<PAGE>
THE BRAZILIAN INVESTMENT FUND, INC.
- ---------------------------------------------
OFFICERS AND DIRECTORS
Barton M. Biggs R. Charles Tschampion
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS Frederick B. Whittemore
Warren J. Olsen DIRECTOR
PRESIDENT AND DIRECTOR James W. Grisham
Peter J. Chase VICE PRESIDENT
DIRECTOR Harold J. Schaaff, Jr.
John W. Croghan VICE PRESIDENT
DIRECTOR Joseph P. Stadler
David B. Gill VICE PRESIDENT
DIRECTOR Valerie Y. Lewis
Graham E. Jones SECRETARY
DIRECTOR James R. Rooney
John A. Levin TREASURER
DIRECTOR Joanna M. Haigney
William G. Morton, Jr. ASSISTANT TREASURER
DIRECTOR
- ---------------------------------------------
INVESTMENT ADVISER
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
- --------------------------------------------------------
U.S. ADMINISTRATOR
The Chase Manhattan Bank, N.A.
73 Tremont Street
Boston, Massachusetts 02108
- --------------------------------------------------------
BRAZILIAN ADMINISTRATOR AND CUSTODIAN
Unibanco-Uniao de Bancos Brasileiros S.A.
Avenida Eusebio Matoso, 891,
Sao Paulo, S.P., Brazil
- --------------------------------------------------------
U.S. CUSTODIAN
The Chase Manhattan Bank, N.A.
770 Broadway
New York, New York 10003
- --------------------------------------------------------
SHAREHOLDER SERVICING AGENT
The Chase Manhattan Bank, N.A.
73 Tremont Street
Boston, Massachusetts 02108
(800) 548-7786
- --------------------------------------------------------
LEGAL COUNSEL
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
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INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
- --------------------------------------------------------
For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726.
------------------------
THE
BRAZILIAN INVESTMENT
FUND, INC.
---------------------
THIRD QUARTER REPORT
SEPTEMBER 30, 1995
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- -------
For the third quarter of 1995, the Fund's total return based on net asset value
per share was 17.15% compared to 12.60% for the IFC Total Return Index for
Brazil (the "IFC Index"). The Fund's results were primarily due to an
overweighting in the telecommunications and beverage sectors which outperformed
due to, respectively, anticipation of a favorable tariff rebalancing of
telephone rates, and better than expected second quarter earnings from local
beer manufacturer Cervejaria Brahma. Year-to-date the Fund's total return based
on net asset value per share is -15.37% versus -10.36% for the IFC Index.
The overall market's strong performance, which easily outdistanced that of its
fellow Latin countries, was driven primarily by lower than expected inflation
numbers and a modest easing of bank reserve requirements by the Central Bank.
Various delays in the reform packages being debated in Congress, however, took
some wind out of the rally in the last two weeks of the quarter.
The economy appeared to reach its bottom in the summer months of June and July,
and indications are that there has been a modest and selective pickup in
activity in August and September. The slowdown differentially affected specific
sectors, with the automotive sector hit the hardest. Demand for consumer
nondurables and, surprisingly, household appliances, did not witness a
significant drop-off compared to that of the automotive sector. Past due loans
in the banking sector reached their peak and appear to have stabilized in
August. Inflation reached a low of 0.7% in the month of August, and should come
in slightly higher for the month of September. Taken together, in the early part
of the third quarter we witnessed the effects of the credit-tightening measures
implemented by the Central Bank in the early part of the year. These measures
were successful in slowing down the economy and reducing inflationary pressures,
and created the sufficient "breathing space" to begin easing credit in the
latter part of the quarter.
Tariffs on regulated industries--frozen for over a year--are cautiously and
gradually being raised so as to avoid one-time inflationary shocks. The
petroleum industry was granted a 13% tariff increase--parceled out at different
points along the distribution chain-- and the electric utility and
telecommunications industries should be granted respective tariff increases of
similar to greater magnitudes by the end of this year.
The task presently facing the government, in addition to maneuvering the reform
measures through Congress (more about those below), is to reduce inflationary
pressures without tipping the economy into a recession, i.e. to engineer a "soft
landing." Although too early to definitively call, signs are pointing to a
favorable attainment of this goal. We think that the economy bottomed in late
summer and that marginally declining interest rates--although likely to remain
high in absolute terms--should contribute to a mild pickup toward the end of
this year.
