<PAGE>
The Chile Fund, Inc.
- ----------------------------------------
ANNUAL REPORT
DECEMBER 31, 1998
[GRAPHIC]
<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
Report of Independent Accountants............................................................. 17
Results of Annual Meeting of Shareholders..................................................... 18
Tax Information............................................................................... 18
Description of InvestLink(SM) Program......................................................... 19
</TABLE>
PICTURED ON THE COVER IS A SCENIC VIEW OF THE ANDES MOUNTAINS LOCATED IN CHILE.
- --------------------------------------------------------------------------------
<PAGE>
LETTER TO SHAREHOLDERS
February 5, 1999
DEAR SHAREHOLDER:
I am writing to report on the activities of The Chile Fund, Inc. (the "Fund")
for the year ended December 31, 1998.
At December 31, 1998, the Fund's net assets were $180.4 million. The Fund's net
asset value ("NAV") was $12.59 per share (net of dividends and distributions
paid of $2.52 per share), as compared to $21.61 at December 31, 1997.
PERFORMANCE
For the period January 1, 1998 through December 31, 1998, the Fund's total
return, based on NAV and assuming reinvestment of dividends and distributions,
fell 23.3%. By comparison, the Morgan Stanley Capital International Chile Index
(the "Index") declined 28.5%.
The Fund outperformed the Index benchmark primarily due to effective sector
allocations. The most favorable was my decision to overweight food and
beverages, with a particular emphasis on bottlers. One bottling stock,
Embotelladora Arica, was a private placement that went public during the year,
thus allowing the Fund to realize a large gain upon the sale of a portion of the
total shares held. I also underweighted electricity generators, which
underperformed the market, and overweighted electricity distributors, which
outperformed.
Exposure to merchandising companies (E.G., Distribucion y Servicio D&S S.A.,
Sociedad Anonima Comercial e Industrial Falabella) hurt absolute and relative
returns. Not only did these stocks suffer in an environment of rising interest
rates, but they also are not included in the benchmark.
1998 WAS A DIFFICULT YEAR FOR CHILE...
Without doubt, 1998 was a difficult year for the Chilean economy and, hence, the
nation's equities. The economy was buffeted by an unusually painful combination
of external forces, of which three were most prominent:
ASIAN MELTDOWN. The severe economic crisis that struck most Asian nations in
1997 continued throughout 1998. Among Latin American economies, Chile's was most
directly affected, since about 30% of its exports go to Asia. As a result,
Chilean merchandise exports fell an estimated 11.2% in 1998 and
inflation-adjusted gross domestic product (GDP) rose an estimated 3.7%, the
smallest such increase in several years.
PLUNGING COPPER PRICES. Chile is the world's largest supplier of copper, which
accounts for about 40% of Chilean exports and is the primary source of
government revenues. The fall in copper prices to $0.66 per lb. from $0.77--the
lowest level in 50 years--in 1998, then, placed tremendous pressure on the
nation's current account. Along with the major decline in Asian demand for
Chilean exports, the plunge in copper prices resulted in a 1998 current account
deficit that is estimated at $4.8 billion, or 6.3% of estimated GDP.
- --------------------------------------------------------------------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
WORSENING CONDITIONS IN BRAZIL. Investors in Latin American equities--and those
of emerging markets more generally--focused on Brazil as the Latin country most
vulnerable to the "Asian contagion" of currency devaluation and economic
collapse. Because of Brazil's stature as the largest Latin economy, widespread
concern about its political and economic viability negatively impacted all Latin
American markets in 1998. Chile suffered accordingly.
In addition to external macroeconomic factors, Chilean equities were hurt by
weak participation by domestic pension funds. Known as Administratoras de Fondos
de Pensiones, or AFPs, pension funds are the largest institutional investors in
Chile and, therefore, a critical source of buying power in the domestic market.
At year-end, AFPs' exposure to stocks was at 14.9% of total assets, down from
23.4% a year earlier. Of that 14.9%, moreover, a substantial chunk was invested
in foreign stocks, thus depriving the local equity market of much-needed
liquidity and buying support.
...BUT THE WORST MAY BE OVER
As I write, it is clear that the Chilean economy is not yet out of the woods.
Nonetheless, there are tentative signs that the worst may be over and the stage
set for what might be a significant rebound as we move toward the new
millennium. Among them:
- - Asian equity markets have rallied in the last few months, partially on the
basis of hopes that the region's battered economies may already have seen
their worst days. If such hopes turn into reality, then Asian demand for
Chile's exports may recover sooner than originally expected.
- - Recent data indicate that the pace of decline in exports has begun to slow,
and we anticipate that export growth will rise at a faster rate in 1999 than
in 1998. Should this trend continue, Chile's current account deficit may begin
to subside to less threatening levels.
