CHILE FUND INC, N-30D, 1998-09-01

CHILE FUND INC
N-30D, 1998-09-01

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<PAGE>

[GRAPHIC]

The Chile Fund, Inc.
- --------------------
SEMI-ANNUAL REPORT
JUNE 30, 1998

<PAGE>
CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders........................................................................ 1

Portfolio Summary............................................................................. 6

Schedule of Investments....................................................................... 7

Statement of Assets and Liabilities........................................................... 9

Statement of Operations....................................................................... 10

Statement of Changes in Net Assets............................................................ 11

Financial Highlights.......................................................................... 12

Notes to Financial Statements................................................................. 13

Results of Annual Meeting of Shareholders..................................................... 17

Description of Dividend Reinvestment and Cash Purchase Plan................................... 18
</TABLE>

PICTURED ON THE COVER IS AN OVERVIEW OF THE CITY OF SANTIAGO LOCATED IN CHILE.

- --------------------------------------------------------------------------------
<PAGE>
LETTER TO SHAREHOLDERS
August 3, 1998

DEAR SHAREHOLDER:

I am writing to report on the activities of The Chile Fund, Inc. (the "Fund")
for the six months ended June 30, 1998.

At June 30, 1998, the Fund's net assets were $240.1 million. The Fund's net
asset value ("NAV") was $16.91 per share, as compared to $21.61 at December 31,
1997.

PERFORMANCE

For the period January 1, 1998 through June 30, 1998, the Fund's total return,
based on NAV, fell 21.8%. By comparison, Morgan Stanley Capital International's
Chile Index (the "Index") declined 21.2%.

The Fund's performance, essentially in line with that of the Index benchmark,
was attributable to several factors. On the positive side, returns were
especially strong in the beverage sector. This was due both to effective stock
selection (notably the bottlers Embotelladora Andina S.A. and Embotelladora
Arica) and my decision to weight the sector in the portfolio at a level nearly
twice as high as in the benchmark. Another significant positive contribution
came from the weak telecommunications sector, which I underweighted. Performance
was most negatively affected by exposure to merchandising companies (E.G.,
Distribucion y Servicio D&S S.A., Sociedad Anonima Comercial e Industrial
Falabella), which are not included in the benchmark and did poorly as well.

INVESTMENT PERSPECTIVE

The decline in Chilean equity prices thus far in 1998 is attributable to several
factors.

ASIA. First and foremost is the economic malaise afflicting Japan and Emerging
Asia and, by extension, Chile and other countries that are dependent on trade
with the region. Chile suffers both from falling demand for its exports, about
30% of which go to Asia, and increasing competition from Asian suppliers. Prices
of many major commodities have plummeted, including those of Chile's major
exports (I.E., copper, pulp). Since copper alone accounts for about 40% of
Chilean exports and is the primary source of revenues to finance the national
budget, any decline in copper prices has a direct and painful impact on the
national economy.

- --------------------------------------------------------------------------------
1
<PAGE>
LETTER TO SHAREHOLDERS

COPPER PRICES HAVE PLUMMETED
(High-grade copper futures contract, $, July 1997-June 1998)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

SOURCE: BLOOMBERG

As a result of these and other factors, Chile's current account deficit is
dangerously high. The deficit is currently running at an annualized rate of over
6% of gross domestic product for the second consecutive year. Investors have
responded by heavily selling the peso vs. the dollar, thereby infecting Chile's
currency with the "Asian Flu" of currency devaluation.

DOMESTIC PENSION FUNDS. Closer to home, Chilean pension funds (known as
Administratoras de Fondos de Pensiones, or AFPs) control a substantial and
extremely influential pool of investment capital in Chile. AFPs' stock purchases
are favoring foreign equities, and they have been net sellers of Chilean shares
throughout 1998 thus far. I continue to believe that the AFPs will need to come
back into the Chilean market in a meaningful way before its full recovery can
occur.

NEW-ISSUE PIPELINE. Actual announcements and anecdotal evidence suggest that the
pipeline of new equity issues stands at roughly $1 billion and includes major
Chilean companies such as Compania de Telecomunicaciones de Chile S.A. ("CTC"),
Empresa Nacional de Electricidad S.A. ("Endesa") and Enersis S.A. ("Enersis").
It is reasonable to expect the market to decline when forced to absorb so much
additional liquidity, particularly when the issuers are blue-chip,
large-capitalization names.

