<PAGE>
The Latin America
Investment Fund, Inc.
-----------------------------
ANNUAL REPORT
DECEMBER 31, 1998
[GRAPHIC]
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................................................................ 1
Portfolio Summary............................................................................. 6
Schedule of Investments....................................................................... 8
Statement of Assets and Liabilities........................................................... 13
Statement of Operations....................................................................... 14
Statement of Changes in Net Assets............................................................ 15
Financial Highlights.......................................................................... 16
Notes to Financial Statements................................................................. 17
Report of Independent Accountants............................................................. 23
Results of Annual Meeting of Shareholders..................................................... 24
Tax Information............................................................................... 24
Description of InvestLink(SM) Program......................................................... 26
</TABLE>
PICTURED ON THE COVER IS A BRANCH OF BANCO POPULAR ARGENTINO LOCATED IN BUENOS
AIRES, ARGENTINA.
- --------------------------------------------------------------------------------
<PAGE>
LETTER TO SHAREHOLDERS
February 15, 1999
DEAR SHAREHOLDER:
I am writing to report on the activities of The Latin America Investment Fund,
Inc. (the "Fund") for the year ended December 31, 1998.
At December 31, 1998, the Fund's net assets were $91.1 million. The Fund's net
asset value ("NAV") was $11.49 per share (net of dividends paid of $0.45 per
share), as compared to $18.21 at December 31, 1997.
PERFORMANCE: RELATIVELY STRONG DUE TO MAXIMUM FIXED INCOME ALLOCATION AND GOOD
STOCK SELECTION IN ARGENTINA
For the year ended December 31, 1998, the Fund's total return, based on NAV and
assuming reinvestment of dividends, was -33.3%, versus -35.1% for the Morgan
Stanley Capital International Emerging Markets Free Latin America Index
("EMFLA"). Although this return was very disappointing in absolute terms, on a
relative basis it will likely place the Fund among the best-performing Latin
funds for the year.
The Fund outperformed its EMFLA benchmark in 1998 principally due to effective
security selection. More specifically, I adopted a relatively defensive stance
by raising the Fund's exposure to fixed income instruments to the maximum 35%
level of total assets allowed. Most of this was allocated to major debt issuers
like Argentina, Brazil, Mexico and Venezuela, though I also took small debt
positions in Colombia, Costa Rica, Ecuador, Panama and Peru.
An additional positive contributor to performance was stock selection in
Argentina. In particular, I elected to tender shares in a couple of related gas
distributors, Sodigas del Sur S.A. and Sodigas Pampeana S.A., back to their
corporate parent in December for large profits. The Fund had acquired the shares
in a private equity placement in 1992. As calculated on a time-weighted basis,
the cumulative return on the total investment was 226%.
On the negative side, I emphasized telecommunications and electricity stocks in
Brazil because of their strong growth prospects. Unfortunately for the Fund,
telecom and electricity also are two of the most liquid sectors in the Brazilian
market, meaning that they suffered disproportionately during the emerging
markets sell-offs in the year's second and third quarters.
1998: A TOUGH YEAR FOR LATIN AMERICAN EQUITIES
By far, Latin America was the worst-performing region among the emerging world's
equity markets in 1998. EMFLA's 35.1% loss, for example, was considerably lower
than the 26.0% decline in the Morgan Stanley Capital International ("MSCI") EMEA
(I.E., Europe/Middle East/Africa) Index and the 11.0% fall in the MSCI Emerging
Markets Free Asia Index.
No Latin market escaped investors' ire. The best performer was Argentina, which
lost 24.3%; the worst, Venezuela, plunged 49.2%.
- --------------------------------------------------------------------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
A combination of adverse global and regional factors weighed most heavily on
market sentiment:
WEAK COMMODITY PRICES. Prices of most of the world's major commodities were
extraordinarily weak in 1998, in some cases reaching lows not seen in several
decades. This was a highly negative development for those Latin American
economies that are heavily dependent on revenues generated by the export of oil
(I.E., Mexico, Venezuela, Argentina, Colombia) and copper (I.E., Chile).
RUSSIAN FREE-FALL. Political and macroeconomic conditions in Russia sharply
deteriorated throughout the year, culminating in the government's devaluation of
the ruble and default on some of its debt in August. Investors seized on
Russia's woes as the next stage of the "contagion" effect that struck Asia's
economies in 1997, and assumed the worst for most emerging markets accordingly.
BRAZILIAN FISCAL DEFICIT. An alarmingly high fiscal deficit directed investor
attention to Brazil as the next likely victim of contagion after Russia. Because
Brazil is the largest economy in Latin America, therefore, concern about its
vulnerability translated into heavy selling in Latin markets generally.
Brazil's apparent progress toward deficit reduction in the fourth quarter (it
received a vital assistance package from the International Monetary Fund, and
Congress approved a restrictive fiscal program and other key legislative
measures) helped to improve market sentiment. By mid-January, however, worsening
conditions forced the government to devalue the REAL currency, a painful step
that it had long avoided.
POLITICAL VOLATILITY. 1998 was a particularly volatile year for politics in
several Latin American nations. Events in Brazil were significantly colored by
developments surrounding President Cardoso's bid for re-election (which he won).
Mexico experienced an unprecedented exchange of political views, as the
historically dominant PRI party loosened its hold on the government.
Presidential elections also took center-stage in Venezuela and Colombia.
GLOBAL RISK AVERSION. During the summer, overall investor tolerance for risk
took a sharply pessimistic turn in response to the conditions I have described,
along with ongoing doubts about Asia's economic viability and concerns that U.S.
interest rates might rise. The pessimism reached a frenzied peak in August, when
continuous and indiscriminate selling devastated virtually all of the world's
equity markets, both developed and emerging.
- --------------------------------------------------------------------------------
2
<PAGE>
LETTER TO SHAREHOLDERS
PORTFOLIO STRATEGY: PRUDENTLY DEFENSIVE, EMPHASIZING BONDS AND BLUE CHIPS
TOP 10 HOLDINGS, BY ISSUER*
<TABLE>
<CAPTION>
% OF
HOLDING COUNTRY NET ASSETS
------------------------------ ---------------- ----------
<C><S> <C> <C>
1. Argentina Govt. Bonds Argentina 9.4
2. Telmex Mexico 8.0
3. Brazil Govt. Bonds Brazil 6.6
4. Telebras Brazil 6.6
5. Mexico Govt. Bonds Mexico 6.3
6. Venezuela Govt. Bonds Venezuela 5.9
7. Eletrobras Brazil 3.8
8. Camuzzi Argentina Argentina 3.7
9. Cifra Mexico 2.9
10. Kimberly-Clark de Mexico Mexico 2.7
*Company names are abbreviations of those found in the chart on
page 7.
</TABLE>
COUNTRY BREAKDOWN
(% of net assets)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Argentina 17.74%
Brazil 28.35%
Chile 6.55%
Mexico 28.96%
Venezuela 6.62%
Peru 3.86%
Other* 6.15%
Cash & Other Assets 1.77%
</TABLE>
Given the difficult environment for Latin American equities in 1998 and thus far
in 1999 as well, I believe it is most prudent to manage the Fund with a
conservative bias.
I am thus maintaining the portfolio's high exposure to relatively less risky
fixed income instruments for the time being. At current levels compared to U.S.
Treasury bonds, the yields on the Fund's fixed income holdings are very
appealing and, arguably, are discounting a great deal of bad news. In addition,
bonds are likely to lead any rally in the region's capital markets, in line with
my belief that the key to a recovery in equity returns will be a reduction in
the overall perception of Latin sovereign risk.
