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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF
THE SECURITIES EXCHANGE ACT OF 1934)
THE BRAZILIAN INVESTMENT FUND, INC.
(Name of Issuer)
THE BRAZILIAN INVESTMENT FUND, INC.
(Name of Person Filing Statement)
COMMON STOCK ($.01 PAR VALUE)
(Title of Class of Securities)
NOT APPLICABLE
(CUSIP Number of Class of Securities)
Harold J. Schaaff, Esq.
Vice President
The Brazilian Investment Fund, Inc.
1221 Avenue of the Americas
New York, New York 10020
(212) 296-7188
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COPY TO:
John Baumgardner, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
(212) 558-4000
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person Filing Statement)
------------------------
OCTOBER 7, 1996
(Date Tender Offer First Published,
Sent or Given to Security Holders)
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TRANSACTION VALUATION $28,186,819.53* AMOUNT OF FILING FEE: $5,637.36
</TABLE>
* Pursuant to Section 13(e)(3) of the Securities Exchange Act of 1934, as
amended, and Rule 0-11(b)(1) thereunder, the transaction value was
calculated by multiplying 509,154.977 shares of Common Stock of The
Brazilian Investment Fund, Inc. by $55.36, the Net Asset Value per share as
of 5:00 P.M. October 4, 1996.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: ____________________________________________________
Form or Registration No.: __________________________________________________
Filing Party: ______________________________________________________________
Date Filed: ________________________________________________________________
<PAGE>
EXPLANATORY NOTE
Copies of the Offer to Purchase, dated October 7, 1996 and the Letter of
Transmittal, among other documents, have been filed by The Brazilian Investment
Fund, Inc. (the "Company") as Exhibits to this Issuer Tender Offer Statement on
Schedule 13E-4 (the "Statement"). Unless otherwise indicated, all material
incorporated by reference in this Statement in response to items or sub-items of
this Statement is incorporated by reference to the corresponding caption in the
Offer to Purchase, including the information stated under such captions as being
incorporated in response thereto.
ITEM 1. SECURITY AND ISSUER.
(a) The Brazilian Investment Fund, Inc.
1221 Avenue of the Americas
New York, New York 10020
(b) See the Introduction Section and Section 1.
No securities are to be purchased from any officer, director or affiliate
of the issuer.
(c) See the Introduction Section and Section 6.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) See Section 8.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
See the Introduction Section, Section 7 and Section 8.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
See Section 10.
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ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
See Section 10.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Not applicable.
ITEM 7. FINANCIAL INFORMATION.
(a) See Exhibit A to the Offer to Purchase (Exhibit (a)(1)) dated October 7,
1996.
(b) Not applicable.
ITEM 8. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) See Section 11.
(c) Not applicable.
(d) Not applicable.
(e) See Exhibits (a)(1) and (a)(2).
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
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EXHIBIT NO. DESCRIPTION
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(a)(1) Offer to Purchase, dated October 7, 1996 (with attached
Exhibit A, the Fund's audited financial statements for the
fiscal years ended December 31, 1994 and December 31, 1995
and unaudited financial statements for the six month period
ended June 30, 1996).
(a)(2) Letter of Transmittal to holders of Common Stock.
(a)(3) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(4) Letter to Clients of Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(5) Guidelines of the Internal Revenue Service for Certification
of Taxpayer Identification Number.
(a)(6) Letter to Shareholders, dated October 7, 1996.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
THE BRAZILIAN INVESTMENT FUND, INC.
By /s/ JAMES R. ROONEY
------------------------------------------
James R. Rooney
TREASURER
Dated: October 7, 1996
4
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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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(a)(1) Offer to Purchase, dated October 7, 1996 (with attached
Exhibit A, the Fund's audited financial statements for the
fiscal years ended December 31, 1994 and December 31, 1995
and unaudited financial statements for the six month period
ended June 30, 1996).
(a)(2) Letter of Transmittal to holders of Common Stock.
(a)(3) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(4) Letter to Clients of Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(5) Guidelines of the Internal Revenue Service for Certification
of Taxpayer Identification Number.
(a)(6) Letter to Shareholders, dated October 7, 1996.
</TABLE>
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EXHIBIT (a)(1)
<PAGE>
OFFER TO PURCHASE FOR CASH
BY
THE BRAZILIAN INVESTMENT FUND, INC.
UP TO 509,154.977 SHARES OF ITS COMMON STOCK
AT
A PRICE NET PER SHARE EQUAL TO THE NET ASSET VALUE PER SHARE
---------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON NOVEMBER 5, 1996 UNLESS THE OFFER IS EXTENDED.
---------------------
THIS OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, NO MORE THAN 509,154.977
SHARES BEING TENDERED AND NOT WITHDRAWN AS OF THE EXPIRATION DATE (AS
HEREINAFTER DEFINED). IF MORE THAN 509,154.977 SHARES ARE TENDERED, THE FUND
WILL NOT PURCHASE ANY SHARES IN THE OFFER AND, PURSUANT TO ARTICLE ELEVENTH OF
THE FUND'S ARTICLES OF INCORPORATION, THE BOARD OF DIRECTORS OF THE FUND SHALL
CONVENE A SHAREHOLDERS MEETING TO CONSIDER A PLAN OF LIQUIDATION OF THE FUND.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS NOR MORGAN STANLEY ASSET
MANAGEMENT INC. (THE INVESTMENT ADVISER TO THE FUND) NOR ITS BOARD OF DIRECTORS
MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN
FROM TENDERING SHARES. THE FUND HAS BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE
OFFICER OF THE FUND INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.
IMPORTANT
Any shareholder desiring to tender all or any portion of his shares of
Common Stock of the Fund should either (1) complete and sign the Letter of
Transmittal or a facsimile thereof in accordance with the instructions in the
Letter of Transmittal, and mail or deliver the Letter of Transmittal or such
facsimile with his certificates for the tendered Shares if such Shareholder has
been issued physical certificates, signature guarantees for all shareholders
tendering uncertificated Shares and any other required documents to the
Depository, or (2) request his broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for him. Shareholders having Shares
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee are urged to contact such broker, dealer, commercial bank, trust
company or other nominee if they desire to tender Shares so registered.
Questions and requests for assistance may be directed to the Depository in
the manner set forth on page 15 of this Offer to Purchase. Requests for
additional copies of this Offer to Purchase and the Letter of Transmittal may
also be directed to the Depository.
October 7, 1996
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
FUND OR MORGAN STANLEY ASSET MANAGEMENT INC. AS TO WHETHER SHAREHOLDERS SHOULD
TENDER OR REFRAIN FROM TENDERING SHARES PURSUANT TO THE OFFER. NO PERSON HAS
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, ANY SUCH RECOMMENDATION OR
ANY SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND.
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TABLE OF CONTENTS
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SECTION PAGE
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1. Terms of the Offer; Expiration Date............................................................... 1
2. Acceptance for Payment and Payment for Shares..................................................... 2
3. Procedure for Tendering Shares.................................................................... 3
4. Rights of Withdrawal.............................................................................. 3
5. Certain United States Federal Income Tax Consequences of the Offer................................ 4
6. Price Range of Shares; Dividends.................................................................. 6
7. Purpose of the Offer; Certain Effects of the Offer................................................ 6
8. Source and Amount of Funds........................................................................ 6
9. Certain Information Concerning the Fund........................................................... 7
10. Interest of Directors and Executive Officers; Transactions and Arrangements Concerning the
Shares.......................................................................................... 7
11. Certain Legal Matters; Regulatory Approvals....................................................... 8
12. Certain Conditions of the Offer................................................................... 8
13. Fees and Expenses................................................................................. 9
14. Miscellaneous..................................................................................... 9
</TABLE>
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF THE BRAZILIAN INVESTMENT FUND, INC.:
The Brazilian Investment Fund, Inc., a Maryland corporation (the "Fund"),
hereby offers to purchase 509,154.977 shares of its Common Stock, par value $.01
per share (the "Shares"), at a price per Share, net to the seller in cash, equal
to the net asset value in U.S. dollars ("NAV") per share as of 5:00 P.M., New
York City time on the Expiration Date (as herein defined) upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which together constitute the "Offer").
THE OFFER IS CONDITIONED UPON NO MORE THAN 509,154.977 SHARES BEING TENDERED
AND NOT WITHDRAWN AS OF THE EXPIRATION DATE. THE OFFER IS ALSO SUBJECT TO
CERTAIN OTHER CONDITIONS. SEE SECTION 12.
THIS OFFER IS BEING MADE PURSUANT TO ARTICLE ELEVENTH OF THE FUND'S ARTICLES
OF INCORPORATION ("ARTICLE ELEVENTH"), WHICH REQUIRES THE FUND, FOR SO LONG AS
THE FUND'S COMMON STOCK IS NOT LISTED ON A STOCK EXCHANGE, TO MAKE PERIODIC
OFFERS TO PURCHASE ALL SHARES OF ITS COMMON STOCK. IF MORE THAN 509,154.977
SHARES ARE TENDERED, THE FUND WILL NOT PURCHASE ANY SHARES IN THE OFFER AND,
PURSUANT TO ARTICLE ELEVENTH, THE BOARD OF DIRECTORS OF THE FUND SHALL CONVENE A
SHAREHOLDERS MEETING TO CONSIDER A PLAN OF LIQUIDATION OF THE FUND.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS NOR MORGAN STANLEY ASSET
MANAGEMENT INC. (THE "INVESTMENT ADVISER") NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING SHARES. EACH SHAREHOLDER MUST MAKE HIS OWN DECISION WHETHER TO TENDER
SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICES. THE FUND HAS
BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER OF THE FUND INTENDS TO TENDER
ANY SHARES PURSUANT TO THE OFFER.
As of October 4, 1996, there was outstanding 1,018,309.954 Shares. As of
September 30, 1996, there were approximately 57 holders of record of Shares. The
Shares are not currently publicly traded. On October 4, 1996, the NAV per Share
was $55.36. Shareholders are urged to contact Chase Global Funds Services
Company (the "Depository") at (800) 221-6726 to obtain current NAV quotations
for the Shares. See Section 6. Pursuant to the requirements of Article Eleventh,
the Fund currently intends each quarter to make a tender offer for its shares of
Common Stock at a price per share equal to the then current NAV.
Any Shares acquired by the Fund pursuant to the Offer will become treasury
Shares and will be available for issuance by the Fund without further
shareholder action (except as required by applicable law). Tendering
shareholders will not be obligated to pay brokerage fees or commissions or,
subject to Instruction 6 of the Letter of Transmittal, transfer taxes on the
purchase of Shares by the Fund.
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions set forth in the Offer (including, if the Offer is extended or
amended, the terms and conditions of such extension or amendment), the Fund will
accept for payment, and pay for, all Shares validly tendered on or prior to the
Expiration Date (as herein defined) and not withdrawn as permitted by Section 4.
The term "Expiration Date" means 12:00 Midnight, New York City time, on November
5, 1996, unless and until the Fund, in its sole discretion, shall have extended
the period for which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date on which the Offer, as so extended by
the Fund, shall expire.
The Fund expressly reserves the right, in its sole discretion, at any time
or from time to time, to extend the period of time during which the Offer is
open by giving oral or written notice of such extension to the Depository. Any
such extension will also be publicly announced by press release issued no later
than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date.
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The Fund confirms that if it makes a material change in the terms of the
Offer or the information concerning the Offer, or if it waives a material
condition of the Offer, the Fund will extend the Offer to the extent required by
Rules 13e-4(d)(2) and 13e-4(e)(2) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
During any extension, all Shares previously tendered and not withdrawn will
remain subject to the Offer, subject to the right of a tendering shareholder to
withdraw his Shares. See Section 4.
Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission"), the Fund also expressly reserves the right, in
its sole discretion, at any time or from time to time (i) to delay acceptance
for payment of, or, regardless of whether such Shares were therefore accepted
for payment, payment for, any Shares or to terminate the Offer and not accept
for payment or pay for any Shares not therefore accepted for payment, or paid
for, upon the occurrence of any of the conditions specified in Section 12 and
(ii) waive any condition or otherwise amend the Offer in any respect, by giving
oral or written notice of such delay, termination or amendment to the Depository
and by making a public announcement thereof. The Fund confirms that its
reservation of the right to delay payment for Shares which it has accepted for
payment is limited by Rule 13e-4(f)(5) under the Exchange Act, which requires
that a tender offer or pay the consideration offered or return the tendered
securities promptly after the termination or withdrawal of a tender offer. If,
following the Expiration Date, the Fund is permitted under applicable law to
delay acceptance for payment of or payment for Shares and does so, the Fund may
not thereafter assert conditions to the Offer to delay or avoid acceptance for
payment of or payment for Shares except to the extent permitted by applicable
law. The Fund has been advised by the Staff of the Commission that the Exchange
Act and the rules and regulations promulgated thereunder require that all
conditions to the Offer, other than the receipt of certain governmental
approvals, must be satisfied or waived prior to the Expiration Date.
Any extension, delay, termination or amendment will be followed as promptly
as practicable by public announcement thereof, such announcement in the case of
an extension to be issued no later than 9:00 A.M., New York City time, on the
next business day after the previously scheduled Expiration Date. Subject to
applicable law (including Rule 13e-4(e)(2) under the Exchange Act, which
requires that any material change in the information published, sent or given to
shareholders in connection with the Offer be promptly disseminated to
shareholders in a manner reasonably designed to inform shareholders of such
change) and without limiting the manner in which the Fund may choose to make any
public announcement, the Fund shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by making a
release to the Dow Jones News Service.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the Fund
will accept for payment, and will pay for, all Shares that are validly tendered
and not withdrawn as promptly as practicable after the Expiration Date. Subject
to applicable rules of the Commission, the Fund expressly reserves the right to
delay acceptance for payment of, or payment for, Shares in order to comply, in
whole or in part, with any applicable law. See Section 1. In all cases, payment
for Shares tendered and accepted for payment pursuant to the Offer will be made
only after timely receipt by the Depository of certificates for such Shares
(unless such Shares are held in uncertificated form), a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) and any other
required documents.
For purposes of the Offer, the Fund will be deemed to have accepted for
payment Shares validly tendered and not withdrawn as, if and when the Fund gives
oral or written notice to the Depository of its acceptance for payment of such
Shares pursuant to the Offer. Payment for Shares accepted for payment pursuant
to the Offer will be made by deposit of the aggregate purchase price therefor
with the Depository, which will act as agent for the tendering shareholders for
purpose of receiving payments from
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the Fund and transmitting such payments to the tendering shareholders. Under no
circumstances will interest on the purchase price for Shares be paid, regardless
of any delay in making such payment.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased Shares will be
returned, without expense to the tendering shareholder, as soon as practicable
following expiration or termination of the Offer.
3. PROCEDURE FOR TENDERING SHARES. For a shareholder validly to tender
Shares pursuant to the Offer, a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), together with any required signature
guarantees and any other required documents, must be transmitted to and received
by the Depository at one of its addresses set forth on page 15 of this Offer to
Purchase and, if such shareholder's tendered Shares are represented by
certificates, the certificates for the tendered Shares must be received by the
Depository at such address, in each case prior to the Expiration Date.
Signatures on Letters of Transmittal must be guaranteed by a firm which is a
member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc. (the "NASD") or by a commercial bank or
trust company having an office, branch or agency in the United States (an
"Eligible Institution") in cases where Shares held in uncertificated form are
tendered. If the certificates are registered in the name of a person other than
the signer of the Letter of Transmittal the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificates, with
the signature(s) on the certificates or stock powers guaranteed as aforesaid.
THE METHOD OF DELIVERY OF ALL REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
EACH TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
To prevent United States federal income tax backup withholding with respect
to the purchase price of Shares purchased pursuant to the Offer, a shareholder
who does not otherwise establish an exemption from such backup withholding must
provide the Depository with his correct taxpayer identification number and
certify that he is not subject to backup withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal. Foreign shareholders
who have not previously submitted a Form W-8 to the Fund must do so in order to
avoid backup withholding. See Section 5.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Shares will be determined
by the Fund, in its sole discretion, which determination shall be final and
binding. The Fund reserves the absolute right to reject any and all tenders of
Shares it determines not to be in proper form or the acceptance for payment of
which may, in the opinion of its counsel, be unlawful. The Fund also reserves
the absolute right to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any Shares. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived. None of the Fund, the Investment Adviser, the Depository or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or will incur any liability for failure to give any
such notification. The Fund's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and instructions thereto) will be
final and binding.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depository of
certificates for such Shares (unless such Shares are held in uncertificated
form), properly completed and duly executed Letter(s) of Transmittal (or
facsimile(s) thereof) and any other required documents.
The tender of Shares pursuant to any of the procedures described above will
constitute an agreement between the tendering shareholder and the Fund upon the
terms and subject to the conditions of the Offer.
4. RIGHTS OF WITHDRAWAL. Tenders of Shares made pursuant to the Offer are
irrevocable except that Shares tendered pursuant to the Offer may be withdrawn
at any time prior to the Expiration Date, and,
3
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unless therefore accepted for payment by the Fund pursuant to the Offer, may
also be withdrawn at any time after December 4, 1996.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Depository at one of its
addresses set forth on page 15 of this Offer to Purchase. Any notice of
withdrawal must specify the name of the person having tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the names in which the
Shares to be withdrawn are registered. The signature(s) on the notice of
withdrawal must be guaranteed by an Eligible Institution. If certificates have
been delivered to the Depository, the name of the registered holder and the
serial numbers of the particular certificates evidencing the Shares withdrawn
must also be furnished to the Depository as aforesaid prior to the physical
release of such certificates. All questions as to the form and validity
(including time of receipt) of any notice of withdrawal will be determined by
the Fund, in its sole discretion, which determination shall be final and
binding. None of the Fund, the Investment Adviser, the Depository, or any other
person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give such notification. Any Shares properly withdrawn will be deemed not to have
been validly tendered for purposes of the Offer. However, withdrawn Shares may
be retendered by following the procedures described in Section 3 at any time
prior to the Expiration Date.
If the Fund is delayed in its acceptance for payment of Shares, or is unable
to accept for payment Shares tendered pursuant to the Offer, for any reason,
then, without prejudice to the Fund's rights under this Offer, the Depository
may, nevertheless, on behalf of the Fund, retain tendered Shares, and such
Shares may not be withdrawn except to the extent that tendering shareholders are
entitled to withdrawal rights as set forth in this Section 4.
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER. The
discussion below is a summary of the material United States federal income tax
consequences of a sale of Shares pursuant to the Offer. Certain shareholders
(including insurance companies, tax-exempt organizations and financial
institutions or broker-dealers) may be subject to special rules not discussed
below.
The sale of Shares pursuant to the Offer will be treated as a "sale or
exchange" if the sale (a) is "not essentially equivalent to a dividend" with
respect to the shareholder, (b) is "substantially disproportionate" with respect
to the shareholder, or (c) results in a "complete termination" of all of the
shareholder's interest in the Fund. In determining whether any of these tests is
met, Shares considered to be owned by the shareholder by reason of certain
constructive ownership rules, as well as Shares actually owned, will be taken
into account. Thus, a shareholder may be deemed to own Shares actually owned,
and in some cases constructively owned, by certain related individuals and
certain entities in which the shareholder has an interest (or which have an
interest in the shareholder) and Shares which such shareholder has the right to
acquire by exercise of an option. In addition, each shareholder should be aware
that, under certain circumstances, a sale or purchase of Shares contemporaneous
with the Offer may be taken into account in determining whether any of the tests
is satisfied.
Whether a sale will be "not essentially equivalent to a dividend" with
respect to any shareholder will depend on the shareholder's facts and
circumstances and on the response of other shareholders to the Offer, but will,
in any event, require a "meaningful reduction" in a shareholder's interest in
the Fund. The sale of Shares by a shareholder will be "substantially
disproportionate" with respect to such shareholder if after the sale (i) the
percentage of the outstanding Shares that the shareholder actually and
constructively owns is less than 80% of the percentage of the outstanding Shares
actually and constructively owned by such shareholder immediately before the
sale, and (ii) the shareholder owns less than 50% of the outstanding Shares.
Finally, if a shareholder sells all the Shares actually owned by him, such
shareholder may be eligible to waive certain constructive ownership provisions
and, thus, meet the requirements for a "complete termination" of his interest in
the Fund.
4
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If any of the above tests is satisfied, the shareholder will recognize gain
(or loss) in the amount by which the purchase price received by the shareholder
pursuant to the Offer is greater (or less) than the shareholder's tax basis in
the Shares sold. Such gain (or loss) will be capital gain (or loss) if the
Shares are held as a capital asset and will be long-term capital gain (or loss)
if the Shares have been held for more than one year. However, any such loss will
be treated as a long-term capital loss to the extent of any long-term capital
gain dividends and undistributed long-term capital gains included in income by
the shareholder with respect to such Shares, if the Shares have been held for 6
months or less. Additionally, any such loss will be disallowed to the extent the
Shares sold are replaced within the 61-day period beginning 30 days before the
Shares are sold, and the disallowed loss will be reflected in an adjustment to
the basis of the Shares acquired.
If none of the above tests is satisfied, (i) the shareholder will be treated
as having received a dividend in the amount of the cash received for the Shares
sold pursuant to the Offer, assuming that the Fund's current or accumulated
earnings and profits equal or exceed the cash paid to shareholders which is
treated as a dividend and (ii) the shareholder's tax basis in the Shares sold to
the Fund will be transferred to any remaining Shares held by the shareholder. If
the shareholder does not actually own any remaining Shares, such shareholder may
be permitted to transfer such basis to Shares owned by a related person or may
lose such basis entirely. The amount treated as a dividend will not be eligible
for the dividends-received deduction allowed to domestic corporate shareholders.
The Depository may be required to backup withhold United States federal
income tax at the rate of 31% of the gross payment made pursuant to the Offer to
shareholders who fail to provide their correct taxpayer identification number or
to make required certifications, or who have been notified by the Internal
Revenue Service that they are subject to backup withholding. Corporate
shareholders and certain other shareholders are exempt from such backup
withholding. Any amounts withheld may be credited against a shareholder's United
States federal income tax liability.
The Depository will withhold 30% of the gross payment to a shareholder that
is a nonresident alien individual, fiduciary of a foreign trust or estate,
foreign corporation or foreign partnership (a "foreign shareholder") unless the
Depository determines that a reduced rate of withholding or an exemption from
withholding is applicable pursuant to an applicable income tax treaty.
(Exemption from backup withholding does not exempt a foreign shareholder from
the 30% withholding). The Depository will determine a shareholder's status as a
foreign shareholder and eligibility for a reduced rate of, or an exemption from,
withholding, by reference to the shareholder's address and to any valid
certificates or statements concerning eligibility for a reduced rate of, or
exemption from, withholding, unless facts and circumstances indicate that such
reliance is not warranted. A foreign shareholder that has not previously
submitted the appropriate certificates or statements with respect to a reduced
rate of, or exemption from, withholding for which such shareholder may be
eligible should consider doing so in order to avoid over-withholding. A foreign
shareholder may be eligible to obtain a refund of tax withheld if such
shareholder meets one of the three tests for sale or exchange treatment
described above or is otherwise able to establish that no tax, or a reduced
amount of tax, was due.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE SALE OF SHARES
PURSUANT TO THE OFFER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL,
FOREIGN OR OTHER TAX LAWS AND ANY POSSIBLE CHANGES IN TAX LAWS.