- --------------------------------------------------------------------------------
2
<PAGE>
LETTER TO SHAREHOLDERS

PORTFOLIO STRUCTURE

TOP 10 HOLDINGS, BY ISSUER*

<TABLE>
<CAPTION>
PERCENT OF
HOLDING SECTOR NET ASSETS
<C><S> <C> <C>
1. CTC Telecom. 12.6
2. Chilectra Electric Dist. 9.4
3. Endesa Electric Gen. 8.5
4. CPC Forestry 6.0
5. Enersis Electric Gen. 5.4
6. CCU Food & Bev. 4.9
7. Andina Food & Bev. 3.8
8. Emel Electric Dist. 3.6
9. D&S Food & Bev. 3.3
10. Cartones Forestry 3.1
*Company names and sectors are abbreviations of
those found in the chart on page 6.
</TABLE>

Sector Breakdown
(as a percent of net assets)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
<S> <C>
Banking 3.48%
Electric Dist. 15.00%
Electric Gen. 13.91%
Food/Bev 19.08%
Forestry 9.34%
Pharmaceuticals 2.62%
Telecom. 12.64%
Chilean Mutual Funds
(short-term) 2.67%
Other* 21.26%
</TABLE>

*Includes sectors representing less than 2.5% of total net assets: Airlines,
Basic Metals, Consumer Durables, Consumer Goods, Engineering & Construction,
Fertilizer, Financial Services, Fishery, Health Care, Infrastructure, Insurance,
Mining, Real Estate Investment & Management, Retail, Shipping, Steel, Textiles
and liabilities in excess of cash and other assets.

Given the difficult investment environment, I am maintaining a fairly
conservative approach and structuring the portfolio to closely resemble the
Index benchmark. More specifically, I have reduced the Fund's exposure to the
banking and retailing sectors, as they are especially sensitive to the state of
the economy. Valuations of banking stocks have already fallen significantly in
the last few months and may go even lower.

CHILEAN BANK VALUATIONS HAVE FALLEN

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PRICE/BV PRICE EARNINGS
MULTIPLE MULTIPLE
<S> <C> <C>
As of 12/31/97 2.2 14.7
As of 6/29/98 1.8 12.3
</TABLE>

SOURCE: J.P. MORGAN

Instead, I am favoring sectors whose prospects are more stable and less
dependent on the economy, as well as those that can provide a hedge against
weakness in the peso. Such companies are most often found in industries like
telecommunications and electricity, which are heavily regulated and less
cyclical.

- --------------------------------------------------------------------------------
3
<PAGE>
LETTER TO SHAREHOLDERS

I would now like to more specifically discuss several stocks that are
representative of my current strategy.

ENERSIS is Latin America's premier electricity holding company. Its 74%-owned
operating subsidiary, CHILECTRA S.A. ("CHILECTRA"), is the electricity
distributor in the metropolitan Santiago area, which is Chile's most heavily
populated service territory. Through their separate ownership stakes in
distributors elsewhere in Latin America (I.E., Argentina, Brazil, Colombia and
Peru), both companies obtain access to growing markets as well as opportunities
for significant profits via gains in efficiency.

I'm attracted to Enersis and Chilectra for several reasons. First is the fact
that Chilean electricity tariffs (I.E., rates) are fixed for the next four
years, meaning that Enersis's and Chilectra's revenues and earnings streams are
much more predictable than those of many other Chilean companies. Tariffs are
indexed both to inflation and the U.S. dollar, moreover, thereby providing
Enersis and Chilectra with important protection against economic and currency
volatility.

Operating conditions are similarly favorable in Argentina, Brazil, Colombia and
Peru, which also offer considerable scope for cost reduction. Management at both
companies is top-notch and highly experienced in the electricity business across
Latin America. Finally, the controversy surrounding Enersis's strategic alliance
with Spain's Endesa, which served to maintain downward pressure on Enersis's
stock price in the second half of 1997, has largely passed.

SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. ("SOQUIMICH") is the world's largest and
lowest-cost producer of specialty fertilizers, industrial nitrates, iodine and
other specialty chemicals. This is greatly enhanced by Chile's status as the
only commercially exploited source of natural nitrates and the world's largest
source of known nitrate and iodine deposits. Demand for Soquimich's core
fertilizer and industrial chemical products is robust, particularly in Europe
and the U.S.

Although Soquimich's operations are not regulated, the company possesses other
key attributes that I look for in structuring the portfolio. It is effectively
hedged against the domestic economy, for example, in that about 70% of total
revenues comes from exports. It should be noted in this context that only about
8% of revenues is derived from exports to Southeast Asia, giving Soquimich
relatively small exposure to the region's problems. In addition, the company is
hedged against currency volatility: as virtually all exports are denominated in
dollars, its vulnerability to any weakening in the peso is limited.

OUTLOOK

In my view, the key question to consider in determining an outlook for Chilean
equities is, "Has the market decline gone too far?"

