<PAGE>
[PHOTO]
THE LATIN AMERICA
INVESTMENT FUND, INC.
- ------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1997
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders....................................................................... 1
Portfolio Summary............................................................................ 8
Schedule of Investments...................................................................... 10
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
Results of Annual Meeting of Shareholders.................................................... 25
Description of Dividend Reinvestment and Cash Purchase Plan.................................. 26
</TABLE>
PICTURED ON THE COVER IS PALENQUE, ONE OF THE MOST BEAUTIFUL MAYAN RUINS. IT IS
LOCATED IN PALENQUE NATIONAL PARK IN THE STATE OF CHIAPAS, MEXICO.
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<PAGE>
LETTER TO SHAREHOLDERS
August 11, 1997
DEAR SHAREHOLDER:
I am pleased to report on the activities of The Latin America Investment Fund,
Inc. (the "Fund") for the six months ended June 30, 1997.
At June 30, 1997, the Fund's net assets were $181.5 million. The Fund's net
asset value ("NAV") was $23.08 per share as compared to $19.07 on December 31,
1996.
PERFORMANCE
For the period January 1, 1997 through June 30, 1997, the Fund's total return,
based on NAV was 21.0%. By comparison, the total return of the benchmark Morgan
Stanley Capital International Emerging Markets Latin America Free Index
("EMFLA") was 40.8%.
While country allocations proved positive, it is undeniable that stock selection
was responsible for the Fund's underperformance versus the benchmark during the
period. It is important, however, that this be understood in the context of our
emphasis on diversification within the portfolio. Much of the rally in Latin
equities has been powered by large-capitalization stocks, whose liquidity means
that they are most widely held by investors. This was notably evident in the
case of Telecomunicacoes Brasileiras S.A. ("Telebras"), which accounts for about
12% of EMFLA. Although the Fund is heavily weighted in Telebras, prudence and
legal diversification requirements prevent us from equally weighting the stock
relative to the benchmark.
We also note that the Fund holds about 9% of total assets in fixed income
instruments and 5% in private equity securities. Since the returns generated by
this 14% of the portfolio were lower than that of EMFLA, this further
diversification negatively affected performance as well.
The Fund's results, then, mainly were due both to our inability to fully capture
the large-capitalization stocks' disproportionately strong impact and our
allocation of a sizable percentage of the portfolio to other asset classes.
From the commencement of investment operations on August 1, 1990 through June
30, 1997, the Fund's total return, based on NAV and assuming the reinvestment of
dividends and distributions, was 346.8%, while EMFLA returned 448.2%.
INVESTMENT PERSPECTIVE
Aggregate Latin equities have soared since the end of 1996. EMFLA's gain of
40.8% through June 30, 1997 sharply exceeds the 2.8% return of emerging Asian
equities and the 11.4% posted by developed markets. This superior performance is
not accidental, in our view. Global liquidity has been drawn to the region
because its economic and political fundamentals, arguably, are as positive as at
any point in the last decade.
- --------------------------------------------------------------------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
Fixed income securities of Latin nations have carried their strong performance
in 1996 straight through the first half of 1997. In addition to positive
country-specific fundamentals, two broader trends have helped. First, Latin bond
prices have risen in response to U.S. interest rates. The yield on the
bellwether 30-year U.S. Treasury bond has dropped as low as 6.29% in recent
weeks, after beginning the year at 7.09%. Such a decline facilitates a climate
in which Latin economies can thrive. Second, improving economic conditions are
allowing Latin nations to refinance their high-interest Brady debt on attractive
new terms. This is a remarkable achievement for a region that was devastated by
the Mexican peso crisis only a few brief years ago.
Investor focus in Brazil has shifted from President Cardoso's proposed
constitutional amendment allowing presidential re-election back to the economy
and the reform process. With the amendment's passage, Congress has restored its
full attention to the administrative and other reforms needed to cement the
nation's tremendous progress over the last few years.
Cardoso was able to utilize the support built up behind the amendment to
engineer several important achievements. Most significant was that he pushed
through the long-delayed privatization of mining giant Companhia Vale do Rio
Doce ("CVRD") in May. With total proceeds of $3.13 billion, the sale was the
largest ever of a Brazilian government-owned company, by far. The great success
of the CVRD sale is very positive for investors both because it demonstrates the
Cardoso administration's commitment to the REAL Plan for economic stabilization
and sets the tone for future large-scale privatizations.
Another important achievement was Cardoso's persuasion of Congress to hold an
extraordinary summer session devoted to passing key acts. Prominent among the
latter were the initial stages of administrative reform and the landmark General
Telecommunications Law.
In Mexico, activity for much of the January through June period revolved around
investor perceptions concerning the national elections held in early July.
Although voters stripped the historically dominant Institutional Revolutionary
Party (PRI) of its parliamentary majority and much of its political power,
investor reaction to the elections was very positive. This is because they took
place with unprecedented calm and transparency, as President Zedillo had vowed.
Such progress is a big plus for democracy and, hence, a competitive marketplace.
Perhaps the biggest news in Chile was that it rained in May after months of the
worst drought in over 30 years. The electricity and agricultural sectors, which
heavily depend on water, were thus able to return to more normal levels of
activity. Macroeconomic conditions are improving, as the central bank has
relaxed its tight grip on monetary policy by reducing interest rates several
times.
PORTFOLIO STRATEGY
The essential charter of the Fund is to generate attractive returns through a
diversified portfolio of equities, fixed income and private securities. Since
becoming Chief Investment Officer earlier in the year, I have chosen not to
alter this basic philosophy. I have, however, made two key shifts in the asset
mix which affected performance in the short-term.
- --------------------------------------------------------------------------------
2
<PAGE>
LETTER TO SHAREHOLDERS
First, I substantially reduced the Fund's Chilean exposure, since that market's
poor performance over the last couple of years had negatively impacted returns.
This gave the Fund more flexibility to invest in other markets, but also
incurred transaction costs that detracted from returns. Second, I raised
exposure to Latin debt instruments due to their diversification benefits. With
the huge run-up in stock prices throughout the region, I felt that this was a
prudent move. The significant decline in Brazilian equities during July
underscored my thinking.
I continue to believe that the Fund should make greater use of its debt
capability as suggested by market conditions. The charter permits debt exposure
of up to 30%, and I intend to make full use of this potential where appropriate.
One other noteworthy change I have made has been to gradually reduce the range
of holdings within the Fund, while still maintaining prudent diversification.
The Fund typically has been very heavily biased toward smaller, illiquid stocks,
and I have begun to alter this bias as conditions permitted. I believe this
trend will continue as I position the Fund to achieve more exposure to larger,
core holdings, while retaining a meaningful position in less accessible issues.