5
<PAGE>
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are not currently publicly
traded. During the past two years the NAVs per Share as of 5:00 P.M. on the last
day of each of the Fund's fiscal quarters are as follows:
<TABLE>
<S> <C>
September 30, 1994......................................... $ 154.78
December 31, 1994.......................................... $ 129.97
March 31, 1995............................................. $ 57.82
June 30, 1995.............................................. $ 65.77
September 30, 1995......................................... $ 73.96
December 31, 1995.......................................... $ 64.14
March 31, 1996............................................. $ 40.92
June 30, 1996.............................................. $ 50.25
September 30, 1996......................................... $ 53.90
</TABLE>
The NAV per Share as of 5:00 P.M., October 4, 1996 was $55.36 per Share.
IT IS ANTICIPATED THAT NO CASH DIVIDEND WILL BE DECLARED BY THE BOARD OF
DIRECTORS WITH A RECORD DATE OCCURRING BEFORE THE EXPIRATION OF THE OFFER AND
THAT, ACCORDINGLY, HOLDERS OF SHARES PURCHASED PURSUANT TO THE OFFER WILL NOT
RECEIVE ANY SUCH DIVIDEND WITH RESPECT TO SUCH SHARES. THE AMOUNT AND FREQUENCY
OF DIVIDENDS IN THE FUTURE WILL DEPEND ON CIRCUMSTANCES EXISTING AT THAT TIME.
7. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER. The purpose of the
Offer is to fulfill the Fund's obligation pursuant to Article Eleventh. Article
Eleventh provides for so long as the Shares are not listed on a stock exchange,
the Fund must make a tender offer, on the Monday following the first Friday of
each of January, April, July and October, to purchase all of the outstanding
Shares at a price per Share equal to the NAV per Share. Pursuant to Article
Eleventh, in the event that 50% or more of the then outstanding Shares are
tendered in any one tender offer, the Fund shall not purchase any Shares in the
tender offer and the Fund's Board of Directors shall convene a shareholders'
meeting to consider a resolution to liquidate the Fund.
Any Shares acquired by the Fund pursuant to the Offer will become treasury
Shares and will be available for issuance by the Fund without further
shareholder action (except as required by applicable law or the rules of
national securities exchanges on which the Shares are listed).
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS NOR THE INVESTMENT ADVISER NOR
ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER
TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH SHAREHOLDER'S SHARES AND
NONE OF SUCH PERSONS HAS AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION.
SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN THE OFFER,
CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN DECISIONS
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE
OR PRICES.
8. SOURCE AND AMOUNT OF FUNDS. If 509,154.977 Shares were to be purchased
pursuant to the Offer, the cost to the Fund (excluding expenses) would be
approximately $28,186,819.53 based on a NAV per Share of $55.36 as of October 4,
1996. The actual cost to the Fund cannot be determined at this time because the
number of Shares to be purchased will depend on the number tendered, and the
price will be based on the NAV per Share on the Expiration Date, which may be
more or less than $55.36.
The monies to be used by the Fund to purchase Shares pursuant to the Offer
will be obtained from cash and from sales of securities in the investment
portfolios of the Fund and BIF-Fundo de Investimento-
6
<PAGE>
Capital Estrangeiro (the "Investment Fund"). The selection of which portfolio
securities to sell will be governed by principles of prudent portfolio
management, taking into account investment merit, relative liquidity and
applicable legal requirements. In accordance with its stated investment
policies, the Fund has concentrated its investments in the equity securities of
companies that are registered with the Commisao de Valores Mobiliarios, the
Brazilian Securities Commission. The Brazilian securities markets are subject to
price volatility and limited liquidity. If the Fund must sell a substantial
amount of portfolio securities to raise cash, the market prices of portfolio
securities, and hence the Fund's net asset value, can be expected to decline. If
such a decline occurs, the Fund cannot predict what its magnitude might be, or
whether such a decline would be temporary or continue to the Expiration Date.
Because the Fund's tender offer price is dependent upon NAV per Share as
determined on the Expiration Date, if such a decline continued to the Expiration
Date, the consideration received by a tendering shareholder would be reduced.
The Fund will sell portfolio securities during the pendency of the Offer to
raise cash for the purchase of Shares. Thus, during the pendency of the Offer,
and possibly for a short time thereafter, the Fund will hold a greater than
normal percentage of its net assets in cash and cash equivalents. The Fund is
required by law to pay for tendered Shares it accepts for payment promptly after
the Expiration Date of this Offer. Because the Fund will not know the number of
Shares tendered until the Expiration Date, the Fund will not know until the
Expiration Date the amount of cash required to pay for such Shares. If on or
prior to the Expiration Date the Fund does not have, or believes it is unlikely
to have, sufficient cash to pay for all Shares tendered, it may extend the Offer
to allow additional time to sell portfolio securities and raise sufficient cash.
As of October 4, 1996, the Fund had no position in cash and cash equivalents.
If the Fund purchases a substantial number of Shares pursuant to the Offer,
the net assets of the Fund would be reduced accordingly. In such case the Fund
would have a higher expense ratio and possibly less investment flexibility than
it currently has.
9. CERTAIN INFORMATION CONCERNING THE FUND. The Fund is a non-diversified,
closed-end management investment company incorporated under the laws of the
State of Maryland and registered under the Investment Company Act of 1940. Its
investment objective is long-term capital appreciation through investment
primarily in equity securities of Brazilian companies.
Exhibit A to this Offer contains the Fund's audited financial statements for
the fiscal years ended December 31, 1994 and December 31, 1995 and unaudited
financial statements for the six month period ended June 30, 1996.
The Fund is subject to the information and reporting requirements of the
Investment Company Act of 1940 and in accordance therewith is obligated to file
reports and other information with the Commission relating to its business,
financial condition and other matters. The Fund has also filed an Issuer Tender
Offer Statement on Schedule 13E-4 with the Commission. Such reports and other
information should be available for inspection at the public reference room at
the Commission's office 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C., and also should be available for inspection and copying at the following
regional offices of the Commission: Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois; 7 World Trade Center, New York, New York.
Copies may be obtained, by mail, upon payment of the Commission's customary
charges, by writing to its principal office at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549.
10. INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING THE SHARES. Neither the Fund nor any subsidiary of the
Fund nor, to the best of the Fund's knowledge, any of the Fund's executive
officers or directors or associates of any of the foregoing, has effected any
transaction in Shares during the past 40 business days.
Except as set forth in this Offer to Purchase, neither the Fund, nor, to the
best of the Fund's knowledge, any of the Fund's executive officers or directors,
or any of the executive officers or directors of any of its subsidiaries, is a
party to any contract, arrangement, understanding or relationship with any other
7
<PAGE>
person relating, directly or indirectly to the Offer with respect to any
securities of the Fund, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss or the giving or withholding
of proxies, consents or authorizations.
11. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. The Fund's investment in
Brazilian securities has been registered as foreign investment with the Central
Bank of Brazil, which has issued a Certificate of Registration for the foreign
currency value of such investment. Based on the Certificate of Registration, the
Fund's current investment in Brazilian securities may be repatriated in order to
permit the Fund to purchase Shares in the Offer. The Fund is not aware of any
approval or other action by any government or governmental, administrative or
regulatory authority or agency, domestic or foreign, that would be required for
the acquisition or ownership of Shares by the Fund as contemplated herein.
Should any such approval or other action be required, the Fund presently
contemplates that such approval or other action will be sought. The Fund is
unable to predict whether it may determine that it is required to delay the
acceptance for payment of, or payment for, Shares tendered pursuant to the Offer
pending the outcome of any such matter. There can be no assurance that any such
approval or other action, if needed, would be obtained without substantial
conditions or that the failure to obtain any such approval or other action might
not result in adverse consequences to the Fund's business. The Fund's
obligations under the Offer to accept for payment and pay for Shares are subject
to certain conditions. See Section 12.
12. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision
of the Offer except as otherwise provided in Section 1, the Fund shall not be
required to accept for payment or pay for any Shares, may postpone the
acceptance for payment of, or payment for, tendered Shares, and may, in its sole
discretion, terminate or amend the Offer as to any Shares not then paid for if
(i) more than 509,154.977 Shares are tendered and not withdrawn as of the
Expiration Date, or (ii) in the judgment of the Investment Adviser, the assets
of the Fund are not sufficiently liquid to fund the purchase of the Shares in
the Offer, or (iii) the Fund would not be able to liquidate portfolio securities
in a manner that is orderly and consistent with the Fund's investment objectives
and policies in order to purchase Shares tendered pursuant to the Offer, or (iv)
at or prior to the time of payment for any such Shares (whether or not any
Shares have therefore been accepted for payment or paid for pursuant to the
Offer), any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action,
proceeding or application before any court or governmental authority or
other regulatory or administrative agency or commission, domestic or
foreign, by any government or governmental authority or other regulatory or
administrative agency or commission, domestic or foreign, or by any other
person, domestic or foreign challenging the acquisition by the Fund of the
Shares or seeking to restrain, delay or prohibit the making of the Offer, or
the acceptance for payment, purchase of, or payment for, some or all of the
Shares or resulting in a delay in, or restricting, the ability of the Fund,
or rendering the Fund unable, to accept for payment, purchase or pay for
some or all of the Shares, or otherwise directly or indirectly relating in
any manner to or affecting the Offer; or
(b) any statute, rule, regulation or order or injunction shall be
sought, proposed, enacted, promulgated, entered, enforced or deemed or
become applicable to the Offer or any other action shall have been taken,
proposed or threatened, by any government, governmental authority or other
regulatory or administrative agency or commission or court, or any other
person, domestic or foreign, that, in the sole judgment of the Fund, might,
directly or indirectly, result in any of the consequences referred to in
paragraph (a) above; or
(c) there shall have occurred (i) any general suspension of, or
limitation on times or prices for, trading in securities on any national
securities exchange or in the over-the-counter market or in any securities
exchange in Brazil, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or Brazil,
(iii) a commencement of a war, armed
8
<PAGE>
hostilities or other international or national calamity directly or
indirectly involving the United States or Brazil, (iv) any limitation
(whether or not mandatory) by any governmental authority on, or any other
event which, in the sole judgment of the Fund, might affect, the extension
of credit by banks or other lending institutions or foreign currency
transactions by such institutions or (v) in the case of any of the foregoing
existing at the time of the commencement of the Offer, in the sole judgment
of the Fund, a material acceleration or worsening thereof; or
(d) any change (or any condition, event or development involving a
prospective change) shall have occurred or be threatened in the general
economic, financial, currency exchange or market conditions in the United
States, in Brazil or abroad that, in the sole judgment of the Fund, has or
may have a material adverse effect upon the value of the assets of the Fund;
or
(e) any other event shall have occurred or condition shall exist which
in the judgment of the Fund would have a material adverse effect on the
Fund, its assets or its shareholders or any such event will occur or such
condition shall exist if the Fund were to purchase Shares in the Offer
which in the sole judgment of the Fund with respect to each and every matter
referred to above and regardless of the circumstances (including any action or
inaction by the Fund) giving rise to any such condition, makes it inadvisable to
proceed with the Offer or with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Fund and may be
asserted by the Fund regardless of the circumstances (including any action or
inaction by the Fund) giving rise to any such conditions or may be waived by the
Fund in whole or in part at any time and from time to time in its sole
discretion. The failure by the Fund at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time. Any determination by the Fund concerning the events described in this
Section shall be final and binding on all parties.
A public announcement shall be made of a material change in, or waiver of,
such conditions, and the Offer may, in certain circumstances, be extended in
connection with any such change or waiver.
13. FEES AND EXPENSES. The Depository is not charging compensation for its
services in connection with the Offer. The Fund has agreed to indemnify the
Depository against certain liabilities and expenses in connection with the
Offer, including liabilities under the federal securities laws. Brokers,
dealers, commercial banks and trust companies will be reimbursed by the Fund for
customary mailing and handling expenses incurred by them in forwarding material
to their customers.
Chase Global Funds Services Company, which is the Depository for the Offer,
is an affiliate of The Chase Manhattan Bank, N.A. ("Chase"), which provides
administrative services to the Fund pursuant to an Administration Agreement. As
part of such agreement, the Fund has agreed to pay to Chase an annual fee of
$75,000 plus .08% of the average weekly net assets of the Fund, computed weekly
and payable monthly.
