<PAGE>
THE LATIN AMERICA
INVESTMENT FUND, INC.
.....................
Annual Report
December 31, 1996
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders....................................................................... 1
Portfolio Summary............................................................................ 7
Schedule of Investments...................................................................... 9
Statement of Assets and Liabilities.......................................................... 16
Statement of Operations...................................................................... 17
Statement of Changes in Net Assets........................................................... 18
Financial Highlights......................................................................... 19
Notes to Financial Statements................................................................ 20
Report of Independent Accountants............................................................ 25
Results of Annual Meeting of Shareholders.................................................... 26
Tax Information.............................................................................. 26
Description of Dividend Reinvestment and Cash Purchase Plan.................................. 27
</TABLE>
PICTURED ON THE COVER IS THE BOLSA DE VALORES DO SAO PAULO STOCK EXCHANGE
("BOVESPA") LOCATED IN SAO PAULO, BRAZIL.
- --------------------------------------------------------------------------------
<PAGE>
LETTER TO SHAREHOLDERS
February 14, 1997
DEAR SHAREHOLDER:
We are pleased to report on the activities of The Latin America Investment Fund,
Inc. (the "Fund") for the year ended December 31, 1996.
PERFORMANCE
At December 31, 1996, the Fund's net assets were $150.0 million. The Fund's net
asset value ("NAV") was $19.07 per share (net of dividends paid of $0.23 per
share), as compared to $17.09 on December 31, 1995.
For the period January 1, 1996 through December 31, 1996, the Fund's total
return, based on NAV and assuming the reinvestment of dividends and
distributions, was 13.1%. By comparison, the total return of the benchmark
Morgan Stanley Capital International Emerging Markets Latin America Free Index
(the "Index") was 22.2%.
The Fund's underperformance relative to the Index can primarily be attributed to
country selection and, to a lesser extent, stock selection. For example, we
significantly overweighted our position in Chile, a market which has
historically been strong but fell short of expectations in 1996. Although the
Chilean stocks in the portfolio outperformed, they underperformed relative to
those in other markets (notably Brazil and Argentina). Stock selection proved
most positive in Mexico. Overall, the Fund's returns were disappointing
principally due to its large Chilean component.
From the commencement of investment operations on August 1, 1990 through
December 31, 1996, the Fund's total return, based on NAV and assuming the
reinvestment of dividends and distributions, was 269.2%. The Index returned
255.0% during this period.
INVESTMENT PERSPECTIVE
The outperformance of aggregate Latin equities in 1996 was a clear signal that
there has been a strong reversal of the effects of the "Tequila crisis," or
Mexican peso devaluation of December 1994. In fact, we believe both that
macroeconomic fundamentals in Latin America are better now than at any point in
recent years and equities there possess real investment value.
Our conviction is based on a variety of factors. Foremost is the remarkably
strong and swift recovery from the Tequila crisis, which served as a catalyst
for a dramatic shift toward economic and political liberalization throughout the
region. Such change, which was impossible for years, is taking place now at a
relatively rapid rate, most prominently in Brazil and Mexico.
In addition:
- - Latin equity markets are among the world's cheapest in terms of standard
valuation measures such as the price/ book value and price/cash earnings
ratios as well as the valuation of assets in recent transactions.
- --------------------------------------------------------------------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
- - The recent strength of Latin debt markets has positive implications for Latin
equities. First, it indicates that perceptions of sovereign risk have
meaningfully improved. Second, the same economic conditions that have powered
debt performance also are very favorable for stocks; since debt outperformed
stocks in most Latin nations in 1996, it is reasonable to expect that stocks
will catch up.
- - Global economic conditions (E.G., stable interest rates, low inflation,
moderate growth, ample liquidity) are quite conducive to investment in
financial assets.
- - The globalization of communications and business is giving Latin nations much
greater access to foreign capital, technology and business expertise.
All in all, we see much room for optimism about Latin American equities. To best
illustrate our investment approach, we'd now like to discuss a few of our
specific holdings.
BANCO DE COLOMBIA
Banco de Colombia ("BdC") is among Colombia's most venerable institutions. It
was founded in 1875 and is the country's second-largest bank in terms of assets,
deposit base and loan portfolio. In 1986, the Colombian government assumed
control of BdC during a nationwide banking crisis. The company remained in
government hands until its privatization in early 1994.
At privatization, the Gilinski family of Colombia acquired control over about
76% of BdC's voting equity. In October 1996, the bank announced that Spain's
third-largest bank, Banco Central Hispanoamericano (BCH), would purchase up to a
19% voting stake in early 1997. Many analysts believe that BCH's move simply is
the initial step toward the eventual acquisition of complete control.
Because new management has focused on efficiency and cost-reduction in the
post-privatization period, BdC's recent operating results have not been
noteworthy. Accordingly, its stock has remained fairly static, which we consider
part of its appeal as an attractive turnaround situation. A combination of
company-specific and domestic factors bodes well for BdC's future prospects:
EMPHASIS ON EFFICIENCY VS. MARKET SHARE. Since privatization, BdC has
meaningfully reduced both its work force and number of branches, aggressively
written down problem loans and significantly upgraded its technology
infrastructure. This emphasis on efficiency has come at the expense of market
share, but we sense that the bank is much closer to turning its attention to its
competitors than it has been in many years.
SOLID NEW MANAGEMENT. Almost all of senior management came to the bank in the
period following privatization. The new team brings substantial experience in
Latin American banking and commands great respect within the market.
BENEFITS OF BCH STAKE. BCH's investment brings several benefits to the bank,
including an injection of cash that will boost its capital base; considerable
prior experience in Latin America through its other regional investments;
expertise in asset/liability management; and access to newer technology.
- --------------------------------------------------------------------------------
2
<PAGE>
LETTER TO SHAREHOLDERS
VALUATION. We believe that, at current prices, BdC shares do not sufficiently
reflect the bank's improving outlook. They also are attractively valued relative
to those of the other Colombian banks.
IMPROVING POLITICAL AND ECONOMIC CLIMATE. Only a few months ago, U.S. pressure
and charges of drug-related corruption appeared to be sending both President
Samper and investors to the exit door. Conditions are quite different now.
Samper managed to hang on and, hence, a general climate of political stability
has been restored. Perhaps most important, Samper is taking constructive steps
to address a serious fiscal deficit problem. His planned fiscal package should
have several desired results for investors, most notably a badly needed decline
in interest rates and a depreciation of the peso currency.
HIGH MARKET GROWTH POTENTIAL. In general, there is considerable growth potential
for Colombia's banks. Market penetration is low and new credit has been
unavailable for many borrowers due to high interest rates. A decline in interest
rates, which we expect, should greatly help to reverse these conditions.
COMPANHIA SIDERURGICA NACIONAL
Within Latin America, Companhia Siderurgica Nacional ("CSN") is the largest
integrated steel mill and has the highest value-added product mix. It was
privatized in 1993 by the Brazilian government, which had controlled it since
its 1941 inception.
CSN has embarked on a diversification program in the last couple of years by
buying equity stakes in entities whose businesses include electricity generation
and distribution, railroads and cement. Although many analysts are critical of
such diversification, we view it as a means for CSN to achieve full vertical
integration and gain greater control over its costs. These latter
characteristics should prove especially valuable for CSN should the Brazilian
steel industry undergo an expected wave of consolidation.
