructure the Mexican economy are modeled after the Chilean program during the
mid and late 1980s. Chile took about two years to recover from its 1982
devaluation crisis, which puts Mexico approximately on schedule. The Chilean
model helps to explain the Mexicans' clear understanding that a significant
improvement in domestic savings is perhaps the most important key to a solid and
permanent recovery.
The essential strength of the Chilean economy and political structure was
reinforced during 1995 by Moody's upgrading of Chile's sovereign credit rating.
Since the Chilean government is not a participant in the international bond
market, the real impact of this upgrade is on Chilean companies, the strongest
of whom saw their own credit automatically upgraded to match that of the
government. Normally, rating agency conventions require that companies' credit
can be rated no higher than that of the country in which the company is
domiciled. The ongoing availability of cheaper credit terms to Chilean companies
is, of course, good news for equity investors.
Up until the onset of the Mexican currency crisis in December 1994, meaningful
progress was being made toward Chile's inclusion in a free trade agreement with
the United States and other countries. This culminated in the announcement made
during that month's Summit of the Americas that in 1995 Chile would commence
negotiations with Canada, Mexico and the U.S. to enter into the North American
Free Trade Agreement ("NAFTA") framework, with an eye toward reaching an
agreement in the spring or summer of 1996. Of course, the crisis in Mexico has
necessarily placed these issues on the back burner for much of the year. Chile's
hopes for a resumption of progress in this direction were set back in early 1996
when the U.S. Congress, under political pressure during an election year when
protectionist sentiment is running high, voted not to give President Clinton
authority to actively pursue Chile's inclusion in NAFTA. Nonetheless, we believe
that, despite delays, movement toward freer trade between Chile and the North
American bloc is probably inevitable. In any case, progress in trade
negotiations continues in other areas, particularly with the Mercosur bloc of
Argentina, Brazil, Uruguay and Paraguay, with whom negotiations are likely to be
completed during the spring of 1996.
During 1995, Chile posted a trade surplus of approximately $1.4 billion, nearly
double the 1994 surplus, with both exports and imports rising substantially.
During the latter part of the year, however, exports began trending downward
while imports continued to rise, and this trend has continued into early 1996.
In response to rising domestic demand, the Chilean central bank raised interest
rates during December amid concern that the economy was beginning to overheat,
and there is some likelihood that further modest tightening may be in store
during the early part of the new year. This has helped to put a crimp on equity
market performance during the past few months.
2
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Chilean government continues to follow through on its long-term program for
infrastructure investment. During 1995, public investment increased by
approximately 8%, approaching an annual total of $2 billion. The government
estimates that more than $10 billion, about a third of which will come from
private sector sources, will be invested in infrastructure projects over the
next five years, including energy projects, highway and urban road building
programs, water treatment plants, airport improvements and port expansions.
Nearly a billion dollars of this total will be devoted to building and upgrading
schools, hospitals and police stations. Upgrading the country's housing stock
has also been made a priority.
At present, the Chilean equity market is trading at a price/earnings ratio of
16.7 times 1995 earnings and 15.4 times projected 1996 earnings. We believe that
the market will in the medium-term be buoyed by infusions of liquidity from
local pension funds, which are still underinvested and continue gradually to
move into equities and by renewed flows of U.S. investment capital into the
Latin American markets generally.
The Fund's long-term objective is to buy securities of well-managed, profitable
and cash generating companies. We believe that we have made significant progress
in meeting this objective while diversifying our holdings across sectors.
We wish to remind shareholders whose shares are registered in their own name
that they automatically participate in the Fund's dividend reinvestment program.
The automatic Dividend Reinvestment Plan (the "Plan") can be of value to
shareholders in maintaining their proportional ownership interest in the Fund in
an easy and convenient way. A shareholder whose shares are held in the name of a
broker/dealer or nominee should contact that party for details about
participating in the Plan. The Plan and the Cash Purchase Plan are described on
pages 18 and 19 of this report.
We appreciate your interest in the Fund and would be pleased to respond to your
questions or comments.
Respectfully,
[LOGO]
Emilio Bassini
President and
Chief Investment Officer*
- ------------------------
*Emilio Bassini, who is a member of the Executive Committee of BEA Associates
and holds the offices of Chief Financial Officer and Executive Director of BEA
Associates, is primarily responsible for management of the Fund's assets. He
has served in such capacity since the commencement of the Fund's operations.
Mr. Bassini joined BEA Associates (formerly Basic Appraisals, Inc. and BEA
Associates, Inc.) in 1984. Mr. Bassini is a Director, Chairman of the Board,
President and Chief Investment Officer of The Emerging Markets Infrastructure
Fund, Inc., The Emerging Markets Telecommunications Fund, Inc., The First
Israel Fund, Inc., The Latin America Equity Fund, Inc., The Latin America
Investment Fund, Inc. and The Portugal Fund, Inc. He is also a Director,
Chairman of the Board, President and Investment Officer of The Brazilian Equity
Fund, Inc., as well as the President and Secretary of The Indonesia Fund, Inc.
3
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
AS OF DECEMBER 31, 1995 (unaudited)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ELECTRIC DISTRIBUTION 22.5%
<S> <C>
Consumer Products 3.2%
Construction Materials 3.0%
Banking 2.3%
Short-Term Investments 2.5%
Other 5.3%
Telecommunications 12.6%
Mining 2.1%
Forestry 12.1%
Food and Beverage 12.1%
Financial Services 4.7%
Fertilizer 2.6%
Electric Generation 15.1%
</TABLE>
THIS CHART REPRESENTS THE SECTOR ALLOCATION
OF TOTAL NET ASSETS OF THE FUND.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS, BY ISSUER
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
OF
HOLDING SECTOR NET ASSETS
<C><S> <C> <C>
- ----------------------------------------------------------------------------------------
1. Compania de Telecomunicaciones de Chile S.A.
Telecommunications 10.42
- ----------------------------------------------------------------------------------------
2. Empresa Nacional de Electricidad S.A.
Electric Generation 10.30
- ----------------------------------------------------------------------------------------
