<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
February 26, 1996
Dear Shareholders:
We are pleased to report on the results of The Latin America Investment Fund,
Inc. (the "Fund") for the year ended December 31, 1995.
At December 31, 1995, the Fund's investments in securities in various Latin
American countries totaled $130.6 million, with the balance of the Fund's
investments, approximately $0.3 million, invested in short-term obligations. At
December 31, 1995, the Fund's net asset value was $17.09 per share, after taking
into account 1995 distributions of $0.19 per share. In comparison, the Fund's
net asset value at December 31, 1994 was $20.18 per share.
MARKET COMMENTARY
The year ended 1995 was a difficult and dramatic one for the Latin American
markets, with the first several months of the year dominated by the fallout from
Mexico's currency crisis. However, as 1996 begins, we are cheered by the
markedly improving tone of the region's equity markets. January 1996 was the
third consecutive positive month for the region, something that had not occurred
since mid-summer. It now appears to us that the "Tequila Effect" -- the
simultaneous decline of virtually the entire region's markets in sympathy with
Mexico's crisis -- is effectively a thing of the past. Local concerns have
returned to the forefront in determining market performance and returns during
the last quarter of the year ranged from strongly positive in Argentina (the
best-performing market worldwide) to deeply negative in Brazil.
We believe that Latin American markets are poised to recover in 1996 following
nearly two years of disappointing performance. In part, this stems from our view
that there will be a continued easing of monetary policy by the U.S. This should
permit local interest rates to fall and also encourage a pick-up in capital
flows. We have already begun to see increased flows of investment capital into
Latin America, relative to an extremely negative investment environment during
much of 1994 and 1995 and we are particularly pleased with growing signs of
interest in the region from "non-dedicated" mutual funds and investment managers
- -- in other words, from investors who evaluate the attractiveness of Latin
American markets against those of all other regions and allocate their global
assets accordingly. Economic fundamentals have been improving throughout the
region for several months, but it is clear that the Mexican peso crisis of
December 1994 had a material impact on both the economic prospects for the
region and, at least in the near term, on investors' perception of the outlook
for stock market returns. In our view, this pessimism was overdone.
The persistent and exaggerated pessimism of investors in Argentina, for example,
is at odds with the substantial gains being made in that economy and the strong
fourth quarter recovery only went part way toward pricing in those fundamental
improvements. Similarly, in light of the tremendous progress being made in
Brazil, it again seems that the market would be significantly higher were it not
for the remaining hangover from the "Tequila Effect."
1
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In addition, contrary to the historic response normally seen in the region, the
peso crisis has acted as a wake-up call to Latin American policy makers. As a
result, social security systems are being reformed and private pension
arrangements have been put in place to boost savings rates, along the lines of
the systems which have worked so well in Chile.
Similarly, there has been widespread recognition of the need to improve export
performance, in order to generate valuable foreign exchange reserves. A key
element of this has been a renewed awareness of the need to increase labor
productivity and at the same time reduce employers' costs. Finally, we also
anticipate renewed measures to reduce bureaucracy and increase deregulation,
primarily through the privatization process. This became evident during 1995 in
Argentina and should expand next year into Mexico and Brazil -- where a series
of far-reaching privatizations are the key to the ultimate transition of those
economies.
Consequently, we expect 1996 to prove to be a more positive year, with the
absence of major macro-economic shocks. Despite the recent rally in various
markets, asset prices are still depressed in our view, and do not yet reflect
the improved prospects.
MEXICO
Both the Mexican BOLSA and the peso continued to display significant levels of
volatility throughout 1995. Interestingly, Mexico's negative performance for the
year (from a U.S. dollar-based investor's perspective) was entirely the result
of a declining currency. The peso began the year trading at approximately 5 to
the U.S. dollar, having depreciated steeply from an exchange rate of 3.5 in
mid-December of 1994. At the end of 1995, it had cheapened to a value of 7.7 to
the U.S. dollar, reflecting a loss in value of 36% during the year and 55% since
the beginning of the crisis. The stock market, on the other hand, reached its
lowest point (in peso terms) in early March and then doubled in price (as
measured by the BOLSA index) in the last nine months of the year.
A key point about Mexico is that the very real risk of default on its external
obligations has clearly passed. The restructuring arrangements overseen by the
World Bank and the U. S. government throughout 1995 have seen to this. Mexico's
prepayment of $700 million of the U.S. loan (funded by a successful Eurobond
offering) in early October was an important, if symbolic, signal that the
stabilization program remains effective. In this respect, it is significant that
President Zedillo has laid out a clear plan to implement continued reform
measures in the coming months. We should expect to see privatizations for
example, in previously untouchable sectors of the economy, such as in the energy
and related industries. Zedillo has a pressing social need to boost the economy
and this stimulus cannot come from domestic sources alone. Hence, Mexico has to
attract overseas capital again. Most important in this regard will be
maintaining a commitment to tight money and fiscal discipline; investors do not
want to see the Mexican government trying to spend its way out of the present
recession.
Late in the year, Mexico was finally able to stabilize the peso, after a steady
decline which had sharpened significantly during the first two weeks of
November. By steadfastly permitting short-term interest rates to rise as high as
the market deemed necessary (back to more than 70% at one point, in fact) and by
projecting an air of consistency and purpose in economic policy, the Mexicans
injected a somewhat higher level of confidence into the market, bringing the
value of the peso down from a weak point of nearly 8 to the U.S.
2
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
dollar to a trading range of around 7.5 to the U.S. dollar. In reality, economic
fundamentals improved substantially in Mexico from their low point early in the
year. Third quarter corporate results, for example, were not as bad as many had
expected, a real sign that the economy may have bottomed.
Serious problems, of course, remain in the Mexican banking system, which will
make progress difficult for both the peso and the stock market. In addition, the
political picture remains murky, as serious questions continue to be raised
about the Colosio and Massieu assassinations, about corruption in former
President Salinas' administration (and in his family), and about the willingness
of the Zedillo administration and the Institutional Revolutionary Party ("PRI")
to confront the disturbing implications of these problems. Equally as important,
President Zedillo's lack of strong leadership has left something of a power and
policy vacuum, a situation with which Mexico -- with its tradition of a strong
presidency -- is completely unaccustomed and apparently uncomfortable. On the
positive side, however, recent political trends have been positive, in that
virtually all of the elections held so far this year have been won by the
conservative opposition, keeping the pressure on the governing PRI. In addition,
talks were recently reactivated to address constitutional reform.
ARGENTINA
In the early part of the year, Argentina suffered particularly from comparisons
with Mexico, and rumors of imminent default or devaluation periodically swirled
through the market. Foreign investors account for a large portion of the trading
in this market, and the economies bore a certain similarity -- with that of
Mexico, particularly in their overvalued currencies and high current account
deficits.
In the May elections, President Menem was re-elected by a surprisingly strong
margin, briefly boosting the market. This euphoria was short-lived, however, as
doubts were soon raised about the health of the relationship between the two key
figures in the government, Menem and his Economics Minister, Domingo Cavallo.
These questions caused repeated jitters in the equity market and slowed its
recovery during the middle months of the year. President Menem visited New York
in November to meet with investment managers, in an attempt to regain the center
stage in Argentina's economic policy process. His attempts to impress U.S.
investment managers with his economic leadership turned into a public relations
disaster. The fallout from this trip was a renewed sense that Menem's political
fate is closely tied to both Cavallo and (more importantly) to the
Convertibility Plan that lies at the heart of Argentina's economic success
during the 1990s.
Soon thereafter, the Argentine government announced a new program of economic
reforms. This program, dominated by spending cuts and a general orientation
toward fiscal discipline, was very well received by the market, particularly as
it was taken to indicate renewed strength in the Menem-Cavallo partnership. One
result of these positive policy developments has been the gradual return to
health of the nation's banking system. Total deposits have grown in recent
months nearly to the levels prevalent before the onset of the Mexican peso
crisis. Thus, paradoxically, the failure of Menem to impress investors led to a
more constructive political and economic policy, which in turn led to an
improvement in investor sentiment. In the wake of this clear turn in the right
direction, Argentina led the region's markets during the last six weeks of the
year, finishing 1995 on a particularly buoyant note.
3
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We continue to believe that Argentina is an extremely attractive market, in
light of both improving fundamentals and continued cheap valuations. At the end
of 1995, the Argentine equity market was priced at only 13.3 times prospective
1996 earnings, based on expected earnings growth of more than 16%.