- - Copper prices are stabilizing. Absent another major shock from Asia, this
trend should continue during 1999, thus providing a firmer foundation for
government revenues and the economy more generally.
- - After raising interest rates to emergency levels to protect the peso during
the third quarter, the central bank has begun to lower them. I expect
additional rate cuts in 1999. If this more benign monetary environment
persists, it would undoubtedly buoy investor confidence in Chile's
macroeconomic stability and, therefore, be a key source of support for stock
prices.
- - Tight fiscal policies implemented in 1998 will likely remain in effect in
1999. Along with a slowing economy and reduced demand for imports, these
should keep a chokehold on inflation and help prices to remain fairly stable.
- - Brazil effectively devalued its currency in mid-January in an effort to
bolster its economic condition. Although the road toward this goal remains
long, the devaluation may end up being an important milestone along the way.
Investor sentiment about Chile and the other Latin American economies will
likely improve if Brazil can succeed in putting its economy back on track.
- --------------------------------------------------------------------------------
2
<PAGE>
LETTER TO SHAREHOLDERS
PORTFOLIO STRATEGY: PRUDENTLY CONSERVATIVE
TOP 10 HOLDINGS, BY ISSUER*
<TABLE>
<CAPTION>
% OF
HOLDING SECTOR NET ASSETS
---------------------------- ----------- -------------
<C> <S> <C> <C>
1. CTC Telecom. 17.1
Electric
2. Chilectra Dist. 13.0
Electric
3. Endesa Gen. 6.9
4. CPC Forestry 6.5
Electric
5. Enersis Gen. 6.2
6. CCU Food & Bev. 5.9
7. Andina Food & Bev. 4.3
Electric
8. Emel Dist. 3.7
9. Cartones Forestry 3.7
10. Arica Food & Bev. 3.4
* Company names are abbreviations of those found on page 6.
</TABLE>
Sector Breakdown
(% of net assets)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Fertilizer 3.41%
Electric Dist. 16.72%
Electric Gen. 13.05%
Food/Bev 17.21%
Forestry 10.75%
Telecom. 17.12%
Cash and Other Assets 1.67%
Other* 20.07%
</TABLE>
*Includes banking, basic metals, consumer durables, engineering &
construction, financial services, fishery, health care, infrastructure,
insurance, mining, real estate investment & management, retail, steel and
textiles.
Given the high level of uncertainty reflected in Latin American equity markets
these days, I am taking a prudently conservative approach to managing the Fund.
For instance, I have raised a good deal of cash and will continue to do so as
appropriate. As there is a reasonable possibility of further market decline in
1999, there may well be shares of many high-quality companies available at
bargain prices. I want to be in a position to take advantage of such
opportunities if and when they arise.
I maintain a preference for regulated industries such as electricity and
telecommunications, which accounted for nearly half the portfolio's total assets
at December 31, 1998. Under current circumstances, they should offer more stable
returns and greater liquidity than most other sectors of the market, while
providing a hedge against possible devaluation of the peso. I also am reducing
exposure to sectors that are affected by the slowing economic cycle,
particularly retailers and banks. Should there be a stronger sense that interest
rates will fall, however, I would probably reconsider this approach and raise
exposure to rate-sensitive sectors instead.
OUTLOOK: CAUTIOUSLY OPTIMISTIC IN THE LONG-TERM
I am cautiously optimistic about the long-term prospects for Chilean equities,
for several reasons:
- - Chile has already gone through the wrenching process of broad macroeconomic
liberalization now occurring in Brazil and elsewhere in Latin America.
Improvement over current conditions is thus more likely to happen sooner than
later.
- - Inflation appears to be falling. This implies that there is scope for interest
rates to fall, which would bode very well for stocks.
- --------------------------------------------------------------------------------
3
<PAGE>
LETTER TO SHAREHOLDERS
- - The market is selling at historically low valuation levels, both absolute and
relative. While there is no guarantee that valuations will not move even
lower, they are clearly compelling at present and investors will undoubtedly
act to take advantage at some point.
- - Interest in Chilean corporate assets from foreign companies is growing. This
is notably evident in the high-priced bid for control of Empresa Nacional de
Electricidad S.A., a major electric utility, tendered by the Spanish company
of the same name.
To be sure, there are factors--Brazil's problems and their impact on the rest of
Latin America, the reluctance of AFPs to raise their exposure to the domestic
market--that are likely to maintain downward pressure on stock prices in the
near term. Nonetheless, the elements I have cited strongly suggest that
farsighted investors will reap great benefits from a commitment to the Chilean
market.