3. Enersis S.A.
Electric Distribution 8.17
- ----------------------------------------------------------------------------------------
4. Chilectra S.A.
Electric Distribution 7.53
- ----------------------------------------------------------------------------------------
5. Embotelladora Andina S.A.
Food and Beverage 6.37
- ----------------------------------------------------------------------------------------
6. Compania de Petreoleos de Chile S.A.
Forestry 5.63
- ----------------------------------------------------------------------------------------
7. Chilgener S.A.
Electric Generation 4.27
- ----------------------------------------------------------------------------------------
8. Compania Manufaturera Papales y Cartones S.A.
Forestry 3.72
- ----------------------------------------------------------------------------------------
9. Emelsa S.A.
Electric Distribution 3.32
- ----------------------------------------------------------------------------------------
10. Compania Cervecerias Unidas S.A.
Food and Beverage 3.29
- ----------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
EQUITY SECURITIES-100.87%
AGRICULTURE-0.11%
1,003,524 Inversiones Agricolas e Industriales S.A.+.................................... $ 395,234
------------
BANKING-2.26%
721,628 Banco de Credito e Inversiones................................................ 6,217,103
25,706,975 Banco Osorno y La Union, Class A.............................................. 1,661,066
117,258 Bice Corp S.A................................................................. 490,680
------------
8,368,849
------------
BASIC METALS-0.58%
316,132 Ceramicas Cordillera S.A...................................................... 2,132,189
------------
BOTTLING-0.80%
6,887,442 Embotelladora Arica*+......................................................... 2,973,524
------------
CONSTRUCTION MATERIALS-2.98%
427,764 Besalco S.A................................................................... 1,642,614
51,502 Cemento Polpaico S.A.......................................................... 3,220,063
98,267 Empresas Pizarreno S.A........................................................ 205,605
26,609 Inversiones Industriales
San Jose S.A................................................................. 5,732
9,316,048 Maderas y Sinteticos Sociedad Anonima......................................... 5,962,271
------------
11,036,285
------------
CONSUMER DURABLES-0.07%
974,398 Companias Cic S.A............................................................. 261,438
------------
CONSUMER GOODS-3.18%
203,162,821 Compania Tecno Industrial S.A................................................. 11,757,189
------------
ELECTRIC DISTRIBUTION-22.52%
4,931,691 Chilectra S.A................................................................. 23,855,424
80,400 Chilectra S.A. ADS++.......................................................... 4,020,000
273,343 Chilquinta S.A................................................................ 1,527,357
1,540,000 Compania de Inversiones Los Almendros, Class A................................ 568,615
1,502,814 Compania General de Electricidad S.A.......................................... 5,175,229
536,777 Emelsa S.A.................................................................... 12,299,957
380,447 Empresa Electrica de
Antofagasta S.A.............................................................. 176,621
6,241,491 Empresa Electrica de Arica S.A................................................ 1,536,367
5,913,829 Empresa Electrica de
Iquique S.A.................................................................. 1,834,197
54,833,012 Enersis S.A................................................................... 30,234,079
84,081 Sociedad Austral de
Electricidad S.A............................................................. 2,162,822
------------
83,390,668
------------
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
ELECTRIC GENERATION-15.10%
2,570,395 Chilgener S.A................................................................. $ 15,817,815
1,758,084 Empresa Electrica Pilmaiquen S.A.............................................. 1,947,416
52,527,708 Empresa Nacional de
Electricidad S.A............................................................. 38,143,197
------------
55,908,428
------------
FERTILIZER-2.58%
1,446,507 Sociedad Quimica y Minera de Chile S.A., Class A.............................. 6,872,021
570,322 Sociedad Quimica y Minera de Chile S.A., Class B.............................. 2,679,987
------------
9,552,008
------------
FINANCIAL SERVICES-4.72%
88,600 Administradora de Fondos de Pensiones Provida S.A. ADS........................ 2,447,575
493,805 Antarchile S.A., Class A...................................................... 2,612,152
302,021 Antarchile S.A., Class C...................................................... 1,709,904
1,540,000 Compania de Inversiones Luz y Fuerza S.A., Class A............................ 574,302
45,274 Duncan Fox S.A................................................................ 47,921
746,303 Elecmetal S.A................................................................. 5,327,455
240,909 Empresas Conosur S.A.+........................................................ 391,384
1,594,008 Invercap S.A.................................................................. 2,393,464
4,068,627 Maritima de Inversiones S.A................................................... 851,282
691,164 Quemchi S.A................................................................... 1,054,823
45,274 Sipsa Sociedad de Inversiones Industriales y Pesqueras S.A.................... 50,150
------------
17,460,412
------------
FISHERY-0.86%
1,518,489 Empresas Pesquera Eperva S.A., Class A........................................ 616,740
4,819,291 Pesquera Itata S.A............................................................ 1,518,447
1,293,879 Sociedad Pesquera Coloso S.A.................................................. 1,066,953
------------
3,202,140
------------
FOOD AND BEVERAGE-12.10%
2,258,304 Compania Cervecerias Unidas S.A............................................... 10,422,942
75,500 Compania Cervecerias Unidas S.A. ADR.......................................... 1,755,375
3,952,506 Embotelladora Andina S.A...................................................... 23,593,420
4,801,231 Embotelladora Polar S.A....................................................... 2,375,501
12,906,344 Empresas Iansa S.A............................................................ 3,431,102
2,486,850 Empresas Santa Carolina S.A................................................... 3,060,738
3,148,050 Jugos Concentrados S.A........................................................ 155,052
------------
44,794,130
------------
</TABLE>
5
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
FORESTRY-12.08%
<C> <S> <C>
635,009 Compania Chilena de
Fosforos S.A................................................................. $ 2,125,815
4,863,505 Compania de Petreoleos de
Chile S.A.................................................................... 20,830,766
1,047,197 Compania Manufaturera Papales y Cartones S.A.................................. 13,790,779