BRAZIL
In Brazil, the success of the REAL Plan in defeating hyperinflation is now
well-established, with the annual inflation rate remaining steadily in the 25%
range -- it should be remembered that Brazil experienced an annual inflation
rate in excess of 14,000% only 14 months ago. This achievement, however, is now
in danger of becoming old news. While we remain bullish on the long-term
prospects for this market, we are somewhat less sanguine on shorter-term
prospects, in light of delays in enacting fiscal discipline and economic
reforms.
Progress in reducing interest rates, in particular, has been hampered by delays
in the passage through Congress of a significant package of fiscal reforms.
During 1995, the fiscal balance has swung from a 1% surplus a year ago to a
current deficit of nearly 4 1/2% of GDP. This negative trend occurred in the
context of a strong rise in tax receipts, indicating that spending pressures
have not yet been adequately dealt with, either on the national or the
provincial level. As a result, real interest rates remain extremely high (around
3% per month), resulting in pronounced weakness in some sectors of the economy.
Nonetheless, it should be noted that a tremendous amount was achieved last year
despite the above-mentioned concerns. An example is that of Telecomunicacoes
Brasileiras S.A., the semi-state-owned telecommunications system that, through
long-anticipated changes in its tariff structure, will finally be allowed to
generate the revenues needed to invest in line growth and generate returns for
shareholders.
CHILE
The impact of the Mexican crisis upon the rest of Latin America was, of course,
profound. The extent to which markets declined in sympathy to Mexico's largely
depended upon two variables, which, as it turns out, often go hand in hand. The
first is the importance, within each market, of foreign investors, which depends
upon both the domestic savings rate and the restrictions imposed upon foreign
investment. As Mexico's troubles sucked liquidity out of the emerging markets,
the BOLSAS that are dominated by foreigners felt substantially more selling
pressure than those where domestic investors control the preponderance of
shares. The second factor is the country's similarity, in economic terms, to
Mexico. Of the major regional markets, the chief beneficiary of this calculus
was Chile, where the savings rate is high, foreign investment is strictly
regulated, the currency is fairly valued, the current account balance is healthy
and economic reform has been a sterling success. As a result, Chilean equities
experienced relatively little diminution of value during the early months of
1995.
However, in the second quarter, concerns arose in the Chilean market about the
attitude of General Pinochet, former president and still head of the country's
armed forces. This political crisis, sparked by the conviction on human rights
violations of two of Pinochet's senior officers and questions over whether the
military would allow them to be jailed, raised concerns once again about the
military's role in the Chilean polity. These concerns dissipated during the
fourth quarter and Chile's essentially democratic political structure remains
firmly in place.
4
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Chile continued to experience high rates of economic activity, resulting in
renewed concerns over inflation and a poorer performance in the trade account.
The Chilean central bank has responded firmly to the possibility of economic
overheating, resulting in a trend toward rising interest rates. The Chilean
economy remains fundamentally the strongest in Latin America and the model which
other nations are striving to emulate. It is worth noting that many of the
policies with which the Zedillo government is attempting to restructure the
Mexican economy are modeled after the Chilean program during the mid and late
1980s. Chile took about two years to recover from its 1982 devaluation crisis,
which puts Mexico approximately on schedule. The Chilean model helps to explain
the Mexicans' clear understanding that a significant improvement in domestic
savings is perhaps the most important key to a solid and permanent recovery.
In summary, 1994 and 1995 may prove to be watershed years for the Latin American
region. Markets have proved highly volatile and returns have been disappointing.
Despite this, the outlook for the major factors we believe determine stock
market performance seem better than they have for many years. In addition,
governments have responded to the crisis by deepening reforms. This has been
especially true in Argentina, but the Cardoso government in Brazil has also made
significant progress. Finally, our analysis of market valuation suggests that
there is very reasonable growth on offer at quite attractive prices. We do not
doubt that there will be occasional periods of volatility and we do expect to
see, for example, investors' nerves tested in Brazil as doubts continue to
surface over the speed of fiscal reform. Despite this, we are confident that
1996 will prove a much more rewarding period for investors than we have
experienced over the past two years.
PORTFOLIO PERFORMANCE
From August 1, 1990 (commencement of investment operations) through December 31,
1995, the Fund's total return, based on net asset value and assuming
reinvestment of dividends and distributions, was 226.31%. For the same period,
the various indices performed as follows in U.S. dollar terms:
<TABLE>
<S> <C>
Argentina............................................... +225.17%
Brazil.................................................. +209.21%
Chile................................................... +354.46%
Mexico.................................................. +68.95%
</TABLE>
The Morgan Stanley Capital International Latin America Index gained 190.48% over
the same time period.
For the year ended December 31, 1995, the Fund's total return, based on net
asset value and assuming reinvestment of distributions, declined 14.24%. For the
same period, the various indices performed as follows in U.S. dollar terms:
<TABLE>
<S> <C>
Argentina............................................... +8.65%
Brazil.................................................. -21.29%
Chile................................................... -6.17%
Mexico.................................................. -23.18%
</TABLE>
The Morgan Stanley Capital International Latin America Index declined 12.84%
over the same time period.
5
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 27 and
28 of this report.
We appreciate your interest in the Fund and would be pleased to respond to your
questions or comments.
Respectfully,
[LOGO]
Emilio Bassini
President and
Chief Investment Officer*
- ------------------------
* Emilio Bassini, who is a member of the Executive Committee of BEA Associates
and holds the offices of Chief Financial Officer and Executive Director of BEA
Associates, is primarily responsible for management of the Fund's assets. He has
served in such capacity since the commencement of the Fund's operations. Mr.
Bassini joined BEA Associates (formerly Basic Appraisals, Inc. and BEA
Associates, Inc.) in 1984. Mr. Bassini is a Director, Chairman of the Board,
President and Chief Investment Officer of The Chile 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. and The
Portugal Fund, Inc. He is also a Director, Chairman of the Board, President and
Investment Officer of The Brazilian Equity Fund, Inc., as well as the President
and Secretary of The Indonesia Fund, Inc.
Peter Wilby, of Salomon Brothers Asset Management Inc. ("SBAM") is responsible
for managing the Fund's sovereign debt portfolio. Mr. Wilby, who joined SBAM in
1989, is a Senior Portfolio Manager responsible for SBAM's portfolios which
invest in high yield sovereign debt and high yield corporate securities. Prior
to that time, Mr. Wilby managed high yield bonds and leveraged equities in
mutual funds and institutional portfolios for Prudential Capital Management
Group ("Prudential"). He had previously served as director of Prudential's
credit research unit and as a corporate and sovereign credit analyst with
Prudential. Mr. Wilby is a Chartered Financial Analyst and a Certified Public
Accountant.
6
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
AS OF DECEMBER 31, 1995 (unaudited)
- --------------------------------------------------------------------------------
GEOGRAPHIC ASSET BREAKDOWN SECTOR ALLOCATION
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Latin America 2.5%
Brazil 25.1%
Puerto Rico 1.0%
Mexico 14.6%
Bolivia 0.6%
Chile 28.8%
Cash and cash equivalents 2.6%
Peru 4.9%
Ecuador 1.4%
Argentina 13.4%
Venezuela 2.7%
Columbia 2.4%
Banking 10.4%
Natural Gas 5.0%
Telecommunications 12.2%
Utilities 9.9%
Food and Beverage 11.9%
Retail 3.2%
Mining 3.6%
Holding Companies 4.4%
Steel 5.2%
Electric Distributors 5.5%
Electric Generators 2.7%
Engineering and Construction 2.1%
Forestry 3.2%
Cement 3.6%
Fixed or Floating Rate
Investments 3.0%
Cash and cash equivalents 2.8%
Other 11.5%
</TABLE>
<TABLE>
<S> <C>
THIS CHART REPRESENTS THE
GEOGRAPHIC ASSET THIS CHART REPRESENTS THE SECTOR
ALLOCATION OF TOTAL NET ASSETS OF ALLOCATION
THE FUND. OF TOTAL NET ASSETS OF THE FUND.