14. MISCELLANEOUS. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. The Fund may, in its sole discretion, take
such action as it may deem necessary to make the Offer in any such jurisdiction.
The Fund is not aware of any jurisdiction in which the making of the Offer
or the acceptance of Shares in connection therewith would not be in compliance
with the laws of such jurisdiction. Consequently, the Offer is currently being
made to all holders of Shares. However, the Fund reserves the right to exclude
shareholders in any jurisdiction in which it is asserted that the Offer cannot
lawfully be made. So long as the Fund makes a good faith effort to comply with
any state law deemed applicable to the Offer, the Fund believes that the
exclusion of shareholders residing in such jurisdiction is permitted under Rule
13e-4(f)(9) promulgated under the Exchange Act.
9
<PAGE>
The Fund has filed with the Commission an Issuer Tender Offer Statement on
Schedule 13E-4 pursuant to Section 13(e)(1) of the Exchange Act and Rule 13e-4
of the General Rules and Regulations under the Exchange Act, furnishing certain
additional information with respect to the Offer, and may file amendments
thereto. Such Statement and any amendments thereto, including exhibits, may be
examined and copies may be obtained from the principal office of the Commission
in Washington, D.C. in the manner set forth in Section 9.
No person has been authorized to give any information or make any
representation on behalf of the Fund not contained in this Offer to Purchase or
in the Letter of Transmittal and, if given or made, such information or
representation must not be relied upon as having been authorized.
THE BRAZILIAN INVESTMENT FUND, INC. October 7, 1996
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal, certificates for the Shares and any other required documents
should be sent by each shareholder of the Fund or his broker-dealer, commercial
bank, trust company or other nominee to the Depository as follows:
THE DEPOSITORY FOR THE OFFER IS:
Chase Global Funds Services Company
BY MAIL, OVERNIGHT COURIER OR HAND:
73 Tremont Street
Boston, MA 02108-3913
BY FACSIMILE TRANSMISSION: CONFIRM BY TELEPHONE:
(617) 557-8697 (800) 221-6726
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal may be directed to Susan DiBona at the
Depository at the following telephone number: (800) 221-6726. You may also
contact your broker, dealer, commercial bank or trust company or other nominee
for assistance concerning the Offer.
10
<PAGE>
EXHIBIT A
<PAGE>
FINANCIAL STATEMENTS
- ---------
STATEMENT OF NET ASSETS
- ---------
DECEMBER 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
BRAZILIAN INVESTMENT FUND (98.7%)
- --------------------------------------------------
- ----------
BRAZILIAN PREFERRED STOCKS (96.8%)
(Unless otherwise noted)
- ---------------------------------------------------------
- -------------
APPLIANCES & HOUSEHOLD DURABLES (9.2%)
Brasmotor 4,441,800 U.S.$ 1,799
Continental 2001 7,600,000 205
Multibras 1,274,500 1,670
Refripar 1,143,557,920 3,780
-----------
7,454
-----------
- ---------------------------------------------------------
- -------------
AUTOMOBILES (4.3%)
Iochpe Maxion 4,850,000 3,378
Marcopolo 'B' 500,000 134
-----------
3,512
-----------
- ---------------------------------------------------------
- -------------
BANKING (11.3%)
Banco Bradesco 360,509,400 3,065
Banco do Brasil 115,000,000 2,267
Banco Nacional 45,653,664 1,159
Banco Nacional (Common) 11,801,600 311
Itaubanco 8,639,000 2,417
-----------
9,219
-----------
- ---------------------------------------------------------
- -------------
BEVERAGES & TOBACCO (1.0%)
Brahma 2,385,700 785
-----------
- ---------------------------------------------------------
- -------------
CHEMICALS (2.9%)
Rhodia-Ster GDR 165,000 2,372
-----------
- ---------------------------------------------------------
- -------------
ENERGY SOURCES (9.1%)
Petrobras 58,477,320 7,387
-----------
- ---------------------------------------------------------
- -------------
FOOD & HOUSEHOLD PRODUCTS (2.5%)
Ceval Alimentos 12,000,000 177
+Dixie Lalekla 1,811,290 1,818
-----------
1,995
-----------
- ---------------------------------------------------------
- -------------
INDUSTRIAL COMPONENTS (1.0%)
SectionSectionSchulz 'B' 18,000,000 850
-----------
- ---------------------------------------------------------
- -------------
MERCHANDISING (1.6%)
+Lojas Americanas (Bonus Rights) 183,270 26
+Mesbla 6,982,050 1,253
-----------
1,279
-----------
- ---------------------------------------------------------
- -------------
METALS -- NON-FERROUS (1.5%)
Vale do Rio Doce 6,163,800 1,179
-----------
- ---------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
METALS -- STEEL (7.9%)
Cia Siderurgica Nacional
(Common) 78,800,000 U.S.$ 2,684
+Cosipa 'B' 194,000 564
Usiminas 2,361,123,300 3,206
-----------
6,454
-----------
- ---------------------------------------------------------
- -------------
RECREATION, OTHER CONSUMER GOODS (0.8%)
Manufatura Brinquedos de
Estrela 198,000,000 502
Tec Toy 175,000,000 182
-----------
684
-----------
- ---------------------------------------------------------
- -------------
TELECOMMUNICATIONS (17.8%)
Telebras 168,700,000 7,549
Telebras 'D' 6,323,895 235
Telebras (Common) 80,700,000 3,478
Telesp 22,157,978 3,152
Telesp 'P' 92,602 41
-----------
14,455
-----------
- ---------------------------------------------------------
- -------------
TEXTILES & APPAREL (4.9%)
Brasperola 'A' 1,000,000 1,346
Moinho Santista 261,000 647
SectionSectionWentex 1,670,000 1,972
-----------
3,965
-----------
- ---------------------------------------------------------
- -------------
UTILITIES -- ELECTRICAL & GAS (21.0%)
Cemig ADR 67,500 1,637
+Centrais Eletricas de Santa Catarina
'B' 1,435,000 1,355
Cia Energetica de Sao Paulo 11,930 16
Cia Energetica de Sao Paulo
(Common) 138,236 180
Cia Paulista de Forca e
Luz 7,050,000 483
+Cia Paulista de Forca e
Luz (Common) 26,120,000 2,313
Eletrobras 'B' 21,097,000 7,323
Eletrobras (Common) 9,008,000 3,180
Light (Common) 1,575,000 569
-----------
17,056
-----------
- ---------------------------------------------------------
- -------------
TOTAL BRAZILIAN PREFERRED STOCKS
(Cost U.S. $46,960) 78,646
-----------
- ---------------------------------------------------------
- -------------
PURCHASED OPTIONS (1.9%)
+Cia Paulista de Forca e
Luz call, expiring
10/16/95, strike price
BRL 70.00 18,700,000 194
+Eletrobras call,
expiring 6/19/95,
strike price BRL 30.58 11,660,000 1,322
-----------
(Cost U.S. $794) 1,516
-----------
- ---------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
AMOUNT VALUE
(000) (000)
<S> <C> <C>
- ------------------------------------------------------
- ------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (0.0%)
Brazilian Real
(Cost U.S. $28) BRL 23 U.S.$ 28
------------
- ------------------------------------------------------
- -------------
TOTAL BRAZILIAN INVESTMENT FUND
(Cost U.S. $47,782) 80,190
------------
- ------------------------------------------------------
- -------------
TOTAL INVESTMENTS (98.7%)
(Cost U.S. $47,782) 80,190
------------
- ------------------------------------------------------
- -------------
OTHER ASSETS (2.6%)
Receivable for
Investments Sold U.S.$1,954
Dividends Receivable 54
Deferred Organization
Costs 127
Other Assets 31 2,166
------------ ------------
- ------------------------------------------------------
- -------------
LIABILITIES (-1.3%)
Payable For:
Bank Overdraft (850)
Investments Purchased (90)
Investment Advisory
Fees (52)
Professional Fees (49)
Shareholder Reporting
Expenses (18)
U.S. Administrative
Fees (12)
Directors' Fees and
Expenses (10)
Brazilian
Administrative and
Custodian Fees (9)
U.S. Custodian Fees (2) (1,092)
------------ ------------
- ------------------------------------------------------
- -------------
NET ASSETS (100%)
Applicable to 625,274 issued and
outstanding U.S. $.01 par value
shares (50,000,000 shares
authorized) U.S.$ 81,264
-------------
- ------------------------------------------------------
- -------------
NET ASSET VALUE PER SHARE U.S.$ 129.97
-------------
- ------------------------------------------------------
- -------------
</TABLE>
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
+ -- Non-income producing
SectionSectionSection -- Security acquired through an initial public offering of
shares and fair valued at cost pending listing -- see Note A-1 to
financial statements
December 31, 1994 exchange rate--Brazilian Real (BRL) 0.847=U.S. $1.00
<TABLE>
<CAPTION>
AMOUNT
(000)
<S> <C> <C>
-------------------------------------------------------
------------
AT DECEMBER 31, 1994, NET ASSETS CONSISTED OF:
</TABLE>
- -----------------------------------------------------------------
<TABLE>
<S> <C> <C>
Common Stock U.S.$ 6
Capital Surplus 25,470
Accumulated Net
Investment Loss (36)
Accumulated Net
Realized Gain 23,409
Unrealized Appreciation
on Investments and
Foreign Currency 32,415
</TABLE>
- -----------------------------------------------------------------
<TABLE>
<S> <C> <C>
TOTAL NET ASSETS U.S.$ 81,264
-------------------------------------------------------
-------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
STATEMENT OF OPERATIONS (000)
<S> <C>
- ------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends................................................. U.S.$ 969
Interest.................................................. 6
Less Foreign Taxes Withheld............................... (86)
- ------------------------------------------------------------------------------
Total Income............................................ 889
- ------------------------------------------------------------------------------
EXPENSES
U.S. Investment Advisory Fees............................. 607
U.S. Administrative Fees.................................. 154
Brazilian Administrative and Custodian Fees............... 103
Brazilian Taxes........................................... 92
Amortization of Organization Costs........................ 89
Legal Fees................................................ 68
Audit Fees................................................ 49
Directors' Fees and Expenses.............................. 47
Brazilian Investment Advisory Fees........................ 39
Shareholder Reporting Expenses............................ 17
Custodian Fees............................................ 5
Other Expenses............................................ 65
- ------------------------------------------------------------------------------
Total Expenses.......................................... 1,335
- ------------------------------------------------------------------------------
Net Investment Loss................................... (446)
- ------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold................................ 24,552
Foreign Currency Transactions............................. (524)
- ------------------------------------------------------------------------------
Net Realized Gain....................................... 24,028
- ------------------------------------------------------------------------------
UNREALIZED APPRECIATION ON INVESTMENTS AND FOREIGN CURRENCY
Beginning of Year......................................... 21,508
End of Year............................................... 32,415
- ------------------------------------------------------------------------------
Change in Unrealized Appreciation....................... 10,907
- ------------------------------------------------------------------------------
Total Net Realized Gain and Change in Unrealized
Appreciation................................................. 34,935
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....... U.S.$ 34,489
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1994
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss)..................................................... U.S.$ 851 U.S.$ (446)
Net Realized Gain................................................................ 10,349 24,028
Change in Unrealized Appreciation................................................ 18,449 10,907
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations............................. 29,649 34,489
- -----------------------------------------------------------------------------------------------------------------------------
Distributions:
In Excess of Net Investment Income............................................... -- (1,122)
Net Realized Gain................................................................ (5,821) (4,148)
In Excess of Net Realized Gain................................................... (141) --
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions.............................................................. (5,962) (5,270)
- -----------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Subscription of Shares (2,355 and 4,128 shares, respectively).................... 196 445
Reinvestment of Distributions (113,719 and 50,471 shares, respectively).......... 5,991 5,220
Repurchase of Shares (335,992 and 53,929 shares, respectively)................... (24,354) (5,827)
- -----------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting From Capital Share Transactions............. (18,167) (162)
- -----------------------------------------------------------------------------------------------------------------------------
Total Increase................................................................... 5,520 29,057
Net Assets:
Beginning of Year................................................................ 46,687 52,207
- -----------------------------------------------------------------------------------------------------------------------------
End of Year (including accumulated net investment loss of
U.S. $15 and U.S. $36, respectively)............................................ U.S.$52,207 U.S.$ 81,264
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 4, 1991* TO YEAR ENDED DECEMBER 31,
DECEMBER 31, ---------------------------------------------
SELECTED PER SHARE DATA AND RATIOS: 1991 1992 1993 1994
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD............................. U.S.$ 50.00 U.S.$ 63.31 U.S.$ 55.28 U.S.$ 83.58
- ------------------------------------------------------------------------------------------------------------------------------------
Offering Costs................................................... (0.21) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss)..................................... 0.84 (0.09) 1.42 (0.71)
Net Realized and Unrealized Gain (Loss) on Investments........... 12.68 (7.94) 33.94 54.72
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations............................. 13.52 (8.03) 35.36 54.01
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions:
In Excess of Net Investment Income........................... -- -- -- (1.80)
Net Realized Gain............................................ -- -- (6.89) (6.65)
In Excess of Net Realized Gain............................... -- -- (0.17) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions.......................................... -- -- (7.06) (8.45)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Asset Value due to Shares Issued on Reinvestment
of Distributions................................................ -- -- -- 0.83
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD................................... U.S.$ 63.31 U.S.$ 55.28 U.S.$ 83.58 U.S.$129.97
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Net Asset Value (1).......................................... 26.62% (12.68)% 72.52% 68.32%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS)............................ U.S.$51,159 U.S.$46,687 U.S.$52,207 U.S.$81,264
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets.......................... 2.00%**(2) 2.27%(2) 2.22% 1.82%
Ratio of Net Investment Income (Loss) to Average Net Assets...... 3.49%** (0.07)% 1.57% (0.61)%
Portfolio Turnover Rate.......................................... 1% 36% 40% 52%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Commencement of operations
**Annualized
(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. The Fund's shares are issued in a private placement and are not
traded, therefore market value total investment return is not calculated.