302,327 Forestal Cholguan............................................................. 275,350
2,430,030 Forestal Terranova............................................................ 3,439,427
9,385,866 Industrias Forestales S.A.+................................................... 2,887,959
3,292,764 Maderas Prensadas
Cholguan S.A................................................................. 1,377,895
------------
44,727,991
------------
HEALTH CARE-0.83%
8,266,362 Banmedica S.A................................................................. 3,072,543
------------
INFRASTRUCTURE-0.31%
5,000,000 Infra Structura 2000*+........................................................ 1,142,574
------------
INSURANCE-0.25%
818,209 Cia. de Seguros La Prevision
Vida S.A..................................................................... 929,284
------------
MACHINERY AND ELECTRIC-0.36%
109,324 Madeco S.A. NPV............................................................... 280,139
38,700 Madeco S.A. NPV ADR........................................................... 1,044,900
------------
1,325,039
------------
MANUFACTURING-0.09%
475,002 Cintac S.A.................................................................... 342,586
------------
MINING-2.10%
1,338,500 Antofagasta Holdings P.L.C.................................................... 6,082,125
486,098 Empresa Minera Mantos
Blancos S.A.................................................................. 1,376,031
30,415 Minera Lo Valdes Ltda......................................................... 6,064
2,423 Sociedad Punta del Cobre S.A., Class A........................................ 339,960
------------
7,804,180
------------
PACKAGING-0.52%
4,335,542 Contenedores Redes y
Envases S.A.................................................................. 1,323,341
940,909 Envases del Pacifico S.A...................................................... 648,503
------------
1,971,844
------------
PHARMACEUTICALS-0.52%
3,205,566 Laboratorio Chile S.A......................................................... 1,918,211
------------
REAL ESTATE-0.22%
407,310 Inmobiliaria Urbana S.A....................................................... 802,087
------------
RETAIL TRADE-0.12%
278,190 Santa Isabel S.A.............................................................. 434,832
------------
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
SHIPPING-0.56%
1,632,577 Compania Sud Americana de Vapores S.A......................................... $ 1,245,782
8,212,350 Portuaria Puchoco S.A......................................................... 580,171
76,440 Puerto de Lirquen S.A......................................................... 88,454
112,988 Puerto Ventanas S.A........................................................... 148,796
------------
2,063,203
------------
STEEL-1.86%
1,594,008 Compania de Aceros del
Pacifico S.A................................................................. 6,886,115
------------
TELECOMMUNICATIONS-12.57%
12,400 Compania de Telecomunicaciones de Chile S.A. ADS.............................. 1,027,650
7,515,737 Compania de Telecomunicaciones de Chile S.A., Class A......................... 36,260,540
287,490 Compania de Telecomunicaciones de Chile S.A., Class B......................... 1,280,879
951 Compania Nacional de Telefonos S.A............................................ 819
890,731 Empresa Nacional de Telecomunicaciones S.A.+.................................. 7,991,913
------------
46,561,801
------------
TEXTILES-0.14%
1,038,030 Coats Cadena S.A.............................................................. 281,067
1,496,767 Zalaquett S.A................................................................. 221,061
------------
502,128
------------
TOBACCO-0.45%
222,137 Empresas CCT S.A.............................................................. 1,667,736
------------
WHOLESALE-0.03%
289,797 Zona Franca de Iquique S.A.................................................... 128,402
------------
TOTAL EQUITY SECURITIES
(Cost $116,412,846)............................................................ 373,513,050
------------
SHORT-TERM INVESTMENTS-2.51%
<CAPTION>
UNITS (000)
- -------------
<C> <S> <C>
CHILEAN INFLATION-ADJUSTED
TIME DEPOSITS-2.13%
CLP 4 Banco de O'Higgins, 6.92%, 03/11/96**......................................... 123,077
24 Banco de O'Higgins, 6.61%, 02/26/96**......................................... 711,385
13 Banco de O'Higgins, 6.57%, 02/21/96**......................................... 384,000
4 Banco de O'Higgins, 6.57%, 02/23/96**......................................... 128,000
9 Banco de O'Higgins, 6.45%, 02/07/96**......................................... 260,923
</TABLE>
6
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
UNITS VALUE
(000) DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
CHILEAN INFLATION-ADJUSTED
TIME DEPOSITS (CONTINUED)
<C> <S> <C>
CLP 2 Banco de O'Higgins, 6.42%, 02/02/96**......................................... $ 71,385
3 Banco de O'Higgins, 6.42%, 02/06/96**......................................... 93,538
27 Banco de O'Higgins, 6.25%, 01/26/96**......................................... 804,923
37 Banco de O'Higgins, 6.05%, 01/22/96**......................................... 1,107,676
16 Banco de O'Higgins, 5.70%, 01/15/96**......................................... 492,308
39 Banco Santander, 6.42%, 02/05/96**............................................ 1,156,923
10 Molina Swett y Valdes Limitada, 6.42%, 01/31/96**............................. 300,308
73 Molina Swett y Valdes Limitada, 6.33%, 01/29/96**............................. 2,178,461
2 Security Pacific, 6.30%, 01/24/96**........................................... 73,846
------------
TOTAL CHILEAN INFLATION-ADJUSTED
TIME DEPOSITS (Cost $7,758,854)................................................ 7,886,753
------------
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
CHILEAN MUTUAL FUNDS-0.38%
17,139 Fondo Mutuo Banco Santander................................................... $ 101,785
65,524 Fondo Mutuo Bonosorno Global.................................................. 244,686
55,423 Fondo Mutuo Operacional BanChile.............................................. 571,787
66,072 Fondo Mutuo Security Check.................................................... 244,344
46,776 Fondo Mutuo Security Premium.................................................. 246,154
------------
TOTAL CHILEAN MUTUAL FUNDS
(Cost $1,409,885).............................................................. 1,408,756
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $9,168,739).............................................................. 9,295,509
------------
TOTAL INVESTMENTS
(Cost $125,581,585)
(Notes A,D)............................................................103.38 % 382,808,559
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS........................................................(3.38)% (12,533,064)
------------
NET ASSETS...............................................................100.00% $370,275,495
------------
------------
</TABLE>
- ------------------------------
* Not readily marketable security.