Sincerely yours,
/s/Richard W. Watt
Richard W. Watt
President
Chief Investment Officer*
FROM CREDIT SUISSE ASSET MANAGEMENT:
I. Effective January 12, 1999, the Fund's investment adviser, BEA Associates,
changed its name to Credit Suisse Asset Management ("CSAM"). In making the
announcement, the firm said that it expected the new name to enhance its
recognition as a global asset manager. Credit Suisse Asset Management is the
investment division of Credit Suisse Group, one of the world's largest
financial organizations, with $600 billion in assets under management.
II. Effective on or about April 1, 1999, shareholders whose shares are
registered in their own name will automatically participate in a dividend
reinvestment program known as the InvestLink(SM) Program (the "Program").
The Program 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 the Fund's Transfer Agent for details about
participating in the Program. The Program also provides for additional
share purchases. The Program is described on pages 19 through 21 of this
report.
III. Many services provided to the Fund and its shareholders by CSAM and the
Fund's service providers rely on the functioning of their respective
computer systems. Many computer systems cannot distinguish the year 2000
from
- --------------------------------------------------------------------------------
4
<PAGE>
LETTER TO SHAREHOLDERS
the year 1900, with resulting potential difficulty in performing various
calculations (the "Year 2000 Issue"). The Year 2000 Issue could potentially
have an adverse impact on the handling of security trades, the payment of
interest and dividends, pricing, account services and other Fund
operations.
CSAM recognizes the importance of the Year 2000 Issue and is taking
appropriate steps necessary in preparation for the year 2000. At this time,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Fund, nor can there be any assurance that the Year
2000 Issue will not have an adverse effect on the Fund's investments or on
global markets or economies, generally.
CSAM anticipates that its systems will be adapted in time for the year
2000. CSAM is seeking assurances that comparable steps are being taken by
the Fund's other major service providers. CSAM will be monitoring the Year
2000 Issue in an effort to ensure appropriate preparation.
- --------------------------------------------------------------------------------
*Richard W. Watt, who is a Managing Director of Credit Suisse Asset Management
("CSAM"), 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 CSAM 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.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.
PORTFOLIO SUMMARY - AS OF DECEMBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
<S> <C> <C> <C> <C>
Banking 2.29% 1.38%
Consumer Durables 1.64% 2.19%
Electric Distribution 16.72% 14.96%
Electric Generation 13.03% 15.98%
Engineering & Construction 0.72% 2.00%
Fertilizer 3.41% 2.66%
Financial Services 2.74% 1.64%
Food & Beverages 17.21% 19.00%
Forestry 10.75% 9.58%
Infrastructure 2.42% 1.32%
Mining 2.26% 2.39%
Pharmaceuticals 0.00% 3.09%
Real Estate Investment & Management 2.37% 1.79%
Retail 1.11% 3.38%
Steel 2.12% 1.10%
Telecommunications 17.12% 15.05%
Other 2.40% 6.11%
Cash & Cash Equivalents 1.69% -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 17.1
- -------------------------------------------------------------------------------------------------------------------------------
2. Chilectra S.A. Electric Distribution 13.0
- -------------------------------------------------------------------------------------------------------------------------------
3. Empresa Nacional de Electricidad S.A. Electric Generation 6.9
- -------------------------------------------------------------------------------------------------------------------------------
4. Compania de Petroleos de Chile S.A. Forestry 6.5
- -------------------------------------------------------------------------------------------------------------------------------
5. Enersis S.A. Electric Generation 6.2
- -------------------------------------------------------------------------------------------------------------------------------
6. Compania Cervecerias Unidas S.A. Food & Beverages 5.9
- -------------------------------------------------------------------------------------------------------------------------------
7. Embotelladora Andina S.A. Food & Beverages 4.3
- -------------------------------------------------------------------------------------------------------------------------------
8. Empresas Emel S.A. Electric Distribution 3.7
- -------------------------------------------------------------------------------------------------------------------------------
9. Empresas CMPC S.A. Forestry 3.7
