<PAGE>
[ART]
THE LATIN AMERICA
INVESTMENT FUND, INC.
- ---------------------
ANNUAL REPORT
DECEMBER 31, 1997
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders.......................................................................1
Portfolio Summary............................................................................6
Schedule of Investments......................................................................8
Statement of Assets and Liabilities.........................................................14
Statement of Operations.....................................................................15
Statement of Changes in Net Assets..........................................................16
Financial Highlights........................................................................17
Notes to Financial Statements...............................................................18
Report of Independent Accountants...........................................................23
Results of Annual Meeting of Shareholders...................................................24
Tax Information.............................................................................25
Description of Dividend Reinvestment and Cash Purchase Plan.................................26
</TABLE>
PICTURED ON THE COVER IS A BRANCH OF BANCO POPULAR ARGENTINO LOCATED IN BUENOS
AIRES, ARGENTINA.
- --------------------------------------------------------------------------------
<PAGE>
LETTER TO SHAREHOLDERS
February 13, 1998
DEAR SHAREHOLDER:
I am pleased to report on the activities of The Latin America Investment Fund,
Inc. (the "Fund") for the year ended December 31, 1997.
At December 31, 1997, the Fund's net assets were $143.4 million. The Fund's net
asset value ("NAV") was $18.21 per share (net of dividends and distributions
paid of $2.63 per share), as compared to $19.07 on December 31, 1996.
PERFORMANCE
For the year ended December 31, 1997, the Fund's total return, based on NAV and
assuming the reinvestment of dividends and distributions, was 13.7%. By
comparison, the total return of the benchmark Morgan Stanley Capital
International Emerging Markets Latin America Free Index ("EMFLA") was 31.6%.
I attribute the Fund's underperformance versus the EMFLA during the year to
several factors. Most prominent was a so-called "large-cap effect," in which a
market index's overall returns are exaggerated by the disproportionate weighting
of large-capitalization (I.E., the most liquid) stocks in the index. Since
management of the Fund is bound by strict legal diversification requirements,
relative performance tends to suffer when the large-cap effect occurs. This
certainly was the case last year, as the Fund was systematically exposed to
medium-sized and even less liquid stocks that lagged the larger-caps by some
distance, especially in the first half of the year.
Returns also were adversely affected by the Fund's relatively large position in
Chile, which was the worst-performing Latin equity market in 1997, mainly
because of capital repatriation rules; poor stock selection in some sectors
(E.G., Brazilian retail); transaction costs incurred as I restructured the
portfolio to improve its liquidity profile; and the Fund's exposure to bonds
during a period (I.E., the fourth quarter) when overall emerging market debt was
the worst performer among all major debt sectors.
Despite all of these problems, performance has been steadily recovering since
mid-1997. With the addition of further staff to provide more analytical support
as well as the introduction of certain changes in the investment process, I am
optimistic that it will continue to do so in 1998.
INVESTMENT PERSPECTIVE
Latin American equities caught a bad case of the "Asian Flu" of currency
devaluation and falling securities prices during the fourth quarter of 1997.
Unlike earlier in the year, Latin markets bore the full brunt of investor
anxiety about Asia's deteriorating economic condition. EMFLA strongly
outperformed emerging markets as a group during the fourth quarter and year as a
whole.
Brazil was one of the hardest-hit Latin markets. This was due to the massive
October sell-off in global financial markets that originated amidst concerns
that Hong Kong would have to devalue its dollar. The sell-off quickly spread
- --------------------------------------------------------------------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
to the markets of other nations whose currencies were considered particularly
vulnerable, among which the Brazilian REAL was foremost. Similar perceptions
about the Chilean peso generated heavy selling in Chilean equities as well.
Mexico weathered the storm best; in fact, it was the top-performing Latin market
both in the fourth quarter and the year, by far.
The macroeconomic backdrop for Latin stocks has substantially changed since my
last report, with conditions in Brazil and Chile most significant in this
regard. Prior to October, the Brazilian economy was encountering some
turbulence, but was in reasonably good shape. With the battering of the REAL,
however, the government has been forced both to implement a harsh fiscal
austerity plan and, more generally, act with much greater urgency to enact a
number of substantive reforms that it had previously approached in a more
leisurely manner. Chile finds itself simultaneously having to manage an
overheated economy, defend the peso, adjust to much lower Asian demand for its
exports and absorb a sharp decline in the price of its most important product,
copper.
FEATURED STOCKS
As is my custom, I'd like to highlight specific companies held in the Fund in
order to provide some insight into how your money is invested. The following are
two that I view quite positively.
TELECOMUNICACOES DE SAO PAULO S.A.
A company whose shares represent an outstanding opportunity for longer-term
appreciation is Telecomunicacoes de Sao Paulo S.A. ("Telesp"), the
telecommunications provider for the Brazilian state of Sao Paulo. Telesp is the
single largest member of Brazil's Telecomunicacoes Brasileiras S.A. ("Telebras")
national phone system, as it contributes about 34% of Telebras's total phone
lines in service; 29% of net revenues; 30% of net income; and 25% of total
employees [note: all figures as of year-end 1996].
My investment thesis for Telesp is based on three notably positive factors.
These include the attractiveness of the Sao Paulo service territory; the
company's post-privatization outlook; and the importance of the privatization
process to the Brazilian government and equity market. I add that the nature of
these factors is such that Telesp's vulnerability to weakness in the Brazilian
economy is relatively low.
SAO PAULO SERVICE TERRITORY - The state of Sao Paulo is considered the crown
jewel of the Telebras system. Analysts estimate that one of every two telephone
calls in Brazil either originates or is received there. Overall, it is regarded
as Brazil's most telecommunication-intensive state.
Other data underscore this point even further. Sao Paulo's 34 million
inhabitants account for about 22% of the nation's population. By far, it is the
wealthiest and most industrialized state in Brazil. Per capita Gross Domestic
Product is the highest among all Brazilian states and about 65% higher than the
national average. Sao Paulo supplies about 65% of national industrial production
(of which two-thirds comes from the city of Sao Paulo area alone) and 20% of
agricultural output. It sends out about one-third of total exports and takes in
approximately 40% of total imports. There also is a heavy concentration of
multinational corporations with operations in the state.