Among equities, I continue to prefer high-quality, blue chip companies that are
best positioned to weather any coming storm and subsequently thrive. In their
haste to run for the exits during last year's sell-offs, investors sold these
stocks down to valuation levels that ignore their inherent strengths and assume
no improvement in their business outlook. When regional sentiment improves, as
it ultimately must, such stocks should be among the first to benefit.
More specifically, I favor the shares of companies with strong domestic
franchises and relatively low financial risk, along with selected exporters. As
the table above indicates, the portfolio's biggest individual equity holdings--
Telmex, Telebras, Eletrobras, Camuzzi Argentina, Cifra and Kimberly-Clark de
Mexico--all fit this profile.
- --------------------------------------------------------------------------------
3
<PAGE>
LETTER TO SHAREHOLDERS
OUTLOOK: A YEAR OF TRANSITION
As I see it, 1999 should be a year of transition for Latin American economies
(and, hence, equity markets). While I do not expect a rapid resurgence of
growth, I do believe that things are unlikely to get much worse. If this
forecast is accurate, then Latin equities could begin to enjoy a sustainable
revival as investor attention shifts to a potential upturn in 2000.
The key will be what happens in Brazil. The Cardoso administration faces an
uphill battle fraught with risks in its efforts to tame the fiscal deficit, push
interest rates down and get the economy back on track. The fruits of such
efforts will not be apparent until the third or fourth quarters of this year, at
the earliest.
In the meantime, there are several encouraging signs:
- - Brazil's problems have generated relatively limited fallout elsewhere in Latin
America. This stands in marked contrast to Asia, whose economies are far more
interdependent. Recent performance among Latin markets suggests that investors
are able to look beyond Brazil and view other nations in a more
country-specific manner.
- - Latin America has already gone through the peso crisis of 1994-95, meaning
that the region's economies are sturdier and potentially more resilient than
at any time in years.
- - Valuations throughout Latin equity markets are at historically low levels,
both on an absolute and relative basis. Stock prices, then, already appear to
reflect considerable negative expectations.
I would like to close my remarks by noting an important development. This past
October, the Directors of the Fund proposed and approved a program to buy back a
substantial portion (I.E., up to 15%) of the Fund's outstanding shares. The
Directors strongly believed in the appropriateness of such a move, given that
the discount of the Fund's share price to its net asset value had widened to
compellingly attractive levels. I will be able to discuss the progress made in
this direction in my next semi-annual report.
Respectfully,
/s/Richard W. Watt
Richard W. Watt
President and Chief Investment Officer*
FROM CREDIT SUISSE ASSET MANAGEMENT:
I. Effective January 12, 1999, the Fund's investment adviser, BEA Associates,
changed its name to Credit Suisse Asset Management ("CSAM"). In making the
announcement, the firm said that it expected the new name to enhance its
recognition as a global asset manager. CSAM is the investment division of
Credit Suisse Group, one of the world's largest financial organizations,
with $600 billion in assets under management.
- --------------------------------------------------------------------------------
4
<PAGE>
LETTER TO SHAREHOLDERS
II. Effective on or about April 1, 1999, shareholders whose shares are
registered in their own name will automatically participate in a dividend
reinvestment program known as the InvestLinkSM Program (the "Program"). The
Program can be of value to shareholders in maintaining their proportional
ownership interest in the Fund in an easy and convenient way. A shareholder
whose shares are held in the name of a broker/dealer or nominee should
contact the Fund's Transfer Agent for details about participating in the
Program. The Program also provides for additional share purchases. The
Program is described on pages 26 through 28 of this report.
III. Many services provided to the Fund and its shareholders by CSAM and the
Fund's service providers rely on the functioning of their respective
computer systems. Many computer systems cannot distinguish the year 2000
from the year 1900, with resulting potential difficulty in performing
various calculations (the "Year 2000 Issue"). The Year 2000 Issue could
potentially have an adverse impact on the handling of security trades, the
payment of interest and dividends, pricing, account services and other Fund
operations.
CSAM recognizes the importance of the Year 2000 Issue and is taking
appropriate steps necessary in preparation for the year 2000. At this time,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Fund, nor can there be any assurance that the Year
2000 Issue will not have an adverse effect on the Fund's investments or on
global markets or economies, generally.
CSAM anticipates that its systems will be adapted in time for the year
2000. CSAM is seeking assurances that comparable steps are being taken by
the Fund's other major service providers. CSAM will be monitoring the Year
2000 Issue in an effort to ensure appropriate preparation.
- --------------------------------------------------------------------------------
* Richard W. Watt, who is a Managing Director of Credit Suisse Asset Management
("CSAM"), is primarily responsible for management of the Fund's assets. Mr. Watt
has served the Fund in such capacity since January 1, 1997. He joined CSAM on
August 2, 1995. Mr. Watt 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, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
GEOGRAPHIC ASSET BREAKDOWN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS A PERCENT OF NET ASSETS
<S> <C> <C>
DECEMBER 31, 1998 DECEMBER 31, 1997
Argentina 17.74 7.86
Brazil 28.35 40.09
Chile 6.55 11.29
Colombia 2.01 0.00
Ecuador 1.33 0.27
Mexico 28.96 34.66
Panama 1.04 0.30
Peru 3.86 3.33
Venezuela 6.62 6.84
Other 1.77 2.32
Cash & Cash Equivalents 1.77 -6.96
</TABLE>
SECTOR ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS A PERCENT OF NET ASSETS
<S> <C> <C>
DECEMBER 31, 1998 DECEMBER 31, 1997
Banking 1.81 2.19
Broadcast, Radio & Television 1.85 4.02
Cement 2.15 2.51
Electric Distribution 1.66 2.25
Electric Generation 1.36 2.84
Food & Beverages 6.80 9.08
Forestry 1.06 1.19
Investment & Holding Companies 2.36 4.90
Local and/or Long Distance Telephone
Service 6.58 9.36
Mining 2.39 2.26
Oil & Natural Gas 8.88 7.10
Paper Products 2.72 1.98
Retail 3.15 4.78
Telecommunications 13.99 13.22
Utilities 4.34 12.18
Fixed or Floating Rate Investments 34.72 15.23
Other 2.33 10.39
Cash & Cash Equivalents 1.85 -5.48
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
PORTFOLIO SUMMARY - AS OF DECEMBER 31, 1998 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS, BY ISSUER
<TABLE>
<CAPTION>
Percent of Net
Holding Sector Country Assets
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
1. Republic of Argentina Fixed or Floating Rate
Investments Argentina 9.4
- ---------------------------------------------------------------------------------------------------------------------------------
2. Telefonos de Mexico, S.A. de C.V. Telecommunications Mexico 8.0
- ---------------------------------------------------------------------------------------------------------------------------------
3. Federal Republic of Brazil Fixed or Floating Rate
Investments Brazil 6.6