** Effective yield on the date of purchase.
+ Security is non-income producing.
++ SEC Rule 144A security. Such securities are traded only among "qualified
institutional buyers".
ADR American Depositary Receipts.
ADS American Depositary Shares.
CLP Chilean pesos.
See accompanying notes to financial statements.
7
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $125,581,585) (Note A) $382,808,559
Cash (Note A) 555,152
Receivables:
Investments sold 959,981
Interest 76,996
Dividends 39,504
Prepaid expenses and other assets 31,511
-----------
Total Assets 384,471,703
-----------
LIABILITIES:
Payables:
Dividend (Note A) 11,337,503
Advisory fees (Note B) 994,339
Administration fees (Note B) 101,113
Other accrued expenses 1,763,253
-----------
Total Liabilities 14,196,208
-----------
NET ASSETS (applicable to 13,996,918 shares of common stock outstanding) (Note
C) $370,275,495
-----------
-----------
NET ASSET VALUE PER SHARE ($370,275,495 DIVIDED BY 13,996,918) $26.45
-----------
-----------
Net assets consist of:
Capital stock, $0.001 par value; 13,996,918 shares issued and outstanding
(100,000,000 shares authorized) $ 13,997
Paid-in capital 114,171,158
Undistributed net investment income 109,048
Distributions in excess of net realized gain on investments and foreign
currency related transactions (1,196,815)
Net unrealized appreciation in value of investments and translation of other
assets and liabilities denominated in foreign currencies 257,178,107
-----------
Net assets applicable to shares outstanding $370,275,495
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income (Note A):
Dividends $13,871,816
Interest 907,668
Less: Foreign taxes withheld (177,650)
----------
Total Investment Income 14,601,834
----------
Expenses:
Investment advisory fees (Note B) 4,186,739
Custodian fees (Note B) 469,151
Administration fees (Note B) 392,117
Audit and legal fees 138,175
Printing 74,989
Insurance 65,356
Accounting fees 57,907
Transfer agent fees 42,375
NYSE listing fee 41,403
Directors' fees 20,305
Other 38,372
----------
Total Expenses 5,526,889
----------
Net Investment Income 9,074,945
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN
CURRENCY RELATED TRANSACTIONS:
Net realized gain from:
Investments 2,610,467
Foreign currency related transactions 14,194
Net change in unrealized appreciation in value of investments and
translation of other assets and liabilities denominated in foreign
currencies 3,280,611
----------
Net realized and unrealized gain on investments and foreign currency
related transactions 5,905,272
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $14,980,217
----------
----------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETSSECTION
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER
31,
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 9,074,945 $ 5,832,102
Net realized gain on investments and foreign currency related transactions 2,624,661 2,595,637
Net change in unrealized appreciation in value of investments and
translation of other assets and liabilities denominated in foreign
currencies 3,280,611 84,570,750
-------------- --------------
Net increase in net assets resulting from operations 14,980,217 92,998,489
-------------- --------------
Dividends and distribution to shareholders from:
Net investment income (9,024,230) (6,500,073)
Net realized gain on investments and foreign currency related transactions (3,152,971) (908,612)
-------------- --------------
Total dividends and distributions to shareholders (12,177,201) (7,408,685)
-------------- --------------
Capital share transactions (Note C):
Proceeds from 18,580 and 19,586 shares, respectively, issued in
reinvestment of dividends 425,598 426,485
-------------- --------------
Net increase in net assets 3,228,614 86,016,289
NET ASSETS:
Beginning of year 367,046,881 281,030,592
-------------- --------------
End of year (including undistributed net investment income of $109,048 and
$312,007, respectively) $ 370,275,495 $ 367,046,881
-------------- --------------
-------------- --------------
</TABLE>
- ------------------------
Section All references in the below financial statement to shares outstanding
have been restated to reflect the two-for-one stock split effective July 17,
1995 (see Note C).
See accompanying notes to financial statements.
10
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTSSECTION
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 27,
1989*
FOR THE YEAR ENDED DECEMBER 31, THROUGH
--------------------------------------------------------------------- DECEMBER 31,
1995 1994+ 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period $ 26.26 $ 20.13 $ 15.55 $ 14.84 $ 8.72 $ 7.40 $ 6.88**
-------- -------- -------- -------- -------- -------- ------
Net investment income 0.65 0.42 0.35 0.39 0.49 0.78 0.02
Net realized and unrealized
gain on investments and
foreign currency related
transactions 0.41++ 6.24 5.96 1.93 7.21 1.17 0.67
-------- -------- -------- -------- -------- -------- ------
Net increase in net assets
from operations 1.06 6.66 6.31 2.32 7.70 1.95 0.69
-------- -------- -------- -------- -------- -------- ------
Dividends and distributions
to shareholders:
From net investment income (0.65) (0.47) (0.31) (0.39) (0.49) (0.63) (0.03)
From net realized gain on
investments and foreign
currency related
transactions (0.22) (0.06) (0.26) (1.22) (1.09) -- --
In excess of net
investment income -- -- -- -- -- -- (0.14)
In excess of net realized
gain on investments and
foreign currency related
transactions -- -- (0.16) -- -- -- --
-------- -------- -------- -------- -------- -------- ------
Total dividends and
distributions to
shareholders (0.87) (0.53) (0.73) (1.61) (1.58) (0.63) (0.17)
-------- -------- -------- -------- -------- -------- ------
Dilution due to capital
share rights offering -- -- (1.00) -- -- -- --
-------- -------- -------- -------- -------- -------- ------
Net asset value, end of
period $ 26.45 $ 26.26 $ 20.13 $ 15.55 $ 14.84 $ 8.72 $ 7.40
-------- -------- -------- -------- -------- -------- ------
-------- -------- -------- -------- -------- -------- ------
Market value, end of period $ 26.000 $ 23.063 $ 22.250 $ 16.563 $ 11.938 $ 7.750 $ 7.813
-------- -------- -------- -------- -------- -------- ------
-------- -------- -------- -------- -------- -------- ------
Total investment return (a) 16.66% 6.05% 38.82% 53.80% 71.05% 7.07% 14.17%
-------- -------- -------- -------- -------- -------- ------
-------- -------- -------- -------- -------- -------- ------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $370,275 $367,047 $281,031 $168,580 $160,360 $93,744 $79,494
Ratio of expenses to average
net assets 1.46% 1.39% 1.72% 1.71%(d) 1.75%(d) 2.04% 1.98%(b)
Ratio of net investment
income to
average net assets 2.39% 1.74% 2.47% 2.61%(d) 3.97%(d) 9.56% 1.44%(b)
Portfolio turnover rate 2.38% 0.86% 11.29% 6.29% 19.32% 12.63% 2.38%(c)
</TABLE>
- ----------------------------------
Section Per share amounts have been restated to reflect the two-for-one stock
split effective July 17, 1995 (see Note C).