(2)Reflects a voluntary expense limitation in effect during the period. As a
result of such limitation, expenses of the Fund for the periods ended
December 31, 1991 and 1992 reflect a benefit of $.10 and $.14, respectively.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
- ----------
The Brazilian Investment Fund, Inc. (the "Fund") was incorporated on
November 7, 1990, and is registered as a non-diversified, closed-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's common stock is not registered under the Securities Act of 1933. The Fund
makes its investments in Brazil through an investment fund established in
compliance with Brazilian law. The accompanying financial statements are
prepared on a consolidated basis and present the financial position and results
of operations of the investment fund and the Fund.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Fund in the preparation of its financial
statements.
1. SECURITY VALUATION: In valuing the Fund's assets, all
listed securities, including purchased options, for which market quotations
are readily available are valued at the last sales price on the valuation
date, or if there was no sale on such date, at the mean between the current
bid and asked prices. Securities which are traded over-the-counter are
valued at the average of the mean of current bid and asked prices obtained
from reputable brokers. All non-equity securities as to which market
quotations are readily available are valued at their market values.
Short-term securities which mature in 60 days or less are valued at
amortized cost. Other securities and assets for which market values are not
readily available (including investments which are subject to limitations as
to their sale or for which a ready market for the securities in the
quantities owned by the Fund does not exist) are valued at fair value as
determined in good faith by the Board of Directors (the "Board"), although
the actual calculations may be done by others.
2. TAXES: It is the Fund's intention to continue to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial
statements.
Through December 31, 1993, the Fund was subject to a Brazilian
repatriation tax with respect to remittances outside of Brazil of its
dividend and interest income net of applicable expenses. Effective January
1, 1994, this tax on dividend and interest income is being withheld at the
source.
Effective January 1, 1994, the Brazilian Government announced a 0.25%
tax on banking transaction debits (withdrawals). The tax was subsequently
repealed on January 1, 1995. This tax is included in Brazilian Taxes on the
Statement of Operations.
Capital surplus, accumulated net investment loss and accumulated
realized gain have been adjusted for permanent book-tax differences.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as custodian for the Fund takes possession of the
underlying securities, the value of which equals or exceeds the principal
amount of the repurchase transaction, including accrued interest. To the
extent that any repurchase transaction exceeds one business day, the value
of the collateral is marked-to-market on a daily basis to determine the
adequacy of the collateral. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. To the extent that proceeds from
the sale of the underlying securities are less than the repurchase price
under the agreement, the Fund may incur a loss. In the event of default or
bankruptcy by the other party to the agreement, realization and/or retention
of the collateral or proceeds may be subject to legal proceedings.
4. FOREIGN CURRENCY TRANSLATION: The books and
records of the Fund are maintained in U.S. dollars. Amounts denominated in
Brazilian currency are translated into U.S. dollars at the mean of the bid
and asked prices of such currency against U.S. dollars last quoted by a
major bank as follows:
- investments, other assets and liabilities at the prevailing rates of
exchange on the valuation date;
- investment transactions and investment income at the prevailing rates
of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rate and market values at the close of the period, the Fund does not isolate
that portion of the results of operations arising as a result of changes in
the foreign exchange rates from the fluctuations arising from changes in the
market prices of the securities held at period end. Similarly, the Fund does
not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of securities sold
during the period. Accordingly, realized and unrealized foreign currency
gains (losses) are included in the reported net realized and unrealized
gains (losses) on investment transactions and balances.
Net realized gains (losses) on foreign currency transactions represent
net foreign exchange gains
8
<PAGE>
(losses) from sales and maturities of forward currency contracts,
disposition of foreign currency and currency gains or losses realized
between the trade and settlement dates on securities transactions. Foreign
currency gains (losses) also occur due to the difference between the amount
of investment income and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent amounts actually received or paid. Net
unrealized currency gains (losses) from valuing foreign currency denominated
assets and liabilities at period end exchange rates are reflected as a
component of unrealized appreciation (depreciation).
5. FORWARD FOREIGN CURRENCY CONTRACTS: The Fund
may enter into forward foreign currency contracts to protect securities and
related receivables and payables against changes in future foreign exchange
rates. A forward currency contract is an agreement between two parties to
buy or sell currency at a set price on a future date. The market value of
the contract will fluctuate with changes in currency exchange rates. The
contract is marked-to-market daily and the change in market value is
recorded by the Fund as unrealized gain or loss. The Fund records realized
gains or losses when the contract is closed equal to the difference between
the value of the contract at the time it was opened and the value at the
time it was closed. Risk may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their
contracts and is generally limited to the amount of unrealized gain on the
contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
6. PURCHASED OPTIONS: The Fund may purchase options. In purchasing a call
(put) option, the Fund will seek to benefit from an increase (decline) in
the market price of the underlying index or security. Risks may arise in the
event of default by the counterparty or unanticipated movements in the
market price of the underlying index or security, however, the maximum
exposure to loss for any purchased option is limited to the premium
initially paid for the option. Realized gains or losses on purchased options
are included with net gain (loss) on securities sold in the financial
statements.
7. OTHER: Security transactions are accounted for on
the date the securities are purchased or sold. Realized gains and losses on
the sale of investment securities are determined on the specific identified
cost basis. Interest income is recognized on the accrual basis. Dividend
income and distributions to shareholders are recorded on the ex-date. Income
distributions and capital gain distributions are determined in accordance
with U.S. Federal income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions and deferral of
post-October losses.
B. Morgan Stanley Asset Management Inc. (the "U.S. Adviser") provides
investment advisory services to the Fund under the terms of an Investment
Advisory Agreement (the "Agreement"). Under the Agreement, the U.S. Adviser is
paid a fee computed weekly and payable monthly at an annual rate of .90% of the
Fund's first $50 million of average weekly net assets, .70% of the Fund's next
$50 million of average weekly net assets and .50% of the Fund's average weekly
net assets in excess of $100 million.
C. For the period January 1, 1994 to June 14, 1994, Unibanco Consulatoria de
Investmentos S/C Ltda. (the "Brazilian Adviser") provided investment advice,
research and assistance on behalf of the Fund to Morgan Stanley Asset Management
Inc. under terms of a contract. Under the contract, the Brazilian Adviser was
paid a fee computed weekly and paid monthly at an annual rate of .15% of the
Fund's first $50 million of average weekly net assets, .125% of the Fund's next
$50 million of average weekly net assets and .10% of the Fund's average weekly
net assets in excess of $100 million. On June 14, 1994, the contract expired and
was not renewed. The Brazilian Adviser is a subsidiary of Unibanco-Uniao de
Bancos Brasileiros S.A., a Brazilian bank and the Fund's Brazilian Administrator
and Custodian.
During the period from January 1, 1994 to June 6, 1994, the Fund made
purchases and sales of $8,746,000 and $8,929,000, respectively, of UBB Financial
Fund, which is sponsored by Unibanco-Uniao de Bancos Brasileiros S.A. (the
"Brazilian Administrator and Custodian"), an affiliate of the Brazilian Adviser.
During the same period, the Fund earned income of $487,000 from UBB Financial
Fund which was offset by foreign currency losses of $571,000. The net loss of
$84,000 is included in net realized loss on foreign currency transactions.
D. The United States Trust Company of New York ("U.S. Trust"), through its
wholly owned subsidiary Mutual Funds Service Company, provides administrative
and shareholder services to the Fund under an Administration Agreement. Under
the Administration Agreement, U.S. Trust is paid a fee computed weekly and
payable monthly at an annual rate of .08% of the Fund's average weekly net
assets, plus $75,000 per annum. Effective May 15, 1994,
9
<PAGE>
U.S. Trust replaced Morgan Guaranty Trust Company of New York as custodian for
the Fund's assets held in the United States.
E. The Brazilian Administrator and Custodian provides Brazilian administrative
and custodian services to the Fund under the terms of an agreement. Under the
agreement, the Brazilian Administrator and Custodian is paid a fee computed
weekly and paid monthly at an annual rate of .15% of the Fund's first $50
million of average weekly net assets, .125% of the Fund's next $50 million of
average weekly net assets and .10% of the Fund's average weekly net assets in
excess of $100 million.
During the period from January 1, 1994 to June 14, 1994, the Fund incurred
$5,000 in brokerage commission fees to Unibanco Corretora de Valores Mobiliarios
S.A., a subsidiary of the Brazilian Administrator and Custodian.
F. During the year ended December 31, 1994, the Fund made purchases and sales
totaling $37,250,000 and $43,938,000, respectively, of investment securities
other than U.S. Government securities and short term investments. At December
31, 1994, the U.S. Federal income tax cost basis of securities was the same as
that for financial reporting purposes and accordingly, net unrealized
appreciation for U.S. Federal income tax purposes was $32,408,000, of which
$33,332,000 related to appreciated securities and $924,000 related to
depreciated securities. For the year ended December 31, 1994, the Fund expects
to defer, to January 1, 1995 for U.S. Federal income tax purposes, post-October
currency losses of $36,000.
G. In connection with its organization the Fund incurred $445,000 of
organization costs which are being amortized on a straight-line basis over a
five year period beginning June 4, 1991, the date the Fund commenced operations.
H. At December 31, 1994, 98.7% of the Fund's net assets consist of securities
denominated in Brazilian currency. Changes in currency exchange rates will
affect the value of and investment income from such securities. Brazilian
securities are subject to greater price volatility, limited capitalization and
liquidity, and higher rates of inflation than securities of companies based in
the United States.
I. The Fund's Articles of Incorporation provide that, commencing January 6,
1992 and on each calendar quarter thereafter, the Fund will make a tender offer
to repurchase its outstanding shares of Common Stock at a price equal to the net
asset value per share at the time of repurchase.