- --------------------------------------------------------------------------------
4
<PAGE>
LETTER TO SHAREHOLDERS

The answer is, "Quite possibly." With the nation's macroeconomic climate
somewhat unencouraging at present, it would not be surprising for share prices
to fall further. As I see it, though, prices may already reflect the bulk of
negative investor sentiment. The fact that there are some excellent values
available within the Fund's investable universe suggests to me that a bottoming
of the market may, perhaps, be closer at hand than the consensus seems to think.
For this reason, I choose not to engage in any meaningful selling and prefer to
hold on to existing positions.

Sincerely yours,

[SIGNATURE]
Richard W. Watt
President
Chief Investment Officer*

From BEA Associates:

I. 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 Fund also offers shareholders a
voluntary Cash Purchase Plan. The Plan and the Cash Purchase Plan are
described on pages 18 through 19 of this report.

II. Like other financial and business organizations, the Fund and its portfolio
could be adversely affected if the computer systems they rely on do not
properly process date-related information and data involving the years 2000
and after. We at BEA Associates are taking steps that we believe are
reasonable to address this problem in our own computer system and are
seeking assurances that comparable steps are being taken by the Fund's other
major service providers. BEA Associates is also attempting to evaluate the
potential impact of this problem on the issues of investment securities that
the portfolio purchases. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the Fund
and portfolio.

- --------------------------------------------------------------------------------
* Richard W. Watt, who is a Managing Director of BEA Associates, is primarily
responsible for management of the Fund's assets. Mr. Watt has served the Fund in
such capacity since January 1, 1997. He joined BEA Associates on August 2, 1995.
Mr. Watt formerly was associated with Gartmore Investment Limited in London,
where he was head of emerging markets investments and research. Before joining
Gartmore Investment Limited in 1992, Mr. Watt was a Director of Kleinwort Benson
International Investments in London, where he was responsible for research,
analysis and trading of equities in Latin America and other regions. Mr. Watt is
President, Chief Investment Officer and a Director of the Fund. He also is
President, Chief Investment Officer and a Director of The Brazilian Equity Fund,
Inc., 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.

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5
<PAGE>
- --------------------------------------------------------------------------------

THE CHILE FUND, INC.

PORTFOLIO SUMMARY - AS OF JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
AS A PERCENT OF NET ASSETS

<S> <C> <C>
June 30, 1998 December 31, 1997
Banking 3.48% 1.38%
Consumer Durables 1.75% 2.19%
Electric Distribution 15.00% 14.96%
Electric Generation 13.91% 15.98%
Engineering & Construction 1.53% 2.00%
Fertilizer 2.40% 2.66%
Financial Services 2.38% 1.64%
Food & Beverages 19.08% 19.00%
Forestry 9.34% 9.58%
Mining 2.33% 2.39%
Pharmaceuticals 2.62% 3.09%
Real Estate Investment & Management 1.92% 1.79%
Retail 2.48% 3.38%
Telecommunications 12.64% 15.05%
Other 8.68% 8.53%
Cash & Cash Equivalents 0.46% -3.62%
</TABLE>

TOP 10 HOLDINGS, BY ISSUER

<TABLE>
<CAPTION>
Percent of Net
Holding Sector Assets
<C> <S> <C> <C>
- ---------------------------------------------------------------------------------------------------
1. Compania de Telecomunicaciones de Chile S.A. Telecommunications 12.6
- ---------------------------------------------------------------------------------------------------
2. Chilectra S.A. Electric
Distribution 9.4
- ---------------------------------------------------------------------------------------------------
3. Empresa Nacional de Electricidad S.A. Electric Generation 8.5
- ---------------------------------------------------------------------------------------------------
4. Compania de Petroleos de Chile S.A. Forestry 6.0
- ---------------------------------------------------------------------------------------------------
5. Enersis S.A. Electric Generation 5.4
- ---------------------------------------------------------------------------------------------------
6. Compania Cervecerias Unidas S.A. Food & Beverages 4.9
- ---------------------------------------------------------------------------------------------------
7. Embotelladora Andina S.A. Food & Beverages 3.8
- ---------------------------------------------------------------------------------------------------
8. Empresas Emel S.A. Electric
Distribution 3.6
- ---------------------------------------------------------------------------------------------------
9. Distribucion y Servicio D&S S.A. Food & Beverages 3.3
- ---------------------------------------------------------------------------------------------------
10. Compania Manufacturera de Papeles y Cartones S.A. Forestry 3.1
- ---------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.