Briefly, here is why we like CSN:
- - Its primary customers are consumer-oriented (I.E., autos, appliances,
beverages) sectors that should outperform the Brazilian economy in the
mid-term.
- - Its free cash flow and profit margins are likely to significantly increase as
its large investments in cost-efficiency begin to pay off soon.
- - It is Brazil's overall second-largest exporter, which enables it both to
benefit from the strong dollar and have a built-in hedge against downturns in
the domestic market.
- - It is a major supplier to the auto industry, which will experience substantial
growth over the next few years as numerous foreign manufacturers bring new
plants onstream in Brazil.
- - Its shares are cheaply valued relative both to its Brazilian peers and some
U.S. steel companies by several valuation standards.
- - As one of the only non-government-controlled companies with sufficient
resources to make large acquisitions, it is especially well-positioned to
participate in the bidding for the many upcoming Brazilian privatizations.
- --------------------------------------------------------------------------------
3
<PAGE>
LETTER TO SHAREHOLDERS
CORPORACION GEO, S.A. DE C.V.
A Mexican company that we like is Corporacion GEO, S.A. de C.V. ("Geo"). As the
largest builder of subsidized housing in Mexico, Geo (pronounced "Hayo")
occupies a singular niche within the country's overall construction sector. Its
shares can be considered an equity play on the development of Mexican
infrastructure as well as the improving condition of the nation's economy.
The general environment for subsidized housing in Mexico is quite positive for a
builder like Geo. There is a chronic shortage of low-income housing, the
reduction of which is a high priority of the Zedillo administration. Over 40% of
the working population cannot afford a home without some kind of financing
assistance, which gives Geo a huge universe of potential home buyers. The
low-income housing sector is relatively less sensitive both to interest-rate
movements and the availability of bank credit. Builders of low-income housing,
furthermore, are fragmented (E.G., the eight top manufacturers accounted for
only an estimated 20% of total units produced in 1995) and locally oriented,
leaving much room for growth among the largest players. Competition from foreign
companies is very low and unlikely to increase.
In addition to this favorable operating climate, numerous company-specific
factors bode well for Geo's performance over the next few years:
STRONG PROJECTED EARNINGS GROWTH. Analysts forecast earnings to grow at an
annualized rate of 20-30%.
HIGH INSIDER STOCK OWNERSHIP. Senior management owns 52% of the stock, meaning
that their interests are closely aligned with those of other shareholders.
COMPETITIVE ADVANTAGES. Geo's integrated approach to design, construction and
marketing, as well as its unusually low debt level, enable it to operate at a
scale and quality standard simply unattainable by its competitors.
LOW FINANCIAL RISK. Normally, builders incur significant financial risk by
having to finance all of the costs involved in construction until the house is
sold. Geo operates in a way that relieves them of such risk: it does not build
until a house is sold; many of the costs to which it is exposed are indexed to
inflation; its typical construction time is a relatively quick six months; and
it is paid by government-backed programs rather than individual buyers.
SIZE. As the largest player in a fragmented industry, it is well-positioned to
compete on the basis of price, grow via consolidation and outlast most of its
competitors during tough economic times. We note in this latter context that Geo
was the only Mexican construction company of any kind whose operating-level
performance grew during the peso crisis.
NATIONAL PRESENCE. Geo is one of the few subsidized housing builders to operate
beyond the local or regional level and is planning further expansion (both
within Mexico and Latin America more generally). This should help it to achieve
economies of scale, reduce risk against regional slowdowns and provide it with
additional opportunities for revenues and profits.
- --------------------------------------------------------------------------------
4
<PAGE>
LETTER TO SHAREHOLDERS
OUTLOOK
Looking ahead, here are our thoughts on several Latin American markets:
- - ARGENTINA'S rebound from its 1995 recession began in mid-1996 and remains in
full swing. 1996 GDP grew a bit more than 4%, ahead of the government's own
forecast, and is expected to rise about 5% this year. Industrial production is
very strong. Perhaps most significant, foreign investment in the Argentine
financial markets reached a record-high $16.8 billion in December, indicating
that global investors are quite optimistic.
- - BRAZIL continues to move in a positive direction. President Cardoso's proposed
re-election amendment, widely viewed as the key to enactment of vital economic
legislation, was recently approved by the lower house of Congress and appears
likely to obtain passage in the Senate as well. Growth of GDP in 1996,
furthermore, was 3.1%. This bodes well for further interest-rate cuts because
it indicates that the economy is growing at a sustainable, non-inflationary
pace following years of hyperinflation. In our view, Brazil remains the most
attractive of the Latin equity markets.
- - In CHILE, the economy has fallen victim to its own strength. With wages and
consumer spending rising at overheating levels in 1995 and well into 1996, the
Chilean central bank twice raised rates to squeeze out inflation. Equities
responded by declining 13.5% in 1996, by far the worst performance among Latin
markets for the year. We see signs that the situation may be improving,
however: the central bank implemented the first of an anticipated series of
rate cuts in early February 1997 (sooner than expected) and the level of
foreign direct investment is reaching record highs.
- - In the latest demonstration of its economic resurgence, MEXICO completed the
prepayment of its Tequila crisis emergency loan from the U.S. in January 1997.
Privatization appears to be back on track after the government reversed its
intention to sell off its powerful oil company. Interest rates have
substantially declined and will likely drop even more. President Zedillo is
retaking control of the dominant PRI party. We continue to favor shares of
infrastructure-related and selected consumer stocks. Overall, we consider this
market very attractive.
- - Equity valuations in PERU are compelling. At the same time, the economy has
returned to a growth mode after a government-induced slowdown. 1996 GDP growth
rose for the fourth consecutive year, with all sectors of the economy closing
out the year with positive returns in December. We anticipate a strong rally
in Peruvian stocks within the next few months and, because the market is
relatively illiquid, have positioned the Fund's holdings in advance so as to
generate optimal performance.
In an important organizational development, Richard W. Watt of BEA Associates
has been named as the Fund's President and Chief Investment Officer as of
January 1, 1997. Richard has contributed his expertise in emerging equity
markets to the Fund and several other BEA closed-end funds since joining BEA in
1995. He succeeds Emilio Bassini, who guided the Fund from its 1990 inception
through the end of 1996. Emilio resigned his position in order to focus his
efforts exclusively on private equity investments through his recently organized
firm, Bassini, Playfair + Associates LLC, and will continue to serve BEA as a
consultant.
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
- --------------------------------------------------------------------------------
5
<PAGE>
LETTER TO SHAREHOLDERS
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.
As developments occur in the Latin American markets or at BEA that we believe
would be of interest to you, we will be sure to keep you informed. Meanwhile, if
you have any questions, please feel free to call upon us at any time.
Respectfully,
[SIGNATURE]
Richard W. Watt*
President and Chief Investment Officer
- --------------------------------------------------------------------------------
* Richard Watt, who is a Managing Director of BEA Associates, is primarily
responsible for management of the Fund's assets. Mr. Watt has served the Fund in
such capacity since January 1, 1997. He joined BEA Associates on August 2, 1995.