- ---------------------------------------------------------------------------------------------------------------------------------
4. Telecomunicacoes Brasileiras S.A. Local and/or Long Distance
Telephone Service Brazil 6.6
- ---------------------------------------------------------------------------------------------------------------------------------
5. United Mexican States Fixed or Floating Rate
Investments Mexico 6.3
- ---------------------------------------------------------------------------------------------------------------------------------
6. Republic of Venezuela Fixed or Floating Rate
Investments Venezuela 5.9
- ---------------------------------------------------------------------------------------------------------------------------------
7. Centrais Eletricas Brasileiras S.A. Utilities Brazil 3.8
- ---------------------------------------------------------------------------------------------------------------------------------
8. Camuzzi Argentina S.A. Oil & Natural Gas Argentina 3.7
- ---------------------------------------------------------------------------------------------------------------------------------
9. Cifra S.A. de C.V. Retail Mexico 2.9
- ---------------------------------------------------------------------------------------------------------------------------------
10. Kimberly-Clark de Mexico, S.A. de C.V. Paper Products Mexico 2.7
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
<S> <C> <C>
- --------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-63.43%
ARGENTINA-8.35%
OIL & NATURAL GAS-6.84%
Camuzzi Argentina S.A.*+................ 1,536,387 $ 3,392,367
Perez Companc S.A., Class B............. 100,900 427,207
YPF Sociedad Anonima ADR................ 86,300 2,411,006
-----------
6,230,580
-----------
RETAIL-0.00%
Domec S.A., Class B..................... 1,640 1,062
-----------
TELECOMMUNICATIONS-1.51%
Telefonica de Argentina S.A. ADR........ 49,200 1,374,525
-----------
TOTAL ARGENTINA (Cost $6,717,683)...................... 7,606,167
-----------
BRAZIL-21.76%
BANKING-1.41%
Banco Bradesco S.A. PN.................. 51,650,276 286,412
Banco Bradesco S.A., Rights (expiring
11/01/99)+............................. 2,140,859 1,240
Banco do Brasil S.A., Series A, Warrants
(expiring 06/30/01)+................... 11,877,000 12,189
Banco do Brasil S.A., Series B, Warrants
(expiring 06/30/06)+................... 17,815,500 18,284
Banco do Brasil S.A., Series C, Warrants
(expiring 06/30/11)+................... 29,692,500 35,388
Banco Itau S.A. PN...................... 1,900,000 927,772
-----------
1,281,285
-----------
ELECTRIC DISTRIBUTION-0.94%
Companhia Energetica de Minas Gerais
ADR.................................... 45,000 856,647
-----------
FOOD & BEVERAGES-1.45%
Ceval Alimentos S.A. ON+................ 146,402,849 212,046
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar ADR................ 12,500 193,750
Companhia Cervejaria Brahma ADR......... 60,000 566,250
Santista Alimentos S.A. ON+............. 364,113 304,369
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
FOOD & BEVERAGES (CONTINUED)
Seara Alimentos S.A.+................... 146,402,849 $ 35,026
Serrana S.A. ON......................... 14,248 6,486
Serrana S.A. PN......................... 16,991 6,328
-----------
1,324,255
-----------
LOCAL AND/OR LONG DISTANCE TELEPHONE SERVICE-6.58%
Telecomunicacoes Brasileiras S.A. PN
ADR+................................... 82,501 5,996,792
-----------
MINING-2.39%
Companhia Vale do Rio Doce ADR.......... 18,900 242,468
Companhia Vale do
Rio Doce PNA........................... 151,000 1,937,099
-----------
2,179,567
-----------
OIL & NATURAL GAS-2.04%
Petroleo Brasileiro S.A. PN............. 16,390,351 1,858,455
-----------
TELECOMMUNICATIONS-2.08%
Telecomunicacoes de Minas Gerais S.A.
PNB.................................... 125,178 3,657
Telecomunicacoes de Sao Paulo S.A. PN... 13,832,793 1,885,587
Telemig Celular S.A. PNC+............... 125,178 2,455
-----------
1,891,699
-----------
TEXTILES-0.05%
Companhia Tecidos Norte de Minas S.A.... 377,124 49,940
-----------
TOBACCO-0.48%
Souza Cruz S.A. ON...................... 68,000 438,982
-----------
UTILITIES-4.34%
Centrais Eletricas Brasileiras S.A.
PNB.................................... 178,241,199 3,422,467
Companhia Paranaense de Energia ADR..... 54,700 389,738
</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)
Light-Servicos de Eletricidade S.A.
ON..................................... 1,176,511 $ 143,139
-----------
3,955,344
-----------
TOTAL BRAZIL (Cost $25,437,408)........................ 19,832,966
-----------
CHILE-6.47%
BANKING-0.40%
Banco de Credito e Inversiones.......... 72,752 361,416
-----------
CONSUMER DURABLES-0.25%
Empresas Almacenes Paris S.A............ 441,229 223,761
-----------
ELECTRIC GENERATION-1.36%
Empresa Nacional de Electricidad S.A.... 1,506,377 545,893
Enersis S.A............................. 1,373,898 691,667
-----------
1,237,560
-----------
ENGINEERING & CONSTRUCTION-0.13%
Besalco S.A............................. 66,354 121,982
-----------
FERTILIZER-0.40%
Sociedad Quimica y Minera de Chile S.A.,
Class A................................ 122,007 360,929
-----------
FINANCIAL SERVICES-0.01%
Invercap S.A............................ 12,094 8,178
-----------
FOOD & BEVERAGES-1.45%
Compania Cervecerias
Unidas S.A............................. 48,420 186,211
Distribucion y Servicio D&S
S.A. ADR............................... 22,700 261,050
Embotelladora Andina S.A. PNA........... 121,203 289,402
Embotelladora Andina S.A. PNB........... 88,172 193,764
Embotelladora Andina S.A., Series B
ADR.................................... 30,300 393,900
-----------
1,324,327
-----------
FORESTRY-1.06%
Compania Chilena de
Fosforos S.A........................... 69,033 84,605
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
FORESTRY (CONTINUED)
Compania de Petroleos de
Chile S.A.............................. 262,729 $ 566,262
Empresas CMPC S.A....................... 51,504 319,417
-----------
970,284
-----------
INSURANCE-0.15%
Compania de Seguros La Prevision Vida
S.A.+.................................. 188,348 139,296
-----------
RETAIL-0.23%
Sociedad Anonima Comercial e Industrial
Falabella.............................. 438,743 211,375
-----------
STEEL-0.47%
Compania de Acero del
Pacifico S.A........................... 270,555 428,772
-----------
TELECOMMUNICATIONS-0.56%
Compania de Telecomunicaciones de Chile
S.A., Class A.......................... 25,717 130,962
Compania de Telecomunicaciones de Chile
S.A., Class B.......................... 113,213 377,951
-----------
508,913
-----------
TOTAL CHILE (Cost $5,871,716).......................... 5,896,793
-----------
COLOMBIA-0.00%
BANKING-0.00%
Banco de Bogota (Cost $0)............... 9 32
-----------
JAMAICA-0.78%
INVESTMENT & HOLDING COMPANIES-0.78%
Jamaican Assets I L.P.=/= (Cost
$801,191).............................. 794,973 707,748
-----------
LATIN AMERICA-0.00%
TELECOMMUNICATIONS-0.00%
International Wireless Communications,
Inc., Series D*+....................... 186,400 0
</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)
International Wireless Communications,
Inc., Series F*+....................... 10,840 $ 0
International Wireless Communications,
Inc., Warrants (expiring 08/17/07)*+... 1 0
-----------
TOTAL LATIN AMERICA (Cost $1,254,580).................. 0
-----------
MEXICO-22.70%
BROADCAST, RADIO & TELEVISION-1.85%
Grupo Televisa S.A. GDR+................ 68,191 1,683,465
-----------
CEMENT-2.15%
Cemex, S.A. de C.V...................... 909,050 1,959,436
-----------
FOOD & BEVERAGES-3.90%
Fomento Economico Mexicano, S.A. de C.V.