</TABLE>
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS, BY ISSUER
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
OF
HOLDING SECTOR COUNTRY/REGION NET ASSETS
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
1. Centrais Eletricas Brasileiras S.A.
Utilities Brazil 3.67
- --------------------------------------------------------------------------------------------------------
2. Telefonica del Peru S.A.
Telecommunications Peru 2.81
- --------------------------------------------------------------------------------------------------------
3. Banco Frances del Rio de la Plata
S.A. Banking Argentina 2.46
- --------------------------------------------------------------------------------------------------------
4. Banco de Credito e Inversiones
Banking Chile 2.40
- --------------------------------------------------------------------------------------------------------
5. Companhia Vale do Rio Doce
Mining Brazil 2.35
- --------------------------------------------------------------------------------------------------------
6. Enersis S.A.
Electric Distribution Chile 2.34
- --------------------------------------------------------------------------------------------------------
7. Camuzzi Argentina S.A.
Natural Gas Argentina 2.18
- --------------------------------------------------------------------------------------------------------
8. Companhia Energetica de Minas
Gerais Utilities Brazil 2.09
- --------------------------------------------------------------------------------------------------------
9. Corporacion Industrial SanLuis,
S.A. Holding Companies Mexico 2.07
de C.V.
- --------------------------------------------------------------------------------------------------------
10. Banco de Galicia y Buenos Aires
S.A. Banking Argentina 1.92
- --------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUMMARY OF INVESTMENTS BY COUNTRY/REGION (unaudited)
<TABLE>
<CAPTION>
PERCENT OF
COUNTRY/REGION NET ASSETS VALUE
- ----------------------------------------------------------------------------------- --------------- --------------
<S> <C> <C>
ARGENTINA.......................................................................... 13.44 $ 18,054,390
BOLIVIA............................................................................ 0.63 844,550
BRAZIL............................................................................. 25.05 33,638,121
CHILE.............................................................................. 28.83 38,712,627
COLOMBIA........................................................................... 2.37 3,184,681
ECUADOR............................................................................ 1.43 1,919,682
LATIN AMERICA...................................................................... 2.53 3,398,215
MEXICO............................................................................. 14.61 19,620,330
PERU............................................................................... 4.90 6,574,461
PUERTO RICO........................................................................ 0.95 1,279,275
VENEZUELA.......................................................................... 2.71 3,641,177
----- --------------
TOTAL INVESTMENTS.............................................................. 97.45 $ 130,867,509
----- --------------
----- --------------
</TABLE>
8
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
EQUITY OR EQUITY-LINKED SECURITIES-94.25%
ARGENTINA-12.60%
AUTO PARTS-0.02%
1,600 Fric Rot S.A.................................................................. $ 23,996
------------
BANKING-4.38%
125,300 Banco de Galicia y Buenos Aires S.A. ADS, Class B............................. 2,584,313
47,150 Banco Frances del Rio de la Plata S.A......................................... 417,215
107,440 Banco Frances del Rio de la Plata S.A. ADS.................................... 2,887,450
------------
5,888,978
------------
FOOD AND BEVERAGE-0.31%
3 Buenos Aires Embotelladora S.A................................................ 2,806
26,200 Quilmes Industrial S.A........................................................ 408,720
------------
411,526
------------
NATURAL GAS-5.03%
1,536,387 Camuzzi Argentina S.A.*....................................................... 2,922,899
186,844 Capex S.A..................................................................... 1,363,756
150,000 Perez Companc S.A., Class B................................................... 794,881
421 Sodigas del Sur S.A.*......................................................... 782,591
583 Sodigas Pampeana S.A.*........................................................ 886,936
------------
6,751,063
------------
RETAIL-0.00%
574 Domec S.A., Class B+.......................................................... 1,464
------------
TELECOMMUNICATIONS-2.39%
247,262 Argentine Cellular Communications (Holdings) Ltd.*+........................... 1,298,126
32,500 Telecom Argentina STET-
France Telecom S.A. ADS...................................................... 1,547,812
13,300 Telefonica de Argentina S.A. ADS.............................................. 362,425
------------
3,208,363
------------
UTILITIES-0.47%
33,500 Central Puerto S.A. ADR++..................................................... 636,500
------------
TOTAL ARGENTINA (Cost $16,775,629).............................................. 16,921,890
------------
BOLIVIA-0.63%
UTILITIES-0.63%
25,400 Compania Boliviana de Energia Electrica S.A. (Cost $609,600).................. 844,550
------------
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
BRAZIL-24.15%
BANKING-1.76%
192,545,206 Banco Bradesco S.A. PN(a)..................................................... $ 1,683,867
59,385,000 Banco do Brasil S.A. PN....................................................... 672,087
------------
2,355,954
------------
BUSINESS SERVICES-0.56%
1,018,000 Multibras S.A. PN............................................................. 754,113
------------
CHEMICALS AND PETROLEUM PRODUCTS-1.16%
18,221,800 Petroleo Brasileiro S.A. PN................................................... 1,555,869
------------
CONSUMER GOODS-0.12%
50 Ficap Marvin S.A. PN.......................................................... 3
373,587,000 Tec Toy Industria e Comercio PN+.............................................. 153,747
------------
153,750
------------
FOOD AND BEVERAGE-2.49%
3,489,073 Companhia Cervejaria
Brahma PN.................................................................... 1,435,942
1,334,000 Santista Alimentos S.A. ON+................................................... 1,715,623
336,530 Serrana S.A. PN+.............................................................. 190,433
------------
3,341,998
------------
HOLDING COMPANIES-0.94%
715,000 Brasmotor S.A. PN............................................................. 141,978
2,050,800 Investimentos Itau S.A. PN.................................................... 1,118,292
------------
1,260,270
------------
MANUFACTURING-0.85%
31,976,978 Continental 2001 S.A.-Utilidades Domesticas PN................................ 394,798
375,496,000 Refrigeracao Parana S.A. PN................................................... 749,485
------------
1,144,283
------------
MINING-2.35%
56,000 Companhia Vale do
Rio Doce ADR................................................................. 2,310,000
5,150,200 Companhia Vale do Rio Doce PN................................................. 847,813
------------
3,157,813
------------
RETAIL-1.42%
72,559,560 Lojas Americanas S.A. PN...................................................... 1,702,102
36,600 Makro Atacadista S.A. GDR+,++................................................. 208,071
------------
1,910,173
------------
</TABLE>
9
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
STEEL-1.36%
4,229 Bardella S.A. PN.............................................................. $ 348,084
42,617,060 Companhia Siderurgica
Nacional ON.................................................................. 876,939
745,808,000 Usinas Siderurgicas de Minas Gerais S.A. PN................................... 606,192
------------
1,831,215
------------
TELECOMMUNICATIONS-1.52%
30,000 Telecomunicacoes de Minas Gerais S.A., PNB.................................... 1,373
4,028,877 Telecomunicacoes de Sao Paulo S.A. PN......................................... 592,756
2,126,000 Telecomunicacoes do
Parana S.A. ON............................................................... 656,207
50,000 Telecomunicacoes do
Parana S.A. PN............................................................... 15,896
680,000 Telecomunicacoes do Rio de Janeiro S.A. ON+................................... 58,559
10,937,000 Telecomunicacoes do Rio de Janeiro S.A. PN+................................... 708,916
------------
2,033,707
------------
TEXTILES-1.66%
6,676,800 Cia. Tecidos Norte de Minas Gerais PN......................................... 2,232,584
------------
TRANSPORTATION-0.33%
3,016,810 Marcopolo S.A. PNB............................................................ 446,958
------------
UTILITIES-7.63%
18,200,431 Centrais Eletricas
Brasileiras S.A. ON.......................................................... 4,924,856
1,598,300 Centrais Eletricas de
Santa Catarin PN+............................................................ 772,880
127,004,750 Companhia Energetica de Minas Gerais PN....................................... 2,809,406
35,930,910 Companhia Paulista de Forca e Luz ON.......................................... 1,741,186
------------
10,248,328
------------
TOTAL BRAZIL (Cost $39,384,903)................................................. 32,427,015
------------
CHILE-28.62%
BANKING-2.93%
373,694 Banco de Credito e Inversiones................................................ 3,219,518
5,783,975 Banco Osorno y La Union,