Mr. Watt was formerly associated with Gartmore Investment Limited ("Gartmore")
in London, where he was head of emerging markets investments and research. In
this capacity, he led a team of four portfolio managers and was manager of a
closed-end Latin American fund focusing on smaller companies. Before joining
Gartmore in 1992, Mr. Watt was a director of Kleinwort Benson International
Investments in London, where he was responsible for research, analysis and
trading of equities in Latin America and other regions. Mr. Watt is a Director,
President and Chief Investment Officer of the Fund. Mr. Watt is also a Director,
President and Chief Investment Officer of The Chile Fund, Inc., The Emerging
Markets Infrastructure Fund, Inc., The Emerging Markets Telecommunications Fund,
Inc., The Brazilian Equity Fund, Inc., The First Israel Fund, Inc., The Latin
America Equity Fund, Inc. and The Portugal 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, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
GEOGRAPHIC ASSET BREAKDOWN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
12/31/96 12/31/95
<S> <C> <C>
Argentina 5.84% 13.44%
Bolivia 0.00% 0.63%
Brazil 29.52% 25.05%
Chile 23.00% 28.83%
Colombia 3.69% 2.37%
Ecuador 1.40% 1.43%
Latin America 1.23% 2.53%
Mexico 21.31% 14.61%
Panama 0.46% 0.00%
Peru 5.34% 4.90%
Puerto Rico 0.61% 0.95%
Venezuela 1.13% 2.71%
Other 6.46% 2.55%
100.0% 100.0%
</TABLE>
SECTOR ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
12/31/1996 12/31/1995
<S> <C> <C>
Banking 5.55% 10.43%
Cement 7.30% 3.60%
Electric Distribution 5.30% 3.12%
Electric Generation 2.83% 5.05%
Engineering & Construction 1.87% 2.47%
Financial Services 3.49% 0.79%
Food & Beverages 9.58% 11.85%
Forestry 2.07% 3.15%
Holding Companies 4.29% 4.40%
Mining 2.41% 3.57%
Natural Gas 3.06% 5.03%
Retail 2.79% 3.19%
Steel 3.54% 4.74%
Telecommunications 11.96% 12.21%
Utilities 6.73% 9.91%
Fixed or Floating Rate
Investments 2.70% 2.99%
Other 14.40% 10.74%
Cash & Cash Equivalents 10.14% 2.76%
100.0% 100.0%
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
PORTFOLIO SUMMARY - AS OF DECEMBER 31, 1996 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS, BY ISSUER
<TABLE>
<CAPTION>
Percent of
Holding Sector Country Net Assets
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
1. Companhia Energetica de Minas Gerais Utilities Brazil 3.3
- --------------------------------------------------------------------------------------------------------------------------------
2. Cementos Mexicanos, S.A. de C.V. Cement Mexico 3.1
- --------------------------------------------------------------------------------------------------------------------------------
3. Companhia Paulista de Forca e Luz Utilities Brazil 2.8
- --------------------------------------------------------------------------------------------------------------------------------
4. Telecomunicacoes do Rio de Janeiro S.A. Telecommunications Brazil 2.7
- --------------------------------------------------------------------------------------------------------------------------------
5. Grupo Modelo, S.A. de C.V. Food & Beverages Mexico 2.4
- --------------------------------------------------------------------------------------------------------------------------------
6. Corporacion Industrial SanLuis, S.A. de C.V. Holding Companies Mexico 2.3
- --------------------------------------------------------------------------------------------------------------------------------
7. Centrais Eletricas de Santa Catarina S.A. Electric Distribution Brazil 2.2
- --------------------------------------------------------------------------------------------------------------------------------
8. Santista Alimentos S.A. Food & Beverages Brazil 2.1
- --------------------------------------------------------------------------------------------------------------------------------
9. Inversiones y Representaciones S.A., 4.50%, 08/02/03 Financial Services Argentina 2.0
- --------------------------------------------------------------------------------------------------------------------------------
10. Camuzzi Argentina S.A. Natural Gas Argentina 1.9
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Description (000) (Note A)
<S> <C> <C>
- ------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-87.16%
ARGENTINA-5.28%
FINANCIAL SERVICES-2.04%
Inversiones y
Representaciones S.A.,
4.50%, 08/02/03++....... USD 3,100 $ 3,053,500
-----------
NATURAL GAS-3.06%
<CAPTION>
No. of
Shares
--------------
<S> <C> <C>
Camuzzi Argentina
S.A.*+.................. 1,536,387 2,922,899
Sodigas del Sur S.A.*.... 421,485 782,592
Sodigas Pampeana S.A.*... 583,264 886,935
-----------
4,592,426
-----------
RETAIL-0.00%
Domec S.A., Class B+..... 574 1,837
-----------
TELECOMMUNICATIONS-0.18%
Argentine Cellular
Communications Holdings
Ltd.*+.................. 247,262 275,395
-----------
TOTAL ARGENTINA (Cost $8,886,099)........ 7,923,158
-----------
BRAZIL-29.12%
BANKING-0.40%
Banco do Brasil S.A.
PN+..................... 59,385,000 514,354
Banco do Brasil S.A.,
Warrants
(expiring 06/30/01)+.... 11,877,000 18,745
Banco do Brasil S.A.,
Warrants
(expiring 06/30/06)+.... 17,815,500 27,432
Banco do Brasil S.A.,
Warrants
(expiring 06/30/11)+.... 29,692,500 40,005
-----------
600,536
-----------
BUSINESS SERVICES-0.86%
Multibras da
Amazonia S.A. PN........ 1,018,000 1,283,399
-----------
<CAPTION>
No. of Value
Description Shares (Note A)
- ------------------------------------------------------
<S> <C> <C>
CHEMICALS-0.26%
S.A. White Martins ON.... 270,156,000 $ 389,986
-----------
CONSUMER GOODS-1.46%
Dixie Toga S.A. PN....... 1,667,270 1,267,581
Refrigeracao Parana S.A.
PN+..................... 375,496,000 849,211
Tec Toy Industria e
Comercio PN+............ 373,587,000 79,097
-----------
2,195,889
-----------
ELECTRIC DISTRIBUTION-2.17%
Centrais Eletricas de
Santa Catarina S.A.,
Class B PN+............. 3,465,971 3,235,484
-----------
FOOD & BEVERAGES-3.33%
Companhia Cervejaria
Brahma PN............... 3,489,073 1,907,221
Santista Alimentos S.A.
ON+..................... 1,334,000 3,093,966
-----------
5,001,187
-----------
HOLDING COMPANIES-1.43%
Brasmotor S.A. PN........ 2,190,000 608,041
Investimentos Itau S.A.
PN...................... 2,050,800 1,539,432
-----------
2,147,473
-----------
MANUFACTURING-0.45%
Continental 2001 S.A.
PN...................... 31,976,978 677,022
-----------
RETAIL-0.54%
Globex Utilidades S.A.
PN+..................... 35,000 570,758
Lojas Americanas S.A.
PN...................... 18,461,721 243,408
-----------
814,166
-----------
STEEL-2.99%
Bardella Industrias S.A.