SCHEDULE OF INVESTMENTS - JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
<S> <C> <C>
- --------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-99.54%
AIRLINES-1.02%
Linea Aerea Nacional de Chile S.A....... 1,466,744 $ 2,444,573
-----------
BANKING-3.48%
Banco de A. Edwards, Series A+.......... 46,331,684 3,910,473
Banco de Credito e Inversiones.......... 833,132 4,448,711
-----------
8,359,184
-----------
BASIC METALS-0.69%
Ceramicas Cordillera S.A................ 316,132 1,648,210
-----------
CONSUMER DURABLES-1.75%
Empresas Almacenes Paris................ 5,957,093 4,200,514
-----------
CONSUMER GOODS-1.44%
Compania Tecno Industrial S.A........... 202,062,821 3,454,065
-----------
ELECTRIC DISTRIBUTION-15.00%
Chilectra S.A........................... 3,885,531 20,631,505
Chilectra S.A. ADS++.................... 88,600 1,899,247
Compania General de Electricidad S.A.... 1,625,652 4,810,957
Empresas Emel S.A....................... 536,777 8,659,543
-----------
36,001,252
-----------
ELECTRIC GENERATION-13.91%
Empresa Nacional de Electricidad S.A.... 43,771,231 20,389,163
Enersis S.A............................. 26,857,625 12,998,402
-----------
33,387,565
-----------
ENGINEERING & CONSTRUCTION-1.53%
Besalco S.A............................. 702,964 1,470,517
Cemento Polpaico S.A.................... 47,867 511,400
Maderas y Sinteticos Sociedad Anonima... 6,595,639 1,691,189
-----------
3,673,106
-----------
FERTILIZER-2.40%
Sociedad Quimica y Minera de Chile S.A.,
Class A................................ 1,446,507 3,863,534

<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
FERTILIZER (CONTINUED)
Sociedad Quimica y Minera de Chile S.A.,
Class B................................ 570,322 $ 1,888,887
-----------
5,752,421
-----------
FINANCIAL SERVICES-2.38%
Invercap S.A............................ 7,314,215 5,704,463
-----------
FISHERY-0.27%
Pesquera Itata S.A...................... 8,007,451 641,623
-----------
FOOD & BEVERAGES-19.08%
Compania Cervecerias Unidas S.A......... 2,238,304 9,326,267
Compania Cervecerias Unidas S.A. ADR.... 111,550 2,356,494
Distribucion y Servicio D&S S.A......... 8,084,914 7,946,710
Embotelladora Andina S.A., Series A..... 1,681,773 4,779,398
Embotelladora Andina S.A. PNB........... 1,681,773 4,312,238
Embotelladora Arica*.................... 4,664,877 5,681,581
Embotelladora Polar S.A................. 6,223,228 4,920,073
Empresas Iansa S.A...................... 15,224,759 1,691,640
Supermercados Unimarc S.A............... 11,695,381 1,624,358
Vina Concha y Toro S.A.................. 5,750,000 3,176,015
-----------
45,814,774
-----------
FORESTRY-9.34%
Compania Chilena de Fosforos S.A........ 434,739 807,240
Compania de Petroleos de Chile S.A...... 5,791,442 14,292,982
Compania Manufacturera de Papeles y
Cartones S.A........................... 1,072,197 7,331,262
-----------
22,431,484
-----------
HEALTH CARE-0.95%
Banmedica S.A........................... 8,530,511 2,278,448
-----------
INFRASTRUCTURE-1.82%
Infra Structura 2000*+.................. 19,568,922 4,371,952
-----------
</TABLE>

- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.

SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
INSURANCE-0.30%
Compania de Seguros La Prevision Vida
S.A.+.................................. 818,209 $ 711,545
-----------
MINING-2.33%
Antofagasta Holdings plc................ 1,338,500 5,587,234
-----------
PHARMACEUTICALS-2.62%
Laboratorio Chile S.A................... 8,661,713 6,292,697
-----------
REAL ESTATE INVESTMENT & MANAGEMENT-1.92%
Parque Arauca S.A....................... 10,000,000 4,615,385
-----------
RETAIL-2.48%
Sociedad Anonima Comercial e Industrial
Falabella.............................. 8,015,087 5,959,937
-----------
SHIPPING-0.32%
Puerto Ventanas S.A..................... 1,111,992 760,336
-----------
STEEL-1.78%
Compania de Aceros del Pacifico S.A..... 2,414,293 4,281,759
-----------
TELECOMMUNICATIONS-12.64%
Compania de Telecomunicaciones de Chile
S.A., Class A.......................... 6,062,937 30,314,686
Compania de Telecomunicaciones de Chile
S.A., Class A, Rights (expiring
7/05/98)+.............................. 238,659 33,147
-----------
30,347,833
-----------
TEXTILES-0.09%
Zalaquett S.A.*......................... 1,496,767 230,272
-----------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES (Cost
$151,469,276)......................................... 238,950,632
-----------
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>