None of these shifts are inconsistent with the Fund's charter, however, and the
basic philosophy and strategies will remain in place.
To better illustrate our investment approach and highlight individual stocks in
the portfolio, I'd like to take this opportunity to discuss some of the Fund's
largest holdings.
COMPANHIA PARANAENSE DE ENERGIA
Companhia Paranaense de Energia ("Copel") is the government-owned electric
company in the Brazilian state of Parana. It is Brazil's second-largest
integrated electric utility (I.E., its operations include the generation,
transmission and distribution of electricity) and fourth-largest electricity
generator in terms of installed capacity.
Unlike many other Latin American government-owned companies, Copel's investment
appeal does not lie in its eventual privatization. In fact, there are several
reasons why privatization is not especially desirable for Parana or Copel. These
include Parana's financial condition, which is sufficiently healthy that it does
not need the funds to be raised by privatization; Copel benefits Parana most by
providing it with a stable income stream; and Copel is able to meet its own
financing needs without state support.
Our investment thesis, rather, is that the increasing deregulation of the
Brazilian electricity business is an environment in which Copel is
well-positioned to succeed:
- - Its location in Parana offers singularly favorable business conditions:
- Gross Domestic Product and electricity consumption are growing far more
rapidly than in Brazil as a whole.
- Relative to many other parts of Brazil, labor costs are substantially
lower.
- Parana is situated in the southeastern corner of Brazil, at the
crossroads of the burgeoning Mercado Comun del Sur (MERCOSUR) free-trade
zone that includes Brazil, Argentina and Uruguay.
- - Copel's customer base is tilted toward residential and commercial users, who
are more profitable than industrial users. In 1996, for example, residential
and commercial customers accounted for 25.5% of total energy sold but 52.6% of
total energy revenues.
- --------------------------------------------------------------------------------
3
<PAGE>
LETTER TO SHAREHOLDERS
- - Copel enjoys significantly lower generating and construction costs than other
Brazilian utilities, allowing it much greater flexibility to adjust prices
according to competitive conditions.
- - In a nation often short on electricity, Copel is one of the few utilities to
produce more than required for its own service area. Under current rules,
Copel must sell this power to the national power grid at rates far below
market prices. Deregulation will allow it to sell the power at market rates,
meaning that it will receive an instant boost to revenues and profits.
- - By several important measures (E.G., energy lost as a percentage of total
generation, sales per employee), Copel is among Brazil's most efficient
utilities.
- - Copel's debt-to-equity ratio is far lower than the estimated average for
international generators. This offers the company plenty of room to raise its
financial leverage without impairing its overall financial soundness.
- - A recent issue of American Depositary Shares was the largest-ever primary
equity offering originating in Latin America and made Copel the first
Brazilian electric utility to be listed on the New York Stock Exchange.
Visibility among global investors will increase accordingly.
UNIAO DE BANCOS BRASILEIROS S.A.
Since our last report, we have added shares in Uniao de Bancos Brasileiros S.A.
("Unibanco") to the portfolio. Unibanco is Brazil's third-largest private bank
in terms of assets and loans and traces its origins back to 1924, when a trading
company established by Joao Moreira Salles obtained permission to operate a
bank. The institution now known as Unibanco was formed in 1967 with the merger
of the Moreira Salles Bank and Banco Agricola Mercantil. The late-1995
acquisition of selected assets and liabilities of the defunct Banco Nacional
S.A. doubled the size of Unibanco's branch network and client base.
The Moreira Salles family still controls Unibanco via its majority stake in
Unibanco Holdings S.A., which owns 49% of Unibanco. Other large shareholders
include Germany's Commerzbank (7.2%) and Japan's Dai-Ichi Kangyo Bank (2.3%).
The fact that Unibanco can attract and maintain such long-term investment from
major foreign institutions is indicative of its stability and performance over
the years.
We like Unibanco because it combines several attractive characteristics:
DIVERSIFICATION - Unibanco's grouping of core businesses is unlike that of any
other Brazilian bank and includes retail banking, commercial banking, insurance
and investment management. This level of diversification gives Unibanco a much
wider potential earnings stream and serves as a defense against economic
cyclicality.
INSURANCE AND INVESTMENT MANAGEMENT - Unibanco Seguros, the bank's insurance
business, is Brazil's sixth-largest in terms of written premiums. Unibanco Asset
Management is the third-largest Brazilian investment manager and a major player
among institutional and retail investors alike. Both units are in businesses
with tremendous growth potential within Brazil and are Unibanco's
fastest-growing operations.
- --------------------------------------------------------------------------------
4
<PAGE>
LETTER TO SHAREHOLDERS
COST-REDUCTION AND EFFICIENCY - Attentiveness to costs and efficiency has long
been a hallmark of Unibanco management and is most recently demonstrated by the
rapid integration of the Banco Nacional S.A. acquisition. The bank's world-class
technology is instrumental in this regard.
CONSERVATIVE LENDING POLICY - The loan portfolio is well-diversified. Most loans
are predominantly short-term and made to high-credit corporations, resulting in
a low default rate. Relative to other Brazilian banks, asset quality is among
the highest and loan non-performance among the lowest.
STRATEGIC REDIRECTION - Unibanco has focused its retail business on high-income
individuals for the past decade. With the acquisition of Banco Nacional S.A. and
a majority stake in consumer lender Fininvest, however, it has extended its
reach to the much larger universe of middle- and lower-income customers, who
tend to utilize more services at higher profit margins. This should be of
particular benefit to Unibanco's credit card operations, which already are the
largest in Brazil.
We add to the above that Unibanco shares are attractively valued at current
prices. The company's recent $1 billion issue of Global Depositary Receipts,
furthermore, will greatly increase trading liquidity and visibility among
investors worldwide. Overall, we consider Unibanco a stock with excellent
potential for long-term appreciation.
CREDICORP LIMITED
Credicorp Limited ("Credicorp") is a holding company that is Peru's leading
provider of financial services. Its three main business units are Banco de
Credito del Peru ("BCP"), the nation's largest commercial bank since the 1920s
(82.4% of consolidated 1996 profits); Atlantic Security Holding Corporation
("ASHC"), the top Peru-focused offshore bank and a pioneer in private banking
(13%); and El Pacifico-Peruano Suiza ("PPS"), Peru's largest insurance company
(4.6%). All three companies had been closely linked for years and were formally
brought together in the new Credicorp structure in late 1995.
Credicorp has great investment merit as a relatively low-risk play on the health
of the Peruvian economy. Its stock price has declined in recent weeks, though,
due to domestic political concerns and volatility resulting from currency
problems in several emerging Asian nations. We view both of these as short-lived
factors that serve to distract investor attention from Peru's economic
resurgence, from which Credicorp should substantially benefit.