- --------------------------------------------------------------------------------
2
<PAGE>
LETTER TO SHAREHOLDERS
Clearly, a statistical profile like that of Sao Paulo is extremely positive for
consumption of telecommunications services and, hence, the value of Telesp's
franchise.
POST-PRIVATIZATION OUTLOOK - Investors should find Telesp attractive both during
and after the privatization process for several reasons. It is expected to be
one of the first pieces to be sold; it is one of the most transparent pieces due
to its long existence as a separately traded company; unlike most of the other
pieces, it will remain a free-standing company and thus carries no risk of
uncertainty relating to possible reorganization; and its shares are the most
liquid after those of Telebras itself. I expect that Telesp will gain even
further liquidity with a listing of American Depositary Receipts later in the
year.
Telesp's ultimate business prospects are quite strong and primarily driven by a
potent combination of huge pent-up demand and high potential gains in efficiency
and productivity. As for demand, Telesp's waiting list for new wireline
customers currently numbers about six million people (equal to around 1.3 times
its installed wireline base) and three million for new wireless connections.
Revenues and profits must rise rapidly over the next few years simply to meet
this existing, verifiable demand. Given the historical shortage of phone service
in Brazil, the recent reduction of new-line installation charges to $80 from
$300, anticipated popularity of value-added services and the economy's eventual
recovery, future demand is certain to be considerably higher.
There is substantial scope for Telesp to improve its system efficiency. As
measured by the industry standards of installed lines per employee and the level
of network digitization, it is far behind most other prominent Latin
telecommunication providers in this regard. I project substantive gains in these
categories that will only enhance the company's streams of revenues, profits and
cash flow.
IMPORTANCE OF PRIVATIZATION - With the weakening of Brazil's macroeconomic
environment in the last few months, the successful privatization of state-owned
companies has taken on much greater urgency for the government and investors
alike. The government needs privatization not simply for the billions of dollars
in revenues it will generate, but also for its psychological value as a
confidence-builder for the Brazilian populace and the global financial
community. Investors see it not simply as a confidence-builder, but also as a
unique opportunity to participate in the growth of some of Latin America's
biggest and most important industry sectors.
The government's commitment to privatizing the telecommunication sector in 1998
has not been diminished by the downturn in the economy. All appears to be moving
quickly and according to plan, with the sale of Telebras's various pieces
expected to take place around midyear.
GRUPO TELEVISA S.A.
Grupo Televisa S.A. ("Televisa") is the largest Spanish-language
media/entertainment company both in Mexico and worldwide, as well as the largest
global producer of television programming in any language. The full range of its
businesses includes television production and broadcasting (roughly 66% of total
revenues), publishing (17%), radio and music recording (9% combined), film
production, sports/special events promotion, outdoor advertising, paging
services, satellite communications and more.
- --------------------------------------------------------------------------------
3
<PAGE>
LETTER TO SHAREHOLDERS
Televisa shares have been publicly traded in Mexico since 1991 and as
U.S.-listed Global Depositary Receipts since 1993. Majority ownership (50.5%) is
held by Televicentro, a holding company owned by members of the company's
several founding families. 30.5% of equity trades publicly and the remaining
19.0% is owned by officers and directors.
I find Televisa's investment appeal compelling and multifaceted:
- - With approximately 60% of its revenues derived from domestic advertising
revenues, Televisa is a direct equity play on the health of the Mexican
economy. Among Latin economies, moreover, I see Mexico's 1998 prospects as
brightest. Televisa should be a major beneficiary.
- - The outlook for overall Mexican advertising revenues in 1998 is vibrant. Three
previously small advertisers will significantly boost their advertising
expenses. These are the telecommunications and pension fund businesses, which
are becoming increasingly competitive; and the political parties, which face
several important state-level elections. Additional large-scale advertising
events will be the Winter Olympics and the quadrennial World Cup of soccer.
- - Televisa is a turnaround situation. The unexpected death last April of Emilio
Azcarraga Milmo, one of Televisa's patriarchs and its longtime guiding force,
was unpropitious for investors. Azcarraga's 28-year-old son became president
and CEO, assuming power just as the company was beginning to stem the loss of
market share to its aggressive upstart rival, TV Azteca, and in the midst of a
major cost-cutting initiative. While many observers expect the younger
Azcarraga to fail in his new responsibilities, I believe he will succeed.
- - Televisa is a direct play on the growth of the Spanish-speaking universe.
Numbering about 350 million worldwide (including 90 million in Mexico and 27
million in the U.S.), this group is increasing both in size and buying power.
Its demand for viewed and published entertainment can only grow. Televisa's
"franchise" in this regard is unmatchable.
- - With significant equity stakes in the hands of the younger Azcarraga (about
25%) and top management (the aforementioned 19.0%), company leadership is
highly incentivized to build shareholder value.
- - Televisa represents a unique integration of presence across a wide spectrum of
media with the control of content and distribution. This is precisely what so
many U.S. media companies are trying to achieve via consolidation.
OUTLOOK
Weakening macroeconomic fundamentals and falling stock prices have compelled me
to adjust my near-term view on Latin equities. At present, then, I see a
cautious stance as most appropriate.
It appears that the problems in Asia are deeply structural and will take
considerable time to resolve, meaning that Latin markets are likely to continue
to experience greater-than-normal volatility. In addition, the Brazilian growth
engine has stalled for the time being, leaving privatization as the key driver
of potential appreciation for Brazilian stocks. It is ironic that Mexico, whose
peso crisis caused Latin equity prices to slump from late 1994 into early 1996,
can now be legitimately regarded as the "safe haven" among the region's markets.
- --------------------------------------------------------------------------------
4
<PAGE>
LETTER TO SHAREHOLDERS
As for stocks themselves, the changed environment means that investors'
expectations of corporate earnings and overall business prospects have been
revised downward. A further negative is one of a more technical nature. By this
I refer to the large-scale selling of Latin equities that invariably occurs when
managers of dedicated emerging markets portfolios must raise cash in response to
declining share prices in Asian markets. Liquidity constraints magnify the
impact of such selling.
I appreciate your interest in the Fund, and would be pleased to respond to your
questions or comments.