SHORT-TERM INVESTMENTS-2.67%
CHILEAN MUTUAL FUNDS-2.67%
Bice Manager Investment Fund............ 390,014 $ 986,514
Bice Valores Investment Fund............ 1,730 14,957
Fondo Mutuo Banco de A. Edwards......... 27,065 713,640
Fondo Mutuo Bancredito Redimiento....... 19,900 808,178
Fondo Mutuo Corp Selecto................ 87,593 216,238
Fondo Mutuo Operacional BanChile........ 82,649 948,979
Fondo Mutuo Santander Interest.......... 25,758 92,622
Fondo Mutuo Santander Money Market...... 31,886 138,947
Fondo Mutuo Security Check.............. 319,576 1,389,482
Fondo Mutuo Security Premium............ 189,067 1,101,644
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost $6,530,205).........
6,411,201
-----------

TOTAL INVESTMENTS-102.21%
(Cost $157,999,481) (Notes A,D)....................... 245,361,833
LIABILITIES IN EXCESS OF CASH AND OTHER
ASSETS-(2.21)%........................................ (5,307,273)
-----------
NET ASSETS-100.00%..................................... $240,054,560
-----------
-----------
- ---------------------------------------------------------
* Not readily marketable security.
+ 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.
PNB Preferred Shares, Class B.
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------

THE CHILE FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost
$157,999,481)(Note A).................. $245,361,833
Receivables:
Dividends............................. 90,234
Investments sold...................... 4,252
Prepaid expenses........................ 26,987
------------
Total Assets............................ 245,483,306
------------

LIABILITIES
Payables:
Investment advisory fees (Note B)..... 785,775
Due to custodian...................... 85,503
Administration fees (Note B).......... 44,282
Investments purchased................. 14,957
Other accrued expenses................ 269,373
Chilean repatriation taxes (Note A)... 4,228,856
------------
Total Liabilities....................... 5,428,746
------------
NET ASSETS (applicable to 14,193,148
shares of common stock outstanding)
(Note C)............................... $240,054,560
------------
------------

NET ASSET VALUE PER SHARE ($240,054,560
DIVIDED BY 14,193,148)................ $16.91
------------
------------

NET ASSETS CONSIST OF
Capital stock, $0.001 par value;
14,193,148 shares issued and
outstanding (100,000,000 shares
authorized)............................ $ 14,193
Paid-in capital......................... 117,782,547
Undistributed net investment income..... 4,144,481
Accumulated net realized gain on
investments and foreign currency
related transactions................... 30,746,711
Net unrealized appreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currencies..................... 87,366,628
------------
Net assets applicable to shares
outstanding............................ $240,054,560
------------
------------
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
9
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.

STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends............................. $ 6,325,353
Interest.............................. 77,477
Less: Foreign taxes withheld.......... (55,430)
------------
Total Investment Income............... 6,347,400
------------
Expenses:
Investment advisory fees (Note B)..... 1,567,336
Custodian fees........................ 273,691
Administration fees (Note B).......... 125,418
Accounting fees....................... 72,172
Printing.............................. 55,124
Audit and legal fees.................. 38,695
Directors' fees....................... 21,370
Transfer agent fees................... 14,876
NYSE listing fees..................... 12,151
Insurance............................. 12,096
Other................................. 9,990
------------
Total Expenses........................ 2,202,919
------------
Net Investment Income................. 4,144,481
------------

NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments........................... 7,245,845
Foreign currency related
transactions......................... (869,186)
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities
denominated in foreign currencies...... (76,382,082)
------------
Net realized and unrealized loss on
investments and foreign currency
related transactions................... (70,005,423)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $(65,860,942)
------------
------------
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the Six
Months
Ended For the Year
June 30, Ended
1998 December 31,
(unaudited) 1997
<S> <C> <C>
------------------------------

DECREASE IN NET ASSETS
Operations:
Net investment income................. $ 4,144,481 $ 1,458,936
Net realized gain on investments and
foreign currency related
transactions......................... 6,376,659 70,499,747
Net change in unrealized appreciation
in value of investments and
translation of other assets and
liabilities denominated in foreign
currencies........................... (76,382,082) (37,891,722)
------------ ------------
Net increase/(decrease) in net
assets resulting from operations... (65,860,942) 34,066,961
------------ ------------
Dividends and distributions to
shareholders:
Net realized gain on investments and
foreign currency related
transactions......................... -- (47,825,955)
------------ ------------
Capital share transactions (Note C):
Proceeds from 126,195 shares and
30,907 shares, respectively, issued
in reinvestment of dividends......... 1,971,795 690,893
------------ ------------
Total decrease in net assets........ (63,889,147) (13,068,101)
------------ ------------