On the reform front, there are a variety of initiatives--including tax reform,
administrative reform, social security reform, industry deregulation, and
privatization--at various stages in the approval process. We do not expect
dramatic, overnight progress on these initiatives but rather slow, painstaking
quid-pro-quo gains to be made over the next six to twelve months. The most
pressing item is to pass legislation allowing the government to balance its
budget (called the "social emergency fund") for the coming fiscal year. In the
meantime, absent fundamental fiscal reform, the government continues to exercise
prudent control over the economy via the foreign exchange
1
<PAGE>
rate, domestic interest rates, and selective import tariffs. We have been very
impressed with their ability to engineer the unfolding soft landing using these
three levers of economic policy.
With respect to the market, we are cautiously optimistic for the rest of the
year. We believe there are opportunities for handsome gains through judicious
stock selection, though we do not expect the continuation of the strong rallies
experienced in the second and third quarters. Although we expect real interest
rates to continue to be high until fiscal reform is implemented, marginal future
declines in interest rates should bode well for the stock market. Further, we
think that companies which sell small-ticket items should do particularly well
in the last quarter owing to: a pickup in economic activity, the Christmas
season, year-end bonuses (given in November), and one-time boosts to disposable
income as a result of industry wide wage renegotiations that take place between
September-November. Further, we continue to like the banks as asset quality has
stabilized, net interest margins are high, and high capitalization levels offer
ample room to grow loan portfolios as credit restrictions ease. Lastly, we feel
there is enormous value in selected state-owned companies, and tend to favor
those companies which are cheap on a price/asset basis and where we see
"positive announcement" catalysts on the horizon. An example is the electric
utility sector, which trades at a fraction of its Chilean
peer's multiples on a price/asset basis, and which should experience both a
favorable tariff increase by the end of this year and a high visibility
privatization--Rio de Janeiro distributor Light--by the end of this year or
early next.
Sincerely,
[SIG]
Warren J. Olsen
PRESIDENT
[SIG]
Robert L. Meyer
SENIOR PORTFOLIO MANAGER
[SIG]
Andy Skov
PORTFOLIO MANAGER
October 18, 1995
2
<PAGE>
The Brazilian Investment Fund, Inc.
Investment Summary as of September 30, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION
TOTAL RETURN (%)
--------------------------------------------------
NET ASSET VALUE (1) INDEX (2)
----------------------- -------------------------
AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL
----------------------- -------------------------
<S> <C> <C> <C> <C>
CURRENT QUARTER 17.15% -- 12.60% --
FISCAL YEAR TO DATE -15.37 -- -10.36 --
ONE YEAR -28.94 -28.94% -21.67 -21.67%
SINCE INCEPTION* 171.69 25.99 215.17 30.30
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION (1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C> <C>
Periods ended September 30:
1991* 1992 1993 1994 9 Months Ended 9/30/95 (Unaudited)
Net Asset Value $ 63.31 $ 55.28 $ 83.58 $ 129.97 $ 73.96
Income Dividends - - - 1.80 -
Capital Gains and Other Distributions - - 7.06 6.65 37.73
Total Return (1) 26.62% (12.68%) 72.52% 68.32% (15.37%)
Index Total Return (2) 3.48% 0.32% 99.45% 69.83% (10.36%)
</TABLE>
(1)Total investment return based on per share net asset value reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. These percentages are not an indication of the performance of a
shareholder's investment in the Fund based on market value due to differences
between the market price of the stock and the net asset value of the Fund.
(2)IFC Total Return Index for Brazil
*The Fund commenced operations on June 4, 1991.
3
<PAGE>
The Brazilian Investment Fund, Inc.