* Commencement of investment operations.
** Initial public offering price of $7.50 per share less underwriting discount
of $0.52 per share and offering expenses of $0.10 per share.
+ Based on average shares outstanding.
++ Reflects a $0.01 per share decrease to the Fund's net asset value per share
resulting from the dilutive impact of shares issued pursuant to the Fund's
automatic dividend reinvestment plan in 1995.
(a) Total investment return at market value is based on the changes in market
price of a share during the period and assumes reinvestment of dividends and
distributions, if any, at actual prices pursuant to the Fund's dividend
reinvestment plan. Total investment return does not reflect brokerage
commissions or initial underwriting discounts and has not been annualized.
In addition, such returns have been restated to reflect the reinvestment of
dividends and distributions, if any, on the ex-dividend date.
(b) Annualized.
(c) Not annualized.
(d) Ratios do not include effect of repatriation taxes. The ratios of expenses
to average net assets and net investment income to average net assets would
have been 2.15% and 2.17% for the year ended December 31, 1992; and 2.13%
and 3.41% for the year ended December 31, 1991, respectively, with the
inclusion of the repatriation taxes.
See accompanying notes to financial statements.
11
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE A. SIGNIFICANT
ACCOUNTING POLICIES
The Chile Fund, Inc. (the "Fund") was incorporated in
Maryland on January 30, 1989 and commenced investment
operations on September 27, 1989. The Fund is registered under the Investment
Company Act of 1940, as amended, as a closed-end, non-diversified management
investment company. Significant accounting policies are as follows:
PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All equity securities for which market quotations are
readily available are valued at the last sales price or lacking any sales, at
the closing price last quoted for the securities (but if bid and asked
quotations are available, at the mean between the current bid and asked prices).
Securities that are traded over-the-counter are valued at the mean between the
current bid and the asked prices, if available. All other securities and assets
are valued as determined in good faith by the Board of Directors. Short-term
investments having a maturity of 60 days or less are valued on the basis of
amortized cost. The preparation of financial statements requires the use of
estimates by management, principally the valuation of non-publicly traded
securities. Accordingly, the Board of Directors has established general
guidelines for calculating fair value of non-publicly traded securities. At
December 31, 1995, the Fund held 1.11% of its net assets in securities valued in
good faith by the Board of Directors with an aggregate cost of $4,114,938 and
fair value of $4,116,098. The net asset value per share of the Fund is
calculated weekly, at the end of each month and at any other times determined by
the Board of Directors.
CASH: Deposits held at Brown Brothers Harriman & Co. (Grand Cayman), the
Fund's custodian, in a variable rate account are classified as cash. At December
31, 1995, the interest rate was 4.94% which resets on a daily basis. Amounts are
generally available on the same business day.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.
TAXES: No provision is made for U.S. federal income or excise taxes as it is
the Fund's intention to continue to qualify as a regulated investment company
and to make the requisite distributions to its shareholders which will be
sufficient to relieve it from all or substantially all U.S. federal income and
excise taxes.
The Fund is subject to and accrues a 10% Chilean repatriation tax with respect
to all remittances from Chile in excess of original invested capital. The Fund
has no current intention of remitting currency from Chile, except to the extent
necessary to pay future U.S. dollar denominated expenses and to make required
U.S. tax distributions.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at the
relevant rates of exchange prevailing on the respective dates of such
transactions.
The Fund does not isolate that portion of gains and losses in investments in
equity securities which is due to changes in the foreign exchange rates from
that which is due to changes in market prices of equity securities. Accordingly,
realized and unrealized foreign currency gains and losses with respect to such
securities are included in the reported net realized and unrealized gains and
losses on investment transactions balances.
The Fund reports certain foreign currency related transactions as components
of realized gains for financial reporting purposes, whereas such components are
treated as ordinary income for U.S. federal income tax purposes.
Net currency gains from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation/depreciation on investments, foreign currency holdings,
and other assets and liabilities denominated in foreign currencies.
Net realized foreign exchange gains represent foreign exchange gains and
losses from sales and maturities of debt securities, transactions in foreign
currencies and forward foreign currency contracts, exchange gains or losses
realized between the trade date and settlement dates on security transactions,
and the difference between the amounts of interest and dividends recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received.
DISTRIBUTIONS OF INCOME AND GAINS: The Fund distributes at least annually to
shareholders, substantially all of its net investment income and net realized
short-term capital gains, if any. The Fund determines annually whether to
distribute any net realized long-term capital gains in excess of net short-term
capital losses, including capital loss carryovers, if any, although it currently
expects to distribute such gains. An additional distribution may be made to the
extent necessary to avoid the payment of a 4% U.S. federal excise tax. Dividends
and distributions to shareholders are recorded by the Fund on the ex-dividend
date.
On December 14, 1995, a distribution in the aggregate amount of $11,337,503,
equal to $0.81 per share was declared. The distribution was comprised of $0.62
per share from net investment income, $0.08 per share from net realized
short-term capital gains, $0.10 per share from net realized long-term capital
gains and $0.01 per share from net realized foreign currency gains. The
distribution is payable on January 12, 1996 to shareholders of record as of
December 29, 1995.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.
OTHER: Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in exchange rates.