Sincerely yours,
[SIG]
Richard W. Watt
President and Chief Investment Officer*
I wish to remind shareholders whose shares are registered in their own name that
they automatically participate in the Fund's dividend reinvestment program. The
automatic Dividend Reinvestment Plan (the "Plan") can be of value to
shareholders in maintaining their proportional ownership interest in the Fund in
an easy and convenient way. A shareholder whose shares are held in the name of a
broker/dealer or nominee should contact that party for details about
participating in the Plan. The Fund also offers shareholders a voluntary Cash
Purchase Plan. The Plan and the Cash Purchase Plan are described on pages 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 fund focusing on smaller Latin American 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
President, Chief Investment Officer and a Director of the Fund. He also is
President, Chief Investment Officer and a Director of The Brazilian Equity Fund,
Inc., The 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.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
PORTFOLIO SUMMARY - AS OF DECEMBER 31, 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>
31-Dec-97 31-Dec-96
Argentina 7.86% 5.84%
Brazil 40.09% 29.53%
Chile 11.28% 23.85%
Colombia 0.00% 3.69%
Mexico 34.67% 21.31%
Peru 3.33% 5.34%
Venezuela 6.84% 1.13%
Other -4.07% 9.31%
</TABLE>
SECTOR ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS A PERCENT OF NET ASSETS
<S> <C> <C>
31-Dec-97 31-Dec-96
Banking 2.19% 5.55%
Broadcast, Radio & Television 4.02% 1.08%
Cement 2.51% 7.30%
Conglomerates 2.61% 0.00%
Electric Distribution 2.25% 5.30%
Electric Generation 2.84% 2.83%
Financial Services 2.09% 3.49%
Food & Beverages 9.08% 9.58%
Investment & Holding Companies 4.90% 4.29%
Local and/or Long Distance Telephone
Service 2.38% 0.00%
Mining 2.26% 2.41%
Oil & Natural Gas 7.10% 3.06%
Retail 4.78% 2.79%
Telecommunications 20.20% 11.96%
Utilities 12.18% 6.73%
Fixed or Floating Rate Investments 15.23% 2.70%
Other 8.86% 20.79%
Cash & Cash Equivalents -5.48% 10.14%
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
PORTFOLIO SUMMARY - AS OF DECEMBER 31, 1997 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS, BY ISSUER
<TABLE>
<CAPTION>
Percent of Net
Holding Sector Country Assets
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
1. Telecomunicacoes Brasileiras S.A. Telecommunications Brazil 7.0
- --------------------------------------------------------------------------------------------------------------------------------
2. Federal Republic of Brazil Fixed or Floating Rate
Investments Brazil 6.8
- --------------------------------------------------------------------------------------------------------------------------------
3. Telefonos de Mexico, S.A. de C.V. Telecommunications Mexico 5.0
- --------------------------------------------------------------------------------------------------------------------------------
4. Telecomunicacoes de Sao Paulo S.A. Telecommunications Brazil 4.3
- --------------------------------------------------------------------------------------------------------------------------------
5. Grupo Televisa S.A. Broadcast, Radio &
Television Mexico 4.0
- --------------------------------------------------------------------------------------------------------------------------------
6. Companhia de Saneamento Basico do Estado de Sao
Paulo Utilities Brazil 3.2
- --------------------------------------------------------------------------------------------------------------------------------
7. Corporacion Industrial SanLuis, S.A. de C.V. Investment & Holding
Companies Mexico 3.1
- --------------------------------------------------------------------------------------------------------------------------------
8. Companhia Paranaense de Energia Utilities Brazil 3.0
- --------------------------------------------------------------------------------------------------------------------------------
9. Republic of Argentina Fixed or Floating Rate
Investments Argentina 2.9
- --------------------------------------------------------------------------------------------------------------------------------
10. Panamerican Beverages, Inc. Food & Beverages Mexico 2.7
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
<S> <C> <C>
- ----------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-90.25%
ARGENTINA-4.93%
OIL & NATURAL GAS-4.93%
Camuzzi Argentina S.A.*+................ 1,536,387 $ 2,922,208
Perez Companc S.A., Class B............. 113,800 812,686
Sodigas del Sur S.A.*................... 421,485 783,962
Sodigas Pampeana S.A.*.................. 583,264 886,561
YPF S.A. ADR............................ 48,422 1,655,427
------------
7,060,844
------------
RETAIL-0.00%
Domec S.A., Class B+.................... 574 1,550
------------
TOTAL ARGENTINA (Cost $5,765,696)....................... 7,062,394
------------
BRAZIL-33.32%
BANKING-1.85%
Banco do Brasil S.A., Warrants (expiring
06/30/01)+............................. 11,877,000 20,326
Banco do Brasil S.A., Warrants (expiring
06/30/06)+............................. 17,815,500 31,128
Banco do Brasil S.A., Warrants (expiring
06/30/11)+............................. 29,692,500 57,999
Banco Itau S.A. PN...................... 4,743,000 2,549,886
------------
2,659,339
------------
BUSINESS SERVICES-0.00%
Multibras da Amazonia S.A. PN........... 10,515 4,428
------------
CONSUMER GOODS-0.04%
Tec Toy Industria de Brinquedos S.A.
PN*+................................... 350,070,000 62,734
------------
FOOD & BEVERAGES-2.64%
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar ADR................ 127,600 2,472,250
Santista Alimentos S.A. ON.............. 946,200 1,314,108
------------
3,786,358
------------
<CAPTION>
No. of Value
Description Shares (Note A)
- ----------------------------------------------------------------------
<S> <C> <C>
MINING-1.45%
Companhia Vale do Rio Doce ADR.......... 18,900 $ 382,914
Companhia Vale do Rio Doce PN........... 84,000 1,689,709
------------
2,072,623
------------
OIL & NATURAL GAS-2.17%
Petroleo Brasileiro S.A. PN............. 13,291,500 3,108,357
------------
TELECOMMUNICATIONS-11.27%
Telecomunicacoes Brasileiras S.A. ON.... 65,174,500 6,628,113
Telecomunicacoes Brasileiras S.A. PN
ADR.................................... 29,053 3,382,859
Telecomunicacoes de Minas Gerais S.A.,
PNB Receipts+.......................... 125,178 15,815
Telecomunicacoes de Sao Paulo S.A. PN... 22,371,969 5,953,363
Telecomunicacoes de Sao Paulo S.A., PN
Receipts+.............................. 723,207 179,278
------------
16,159,428
------------
TEXTILES-1.72%
Companhia Tecidos Norte de Minas
S.A.+.................................. 377,124 125,027
Companhia Tecidos Norte de Minas S.A.