The Peruvian banking business is intensely competitive at present, as the
positive effects of economic reform have not yet resulted in higher demand for
credit. We note in this context, however, that Peru is quite "underbanked"
relative to other Latin nations. According to the standard measure of total
outstanding credit as a percentage of Gross Domestic Product, for instance,
Peru's banking penetration is just 29%. By contrast, penetration is 60% in
Chile. This suggests substantial untapped credit demand that should materialize
as the economy continues to improve.
There is much to recommend Credicorp on a company-specific level. BCP enjoys a
commanding market share (about 26% of gross loans as of April 1997, versus 19%
for the nearest competitor), the highest asset quality in the domestic banking
sector, Peru's biggest retail branch network and a much lower reliance on
interest-based income than most other major Peruvian banks. Management is
regarded as among the best in Latin America and technology is state-of-the-art.
The company's emphasis on reducing costs will substantially enhance its future
earnings capability.
- --------------------------------------------------------------------------------
5
<PAGE>
LETTER TO SHAREHOLDERS
The creation of Credicorp's holding company structure has consolidated all
private banking functions in ASHC. Private banking is a particularly stable
business with low overall credit risk and consistent fee-based income. Since
most of ASHC's assets are denominated in dollars, furthermore, it also serves
Credicorp as an important source of protection against volatility in the
Peruvian nuevo sol.
PPS's main insurance line is property and casualty, which has become less
lucrative in Peru due to rising competitive pressures. There is tremendous
growth potential for life and residential insurance, though: current penetration
rates are only about 1% and 2-3% of the population for life and residential,
respectively. The requirement that participants in private pension plans hold
life annuity policies also will help to boost penetration. An aggressive plan to
cross-sell PPS products to customers of BCP may generate significant additional
growth.
OUTLOOK
As we discussed earlier, a notable feature of activity in Latin American equity
markets so far in 1997 has been the outperformance of large-capitalization
stocks. This has been driven in part by global institutional fund flows into the
region, but increasingly by local individual investors eager to jump on the bull
trend. We consider this environment unlikely to persist, especially as relative
value is created in second-tier stocks.
Looking further ahead, it is difficult to overstate our optimism about Latin
equities generally. Throughout the region's markets, we see a potent mixture of
economic reforms, improving macroeconomic conditions and increasing inflows of
global liquidity. We believe that this mixture will remain in place for some
time to come. Patient, long-term investment in Latin equities should produce
very favorable results.
I appreciate your interest in the Fund, and would be pleased to respond to your
questions or comments.
Sincerely yours,
[SIGNATURE]
Richard W. Watt
President and Chief Investment Officer*
- --------------------------------------------------------------------------------
6
<PAGE>
LETTER TO SHAREHOLDERS
I wish to remind shareholders whose shares are registered in their own names
that they automatically participate in the Fund's dividend reinvestment program.
The automatic Dividend Reinvestment Plan (the "Plan") can be of value to
shareholders in maintaining their proportional ownership interest in the Fund in
an easy and convenient way. A shareholder whose shares are held in the name of a
broker/dealer or nominee should contact that party for details about
participating in the Plan. The Fund also offers shareholders a voluntary Cash
Purchase Plan. The Plan and the Cash Purchase Plan are described on pages 26 and
27 of this report.
- --------------------------------------------------------------------------------
* Richard W. Watt, who is a Managing Director of BEA Associates, is primarily
responsible for management of the Fund's assets. Mr. Watt has served the Fund in
such capacity since January 1, 1997. He joined BEA Associates on August 2, 1995.
Mr. Watt was formerly associated with Gartmore Investment Limited 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 Investment Limited in 1992, Mr. Watt was a director of Kleinwort Benson
International Investments in London, where he was responsible for research,
analysis and trading of equities in Latin America and other regions. Mr. Watt is
a Director, President, and Chief Investment Officer of the Fund. He also is a
Director, President and Chief Investment Officer of The Brazilian Equity Fund,
Inc., The Chile Fund, Inc., The Emerging Markets Infrastructure Fund, Inc., The
Emerging Markets Telecommunications Fund, Inc., The First Israel Fund, Inc., The
Latin America Equity Fund, Inc. and The Portugal Fund, Inc.
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.
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
PORTFOLIO SUMMARY - AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
GEOGRAPHIC ASSET BREAKDOWN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS A PERCENT OF NET ASSETS
<S> <C> <C>
30-Jun-97 31-Dec-96
Argentina 6.67% 5.84%
Brazil 36.41% 29.53%
Chile 13.90% 23.89%
Colombia 2.62% 3.69%
Ecuador 0.45% 1.40%
Latin America 1.02% 1.23%
Mexico 23.80% 21.31%
Panama 0.75% 0.46%
Peru 7.55% 5.34%
Puerto Rico 0.44% 0.61%
Venezuela 6.14% 1.13%
Other 0.25% 5.61%
</TABLE>
SECTOR ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS A PERCENT OF NET ASSETS
<S> <C> <C>
30-Jun-97 31-Dec-96
Banking 4.98% 5.55%
Cement 5.94% 7.30%
Electric Distribution 3.10% 5.30%
Electric Generation 2.98% 2.83%
Engineering & Construction 2.54% 1.87%
Financial Services 5.26% 3.49%
Food & Beverages 9.15% 9.58%