During the year ended December 31, 1994, the Fund repurchased the following
shares:
<TABLE>
<CAPTION>
U.S.
DATE SHARES (000)
- --------- --------- ---------
<S> <C> <C>
2/4/94 45,452 $ 5,017
4/30/94 7,501 $ 678
8/1/94 242 $ 26
11/7/94 734 $ 106
</TABLE>
On February 13, 1995 the Fund repurchased 312,637 shares totaling
$24,964,000.
J. Shareholders of the Fund may purchase shares of common stock from the Fund
at a price equal to the net asset value at the beginning of the month. Purchases
are not allowed during each month the Fund makes a tender offer to repurchase
its outstanding shares. During the year ended December 31, 1994, the Fund issued
4,128 shares totaling $445,000.
K. During December 1994, the Board declared a distribution of $34.88 per share,
derived from net realized gains, payable on January 10, 1995, to shareholders of
record on December 30, 1994.
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION: (UNAUDITED)
For the year ended December 31, 1994, the Fund designates $15,921,000 as
long-term capital gain.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------
To the Shareholders and Board of Directors of
The Brazilian Investment Fund, Inc.
In our opinion, the accompanying statement of net assets 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
Brazilian Investment Fund, Inc. (the "Fund") at December 31, 1994, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the financial highlights for
each of the three years in the period then ended and for the period June 4, 1991
(commencement of operations) through December 31, 1991, 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, 1994 by
correspondence with the custodians and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 17, 1995
11
<PAGE>
The Brazilian Investment Fund, Inc.
Investment Summary as of December 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION
TOTAL RETURN (%)
--------------------------------------------------
NET ASSET VALUE (2) INDEX (1)(3)**
----------------------- -------------------------
AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL
----------------------- -------------------------
<S> <C> <C> <C> <C>
ONE YEAR -26.61% -26.61% -20.24% -20.24%
SINCE INCEPTION* 135.61 20.59 180.44 25.20
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
A BAR CHART REFLECTING THE DATA BELOW IS REFLECTED HERE.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31:
1991* 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value Per Share $ 63.31 $ 55.28 $ 83.58 $ 129.97 $ 64.14
Income Dividends - - - $ 1.80 -
Capital Gains Distributions - - $ 7.06 $ 6.65 $ 37.73
Fund Total Return (2) 26.62% (12.68%) 72.52% 68.32% (26.61%)
Index Total Return (1)(3)
** 3.48% 0.32% 99.45% 69.83% (20.24%)
</TABLE>
(1) Assumes dividends and distributions, if any, were reinvested.
(2) 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. The Fund's shares are issued in a private placement and not
traded; therefore, market value total investment return is not calculated.
(3) IFC Total Return Index for Brazil
* The Fund commenced operations on June 4, 1991.
** Unaudited.
4
<PAGE>
The Brazilian Investment Fund, Inc.
Portfolio Summary as of December 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equity Securities 99.0%
Short-Term Investments 1.0%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Telecommunications 24.9%
Utilities - Electrical &
Gas 20.0%
Beverages & Tobacco 13.9%
Banking 12.1%
Merchandising 7.7%
Metals -- Non-Ferrous 4.0%
Energy Sources 3.9%
Textiles & Apparel 2.3%
Machinery & Engineering 2.1%
Industrial Components 2.0%
Other 7.1%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
------------
<C> <S> <C>
1. Telebras 17.4%
2. Brahma 14.0
3. Eletrobras (Common) 8.6
4. Lojas Renner 4.8
5. Banco Bradesco 4.6
<CAPTION>
PERCENT OF
NET ASSETS
------------
<C> <S> <C>
6. CVRD 4.0%
7. Petrobras 4.0
8. Banco do Brasil 3.7
9. Telebras ADR 3.5
10. Banco Itau 3.1
---
67.7%
---
---
</TABLE>
5
<PAGE>
FINANCIAL STATEMENTS
- ---------
STATEMENT OF NET ASSETS
- ---------
DECEMBER 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
BRAZILIAN INVESTMENT FUND (97.4%)
- --------------------------------------------------
- ----------
BRAZILIAN NON-VOTING PREFERRED STOCKS (96.4%)
(Unless otherwise noted)
- ----------------------------------------------------------
- -------------
APPLIANCES & HOUSEHOLD DURABLES (0.4%)
Refripar 43,520,927 U.S.$ 87
Refripar (Common) 23,893,000 42
------------
129
------------
- ----------------------------------------------------------
- -------------
BANKING (12.1%)
Banco Bradesco 187,301,708 1,638
+***Banco Bradesco (Rights) 8,660,218 14
+Banco do Brasil 117,642,000 1,332
Banco Itau 4,032,500 1,124
**Banco Nacional 112,483,664 232
------------
4,340
------------
- ----------------------------------------------------------
- -------------
BEVERAGES & TOBACCO (13.9%)
Brahma 12,187,489 5,016
------------
- ----------------------------------------------------------
- -------------
ENERGY SOURCES (3.9%)
Petrobras 16,640,000 1,421
------------
- ----------------------------------------------------------
- -------------
FOOD & HOUSEHOLD PRODUCTS (1.3%)
+Dixie Toga 461,291 403
+Dixie Toga (Receipts) 55,167 48
------------
451
------------
- ----------------------------------------------------------
- -------------
INDUSTRIAL COMPONENTS (2.0%)
Schulz 24,570,000 721
------------
- ----------------------------------------------------------
- -------------
MACHINERY & ENGINEERING (2.1%)
WEG 1,822,000 750
------------
- ----------------------------------------------------------
- -------------
MERCHANDISING (7.7%)
#+Cia Brasileira ADR 76,450 765
Lojas Americanas 183,270 26
+Lojas Arapua ADR 30,140 256
Lojas Renner 64,370,000 1,722
------------
2,769
------------
- ----------------------------------------------------------
- -------------
METALS -- NON-FERROUS (4.0%)
CVRD 8,700,000 1,432
------------
- ----------------------------------------------------------
- -------------
METALS -- STEEL (1.8%)
Usiminas 776,700,000 631
------------
- ----------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
TELECOMMUNICATIONS (24.9%)
Telebras 130,044,895 U.S.$ 6,262
Telebras ADR 26,200 1,241
Telebras (Common) 28,453,000 1,101
Telesp 1,245,601 183
Telesp (Common) 1,200,500 174
------------
8,961
------------
- ----------------------------------------------------------
- -------------
TEXTILES & APPAREL (2.3%)
Coteminas 1,200,000 401
+Wentex 318,000 439
------------
840
------------
- ----------------------------------------------------------
- -------------
UTILITIES--ELECTRICAL & GAS (20.0%)
Cemig 46,400,000 1,027
#Cemig ADR 18,357 406
+CESP 90 --
CPFL 22,591,000 604
Eletrobras ADR 15,250 206
Eletrobras 'B' 2,940,000 796
Eletrobras (Common) 11,372,000 3,077
Light (Common) 3,420,000 1,094
------------
7,210
------------
- ----------------------------------------------------------
- -------------
TOTAL BRAZILIAN NON-VOTING PREFERRED
STOCKS
(Cost U.S. $36,931) 34,671
------------
- ----------------------------------------------------------
- -------------
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (1.0%)
Brazilian Real (Cost U.S.
$344) BRL 334 344
------------
- ----------------------------------------------------------
- -------------
TOTAL BRAZILIAN INVESTMENT FUND
(Cost U.S. $37,275) 35,015
------------
- ----------------------------------------------------------
- -------------
TOTAL INVESTMENTS (97.4%)
(Cost U.S. $37,275) 35,015
------------
- ----------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AMOUNT
(000) (000)
- ---------------------------------------------------------
<S> <C> <C>
- ------------
OTHER ASSETS (5.3%)
Cash U.S.$ 65
Receivable for Investments
Sold 1,642
Dividends Receivable 145
Deferred Organization Costs 38
Other Assets 7 U.S.$ 1,897
------------- ------------
- ----------------------------------------------------------
- -------------
LIABILITIES (-2.7%)
Payable for:
Investments Purchased (865)
Professional Fees (39)
Investment Advisory Fees (21)
Shareholder Reporting
Expenses (13)
Administrative and
Transfer Agent Fees (9)
Directors' Fees and
Expenses (6)
Brazilian Administrative
and Custodian Fees (4)
U.S. Custodian Fees (1) (958)
------------- ------------
- ----------------------------------------------------------
- -------------
NET ASSETS (100%)
Applicable to 560,593
issued and outstanding
U.S. $0.01 par value
shares (50,000,000 shares
authorized) U.S.$35,954
-------------
- ----------------------------------------------------------
- -------------
NET ASSET VALUE PER SHARE U.S.$ 64.14
-------------
- ----------------------------------------------------------
- -------------
</TABLE>
+ -- Non-income producing
** -- Security valued at fair value -- see Note A-1 to financial statements.
*** -- Security valued at fair value as determined based on the market value of
the underlying security less subscription costs.
# -- 144A security -- certain conditions for public sale may exist.
ADR -- American Depositary Receipt.
December 31, 1995 exchange rate--Brazilian Real (BRL) 0.9719 = U.S. $1.00
<TABLE>
<CAPTION>
AMOUNT
(000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
AT DECEMBER 31, 1995, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------
Common Stock U.S.$ 6
Capital Surplus 20,804
Accumulated Net Realized
Gain 17,409
Unrealized Depreciation on
Investments and Foreign
Currency Translations (2,265)
- ------------------------------------------------------------
TOTAL NET ASSETS U.S.$35,954
-------------
</TABLE>
- -----------------------------------------------------------------
- -------------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
STATEMENT OF OPERATIONS (000)
<S> <C>
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends............................................... U.S.$ 909
Interest................................................ 25
Less: Foreign Taxes Withheld............................ (129)
- -------------------------------------------------------------------------------
Total Income.......................................... 805
- -------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees................................ 375
U.S. Administrative and Transfer Agent Fees............. 118
Amortization of Organization Costs...................... 89
Brazilian Administrative and Custodian Fees............. 63
Audit Fees.............................................. 56
Directors' Fees and Expenses............................ 31
Shareholder Reporting Expenses.......................... 31
Legal Fees.............................................. 22
Custodian Fees.......................................... 2
Other Expenses.......................................... 78
- -------------------------------------------------------------------------------
Total Expenses........................................ 865
- -------------------------------------------------------------------------------
Net Investment Loss................................. (60)
- -------------------------------------------------------------------------------
NET REALIZED GAIN
Investment Securities Sold.............................. 17,408
Foreign Currency Transactions........................... 32
- -------------------------------------------------------------------------------
Net Realized Gain................................... 17,440
- -------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investments............................................. (34,668)
Foreign Currency Translations........................... (12)
- -------------------------------------------------------------------------------
Change in Unrealized Appreciation (Depreciation).... (34,680)
- -------------------------------------------------------------------------------
Total Net Realized Gain and Change in Unrealized
Appreciation (Depreciation)................................ (17,240)
- -------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.... U.S.$(17,300)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1995
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
<S> <C> <C>
- -----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Loss........................... U.S.$ (446) U.S.$ (60)
Net Realized Gain............................. 24,028 17,440
Change in Unrealized Appreciation
(Depreciation)............................... 10,907 (34,680)
- -----------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations.................... 34,489 (17,300)
- -----------------------------------------------------------------------------------------
Distributions:
In Excess of Net Investment Income............ (1,122) --
Net Realized Gain............................. (4,148) (23,408)
- -----------------------------------------------------------------------------------------
Total Distributions........................... (5,270) (23,408)
- -----------------------------------------------------------------------------------------
Capital Share Transactions:
Subscription of Shares (4,128 and 25,702
shares, respectively)........................ 445 1,853
Reinvestment of Distributions (50,471 and
286,103 shares, respectively)................ 5,220 23,041
Repurchase of Shares (53,929 and 376,486
shares, respectively)........................ (5,827) (29,496)
- -----------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting From
Capital Share Transactions................... (162) (4,602)
- -----------------------------------------------------------------------------------------
Total Increase (Decrease)..................... 29,057 (45,310)
Net Assets:
Beginning of Year............................. 52,207 81,264
- -----------------------------------------------------------------------------------------
End of Year (including accumulated net
investment loss of U.S. $36 and U.S. $0,
respectively................................. U.S.$81,264 U.S.$ 35,954
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PERIOD FROM
JUNE 4, 1991* TO YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS: 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.... U.S.$ 50.00 U.S.$ 63.31 U.S.$ 55.28 U.S.$ 83.58 U.S.$129.97
- ---------------------------------------------------------------------------------------------------------------------------
Offering Costs.......................... (0.21) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss)............ 0.84 (0.09) 1.42 (0.71) (0.11)
Net Realized and Unrealized Gain (Loss)
on Investments......................... 12.68 (7.94) 33.94 55.55 (27.99)
- ---------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations.... 13.52 (8.03) 35.36 54.84 (28.10)
- ---------------------------------------------------------------------------------------------------------------------------
Distributions:
In Excess of Net Investment
Income............................. -- -- -- (1.80) --
Net Realized Gain................... -- -- (6.89) (6.65) (37.73)
In Excess of Net Realized Gain...... -- -- (0.17) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions................. -- -- (7.06) (8.45) (37.73)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.......... U.S.$ 63.31 U.S.$ 55.28 U.S.$ 83.58 U.S.$129.97 U.S.$ 64.14
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Net Asset Value (1)................. 26.62% (12.68)% 72.52% 68.32% (26.61)%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS)... U.S.$51,159 U.S.$46,687 U.S.$52,207 U.S.$81,264 U.S.$35,954
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets................................. 2.00%**(2) 2.27%(2) 2.22% 1.82% 2.07%
Ratio of Net Investment Income (Loss) to
Average Net Assets..................... 3.49%** (0.07)% 1.57% (0.61)% (0.14)%
Portfolio Turnover Rate................. 1% 36% 40% 52% 112%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Commencement of operations.