The Chilean securities markets are substantially smaller, less liquid and more
volatile than the major securities markets in the United States. Consequently,
acquisition and disposition of securities by the Fund may be inhibited. A
significant proportion of the aggregate market value of equity securities listed
on the Santiago Exchange are held by a small number of investors and are not
publicly traded. This may limit the number of shares available for acquisition
or disposition by the Fund.
Investments in Chile may involve certain considerations and risks not
typically associated with investments in the United States including the
possibility of future political and economic developments and the level of
Chilean governmental supervision and regulation of its securities markets.
NOTE B. AGREEMENTS
BEA Associates ("BEA") serves as the Fund's investment
adviser with respect to all investments. As compensation for its advisory
services, BEA receives from the Fund an annual fee, calculated weekly and paid
quarterly, equal to 1.20% of the first $50 million of the Fund's average weekly
net assets, 1.15% of the next $50 million of the Fund's average weekly net
assets, and 1.10% of amounts over $100 million. In addition, BEA receives from
the Fund an administration fee which represents a reimbursement of certain Fund
expenses. For the year ended December 31, 1995, advisory and administration fees
amounted to $4,186,739 and $18,643, respectively.
Celfin Servicios Financieros Limitada (formerly Celfin Agente de Valores
Limitada) ("Celfin") serves as the Fund's Chilean sub-adviser. In return for its
services, Celfin is paid a fee, out of the advisory fee payable to BEA, computed
weekly and paid quarterly at an annual rate of 0.15% of the first $50 million of
the Fund's average weekly net assets, 0.10% of the next $50 million of the
Fund's average weekly net assets and 0.05% of amounts over $100 million. For the
year ended December 31, 1995, these sub-advisory fees amounted to $266,398.
Through August 24, 1995, PFPC Inc. ("PFPC") served as the Fund's U.S.
administrator. The Fund paid
12
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
PFPC a fee that was computed weekly and paid quarterly at an annual rate of
0.10% of the value of the Fund's first $250 million in average weekly net assets
and 0.075% of the next $250 million in average weekly net assets, which was
subject to a minimum annual fee.
For the period January 1, 1995 through August 24, 1995, PFPC earned $226,147 for
administrative services.
Effective August 25, 1995, Bear Stearns Funds Management Inc. ("BSFM") serves
as the Fund's U.S. administrator. The Fund pays BSFM a monthly fee that is
computed weekly at an annual rate of 0.08% of the first $100 million of the
Fund's average weekly net assets, 0.06% of the next $50 million of the Fund's
average weekly net assets and 0.04% of amounts in excess of $150 million. For
the period August 25, 1995 through December 31, 1995, BSFM earned $70,460 for
administrative services.
BEA Administration, Administradora de Fondos de Inversion de Capital
Extranjero S.A. ("AFICE") serves as the Fund's Chilean administrator. For its
services, AFICE is paid a fee, out of the advisory fee payable to BEA, that is
calculated weekly and paid quarterly at an annual rate of 0.05% of the value of
the Fund's average weekly net assets and an annual reimbursement of out-
of-pocket expenses. In addition, AFICE receives a supplemental administration
fee and an accounting fee. Such fees are paid by AFICE to Celfin for certain
administrative services. For the year ended December 31, 1995, the
administration fees, supplemental administration fees and accounting fees
amounted to $195,103, $76,867 and $7,905, respectively.
Through June 12, 1995, Citibank, N.A. served as the custodian for the Fund's
foreign assets. Through June 15, 1995, PNC Bank, N.A. served as the custodian
for the U.S. assets of the Fund. Effective June 13, 1995, Brown Brothers
Harriman & Co. serves as the custodian for the Fund's foreign assets and
effective June 16, 1995, as the custodian for its U.S. assets.
Through September 4, 1995, PNC Bank, N.A. served as the Fund's transfer agent
and registrar. Effective September 5, 1995, The First National Bank of Boston
serves as the Fund's transfer agent and registrar.
NOTE C. CAPITAL STOCK
The authorized capital stock of the Fund is
100,000,000 shares of common stock, $0.001, par value.
Of the 13,996,918 shares outstanding at December 31, 1995, BEA owned 14,615
shares.
The Board of Directors of the Fund approved a two-for-one stock split on May
16, 1995. The record date, payment date and ex-date were July 5, 1995, July 12,
1995 and July 17, 1995, respectively. For each share held of record, including
shares held through the Fund's dividend reinvestment and cash purchase plan, a
shareholder received one additional share of the Fund's common stock, par value
$0.001 per share. Shareholders holding fractional shares received a cash payment
for their fractional share interest based on the reported closing price of the
common stock on the New York Stock Exchange on the ex-dividend date.
Certificates were first mailed to shareholders on or about July 14, 1995.
Shareholders holding shares through the Fund's dividend reinvestment and cash
purchase plan did not receive certificates evidencing such additional shares but
instead had such additional shares credited to their plan account.
In addition, all references in the financial statements to shares outstanding
and per share amounts have been restated to reflect the two-for-one stock split.
NOTE D. INVESTMENT TRANSACTIONS
For U.S. federal income tax purposes, the cost of
securities owned at December 31, 1995 was
$126,959,427. Accordingly, the net unrealized appreciation of investments
(including investments denominated in foreign currencies) of $255,849,132, was
composed of gross appreciation of $257,293,957 for those investments having an
excess of value over cost and gross depreciation of $1,444,825 for those
investments having an excess of cost over value.
For the year ended December 31, 1995, purchases and sales of securities, other
than short-term obligations, were $17,682,553 and $8,795,986, respectively.
NOTE E. CREDIT AGREEMENT
The Fund, along with 15 other U.S. regulated
investment companies for which BEA serves as
investment adviser, has a credit agreement with The First National Bank of
Boston. The agreement provides that each fund is permitted to borrow an amount
equal to the lesser of $50,000,000 or 25% of the net assets of the fund.