PN...................... 4,229 402,876
Companhia Siderurgica
Nacional ON............. 42,617,060 1,209,896
Usinas Siderurgicas de
Minas Gerais S.A. PN.... 2,817,168,000 2,873,831
-----------
4,486,603
-----------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- ------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS-5.99%
Telecomunicacoes de Minas
Gerais S.A. ON+......... 2,347,547 $ 293,675
Telecomunicacoes de Minas
Gerais S.A. PNB......... 17,068,000 2,110,709
Telecomunicacoes de Sao
Paulo S.A. PN........... 4,584,877 992,780
Telecomunicacoes do
Parana S.A. ON+......... 2,126,000 1,166,221
Telecomunicacoes do
Parana S.A. PN.......... 596,000 333,303
Telecomunicacoes do Rio
de Janeiro S.A. PN+..... 32,285,000 4,085,415
-----------
8,982,103
-----------
TEXTILES-2.39%
Companhia Tecidos Norte
de Minas S.A. PN........ 6,676,800 2,130,780
Wentex Textil S.A. PN+... 467,000 1,460,639
-----------
3,591,419
-----------
TRANSPORTATION-0.69%
Marcopolo S.A. PN+....... 6,168,810 1,032,983
-----------
UTILITIES-6.16%
Companhia Energetica de
Minas Gerais PN......... 146,504,750 4,991,116
Companhia Paulista de
Forca e Luz ON+(5)...... 35,930,910 4,253,202
-----------
9,244,318
-----------
TOTAL BRAZIL (Cost $36,181,222).......... 43,682,568
-----------
CHILE-19.32%
BANKING-1.24%
Banco de Credito e
Inversiones............. 231,794 1,480,292
Banco Santander Chile+... 5,783,975 376,875
-----------
1,857,167
-----------
CONSUMER DURABLES-0.23%
Companias Cic S.A........ 65,581 8,500
<CAPTION>
No. of Value
Description Shares (Note A)
- ------------------------------------------------------
<S> <C> <C>
CONSUMER DURABLES (CONTINUED)
Empresas Almacenes
Paris+.................. 441,229 $ 343,126
-----------
351,626
-----------
CONSUMER GOODS-0.33%
Compania Tecno
Industrial S.A.......... 21,643,485 489,637
-----------
ELECTRIC DISTRIBUTION-1.88%
Chilectra S.A............ 599 3,091
Compania General de
Electricidad S.A........ 142,000 565,524
Empresas Emel S.A........ 34,190 757,361
Sociedad Austral de
Electricidad S.A........ 57,500 1,490,515
-----------
2,816,491
-----------
ELECTRIC GENERATION-2.83%
Chilgener S.A............ 69,992 346,373
Chilquinta Energia
S.A..................... 11,612 129,159
Empresa Electrica
Pilmaiquen S.A.......... 112,686 90,287
Empresa Nacional de
Electricidad S.A........ 2,670,387 1,327,799
Enersis S.A.............. 4,499,129 2,359,034
-----------
4,252,652
-----------
ENGINEERING & CONSTRUCTION-0.61%
Besalco S.A.............. 66,469 422,920
Maderas y Sinteticos
Sociedad Anonima........ 13,524 6,087
Maderas y Sinteticos
Sociedad Anonima ADR.... 34,300 480,200
-----------
909,207
-----------
FERTILIZER-0.75%
Sociedad Quimica y Minera
de Chile S.A., Class
A....................... 170,191 790,094
Sociedad Quimica y Minera
de Chile S.A., Class
B....................... 64,814 338,313
-----------
1,128,407
-----------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- ------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES-0.09%
Antarchile S.A., Class
A....................... 42,465 $ 130,092
Inversiones Litani
S.A.+................... 42,465 4,402
-----------
134,494
-----------
FISHERY-0.17%
Pesquera Itata S.A....... 1,204,818 251,270
-----------
FOOD & BEVERAGES-1.93%
Compania Cervecerias
Unidas S.A.(6).......... 517 1,620
Embotelladora Andina
S.A.(7)................. 150,003 728,187
Embotelladora Polar
S.A..................... 2,387,415 1,800,337
Empresas Iansa S.A....... 830,627 178,124
Empresas Santa Carolina
S.A., Series A.......... 182,729 150,713
Empresas Santa Carolina
S.A., Series B.......... 18,273 15,071
Jugos Concentrados
S.A..................... 451,025 18,866
-----------
2,892,918
-----------
FORESTRY-2.07%
Compania Chilena de
Fosforos S.A............ 123,431 337,410
Compania de Petreoleos de
Chile S.A............... 246,029 884,162
Compania Manufacturera de
Papeles y Cartones
S.A..................... 114,504 1,233,141
Forestal Terranova....... 647,903 656,530
-----------
3,111,243
-----------
HEALTH CARE-0.25%
Banmedica S.A............ 1,122,599 370,364
-----------
INSURANCE-0.13%
Compania de Seguros La
Prevision Vida S.A...... 188,348 196,182
-----------
MACHINERY & ELECTRIC-0.28%
Madeco S.A. NPV ADR...... 17,500 424,375
-----------
MINING-1.11%
Antofagasta Holdings
P.L.C................... 213,500 1,243,539
<CAPTION>
No. of Value
Description Shares (Note A)
- ------------------------------------------------------
<S> <C> <C>
MINING (CONTINUED)
Empresa Minera de Mantos
Blancos S.A............. 199,302 $ 342,855
Sociedad Punta del Cobre
S.A., Class A........... 761 72,182
-----------
1,658,576
-----------
PACKAGING-0.10%
Envases del Pacifico
S.A..................... 297,747 148,751
-----------
PHARMACEUTICALS-1.13%
Laboratorio Chile S.A.... 2,049,137 1,690,109
-----------
RETAIL-0.43%
S.A.C.I. Falabella....... 438,743 351,532
Santa Isabel S.A......... 208,642 297,463
-----------
648,995
-----------
SHIPPING-0.02%
Puerto Ventanas S.A...... 23,635 32,862
-----------
STEEL-0.55%
Compania de Aceros del
Pacifico S.A............ 425,000 831,271
-----------
TELECOMMUNICATIONS-2.22%
Compania de
Telecomunicaciones de
Chile S.A., Class A..... 290,317 1,666,099
Compania de
Telecomunicaciones de
Chile S.A., Class B..... 200,000 1,036,880
Empresa Nacional de
Telecomunicaciones
S.A..................... 92,411 627,180
-----------
3,330,159
-----------
TOBACCO-0.14%
Empresas CCT S.A......... 33,887 215,612
-----------
UTILITIES-0.57%
Compania de Consumidores
de Gas de Santiago
S.A..................... 131,593 530,279
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- ------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
Empresa Metropolitana de
Obras Santinas.......... 1,239,254 $ 318,319
-----------
848,598
-----------
WHOLESALE-0.26%
Zona Franca de Iquique
S.A..................... 1,153,465 396,856
-----------
TOTAL CHILE (Cost $18,038,901)........... 28,987,822
-----------
COLOMBIA-3.69%
BANKING-2.64%
Banco de Bogota.......... 9 52
<CAPTION>
Par (000)
--------------
<S> <C> <C>
Banco de Colombia, Senior
Subordinated Convertible
Note, 5.20%,
02/01/99++.............. USD 1,270 1,181,100
<CAPTION>
No. of
Shares
--------------
<S> <C> <C>
Banco Ganadero,
Preferred C ADR......... 47,100 1,012,650
Banco Industrial
Colombiano ADR.......... 85,200 1,762,575
-----------
3,956,377
-----------
CEMENT-0.79%
Cementos Diamante S.A.
ADS++................... 74,300 965,900
Cementos Paz del Rio S.A.
ADR+,++................. 17,900 219,275
-----------
1,185,175
-----------
FINANCIAL SERVICES-0.08%
Corporacion Financiera
del Valle, S.A. GDR++... 33,375 125,156
-----------
RETAIL-0.18%
Carulla y Compania S.A.