NET ASSETS
Beginning of period..................... 303,943,707 317,011,808
End of period (including undistributed
net investment income of $4,144,481 for
the six months ended June 30, 1998).... $240,054,560 $303,943,707
------------ ------------
------------ ------------
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
11
<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
Six Months
Ended For the Years Ended
June 30, December 31,
1998 -------------------------------------------------------------------------------
(unaudited) 1997 1996 1995 1994+ 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period... $21.61 $22.59 $26.45 $26.26 $20.13 $15.55 $14.84
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment
income................ 0.29 0.10 0.47 0.65 0.42 0.35 0.39
Net realized and
unrealized gains/
(losses) on
investments and
foreign currency
related
transactions.......... (4.99)++ 2.32 (3.44) 0.41++ 6.24 5.96 1.93
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net
increase/(decrease)in
net assets resulting
from operations....... (4.70) 2.42 (2.97) 1.06 6.66 6.31 2.32
---------- ---------- ---------- ---------- ---------- ---------- ----------
Dividends and
distributions to
shareholders:
Net investment
income.............. -- -- (0.47) (0.65) (0.47) (0.31) (0.39)
Net realized gain on
investments and
foreign currency
related
transactions........ -- (3.40) (0.26) (0.22) (0.06) (0.26) (1.22)
In excess of net
investment income... -- -- (0.16) -- -- -- --
In excess of net
realized gain on
investments and
foreign currency
related
transactions........ -- -- -- -- -- (0.16) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total dividends and
distributions to
shareholders.......... -- (3.40) (0.89) (0.87) (0.53) (0.73) (1.61)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Dilution due to capital
share rights
offering.............. -- -- -- -- -- (1.00) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of
period................ $16.91 $21.61 $22.59 $26.45 $26.26 $20.13 $15.55
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Market value, end of
period................ $13.563 $17.813 $20.875 $26.000 $23.063 $22.250 $16.563
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total investment
return(a)............. (23.86)% 3.56% (16.43)% 16.66% 6.05% 38.82% 53.80%
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------

RATIOS/ SUPPLEMENTAL
DATA
Net assets, end of
period (000
omitted).............. $240,055 $303,944 $317,012 $370,275 $367,047 $281,031 $168,580
Ratio of expenses to
average net assets.... 1.59%(b) 3.34%(c) 1.96%(c) 1.46% 1.39% 1.72% 2.15%(c)
Ratio of net investment
income to average net
assets................ 2.99%(b) 0.38% 1.79% 2.39% 1.74% 2.47% 2.17%
Portfolio turnover
rate.................. 4.35% 35.59% 4.82% 2.38% 0.86% 11.29% 6.29%

<CAPTION>
For the Period
September 27,
1989*
through
December 31,
1991 1990 1989
<S> <C> <C> <C>

PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period... $8.72 $7.40 $6.88**
---------- --------- --------
Net investment
income................ 0.49 0.78 0.02
Net realized and
unrealized gains/
(losses) on
investments and
foreign currency
related
transactions.......... 7.21 1.17 0.67
---------- --------- --------
Net
increase/(decrease)in
net assets resulting
from operations....... 7.70 1.95 0.69
---------- --------- --------
Dividends and
distributions to
shareholders:
Net investment
income.............. (0.49) (0.63) (0.03)
Net realized gain on
investments and
foreign currency
related
transactions........ (1.09) -- --
In excess of net
investment income... -- -- (0.14)
In excess of net
realized gain on
investments and
foreign currency
related
transactions........ -- -- --
---------- --------- --------
Total dividends and
distributions to
shareholders.......... (1.58) (0.63) (0.17)
---------- --------- --------
Dilution due to capital
share rights
offering.............. -- -- --
---------- --------- --------
Net asset value, end of
period................ $14.84 $8.72 $7.40
---------- --------- --------
---------- --------- --------
Market value, end of
period................ $11.938 $7.750 $7.813
---------- --------- --------
---------- --------- --------
Total investment
return(a)............. 71.05% 7.07% 14.17%
---------- --------- --------
---------- --------- --------
RATIOS/ SUPPLEMENTAL
DATA
Net assets, end of
period (000
omitted).............. $160,360 $93,744 $79,494
Ratio of expenses to
average net assets.... 2.13%(c) 2.04% 1.98%(b)
Ratio of net investment
income to average net
assets................ 3.41% 9.56% 1.44%(b)
Portfolio turnover
rate.................. 19.32% 12.63% 2.38%
</TABLE>

- ---------------------------------------------------------------------------
Section Per share amounts prior to July 17, 1995 have been restated to reflect
a two-for-one stock split on July 17, 1995.
* 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.
++ Includes a per share decrease of $0.05 and $0.01 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,
for the six months ended June 30, 1998 and the fiscal year ended
December 31, 1995, respectively.
(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.
(b) Annualized.
(c) Ratios include effect of repatriation taxes. The ratio of expenses to
average net assets would have been 1.50% for the year ended December
31, 1997; 1.48% for the year ended December 31, 1996; 1.71% for the
year ended December 31, 1992; and 1.75% for the year ended December
31, 1991, respectively, excluding repatriation taxes.