PN..................................... 6,513,960 2,334,648
Empresa Nacional de Comercio Redito e
Participacoes S.A. PN+................. 8,463,800 6,294
------------
2,465,969
------------
UTILITIES-12.18%
Centrais Eletricas Brasileiras S.A.
ADR.................................... 21,000 535,500
Centrais Eletricas Brasileiras S.A.
PN..................................... 32,340,000 1,651,700
Companhia de Saneamento Basico do Estado
de Sao Paulo ON(7)..................... 19,471,000 4,623,283
Companhia Energetica de Minas Gerais
PN..................................... 67,018,064 2,911,792
</TABLE>
- --------------------------------------------------------------------------------
8
<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)
Companhia Paranaense de Energia ADR..... 10,900 $ 149,194
Companhia Paranaense de Energia PNB..... 309,614,000 4,202,905
Companhia Paulista de Forca e Luz ON.... 25,702,987 3,385,457
------------
17,459,831
------------
TOTAL BRAZIL (Cost $52,616,286)......................... 47,779,067
------------
CHILE-9.81%
BANKING-0.34%
Banco de Credito e Inversiones.......... 72,752 489,438
------------
CONSUMER DURABLES-0.34%
Empresas Almacenes Paris................ 441,229 489,025
------------
ELECTRIC DISTRIBUTION-1.00%
Chilectra S.A........................... 4,210 26,883
Empresas Emel S.A....................... 25,193 488,348
Sociedad Austral de Electricidad S.A.... 38,500 921,893
------------
1,437,124
------------
ELECTRIC GENERATION-1.72%
Chilgener S.A........................... 1,432,421 506,329
Empresa Nacional de Electricidad S.A.... 1,664,710 956,686
Enersis S.A............................. 1,816,263 1,006,504
------------
2,469,519
------------
ENGINEERING & CONSTRUCTION-0.19%
Besalco S.A............................. 66,469 265,270
------------
FERTILIZER-0.66%
Sociedad Quimica y Minera de Chile S.A.,
Class A................................ 170,191 663,687
Sociedad Quimica y Minera de Chile S.A.,
Class B................................ 64,814 277,880
------------
941,567
------------
<CAPTION>
No. of Value
Description Shares (Note A)
- ----------------------------------------------------------------------
<S> <C> <C>
FOOD & BEVERAGES-1.25%
Embotelladora Andina S.A., Series A..... 150,003 $ 501,150
Embotelladora Andina S.A., Series B..... 150,003 478,915
Embotelladora Polar S.A................. 854,839 818,774
------------
1,798,839
------------
FORESTRY-1.19%
Compania Chilena de Fosforos S.A........ 75,432 206,427
Compania de Petroleos de Chile S.A...... 313,229 1,064,336
Compania Manufacturera de Papeles y
Cartones S.A........................... 51,504 434,583
------------
1,705,346
------------
HEALTH CARE-0.08%
Banmedica S.A........................... 327,580 121,395
------------
INSURANCE-0.12%
Compania de Seguros La Prevision Vida
S.A.+.................................. 188,348 175,247
------------
MINING-0.81%
Antofagasta Holdings plc................ 213,500 1,157,118
------------
PHARMACEUTICALS-0.01%
Laboratorio Chile S.A................... 8,384 9,101
------------
RETAIL-0.34%
Sociedad Anonima Comercial e Industrial
Falabella.............................. 438,743 480,266
------------
STEEL-0.39%
Compania de Aceros del Pacifico S.A..... 270,555 564,556
------------
TELECOMMUNICATIONS-1.37%
Compania de Telecomunicaciones de Chile
S.A., Class A.......................... 170,317 1,231,254
</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 (CONTINUED)
Compania de Telecomunicaciones de Chile
S.A., Class B.......................... 146,000 $ 732,497
------------
1,963,751
------------
TOTAL CHILE (Cost $8,000,710)........................... 14,067,562
------------
COLOMBIA-0.00%
BANKING-0.00%
Banco de Bogota (Cost $0)............... 9 46
------------
JAMAICA-0.80%
INVESTMENT & HOLDING COMPANIES-0.80%
Jamaican Assets I L.P.*+ (Cost
$1,100,000)............................ 1,100,000 1,142,636
------------
LATIN AMERICA-1.52%
TELECOMMUNICATIONS-1.52%
International Wireless Communications,
Inc.*+................................. 322,582 322,582
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 $1,648,250)................... 2,172,007
------------
MEXICO-32.15%
BROADCAST, RADIO & TELEVISION-4.02%
Grupo Televisa S.A. GDR+,++............. 149,000 5,764,437
------------
CEMENT-2.29%
Cementos Mexicanos, S.A. de C.V., Class
B+..................................... 226,000 1,206,939
<CAPTION>
No. of Value
Description Shares (Note A)
- ----------------------------------------------------------------------
<S> <C> <C>
CEMENT (CONTINUED)
Cementos Mexicanos, S.A. de C.V. CPO+... 458,500 $ 2,076,473
------------
3,283,412
------------
CONGLOMERATES-2.61%
ALFA, S.A. de C.V....................... 259,000 1,755,443
Desc, S.A. de C.V. ADR.................. 53,100 1,991,250
------------
3,746,693
------------
ENGINEERING & CONSTRUCTION-1.34%
Empresas ICA Sociedad Controladora, S.A.
de C.V. ADR............................ 116,670 1,917,763
------------
FINANCIAL SERVICES-1.18%
Grupo Financiero Banamex Accival, S.A.