However, at no time shall the aggregate outstanding
principal amount of all loans to any of the 16 funds exceed $50,000,000. The
line of credit will bear interest at (I) the greater of the bank's prime rate or
the Federal Funds Effective Rate plus 0.50% or (II) the Adjusted Eurodollar Rate
plus 1.50%. The Fund had no amounts outstanding under the credit agreement
during the year ended December 31, 1995.
NOTE F. QUARTERLY RESULTS OF OPERATIONS (unaudited)
<TABLE>
<CAPTION>
NET GAIN/(LOSS)
ON INVESTMENT NET
AND FOREIGN INCREASE/(DECREASE)
NET CURRENCY IN NET
INVESTMENT INVESTMENT RELATED ASSETS RESULTING
INCOME INCOME TRANSACTIONS FROM OPERATIONS MARKET PRICE
------------- -------------- ---------------- ---------------- ON NYSE
TOTAL PER TOTAL PER TOTAL PER TOTAL PER ----------------
QUARTER ENDED (000) SHARE (000) SHARE (000) SHARE (000) SHARE HIGH LOW
- ------------------------------------- ------ ----- ------ ------ -------- ------ -------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1995....................... $1,900 $ 0.14 $ 682 $ 0.05 $(22,160) $ (1.59) $(21,478) $ (1.54) $ 22.875 $ 18.750
June 30, 1995........................ 5,856 0.42 4,425 0.32 84,304 6.03 88,729 6.35 26.875 20.875
September 30, 1995................... 2,567 0.18 1,059 0.07 (58,377) (4.17) (57,318) (4.10) 28.000 22.625
December 31, 1995.................... 4,279 0.31 2,909 0.21 2,138 0.14* 5,047 0.35 26.000 22.125
------ ----- ------ ------ -------- ------ -------- ------
Totals......................... $14,602 $ 1.05 $9,075 $ 0.65 $ 5,905 $ 0.41 $ 14,980 $ 1.06
------ ----- ------ ------ -------- ------ -------- ------
------ ----- ------ ------ -------- ------ -------- ------
March 31, 1994....................... $1,624 $ 0.12 $ 447 $ 0.03 $ 3,413 $ 0.25 $ 3,860 $ 0.28 $ 27.375 $ 21.375
June 30, 1994........................ 3,959 0.28 2,829 0.20 31,927 2.29 34,756 2.49 23.625 21.250
September 30, 1994................... 2,748 0.20 1,719 0.13 45,144 3.23 46,863 3.36 24.125 20.750
December 31, 1994.................... 2,184 0.16 837 0.06 6,682 0.47 7,519 0.53 25.250 22.125
------ ----- ------ ------ -------- ------ -------- ------
Totals......................... $10,515 $ 0.76 $5,832 $ 0.42 $ 87,166 $ 6.24 $ 92,998 $ 6.66
------ ----- ------ ------ -------- ------ -------- ------
------ ----- ------ ------ -------- ------ -------- ------
</TABLE>
- --------------------------
* Reflects a $0.01 per share decrease to the Fund's net asset value per share
resulting from the dilutive impact of shares issued pursuant to the Fund's
automatic dividend reinvestment plan in 1995.
13
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of The Chile Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of The
Chile Fund, Inc., including the schedule of investments, as of December 31,
1995, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Chile Fund, Inc. as of December 31, 1995, the results of its operations for the
year then ended, the changes in net assets for each of the two years in the
period then ended, and its financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 16, 1996
16
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (unaudited)
On April 25, 1995, the annual meeting of shareholders of The Chile Fund, Inc.
(the "Fund") was held and the following matters were voted upon:
(1) To re-elect two directors to the Board of Directors of the Fund.
<TABLE>
<CAPTION>
NAME OF DIRECTOR VOTES FOR VOTES WITHHELD NON-VOTES
- -------------------------------------------------------------- ---------- --------------- ----------
<S> <C> <C> <C>
George Landau................................................. 4,736,310 15,006 2,246,328
Daniel Sigg................................................... 4,729,115 22,201 2,246,328
</TABLE>
In addition to the directors re-elected at the meeting, Emilio Bassini,
James Cattano and Jose Luiz Ibanez continue to serve as directors of the
Fund.
(2) To ratify the selection of Coopers & Lybrand L.L.P. as independent public
accountants for the year ending December 31, 1995.
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST VOTES WITHHELD NON-VOTES
---------- --------------- --------------- ----------
<S> <C> <C> <C> <C>
4,739,628 5,931 5,757 2,246,328
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX INFORMATION (unaudited)
The Fund is required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise its shareholders within 60 days of the Fund's fiscal year end
(December 31, 1995) as to the U.S. federal tax status of dividends and
distributions received by the Fund's shareholders in respect of such fiscal
year. Of the $0.87 per share dividend and distribution paid in respect of such
fiscal year, $0.65 per share was derived from net investment income, $0.01 per
share was from net realized foreign exchange gains, $0.09 per share was from net
realized short-term capital gains and $0.12 per share was from net realized
long-term capital gains. There were no dividends and distributions which would
qualify for the dividend received deduction available to corporate shareholders.
The Fund does not intend to make an election under Section 853 to pass through
foreign taxes paid by the Fund to its shareholders. This information is given to
meet certain requirements of the Internal Revenue Code of 1986, as amended.
Shareholders should refer to their Form 1099-DIV to determine the amount
includable on their respective tax returns for 1995.
Notification for calendar year 1995 was mailed in January 1996. The notification
reflected the amount to be used by calendar year taxpayers on their U.S. federal
income tax returns along with Form 1099-DIV.
Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of their dividend and distribution. They will generally not be entitled
to a foreign tax credit or deduction for the withholding taxes paid by the Fund.
In general, dividends and distributions received by tax-exempt recipients (e.g.,
IRAs and Keoghs) need not be reported as taxable income for U.S. federal income
tax purposes. However, some retirement trusts (e.g., corporate, Keogh and
403(b)(7) plans) may need this information for their annual information
reporting.
Shareholders are advised to consult their own tax advisers with respect to the
tax consequences of their investment in the Fund.