Class A...................................................................... 373,734
80,229 Bice Corp S.A................................................................. 335,728
------------
3,928,980
------------
CONSUMER DURABLES-0.01%
65,581 Companias Cic S.A............................................................. 17,596
------------
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
CONSUMER GOODS-0.93%
21,643,485 Compania Tecno Industrial S.A................................................. $ 1,252,525
------------
ELECTRIC DISTRIBUTION-4.34%
599 Chilectra S.A................................................................. 2,897
142,000 Compania General de
Electricidad S.A............................................................. 489,004
31,135 Emelsa S.A.................................................................... 713,442
5,699,129 Enersis S.A................................................................... 3,142,412
57,500 Sociedad Austral de
Electricidad S.A............................................................. 1,479,077
------------
5,826,832
------------
ELECTRIC GENERATION-2.71%
256,056 Chilgener S.A................................................................. 1,575,729
112,686 Empresa Electrica Pilmaiquen S.A.............................................. 124,821
2,670,387 Empresa Nacional de
Electricidad S.A............................................................. 1,939,112
------------
3,639,662
------------
ENGINEERING AND CONSTRUCTION-0.51%
60,426 Besalco S.A................................................................... 232,036
698,968 Maderas y Sinteticos Sociedad Anonima......................................... 447,340
------------
679,376
------------
FERTILIZER-1.31%
244,421 Sociedad Quimica y Minera de Chile S.A., Class A.............................. 1,161,188
127,949 Sociedad Quimica y Minera de Chile S.A., Class B.............................. 601,242
------------
1,762,430
------------
FINANCIAL SERVICES-0.79%
7,000 Administradora de Fondos de Pensiones Provida S.A. ADS........................ 193,375
42,465 Antarchile S.A., Class A...................................................... 224,633
425,000 Invercap S.A.................................................................. 638,154
------------
1,056,162
------------
FISHERY-0.28%
1,204,818 Pesquera Itata S.A............................................................ 379,610
------------
FOOD AND BEVERAGE-3.25%
517 Compania Cervecerias Unidas S.A............................................... 2,386
347,533 Embotelladora Andina S.A...................................................... 2,074,505
3,637,415 Embotelladora Polar S.A....................................................... 1,799,681
830,627 Empresas Iansa S.A............................................................ 220,819
182,729 Empresas Santa Carolina S.A................................................... 224,897
912,650 Jugos Concentrados S.A........................................................ 44,930
------------
4,367,218
------------
</TABLE>
10
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
FORESTRY-3.15%
218,449 Compania Chilena de
Fosforos S.A................................................................. $ 731,300
246,029 Compania de Petreoleos de
Chile S.A.................................................................... 1,053,761
114,504 Compania Manufacturera de Papeles y Cartones S.A.............................. 1,507,930
647,903 Forestal Terranova............................................................ 917,032
------------
4,210,023
------------
HEALTH CARE-0.31%
1,122,599 Banmedica S.A................................................................. 417,261
------------
INSURANCE-0.16%
188,348 Cia. de Seguros la Prevision
Vida S.A..................................................................... 213,917
------------
MINING-1.22%
213,500 Antofagasta Holdings P.L.C.................................................... 970,141
199,302 Empresa Minera de Mantos Blancos S.A.......................................... 564,178
761 Sociedad Punta del
Cobre S.A., Class A.......................................................... 106,772
------------
1,641,091
------------
PACKAGING-0.15%
297,747 Envases del Pacifico S.A...................................................... 205,216
------------
PHARMACEUTICALS-0.91%
2,049,137 Laboratorio Chile S.A......................................................... 1,226,204
------------
RETAIL-0.24%
208,642 Santa Isabel S.A.............................................................. 326,124
------------
SHIPPING-0.02%
23,635 Puerto Ventanas S.A........................................................... 31,125
------------
STEEL-1.37%
425,000 Compania de Aceros del
Pacifico S.A................................................................. 1,836,000
------------
TELECOMMUNICATIONS-2.65%
290,317 Compania de Telecomunicaciones de Chile S.A., Class A......................... 1,400,668
200,000 Compania de Telecomunicaciones de Chile S.A., Class B......................... 891,077
141,547 Empresa Nacional de Telecomunicaciones S.A.................................... 1,270,003
------------
3,561,748
------------
TOBACCO-0.19%
33,887 Empresas CCT S.A.............................................................. 254,413
------------
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
UTILITIES-0.81%
131,593 Compania de Consumidores de Gas de Santiago S.A............................... $ 599,254
1,239,254 Empresa Metropolitana de Obras Santinas....................................... 488,075
------------
1,087,329
------------
WHOLESALE-0.38%
1,153,465 Zona Franca de Iquique S.A.................................................... 511,074
------------
TOTAL CHILE (Cost $19,063,000).................................................. 38,431,916
------------
COLOMBIA-2.37%
BANKING-1.36%
9 Banco de Bogota............................................................... 43
34,300 Banco Ganadero S.A.,
Preferred C, ADR............................................................. 445,900
25,500 Banco Industrial Colombiano ADR............................................... 417,563
<CAPTION>
PAR (000)
- -------------
<C> <S> <C>
U.S.$ 1,270 Banco de Colombia, Senior Subordinated Convertible Notes, 5.20%, 02/01/99++... 965,200
------------
1,828,706
------------
<CAPTION>
NO. OF SHARES
- -------------
<C> <S> <C>
CEMENT-1.01%
74,300 Cementos Diamante ADS+,++..................................................... 1,355,975
------------
TOTAL COLOMBIA (Cost $3,442,290)................................................ 3,184,681
------------
ECUADOR-0.85%
CEMENT-0.85%
6,528 Cemento Nacional Ecuador GDR++ (Cost $1,371,182).............................. 1,142,400
------------
LATIN AMERICA-2.53%
FOOD AND BEVERAGE-1.15%
48,400 Panamerican Beverages, Inc., Class A.......................................... 1,548,800
------------
TELECOMMUNICATIONS-1.38%
4,660 International Wireless Communications, Inc.,
Series D*+................................................................... 1,747,500
271 International Wireless Communications, Inc.,
Series F*+................................................................... 101,625
</TABLE>
11
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
TELECOMMUNICATIONS (CONTINUED)
16 International Wireless Communications, Inc., Warrants (expiring 12/31/98)*+... $ 290
------------
1,849,415
------------
TOTAL LATIN AMERICA (Cost $2,640,982)........................................... 3,398,215
------------
MEXICO-14.37%
CEMENT-1.09%
357,619 Apasco, S.A. de C.V........................................................... 1,464,778
------------
ENGINEERING & CONSTRUCTION-0.84%
76,900 Corporacion GEO, S.A. de C.V. ADR+,++......................................... 903,575
75,640 Corporacion GEO, S.A. de C.V., Series B....................................... 219,126
------------
1,122,701
------------
FOOD AND BEVERAGE-4.11%
56,700 Coca-Cola Femsa, S.A de C.V. ADS.............................................. 1,048,950
328,200 Fomento Economico Mexicano, S.A. de C.V., Class B............................. 737,652
377,399 Grupo Industrial Bimbo, S.A de C.V., Class A.................................. 1,560,470
460,000 Grupo Modelo, S.A. de C.V., Series C.......................................... 2,176,280
------------
5,523,352
------------
HOLDING COMPANIES-3.46%
537,354 Corporacion Industrial SanLuis, S.A. de C.V. CPO.............................. 2,786,022
346,500 Grupo Carso, S.A. de C.V., Class A1+.......................................... 1,868,360
658 Grupo Sidek, S.A. de C.V., Class A+........................................... 307
------------
4,654,689
------------
PAPER PRODUCTS-1.20%
106,800 Kimberly Clark de Mexico, S.A. de C.V., Class A............................... 1,611,344
------------
RETAIL-1.53%
320,000 Fotoluz Corporacion, S.A. de C.V., Class B+................................... 17,421
51,800 Grupo Casa Autrey, S.A. de C.V. ADS........................................... 692,825
313,000 Grupo Elektra, S.A. de C.V. CPO............................................... 1,338,821
------------
2,049,067
------------
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
STEEL-2.01%
38,950 Grupo Simec, S.A. de C.V. ADS+................................................ $ 243,438
545,300 Grupo Simec, S.A. de C.V., Series B+.......................................... 187,303
436,000 Hylsamex, S.A. de C.V., Class B+.............................................. 1,571,069
31,000 Tubos de Acero de Mexico, S.A.+............................................... 226,222
67,300 Tubos de Acero de Mexico, S.A. ADR+........................................... 471,100
------------
2,699,132
------------
TOURISM-0.13%
19,074 Grupo Situr, S.A. de C.V.