**Annualized.
(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. The Fund's shares are issued in a private placement and are not
traded; therefore, market value total investment return is not calculated.
Total return for the periods ended December 31, 1991 and 1992 would have been
lower were it not for voluntary expense limits.
(2)Reflects a voluntary expense limitation in effect during the period. As a
result of such limitation, expenses of the Fund for the periods ended
December 31, 1991 and 1992 reflect a benefit of U.S.$0.10 and U.S.$0.14,
respectively.
Note: Current period permanent book-tax differences, if any, are not included
in the calculation of net investment income (loss) per share.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
- ----------
The Brazilian Investment Fund, Inc. (the "Fund") was incorporated on
November 7, 1990, and is registered as a non-diversified, closed-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's common stock is not registered under the Securities Act of 1933. The
Fund's investment objective is long-term capital appreciation through
investments primarily in equity securities. The Fund makes its investments in
Brazil through an investment fund established in compliance with Brazilian law.
The accompanying financial statements are prepared on a consolidated basis and
present the financial position and results of operations of the investment fund
and the Fund.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: In valuing the Fund's assets, all
listed securities, including purchased options, for which market quotations
are readily available are valued at the last sales price on the valuation
date, or if there was no sale on such date, at the mean between the current
bid and asked prices. Securities which are traded over-the-counter are
valued at the average of the mean of current bid and asked prices obtained
from reputable brokers. All non-equity securities as to which market
quotations are readily available are valued at their market values.
Short-term securities which mature in 60 days or less are valued at
amortized cost. Other securities and assets for which market values are not
readily available (including investments which are subject to limitations as
to their sale or for which a ready market for the securities in the
quantities owned by the Fund does not exist) are valued at fair value as
determined in good faith by the Board of Directors (the "Board"), although
the actual calculations may be done by others.
2. TAXES: It is the Fund's intention to continue to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial
statements.
Accumulated undistributed net investment income and accumulated realized
gain have been adjusted for current and prior period permanent book-tax
differences. Current period adjustments arose principally from differing
book-tax treatments for foreign currency transactions and net operating
losses.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as custodian for the Fund takes possession of the
underlying securities, the value of which equals or exceeds the principal
amount of the repurchase transaction, including accrued interest. To the
extent that any repurchase transaction exceeds one business day, the value
of the collateral is marked-to-market on a daily basis to determine the
adequacy of the collateral. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. To the extent that proceeds from
the sale of the underlying securities are less than the repurchase price
under the agreement, the Fund may incur a loss. In the event of default or
bankruptcy by the other party to the agreement, realization and/or retention
of the collateral or proceeds may be subject to legal proceedings.
4. FOREIGN CURRENCY TRANSLATION: The books and
records of the Fund are maintained in U.S. dollars. Amounts denominated in
Brazilian currency are translated into U.S. dollars at the mean of the bid
and asked prices of such currency against U.S. dollars last quoted by a
major bank as follows:
- investments, other assets and liabilities at the prevailing rates of
exchange on the valuation date;
- investment transactions and investment income at the prevailing rates
of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rate and market values at the close of the period, the Fund does not isolate
that portion of the results of operations arising as a result of changes in
the foreign exchange rates from the fluctuations arising from changes in the
market prices of the securities held at period end. Similarly, the Fund does
not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of securities sold
during the period. Accordingly, realized and unrealized foreign currency
gains (losses) are included in the reported net realized and unrealized
gains (losses) on investment transactions and balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses)
10
<PAGE>
from sales and maturities of forward foreign currency contracts, disposition
of foreign currency and currency gains or losses realized between the trade
and settlement dates on securities transactions. Foreign currency gains
(losses) also occur due to the difference between the amount of investment
income and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent amounts actually received or paid. Net unrealized
currency gains (losses) from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of
unrealized appreciation (depreciation) in the Statement of Net Assets. The
change in net unrealized currency gains (losses) for the period is reflected
in the Statement of Operations.
5. FORWARD FOREIGN CURRENCY CONTRACTS: The Fund
may enter into forward foreign currency contracts to protect securities and
related receivables and payables against changes in future foreign exchange
rates. A forward foreign currency contract is an agreement between two
parties to buy or sell currency at a set price on a future date. The market
value of the contract will fluctuate with changes in currency exchange
rates. The contract is marked-to-market daily and the change in market value
is recorded by the Fund as unrealized gain or loss. The Fund records
realized gains or losses when the contract is closed equal to the difference
between the value of the contract at the time it was opened and the value at
the time it was closed. Risk may arise upon entering into these contracts
from the potential inability of counterparties to meet the terms of their
contracts and is generally limited to the amount of unrealized gain on the
contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
6. PURCHASED OPTIONS: The Fund may purchase options. In purchasing a call
(put) option, the Fund will seek to benefit from an increase (decline) in
the market price of the underlying index or security. Risks may arise in the
event of default by the counterparty or unanticipated movements in the
market price of the underlying index or security, however, the maximum
exposure to loss for any purchased option is limited to the premium
initially paid for the option. Realized gains or losses on purchased options
are included with net gain (loss) on securities sold in the financial
statements.
7. OTHER: Security transactions are accounted for on
the date the securities are purchased or sold. Realized gains and losses on
the sale of investment securities are determined on the specific identified
cost basis. Interest income is recognized on the accrual basis. Dividend
income is recorded on the ex-dividend date (except certain dividends which
may be recorded as soon as the Fund is informed of such dividend) net of
applicable withholding taxes where recovery of such taxes is not reasonably
assured. Distributions to shareholders are recorded on the ex-date. Income
distributions and capital gain distributions are determined in accordance
with U.S. Federal income tax regulations which may differ from generally
accepted accounting principles. These differences are principally due to the
timing of the recognition of losses on securities and due to permanent
differences described in note A-2.
B. Morgan Stanley Asset Management Inc. (the "U.S. Adviser") provides
investment advisory services to the Fund under the terms of an Investment
Advisory Agreement (the "Agreement"). Under the Agreement, the U.S. Adviser is
paid a fee computed weekly and payable monthly at an annual rate of .90% of the
Fund's first $50 million of average weekly net assets, .70% of the Fund's next
$50 million of average weekly net assets and .50% of the Fund's average weekly
net assets in excess of $100 million.
C. Effective September 1, 1995, The Chase Manhattan Bank, N.A., through its
affiliate Chase Global Funds Services Company (the "Administrator"), (formerly
Mutual Funds Service Company, a wholly owned subsidiary of the United States
Trust Company of New York), provides administrative and shareholder services to
the Fund under an Administration Agreement. Under the Administration Agreement,
the Administrator is paid a fee computed weekly and payable monthly at an annual
rate of .08% of the Fund's average weekly net assets, plus $75,000 per annum. In
addition, the Fund is charged certain out of pocket expenses by the
Administrator. Effective September 1, 1995, The Chase Manhattan Bank, N.A. acts
as custodian for the Fund's assets held in the United States. Prior to September
1, 1995, Mutual Funds Service Company and United States Trust Company of New
York provided administrative and custodian services, respectively, to the Fund
under the same terms, conditions and fees as stated above.
D. Unibanco - Uniao de Bancos Brasileiras S.A. ("the Brazilian Administrator
and Custodian") provides Brazilian administrative and custodian services to the
Fund under the terms of an agreement. Under the agreement, the Brazilian
Administrator and Custodian is paid a fee computed weekly and paid monthly at an
annual rate of .15% of the Fund's first $50 million of average weekly net
11
<PAGE>
assets, .125% of the Fund's next $50 million of average weekly net assets and
.10% of the Fund's average weekly net assets in excess of $100 million.
E. During the year ended December 31, 1995, the Fund made purchases and sales
totaling $48,108,000 and $77,135,000, respectively, of investment securities
other than long-term U.S. Government securities and short term investments.
There were no purchases and sales of long-term U.S. Government securities. At
December 31, 1995, the U.S. Federal income tax cost basis of securities was
$37,106,000 and accordingly, net unrealized depreciation for U.S. Federal income
tax purposes was $2,435,000, of which $2,412,000, related to appreciated
securities and $4,847,000 related to depreciated securities.
F. In connection with its organization the Fund incurred $445,000 of
organization costs which are being amortized on a straight-line basis over a
five year period beginning June 4, 1991, the date the Fund commenced operations.
G. At December 31, 1995, a significant portion of the Fund's net assets consist
of securities denominated in Brazilian currency. Changes in currency exchange
rates will affect the value of and investment income from such securities.
Brazilian securities are subject to greater price volatility, limited
capitalization and liquidity, and higher rates of inflation than securities of
companies based in the United States. In addition, Brazilian securities may be
subject to substantial governmental involvement in the economy and greater
social, economic and political uncertainty.
H. The Fund's Articles of Incorporation provide that, commencing January 6,
1992 and on each calendar quarter thereafter, the Fund will make a tender offer
to repurchase its outstanding shares of Common Stock at a price equal to the net
asset value per share at the time of repurchase.
During the year ended December 31, 1995, the Fund repurchased the following
shares:
<TABLE>
<CAPTION>
U.S.
DATE SHARES (000)
- --------- --------- ---------
<S> <C> <C>
2/6/95 312,637 $ 24,964
5/5/95 41,019 $ 2,975
8/4/95 2,544 $ 180
11/6/95 20,286 $ 1,377
</TABLE>
On February 5, 1996, the Fund repurchased 15,131 shares totaling $653,000.
I. Shareholders of the Fund may purchase shares of Common Stock from the Fund
at a price equal to the net asset value at the beginning of the month. Purchases
are not allowed during each month the Fund makes a tender offer to repurchase
its outstanding shares. During the year ended December 31, 1995, the Fund issued
25,702 shares totaling $1,853,000.
J. Each Director of the Fund who is not an officer of the Fund or an affiliated
person as defined under the Investment Company Act of 1940, as amended, may
elect to participate in the Directors' Deferred Compensation Plan (the "Plan").