ADR.................................... 79,480 2,116,155
Grupo Industrial Bimbo, S.A. de C.V.,
Series A............................... 6,000 11,509
Grupo Modelo, S.A. de C.V., Series C.... 671,795 1,420,909
-----------
3,548,573
-----------
INVESTMENT & HOLDING COMPANIES-1.15%
Grupo Carso, S.A. de C.V., Class A1..... 218,135 739,963
Sanluis Corporacion, S.A. de C.V. CPO... 214,019 308,983
-----------
1,048,946
-----------
PAPER PRODUCTS-2.72%
Kimberly-Clark de Mexico, S.A. de C.V.,
Class A................................ 780,436 2,481,952
-----------
RETAIL-2.92%
Cifra S.A. de C.V. ADR.................. 218,989 2,657,169
-----------
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS-8.01%
Telefonos de Mexico,
S.A. de C.V. ADR....................... 149,787 $ 7,292,755
-----------
TOTAL MEXICO (Cost $25,318,494)........................ 20,672,296
-----------
PERU-2.24%
ELECTRIC DISTRIBUTION-0.72%
Ontario-Quinta A.V.V.*.................. 824,037 655,231
-----------
TELECOMMUNICATIONS-1.52%
Telefonica del Peru S.A. ADR............ 108,900 1,381,669
-----------
TOTAL PERU (Cost $2,439,173)........................... 2,036,900
-----------
VENEZUELA-0.70%
CEMENT-0.00%
Corporacion Venezolana de Cementos,
S.A.C.A., Class 1...................... 217 142
Corporacion Venezolana de Cementos,
S.A.C.A., Class 2...................... 29 19
-----------
161
-----------
REAL ESTATE INVESTMENT & MANAGEMENT-0.39%
F.V.I. Fondo de Valores Inmobiliarios
S.A.C.A ADR............................ 105,483 357,376
-----------
TELECOMMUNICATIONS-0.31%
Venworld Telecommunications=/=.......... 40,140 285,663
-----------
TOTAL VENEZUELA (Cost $1,725,371)...................... 643,200
-----------
GLOBAL-0.43%
INVESTMENT & HOLDING COMPANIES-0.43%
Emerging Markets Ventures, L.P.+=/=#
(Cost $447,558)........................ 447,558 389,800
-----------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES (Cost
$70,013,174).......................................... 57,785,902
-----------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Description (000) (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
FIXED OR FLOATING RATE INVESTMENTS-34.72%
ARGENTINA-9.39%
Republic of Argentina, Bocon, Pro 1,
3.0106%, 04/01/07(4)(7)................ ARS 2,305 $ 1,475,577
Republic of Argentina, Series REGS, Euro
MTN, 11.75%, 02/12/07++................ 150 127,807
Republic of Argentina, Global Senior
Note, 12.143%, 04/10/05(5)............. USD 300 273,750
Republic of Argentina, Note, 11.75%,
02/12/07++............................. 2,250 1,915,312
Republic of Argentina, Series 54,
Tranche 1, Unsubordinated Note, 8.75%,
07/10/02++............................. 1,250 1,028,750
Republic of Argentina, Series BGL5,
Global Unsubordinated Bond, 11.375%,
01/30/17............................... 460 461,150
Republic of Argentina, Series XW, Global
Note, 11.00%, 12/04/05................. 3,140 3,132,150
<CAPTION>
No. of Shares
-------------
<S> <C> <C>
Republic of Argentina, Warrants
(expiring 12/03/99)+................... 2,940 141,120
-----------
TOTAL ARGENTINA (Cost $8,125,209)...................... 8,555,616
-----------
BRAZIL-6.59%
<CAPTION>
Par (000)
-------------
<S> <C> <C>
Federal Republic of Brazil, Bearer Bond,
5.00%, 04/15/09(5)(6)(7)............... USD 248 121,520
Federal Republic of Brazil,
Capitalization Debenture, 8.00%,
04/15/14(1)(5)(6)(7)................... 8,184 4,931,137
Federal Republic of Brazil, Series L,
Debt Conversion Bond, 6.1875%,
04/15/12(3)(6)(7)...................... 250 128,438
<CAPTION>
Par Value
Description (000) (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
BRAZIL (CONTINUED)
Federal Republic of Brazil, Series L,
Eligible Interest Debenture, 6.125%,
04/15/06(2)(6)(7)...................... USD 1,272 $ 825,210
-----------
TOTAL BRAZIL (Cost $6,399,802)......................... 6,006,305
-----------
COLOMBIA-2.01%
Republic of Colombia, Global
Unsubordinated Bond, 7.625%,
02/15/07............................... 200 166,000
Republic of Colombia, Note, 7.27%,
06/15/03............................... 500 427,500
Republic of Colombia, Yankee Note,
12.243%, 08/13/05(5)................... 1,350 1,238,625
-----------
TOTAL COLOMBIA (Cost $1,748,489)....................... 1,832,125
-----------
COSTA RICA-0.27%
Banco Central Costa Rica, Series B,
Principal Bond, 6.25%, 05/21/15(6)(7)
(Cost $262,340)........................ 300 249,000
-----------
ECUADOR-1.33%
The Republic of Ecuador, Global
Registered Par Bond, 3.50%,
02/28/25(6)(8)......................... 2,025 880,875
The Republic of Ecuador, Past Due
Interest, Global Bearer Debenture,
6.625%, 02/27/15(1)(2)(6)(7)........... 203 82,799
The Republic of Ecuador, Series IE,
Global Bearer Debenture, 6.5625%,
12/21/04(2)(6)(7)...................... 400 244,000
-----------
TOTAL ECUADOR (Cost $1,223,342)........................ 1,207,674
-----------
LATIN AMERICA-0.29%
International Wireless Communications,
Inc., Senior Secured Note,
14.00%-25.00%, 08/17/02*(9) (Cost
$403,238).............................. 323 266,820
-----------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Description (000) (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
MEXICO-6.26%
United Mexican States, Global Bond,
11.375%, 09/15/16...................... USD 825 $ 858,000
United Mexican States, Global Bond,
11.50%, 05/15/26....................... 350 372,925
United Mexican States, Series W-B, Par
Bond, 6.25%, 12/31/19(6)............... 5,750 4,474,075
-----------
TOTAL MEXICO (Cost $5,436,641)......................... 5,705,000
-----------
PANAMA-1.04%
The Republic of Panama, Interest
Reduction Debenture, 4.00%,
07/17/14(5)(6)(7)...................... 200 151,000
The Republic of Panama, Past Due
Interest Debenture, 6.6875%,
07/17/16(1)(2)(6)(7)................... 1,055 790,995
-----------
TOTAL PANAMA (Cost $951,016)........................... 941,995
-----------
PERU-1.62%
The Republic of Peru, Front Loaded
Interest Reduction Bond, 3.25%,
03/07/17(5)(6)(7)...................... 2,250 1,284,609
The Republic of Peru, Past Due Interest
Bond, 4.00%, 03/07/17(5)(6)(7)......... 300 189,750
-----------
TOTAL PERU (Cost $1,515,798)........................... 1,474,359
-----------
VENEZUELA-5.92%
Republic of Venezuela, Global Bond,
13.625%, 08/15/18...................... 3,325 2,585,188
Republic of Venezuela, Series A, Front
Loaded Interest Reduction Debenture,
6.125%, 03/31/07(5)(6)(7).............. 4,048 2,531,015
Republic of Venezuela, Series DL, Debt
Conversion Debenture, 5.9375%,
12/18/07(3)(6)(7)...................... 429 272,679
-----------
TOTAL VENEZUELA (Cost $4,708,883)...................... 5,388,882
-----------
TOTAL FIXED OR FLOATING RATE INVESTMENTS (Cost
$30,774,758).......................................... 31,627,776
-----------
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS-0.08%
CHILEAN MUTUAL FUNDS-0.08%
Fondo Mutuo Citicorp Cash............... 21,514 $ 48,848
Fondo Mutuo Santander Money Market...... 5,031 23,296
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost $71,799)............