ADS+,++...................................................................... 56,030
353,365 Grupo Situr, S.A. de C.V.,
Series B+.................................................................... 112,674
------------
168,704
------------
TOTAL MEXICO (Cost $23,895,970)................................................. 19,293,767
------------
PERU-4.90%
ELECTRIC DISTRIBUTION-1.12%
1,434,000 Ontario-Quinta A.V.V.*........................................................ 1,497,813
------------
ENGINEERING AND CONSTRUCTION-0.71%
75,866 Cementos Lima S.A.++.......................................................... 959,709
------------
FOOD AND BEVERAGE-0.00%
11 Backus y Johnson.............................................................. 19
------------
TELECOMMUNICATIONS-3.07%
1,760,655 Telefonica del Peru S.A., Series B............................................ 3,776,920
<CAPTION>
PAR (000)
- -------------
<C> <S> <C>
U.S.$ 400 Tele 2000 S.A., Convertible Notes, 9.75%, 04/14/97++.......................... 340,000
------------
4,116,920
------------
TOTAL PERU (Cost $4,702,070).................................................... 6,574,461
------------
<CAPTION>
NO. OF SHARES
- -------------
<C> <S> <C>
PUERTO RICO-0.95%
TELECOMMUNICATIONS-0.95%
46,100 Cellular Communications of Puerto Rico, Inc.+ (Cost $800,940)................. 1,279,275
------------
</TABLE>
12
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
VENEZUELA-2.28%
CEMENT-0.65%
712,400 C.A. Venezolana de Cementos S.A.C.A., Class 1................................. $ 874,920
21 C.A. Venezolana de Cementos S.A.C.A., Class 2................................. 23
------------
874,943
------------
ENGINEERING AND CONSTRUCTION-0.41%
295,700 Siderurgica Venezolana S.A.I.C.A. ADR......................................... 554,437
------------
FOOD AND BEVERAGE-0.54%
184,000 Mavesa S.A. ADR+.............................................................. 713,000
1,545 Mavesa S.A. ADR+,++........................................................... 5,987
------------
718,987
------------
MANUFACTURING-0.00%
3,733 Ceramica Carabobo C.A., Class A............................................... 3,241
1,866 Ceramica Carabobo C.A., Class B............................................... 1,456
------------
4,697
------------
TELECOMMUNICATIONS-0.25%
40,140 Venworld Telecommunications*+++............................................... 334,374
------------
TEXTILES-0.06%
933,886 Mantex S.A.I.C.A.............................................................. 79,763
56,660 Sudamtex de Venezuela, C.A., Class B.......................................... 5,173
------------
84,936
------------
UTILITIES-0.37%
725,443 C.A. La Electricadad de Caracas, SAICA-SACA................................... 495,678
------------
TOTAL VENEZUELA (Cost $4,285,579)............................................... 3,068,052
------------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES (Cost $116,972,145).................... 126,566,222
------------
FIXED OR FLOATING RATE INVESTMENTS-2.99%
<CAPTION>
PAR (000)
- -------------
<C> <S> <C>
ARGENTINA-0.84%
U.S.$ 1,000 Republic of Argentina, Discount Bonds, Series L, FRB, 6.5625%,
03/31/23(e)(g)............................................................... 652,500
533 Republic of Argentina, New Money Bonds FRB, 6.8125%, 10/25/99(e)(f)........... 480,000
------------
TOTAL ARGENTINA (Cost $1,060,434)............................................... 1,132,500
------------
<CAPTION>
PAR VALUE
(000) DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
BRAZIL-0.90%
U.S.$ 2,122 Federal Republic of Brazil, Capitalization Bonds PIK, 8.00%,
04/15/14(b)(e)(Cost $1,129,090).............................................. $ 1,211,106
------------
ECUADOR-0.58%
331 Republic of Ecuador, Interest Equalization Bonds FRB, 6.50%, 12/21/04(g)...... 200,588
1,715 Republic of Ecuador, Past Due Interest Bonds FRB, PIK, 6.8125%,
02/28/15(c)(g)............................................................... 576,694
------------
TOTAL ECUADOR (Cost $887,285)................................................... 777,282
------------
MEXICO-0.24%
500 United Mexican States, Par Bonds, Series A, 6.25%, 12/31/19(e) (Cost
$306,001).................................................................... 326,563
------------
VENEZUELA-0.43%
1,000 Republic of Venezuela, Par Bonds, Series W-A, 6.75%, 03/31/20 (d)(e) (Cost
$555,552).................................................................... 573,125
------------
TOTAL FIXED OR FLOATING RATE INVESTMENTS (Cost $3,938,362)...................... 4,020,576
------------
SHORT-TERM INVESTMENTS-0.21%
<CAPTION>
UNITS (000)
- -------------
<C> <S> <C>
CHILEAN INFLATION-ADJUSTED TIME
DEPOSITS-0.13%
CLP 6 Banco de O'Higgins, 6.92%, 03/11/96** (Cost $172,602)......................... 174,769
------------
<CAPTION>
NO. OF
SHARES
- -------------
<C> <S> <C>
CHILEAN MUTUAL FUNDS-0.08%
8,518 Fondo Mutuo Bonosorno Global.................................................. 32,000
3,994 Fondo Mutuo Operacional BanChile.............................................. 41,204
6,221 Fondo Mutuo Security Premium.................................................. 32,738
------------
TOTAL CHILEAN MUTUAL FUNDS (Cost $105,740)...................................... 105,942
------------
</TABLE>
13
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
VALUE
DESCRIPTION (NOTE A)
-------------------------------------------------------------------------------- ------------
<C> <S> <C>
TOTAL SHORT-TERM INVESTMENTS (Cost $278,342).................................... $ 280,711
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS (Cost $121,188,849)
(Notes A,D).............................................................. 97.45% 130,867,509
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES.................................................... 2.55% 3,422,235
----- ------------
NET ASSETS............................................................... 100.00% $134,289,744
----- ------------
----- ------------
</TABLE>
- ----------------------------------
* Not readily marketable security.
** Effective yield on the date of purchase.
+ Security is non-income producing.
++ SEC Rule 144A security. Such securities are traded only among "qualified
institutional buyers."
++ Restricted security (see Note F).
(a) With an additional 4,502,094 rights attached, expiring 01/15/96, with no
market value.
(b) Payment-in-kind; of which 4.00% is being capitalized.
(c) Payment-in-kind; of which 3.00% is being capitalized.
(d) With an additional 5,000 oil obligation certificates attached, expiring
4/15/20, with no market value.
(e) Brady Bonds.
(f) Adjustable rate; rate reset based on 6-month London Interbank Offered
Rate (LIBOR) plus 0.875%.
(g) Adjustable rate; rate reset based on 6-month LIBOR plus 0.8125%.
ADR American Depositary Receipts.
ADS American Depositary Shares.
CLP Chilean pesos.
FRB Floating Rate Bonds.
GDR Global Depositary Receipts.
ON Ordinary Shares.
PIK Payment-in-Kind.
PN Preferred Shares.
U.S.$ United States dollars.
See accompanying notes to financial statements.