ADR++................... 36,960 152,460
<CAPTION>
No. of Value
Description Shares (Note A)
- ------------------------------------------------------
<S> <C> <C>
RETAIL (CONTINUED)
La Gran Cadena de
Almacenes Colombianos
S.A. ADS++.............. 11,500 $ 112,125
-----------
264,585
-----------
TOTAL COLOMBIA (Cost $5,747,120)......... 5,531,293
-----------
ECUADOR-1.00%
CEMENT-1.00%
La Cemento Nacional GDR++
(Cost $1,371,182)....... 6,528 1,494,912
-----------
LATIN AMERICA-1.23%
TELECOMMUNICATIONS-1.23%
International Wireless
Communications, Inc.,
Series D*+.............. 186,400 1,747,500
International Wireless
Communications, Inc.,
Series F*+.............. 10,840 101,625
International Wireless
Communications, Inc.,
Warrants (expiring
12/31/98)*+............. 640 300
-----------
TOTAL LATIN AMERICA (Cost $1,328,894).... 1,849,425
-----------
MEXICO-20.88%
BROADCAST, RADIO & TELEVISION-1.08%
Grupo Televisa S.A.
GDR+,++................. 63,000 1,614,375
-----------
CEMENT-4.49%
Cementos Apasco, S.A. de
C.V..................... 295,569 2,027,531
Cementos Mexicanos,
S.A. de C.V., Class B... 417,000 1,642,149
Cementos Mexicanos,
S.A. de C.V. CPO........ 850,000 3,061,166
-----------
6,730,846
-----------
ENGINEERING & CONSTRUCTION-1.26%
Corporacion GEO,
S.A. de C.V. ADR+,++.... 76,900 1,518,775
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- ------------------------------------------------------
<S> <C> <C>
ENGINEERING & CONSTRUCTION (CONTINUED)
Corporacion GEO,
S.A. de C.V., Series
B+...................... 75,640 $ 369,937
-----------
1,888,712
-----------
FINANCIAL SERVICES-0.42%
Grupo Financiero Banamex
Accival, S.A. de
C.V.+................... 296,000 624,939
-----------
FOOD & BEVERAGES-3.83%
Grupo Industrial Maseca,
S.A. de C.V., Series
B....................... 1,106,000 1,402,170
Grupo Modelo, S.A. de
C.V., Series C.......... 624,000 3,622,561
Sigma Alimentos, S.A.,
Class A1................ 80,000 714,431
-----------
5,739,162
-----------
HOLDING COMPANIES-2.86%
Corporacion Industrial
SanLuis, S.A. de C.V.
CPO..................... 537,354 3,413,072
Grupo Carso, S.A. de
C.V., Class A1+......... 166,500 881,993
-----------
4,295,065
-----------
MANUFACTURING-0.51%
Elamex, S.A. de C.V.+.... 79,000 760,375
-----------
MINING-0.78%
Grupo Mexico, S.A. de
C.V., Class B+.......... 379,000 1,174,746
-----------
PAPER PRODUCTS-1.41%
Kimberly Clark de Mexico,
S.A. de C.V., Class A... 106,800 2,109,680
-----------
RETAIL-1.64%
Grupo Elektra,
S.A. de C.V. CPO........ 313,000 2,461,217
-----------
TELECOMMUNICATIONS-1.11%
Telefonos de Mexico,
S.A. de C.V. ADR........ 50,700 1,673,100
-----------
<CAPTION>
No. of Value
Description Shares (Note A)
- ------------------------------------------------------
<S> <C> <C>
TOBACCO-1.49%
Empresas La Moderna,
S.A. de C.V............. 457,000 $ 2,235,074
-----------
TOTAL MEXICO (Cost $26,805,475).......... 31,307,291
-----------
PERU-5.34%
BANKING-1.27%
Banco Wiese Ltd. ADR..... 324,000 1,903,500
-----------
CEMENT-1.02%
Cementos Lima S.A.++..... 101,574 1,485,785
Cementos Norte
Pacasmayo S.A........... 30,000 40,322
-----------
1,526,107
-----------
ELECTRIC DISTRIBUTION-1.25%
Ontario-Quinta A.V.V.*... 1,434,000 1,875,048
-----------
FINANCIAL SERVICES-0.53%
Credicorp Limited........ 42,800 791,800
-----------
FOOD & BEVERAGES-0.49%
Backus y Johnston........ 860,770 741,617
-----------
MINING-0.52%
Southern Peru Copper
Corporation............. 3,000 44,250
Southern Peru Copper
Corporation ADR......... 50,600 740,025
-----------
784,275
-----------
TELECOMMUNICATIONS-0.26%
<CAPTION>
Par (000)
--------------
<S> <C> <C>
Tele 2000 S.A.,
Convertible Note, 9.75%,
04/14/97++.............. USD 400 396,000
-----------
TOTAL PERU (Cost $7,677,880)............. 8,018,347
-----------
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- ------------------------------------------------------
<S> <C> <C>
PUERTO RICO-0.61%
TELECOMMUNICATIONS-0.61%
Cellular Communications
of Puerto Rico, Inc.+
(Cost $800,940)......... 46,100 $ 910,475
-----------
VENEZUELA-0.69%
CEMENT-0.00%
C.A. Venezolana de
Cementos S.A.C.A., Class
1....................... 112 306
C.A. Venezolana de
Cementos S.A.C.A., Class
2....................... 7 19
-----------
325
-----------
FINANCIAL SERVICES-0.33%
<CAPTION>
Par (000)
--------------
<S> <C> <C>
Global Investment
Financial Corp.,
Convertible Note,
11.00%, 03/19/01........ USD 500 500,000
-----------
FOOD & BEVERAGES-0.00%
<CAPTION>
No. of
Shares
--------------
<S> <C> <C>
Mavesa S.A. ADR++........ 17 108
-----------
TELECOMMUNICATIONS-0.36%
Venworld
Telecommunications*=/=+... 40,140 543,496
-----------
TOTAL VENEZUELA (Cost $1,317,034)........ 1,043,929
-----------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES
(Cost $108,154,747)..................... 130,749,220
-----------
FIXED OR FLOATING RATE INVESTMENTS-2.70%
ARGENTINA-0.56%
<CAPTION>
Par (000)
--------------
<S> <C> <C>
Republic of Argentina
FRB, 6.625%,
03/31/05+++(2).......... USD 245 213,456
<CAPTION>
Par Value
Description (000) (Note A)
- ------------------------------------------------------
<S> <C> <C>
ARGENTINA (CONTINUED)
Republic of Argentina,
Par Bond, 5.25%,
03/31/23***+++.......... USD 1,000 $ 630,625
-----------
TOTAL ARGENTINA (Cost $826,679).......... 844,081
-----------
BRAZIL-0.41%
Federal Republic of
Brazil, Capitalization
Bond PIK, 8.00%,
04/15/14+++(1) (Cost
$583,045)............... 826 609,712
-----------
ECUADOR-0.40%
Republic of Ecuador, Past
Due Interest Bond FRB,
PIK, 6.50%,
02/27/15(1)(2) (Cost
$456,455)............... 982 604,124
-----------
MEXICO-0.43%
United Mexican States,
Discount Bond, Series A
FRB, 6.4531%,
12/31/19+++(2)(4) (Cost
$626,043)............... 750 645,937
-----------
PANAMA-0.46%
Republic of Panama,
Interest Reduction Bond,
3.50%, 07/17/14 (Cost
$629,928)............... 1,000 692,500
-----------
VENEZUELA-0.44%
Republic of Venezuela,
Debt Conversion Bond,
Series DL FRB, 6.50%,
12/18/07+++(3) (Cost
$551,111)............... 750 661,875
-----------
TOTAL FIXED OR FLOATING RATE INVESTMENTS
(Cost $3,673,261)....................... 4,058,229
-----------
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Units Value
Description (000) (Note A)
- ------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS-4.53%
CHILEAN INFLATION-ADJUSTED TIME DEPOSITS-1.10%
Banco de O'Higgins,
6.80%, 03/17/97**....... CLP 21 $ 650,407
Banco de Security, 6.90%,
03/17/97**.............. 9 273,359
Banco de Security, 6.90%,
03/18/97**.............. 21 631,554
Banco de Security, 7.10%,
01/06/97**.............. 3 94,262
-----------
TOTAL CHILEAN INFLATION-ADJUSTED TIME
DEPOSITS (Cost $1,657,672).............. 1,649,582
-----------
CHILEAN MUTUAL FUNDS-2.28%
<CAPTION>
No. of
Shares
--------------
<S> <C> <C>
Fondo Mutuo Bancredito
Redimiento.............. 15,597 593,827
Fondo Mutuo Operacional
BanChile................ 130,711 1,437,468
Fondo Mutuo Security
Check................... 342,243 1,383,126
-----------
TOTAL CHILEAN MUTUAL FUNDS (Cost
$3,411,901)............................. 3,414,421
-----------
CHILEAN REPURCHASE AGREEMENT-0.30%
<CAPTION>
Par (000)
--------------
<S> <C> <C>
Citibank (Agreement dated
12/30/96 to be
repurchased at $445,547,
collateralized by
187,425,000 CLP Deposito
a Plazo Fijo, 10.91%,
due 03/10/97 and
5,500,000 CLP Pagares
Descontables Banco
Central de Chile,
11.95%, due 01/17/97.