de C.V.+............................... 565,200 1,691,293
------------
FOOD & BEVERAGES-5.19%
Fomento Economico Mexicano, S.A. de
C.V., Class B.......................... 438,800 3,506,920
Panamerican Beverages, Inc., Class A.... 120,441 3,929,388
------------
7,436,308
------------
INVESTMENT & HOLDING COMPANIES-4.10%
Corporacion Industrial SanLuis, S.A. de
C.V. CPO............................... 537,354 4,414,419
Grupo Carso, S.A. de C.V., Class A1..... 218,135 1,459,549
------------
5,873,968
------------
PAPER PRODUCTS-1.98%
Kimberly-Clark de Mexico, S.A. de C.V.,
Class A................................ 581,130 2,844,264
------------
RETAIL-4.44%
Controladora Comercial Mexicana, S.A. de
C.V. GDR............................... 140,225 3,637,086
</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>
RETAIL (CONTINUED)
Grupo Elektra, S.A. de C.V. CPO......... 1,577,150 $ 2,735,902
------------
6,372,988
------------
TELECOMMUNICATIONS-5.00%
Telefonos de Mexico, S.A. de C.V. ADR... 127,800 7,164,788
------------
TOTAL MEXICO (Cost $34,782,465)......................... 46,095,914
------------
PERU-2.73%
ELECTRIC DISTRIBUTION-1.25%
Ontario-Quinta A.V.V.*.................. 1,434,000 1,793,221
------------
FINANCIAL SERVICES-0.91%
Credicorp Limited....................... 72,160 1,298,880
------------
TELECOMMUNICATIONS-0.57%
Telefonica del Peru S.A. ADR............ 35,100 818,269
------------
TOTAL PERU (Cost $3,721,172)............................ 3,910,370
------------
VENEZUELA-4.99%
CEMENT-0.22%
C.A. Venezolana de Cementos S.A.C.A.,
Class 1................................ 145 234
C.A. Venezolana de Cementos S.A.C.A.,
Class 2................................ 196,321 314,550
------------
314,784
------------
ELECTRIC GENERATION-1.12%
C.A. La Electricidad de Caracas,
SAICA-SACA............................. 1,336,336 1,603,179
------------
LOCAL AND/OR LONG DISTANCE TELEPHONE SERVICE-2.38%
Compania Anonima Nacional Telefonos de
Venezuela ADR.......................... 82,162 3,419,993
------------
REAL ESTATE & CONSTRUCTION-0.80%
Fondo de Valores Inmobiliarios S.A.,
Series B+.............................. 12,588,436 1,148,261
------------
<CAPTION>
No. of Value
Description Shares (Note A)
- ----------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS-0.47%
Venworld Telecommunications+++.......... 40,140 $ 667,568
------------
TOTAL VENEZUELA (Cost $6,391,226)....................... 7,153,785
------------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES (Cost
$114,025,805).......................................... 129,383,781
------------
FIXED OR FLOATING RATE INVESTMENTS-15.23%
ARGENTINA-2.93%
<CAPTION>
Par (000)
--------------
<S> <C> <C>
Republic of Argentina, Debenture FRB,
6.6875%, 03/31/05(2)(5)(6)............. USD 1,944 1,740,123
Republic of Argentina, Euro MTN, Series
REGS, 11.75%, 02/12/07................. ARS 400 378,072
Republic of Argentina, Global Senior
Unsubordinated Note, Series BGLO,
8.375%, 12/20/03....................... USD 100 95,375
Republic of Argentina, Global
Unsubordinated Note, Series BGL4,
11.00%, 10/09/06....................... 1,750 1,986,250
------------
TOTAL ARGENTINA (Cost $4,008,833)....................... 4,199,820
------------
BRAZIL-6.77%
Federal Republic of Brazil, Bearer Bond
VRB, 4.00%, 04/15/09(4)(5)(6).......... 248 179,999
Federal Republic of Brazil,
Capitalization Bond VRB, 8.00%,
04/15/14(1)(5)(6)...................... 9,692 7,632,615
Federal Republic of Brazil, Debt
Conversion Bond, Series L FRB, 6.75%,
04/15/12(3)(5)(6)...................... 2,500 1,893,750
------------
TOTAL BRAZIL (Cost $9,425,461).......................... 9,706,364
------------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Description (000) (Note A)
- ----------------------------------------------------------------------
<S> <C> <C>
ECUADOR-0.27%
Republic of Ecuador, Past Due Interest
Bond, Global Bearer FRB, 6.6875%,
02/27/15(1)(2)(5)(6) (Cost $333,973)... USD 589 $ 385,339
------------
MEXICO-2.51%
United Mexican States, Global Bond,
9.875%, 01/15/07....................... 450 470,250
United Mexican States, Secured Bond,
Series B, 6.25%, 12/31/19(5)........... 3,250 2,714,766
United Mexican States, Secured Bond,
Series W-A, 6.25%, 12/31/19(5)......... 500 417,656
------------
TOTAL MEXICO (Cost $3,457,529).......................... 3,602,672
------------
PANAMA-0.30%
The Republic of Panama, Global Bond,
8.875%, 09/30/27....................... 100 93,780
The Republic of Panama, Past Due
Interest Bond FRB, 6.6875%,
07/17/16(1)(2)(5)(6)................... 411 334,844
------------
TOTAL PANAMA (Cost $444,666)............................ 428,624
------------
PERU-0.60%
The Republic of Peru, Front Loaded
Interest Reduction Bond VRB, 3.25%,
03/07/17(4)(5)(6)...................... 1,100 654,500
<CAPTION>
Par Value
Description (000) (Note A)
- ----------------------------------------------------------------------
<S> <C> <C>
PERU (CONTINUED)
The Republic of Peru, Past Due Interest
Bond VRB, 4.00%, 03/07/17++(4)(5)(6)... USD 300 $ 198,000
------------
TOTAL PERU (Cost $828,255).............................. 852,500
------------
VENEZUELA-1.85%
Republic of Venezuela, Debt Conversion
Bond, Series DL FRB, 6.8125%,
12/18/07(3)(5)(6)...................... 952 853,867
Republic of Venezuela, Global Bond,
9.25%, 09/15/27........................ 2,000 1,798,500
------------
TOTAL VENEZUELA (Cost $2,611,323)....................... 2,652,367
------------
TOTAL FIXED OR FLOATING RATE INVESTMENTS (Cost
$21,110,040)........................................... 21,827,686
------------
SHORT-TERM INVESTMENTS-1.48%
CHILEAN MUTUAL FUNDS-1.04%
<CAPTION>
No. of
Shares
--------------
<S> <C> <C>
Fondo Mutuo Operacional BanChile........ 68,787 809,563
Fondo Mutuo Security Check.............. 155,350 684,151
------------
TOTAL CHILEAN MUTUAL FUNDS (Cost $1,215,436)............