14
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $121,188,849) (Note
A) $130,867,509
Cash (including $56,074 of foreign currency
holdings
with a cost of $110,137) (Note A) 5,338,949
Receivables:
Investments sold 1,119,440
Dividends 162,190
Interest 127,963
Prepaid expenses 4,602
------------
Total Assets 137,620,653
------------
LIABILITIES:
Payables:
Investments purchased 2,617,997
Advisory fees (Note B) 370,078
Administration fees (Note B) 43,412
Other accrued expenses 299,422
------------
Total Liabilities 3,330,909
------------
NET ASSETS (applicable to 7,859,999 shares of
common stock outstanding) (Note C) $134,289,744
------------
------------
NET ASSET VALUE PER SHARE
($134,289,744 DIVIDED BY 7,859,999) $17.09
------------
------------
Net assets consist of:
Capital stock, $0.001 par value; 7,859,999
shares issued and outstanding
(100,000,000 shares authorized) $ 7,860
Paid-in capital 130,572,131
Undistributed net investment income 1,490,854
Accumulated net realized loss on investments and
foreign currency related transactions (7,397,695)
Net unrealized appreciation in value of
investments and translation of other assets and
liabilities denominated in foreign currencies 9,616,594
------------
Net assets applicable to shares outstanding $134,289,744
------------
------------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income (Note A):
Dividends $ 2,955,302
Interest 1,368,854
Less: Foreign taxes withheld (122,169)
------------
Total Investment Income 4,201,987
------------
Expenses:
Investment advisory fees (Note B) 1,659,751
Administration fees (Note B) 333,825
Custodian fees (Note B) 210,548
Audit and legal fees 80,732
Transfer agent fees 55,061
Printing 53,229
Insurance 46,253
Accounting fees 35,853
Amortization of organizational costs 30,530
Directors' fees 29,451
NYSE listing fee 16,170
Other 24,828
Chilean repatriation taxes (Note A) 297,603
------------
Total Expenses 2,873,834
Less: Fee waivers (Note B) (162,701)
------------
Net Expenses 2,711,133
------------
Net Investment Income 1,490,854
------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY RELATED
TRANSACTIONS:
Net realized gain/(loss) from:
Investments (7,361,121)
Foreign currency related transactions 19,059
Net change in unrealized appreciation in value
of investments and translation
of other assets and liabilities denominated
in foreign currencies (16,912,743)
------------
Net realized and unrealized loss on
investments and foreign currency related
transactions (24,254,805)
------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(22,763,951)
------------
------------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994
----------------- ------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 1,490,854 $ 538,222
Net realized gain/(loss) on investments
and foreign currency related
transactions (7,342,062) 34,568,804
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities denominated
in foreign currencies (16,912,743) (35,400,381)
----------------- ------------
Net decrease in net assets resulting from
operations (22,763,951) (293,355)
----------------- ------------
Dividends and distributions to shareholders
from:
Net investment income -- (379,665)
Net realized gains on investments (1,492,105) (33,609,403)
----------------- ------------
Total dividends and distributions to
shareholders (1,492,105) (33,989,068)
----------------- ------------
Capital share transactions (Note C):
Proceeds from the sale of 2,282,740
shares in rights offering -- 50,380,357
Proceeds from 98,012 and 20,673 shares,
respectively, issued in reinvestment of
dividends 1,820,380 601,896
Offering costs charged to capital -- (485,000)
Reduction of offering costs charged to
capital 52,713 --
----------------- ------------
Net increase in net assets resulting from
capital share transactions 1,873,093 50,497,253
----------------- ------------
Total increase/(decrease) in net assets (22,382,963) 16,214,830
NET ASSETS:
Beginning of year 156,672,707 140,457,877
----------------- ------------
End of year (including undistributed net
investment income of $1,490,854 and $0,
respectively) $ 134,289,744 $156,672,707
----------------- ------------
----------------- ------------
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
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
AUGUST 1, 1990*
FOR THE YEAR ENDED DECEMBER 31, THROUGH
-------------------------------------------------------------- DECEMBER 31,
1995 1994+ 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $20.18 $25.73 $25.36 $26.05 $14.24 $ 13.64**
---------- ---------- ---------- ---------- ---------- ---------------
Net investment income 0.19 0.09 0.08 0.24 0.61 0.29
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions (3.09) 1.29 10.18 1.51 14.66 0.58
---------- ---------- ---------- ---------- ---------- ---------------
Net increase/(decrease) in net assets from
operations (2.90) 1.38 10.26 1.75 15.27 0.87
---------- ---------- ---------- ---------- ---------- ---------------
Dividends and distributions to
shareholders:
From net investment income -- (0.07) (0.22) -- (0.63) (0.27)
From net realized gains on investments and
foreign currency related transactions (0.19) (4.33) (8.61) (2.44) (2.83) --
In excess of net realized gains -- -- (0.04) -- -- --
---------- ---------- ---------- ---------- ---------- ---------------
Total dividends and distributions to
shareholders (0.19) (4.40) (8.87) (2.44) (3.46) (0.27)
---------- ---------- ---------- ---------- ---------- ---------------
Dilution due to capital share rights
offering -- (2.53) (1.02) -- -- --
---------- ---------- ---------- ---------- ---------- ---------------
Net asset value, end of period $17.09 $20.18 $25.73 $25.36 $26.05 $ 14.24
---------- ---------- ---------- ---------- ---------- ---------------
---------- ---------- ---------- ---------- ---------- ---------------
Market value, end of period $14.750 $18.750 $31.500 $24.375 $26.500 $11.125
---------- ---------- ---------- ---------- ---------- ---------------
---------- ---------- ---------- ---------- ---------- ---------------
Total investment return(a) (20.34)% (26.63)%(d) 89.45%(d) 2.35% 167.96% (18.35)%
---------- ---------- ---------- ---------- ---------- ---------------
---------- ---------- ---------- ---------- ---------- ---------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $134,290 $156,673 $140,458 $102,259 $104,435 $57,081
Ratio of expenses to average net assets 1.78%(f) 1.72%(e) 2.06% 2.31%(e) 2.30% 3.27%(b)
Ratio of net investment income to average
net assets 1.32%(f) 0.63%(e) 1.45% 1.15%(e) 2.85% 5.10%(b)
Portfolio turnover rate 38.71% 77.81% 70.17% 55.40% 82.39% 52.49%(c)
</TABLE>
- ------------------------------
* Commencement of investment operations.
** Initial public offering price of $15.00 per share less underwriting discount
of $1.05 per share and offering expenses of $0.31 per share.
+ Based on average shares outstanding.
(a) Total investment return at market value is based on the changes in market
price of a share during the period and assumes reinvestment of dividends and
distributions, if any, at actual prices pursuant to the Fund's dividend
reinvestment plan. Total investment return does not reflect brokerage
commissions or initial underwriting discounts and has not been annualized.
In addition, such returns have been restated to reflect the reinvestment of
dividends and distributions, if any, on the ex-dividend date.
(b) Annualized.
(c) Not annualized.
(d) Excludes dilutive effect of rights offering.
(e) Ratios do not include effect of taxes. The ratios of expenses to average net
assets and net investment income to average net assets would have been 2.02%
and 0.34% for the year ended December 31, 1994; and 2.61% and 0.85% for the
year ended December 31, 1992, respectively, with the inclusion of the taxes.
(f) Ratios are presented net of fee waivers and do not include the effect of
repatriation taxes. Without fee waivers and including the effect of
repatriation taxes the ratios of expenses to average net assets and net
investment income to average net assets would have been 2.12% and 0.98%,
respectively.
See accompanying notes to financial statements.
18
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE A. SIGNIFICANT
ACCOUNTING POLICIES
The Latin America Investment Fund, Inc. (the "Fund") was incorporated in
Maryland on April 17, 1990 and commenced investment operations on August 1,
1990. The Fund is registered under the Investment Company Act of 1940, as
amended, as a closed-end, non-diversified management investment company.
Significant accounting policies are as follows:
PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All equity securities for which market quotations are
readily available are valued at the last sales price or lacking any sales, at
the closing price last quoted for the securities (but if bid and asked
quotations are available, at the mean between the current bid and asked prices).
Securities that are traded over-the-counter are valued at the mean between the
current bid and the asked prices, if available. All other securities and assets
are valued as determined in good faith by the Board of Directors. Short-term
investments having a maturity of 60 days or less are valued on the basis of
amortized cost. The preparation of financial statements requires the use of
estimates by management, principally the valuation of non-publicly traded
securities. Accordingly, the Board of Directors has established general
guidelines for calculating fair value of non-publicly traded securities. At
December 31, 1995, the Fund held 7.13% of its net assets in securities valued in
good faith by the Board of Directors with an aggregate cost of $9,389,157 and
fair value of $9,572,154. The net asset value per share of the Fund is
calculated weekly, at the end of each month and at any other times determined by
the Board of Directors.
CASH: Deposits held at Brown Brothers Harriman & Co. (Grand Cayman), the
Fund's custodian, in a variable rate account are classified as cash. At December
31, 1995, the interest rate was 4.94% which resets on a daily basis. Amounts are
generally available on the same business day.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.
TAXES: No provision is made for U.S. federal income or excise taxes as it is
the Fund's intention to continue to qualify as a regulated investment company
and to make the requisite distributions to its shareholders which will be
sufficient to relieve it from all or substantially all U.S. federal income and
excise taxes.
At December 31, 1995, the Fund had a capital loss carryover of $5,842,282
which expires in 2003.
For U.S. federal income tax purposes, realized capital losses and foreign
exchange losses incurred after October 31, 1995, within the fiscal year, are
deemed to arise on the first day of the following fiscal year. The Fund incurred
and elected to defer capital losses of $1,520,544.
Income received by the Fund from sources within Latin America may be subject
to withholding and other taxes imposed by Latin American countries. Also,
certain Latin American countries impose taxes on funds remitted or repatriated
from such countries.