Market value of
collateral is $432,503
and $12,884,
respectively)
4.32%, 01/02/97
(Cost $445,387)......... CLP 189,000 445,387
-----------
<CAPTION>
Par Value
Description (000) (Note A)
- ------------------------------------------------------
<S> <C> <C>
TIME DEPOSIT-0.85%
The Chase Manhattan Bank,
N.A., 7.00%, 01/06/97**
(Cost $1,279,332)....... USD 1,279 $ 1,279,332
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost
$6,794,292)............................. 6,788,722
-----------
TOTAL INVESTMENTS-94.39%
(Cost $118,622,300) (Notes A,D)......... 141,596,171
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES-5.61%....................... 8,410,418
-----------
NET ASSETS-100.00%....................... $150,006,589
-----------
-----------
- ---------------------------------------------------------
* Not readily marketable security.
** Effective yield on the date of purchase.
*** Step-Up Coupon.
+ Security is non-income producing.
++ SEC Rule 144A security. Such securities are traded
only among "qualified institutional buyers."
+++ Brady Bonds.
=/= Restricted security (See Note F).
(1) Payment-in-kind; of which 3.50% is being capitalized.
(2) Adjustable rate; rate resets based on 6-month London
Interbank Offered Rate ("LIBOR") plus 0.8125%.
(3) Adjustable rate; rate resets based on 6-month LIBOR
plus 0.875%.
(4) With an additional 1,153,000 value recovery rights
attached, expiring 06/30/03, with no market value.
(5) With an additional 208,795 rights attached, expiring
01/31/97, with no market value.
(6) With an additional 112 rights attached, expiring
01/18/97, with no market value.
(7) With an additional 42,382 rights attached, expiring
01/14/97, with no market value.
ADR American Depositary Receipts.
ADS American Depositary Shares.
CPO Ordinary Participation Certificates.
FRB Floating Rate Bonds.
GDR Global Depositary Receipts.
ON Ordinary Shares.
PIK Payment-in-kind.
PN Preferred Shares.
PNB Preferred Shares, Class B.
CLP Chilean Pesos.
USD United States Dollars.
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost
$118,622,300) (Note A)................. $141,596,171
Cash (including $290,153 of foreign
currencies with a cost of $290,153)
(Note A)............................... 9,962,011
Receivables:
Investments sold...................... 667,431
Interest.............................. 130,479
Dividends............................. 65,221
Prepaid expenses and other assets....... 3,185
------------
Total Assets............................ 152,424,498
------------
LIABILITIES
Payables:
Investments purchased................. 1,394,642
Dividend (Note A)..................... 235,998
Advisory fees (Note B)................ 413,890
Administration fees (Note B).......... 47,408
Other accrued expenses................ 325,971
------------
Total Liabilities....................... 2,417,909
------------
NET ASSETS (applicable to 7,866,612
shares of common stock outstanding)
(Note C)............................... $150,006,589
------------
------------
NET ASSET VALUE PER SHARE ($150,006,589
DIVIDED BY 7,866,612)................. $19.07
------------
------------
NET ASSETS CONSIST OF
Capital stock, $0.001 par value;
7,866,612 shares issued and outstanding
(100,000,000 shares authorized)........ $ 7,867
Paid-in capital......................... 130,681,235
Undistributed net investment income..... 1,610,956
Accumulated net realized loss on
investments and foreign currency
related transactions................... (5,258,538)
Net unrealized appreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currencies..................... 22,965,069
------------
Net assets applicable to shares
outstanding............................ $150,006,589
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends............................. $ 3,547,422
Interest.............................. 997,499
Other (Note B)........................ 348,477
Less: Foreign taxes withheld.......... (175,023)
-----------
Total Investment Income............... 4,718,375
-----------
Expenses:
Investment advisory fees (Note B)..... 1,812,556
Custodian fees........................ 290,000
Administration fees (Note B).......... 230,254
Printing.............................. 101,386
Audit and legal fees.................. 75,664
Accounting fees....................... 65,563
Directors' fees....................... 38,192
Insurance............................. 33,826
Transfer agent fees................... 25,339
NYSE listing fees..................... 16,170
Other................................. 22,101
-----------
Total Expenses........................ 2,711,051
Less: Fee waivers (Note B)............ (178,857)
-----------
Net Expenses........................ 2,532,194
-----------
Net Investment Income................. 2,186,181
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments........................... 2,148,878
Foreign currency related
transactions......................... (287,247)
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities
denominated in foreign currencies...... 13,367,921
-----------
Net realized and unrealized gain on
investments and foreign currency
related transactions................... 15,229,552
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $17,415,733
-----------
-----------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
17
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended
December 31,
--------------------------
1996 1995
<S> <C> <C>
--------------------------
INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income................. $ 2,186,181 $ 1,490,854
Net realized gain/(loss) on
investments and foreign currency
related transactions................. 1,861,631 (7,342,062)
Net change in unrealized appreciation
in value of investments and
translation of other assets and
liabilities denominated in foreign
currencies........................... 13,367,921 (16,912,743)
------------ ------------
Net increase/(decrease) in net
assets resulting from operations... 17,415,733 (22,763,951)
------------ ------------
Dividends and distributions to
shareholders:
Net investment income................. (1,788,940) --
Net realized gain on foreign currency
related transactions................. (19,059) --
Net realized gain on investments...... -- (1,492,105)
------------ ------------
Total dividends and distributions to
shareholders....................... (1,807,999) (1,492,105)
------------ ------------
Capital share transactions (Note C):
Proceeds from 6,613 shares and 98,012
shares, respectively, issued in
reinvestment of dividends............ 109,111 1,820,380
Reduction of offering costs charged to
capital.............................. -- 52,713
------------ ------------
Net increase in net assets resulting
from capital share transactions.... 109,111 1,873,093
------------ ------------
Total increase/(decrease) in net
assets............................. 15,716,845 (22,382,963)
------------ ------------
NET ASSETS
Beginning of year....................... 134,289,744 156,672,707
------------ ------------
End of year (including undistributed net
investment income of $1,610,956
and $1,490,854, respectively).......... $150,006,589 $134,289,744
------------ ------------
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
18
<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 Years Ended December 31, through
---------------------------------------------------------- December 31,
1996 1995 1994+ 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of period............ $17.09 $20.18 $25.73 $25.36 $26.05 $14.24 $13.64**
-------- -------- -------- -------- -------- -------- -------------
Net investment income........................... 0.28 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................................... 1.93 (3.09) 1.29 10.18 1.51 14.66 0.58
-------- -------- -------- -------- -------- -------- -------------
Net increase/(decrease) in assets resulting from
operations..................................... 2.21 (2.90) 1.38 10.26 1.75 15.27 0.87
-------- -------- -------- -------- -------- -------- -------------