Portfolio Summary as of September 30, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equity Securities 97.8%
Cash Equivalents 2.2%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Utilities - Electrical & Gas 23.8%
Banking 20.2%
Telecommunications 18.3%
Beverages & Tobacco 8.9%
Energy Sources 5.7%
Appliances & Household Durables 3.5%
Merchandising 3.5%
Machinery & Engineering 2.2%
Metals - Non-Ferrous 2.0%
Other 11.9%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<C> <S>
1. Eletrobras (Common)
2. Telebras
3. Brahma
4. Banco Bradesco
5. Petrobras
6. Banco Itau
7. Banco do Brasil
8. Light (Common)
9. Banco Nacional
10. Refripar
</TABLE>
4
<PAGE>
INVESTMENTS (UNAUDITED)
- ---------
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
BRAZILIAN INVESTMENT FUND (96.7%)
- ---------------------------------------------------------
- ------------
BRAZILIAN PREFERRED STOCKS (94.9%)
(Unless otherwise noted)
- ------------------------------------------------------------
- -------------
APPLIANCES & HOUSEHOLD DURABLES (3.5%)
Refripar 557,352,927 U.S.$ 1,456
Refripar (Common) 23,893,000 53
------------
1,509
------------
- ------------------------------------------------------------
- -------------
BANKING (20.2%)
Banco Bradesco 381,104,708 3,659
Banco do Brasil 108,442,000 1,741
Banco Itau 5,582,500 1,757
Banco Nacional 77,183,664 1,531
------------
8,688
------------
- ------------------------------------------------------------
- -------------
BEVERAGES & TOBACCO (8.9%)
Brahma 9,419,489 3,840
------------
- ------------------------------------------------------------
- -------------
CHEMICALS (0.5%)
Rhodia Ster ADS 14,810 198
------------
- ------------------------------------------------------------
- -------------
ENERGY SOURCES (5.7%)
Petrobras 23,377,333 2,465
------------
- ------------------------------------------------------------
- -------------
FOOD & HOUSEHOLD PRODUCTS (0.9%)
Dixie Toga 461,291 397
------------
- ------------------------------------------------------------
- -------------
INDUSTRIAL COMPONENTS (1.9%)
Schulz 23,670,000,000 801
------------
- ------------------------------------------------------------
- -------------
MACHINERY & ENGINEERING (2.2%)
WEG 1,822,000 937
------------
- ------------------------------------------------------------
- -------------
MERCHANDISING (3.5%)
Cia Brasileira ADR 43,850 477
Lojas Americanas (Bonus
Rights) 183,270 26
Lojas Renner 43,970,000 992
------------
1,495
------------
- ------------------------------------------------------------
- -------------
METALS -- NON-FERROUS (2.0%)
CVRD 5,013,800 842
------------
- ------------------------------------------------------------
- -------------
METALS -- STEEL (1.5%)
Acesita 27,450,000 196
Usiminas 310,000,000 341
Usiminas ADS 9,000 99
------------
636
------------
- ------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
TELECOMMUNICATIONS (18.3%)
Telebras 88,253,895 U.S.$ 4,212
Telebras ADR 17,400 827
Telebras (Common) 28,453,000 1,149
Telesp 5,185,601 850
Telesp (Common) 5,010,500 839
------------
7,877
------------
- ------------------------------------------------------------
- -------------
TEXTILES & APPAREL (2.0%)
Coteminas 1,200,000 393
Wentex 318,000,000 467
------------
860
------------
- ------------------------------------------------------------
- -------------
UTILITIES -- ELECTRICAL & GAS (23.8%)
Cemig ADR 28,357 631
CESP 4,440,090 154
CESP (Common) 6,900,000 224
CPFL 22,591,000 903
Eletrobras 'B' 3,438,000 1,061
Eletrobras (Common) 18,468,000 5,697
Light (Common) 4,191,000 1,561
------------
10,231
------------
- ------------------------------------------------------------
- -------------
TOTAL BRAZILIAN PREFERRED STOCKS
(Cost U.S. $35,804) 40,776
------------
- ------------------------------------------------------------
- -------------
PURCHASED OPTION (0.0%)
- ---------------------------------------------------------
- ------------
UTILITIES -- ELECTRICAL & GAS
CPFL call, expiring
10/16/95, strike price BRL
70.00
(Cost U.S. $0) 18,700,000 --
------------
</TABLE>
- -----------------------------------------------------------------
- -------------
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (1.8%)
Brazilian Real
(Cost U.S. $756) BRL 721 757
------------
- ----------------------------------------------------------------
- -------------
TOTAL BRAZILIAN INVESTMENT FUND
(Cost U.S. $36,560) 41,533
------------
- ---------------------------------------------------------
- ------------
SHORT-TERM INVESTMENT (0.3%)
- ---------------------------------------------------------
- ------------
REPURCHASE AGREEMENT (0.3%)
Chase Manhattan Bank, N.A.,
6.00%, dated 9/29/95, due
10/2/95, to be repurchased at
$153, collateralized by U.S.$130
United States Treasury Bonds
8.125%, due 5/15/21, valued at
U.S.$156 (Cost U.S. $153) U.S.$ 153 153
------------
- ----------------------------------------------------------------
- -------------
TOTAL INVESTMENTS (97.0%)
(Cost U.S. $36,713) 41,686
------------
- ----------------------------------------------------------------
- -------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES (3.0%)
Other Assets U.S. $ 2,585
Liabilities (1,312) U.S.$ 1,273
------------- ------------
- ----------------------------------------------------------------
- -------------
NET ASSETS (100%)
Applicable to 580,879, issued and outstanding
U.S. $.01 par value shares (50,000,000 shares
authorized) U.S.$ 42,959
-------------
</TABLE>
- -----------------------------------------------------------------
- -------------
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------------------------------------------
- ------------
NET ASSET VALUE PER SHARE U.S. $ 73.96
-------------
- ----------------------------------------------------------------
- -------------
</TABLE>
ADR--American Depositary Receipt
ADS --American Depositary Share
6