17
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN
Pursuant to The Chile Fund, Inc.'s (the "Fund") Dividend Reinvestment and Cash
Purchase Plan (the "Plan"), each shareholder will be deemed to have elected,
unless the Fund's transfer agent as the Plan Agent (the "Plan Agent"), is
otherwise instructed by the shareholder in writing, to have all dividends and
distributions, net of any applicable U.S. withholding tax, automatically
reinvested in additional shares of the Fund. Shareholders who do not participate
in the Plan will receive all dividends and distributions in cash, net of any
applicable U.S. withholding tax, paid in dollars by check mailed directly to the
shareholder by the Plan Agent, as dividend-paying agent. Shareholders who do not
wish to have dividends and distributions automatically reinvested should notify
the Plan Agent for the Fund, at the address set forth below. Dividends and
distributions with respect to shares registered in the name of a broker-dealer
or other nominee (i.e., in "street name") will be reinvested under the Plan
unless such service is not provided by the broker or nominee or the shareholder
elects to receive dividends and distributions in cash. A shareholder whose
shares are held by a broker or nominee that does not provide a dividend
reinvestment program may be required to have his shares registered in his own
name to participate in the Plan. Investors who own shares of the Fund's common
stock registered in street name should contact the broker or nominee for details
concerning participation in the Plan.
Certain distributions of cash attributable to (a) some of the dividends and
interest amounts paid to the Fund and (b) certain capital gains earned by the
Fund that are derived from securities of certain foreign issuers are subject to
taxes payable by the Fund at the time amounts are remitted. Such taxes, if any,
will be borne by the Fund and allocated to all shareholders in proportion to
their interests in the Fund.
The Plan Agent serves as agent for the shareholders in administering the Plan.
If the Board of Directors of the Fund declares an income dividend or a capital
gains distribution payable either in the Fund's common stock or in cash, as
shareholders may have elected, nonparticipants in the Plan will receive cash and
participants in the Plan will receive common stock to be issued by the Fund. If
the market price per share on the valuation date equals or exceeds net asset
value per share on that date, the Fund will issue new shares to participants
valued at net asset value or, if the net asset value is less than 95% of the
market price on the valuation date, then valued at 95% of the market price. If
net asset value per share on the valuation date exceeds the market price per
share on that date, participants in the Plan will receive shares of stock from
the Fund valued at the market price.
The valuation date is the dividend or distribution payment date or, if that date
is not a New York Stock Exchange trading day, the next preceding trading day. If
the Fund should declare an income dividend or capital gains distribution payable
only in cash, the Plan Agent will, as agent for the participants, buy Fund
shares in the open market, on the New York Stock Exchange or elsewhere, for the
participants' accounts on, or shortly after, the payment date.
Participants in the Plan have the option of making additional cash payments to
the Plan Agent, semiannually, in any amount from $100 to $3,000, for investment
in the Fund's common stock. The Plan Agent will use all funds received from
participants to purchase Fund shares in the open market on or about February 15
and August 15 of each year. Any voluntary cash payments received more than 30
days prior to these dates will be returned by the Plan Agent and interest will
not be paid on any uninvested cash payments. To avoid unnecessary cash
accumulations, and also to allow ample time for receipt and processing by the
Plan Agent, it is suggested that participants send in voluntary cash payments to
be received by the Plan Agent approximately 10 days before February 15 or August
15, as the case may be. A participant may withdraw a voluntary cash payment by
written notice, if the notice
18
<PAGE>
THE CHILE FUND, INC.
- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN (continued)
is received by the Plan Agent not less than 48 hours before the payment is to be
invested. A participant's tax basis in his shares acquired through his optional
investment right will equal his cash payments to the Plan, including any cash
payments used to pay brokerage commissions allocable to his acquired shares.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of the
participant and each shareholder's proxy will include those shares purchased
pursuant to the Plan.
In the case of a shareholder, such as a bank, broker or nominee, that holds
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are to participate in the
Plan.
There is no charge to participants for reinvesting dividends or capital gains
distributions payable in either stock or cash. The Plan Agent's fees for the
handling of reinvestment of such dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage charges with respect to shares
issued directly by the Fund as a result of dividends and capital gains
distributions payable either in stock or in cash. However, each participant will
be charged by the Plan Agent a pro rata share of brokerage commissions incurred
with respect to the Plan Agent's open market purchases in connection with
voluntary cash payments made by the participant or the reinvestment of dividends
and capital gains distributions payable only in cash. Brokerage charges for
purchasing small amounts of stock for individual accounts through the Plan are
expected to be less than the usual brokerage charges for such transactions
because the Plan Agent will be purchasing stock for all participants in blocks
and prorating the lower commission thus obtainable. Brokerage commissions will
vary based on, among other things, the broker selected to effect a particular
purchase and the number of participants on whose behalf such purchase is being
made. The Fund cannot predict, therefore, whether the cost to a participant who
makes a voluntary cash payment will be less than if a participant were to make
an open market purchase on the Fund's common stock on his own behalf.
The receipt of dividends and distributions in stock under the Plan will not
relieve participants of any income tax (including withholding tax) that may be
payable on such dividends and distributions.
Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to notice of the termination sent to the members of the Plan at
least 30 days before the semiannual contribution date, in the case of voluntary
cash payments, or the record date for dividends or distributions. The Plan also
may be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by at least 30 days' written notice to members of the Plan. All
correspondence concerning the Plan should be directed to the Plan Agent, The
First National Bank of Boston, Investor Relations Department, P.O. Box 644, Mail
Stop 45-02-09, Boston, Massachusetts 02102-0644 or by telephone at
1-800-730-6001.
19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
BEA Associates
New York, New York
ADMINISTRATOR
Bear Stearns Funds Management Inc.
New York, New York
TRANSFER AGENT AND REGISTRAR
The First National Bank of Boston
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
LEGAL COUNSEL
Willke Farr & Gallagher
New York, New York
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. It is not a prospectus, circular
or representation intended for use in the purchase or sale of shares of the Fund
or of any securities mentioned in this report.
[LOGO] THE CHILE FUND, INC.
------------------------
THE CHILE FUND, INC.
ANNUAL REPORT
DECEMBER 31, 1995