Dividends and distributions to shareholders:
Net investment income......................... (0.23) -- (0.07) (0.22) -- (0.63) (0.27)
Net realized gain 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................................... (0.23) (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.................. $19.07 $17.09 $20.18 $25.73 $25.36 $26.05 $14.24
-------- -------- -------- -------- -------- -------- -------------
-------- -------- -------- -------- -------- -------- -------------
Market value, end of period..................... $15.750 $14.750 $18.750 $31.500 $24.375 $26.500 $11.125
-------- -------- -------- -------- -------- -------- -------------
-------- -------- -------- -------- -------- -------- -------------
Total investment return(a)...................... 8.26% (20.34)% (26.63)% 89.45% 2.35% 167.96% (18.35)%
-------- -------- -------- -------- -------- -------- -------------
-------- -------- -------- -------- -------- -------- -------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted)......... $150,007 $134,290 $156,673 $140,458 $102,259 $104,435 $57,081
Ratio of expenses to average net assets(d)...... 1.70% 2.00% 2.02% 2.06% 2.61% 2.30% 3.27%(b)
Ratio of expenses to average net assets,
excluding fee waivers ......................... 1.82% 2.12% -- -- -- -- --
Ratio of net investment income to average net
assets......................................... 1.47% 1.10% 0.63% 1.45% 1.15% 2.85% 5.10%(b)
Portfolio turnover rate......................... 50.21% 38.71% 77.81% 70.17% 55.40% 82.39% 52.49%(c)
Average commission rate per share(e)............ $0.0001 -- -- -- -- -- --
</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.
(b) Annualized.
(c) Not annualized.
(d) Ratios reflect actual expenses incurred by the Fund. Amounts are net
of fee waivers and inclusive of taxes.
(e) Disclosure is required for fiscal years beginning on or after
September 1, 1995. Represents average commission rate per share
charged to the Fund on purchases and sales of investments during the
period.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
19
<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:
MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make certain
estimates and assumptions that may affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All securities for which market quotations are readily
available are valued at the last sales price or lacking any sales, at the
closing price last quoted for the securities (but if bid and asked quotations
are available, at the mean between the current bid and asked prices). Securities
that are traded over-the-counter are valued at the mean between the current bid
and the asked prices, if available. All other securities and assets are valued
at fair value as determined in good faith by the Board of Directors. Short-term
investments having a maturity of 60 days or less are valued on the basis of
amortized cost. The Board of Directors has established general guidelines for
calculating fair value of non-publicly traded securities. At December 31, 1996,
the Fund held 6.09% of its net assets in securities valued in good faith by the
Board of Directors with an aggregate cost of $9,393,301 and fair value of
$9,135,790. 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., the Fund's custodian, in a
variable rate account are classified as cash. At December 31, 1996, the interest
rate was 5.00% which resets on a daily basis. Amounts on deposit are generally
available on the same business day.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.
TAXES: No provision is made for U.S. federal income or excise taxes as it is the
Fund's intention to continue to qualify as a regulated investment company and to
make the requisite distributions to its shareholders which will be sufficient to
relieve it from all or substantially all U.S. federal income and excise taxes.
At December 31, 1996, the Fund had a capital loss carryover of $5,235,534 which
expires in 2003.
Income received by the Fund from sources within Latin America may be subject to
withholding and other taxes imposed by such 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, 1996, the Fund incurred no such tax.
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:
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(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.
Net currency gains from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation /depreciation in value of investments and translation of
other assets and liabilities denominated in foreign currencies.
Net realized foreign exchange losses represent foreign exchange gains and losses
from 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 realized
short-term capital losses, including capital loss carryovers, if any. An
additional distribution may be made to the extent necessary to avoid the payment
of a 4% U.S. federal excise tax. Dividends and distributions to shareholders are
recorded by the Fund on the ex-dividend date.
On December 12, 1996, a dividend from net investment income in the aggregate
amount of $235,998 equal to $0.03 per share was declared to shareholders of
record on December 31, 1996, payable on January 10, 1997.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.
At December 31, 1996, the Fund reclassified $287,247 of net realized losses from
foreign currency related transactions and $9,338 of short-term capital gain
overdistribution to undistributed net investment income.
OTHER: Securities denominated in currencies other than U.S. dollars are subject
to changes in value due to fluctuations in exchange rates.
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
- --------------------------------------------------------------------------------
21
<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 imposed by a foreign country.
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.
The Fund may enter into repurchase agreements on U.S. Government securities with
primary government securities dealers recognized by the Federal Reserve Bank of
New York and member banks of the Federal Reserve System and on securities issued
by the governments of Latin American countries, their instrumentalities and with
creditworthy parties in accordance with established procedures. Repurchase
agreements are contracts under which the buyer of a security simultaneously buys
and commits to resell the security to the seller at an agreed upon price and
date. Securities purchased subject to repurchase agreements are deposited with
the Fund's custodian and, pursuant to the terms of the repurchase agreement,
must have an aggregate market value greater than or equal to the repurchase
price plus accrued interest at all times. If the value of the underlying
securities fall below the value of the repurchase price plus accrued interest,
the Fund will require the seller to deposit additional collateral by the next
business day. If the request for additional collateral is not met, or the seller
defaults on its repurchase obligation, the Fund maintains the right to sell the
underlying securities at market value and may claim any resulting loss against
the seller; collectibility of such claims may be limited.
NOTE B. AGREEMENTS
BEA Associates ("BEA") serves as the Fund's investment adviser, with respect to
all investments 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 the
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Fund's former sub-advisers. For the year ended December 31, 1996, BEA earned
$1,540,692 for advisory services, of which BEA waived $152,028. BEA also
provides certain administrative services to the Fund and is reimbursed by the
Fund for costs incurred on behalf of the Fund. For the year ended December 31,
1996, BEA was reimbursed $13,449 for administrative services rendered to the
Fund.
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 former sub-advisers. For the year ended December 31,
1996, advisory fees amounted to $271,864, of which $26,829 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, 1996, these sub-advisory fees amounted to $74,523.