Holding Companies 2.83% 4.29%
Paper Products 2.10% 1.41%
Oil & Natural Gas 5.41% 3.06%
Retail 3.51% 2.79%
Steel 0.43% 3.54%
Telecommunications 16.40% 11.96%
Textiles 2.94% 2.39%
Utilities 12.58% 6.73%
Fixed or Floating Rate
Investments 9.51% 2.70%
Other 10.07% 15.07%
Cash & Cash Equivalents 0.27% 10.14%
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
PORTFOLIO SUMMARY - AS OF JUNE 30, 1997 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS, BY ISSUER
<TABLE>
<CAPTION>
Percent of Net
Holding Sector Country Assets
<C> <S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
1. Companhia Paulista de Forca e Luz Utilities Brazil 5.4
- -----------------------------------------------------------------------------------------------------------------------------
2. Telecomunicacoes Brasileiras S.A. Telecommunications Brazil 3.5
- -----------------------------------------------------------------------------------------------------------------------------
3. Companhia Paranaense de Energia Utilities Brazil 3.4
- -----------------------------------------------------------------------------------------------------------------------------
4. Cementos Mexicanos, S.A. de C.V. Cement Mexico 3.2
- -----------------------------------------------------------------------------------------------------------------------------
5. Telecomunicacoes de Sao Paulo S.A. Telecommunications Brazil 3.0
- -----------------------------------------------------------------------------------------------------------------------------
6. Petroleo Brasileiro S.A. Oil & Natural Gas Brazil 2.9
- -----------------------------------------------------------------------------------------------------------------------------
7. Grupo Financiero Banamex Accival, S.A. de C.V. Financial Services Mexico 2.3
- -----------------------------------------------------------------------------------------------------------------------------
8. Corporacion Industrial SanLuis, S.A. de C.V. Holding Companies Mexico 2.2
- -----------------------------------------------------------------------------------------------------------------------------
9. Federal Republic of Brazil Fixed or Floating Rate
Investments Brazil 2.2
- -----------------------------------------------------------------------------------------------------------------------------
10. Republic of Argentina Fixed or Floating Rate
Investments Argentina 2.2
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Description (000) (Note A)
<S> <C> <C>
- --------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-90.22%
ARGENTINA-4.50%
FINANCIAL SERVICES-1.97%
Inversiones y Representaciones S.A.,
Convertible Bond, 4.50%, 08/02/03++.... USD 3,100 $ 3,580,500
-----------
OIL & NATURAL GAS-2.53%
<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 1,981
-----------
TELECOMMUNICATIONS-0.00%
Argentine Cellular Communications
Holdings Ltd.*+........................ 247,262 0
-----------
TOTAL ARGENTINA (Cost $8,886,099)...................... 8,174,907
-----------
BRAZIL-34.23%
BANKING-2.14%
Banco do Brasil S.A., Warrants (expiring
06/30/01)+............................. 11,877,000 38,614
Banco do Brasil S.A., Warrants (expiring
06/30/06)+............................. 17,815,500 49,812
Banco do Brasil S.A., Warrants (expiring
06/30/11)+............................. 29,692,500 82,743
Uniao de Bancos
Brasileiros S.A. GDR+.................. 99,880 3,708,045
-----------
3,879,214
-----------
BUSINESS SERVICES-0.45%
Multibras da Amazonia S.A. PN........... 797,315 822,089
-----------
CONSUMER GOODS-0.60%
Dixie Toga S.A. PN...................... 741,270 399,365
Electrolux do Brasil S.A. PN............ 375,496,000 596,441
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS (CONTINUED)
Tec Toy Industria de Brinquedos S.A.
PN+.................................... 369,591,000 $ 99,560
-----------
1,095,366
-----------
ELECTRIC DISTRIBUTION-1.04%
Centrais Eletricas de Santa Catarina
S.A., PN Class B....................... 1,264,135 1,878,794
-----------
FOOD & BEVERAGES-2.75%
Companhia Cervejaria Brahma PN.......... 2,817,073 2,145,743
Santista Alimentos S.A. ON.............. 1,334,000 2,850,030
-----------
4,995,773
-----------
MANUFACTURING-0.26%
Continental 2001 S.A. PN................ 31,976,978 475,251
-----------
OIL & NATURAL GAS-2.88%
Petroleo Brasileiro S.A. PN............. 18,813,000 5,225,280
-----------
TELECOMMUNICATIONS-9.09%
Telecomunicacoes Brasileiras S.A. ADR
PN..................................... 41,290 6,265,757
Telecomunicacoes de Minas Gerais S.A.
PNB.................................... 10,092,297 1,785,874
Telecomunicacoes de Minas Gerais S.A.,
PNB Receipts+.......................... 125,178 22,151
Telecomunicacoes de Sao Paulo S.A. PN... 16,182,731 5,291,274
Telecomunicacoes de Sao Paulo S.A., PN
Receipts+.............................. 207,238 67,761
Telecomunicacoes do Parana S.A. ON...... 641,572 429,085
Telecomunicacoes do Parana S.A. PN,
Rights (expiring 06/24/97)+............ 106,869 2,978
Telecomunicacoes do Rio de Janeiro S.A.
PN..................................... 15,284,000 2,356,736
Telecomunicacoes do Rio de Janeiro S.A.,
PN Receipts+........................... 1,812,060 279,413
-----------
16,501,029
-----------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
TEXTILES-2.94%
Companhia Tecidos Norte de Minas S.A.
PN(13)................................. 8,463,800 $ 3,302,026
Wentex Textil S.A. PN................... 467,000 2,038,828
-----------
5,340,854
-----------
UTILITIES-12.08%
Companhia Energetica de Minas Gerais
PN..................................... 75,415,064 3,887,916
Companhia Paranaense de Energia PNB..... 334,512,000 6,214,519
Companhia Paulista de Forca e Luz ON.... 57,977,540 9,747,745
Light Participacoes, S.A................ 5,235,300 2,086,242
-----------
21,936,422
-----------
TOTAL BRAZIL (Cost $44,814,451)........................ 62,150,072
-----------
CHILE-13.88%
AGRICULTURE-0.00%
Inversiones Siemel S.A., Class A+....... 16,416 3,351