72,144
-----------
TOTAL INVESTMENTS-98.23%
(Cost $100,859,731) (Notes A,D)....................... 89,485,822
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES-1.77%...
1,613,485
-----------
NET ASSETS-100.00%..................................... $91,099,307
-----------
-----------
- ---------------------------------------------------------
* Not readily marketable security.
+ Security is non-income producing.
++ SEC Rule 144A security. Such securities are traded
only among "qualified institutional buyers."
=/= Restricted security, not readily marketable (See
Note F).
# As of December 31, 1998, the Fund committed to
investing an additional $1,060,754 of capital in
Emerging Markets Ventures, L.P.
(1) Payment-in-kind bond; of which all or a portion of
the coupon is being capitalized at periodic
intervals.
(2) Floating rate bond; rate resets based on 6-month
London Interbank Offered Rate ("LIBOR") plus
0.8125%.
(3) Floating rate bond; rate resets based on 6-month
LIBOR plus 0.875%.
(4) Floating rate bond; rate resets based on 1-month
Certificate of Deposit rate.
(5) Variable rate bond; coupon varies at periodic
intervals.
(6) Brady Bond.
(7) Pro-rata sinking fund has been established.
(8) Step-up bond; coupon increases at periodic
intervals.
(9) As of March 31, 1998, this investment ceased
accruing interest.
ADR American Depositary Receipts.
ARS Argentine Pesos.
CPO Ordinary Participation Certificates.
GDR Global Depositary Receipts.
MTN Medium Term Note.
ON Ordinary Shares.
PN Preferred Shares.
PNA Preferred Shares, Class A.
PNB Preferred Shares, Class B.
PNC Preferred Shares, Class C.
USD United States Dollars.
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost
$100,859,731) (Note A)................. $89,485,822
Cash (including $8,035 of foreign
currencies with a cost of $8,022) (Note
A)..................................... 4,801,254
Receivables:
Interest.............................. 822,214
Dividends............................. 243,642
Investments sold...................... 115,316
Prepaid expenses and other assets....... 1,879
-----------
Total Assets............................ 95,470,127
-----------
LIABILITIES
Payables:
Dividend.............................. 3,566,312
Investment advisory fees (Note B)..... 285,939
Administration fees (Note B).......... 61,132
Chilean repatriation taxes (Note A)... 162,111
Other accrued expenses................ 295,326
-----------
Total Liabilities....................... 4,370,820
-----------
NET ASSETS (applicable to 7,925,139
shares of common stock outstanding)
(Note C)............................... $91,099,307
-----------
-----------
NET ASSET VALUE PER SHARE ($91,099,307
DIVIDED BY 7,925,139)................. $11.49
-----------
-----------
NET ASSETS CONSIST OF
Capital stock, $0.001 par value;
7,925,139 shares issued and outstanding
(100,000,000 shares authorized)........ $ 7,925
Paid-in capital......................... 131,629,278
Distribution in excess of net investment
income................................. (1,418,384)
Accumulated net realized loss on
investments and foreign currency
related transactions................... (27,719,827)
Net unrealized depreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currencies..................... (11,399,685)
-----------
Net assets applicable to shares
outstanding............................ $91,099,307
-----------
-----------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
13
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends............................. $ 3,227,002
Interest.............................. 3,305,398
Less: Foreign taxes withheld.......... (273,365)
------------
Total Investment Income............... 6,259,035
------------
Expenses:
Investment advisory fees (Note B)..... 1,452,761
Administration fees (Note B).......... 222,218
Custodian fees........................ 165,704
Audit and legal fees.................. 108,007
Printing.............................. 99,015
Accounting fees....................... 79,010
Directors' fees....................... 41,531
Transfer agent fees................... 36,334
Insurance............................. 18,710
NYSE listing fees..................... 16,169
Other................................. 25,092
Brazilian taxes (Note A).............. 145,310
Chilean repatriation taxes (Note A)... 549,388
------------
Total Expenses........................ 2,959,249
Less: Fee waivers (Note B)............ (139,993)
------------
Net Expenses........................ 2,819,256
------------
Net Investment Income................. 3,439,779
------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized loss from:
Investments........................... (24,877,077)
Foreign currency related
transactions......................... (351,421)
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities
denominated in foreign currencies...... (27,737,482)
------------
Net realized and unrealized loss on
investments and foreign currency
related transactions................... (52,965,980)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $(49,526,201)
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1998 1997
<S> <C> <C>
--------------------------------
DECREASE IN NET ASSETS
Operations:
Net investment income................. $ 3,439,779 $ 905,344
Net realized gain/(loss) on
investments and foreign currency
related transactions................. (25,228,498) 19,663,288
Net change in unrealized appreciation
in value of investments and
translation of other assets and
liabilities denominated in foreign
currencies........................... (27,737,482) (6,627,272)
------------ ------------
Net increase/(decrease) in net
assets resulting from operations... (49,526,201) 13,941,360
------------ ------------
Dividends and distributions to
shareholders:
Net investment income................. (3,566,312) (1,652,151)
Net realized gain on investments...... -- (19,052,079)
------------ ------------
Total dividends and distributions to
shareholders....................... (3,566,312) (20,704,230)
------------ ------------
Capital share transactions (Note C):
Proceeds from 78,479 shares and 6,148
shares, respectively, issued in
reinvestment of dividends............ 1,069,270 114,259
Cost of 26,100 shares repurchased
(Note G)............................. (235,428) --
------------ ------------
Net increase in net assets resulting
from capital share transactions...... 833,842 114,259
------------ ------------
Total decrease in net assets........ (52,258,671) (6,648,611)
------------ ------------
NET ASSETS
Beginning of year....................... 143,357,978 150,006,589
------------ ------------
End of year............................. $ 91,099,307 $143,357,978*
------------ ------------
------------ ------------
- ------------------------------
</TABLE>
* Includes undistributed net investment income of $864,149.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Period
August
1,
1990*
For the Years Ended December 31, through
------------------------------------------------------------------------------ December
1998 1997 1996 1995 1994+ 1993 1992 1991 31, 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of
period............. $18.21 $19.07 $17.09 $20.18 $25.73 $25.36 $26.05 $14.24 $13.64**
------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment
income............. 0.43 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....... (6.70)++ 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......... (6.27) 1.77 2.21 (2.90) 1.38 10.26 1.75 15.27 0.87
------- ------- ------- ------- ------- ------- ------- ------- -------
Dividends and
distributions to
shareholders:
Net investment
income........... (0.45) (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....... (0.45) (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.......... $11.49 $18.21 $19.07 $17.09 $20.18 $25.73 $25.36 $26.05 $14.24
------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- -------
Market value, end of
period............. $8.188 $14.313 $15.750 $14.750 $18.750 $31.500 $24.375 $26.500 $11.125
------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- -------
Total investment
return(a).......... (39.56)% 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)...... $91,099 $143,358 $150,007 $134,290 $156,673 $140,458 $102,259 $104,435 $57,081
Ratio of expenses to
average net
assets(c).......... 2.39% 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........ 2.51% 2.58% 1.82% 2.12% -- -- -- -- --
Ratio of expenses to
average net assets,
excluding taxes.... 1.80% 1.68% -- 1.78% 1.72% -- 2.31% -- --
Ratio of net
investment income
to average net
assets............. 2.91% 0.53% 1.47% 1.10% 0.63% 1.45% 1.15% 2.85% 5.10%(b)
Portfolio turnover
rate............... 172.62% 124.98% 50.21% 38.71% 77.81% 70.17% 55.40% 82.39% 52.49%
</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.