1,493,714
------------
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Description (000) (Note A)
- ----------------------------------------------------------------------
<S> <C> <C>
CHILEAN REPURCHASE AGREEMENT-0.44%
Citibank, N.A. (Agreement dated
12/30/97, to be repurchased at
$637,136) 7.08%, 01/06/98* (Note G)
(Cost $634,557)........................ CLP 279,384 $ 636,510
------------
TOTAL SHORT-TERM INVESTMENTS (Cost $1,849,993)..........
2,130,224
------------
TOTAL INVESTMENTS-106.96%
(Cost $136,985,838) (Notes A,D)........................ 153,341,691
LIABILITIES IN EXCESS OF CASH AND OTHER
ASSETS-(6.96)%......................................... (9,983,713)
------------
NET ASSETS-100.00%...................................... $143,357,978
------------
------------
- ---------------------------------------------------------
* 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) Variable rate coupon; coupon varies at periodic
intervals.
(5) Brady Bonds.
(6) Pro-rata sinking fund has been established.
(7) With an additional 61,855 rights attached, expiring
01/02/98, with no market value.
ADR American Depositary Receipts.
ARS Argentine Pesos.
CLP Chilean Pesos.
CPO Ordinary Participation Certificates.
FRB Floating Rate Bond.
GDR Global Depositary Receipts.
MTN Medium Term Note.
ON Ordinary Shares.
PN Preferred Shares.
PNB Preferred Shares, Class B.
USD United States Dollars.
VRB Variable Rate Bond.
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
13
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost
$136,985,838) (Note A)................. $153,341,691
Cash (including $286,444 of foreign
currencies with a cost of $286,444)
(Note A)............................... 8,252,441
Receivables:
Investments sold...................... 1,276,100
Interest.............................. 472,077
Dividends............................. 192,342
Prepaid expenses and other assets....... 20,589
------------
Total Assets............................ 163,555,240
------------
LIABILITIES
Payables:
Dividend (Note A)..................... 19,052,079
Investment advisory fees (Note B)..... 447,788
Investments purchased................. 249,297
Administration fees (Note B).......... 52,301
Other accrued expenses................ 395,797
------------
Total Liabilities....................... 20,197,262
------------
NET ASSETS (applicable to 7,872,760
shares of common stock outstanding)
(Note C)............................... $143,357,978
------------
------------
NET ASSET VALUE PER SHARE ($143,357,978
DIVIDED BY 7,872,760)................. $18.21
------------
------------
NET ASSETS CONSIST OF
Capital stock, $0.001 par value;
7,872,760 shares issued and outstanding
(100,000,000 shares authorized)........ $ 7,873
Paid-in capital......................... 130,795,488
Undistributed net investment income..... 864,149
Accumulated net realized loss on
investments and foreign currency
related transactions................... (4,647,329)
Net unrealized appreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currencies..................... 16,337,797
------------
Net assets applicable to shares
outstanding............................ $143,357,978
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends............................. $ 3,719,161
Interest.............................. 1,448,466
Less: Foreign taxes withheld.......... (96,622)
-----------
Total Investment Income............... 5,071,005
-----------
Expenses:
Investment advisory fees (Note B)..... 2,027,471
Custodian fees........................ 368,045
Administration fees (Note B).......... 255,523
Printing.............................. 108,498
Audit and legal fees.................. 85,100
Accounting fees....................... 68,378
Directors' fees....................... 43,900
Transfer agent fees................... 35,005
Insurance............................. 20,015
NYSE listing fees..................... 16,169
Other................................. 23,237
Brazilian taxes (Note A).............. 242,499
Chilean repatriation taxes (Note A)... 1,074,022
-----------
Total Expenses........................ 4,367,862
Less: Fee waivers (Note B)............ (202,201)
-----------
Net Expenses........................ 4,165,661
-----------
Net Investment Income................. 905,344
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments........................... 20,113,478
Foreign currency related
transactions......................... (450,190)
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities
denominated in foreign currencies...... (6,627,272)
-----------
Net realized and unrealized gain on
investments and foreign currency
related transactions................... 13,036,016
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $13,941,360
-----------
-----------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-----------------------------
1997 1996
<S> <C> <C>
-----------------------------
INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income................. $ 905,344 $ 2,186,181
Net realized gain on investments and
foreign currency related
transactions......................... 19,663,288 1,861,631
Net change in unrealized appreciation
in value of investments and
translation of other assets and
liabilities denominated in foreign
currencies........................... (6,627,272) 13,367,921
------------ ------------
Net increase in net assets resulting
from operations.................... 13,941,360 17,415,733
------------ ------------
Dividends and distributions to
shareholders:
Net investment income................. (1,652,151) (1,788,940)
Net realized gain on foreign currency
related transactions................. -- (19,059)
Net realized gain on investments...... (19,052,079) --
------------ ------------
Total dividends and distributions to
shareholders....................... (20,704,230) (1,807,999)
------------ ------------
Capital share transactions (Note C):
Proceeds from 6,148 shares and 6,613
shares, respectively, issued in
reinvestment of dividends............ 114,259 109,111
------------ ------------
Total increase/(decrease) in net
assets............................. (6,648,611) 15,716,845
------------ ------------
NET ASSETS
Beginning of year....................... 150,006,589 134,289,744
------------ ------------
End of year (including undistributed net
investment income of $864,149 and
$1,610,956, respectively).............. $143,357,978 $150,006,589
------------ ------------
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
16
<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
For the Years Ended December 31, August 1, 1990*
------------------------------------------------------------------------ through
1997 1996 1995 1994+ 1993 1992 1991 December 31, 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............. 0.11 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.... 1.66 1.93 (3.09) 1.29 10.18 1.51 14.66 0.58
-------- -------- -------- -------- -------- -------- -------- --------
Net increase/(decrease) in net
assets resulting from
operations....................... 1.77 2.21 (2.90) 1.38 10.26 1.75 15.27 0.87
-------- -------- -------- -------- -------- -------- -------- --------
Dividends and distributions to
shareholders:
Net investment income........... (0.21) (0.23) -- (0.07) (0.22) -- (0.63) (0.27)
Net realized gain on investments
and foreign currency related
transactions................... (2.42) -- (0.19) (4.33) (8.61) (2.44) (2.83) --
In excess of net realized
gains.......................... -- -- -- -- (0.04) -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total dividends and distributions
to shareholders.................. (2.63) (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.... $18.21 $19.07 $17.09 $20.18 $25.73 $25.36 $26.05 $14.24
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Market value, end of period....... $14.313 $15.750 $14.750 $18.750 $31.500 $24.375 $26.500 $11.125
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Total investment return(a)........ 8.21% 8.26% (20.34)% (26.63)% 89.45% 2.35% 167.96% (18.35)%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted).................... $143,358 $150,007 $134,290 $156,673 $140,458 $102,259 $104,435 $57,081
Ratio of expenses to average net
assets(c)........................ 2.46% 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.... 2.58% 1.82% 2.12% -- -- -- -- --
Ratio of expenses to average net
assets, excluding taxes.......... 1.68% -- 1.78% 1.72% -- 2.31% -- --
Ratio of net investment income to
average net assets............... 0.53% 1.47% 1.10% 0.63% 1.45% 1.15% 2.85% 5.10%(b)
Portfolio turnover rate........... 124.98% 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) Computed by dividing the total amount of brokerage commissions paid by
the total shares of investment securities purchased and sold during
the respective periods for which commissions were charged, as required
by the SEC for fiscal years beginning on or after September 1, 1995.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
17
<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, 1997,
the Fund held 7.23% of its net assets in securities valued in good faith by the
Board of Directors with an aggregate cost of $8,295,645 and fair value of
$10,368,163. The net asset value per share of the Fund is currently 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, 1997, 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.