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------

THE CHILE FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------

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:

MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make certain
estimates and assumptions that may affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.

PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All 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
at fair value 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 Board of Directors has established general guidelines for
calculating fair value of non-publicly traded securities. At June 30, 1998, the
Fund held 4.19% of its net assets in securities valued in good faith by the
Board of Directors with an aggregate cost of $6,403,366 and fair value of
$10,053,533. The net asset value per share of the Fund is calculated on each
business day, with the exception of those days on which the New York Stock
Exchange is closed.

CASH: Deposits held at Brown Brothers Harriman & Co., the Fund's custodian, in a
variable rate account are classified as cash. Amounts on deposit 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 will be subject to and accrues a 10% Chilean repatriation tax with
respect to all known and estimated remittances from Chile. The Fund does not
accrue repatriation tax with respect to all unrealized gains on Chilean
securities, as the Fund does not intend to realize and remit such unrealized
gains in the foreseeable future. If all unrealized gains on Chilean securities
had been realized and repatriated at June 30, 1998, the Fund would have to pay a
repatriation tax of approximately $7,986,037 or $0.56 per share.

- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------

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 in the value of investments and translation
of other assets and liabilities denominated in foreign currencies.

Net realized foreign exchange losses represent foreign exchange gains and losses
from 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 realized
short-term capital losses, including capital loss carryovers, if any. 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 August 12, 1998, a distribution in the aggregate amount of $25,831,529, equal
to $1.82 per share was declared from net realized long-term capital gains. The
distribution is payable on September 25, 1998 to shareholders of record as of
September 11, 1998.

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

- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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.

The Fund, subject to local investment limitations, may invest up to 20% of its
assets in non-publicly traded equity securities, which may involve a high degree
of business and financial risk and may result in substantial losses. Because of
the current absence of any liquid trading market for these investments, the Fund
may take longer to liquidate these positions than would be the case for publicly
traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized on such sales could be less than
those originally paid by the Fund. Further, companies whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements applicable to companies whose securities are publicly
traded.

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.

The Fund may enter into repurchase agreements on U.S. Government securities with
primary government securities dealers recognized by the Federal Reserve Bank of
New York and member banks of the Federal Reserve System and on securities issued
by the governments of foreign countries, their instrumentalities and with
creditworthy parties in accordance with established procedures. Repurchase
agreements are contracts under which the buyer of a security simultaneously buys
and commits to resell the security to the seller at an agreed upon price and
date. Repurchase agreements are deposited with the Fund's custodian and,
pursuant to the terms of the repurchase agreement, the collateral must have an
aggregate market value greater than or equal to the repurchase price plus
accrued interest at all times. If the value of the underlying securities fall
below the value of the repurchase price plus accrued interest, the Fund will
require the seller to deposit additional collateral by the next business day. If
the request for additional collateral is not met, or the seller defaults on its
repurchase obligation, the Fund maintains the right to sell the underlying
securities at market value and may claim any resulting loss against the seller;
collectibility of such claims may be limited.
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. For the six months ended June 30, 1998, BEA earned $1,567,336 for
advisory services. BEA also provides certain administrative services to the Fund
and is reimbursed by the Fund for costs incurred on behalf of the Fund (up to
$20,000 per annum). For the six months ended June 30, 1998, BEA was reimbursed
$9,920 for administrative services rendered to the Fund.

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
six months ended June 30, 1998, these sub-advisory fees amounted to $106,394.

- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------

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 six months ended June
30, 1998, BSFM earned $80,157 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 six months ended June 30, 1998, the administration fees, supplemental
administration fees and accounting fees amounted to $76,890, $35,345 and $4,772,
respectively.
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 14,193,148 shares outstanding at June 30, 1998, BEA
owned 14,615 shares.
NOTE D. INVESTMENT IN SECURITIES

For U.S. federal income tax purposes, the cost of securities owned at June 30,
1998 was $158,942,409. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currencies) of
$86,419,424, was composed of gross appreciation of $106,225,331 for those
investments having an excess of value over cost and gross depreciation of
$19,805,907 for those investments having an excess of cost over value.

For the six months ended June 30, 1998, purchases and sales of securities, other
than short-term investments, were $12,245,879 and $19,661,600, respectively.
NOTE E. CREDIT AGREEMENT

The Fund, along with 18 other U.S. regulated investment companies for which BEA
serves as investment adviser, has a credit agreement with BankBoston, N.A. 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 19
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 for the six months ended June 30, 1998.

- --------------------------------------------------------------------------------
16
<PAGE>
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On April 24, 1998, 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 three directors to the Board of Directors of the Fund.