- -------------------------------------------------------------------------------------------------------------------------------
10. Embotelladora Arica Food & Beverages 3.4
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
<S> <C> <C>
- --------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-98.33%
BANKING-2.29%
Banco de Credito e Inversiones.......... 833,132 $ 4,138,813
-----------
BASIC METALS-0.89%
Ceramicas Cordillera S.A................ 316,132 1,603,873
-----------
CONSUMER DURABLES-1.64%
Empresas Almacenes Paris................ 5,851,259 2,967,358
-----------
ELECTRIC DISTRIBUTION-16.72%
Chilectra S.A........................... 3,885,531 21,511,022
Chilectra S.A. ADS++.................... 88,600 1,962,082
Empresas Emel S.A....................... 451,290 6,675,182
-----------
30,148,286
-----------
ELECTRIC GENERATION-13.05%
Empresa Nacional de Electricidad S.A.... 34,313,568 12,434,817
Enersis S.A............................. 22,040,251 11,095,805
-----------
23,530,622
-----------
ENGINEERING & CONSTRUCTION-0.72%
Besalco S.A............................. 702,964 1,292,295
-----------
FERTILIZER-3.41%
Sociedad Quimica y Minera de Chile S.A.,
Class A................................ 1,446,507 4,279,154
Sociedad Quimica y Minera de Chile S.A.,
Class B................................ 570,322 1,879,984
-----------
6,159,138
-----------
FINANCIAL SERVICES-2.74%
Invercap S.A............................ 7,314,215 4,945,692
-----------
FISHERY-0.29%
Pesquera Itata S.A...................... 7,936,619 528,269
-----------
FOOD & BEVERAGES-17.21%
Compania Cervecerias Unidas S.A......... 2,188,304 8,415,665
Compania Cervecerias Unidas S.A. ADR.... 111,550 2,147,338
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
FOOD & BEVERAGES (CONTINUED)
Distribucion y Servicio D&S S.A......... 2,532,903 $ 1,873,251
Embotelladora Andina S.A. PNA........... 1,681,773 4,015,644
Embotelladora Andina S.A. PNB........... 1,681,773 3,695,814
Embotelladora Arica..................... 4,664,877 6,209,979
Embotelladora Polar S.A................. 2,903,337 1,779,118
Empresas Iansa S.A...................... 7,669,421 559,102
Supermercados Unimarc S.A............... 672,109 55,388
Vina Concha y Toro S.A.................. 4,349,433 2,279,259
-----------
31,030,558
-----------
FORESTRY-10.75%
Compania Chilena de Fosforos S.A........ 762,465 934,453
Compania de Petroleos de Chile S.A...... 5,474,483 11,799,203
Empresas CMPC S.A....................... 1,072,197 6,649,547
-----------
19,383,203
-----------
HEALTH CARE-0.78%
Banmedica S.A........................... 7,030,511 1,411,302
-----------
INFRASTRUCTURE-2.42%
Infra Structura 2000*+.................. 19,568,922 4,364,868
-----------
INSURANCE-0.34%
Compania de Seguros La Prevision Vida
S.A.+.................................. 818,209 605,120
-----------
MINING-2.26%
Antofagasta Holdings plc................ 1,338,500 4,005,341
Empresa Minera de Mantos Blancos S.A.... 80,152 67,746
-----------
4,073,087
-----------
REAL ESTATE INVESTMENT & MANAGEMENT-2.37%
Parque Arauca S.A....................... 10,000,000 4,268,357
-----------
RETAIL-1.11%
Sociedad Anonima Comercial e Industrial
Falabella.............................. 4,143,705 1,996,333
-----------
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
STEEL-2.12%
Compania de Aceros del Pacifico S.A..... 2,414,293 $ 3,826,138
-----------
TELECOMMUNICATIONS-17.12%
Compania de Telecomunicaciones de Chile
S.A., Class A.......................... 6,062,937 30,875,178
-----------
TEXTILES-0.10%
Zalaquett S.A........................... 1,496,767 189,765
-----------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES (Cost
$109,186,168)......................................... 177,338,255
-----------
SHORT-TERM INVESTMENTS-5.96%
CHILEAN MUTUAL FUNDS-5.96%
Bice Manager Investment Fund............ 607,102 1,641,388
Fondo Mutuo Banco Edwards............... 13,014 597,046
Fondo Mutuo Bancredito Redimiento....... 32,060 1,383,417
Fondo Mutuo Santander Money Market...... 481,504 2,229,645
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
CHILEAN MUTUAL FUNDS (CONTINUED)
Fondo Mutuo Security Check.............. 503,190 $ 2,329,523
Citicorp Cash Mutual Fund............... 1,133,435 2,573,453
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost $10,673,606)........
10,754,472
-----------
TOTAL INVESTMENTS-104.29%
(Cost $119,859,774) (Notes A,D)....................... 188,092,727
LIABILITIES IN EXCESS OF CASH AND OTHER
ASSETS-(4.29)%........................................ (7,735,605)
-----------
NET ASSETS-100.00%..................................... $180,357,122
-----------
-----------
- ---------------------------------------------------------
* 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.
PNA Preferred Shares, Class A.
PNB Preferred Shares, Class B.