The Fund is subject to a 10% Chilean repatriation tax with respect to all
remittances from Chile in excess of original invested capital. For the year
ended December 31, 1995, the Fund incurred $297,603 of such taxes.
19
<PAGE>
THE LATIN AMERICA INVESTMENT 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 U.S. federal
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 on investments, foreign currency holdings,
and other assets and liabilities denominated in foreign currencies.
Net realized foreign exchange losses represent foreign exchange gains and
losses from sales and maturities of debt securities, transactions in foreign
currencies and forward foreign currency contracts, exchange gains or losses
realized between the trade date and settlement dates on security transactions,
and the difference between the amounts of interest and dividends recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received.
DISTRIBUTIONS OF INCOME AND GAINS: The Fund distributes at least annually to
shareholders, substantially all of its net investment income and net realized
short-term capital gains, if any. The Fund determines annually whether to
distribute any net realized long-term capital gains in excess of net short-term
capital losses, including capital loss carryovers, if any, although it currently
expects to distribute such gains. An additional distribution may be made to the
extent necessary to avoid the payment of a 4% U.S. federal excise tax. Dividends
and distributions to shareholders are recorded by the Fund on the ex-dividend
date.
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.
Some countries require governmental approval for the repatriation of
investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if there is a deterioration in a country's balance of
payments or for other reasons, a country may impose temporary restrictions on
foreign capital
20
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
remittances abroad. Amounts repatriated prior to the end of specified periods
may be subject to taxes as specified in the Fund's prospectus.
The Latin American 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 major securities exchange are held by a small number of
investors. This may limit the number of shares for acquisition or disposition by
the Fund.
The Fund, subject to local investment limitations, may invest up to 25% 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.
The Fund is permitted to engage in the trading of sovereign debt of Latin
American countries which involves a high degree of risk. The issuer of the debt
or the governmental authorities that control the repayment of the debt may be
unable or unwilling to repay principal and/or interest when due in accordance
with the terms of such debt. Sovereign debt in which the Fund will invest is
widely considered to have a credit quality below investment grade as determined
by U.S. rating agencies. As a result, sovereign debt may be regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations and involves
major risk exposure to adverse conditions.
NOTE B. AGREEMENTS
BEA Associates ("BEA") serves as the Fund's investment adviser, with respect to
all investments other than sovereign debt. As compensation for its advisory
services, BEA receives from the Fund an annual fee, calculated weekly and paid
quarterly, equal to 1.0625% of the first $100 million of the Fund's average
weekly net assets, 0.9775% of the next $50 million of the Fund's average weekly
net assets and 0.8925% of amounts over $150 million. BEA has agreed to waive its
portion of the advisory fee previously payable to Merchant Bankers Asociados
S.A., Patrimonio Planejamento Financeiro Ltda., and Acci Worldwide S.A. de C.V.
(the "Sub-Advisers") who had been employed by the Fund as sub-advisers through
March 1, 1994, August 15, 1994, and November 16, 1994, respectively. In
addition, BEA receives from the Fund an administration fee, which represents a
reimbursement of certain Fund expenses. For the year ended December 31, 1995,
advisory and administration fees amounted to $1,411,019 and $8,927,
respectively, of which BEA waived $138,296 in advisory fees previously payable
to its Sub-Advisers.
Salomon Brothers Asset Management Inc. ("SBAM") serves as the Fund's
investment adviser with respect to sovereign debt. In return for its services,
SBAM is paid an annual fee, calculated weekly and paid quarterly, equal to
0.1875% of the first $100 million of the Fund's average weekly net assets,
0.1725% of the next $50 million of the Fund's average weekly net assets and
0.1575% of amounts over $150 million. SBAM has agreed to waive its portion of
the advisory fee previously payable to the Sub-Advisers.
21
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
For the year ended December 31, 1995, advisory fees amounted to $248,732 of
which $24,405 was waived by SBAM.
Celfin Servicios Financieros Limitada (formerly Celfin Agente de Valores
Limitada) ("Celfin") serves as the Fund's sub-adviser with respect to Chilean
investments. In return for its services, Celfin is paid a fee out of the
advisory fees payable to BEA and SBAM, computed weekly and paid quarterly at an
annual rate of 0.05% of the Fund's average weekly net assets. For the year ended
December 31, 1995, these sub-advisory fees amounted to $67,792.
Through August 10, 1995, PFPC Inc. ("PFPC") served as the Fund's U.S.
administrator. The Fund paid PFPC a fee that was computed weekly and paid
quarterly at an annual rate of 0.10% of the value of the Fund's average weekly
net assets, which was subject to a minimum annual fee. For the period January 1,
1995 through August 10, 1995, PFPC earned $81,871 for administrative services.
Effective August 11, 1995, Bear Stearns Funds Management Inc. ("BSFM") serves
as the Fund's U.S. administrator. The Fund pays BSFM a monthly fee that is
computed weekly at an annual rate of 0.10% of the first $100 million of the
Fund's average weekly net assets and 0.08% of amounts in excess of $100 million.
For the period August 11, 1995 through December 31, 1995, BSFM earned $50,700
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 an annual fee by the Fund equal to the greater of 2,000
U.F.'s (approximately $61,300 at December 31, 1995) or 0.10% of the Fund's
average weekly net assets and an annual reimbursement of out-of-pocket expenses
not to exceed 500 U.F.'s. Such fees are paid by AFICE to Celfin for certain
administrative services. An accounting fee is also paid to Celfin which is
calculated and paid quarterly at an annual rate of 205.32 U.F.'s (approximately
$6,300 at December 31, 1995). For the year ended December 31, 1995, Celfin
earned $135,663 and $6,193 for administration and accounting services,
respectively.
Through June 20, 1995, Banco Bradesco de Investimento S.A. ("Bradesco") served
as the Fund's Brazilian Economic Adviser and Administrator. For its services,
Bradesco was paid an annual fee by the Fund equal to the greater of $40,000 or
0.10% of the Fund's average weekly net assets invested in Brazil. For the period
January 1, 1995 through June 20, 1995, the administration fees amounted to
$28,418.
Through June 20, 1995, PNC Bank, N.A., and Citibank, N.A. served as the
custodian for the Fund's U.S. and foreign assets (other than Brazilian and
Mexican assets), respectively. Banco Bradesco S.A. served as the custodian for
the Fund's Brazilian assets and S.D. Indeval, S.A. de C.V. served as custodian
for the Fund's Mexican assets. Effective June 21, 1995, Brown Brothers Harriman
& Co. serves as the custodian for all of the Fund's U.S. and foreign assets.
Through September 4, 1995, PNC Bank, N.A. served as the Fund's transfer agent
and registrar. Effective
September 5, 1995, The First National Bank of Boston serves as the Fund's
transfer agent and registrar.
NOTE C. CAPITAL STOCK
The authorized capital stock of the Fund is 100,000,000 shares of common stock,
$0.001, par value. Of the 7,859,999 shares outstanding at December 31, 1995, BEA
owned 7,169 shares.
During the year ended December 31, 1994, the Fund issued 2,282,740 shares in
connection with a rights offering of the Fund's shares. Shareholders of record
on October 3, 1994 were issued one nontransferable
22
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
right for each share of common stock owned, entitling shareholders the
opportunity to acquire one newly issued share of common stock for every three
rights held at a subscription price of $22.93 per share. Shareholders who fully
exercised all the rights issued to them in the Primary Subscription were allowed
to purchase additional shares at the same price under an overallotment
agreement. Offering costs of $1,962,871 for sales commissions and $432,287 for
expenses attributed to the rights offering were charged to additional paid-in
capital.
NOTE D. INVESTMENT TRANSACTIONS
For U.S. federal income tax purposes, the cost of securities owned at December
31, 1995 was $121,233,438. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currencies) of
$9,634,071, was composed of gross appreciation of $30,401,504 for those
investments having an excess of value over cost and gross depreciation of
$20,767,433 for those investments having an excess of cost over value.
For the year ended December 31, 1995, purchases and sales of securities, other
than short-term obligations, were $50,865,864 and $52,912,141, respectively.
NOTE E. CREDIT AGREEMENT
The Fund, along with 15 other U.S. registered investment companies for which BEA
serves as investment adviser, has a credit agreement with The First National
Bank of Boston. The agreement provides that each fund is permitted to borrow an
amount equal to the lesser of $50,000,000 or 25% of the net assets of the fund.