++ Includes a $0.05 per share decrease to the Fund's net asset value per
share resulting from the dilutive impact of shares issued pursuant to
the Fund's automatic dividend reinvestment program and a $0.01 per
share increase to the Fund's net asset value per share resulting from
the anti-dilutive impact of shares repurchased pursuant to the Fund's
share repurchase program for the year ended December 31, 1998.
(a) Total investment return at market value is based on the changes in
market price of a share during the period and assumes reinvestment of
dividends and distributions, if any, at actual prices pursuant to the
Fund's dividend reinvestment program. Total investment return does not
reflect brokerage commissions or initial underwriting discounts and
has not been annualized.
(b) Annualized.
(c) Ratios reflect actual expenses incurred by the Fund. Amounts are net
of fee waivers and inclusive of taxes.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
16
<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, 1998,
the Fund held 6.25% of its net assets in securities valued in good faith by the
Board of Directors with an aggregate cost of $6,826,989 and fair value of
$5,697,629. The net asset value per share of the Fund is calculated on each
business day, with the exception of those days on which the New York Stock
Exchange is closed.
CASH: Deposits held at Brown Brothers Harriman & Co., the Fund's custodian, in a
variable rate account are classified as cash. At December 31, 1998, the interest
rate was 4.125%, which resets on a daily basis. Amounts on deposit are generally
available on the same business day.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.
TAXES: No provision is made for U.S. federal income or excise taxes as it is the
Fund's intention to continue to qualify as a regulated investment company and to
make the requisite distributions to its shareholders which will be sufficient to
relieve it from all or substantially all U.S. federal income and excise taxes.
At December 31, 1998, the Fund had a capital loss carryforward of $22,881,266
which expires in 2006.
For U.S. federal income tax purposes, realized foreign currency losses and net
realized capital losses from investments incurred after October 31, 1998, within
the Fund's current fiscal year, are deemed to arise on the first day of the
following fiscal year. The Fund incurred and elected to defer such losses of
$72,132 and $3,037,861, 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
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
original invested capital. For the year ended December 31, 1998, the Fund
incurred $549,388 of such expense.
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. For the year ended December 31, 1998, the
Fund incurred $145,310 of such expense. Effective January 23, 1999, the CPMF tax
will expire and no longer be charged.
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 or losses 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.
At December 31, 1998, the Fund reclassified $386,283 of net realized losses from
foreign currency related transactions to undistributed net investment income. In
addition, the Fund reclassified $1,769,717 of
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
distributions from accumulated net realized loss on investments and foreign
currency related transactions to undistributed net investment income.
OTHER: Securities denominated in currencies other than U.S. dollars are subject
to changes in value due to fluctuations in exchange rates.
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
substantially less than those originally paid by the Fund or the current
carrying values. Further, companies whose securities are not publicly traded may
not be subject to the disclosure and other investor protection requirements
applicable to companies whose securities are publicly traded.
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 ("repos") 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. Repos 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. Repos are deposited with the Fund's custodian and,
pursuant to the terms of the repo, 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
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
may claim any resulting loss against the seller; collectibility of such claims
may be limited. At December 31, 1998, the Fund had no such agreements.
NOTE B. AGREEMENTS
BEA Associates ("BEA") serves as the Fund's investment adviser, with respect to
all investments 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, 1998, BEA earned $1,234,850 for
advisory services, of which BEA waived $118,997. BEA also provides certain
administrative services to the Fund and is reimbursed by the Fund for costs
incurred on behalf of the Fund (up to $20,000 per annum). For the year ended
December 31, 1998, BEA was reimbursed $13,137 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,
1998, advisory fees amounted to $217,911, of which $20,996 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, 1998, these sub-advisory fees
amounted to $59,029.
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, 1998, BSFM earned $113,804 for administrative services.
BEA Administration, Administradora de Fondos de Inversion de Capital Extranjero
S.A. ("AFICE") serves as the Fund's Chilean administrator. For its services,
AFICE is paid an annual fee by the Fund equal to the greater of 2,000 U.F.'s
(approximately $61,600 at December 31, 1998) 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 $6,300 at December 31, 1998). For the year ended December 31,
1998, Celfin earned $95,277 and $7,001 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 7,925,139 shares outstanding at December 31, 1998, BEA
owned 7,169 shares.
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE D. INVESTMENT IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at December
31, 1998 was $102,588,298. Accordingly, the net unrealized depreciation of
investments (including investments denominated in foreign currencies) of
$13,102,476, was composed of gross appreciation of $4,143,187 for those
investments having an excess of value over cost and gross depreciation of
$17,245,663 for those investments having an excess of cost over value.
For the year ended December 31, 1998, purchases and sales of securities, other
than short-term investments, were $194,565,473 and $203,858,537, respectively.
NOTE E. CREDIT AGREEMENT
The Fund, along with 10 other U.S. regulated investment companies for which BEA
serves as investment adviser, has a credit agreement with BankBoston, N.A. The
agreement provides that each fund is permitted to borrow an amount equal to the
lesser of $25,000,000 or 25% of the net assets of the fund. However, at no time
shall the aggregate outstanding principal amount of all loans to any of the 11
funds exceed $25,000,000. The line of credit will bear interest at (i) the
greater of the bank's prime rate or the Federal Funds Effective Rate plus 0.50%
or (ii) the Adjusted Eurodollar Rate plus 1.50%. The Fund had no amounts
outstanding under the credit agreement during the year ended and at December 31,
1998.
NOTE F. RESTRICTED SECURITIES
Certain of the Fund's investments are restricted as to resale and are valued at
the direction of the Fund's Board of Directors in good faith, at fair value,
after taking into consideration appropriate indications of value. The table
below shows the number of shares held, the acquisition dates, aggregate cost,
fair value as of December 31, 1998, per share value of such securities and
percentage of net assets which the securities comprise.
<TABLE>
<CAPTION>
PERCENT
NUMBER FAIR VALUE VALUE OF
OF ACQUISITION AT PER NET
SECURITY SHARES DATES COST 12/31/98 SHARE ASSETS
- --------------------------------------- -------- ---------------- ------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Emerging Markets Ventures, L.P......... 5,333 01/22/98 $ 5,333 $ 4,644 $ 0.87 0.01
Emerging Markets Ventures, L.P......... 234,746 05/06/98 234,746 204,452 0.87 0.22
Emerging Markets Ventures, L.P......... 115,870 07/07/98 115,870 100,917 0.87 0.11
Emerging Markets Ventures, L.P......... 91,609 10/27/98 91,609 79,787 0.87 0.09
Jamaican Assets I L.P.................. 397,486 07/29/97 400,595 353,874 0.89 0.39
Jamaican Assets I L.P.................. 397,487 10/17/97 400,596 353,874 0.89 0.39
Venworld Telecommunications............ 24,887 07/30/92 501,978 177,112 7.12 0.19
Venworld Telecommunications............ 15,253 08/07/92 314,981 108,551 7.12 0.12
</TABLE>
The Fund may incur certain costs in connection with the disposition of the above
securities.