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost
$119,859,774) (Note A)................. $188,092,727
Cash (including $3,064 of foreign
currencies with a cost of $3,061) (Note
A)..................................... 1,166,706
Receivables:
Investments sold...................... 2,902,755
Dividends............................. 53,586
Prepaid expenses........................ 2,540
------------
Total Assets............................ 192,218,314
------------
LIABILITIES
Payables:
Dividend.............................. 10,029,531
Investment advisory fees (Note B)..... 556,060
Administration fees (Note B).......... 27,161
Other accrued expenses................ 135,989
Chilean repatriation taxes (Note A)... 1,112,451
------------
Total Liabilities....................... 11,861,192
------------
NET ASSETS (applicable to 14,327,901
shares of common stock outstanding)
(Note C)............................... $180,357,122
------------
------------
NET ASSET VALUE PER SHARE ($180,357,122
DIVIDED BY 14,327,901)................ $12.59
------------
------------
NET ASSETS CONSIST OF
Capital stock, $0.001 par value;
14,327,901 shares issued and
outstanding (100,000,000 shares
authorized)............................ $ 14,328
Paid-in capital......................... 118,910,972
Accumulated net realized loss on
investments and foreign currency
related transactions................... (6,800,434)
Net unrealized appreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currencies..................... 68,232,256
------------
Net assets applicable to shares
outstanding............................ $180,357,122
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
9
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends............................. $ 8,971,822
Interest.............................. 457,389
Less: Foreign taxes withheld.......... (59,810)
------------
Total Investment Income............... 9,369,401
------------
Expenses:
Investment advisory fees (Note B)..... 2,732,233
Custodian fees........................ 428,492
Administration fees (Note B).......... 232,416
Printing.............................. 127,727
Accounting fees....................... 108,370
Audit and legal fees.................. 93,691
Transfer agent fees................... 44,967
Directors' fees....................... 41,841
NYSE listing fees..................... 24,368
Insurance............................. 24,326
Other................................. 21,264
------------
Total Expenses........................ 3,879,695
------------
Net Investment Income................. 5,489,706
------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized loss from:
Investments........................... (34,002)
Foreign currency related
transactions......................... (765,128)
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities
denominated in foreign currencies...... (95,516,454)
------------
Net realized and unrealized loss on
investments and foreign currency
related transactions................... (96,315,584)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $(90,825,878)
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1998 1997
<S> <C> <C>
--------------------------------
DECREASE IN NET ASSETS
Operations:
Net investment income................. $ 5,489,706 $ 1,458,936
Net realized gain/(loss) on
investments and foreign currency
related transactions................. (799,130) 70,499,747
Net change in unrealized appreciation
in value of investments and
translation of other assets and
liabilities denominated in foreign
currencies........................... (95,516,454) (37,891,722)
------------ ------------
Net increase/(decrease) in net
assets resulting from operations... (90,825,878) 34,066,961
------------ ------------
Dividends and distributions to
shareholders:
Net investment income................. (4,584,928) --
Net realized gain on investments...... (31,276,134) (47,825,955)
------------ ------------
Total dividends and distributions to
shareholders....................... (35,861,062) (47,825,955)
------------ ------------
Capital share transactions (Note C):
Proceeds from 260,948 and 30,907
shares, respectively, issued in
reinvestment of dividends............ 3,100,355 690,893
------------ ------------
Total decrease in net assets........ (123,586,585) (13,068,101)
------------ ------------
NET ASSETS
Beginning of year....................... 303,943,707 317,011,808
------------ ------------
End of year............................. $180,357,122 $303,943,707
------------ ------------
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
11
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.