-----------
BANKING-0.30%
Banco de Credito e Inversiones.......... 72,752 541,861
-----------
CONSUMER DURABLES-0.26%
Empresas Almacenes Paris................ 441,229 466,292
-----------
CONSUMER GOODS-0.35%
Compania Tecno Industrial S.A........... 21,643,485 637,322
-----------
ELECTRIC DISTRIBUTION-1.06%
Compania General de Electricidad S.A.... 74,000 305,704
Empresas Emel S.A.(14).................. 25,193 584,821
Sociedad Austral de Electricidad S.A.... 38,500 1,035,667
-----------
1,926,192
-----------
ELECTRIC GENERATION-1.63%
Chilgener S.A........................... 1,189,864 480,118
Chilgener S.A., Rights (expiring
07/22/97)+............................. 392,557 16,029
Empresa Electrica Pilmaiquen S.A........ 112,686 100,141
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
ELECTRIC GENERATION (CONTINUED)
Empresa Nacional de Electricidad S.A.... 1,664,710 $ 1,239,486
Enersis S.A............................. 1,640,000 1,130,491
-----------
2,966,265
-----------
ENGINEERING & CONSTRUCTION-0.29%
Besalco S.A............................. 66,469 395,924
Maderas y Sinteticos Sociedad Anonima
ADR.................................... 7,520 125,020
-----------
520,944
-----------
FERTILIZER-0.73%
Sociedad Quimica y Minera de Chile S.A.,
Class A................................ 170,191 919,730
Sociedad Quimica y Minera de Chile S.A.,
Class B................................ 64,814 415,644
-----------
1,335,374
-----------
FINANCIAL SERVICES-0.10%
Antarchile S.A., Class A................ 42,465 173,389
-----------
FISHERY-0.14%
Pesquera Itata S.A...................... 1,204,818 245,970
-----------
FOOD & BEVERAGES-1.34%
Embotelladora Andina S.A., Series A..... 150,003 513,400
Embotelladora Andina S.A., Series B..... 150,003 497,188
Embotelladora Polar S.A................. 1,107,285 1,303,158
Empresas Santa Carolina S.A., Series
A...................................... 182,729 105,332
Jugos Concentrados S.A.................. 451,025 13,541
-----------
2,432,619
-----------
FORESTRY-1.24%
Compania Chilena de Fosforos S.A........ 75,432 217,409
Compania de Petreoleos de Chile S.A..... 196,029 1,007,571
Compania Manufacturera de Papeles y
Cartones S.A........................... 51,504 643,259
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
FORESTRY (CONTINUED)
Forestal Terranova S.A.................. 394,366 $ 378,879
-----------
2,247,118
-----------
HEALTH CARE-0.27%
Banmedica S.A........................... 1,122,599 485,332
-----------
INSURANCE-0.10%
Compania de Seguros La Prevision Vida
S.A.................................... 188,348 189,999
-----------
MINING-1.27%
Antofagasta Holdings P.L.C.............. 213,500 1,634,902
Empresa Minera de Mantos Blancos S.A.... 199,302 612,721
Sociedad Punta del Cobre S.A., Class
A...................................... 461 53,148
-----------
2,300,771
-----------
PACKAGING-0.08%
Envases del Pacifico S.A.(15)........... 282,510 145,886
-----------
PHARMACEUTICALS-0.84%
Laboratorio Chile S.A................... 1,107,125 1,528,995
-----------
RETAIL-0.53%
Santa Isabel S.A........................ 208,642 430,965
Sociedad Anonima Comercial e Industrial
Falabella.............................. 438,743 526,892
-----------
957,857
-----------
STEEL-0.43%
Compania de Aceros del Pacifico S.A..... 270,555 786,289
-----------
TELECOMMUNICATIONS-2.08%
Compania de Telecomunicaciones de Chile
S.A. ADR............................... 43,000 1,419,000
Compania de Telecomunicaciones de Chile
S.A., Class A.......................... 170,317 1,358,118
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
Compania de Telecomunicaciones de Chile
S.A., Class B.......................... 146,000 $ 1,002,906
-----------
3,780,024
-----------
UTILITIES-0.50%
Compania de Consumidores de Gas de
Santiago S.A........................... 131,593 556,272
Empresa Metropolitana de Obras Santinas
S.A.................................... 1,239,254 355,688
-----------
911,960
-----------
WHOLESALE-0.34%
Zona Franca de Iquique S.A.............. 1,153,465 617,804
-----------
TOTAL CHILE (Cost $12,727,932)......................... 25,201,614
-----------
COLOMBIA-2.62%
BANKING-2.19%
Banco de Bogota......................... 9 56
<CAPTION>
Par (000)
-------------
<S> <C> <C>
Banco de Colombia S.A., Senior
Subordinated Convertible Note, 5.20%,
02/01/99++............................. USD 1,270 1,219,200
<CAPTION>
No. of
Shares
-------------
<S> <C> <C>
Banco Ganadero S.A., Preferred C ADR.... 47,100 1,230,488
Banco Industrial Colombiano S.A. ADR.... 85,200 1,533,600
-----------
3,983,344
-----------
CEMENT-0.43%
Cementos Diamante S.A. ADS++............ 59,909 782,561
-----------
TOTAL COLOMBIA (Cost $4,413,006)....................... 4,765,905
-----------
LATIN AMERICA-1.02%
TELECOMMUNICATIONS-1.02%
International Wireless Communications,
Inc., Series D*+....................... 4,660 1,747,500
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
International Wireless Communications,
Inc., Series F*+....................... 271 $ 101,625
International Wireless Communications,
Inc., Warrants (expiring 12/31/98)*+... 16 300
-----------
TOTAL LATIN AMERICA (Cost $1,328,894).................. 1,849,425
-----------
MEXICO-22.21%
BROADCAST, RADIO & TELEVISION-1.51%
Grupo Televisa S.A. GDR+,++............. 90,400 2,745,900
-----------
CEMENT-4.11%
Cementos Apasco, S.A. de C.V............ 242,300 1,738,120
Cementos Mexicanos, S.A. de C.V., Class
B...................................... 417,000 2,030,946
Cementos Mexicanos, S.A. de C.V. CPO.... 850,000 3,690,536
-----------
7,459,602
-----------
ENGINEERING & CONSTRUCTION-2.25%
Corporacion GEO,
S.A. de C.V. ADR+,++................... 76,900 1,768,700
Corporacion GEO,
S.A. de C.V., Series B+................ 75,640 435,982
Empresas ICA Sociedad Controladora,
S.A. de C.V. ADR....................... 116,670 1,874,012
-----------
4,078,694
-----------
FINANCIAL SERVICES-2.29%
Grupo Financiero Banamex Accival, S.A.