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE G. SHARE REPURCHASE PROGRAM
On October 21, 1998, the Fund announced that its Board of Directors has
authorized the repurchase by the Fund of up to 15% of the Fund's outstanding
common stock, for the purposes of enhancing shareholder value. The Fund's Board
has authorized management of the Fund to repurchase such shares in open market
transactions at prevailing market prices from time to time and in a manner
consistent with the Fund continuing to seek to achieve its investment
objectives. The Board's actions were taken in light of the significant discounts
at which the Fund's shares recently have been trading. It is intended both to
provide additional liquidity to those shareholders that elect to sell their
shares and to enhance the net asset value of the shares held by those
shareholders that maintain their investment. The repurchase program will be
subject to review by the Board of Directors of the Fund. From October 21, 1998
to December 31, 1998, the Fund repurchased 26,100 of its shares for a total of
$235,428 at a weighted average discount of 25.43% from net asset value. The
discount of individual repurchases ranged from 25.31% - 25.83%.
- --------------------------------------------------------------------------------
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of The Latin America Investment Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Latin America Investment Fund,
Inc. (the "Fund") at December 31, 1998, and the results of its operations for
the year then ended, 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. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian, brokers and issuers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 19, 1999
- --------------------------------------------------------------------------------
23
<PAGE>
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On April 24, 1998, the annual meeting of shareholders of The Latin America
Investment Fund, Inc. (the "Fund") was held and the following matters were voted
upon:
(1) To re-elect three directors to the Board of Directors of the Fund.
<TABLE>
<CAPTION>
NAME OF DIRECTOR FOR WITHHELD NON-VOTES
- ----------------------------------------------------------------------------------- ---------- --------- ----------
<S> <C> <C> <C>
Martin M. Torino 6,175,304 757,776 1,018,159
Peter A. Gordon 6,173,782 759,298 1,018,159
William W. Priest, Jr. 6,175,383 757,697 1,018,159
</TABLE>
In addition to the directors re-elected at the meeting, Dr. Enrique R. Arzac,
James J. Cattano, Michael Hyland*, George W. Landau and Richard W. Watt continue
to serve as directors of the Fund.
- ------------------------
* Resigned effective February 9, 1999.
(2) To ratify the selection of PricewaterhouseCoopers LLP (formerly Coopers &
Lybrand L.L.P.) as independent public accountants for the fiscal year ending
December 31, 1998.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
5,088,786 590,304 1,253,990 1,018,159
</TABLE>
(3) To approve the investment advisory agreement between the Fund and Salomon
Brothers Asset Management Inc.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
4,959,188 663,977 1,309,915 1,018,159
</TABLE>
TAX INFORMATION (UNAUDITED)
The Fund is required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise its shareholders within 60 days of the Fund's fiscal year end
(December 31, 1998) as to the U.S. federal tax status of dividends and
distributions received by the Fund's shareholders in respect of such fiscal
year. The $0.45 per share distribution paid in respect of such fiscal year was
derived entirely from net investment income. There were no distributions which
would qualify for the dividend received deduction available to corporate
shareholders.
The Fund does not intend to make an election under Section 853 to pass through
foreign taxes paid by the Fund to its shareholders. This information is given to
meet certain requirements of the Internal Revenue Code of 1986, as amended.
Shareholders should refer to their Form 1099-DIV to determine the amount
includable on their respective tax returns for 1998.
- --------------------------------------------------------------------------------
24
<PAGE>
TAX INFORMATION (UNAUDITED) (CONTINUED)
Notification for calendar year 1998 was mailed in January 1999. 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 investment in the Fund.
- --------------------------------------------------------------------------------
25
<PAGE>
DESCRIPTION OF INVESTLINK-SM-* PROGRAM
The InvestLink-SM- Program is sponsored and administered by BankBoston, N.A.,
not by The Latin America Investment Fund, Inc. (the "Fund"). BankBoston, N.A.
will act as program administrator (the "Program Administrator") of the
InvestLink-SM- Program (the "Program"). The purpose of the Program is to provide
interested investors with a simple and convenient way to invest funds and
reinvest dividends in shares of the Fund's common stock ("Shares") at prevailing
prices, with reduced brokerage commissions and fees.
An interested investor may join the Program at any time. Purchases of Shares
with funds from a participant's cash payment or automatic account deduction will
begin on the next day on which funds are invested. If a participant selects the
dividend reinvestment option, automatic investment of dividends generally will
begin with the next dividend payable after the Program Administrator receives
his enrollment form. Once in the Program, a person will remain a participant
until he terminates his participation or sells all Shares held in his Program
account, or his account is terminated by the Program Administrator. A
participant may change his investment options at any time by requesting a new
enrollment form and returning it to the Program Administrator.
A participant will be assessed certain charges in connection with his
participation in the Program. First-time investors will be subject to an initial
service charge which will be deducted from their initial cash deposit. All
optional cash deposit investments will be subject to a service charge. Sales
processed through the Program will have a service fee deducted from the net
proceeds, after brokerage commissions. In addition to the transaction charges
outlined above, participants will be assessed per share processing fees (which
include brokerage commissions.) Participants will not be charged any fee for
reinvesting dividends.
The number of Shares to be purchased for a participant depends on the amount of
his dividends, cash payments or bank account or payroll deductions, less
applicable fees and commissions, and the purchase price of the Shares. The
Program Administrator uses dividends and funds of participants to purchase
Shares of the Fund's common stock in the open market. Such purchases will be
made by participating brokers as agent for the participants using normal cash
settlement practices. All Shares purchased through the Program will be allocated
to participants as of the settlement date, which is usually three business days
from the the purchase date. In all cases, transaction processing will occur
within 30 days of the receipt of funds, except where temporary curtailment or
suspension of purchases is necessary to comply with applicable provisions of the
Federal Securities laws or when unusual market conditions make prudent
investment impracticable. In the event the Program Administrator is unable to
purchase Shares within 30 days of the receipt of funds, such funds will be
returned to the participants.
The average price of all Shares purchased by the Program Administrator with all
funds received during the time period from two business days preceding any
investment date up to the second business day preceding the next investment date
shall be the price per share allocable to a participant in connection with the
Shares purchased for his account with his funds or dividends received by the
Program Administrator during such time period. The average price of all Shares
sold by the Program Administrator pursuant to sell orders received during such
time period shall be the price per share allocable to a participant in
connection with the Shares sold for his account pursuant to his sell orders
received by the Program Administrator during such time period.
BankBoston, N.A., as Program Administrator, administers the Program for
participants, keeps
- --------------------------------------------------------------------------------
26
<PAGE>
DESCRIPTION OF INVESTLINK-SM-* PROGRAM (CONTINUED)
records, sends statements of account to participants and performs other duties
relating to the Program. Each participant in the Program will receive a
statement of his account following each purchase of Shares. The statements will
also show the amount of dividends credited to such participant's account (if
applicable), as well as the fees paid by the participant. In addition, each
participant will receive copies of the Fund's annual and semi-annual reports to
shareholders, proxy statements and, if applicable, dividend income information
for tax reporting purposes.