FINANCIAL HIGHLIGHTS SECTION
- --------------------------------------------------------------------------------
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 Years Ended through
December 31, December
----------------------------------------------------------------------------------------------- 31,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <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 $8.72 $7.40 $6.88**
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment
income+............ 0.38 0.10 0.47 0.65 0.42 0.35 0.39 0.49 0.78 0.02
Net realized and
unrealized
gain/(loss) on
investments and
foreign currency
related
transactions+/++... (6.88) 2.32 (3.44) 0.41 6.24 5.96 1.93 7.21 1.17 0.67
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net
increase/(decrease)
in net assets
resulting from
operations......... (6.50) 2.42 (2.97) 1.06 6.66 6.31 2.32 7.70 1.95 0.69
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Dividends and
distributions to
shareholders:
Net investment
income........... (0.32) -- (0.47) (0.65) (0.47) (0.31) (0.39) (0.49) (0.63) (0.03)
Net realized gain
on investments
and foreign
currency related
transactions..... (2.20) (3.40) (0.26) (0.22) (0.06) (0.26) (1.22) (1.09) -- --
In excess of net
investment
income........... -- -- (0.16) -- -- -- -- -- -- (0.14)
In excess of net
realized gain on
investments and
foreign currency
related
transactions..... -- -- -- -- -- (0.16) -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total dividends and
distributions to
shareholders....... (2.52) (3.40) (0.89) (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.......... $12.59 $21.61 $22.59 $26.45 $26.26 $20.13 $15.55 $14.84 $8.72 $7.40
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Market value, end of
period............. $9.063 $17.813 $20.875 $26.000 $23.063 $22.250 $16.563 $11.938 $7.750 $7.813
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total investment
return(a).......... (33.00)% 3.56% (16.43)% 16.66% 6.05% 38.82% 53.80% 71.05% 7.07% 14.17%
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
RATIOS/
SUPPLEMENTAL DATA
Net assets, end of
period
(000 omitted)...... $180,357 $303,944 $317,012 $370,275 $367,047 $281,031 $168,580 $160,360 $93,744 $79,494
Ratio of expenses to
average net
assets............. 1.62% 3.34%(c) 1.96%(c) 1.46% 1.39% 1.72% 2.15%(c) 2.13%(c) 2.04% 1.98%(b)
Ratio of net
investment income
to average net
assets............. 2.29% 0.38% 1.79% 2.39% 1.74% 2.47% 2.17% 3.41% 9.56% 1.44%(b)
Portfolio turnover
rate............... 5.39% 35.59% 4.82% 2.38% 0.86% 11.29% 6.29% 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 $0.08 and $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 1998
and 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 program. 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, if any. 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
- --------------------------------------------------------------------------------
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 December 31, 1998,
the Fund held 2.42% of its net assets in securities valued in good faith by the
Board of Directors with an aggregate cost of $4,384,163 and fair value of
$4,364,868. 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. At December 31, 1998, the interest
rate was 4.125%, which resets on a daily basis. 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.
For U.S. federal income tax purposes, realized foreign currency losses and net
realized capital losses from investments incurred after October 31, 1998, within
the Fund's current fiscal year, are deemed to arise on the first day of the
following fiscal year. The Fund incurred and elected to defer such losses of
$11,911 and $6,016,341, respectively.
The Fund will be subject to and accrues a 10% Chilean repatriation tax with
respect to all known and estimated remittances from Chile in excess of original
invested capital. 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 December 31,
1998, the Fund would have to pay a repatriation tax of approximately $6,190,941
or $0.43 per share.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (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. However, the Fund does isolate the
effect of fluctuations in foreign exchange rates when determining the gain or
loss upon the sale or maturity of foreign currency denominated debt obligations
pursuant to U.S. federal income tax regulations, with such amount categorized as
foreign exchange gain or loss for both financial reporting and income tax
reporting purposes.
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.
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.
At December 31, 1998, the Fund reclassified $904,778 of net realized losses from
foreign currency related transactions to undistributed net investment income.
OTHER: Securities denominated in currencies other than U.S. dollars are subject
to changes in value due to fluctuations in exchange rates.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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.
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
substantially less than those originally paid by the Fund or the current
carrying values. 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. At December 31, 1998, the Fund had
no such agreements.
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 year ended December 31, 1998, BEA earned $2,732,233 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 year ended December 31, 1998, BEA was reimbursed
$19,944 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,
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
THE CHILE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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, 1998, these sub-advisory fees amounted to $195,079.
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 year ended December 31,
1998, BSFM earned $146,044 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, 1998, the administration fees, supplemental
administration fees and accounting fees amounted to $135,580, $66,429 and
$8,181, 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 14,327,901 shares outstanding at December 31, 1998,
BEA owned 14,615 shares.
NOTE D. INVESTMENT IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at December
31, 1998 was $120,867,247. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currencies) of
$67,225,480, was composed of gross appreciation of $84,140,449 for those
investments having an excess of value over cost and gross depreciation of
$16,914,969 for those investments having an excess of cost over value.
For the year ended December 31, 1998, purchases and sales of securities, other
than short-term investments, were $12,965,813 and $55,312,494, respectively.
NOTE E. CREDIT AGREEMENT
The Fund, along with 10 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 $25,000,000 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 11
funds exceed $25,000,000. 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 year ended and at December 31,
1998.
- --------------------------------------------------------------------------------
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of The Chile Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Chile Fund, Inc. (the "Fund")
at December 31, 1998, and the results of its operations for the year then ended,
changes in its 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. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 19, 1999
- --------------------------------------------------------------------------------
17
<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 WITHHELD NON-VOTES
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
8,734,737 160,608 145,786 5,152,017
</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 year end
(December 31, 1998) as to the U.S. federal tax status of dividends and
distributions received by the Fund's shareholders in respect of such year. Of
the $2.52 per share distribution paid in respect of such year, $0.32 was derived
from net investment income and $2.20 was derived from net realized long-term
capital gains. There were no 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 1998.