For U.S. federal income tax purposes, realized foreign currency losses and net
realized capital losses from investments incurred after October 31, 1997, within
the Fund's current fiscal year, are deemed to arise on the first day of the
following fiscal year. The Fund incurred and elected to defer such losses of
$106,993 and $2,488,409, respectively.
Income received by the Fund from sources within Latin America may be subject to
withholding and other taxes imposed by Latin American countries. Also, certain
Latin American countries impose taxes on funds remitted or repatriated from such
countries.
The Fund is subject to a 10% Chilean repatriation tax with respect to all
remittances from Chile in excess of original invested capital. For the year
ended December 31, 1997, the Fund incurred $1,074,022 of such expense.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 transactions are not
affected by this tax. For the year ended December 31, 1997, the Fund incurred
$242,499 of such expense.
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.
On December 10, 1997, a distribution from net realized long-term capital gains
in the aggregate amount of $19,052,079, equal to $2.42 per share was declared to
shareholders of record on December 31, 1997, payable on January 16, 1998.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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
remittances abroad. Amounts repatriated prior to the end of specified periods
may be subject to taxes as specified in the Fund's prospectus.
The Latin American securities markets are substantially smaller, less liquid and
more volatile than the major securities markets in the United States.
Consequently, acquisition and disposition of securities by the Fund may be
inhibited. A significant proportion of the aggregate market value of equity
securities listed on the major securities exchanges 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 foreign countries, their instrumentalities and with
creditworthy parties in accordance with established procedures. Repurchase
agreements are contracts under which the buyer of a security simultaneously buys
and commits to resell the security to the seller at an agreed upon price and
date. Repurchase agreements are deposited with the Fund's custodian and,
pursuant to the terms of the repurchase agreement, the collateral must have an
aggregate market value greater than or equal to the repurchase price plus
accrued interest at all times. If the value of the underlying securities fall
below the value of the repurchase price plus accrued interest, the Fund will
require the seller to deposit additional collateral by the next business day. If
the request for additional collateral is not met, or the seller defaults on its
repurchase obligation, the Fund maintains the right to sell the underlying
securities at market value and may claim any resulting loss against the seller;
collectibility of such claims may be limited (see Note G).
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 year ended December 31, 1997, BEA earned $1,724,006 for
advisory services, of which BEA waived $172,739. BEA also provides certain
administrative services to the Fund and is reimbursed by the Fund for costs
incurred on behalf of the Fund (up to $20,000 per annum). For the year ended
December 31, 1997, BEA was reimbursed $16,824 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,
1997, advisory fees amounted to $303,465, of which $29,462 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 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, 1997, these sub-advisory fees
amounted to $84,685.
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, 1997, BSFM earned $155,498 for administrative services.
BEA Administration, Administradora de Fondos de Inversion de Capital Extranjero
S.A. ("AFICE"), an affiliate of BEA, 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 $64,300 at December 31, 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 $6,600 at December 31, 1997). For the year ended December
31, 1997, Celfin earned $83,201 and $8,309 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 7,872,760 shares outstanding at December 31, 1997, 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, 1997 was $137,268,044. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currencies) of
$16,073,647, was composed of gross appreciation of $24,291,769 for those
investments having an excess of value over cost and gross depreciation of
$8,218,122 for those investments having an excess of cost over value.
For the year ended December 31, 1997, purchases and sales of securities, other
than short-term investments, were $200,727,958 and $197,556,533, respectively.
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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
maximum amount outstanding under the credit agreement for the Fund was
$2,000,000 with an average balance of $73,973 with an interest rate of 8.50%
during the year ended December 31, 1997. The Fund had no amounts outstanding
under the credit agreement at December 31, 1997.
NOTE F. RESTRICTED SECURITY
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, 1997, share value of the security and percentage
of net assets which the security comprises.
<TABLE>
<CAPTION>
PERCENT
NUMBER FAIR VALUE VALUE OF
OF AT DECEMBER 31, PER NET
SECURITY SHARES ACQUISITION DATES COST 1997 SHARE ASSETS
- --------------------------------------- -------- ------------------ ------- ------------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
07/30/92 &
Venworld Telecommunications............ 40,140 08/07/92 $816,959 $ 667,568 $ 16.63 0.47
</TABLE>
The Fund may incur certain costs in connection with the disposition of the above
security.