de C.V.+............................... 1,620,100 4,159,330
-----------
FOOD & BEVERAGES-3.09%
Fomento Economico Mexicano, S.A. de
C.V., Class B.......................... 438,800 2,612,036
Panamerican Beverages, Inc., Class A.... 91,141 2,996,260
-----------
5,608,296
-----------
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
HOLDING COMPANIES-2.83%
Corporacion Industrial SanLuis, S.A. de
C.V. CPO............................... 537,354 $ 3,983,155
Grupo Carso, S.A. de C.V., Class A1..... 166,500 1,162,944
-----------
5,146,099
-----------
PAPER PRODUCTS-2.10%
Kimberly-Clark de Mexico, S.A. de C.V.,
Class A................................ 948,280 3,818,898
-----------
RETAIL-2.98%
Controladora Comercial Mexicana, S.A. de
C.V. GDR............................... 137,625 2,546,063
Grupo Elektra,
S.A. de C.V. CPO....................... 261,495 2,863,084
-----------
5,409,147
-----------
TOBACCO-1.05%
Empresas La Moderna,
S.A. de C.V.+.......................... 357,400 1,900,346
-----------
TOTAL MEXICO (Cost $32,440,995)........................ 40,326,312
-----------
PERU-7.03%
BANKING-0.35%
Banco Wiese Ltd. ADR.................... 98,655 641,258
-----------
CEMENT-1.40%
Cementos Lima S.A.++.................... 126,243 2,541,518
-----------
ELECTRIC DISTRIBUTION-1.00%
Ontario-Quinta A.V.V.*.................. 1,434,000 1,819,846
-----------
FINANCIAL SERVICES-0.90%
Credicorp Limited....................... 73,960 1,627,120
-----------
FOOD & BEVERAGES-0.88%
Cerveceria Backus & Johnston S.A........ 1,542,643 1,605,163
-----------
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
MINING-0.58%
Southern Peru Copper Corporation ADR.... 53,600 $ 1,045,200
-----------
TELECOMMUNICATIONS-1.92%
Telefonica del Peru S.A. ADR............ 132,800 3,477,700
-----------
TOTAL PERU (Cost $10,142,975).......................... 12,757,805
-----------
PUERTO RICO-0.44%
TELECOMMUNICATIONS-0.44%
CoreComm Inc.+ (Cost $800,940).......... 46,100 795,225
-----------
VENEZUELA-4.29%
CEMENT-0.00%
C.A. Venezolana de Cementos S.A.C.A.,
Class 1................................ 117 397
C.A. Venezolana de Cementos S.A.C.A.,
Class 2................................ 7 23
-----------
420
-----------
ELECTRIC GENERATION-1.35%
C.A. La Electricidad de Caracas,
SAICA-SACA............................. 1,531,734 2,454,116
-----------
FOOD & BEVERAGES-1.09%
Mavesa S.A. ADR++....................... 194,566 1,969,981
-----------
TELECOMMUNICATIONS-1.85%
Compania Anonima Nacional Telefonos de
Venezuela ADR.......................... 61,693 2,660,511
Venworld Telecommunications+=/ =........ 40,140 691,612
-----------
3,352,123
-----------
TOTAL VENEZUELA (Cost $6,079,774)...................... 7,776,640
-----------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES (Cost
$121,635,066)......................................... 163,797,905
-----------
<CAPTION>
Par Value
Description (000) (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
FIXED OR FLOATING RATE INVESTMENTS-9.51%
ARGENTINA-2.17%
Republic of Argentina, 11.75%,
02/12/07............................... ARS 750 $ 838,255
Republic of Argentina, Bocon, Pre 4 FRB,
5.6953%, 09/01/02(1)(4)(8)............. USD 622 589,750
Republic of Argentina FRB, 6.75%,
03/31/05(2)(7)(8)...................... 1,940 1,823,600
Republic of Argentina, Par Bond, Series
L-GP, 5.50%, 03/31/23(7)(11)........... 1,000 692,500
-----------
TOTAL ARGENTINA (Cost $3,816,245)...................... 3,944,105
-----------
BRAZIL-2.18%
Federal Republic of Brazil,
Capitalization Bond VRB, 8.00%,
04/15/14(1)(7)(8)...................... 2,942 2,368,074
Federal Republic of Brazil, Debt
Conversion Bond, Series L FRB, 6.9375%,
04/15/12(3)(7)(8)...................... 1,750 1,445,937
Federal Republic of Brazil, Global Bond,
10.125%, 05/15/27...................... 150 145,050
-----------
TOTAL BRAZIL (Cost $3,871,066)......................... 3,959,061
-----------
ECUADOR-0.45%
Republic of Ecuador, Past Due Interest
Bond, Global Bearer FRB, 6.4375%,
02/27/15(1)(2)(7)(8) (Cost $725,184)... 1,269 821,664
-----------
MEXICO-1.59%
Mexican Udibonos, 6.00%, 02/14/02(6).... MXN 3,277 411,439
United Mexican States, Discount Bond,
Series D FRB, 6.8125%,
12/31/19(2)(7)(9)...................... USD 500 465,313
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Description (000) (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
MEXICO (CONTINUED)
United Mexican States, Global Bond,
11.50%, 05/15/26....................... USD 1,750 $ 2,003,313
-----------
TOTAL MEXICO (Cost $2,772,898)......................... 2,880,065
-----------
PANAMA-0.75%
The Republic of Panama, Interest
Reduction Bond VRB, 3.50%,
07/17/14(5)(7)(8)...................... 600 463,500
The Republic of Panama, Past Due
Interest Bond FRB, 6.5625%,
07/17/16(1)(2)(7)(8)................... 1,014 891,105
-----------
TOTAL PANAMA (Cost $1,328,172)......................... 1,354,605
-----------
PERU-0.52%
The Republic of Peru, Front Loaded
Interest Reduction Bond VRB, 3.25%,
03/07/17(5)(7)(8)...................... 500 300,000
The Republic of Peru, Past Due Interest
Bond VRB, 4.00%, 03/07/17++(5)(7)(8)... 1,000 649,375
-----------
TOTAL PERU (Cost $923,252)............................. 949,375
-----------
VENEZUELA-1.85%
Republic of Venezuela, Debt Conversion
Bond, Series DL FRB, 6.75%,
12/18/07(3)(7)(8)...................... 1,000 928,125
Republic of Venezuela, Front Loaded
Interest Reduction Bond, Series A VRB,
6.75%, 03/31/07(3)(7)(8)............... 714 666,071
Republic of Venezuela, Par Bond, Series
W-A, 6.75%, 03/31/20(7)(10)............ 250 196,875
Republic of Venezuela, Par Bond, Series
X-B, 6.75%, 03/31/20(7)(12)............ 2,000 1,575,000
-----------
TOTAL VENEZUELA (Cost $3,264,156)...................... 3,366,071
-----------
TOTAL FIXED OR FLOATING RATE INVESTMENTS (Cost
$16,700,973).......................................... 17,274,946
-----------
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT-0.02%
CHILEAN MUTUAL FUND-0.02%
Fondo Mutuo Security Check (Cost
$29,434)............................... 6,800 $ 29,622
-----------
TOTAL INVESTMENTS-99.75%
(Cost $138,365,473) (Notes A,D)....................... 181,102,473
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES-0.25%...
446,756
-----------
NET ASSETS-100.00%..................................... $181,549,229
-----------
-----------
- ---------------------------------------------------------
* Not readily marketable security.
+ Security is non-income producing.
++ SEC Rule 144A security. Such securities are traded
only among "qualified institutional buyers."
=/= Restricted security (See Note F).
(1) Payment-in-kind; of which all or a portion of the
coupon is being capitalized at periodic intervals.
(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) Adjustable rate; rate resets based on 1-month U.S.
Dollar LIBOR flat.
(5) Variable rate coupon; coupon varies at periodic
intervals.
(6) Coupon is linked to the Consumer Price Index.
(7) Brady Bond.
(8) Pro-rata sinking fund has been established.
(9) With an additional 769,000 value recovery rights
attached, expiring 06/30/03, with no market value.
(10) With an additional 1,250 oil obligation certificates
attached, expiring 04/15/20, with no market value.
(11) Step-up coupon; coupon increases at periodic
intervals.
(12) With an additional 10,000 oil obligation
certificates attached, expiring 04/15/20, with no
market value.
(13) With an additional 8,463,800 shares of Encorpar PN
attached, with no market value.
(14) With an additional 8,928 rights attached, expiring
07/20/97, with no market value.