Notification for calendar year 1998 was mailed in January 1999. 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 distribution. They will generally not be entitled to a foreign
tax credit or deduction for the withholding taxes paid by the Fund.
In general, 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.
- --------------------------------------------------------------------------------
18
<PAGE>
DESCRIPTION OF INVESTLINK(SM)* PROGRAM
The InvestLink(SM) Program is sponsored and administered by BankBoston, N.A.,
not by The Chile Fund, Inc. (the "Fund"). BankBoston, N.A. will act as program
administrator (the "Program Administrator") of the InvestLink(SM) Program (the
"Program"). The purpose of the Program is to provide interested investors with a
simple and convenient way to invest funds and reinvest dividends in shares of
the Fund's common stock ("Shares") at prevailing prices, with reduced brokerage
commissions and fees.
An interested investor may join the Program at any time. Purchases of Shares
with funds from a participant's cash payment or automatic account deduction will
begin on the next day on which funds are invested. If a participant selects the
dividend reinvestment option, automatic investment of dividends generally will
begin with the next dividend payable after the Program Administrator receives
his enrollment form. Once in the Program, a person will remain a participant
until he terminates his participation or sells all Shares held in his Program
account, or his account is terminated by the Program Administrator. A
participant may change his investment options at any time by requesting a new
enrollment form and returning it to the Program Administrator.
A participant will be assessed certain charges in connection with his
participation in the Program. First-time investors will be subject to an initial
service charge which will be deducted from their initial cash deposit. All
optional cash deposit investments will be subject to a service charge. Sales
processed through the Program will have a service fee deducted from the net
proceeds, after brokerage commissions. In addition to the transaction charges
outlined above, participants will be assessed per share processing fees (which
include brokerage commissions). Participants will not be charged any fee for
reinvesting dividends.
The number of Shares to be purchased for a participant depends on the amount of
his dividends, cash payments or bank account or payroll deductions, less
applicable fees and commissions, and the purchase price of the Shares. The
Program Administrator uses dividends and funds of participants to purchase
Shares of the Fund's common stock in the open market. Such purchases will be
made by participating brokers as agent for the participants using normal cash
settlement practices. All Shares purchased through the Program will be allocated
to participants as of the settlement date, which is usually three business days
from the purchase date. In all cases, transaction processing will occur within
30 days of the receipt of funds, except where temporary curtailment or
suspension of purchases is necessary to comply with applicable provisions of the
Federal Securities laws or when unusual market conditions make prudent
investment impracticable. In the event the Program Administrator is unable to
purchase Shares within 30 days of the receipt of funds, such funds will be
returned to the participants.
The average price of all Shares purchased by the Program Administrator with all
funds received during the time period from two business days preceding any
investment date up to the second business day preceding the next investment date
shall be the price per share allocable to a participant in connection with the
Shares purchased for his account with his funds or dividends received by the
Program Administrator during such time period. The average price of all Shares
sold by the Program Administrator pursuant to sell orders received during such
time period shall be the price per share allocable to a participant in
connection with the Shares sold for his account pursuant to his sell orders
received by the Program Administrator during such time period.
BankBoston, N.A., as Program Administrator, administers the Program for
participants, keeps records, sends statements of account to participants and
performs other duties relating to the Program.
- --------------------------------------------------------------------------------
19
<PAGE>
DESCRIPTION OF INVESTLINK(SM)* PROGRAM (CONTINUED)
Each participant in the Program will receive a statement of his account
following each purchase of Shares. The statements will also show the amount of
dividends credited to such participant's account (if applicable), as well as the
fees paid by the participant. In addition, each participant will receive copies
of the Fund's annual and semi-annual reports to shareholders, proxy statements
and, if applicable, dividend income information for tax reporting purposes.
If the Fund is paying dividends on the Shares, a participant will receive
dividends through the Program for all Shares held on the dividend record date on
the basis of full and fractional Shares held in his account, and for all other
Shares of the Fund registered in his name. The Program Administrator will send
checks to the participants for the amounts of their dividends that are not to be
automatically reinvested at no cost to the participants.
Shares of the Fund purchased under the Program will be registered in the name of
the accounts of the respective participants. Unless requested, the Fund will not
issue to participants certificates for Shares of the Fund purchased under the
Program. The Program Administrator will hold the Shares in book-entry form until
a Program participant chooses to withdraw his Shares or terminate his
participation in the Program. The number of Shares purchased for a participant's
account under the Program will be shown on his statement of account. This
feature protects against loss, theft or destruction of stock certificates.