<TABLE>
<CAPTION>
NAME OF DIRECTOR FOR WITHHELD NON-VOTES
- ------------------------------ --------- --------- ---------
<S> <C> <C> <C>
Jorge E. Desormeaux 8,806,280 234,851 5,152,017
George W. Landau 8,706,136 334,995 5,152,017
William W. Priest, Jr. 8,688,574 352,557 5,152,017
</TABLE>

In addition to the directors re-elected at the meeting, Dr. Enrique R. Arzac,
James J. Cattano and Richard W. Watt continue to serve as directors of the Fund.

(2) To ratify the selection of PricewaterhouseCoopers LLP (formerly Coopers &
Lybrand L.L.P.) as independent public accountants for the year ending
December 31, 1998.

<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
8,734,737 160,608 145,786 5,152,017
</TABLE>

- --------------------------------------------------------------------------------
17
<PAGE>
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 is received by the Plan Agent not less than 48 hours before the payment
is to be

- --------------------------------------------------------------------------------
18
<PAGE>
DESCRIPTION OF DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)
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,
BankBoston, N.A., 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>
SUMMARY OF GENERAL INFORMATION

The Fund--The Chile Fund, Inc.--is a closed-end, non-diversified management
investment company whose shares trade on the New York Stock Exchange. Its
investment objective is to seek total return, consisting of capital appreciation
and current income through investments primarily in Chilean equity and debt
securities. The Fund is managed and advised by BEA Associates ("BEA"). BEA is a
diversified asset manager, handling equity, balanced, fixed income,
international and derivative based accounts. Portfolios include international
and emerging market investments, common stocks, taxable and non-taxable bonds,
options, futures and venture capital. BEA manages money for corporate pension
and profit-sharing funds, public pension funds, union funds, endowments and
other charitable institutions and private individuals. As of June 30, 1998, BEA
managed approximately $35.6 billion in assets.

SHAREHOLDER INFORMATION

The market price is published in: THE NEW YORK TIMES (daily) under the
designation "Chile" and THE WALL STREET JOURNAL (daily), and BARRON'S (each
Monday) under the designation "ChileFd". The Fund's New York Stock Exchange
trading symbol is CH. Weekly comparative net asset value (NAV) and market price
information about The Chile Fund, Inc.'s shares are published each Sunday in THE
NEW YORK TIMES and each Monday in THE WALL STREET JOURNAL and BARRON's, as well
as other newspapers, in a table called "Closed-End Funds."

THE BEA GROUP OF FUNDS

LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds or a prospectus on any of the open-end mutual funds listed
below. The prospectus contains more complete information, including fees,
charges and expenses, and should be read carefully before investing or sending
money.

<TABLE>
<S> <C>
CLOSED-END FUNDS BEA ADVISOR FUNDS
SINGLE COUNTRY OPEN-END MUTUAL FUNDS
The Brazilian Equity Fund, Inc. (BZL) BEA Emerging Markets Equity Fund
The First Israel Fund, Inc. (ISL) BEA Global Telecommunications
The Indonesia Fund, Inc. (IF) Fund
The Portugal Fund, Inc. (PGF) BEA High Yield Fund
BEA International Equity Fund
MULTIPLE COUNTRY
The Emerging Markets Infrastructure Fund, Inc. (EMG)
The Emerging Markets Telecommunications Fund, Inc.
(ETF)
The Latin America Equity Fund, Inc. (LAQ)
The Latin America Investment Fund, Inc. (LAM)

For shareholder information or a
FIXED INCOME copy of a prospectus for any of
BEA Income Fund, Inc. (FBF) the open- end mutual funds,
BEA Strategic Global Income Fund, Inc. (FBI) please call, 1-800-401-2230.

For closed-end fund information Visit our website on the
please call, 1-800-293-1232. Internet:
http://www.beafunds.com
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DIRECTORS AND CORPORATE OFFICERS

Dr. Enrique R. Arzac Director

James J. Cattano Director

Jorge E. Desormeaux Director

George W. Landau Director

William W. Priest, Jr. Chairman of the Board of Directors

Richard W. Watt President, Chief Investment Officer
and Director

Emily Alejos Investment Officer

Hal Liebes Senior Vice President

Michael A. Pignataro Chief Financial Officer and
Secretary

Rocco A. Del Guercio Vice President

Wendy S. Setnicka Treasurer

INVESTMENT ADVISER

BEA Associates
One Citicorp Center
153 East 53rd Street
New York, NY 10022

ADMINISTRATOR

Bear Stearns Funds Management Inc.
245 Park Avenue
New York, NY 10167

CUSTODIAN

Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109

SHAREHOLDER SERVICING AGENT

BankBoston, N.A.
P.O. Box 1865
Mail Stop 45-02-62
Boston, MA 02105-1865

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA 19103

LEGAL COUNSEL

Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099

This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. The financial
information included herein is taken from the records of the Fund,
without examination by independent accountants who do not express an
opinion thereon. 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]

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3911-SAR-98