However, at no time shall the aggregate outstanding principal amount of all
loans to any of the 16 funds exceed $50,000,000. The line of credit will bear
interest at (I) the greater of the bank's prime rate or the Federal Funds
Effective Rate plus 0.50% or (II) the Adjusted Eurodollar Rate plus 1.50%. The
Fund had no amounts outstanding under the credit agreement at December 31, 1995.
23
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE F. RESTRICTED SECURITIES
Certain of the Fund's investments are restricted as to resale and are valued at
the direction of the Fund's Board of Directors in good faith, at fair value,
after taking into consideration appropriate indications of value. The table
below shows the number of shares held, the acquisition dates, aggregate cost,
fair value at December 31, 1995, share value of the securities and percent of
net assets which the securities comprise.
<TABLE>
<CAPTION>
FAIR
VALUE
NUMBER OF AT VALUE PER PERCENT OF
SECURITY SHARES ACQUISITION DATES COST 12/31/95 SHARE NET ASSETS
- -------------------------------- ----------- ------------------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Venworld Telecommunications 40,140 7/30/92 & 8/07/92 $ 816,959 $ 334,374 $ 8.33 0.25
</TABLE>
NOTE G. QUARTERLY RESULTS OF OPERATIONS (unaudited)
<TABLE>
<CAPTION>
NET GAIN/(LOSS)
ON INVESTMENT NET
AND FOREIGN INCREASE/(DECREASE)
NET CURRENCY IN NET
INVESTMENT INVESTMENT RELATED ASSETS RESULTING
INCOME INCOME/(LOSS) TRANSACTIONS FROM OPERATIONS MARKET PRICE
----------------- ----------------- ------------------ ------------------ ON NYSE
TOTAL PER TOTAL PER TOTAL PER TOTAL PER --------------------
QUARTER ENDED (000) SHARE (000) SHARE (000) SHARE (000) SHARE HIGH LOW
- ------------------------- ------- ------- ------- ------- -------- ------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1995........... $ 976 $ 0.12 $ 403 $ 0.05 $(40,173) $(5.12) $(39,770) $(5.07) $19.125 $13.875
June 30, 1995............ 1,151 0.15 561 0.07 21,424 2.73 21,985 2.80 17.250 14.875
September 30, 1995....... 1,190 0.15 585 0.07 663 0.08 1,248 0.15 18.750 15.000
December 31, 1995........ 885 0.11 (58) -- (6,169) (0.78) (6,227) (0.78) 15.125 13.625
------- ------- ------- ------- -------- ------- -------- -------
Totals............... $ 4,202 $ 0.53 $ 1,491 $ 0.19 $(24,255) $(3.09) $(22,764) $(2.90)
------- ------- ------- ------- -------- ------- -------- -------
------- ------- ------- ------- -------- ------- -------- -------
March 31, 1994........... $ 515 $ 0.10 $ (290) $(0.05) $ 1,461 $ 0.28 $ 1,171 $ 0.23 $35.750 $23.875
June 30, 1994............ 1,053 0.19 442 0.08 (9,499) (1.74) (9,057) (1.66) 25.500 21.875
September 30, 1994....... 943 0.17 26 0.01 41,267 7.53 41,293 7.54 31.750 23.750
December 31, 1994........ 1,241 0.18 360 0.05 (34,061) (4.78) (33,701) (4.73) 27.750 18.750
------- ------- ------- ------- -------- ------- -------- -------
Totals............... $ 3,752 $ 0.64 $ 538 $ 0.09 $ (832) $ 1.29 $ (294) $ 1.38
------- ------- ------- ------- -------- ------- -------- -------
------- ------- ------- ------- -------- ------- -------- -------
</TABLE>
24
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of The Latin America Investment Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of The
Latin America Investment Fund, Inc., including the schedule of investments, as
of December 31, 1995, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1995 by correspondence with the custodian, brokers and issuers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Latin America Investment Fund, Inc. as of December 31, 1995, the results of its
operations for the year then ended, the changes in net assets for each of the
two years in the period then ended, and its financial highlights for each of the
periods presented, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 16, 1996
25
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (unaudited)
On April 25, 1995, the annual meeting of shareholders of The Latin America
Investment 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 VOTES FOR VOTES WITHHELD NON-VOTES
- -------------------------------------------------------------- ---------- --------------- ----------
<S> <C> <C> <C>
Peter Gordon.................................................. 5,679,929 42,637 2,130,616
Daniel Sigg................................................... 5,679,278 43,288 2,130,616
Martin Torino................................................. 5,679,278 43,288 2,130,616
</TABLE>
In addition to the directors re-elected at the meeting, Emilio Bassini,
James Cattano, Michael Hyland, and George Landau continue to serve as
directors of the Fund.
(2) To ratify the selection of Coopers & Lybrand L.L.P. as independent public
accountants for the year ending December 31, 1995.
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST VOTES WITHHELD NON-VOTES
---------- ------------- --------------- ----------
<S> <C> <C> <C> <C>
5,679,008 29,998 13,560 2,130,616
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX INFORMATION (unaudited)
The Fund is required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise its shareholders within 60 days of the Fund's fiscal year end
(December 31, 1995) as to the U.S. federal tax status of distributions received
by the Fund's shareholders in respect of such fiscal year. Of the $0.19 per
share distribution paid in respect of such fiscal year, $0.03 per share was
derived from net realized short-term capital gains and $0.16 per share was 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 1995.
Notification for calendar year 1995 was mailed in January 1996. The notification
reflected the amount to be used by calendar year taxpayers on their U.S. federal
income tax returns along with Form 1099-DIV.
Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of their 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.
26
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN
Pursuant to The Latin America Investment 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,
27
<PAGE>
THE LATIN AMERICA INVESTMENT FUND, INC.
- --------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN (continued)
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 invested. A participant's tax basis in his shares
acquired through his optional investment right will equal his cash payments to
the Plan, including any cash payments used to pay brokerage commissions
allocable to his acquired shares.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of the
participant and each shareholder's proxy will include those shares purchased
pursuant to the Plan.
In the case of a shareholder, such as a bank, broker or nominee, that holds
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are to participate in the
Plan.
There is no charge to participants for reinvesting dividends or capital gains
distributions payable in either stock or cash. The Plan Agent's fees for the
handling of reinvestment of such dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage charges with respect to shares
issued directly by the Fund as a result of dividends and capital gains
distributions payable either in stock or in cash. However, each participant will
be charged by the Plan Agent a pro rata share of brokerage commissions incurred
with respect to the Plan Agent's open market purchases in connection with
voluntary cash payments made by the participant or the reinvestment of dividends
and capital gains distributions payable only in cash. Brokerage charges for
purchasing small amounts of stock for individual accounts through the Plan are
expected to be less than the usual brokerage charges for such transactions
because the Plan Agent will be purchasing stock for all participants in blocks
and prorating the lower commission thus obtainable. Brokerage commissions will
vary based on, among other things, the broker selected to effect a particular
purchase and the number of participants on whose behalf such purchase is being
made. The Fund cannot predict, therefore, whether the cost to a participant who
makes a voluntary cash payment will be less than if a participant were to make
an open market purchase on the Fund's common stock on his own behalf.
The receipt of dividends and distributions in stock under the Plan will not
relieve participants of any income tax (including withholding tax) that may be
payable on such dividends and distributions.
Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to notice of the termination sent to the members of the Plan at
least 30 days before the semiannual contribution date, in the case of voluntary
cash payments, or the record date for dividends or distributions. The Plan also
may be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by at least 30 days' written notice to members of the Plan. All
correspondence concerning the Plan should be directed to the Plan Agent, The
First National Bank of Boston, Investor Relations Department, P.O. Box 644, Mail
Stop 45-02-09, Boston, Massachusetts 02102-0644 or by telephone at
1-800-730-6001.
28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
BEA Associates
New York, New York
Salomon Brothers Asset Management Inc.
New York, New York
ADMINISTRATOR
Bear Stearns Funds Management Inc.
New York, New York
TRANSFER AGENT AND REGISTRAR
The First National Bank of Boston
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
LEGAL COUNSEL
Willke Farr & Gallagher
New York, New York
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. It is not a prospectus, circular
or representation intended for use in the purchase or sale of shares of the Fund
or of any securities mentioned in this report.
THE LATIN AMERICA
----------------------
INVESTMENT FUND, INC.
--------------------------
THE LATIN AMERICA
INVESTMENT FUND, INC.
ANNUAL REPORT
DECEMBER 31, 1995