If the Fund is paying dividends on the Shares, a participant will receive
dividends through the Program for all Shares held on the dividend record date on
the basis of full and fractional Shares held in his account, and for all other
Shares of the Fund registered in his name. The Program Administrator will send
checks to the participants for the amounts of their dividends that are not to be
automatically reinvested at no cost to the participants.
Shares of the Fund purchased under the Program will be registered in the name of
the accounts of the respective participants. Unless requested, the Fund will not
issue to participants certificates for Shares of the Fund purchased under the
Program. The Program Administrator will hold the Shares in book-entry form until
a Program participant chooses to withdraw his Shares or terminate his
participation in the Program. The number of Shares purchased for a participant's
account under the Program will be shown on his statement of account. This
feature protects against loss, theft or destruction of stock certificates.
A participant may withdraw all or a portion of the Shares from his Program
account by notifying the Program Administrator. After receipt of a participant's
request, the Program Administrator will issue to such participant certificates
for the whole Shares of the Fund so withdrawn or, if requested by the
participant, sell the Shares for him and send him the proceeds, less applicable
brokerage commissions, fees, and transfer taxes, if any. If a participant
withdraws all full and fractional Shares in his Program account, his
participation in the Program will be terminated by the Program Administrator. In
no case will certificates for fractional Shares be issued. The Program
Administrator will convert any fractional Shares held by a participant at the
time of his withdrawal to cash.
Participation in any rights offering, dividend distribution or stock split will
be based upon both the Shares of the Fund registered in participants' names and
the Shares (including fractional Shares) credited to participants' Program
accounts. Any stock dividend or Shares resulting from stock splits with respect
to Shares of the Fund, both full and fractional, which participants hold in
their Program accounts and with respect to all Shares registered in their names
will be automatically credited to their accounts.
All Shares of the Fund (including any fractional share) credited to his account
under the Program will be voted as the participant directs. The participants
will be sent the proxy materials for the annual meetings of shareholders. When a
participant returns an executed proxy, all of such Shares will be voted as
indicated. A participant may also elect to vote his Shares in person at the
Shareholders' meeting.
A participant will receive tax information annually for his personal records and
to help him prepare his U.S. federal income tax return. The automatic
reinvestment of dividends does not relieve him of any income tax which may be
payable on dividends. For further information as to tax consequences of
participation in the Program, participants should consult with their own tax
advisors.
The Program Administrator in administering the Program will not be liable for
any act done in good faith or for any good faith omission to act. However, the
- --------------------------------------------------------------------------------
27
<PAGE>
DESCRIPTION OF INVESTLINK-SM-* PROGRAM (CONTINUED)
Program Administrator will be liable for loss or damage due to error caused by
its negligence, bad faith or willful misconduct. Shares held in custody by the
Program Administrator are not subject to protection under the Securities
Investors Protection Act of 1970.
The participant should recognize that neither the Fund nor the Program
Administrator can provide any assurance of a profit or protection against loss
on any Shares purchased under the Program. A participant's investment in Shares
held in his Program account is no different than his investment in directly held
Shares in this regard. The participant bears the risk of loss and the benefits
of gain from market price changes with respect to all of his Shares. Neither the
Fund nor the Program Administrator can guarantee that Shares purchased under the
Program will, at any particular time, be worth more or less than their purchase
price. Each participant must make an independent investment decision based on
his own judgment and research.
While the Program Administrator hopes to continue the Program indefinitely, the
Program Administrator reserves the right to suspend or terminate the Program at
any time. It also reserves the right to make modifications to the Program.
Participants will be notified of any such suspension, termination or
modification in accordance with the terms and conditions of the Program. The
Program Administrator also reserves the right to terminate any participant's
participation in the Program at any time. Any question of interpretation arising
under the Program will be determined in good faith by the Program Administrator
and any such good faith determination will be final.
Any interested investor may participate in the Program. To participate in the
Program, an investor who is not already a registered owner of the Shares must
make an initial investment of at least $250.00. All other cash payments or bank
account deductions must be at least $100.00, up to a maximum of $100,000.00
annually. An interested investor may join the Program by reading the Program
description, completing and signing the enrollment form and returning it to the
Program Administrator. The enrollment form and information relating to the
Program (including the terms and conditions) may be obtained by calling the
Program Administrator at one of the following telephone numbers: First Time
Investors--(800) 337-9697; Current Shareholders--(800) 730-6001. All
correspondence regarding the Program should be directed to: BankBoston, N.A.,
InvestLink Program, P.O. Box 8040, Boston, MA 02266-8040.
- ---------------------------------------------
*InvestLink is a service mark of Boston EquiServe Limited Partnership.
- --------------------------------------------------------------------------------
28
<PAGE>
SUMMARY OF GENERAL INFORMATION
The Fund--The Latin America Investment Fund, Inc.--is a closed-end,
non-diversified management investment company whose shares trade on the New York
Stock Exchange. Its investment objective is long-term capital appreciation
through investments primarily in Latin American equity and debt securities. The
Fund is managed and advised by Credit Suisse Asset Management ("CSAM"), formerly
known as BEA Associates. CSAM is a diversified asset manager, handling equity,
balanced, fixed income, international and derivative based accounts. Portfolios
include international and emerging market investments, common stocks, taxable
and non-taxable bonds, options, futures and venture capital. CSAM manages money
for corporate pension and profit-sharing funds, public pension funds, union
funds, endowments and other charitable institutions and private individuals. As
of December 31, 1998, CSAM managed approximately $35.3 billion in assets in the
U.S. .
SHAREHOLDER INFORMATION
The market price is published in: THE NEW YORK TIMES (daily) under the
designation "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 CSAM CLOSED-END FUNDS
LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds listed below at 1-800-293-1232 or visit our website on the
Internet: http://www.cefsource.com.
CLOSED-END FUNDS
SINGLE COUNTRY
The Brazilian Equity Fund, Inc. (BZL)
The Chile Fund, Inc. (CH)
The First Israel Fund, Inc. (ISL)
The Indonesia Fund, Inc. (IF)
The Portugal Fund, Inc. (PGF)
MULTIPLE COUNTRY
The Emerging Markets Infrastructure Fund, Inc. (EMG)
The Emerging Markets Telecommunications Fund, Inc. (ETF)
The Latin America Equity Fund, Inc. (LAQ)
FIXED INCOME
BEA Income Fund, Inc. (FBF)
BEA Strategic Global Income Fund, Inc. (FBI)
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that The Latin America Investment Fund, Inc.
may from time to time purchase shares of its capital stock in the open market.
- --------------------------------------------------------------------------------
<PAGE>
DIRECTORS AND CORPORATE OFFICERS
Dr. Enrique R. Arzac Director
James J. Cattano Director
Peter A. Gordon Director
George W. Landau Director
Martin M. Torino Director
William W. Priest, Jr. Chairman of the Board of Directors
Richard W. Watt President, Chief Investment Officer
and Director
Emily Alejos Investment Officer
Hal Liebes Senior Vice President
Michael A. Pignataro Chief Financial Officer and
Secretary
Rocco A. Del Guercio Vice President
INVESTMENT ADVISERS
Credit Suisse Asset Management
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
BankBoston, N.A.
P.O. Box 1865
Mail Stop 45-02-62
Boston, MA 02105-1865
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA 19103
LEGAL COUNSEL
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. It is not a prospectus, circular
or representation intended for use in the purchase or sale of shares of the Fund
or of any securities mentioned in this report.
[LOGO]
- --------------------------------------------------------------------------------
3914-AR-98