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 year ended
December 31, 1996, BSFM earned $139,236 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 $62,700 at December 31, 1996) or 0.10% of the Fund's average
weekly net assets invested in Chile 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 $6,400 at December 31, 1996). For the year ended December 31,
1996, Celfin earned $77,569 and $6,472 for administrative and accounting
services, respectively. In addition, during the year, Celfin reimbursed the Fund
$348,477 due to an overpayment of prior years administration fees.
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 7,866,612 shares outstanding at December 31, 1996, BEA
owned 7,169 shares.
NOTE D. INVESTMENT IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at December
31, 1996 was $118,645,302. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currencies) of
$22,950,869, was composed of gross appreciation of $32,183,151 for those
investments having an excess of value over cost and gross depreciation of
$9,232,282 for those investments having an excess of cost over value.
For the year ended December 31, 1996, purchases and sales of securities, other
than short-term investments, were $71,205,340 and $82,540,977, respectively.
NOTE E. CREDIT AGREEMENT
The Fund, along with 18 other U.S. regulated investment companies for which BEA
serves as
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 19 funds exceed $50,000,000. The line of credit will bear
interest at (i) the greater of the bank's prime rate or the Federal Funds
Effective Rate plus 0.50% or (ii) the Adjusted Eurodollar Rate plus 1.50%. The
Fund had no amounts outstanding under the credit agreement at December 31, 1996.
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 as of December 31, 1996, share value of the security and percentage
of net assets which the security comprises.
<TABLE>
<CAPTION>
NUMBER OF FAIR VALUE VALUE PERCENT OF
SECURITY SHARES ACQUISITION DATES COST AT 12/31/96 PER SHARE NET ASSETS
- ------------------------------------- ----------- ------------------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Venworld Telecommunications 40,140 7/30/92 & 8/07/92 $ 816,959 $ 543,496 $ 13.54 0.36
</TABLE>
The Fund may incur certain costs in connection with the disposition of the above
security.
- --------------------------------------------------------------------------------
24
<PAGE>
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, 1996, 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, 1996 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, 1996, 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 21, 1997
- --------------------------------------------------------------------------------
25
<PAGE>
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On April 23, 1996, 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 FOR WITHHELD NON-VOTES
- ----------------------------------------------------------------------------------- ---------- --------- ----------
<S> <C> <C> <C>
Dr. Enrique R. Arzac* 6,360,253 147,320 1,352,426
James J. Cattano 6,346,163 161,410 1,352,426
Michael Hyland 6,341,804 165,769 1,352,426
</TABLE>
- --------------
* On February 13, 1996, the Board of Directors increased the size of the Fund's
Board of Directors and Dr. Enrique R. Arzac was elected to fill the newly
created vacancy. The election of Dr. Arzac was submitted to the Fund's
shareholders for their ratification at the annual meeting of shareholders.
In addition to the directors re-elected at the meeting, Peter A. Gordon, George
W. Landau and Martin M. Torino continue to serve as directors of the Fund.
Emilio Bassini and Daniel Sigg resigned as directors of the Fund effective
January 1, 1997 and February 11, 1997, respectively.
(2) To ratify the selection of Coopers & Lybrand L.L.P. as independent public
accountants for the year ending December 31, 1996.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
6,331,009 117,750 58,814 1,352,426
</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, 1996) as to the U.S. federal tax status of distributions received
by the Fund's shareholders in respect of such fiscal year. The $0.23 per share
distribution paid in respect of such fiscal year, was derived entirely from
ordinary income. 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 1996.
Notification for calendar year 1996 was mailed in January 1997. 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>
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, 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
- --------------------------------------------------------------------------------
27
<PAGE>
DESCRIPTION OF DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)
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>
SUMMARY OF GENERAL INFORMATION
The Fund--The Latin America Investment Fund, Inc.--is a closed-end,
non-diversified management investment company whose shares trade on the New York
Stock Exchange. Its investment objective is long-term capital appreciation
through investments primarily in Latin American equity and debt securities. The
Fund is managed and advised by BEA Associates ("BEA"). BEA is a diversified
asset manager, handling equity, balanced, fixed income, international and
derivative based accounts. Portfolios include international and emerging market
investments, common stocks, taxable and non-taxable bonds, options, futures and
venture capital. BEA manages money for corporate pension and profit-sharing
funds, public pension funds, union funds, endowments and other charitable
institutions and private individuals. As of December 31, 1996, BEA managed
approximately $31.3 billion in assets.
SHAREHOLDER INFORMATION
The market price is published in: THE NEW YORK TIMES (daily) under the
designation "LatInv" and THE WALL STREET JOURNAL (daily), and BARRON'S (each
Monday) under the designation "LatinAmFd". The Fund's New York Stock Exchange
trading symbol is LAM. Weekly comparative net asset value (NAV) and market price
information about The Latin America Investment Fund, Inc.'s shares are published
each Sunday in THE NEW YORK TIMES and each Monday in THE WALL STREET JOURNAL and
BARRON'S, as well as other newspapers, in a table called "Closed End Funds."
THE BEA GROUP OF FUNDS
LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds or a prospectus on any of the open-end mutual funds listed
below. The prospectus contains more complete information, including fees,
charges and expenses, and should be read carefully before investing or sending
money.
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<S> <C>
CLOSED-END FUNDS BEA ADVISOR FUNDS
SINGLE COUNTRY OPEN-END MUTUAL FUNDS
The Brazilian Equity Fund, Inc. (BZL) BEA Emerging Markets Equity Fund
The Chile Fund, Inc. (CH) BEA Global Telecommunications Fund
The First Israel Fund, Inc. (ISL) BEA High Yield Fund
The Indonesia Fund, Inc. (IF) BEA International Equity Fund
The Portugal Fund, Inc. (PGF)
MULTIPLE COUNTRY
The Emerging Markets Infrastructure Fund, Inc. (EMG)
The Emerging Markets Telecommunications Fund, Inc. (ETF)
The Latin America Equity Fund, Inc. (LAQ)
For shareholder information or a copy
FIXED INCOME of a prospectus for any of the
BEA Income Fund, Inc. (FBF) open-end mutual funds please call,
BEA Strategic Income Fund, Inc. (FBI) 1-800-401-2230.
For closed-end fund information Visit our website on the Internet:
please call, 1-800-293-1232. http://www.beafunds.com
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DIRECTORS AND CORPORATE OFFICERS
William W. Priest, Chairman of the
Jr. Board of Directors
Richard W. Watt President, Chief Investment Officer
and Director
Dr. Enrique R. Arzac Director
James J. Cattano Director
Peter A. Gordon Director
Michael Hyland Director
George W. Landau Director
Martin M. Torino Director
Paul P. Stamler Senior Vice President
Michael A. Pignataro Chief Financial Officer and
Secretary
Rachel D. Manney Vice President and Treasurer
Wendy S. Setnicka Assistant Treasurer
INVESTMENT ADVISERS
BEA Associates
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Salomon Brothers Asset Management Inc.
7 World Trade Center
New York, NY 10048
ADMINISTRATOR
Bear Stearns Funds Management Inc.
245 Park Avenue
New York, NY 10167
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
SHAREHOLDER SERVICING AGENT
The First National Bank of Boston
P.O. Box 1865
Mail Stop 45-02-62
Boston, MA 02105-1865
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
LEGAL COUNSEL
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. It is not a
prospectus, circular or representation intended for use in the
purchase or sale of shares of the Fund or of any securities mentioned
in this report. [LOGO]
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