A participant may withdraw all or a portion of the Shares from his Program
account by notifying the Program Administrator. After receipt of a participant's
request, the Program Administrator will issue to such participant certificates
for the whole Shares of the Fund so withdrawn or, if requested by the
participant, sell the Shares for him and send him the proceeds, less applicable
brokerage commissions, fees, and transfer taxes, if any. If a participant
withdraws all full and fractional Shares in his Program account, his
participation in the Program will be terminated by the Program Administrator. In
no case will certificates for fractional Shares be issued. The Program
Administrator will convert any fractional Shares held by a participant at the
time of his withdrawal to cash.
Participation in any rights offering, dividend distribution or stock split will
be based upon both the Shares of the Fund registered in participants' names and
the Shares (including fractional Shares) credited to participants' Program
accounts. Any stock dividend or Shares resulting from stock splits with respect
to Shares of the Fund, both full and fractional, which participants hold in
their Program accounts and with respect to all Shares registered in their names
will be automatically credited to their accounts.
All Shares of the Fund (including any fractional share) credited to his account
under the Program will be voted as the participant directs. The participants
will be sent the proxy materials for the annual meetings of shareholders. When a
participant returns an executed proxy, all of such Shares will be voted as
indicated. A participant may also elect to vote his Shares in person at the
Shareholders' meeting.
A participant will receive tax information annually for his personal records and
to help him prepare his U.S. federal income tax return. The automatic
reinvestment of dividends does not relieve him of any income tax which may be
payable on dividends. For further information as to tax consequences of
participation in the Program, participants should consult with their own tax
advisors.
The Program Administrator in administering the Program will not be liable for
any act done in good faith or for any good faith omission to act. However, the
Program Administrator will be liable for loss or damage due to error caused by
its negligence, bad faith or
- --------------------------------------------------------------------------------
20
<PAGE>
DESCRIPTION OF INVESTLINK(SM)* PROGRAM (CONTINUED)
willful misconduct. Shares held in custody by the Program Administrator are not
subject to protection under the Securities Investors Protection Act of 1970.
The participant should recognize that neither the Fund nor the Program
Administrator can provide any assurance of a profit or protection against loss
on any Shares purchased under the Program. A participant's investment in Shares
held in his Program account is no different than his investment in directly held
Shares in this regard. The participant bears the risk of loss and the benefits
of gain from market price changes with respect to all of his Shares. Neither the
Fund nor the Program Administrator can guarantee that Shares purchased under the
Program will, at any particular time, be worth more or less than their purchase
price. Each participant must make an independent investment decision based on
his own judgment and research.
While the Program Administrator hopes to continue the Program indefinitely, the
Program Administrator reserves the right to suspend or terminate the Program at
any time. It also reserves the right to make modifications to the Program.
Participants will be notified of any such suspension, termination or
modification in accordance with the terms and conditions of the Program. The
Program Administrator also reserves the right to terminate any participant's
participation in the Program at any time. Any question of interpretation arising
under the Program will be determined in good faith by the Program Administrator
and any such good faith determination will be final.
Any interested investor may participate in the Program. To participate in the
Program, an investor who is not already a registered owner of the Shares must
make an initial investment of at least $250.00. All other cash payments or bank
account deductions must be at least $100.00, up to a maximum of $100,000.00
annually. An interested investor may join the Program by reading the Program
description, completing and signing the enrollment form and returning it to the
Program Administrator. The enrollment form and information relating to the
Program (including the terms and conditions) may be obtained by calling the
Program Administrator at one of the following telephone numbers: First Time
Investors--(800) 337-1944; Current Shareholders--(800) 730-6001. All
correspondence regarding the Program should be directed to: BankBoston, N.A.,
InvestLink Program, P.O. Box 8040, Boston, MA 02266-8040.
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*InvestLink is a service mark of Boston EquiServe Limited Partnership.
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21
<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 Credit Suisse Asset Management
("CSAM"), formerly known as BEA Associates. CSAM 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. CSAM manages money for corporate pension and profit-sharing funds,
public pension funds, union funds, endowments and other charitable institutions
and private individuals. As of December 31, 1998, CSAM managed approximately
$35.3 billion in assets in the U.S.
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 CSAM CLOSED-END FUNDS
LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds listed below at 1-800-293-1232 or visit our website on the
Internet: http://www.cefsource.com.
CLOSED-END FUNDS
SINGLE COUNTRY
The Brazilian Equity Fund, Inc. (BZL)
The First Israel Fund, Inc. (ISL)
The Indonesia Fund, Inc. (IF)
The Portugal Fund, Inc. (PGF)
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)
FIXED INCOME
BEA Income Fund, Inc. (FBF)
BEA Strategic Global Income Fund, Inc. (FBI)
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<PAGE>
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
INVESTMENT ADVISER
Credit Suisse Asset Management
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. 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-AR-98