(15) With an additional 87,942 rights attached, expiring
07/02/97, with no market value.
ADR American Depositary Receipts.
ADS American Depositary Shares.
ARS Argentine Pesos.
CPO Ordinary Participation Certificates.
FRB Floating Rate Bond.
GDR Global Depositary Receipts.
ON Ordinary Shares.
MXN Mexican Pesos.
PN Preferred Shares.
PNB Preferred Shares, Class B.
USD United States Dollars.
VRB Variable Rate Bond.
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost
$138,365,473) (Note A)................. $181,102,473
Cash (including $253,194 of foreign
currencies with a cost of $255,099)
(Note A)............................... 629,793
Receivables:
Investments sold...................... 1,782,240
Interest.............................. 403,604
Dividends............................. 267,931
Prepaid expenses and other assets....... 38,172
------------
Total Assets............................ 184,224,213
------------
LIABILITIES
Payables:
Loan (Note E)......................... 1,500,000
Investments purchased................. 291,854
Advisory fees (Note B)................ 454,932
Administration fees (Note B).......... 55,200
Other accrued expenses................ 372,998
------------
Total Liabilities....................... 2,674,984
------------
NET ASSETS (applicable to 7,867,385
shares of common stock outstanding)
(Note C)............................... $181,549,229
------------
------------
NET ASSET VALUE PER SHARE ($181,549,229
DIVIDED BY 7,867,385)................. $23.08
------------
------------
NET ASSETS CONSIST OF
Capital stock, $0.001 par value;
7,867,385 shares issued and outstanding
(100,000,000 shares authorized)........ $ 7,867
Paid-in capital......................... 130,694,372
Undistributed net investment income..... 2,526,222
Accumulated net realized gain on
investments and foreign currency
related transactions................... 5,596,368
Net unrealized appreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currencies..................... 42,724,400
------------
Net assets applicable to shares
outstanding............................ $181,549,229
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends............................. $ 2,628,327
Interest.............................. 871,118
Less: Foreign taxes withheld.......... (64,874)
-----------
Total Investment Income............... 3,434,571
-----------
Expenses:
Investment advisory fees (Note B)..... 984,296
Custodian fees........................ 154,268
Administration fees (Note B).......... 124,823
Printing.............................. 45,621
Audit and legal fees.................. 38,680
Accounting fees....................... 33,025
Directors' fees....................... 19,836
Transfer agent fees................... 19,345
Insurance............................. 10,583
NYSE listing fees..................... 8,018
Other................................. 9,824
Brazilian taxes (Note A).............. 95,273
Chilean repatriation taxes (Note A)... 1,074,021
-----------
Total Expenses........................ 2,617,613
Less: Fee waivers (Note B)............ (98,308)
-----------
Net Expenses........................ 2,519,305
-----------
Net Investment Income................. 915,266
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments........................... 11,051,739
Foreign currency related
transactions......................... (196,833)
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities
denominated in foreign currencies...... 19,759,331
-----------
Net realized and unrealized gain on
investments and foreign currency
related transactions................... 30,614,237
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $31,529,503
-----------
-----------
</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 Six Months For the Year
Ended June 30, 1997 Ended
(unaudited) December 31, 1996
<S> <C> <C>
------------------------------------------
INCREASE IN NET ASSETS
Operations:
Net investment income................. $ 915,266 $ 2,186,181
Net realized gain on investments and
foreign currency related
transactions......................... 10,854,906 1,861,631
Net change in unrealized appreciation
in value of investments and
translation of other assets and
liabilities denominated in foreign
currencies........................... 19,759,331 13,367,921
------------------- -----------------
Net increase in net assets resulting
from operations.................... 31,529,503 17,415,733
------------------- -----------------
Dividends and distributions to
shareholders:
Net investment income................. -- (1,788,940)
Net realized gain on foreign currency
related transactions................. -- (19,059)
------------------- -----------------
Total dividends and distributions to
shareholders....................... -- (1,807,999)
------------------- -----------------
Capital share transactions (Note C):
Proceeds from 773 shares and 6,613
shares, respectively, issued in
reinvestment of dividends............ 13,137 109,111
------------------- -----------------
Total increase in net assets........ 31,542,640 15,716,845
------------------- -----------------
NET ASSETS
Beginning of period..................... 150,006,589 134,289,744
------------------- -----------------
End of period (including undistributed
net investment income of $2,526,222 and
$1,610,956, respectively).............. $181,549,229 $150,006,589
------------------- -----------------
------------------- -----------------
</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,
For the Six 1990*
Months Ended For the Years Ended December 31, through
June 30, 1997 --------------------------------------------------------------- December 31,
(unaudited) 1996 1995 1994+ 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of
period....................... $19.07 $17.09 $20.18 $25.73 $25.36 $26.05 $14.24 $13.64**
------------- -------- -------- -------- -------- -------- -------- ------------
Net investment income......... 0.12 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................. 3.89 1.93 (3.09) 1.29 10.18 1.51 14.66 0.58
------------- -------- -------- -------- -------- -------- -------- ------------
Net increase/(decrease) in net
assets resulting from
operations................... 4.01 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....................... $23.08 $19.07 $17.09 $20.18 $25.73 $25.36 $26.05 $14.24
------------- -------- -------- -------- -------- -------- -------- ------------
------------- -------- -------- -------- -------- -------- -------- ------------
Market value, end of period... $19.500 $15.750 $14.750 $18.750 $31.500 $24.375 $26.500 $11.125
------------- -------- -------- -------- -------- -------- -------- ------------
------------- -------- -------- -------- -------- -------- -------- ------------
Total investment return(a).... 23.81% 8.26% (20.34)% (26.63)% 89.45% 2.35% 167.96% (18.35)%
------------- -------- -------- -------- -------- -------- -------- ------------
------------- -------- -------- -------- -------- -------- -------- ------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted)..................... $181,549 $150,007 $134,290 $156,673 $140,458 $102,259 $104,435 $57,081
Ratio of expenses to average
net assets(c)................ 3.08%(b) 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...................... 3.20%(b) 1.82% 2.12% -- -- -- -- --
Ratio of expenses to average
net assets, excluding
taxes........................ 1.65%(b) -- 1.78% 1.72% -- 2.31% -- --
Ratio of net investment income
to
average net assets........... 1.12%(b) 1.47% 1.10% 0.63% 1.45% 1.15% 2.85% 5.10%(b)
Portfolio turnover rate....... 57.83% 50.21% 38.71% 77.81% 70.17% 55.40% 82.39% 52.49%
Average commission rate per
share(d)..................... $0.0001 $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) Ratios reflect actual expenses incurred by the Fund. Amounts are net
of fee waivers and inclusive of taxes.