NOTE G. COLLATERAL FOR REPURCHASE AGREEMENT
Listed below is the collateral associated with the repurchase agreement with
Citibank, N.A. outstanding at December 31, 1997:
<TABLE>
<CAPTION>
INTEREST MATURITY MARKET ACCRUED TOTAL
SECURITY SERIES RATE DATE CLP PAR VALUE INTEREST VALUE
- --------------------------------------- ----- ------- ------- --------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Pagares Capitulo Diez y Nueve.......... QA 7.88% 09/20/99 100,000 $97,118 $ 5 $ 97,123
Pagares Capitulo Diez y Nueve.......... RA 8.21 07/14/98 400,000 405,402 35 405,437
Pagares Descontables Banco Central de
Chile................................. -- 8.37 01/14/98 1,400,000 3,182 124 3,306
Pagares Descontables Banco Central de
Chile................................. -- 7.92 01/14/98 1,600,000 3,637 135 3,772
Pagares Reajustable Banco Central de
Chile................................. 1A 7.02 11/01/99 9,500 79,860 -- 79,860
Pagares Reajustable Banco Central de
Chile................................. 1A 6.96 02/01/00 4,500 47,061 -- 47,061
-------- ------ ----------
Total.............................. $636,260 $ 299 $ 636,559
-------- ------ ----------
-------- ------ ----------
</TABLE>
- --------------------------------------------------------------------------------
22
<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, 1997, 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, 1997 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, 1997, 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 18, 1998
- --------------------------------------------------------------------------------
23
<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>
VOTES
NAME OF DIRECTOR VOTES 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>
VOTES
VOTES 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>
VOTES
VOTES 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>
VOTES
VOTES FOR AGAINST ABSTAIN NON-VOTES
---------- ------------ ------------- ----------
<S> <C> <C> <C> <C>
4,542,300 970,375 160,127 2,194,583
</TABLE>
- --------------------------------------------------------------------------------
24
<PAGE>
TAX INFORMATION (UNAUDITED)
The Fund is required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise its shareholders within 60 days of the Fund's year end
(December 31, 1997) as to the U.S. federal tax status of dividends and
distributions received by the Fund's shareholders in respect of such fiscal
year. Of the $2.63 per share distribution paid in respect of such year, $0.21
per share was derived from net investment income and $2.42 per share was derived
from net realized long-term capital gains. Of the $2.42 per share distribution
paid from net realized long-term capital gains, $1.44 per share was derived from
28 Percent Rate Gains and $0.98 per share was derived from 20 Percent Rate
Gains. There were no distributions which would qualify for the dividend received
deduction available to corporate shareholders.
The Fund does not intend to make an election under Section 853 to pass through
foreign taxes paid by the Fund to its shareholders. This information is given to
meet certain requirements of the Internal Revenue Code of 1986, as amended.
Shareholders should refer to their Form 1099-DIV to determine the amount
includable on their respective tax returns for 1997.
Notification for calendar year 1997 was mailed in January 1998. The notification
will reflect 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 investments in the Fund.
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
26
<PAGE>
DESCRIPTION OF DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)
withdraw a voluntary cash payment by written notice, if the notice is received
by the Plan Agent not less than 48 hours before the payment is to be invested. A
participant's tax basis in his shares acquired through his optional investment
right will equal his cash payments to the Plan, including any cash payments used
to pay brokerage commissions allocable to his acquired shares.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of the
participant and each shareholder's proxy will include those shares purchased
pursuant to the Plan.
In the case of a shareholder, such as a bank, broker or nominee, that holds
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are to participate in the
Plan.
There is no charge to participants for reinvesting dividends or capital gains
distributions payable in either stock or cash. The Plan Agent's fees for the
handling of reinvestment of such dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage charges with respect to shares
issued directly by the Fund as a result of dividends and capital gains
distributions payable either in stock or in cash. However, each participant will
be charged by the Plan Agent a pro rata share of brokerage commissions incurred
with respect to the Plan Agent's open market purchases in connection with
voluntary cash payments made by the participant or the reinvestment of dividends
and capital gains distributions payable only in cash. Brokerage charges for
purchasing small amounts of stock for individual accounts through the Plan are
expected to be less than the usual brokerage charges for such transactions
because the Plan Agent will be purchasing stock for all participants in blocks
and prorating the lower commission thus obtainable. Brokerage commissions will
vary based on, among other things, the broker selected to effect a particular
purchase and the number of participants on whose behalf such purchase is being
made. The Fund cannot predict, therefore, whether the cost to a participant who
makes a voluntary cash payment will be less than if a participant were to make
an open market purchase on the Fund's common stock on his own behalf.
The receipt of dividends and distributions in stock under the Plan will not
relieve participants of any income tax (including withholding tax) that may be
payable on such dividends and distributions.
Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to notice of the termination sent to the members of the Plan at
least 30 days before the semiannual contribution date, in the case of voluntary
cash payments, or the record date for dividends or distributions. The Plan also
may be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by at least 30 days' written notice to members of the Plan. All
correspondence concerning the Plan should be directed to the Plan Agent, The
First National Bank of Boston, Investor Relations Department, P.O. Box 644, Mail
Stop 45-02-09, Boston, Massachusetts 02102-0644 or by telephone at
1-800-730-6001.
- --------------------------------------------------------------------------------
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 December 31, 1997, BEA managed
approximately $34.2 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) For shareholder information or a
The Emerging Markets Telecommunications Fund, Inc. copy of a prospectus for any of
(ETF) the open-end mutual funds, please
The Latin America Equity Fund, Inc. (LAQ) call, 1-800-401-2230.
FIXED INCOME
BEA Income Fund, Inc. (FBF)
BEA Strategic Global Income Fund, Inc. (FBI)
For closed-end fund information Visit our website on the
please call, 1-800-293-1232. Internet:
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
Emily Alejos Investment Officer
Dr. Enrique R. Arzac Director
James J. Cattano Director
Peter A. Gordon Director
Michael Hyland Director
George W. Landau Director
Martin M. Torino Director
Hal Liebes Senior Vice President
Michael A. Pignataro Chief Financial Officer and
Secretary
Rocco A. Del Guercio Vice President
Wendy S. Setnicka 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
[LOGO]
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.
- --------------------------------------------------------------------------------
3914-AR-97