(d) 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 subject to
such commissions during the period.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
19
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 June 30, 1997, the
Fund held 4.93% 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
$8,953,309. 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 June 30, 1997, the interest
rate was 4.9375% 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 Latin American countries. Also, certain
Latin American countries impose taxes on funds remitted or repatriated from such
countries.
The Fund is subject to a 10% Chilean repatriation tax with respect to all
remittances from Chile in excess of original invested capital. For the six
months ended June 30, 1997, the Fund incurred $1,074,021 of such taxes.
Effective January 23, 1997, Brazil imposes a 0.20% CONTRIBUCAO SOBRE
MOVIMENTACAO FINANCIERA ("CPMF") tax that applies to most debit transactions
carried out by financial institutions. Stock exchange
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
transactions are not affected by this tax. For the six months ended June 30,
1997, the Fund incurred $95,273 of such taxes.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The Fund does not isolate that portion of gains and losses in investments in
equity securities which is due to changes in the foreign exchange rates from
that which is due to changes in market prices of equity securities. Accordingly,
realized and unrealized foreign currency gains and losses with respect to such
securities are included in the reported net realized and unrealized gains and
losses on investment transactions balances. However, the Fund does isolate the
effect of fluctuations in foreign exchange rates when determining the gain or
loss upon the sale or maturity of foreign currency denominated debt obligations
pursuant to U.S. federal income tax regulations, with such amount categorized as
foreign exchange gain or loss for both financial reporting and U.S. federal
income tax reporting purposes.
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.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.
OTHER: Securities denominated in currencies other than U.S. dollars are subject
to changes in value due to fluctuations in exchange rates.
Some countries require governmental approval for the repatriation of investment
income, capital or the proceeds of sales of securities by foreign investors. In
addition, if there is a deterioration in a country's balance of payments or for
other reasons, a country may impose temporary restrictions on foreign capital
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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.
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 Fund's former
sub-advisers. For the six months ended June 30, 1997, BEA earned $836,540 for
advisory services, of which BEA waived $83,562. BEA also provides certain
administrative services to the Fund and is reimbursed by the Fund for costs
incurred on behalf of the Fund (up to $20,000 per annum). For the six months
ended June 30, 1997, BEA was reimbursed $9,695 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 six months ended June 30,
1997, advisory fees amounted to $147,756, of which $14,746 was waived by SBAM.
Celfin Servicios Financieros Limitada ("Celfin") serves as the Fund's
sub-adviser with respect to Chilean investments. In return for its services,
Celfin is paid a
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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 six months ended June 30, 1997, these sub-advisory fees amounted to
$40,962.
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 six months ended
June 30, 1997, BSFM earned $75,456 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 $65,400 at June 30, 1997) 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 $6,700 at June 30, 1997). For the six months ended June 30, 1997,
Celfin earned $39,672 and $3,272 for administrative and accounting services,
respectively.
NOTE C. CAPITAL STOCK
The authorized capital stock of the Fund is 100,000,000 shares of common stock,
$0.001, par value. Of the 7,867,385 shares outstanding at June 30, 1997, BEA
owned 7,169 shares.
NOTE D. INVESTMENT IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at June 30,
1997 was $138,392,870. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currencies) of
$42,709,603, was composed of gross appreciation of $47,918,478 for those
investments having an excess of value over cost and gross depreciation of
$5,208,875 for those investments having an excess of cost over value.
For the six months ended June 30, 1997, purchases and sales of securities, other
than short-term investments, were $88,518,266 and $72,580,068, respectively.
NOTE E. CREDIT AGREEMENT
The Fund, along with 18 other U.S. regulated investment companies for which BEA
serves as investment adviser, has a credit agreement with 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 $1,500,000 with an interest rate of 8.50% outstanding under the credit
agreement at June 30, 1997. The amount outstanding under the credit agreement
for the Fund averaged $66,298 with an average interest rate of 8.50% during the
six months ended June 30, 1997.
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
NOTE F. RESTRICTED SECURITIES
Certain of the Fund's investments are restricted as to resale and are valued at
the direction of the Fund's Board of Directors in good faith, at fair value,
after taking into consideration appropriate indications of value. The table
below shows the number of shares held, the acquisition dates, aggregate cost,
fair value as of June 30, 1997, 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 06/30/97 PER SHARE NET ASSETS
- ------------------------------------- ----------- ------------------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Venworld Telecommunications 40,140 7/30/92 & 8/07/92 $ 816,959 $ 691,612 $ 17.23 0.38
</TABLE>
The Fund may incur certain costs in connection with the disposition of the above
security.
- --------------------------------------------------------------------------------
24
<PAGE>
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On April 22, 1997, 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 four 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 4,971,465 156,920 2,739,000
George W. Landau 4,965,305 163,080 2,739,000
William W. Priest, Jr. 4,961,866 166,519 2,739,000
Richard W. Watt 4,962,087 166,298 2,739,000
</TABLE>
In addition to the directors re-elected at the meeting, James J. Cattano, Peter
A. Gordon, Michael Hyland and Martin M. Torino continue to serve as directors of
the Fund.
(2) To ratify the selection of Coopers & Lybrand L.L.P. as independent public
accountants for the year ending December 31, 1997.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
4,969,674 112,654 46,057 2,739,000
</TABLE>
(3) To approve an amendment to the Fund's investment restrictions to permit the
Fund to issue "senior securities" to the extent permitted by the Investment
Company Act of 1940, as amended.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
1,800,828 1,138,384 117,610 4,810,563
</TABLE>
The Fund did not receive the required votes to approve the above proposal.
(4) To approve an amendment to the Fund's Articles of Incorporation relating to
the size of the Board of Directors and the removal of Directors.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
4,542,300 970,375 160,127 2,194,583
</TABLE>
- --------------------------------------------------------------------------------
25
<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
- --------------------------------------------------------------------------------
26
<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.
- --------------------------------------------------------------------------------
27
<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 June 30, 1997, BEA managed
approximately $31.9 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.
<TABLE>
<S> <C>
CLOSED-END FUNDS BEA ADVISOR FUNDS
SINGLE COUNTRY OPEN-END MUTUAL FUNDS
The Brazilian Equity Fund, Inc. (BZL) BEA Emerging Markets Equity Fund
The 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
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
DIRECTORS AND CORPORATE OFFICERS
William W. Priest, Jr. Chairman of the
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
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. The financial
information included herein is taken from the records of the Fund
without examination by independent accountants who do not express an
opinion thereon. It is not a prospectus, circular or representation
intended for use in the purchase or sale of shares of the Fund or of
any securities mentioned in this report. [LOGO]
- --------------------------------------------------------------------------------
3914-SAR-6/97