Under the Plan, such Directors may elect to defer payment of a percentage of
their total fees earned as a Director of the Fund. These deferred portions are
treated, based on an election by the Director, as if they were either invested
in the Fund's shares or invested in U.S. Treasury Bills, as defined under the
Plan. At December 31, 1995, none of the Directors elected to participate in the
Plan.
K. During December 1995, the Board declared a distribution of $29.97 per share,
derived from net realized gains, payable on January 9, 1996, to shareholders of
record on December 29, 1995.
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED):
For the year ended December 31, 1995, the Fund designates $17,954,000 as
long-term capital gain dividend.
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------
To the Shareholders and Board of Directors of
The Brazilian Investment Fund, Inc.
In our opinion, the accompanying statement of net assets 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 Brazilian Investment Fund, Inc. (the "Fund") at December 31, 1995, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for each of the four years in the period then ended and for the period June 4,
1991 (commencement of operations) through December 31, 1991, 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, 1995 by
correspondence with the custodians and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 9, 1996
13
<PAGE>
FINANCIAL STATEMENTS
- ---------
STATEMENT OF NET ASSETS (UNAUDITED)
- ---------
JUNE 30, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -------------------------------------------------------
- ------------
BRAZILIAN INVESTMENT FUND (90.2%)
- -------------------------------------------------------
- ------------
BRAZILIAN NON-VOTING PREFERRED STOCKS (86.3%)
(Unless otherwise noted)
- -------------------------------------------------------
- -------------
APPLIANCES & HOUSEHOLD DURABLES (4.7%)
+Casa Anglo Brasileira 44,498,195 U.S.$2,438
-----------
- -------------------------------------------------------
- -------------
BANKING (9.0%)
Banco Bradesco 285,753,062 2,334
+**Banco Bradesco (Rights) 8,660,222 71
Banco Itau 5,378,500 2,186
**Banco Nacional 112,483,664 5
-----------
4,596
-----------
- -------------------------------------------------------
- -------------
BEVERAGES (4.2%)
Brahma 3,616,489 2,158
-----------
- -------------------------------------------------------
- -------------
ELECTRICAL & ELECTRONICS
(0.9%)
Ericsson Telecom 31,900,000 478
-----------
- -------------------------------------------------------
- -------------
ENERGY SOURCES (4.6%)
Petrobras 19,176,000 2,359
-----------
- -------------------------------------------------------
- -------------
FOOD & HOUSEHOLD PRODUCTS (3.1%)
#Pao de Acucar GDR 77,515 1,284
Dixie Toga 297,458 287
-----------
1,571
-----------
- -------------------------------------------------------
- -------------
INDUSTRIAL COMPONENTS (0.5%)
Schulz 15,018,000 262
-----------
- -------------------------------------------------------
- -------------
MACHINERY & ENGINEERING
(0.4%)
WEG 467,000 222
-----------
- -------------------------------------------------------
- -------------
MERCHANDISING (18.9%)
**Lojas Americanas 183,270 26
Lojas Renner 183,169,000 9,670
-----------
9,696
-----------
- -------------------------------------------------------
- -------------
METALS -- NON-FERROUS (0.9%)
CVRD 23 --
CVRD ADR 22,600 455
-----------
455
-----------
- -------------------------------------------------------
- -------------
TELECOMMUNICATIONS (27.8%)
Telebras 167,099,895 11,668
Telebras ADR 8,450 589
Telebras (Common) 29,153,000 1,713
Telesp 245,601 53
+Telesp (Common) 1,200,473 212
-----------
14,235
-----------
- -------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -------------------------------------------------------
- -------------
TEXTILES & APPAREL (1.9%)
Coteminas 1,200,000 U.S.$ 473
+Wentex 188,000 476
-----------
949
-----------
- -------------------------------------------------------
- -------------
UTILITIES -- ELECTRICAL & GAS
(9.4%)
Cemig 39,289,000 1,045
Cemig ADR 16,600 471
+#Cemig ADR 3,357 90
+CESP 90 --
+CPFL 27,888,000 1,833
+Electricdade de Sao Paulo
(Common) 2,742,000 287
Eletrobras 'B' 4,118,000 1,107
Eletrobras ADR 250 4
-----------
4,837
-----------
- -------------------------------------------------------
- -------------
TOTAL BRAZILIAN NON-VOTING
PREFERRED STOCKS
(Cost U.S. $35,803) 44,256
-----------
- -------------------------------------------------------
- -------------
<CAPTION>
AMOUNT
(000)
<S> <C> <C>
- -------------------------------------------------------
- ------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (3.9%)
Brazilian Real (Cost U.S.
$1,983) BRL 1,990 1,982
-----------
- -------------------------------------------------------
- -------------
TOTAL BRAZILIAN INVESTMENT FUND
(Cost U.S. $37,786) 46,238
-----------
- -------------------------------------------------------
- -------------
TOTAL INVESTMENTS (90.2%)
(Cost U.S. $37,786) 46,238
-----------
- -------------------------------------------------------
- -------------
OTHER ASSETS (11.7%)
Cash U.S.$ 44
Receivable for Investment
Sold 5,678
Dividends Receivable 260
Other Assets 13 5,995
----------- -----------
- -------------------------------------------------------
- -------------
LIABILITIES (-1.9%)
Payable for:
Investments Purchased (833)
Investment Advisory Fees (34)
Professional Fees (23)
Shareholder Reporting
Expenses (20)
Directors' Fees and
Expenses (14)
Administrative and
Transfer Agent Fees (10)
Brazilian Administrative
and Custodian Fees (5)
U.S. Custodian Fees (1)
Other Liabilities (24) (964 )
----------- -----------
- -------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
(000)
- -------------------------------------------------------
- ------------
<S> <C> <C>
NET ASSETS (100%)
Applicable to 1,020,310,
issued and outstanding
U.S. $0.01 par value
shares (50,000,000 shares
authorized) U.S.$51,269
-------------
- -------------------------------------------------------
- -------------
NET ASSET VALUE PER SHARE U.S.$ 50.25
-------------
- -------------------------------------------------------
- -------------
AT JUNE 30, 1996, NET ASSETS CONSISTED OF:
- -------------------------------------------------------
Common Stock U.S.$ 10
Capital Surplus 38,732
Undistributed Net Investment Income 671
Accumulated Net Realized
Gain 3,408
Unrealized Appreciation on
Investments and Foreign
Currency Translations 8,448
- -------------------------------------------------------
TOTAL NET ASSETS U.S.$51,269
-------------
</TABLE>
- ---------------------------------------------
- ---------
+ -- Non-income producing.
** -- Security valued at fair value -- see note A-1 to financial statements.
# -- 144A Security -- certain conditions for public sale may exist.
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
June 30, 1996 exchange rate--Brazilian Real (BRL) 1.00395 = U.S. $1.00
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
<S> <C>
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends............................................... U.S.$1,249
Interest................................................ 4
Less: Foreign Taxes Withheld............................ (115)
- -------------------------------------------------------------------------------
Total Income.......................................... 1,138
- -------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees................................ 192
U.S. Administrative Fees and Transfer Agent Fees........ 60
Amortization of Organization Costs...................... 38
Brazilian Administrative and Custodian Fees............. 31
Audit Fees.............................................. 24
Directors' Fees and Expenses............................ 19
Legal Fees.............................................. 16
Shareholder Reporting Expenses.......................... 13
Custodian Fees.......................................... 2
Other Expenses.......................................... 51
- -------------------------------------------------------------------------------
Total Expenses........................................ 446
- -------------------------------------------------------------------------------
Net Investment Income............................... 692
- -------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold.............................. 3,590
Foreign Currency Transactions........................... (8)
- -------------------------------------------------------------------------------
Net Realized Gain................................... 3,582
- -------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments............................. 10,713
Depreciation on Foreign Currency Translations........... --
- -------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation...... 10,713
- -------------------------------------------------------------------------------
Total Net Realized Gain and Change in Unrealized
Appreciation/Depreciation.................................. 14,295
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... U.S.$14,987
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
<S> <C> <C>
- -----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss).................. U.S.$ 692 U.S.$ (60)
Net Realized Gain............................. 3,582 17,440
Change in Unrealized Appreciation/Depreciation 10,713 (34,680)
- -----------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations.................... 14,987 (17,300)
- -----------------------------------------------------------------------------------------
Distributions:
Net Investment Income......................... (21) --
Net Realized Gain............................. (17,583) (23,408)
- -----------------------------------------------------------------------------------------
Total Distributions........................... (17,604) (23,408)
- -----------------------------------------------------------------------------------------
Capital Share Transactions:
Subscription of Shares (35,440 and 25,702
shares, respectively)........................ 1,525 1,853
Reinvestment of Distributions (446,448 and
286,103 shares, respectively)................ 17,360 23,041
Repurchase of Shares (22,171 and 376,486
shares, respectively)........................ (953) (29,496)
- -----------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting From Capital Share Transactions.... 17,932 (4,602)
- -----------------------------------------------------------------------------------------
Total Increase (Decrease)..................... 15,315 (45,310)
Net Assets:
Beginning of Period........................... 35,954 81,264
- -----------------------------------------------------------------------------------------
End of Period (including undistributed net
investment income of U.S. $671 and U.S. $0,
respectively.)............................... U.S.$51,269 U.S.$ 35,954
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PERIOD FROM
SIX MONTHS JUNE 4, 1991*
ENDED YEAR ENDED DECEMBER 31, TO
SELECTED PER SHARE DATA AND JUNE 30, 1996 ------------------------------------------------------------- DECEMBER 31,
RATIOS: (UNAUDITED) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD....................... U.S.$ 64.14 U.S.$ 129.97 U.S.$ 83.58 U.S.$ 55.28 U.S.$ 63.31 U.S.$ 50.00
- -----------------------------------------------------------------------------------------------------------------------------
Offering Costs................ -- -- -- -- -- (0.21)
- -----------------------------------------------------------------------------------------------------------------------------
Net Investment Income
(Loss)....................... 0.68 (0.11) (0.71) 1.42 (0.09) 0.84
Net Realized and Unrealized
Gain (Loss) on Investments... 16.20 (27.99) 55.55 33.94 (7.94) 12.68
- -----------------------------------------------------------------------------------------------------------------------------
Total from Investment
Operations.............. 16.88 (28.10) 54.84 35.36 (8.03) 13.52
- -----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income..... (0.02) -- -- -- -- --
In Excess of Net
Investment Income....... -- -- (1.80) -- -- --
Net Realized Gain......... (30.75) (37.73) (6.65) (6.89) -- --
In Excess of Net Realized
Gain.................... -- -- -- (0.17) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions....... (30.77) (37.73) (8.45) (7.06) -- --
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD....................... U.S.$ 50.25 U.S.$ 64.14 U.S.$ 129.97 U.S.$ 83.58 U.S.$ 55.28 U.S.$ 63.31
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Net Asset Value (1)....... 41.58% (26.61)% 68.32% 72.52% (12.68)% 26.62%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(THOUSANDS).................. U.S.$ 51,269 U.S.$ 35,954 U.S.$ 81,264 U.S.$ 52,207 U.S.$ 46,687 U.S.$ 51,159
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average
Net Assets................... 2.07%** 2.07% 1.82% 2.22% 2.27%(2) 2.00%**(2)
Ratio of Net Investment Income
(Loss) to Average Net
Assets....................... 3.22%** (0.14)% (0.61)% 1.57% (0.07)% 3.49%**
Portfolio Turnover Rate....... 93% 112% 52% 40% 36% 1%
Average Commission Rate (3)... U.S.$ 0.0000 N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Commencement of Operations.
**Annualized.
(1)Total investment return based on net asset value per share 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. The Fund's shares are issued in a private placement and are not
traded, therefore market value total investment return is not calculated.
(2)Reflects a voluntary expense limitation in effect during the period. As a
result of such limitation, expenses of the Fund for the periods ended
December 31, 1991 and 1992 reflect a benefit of U.S. $0.10 and U.S. $0.14,
respectively.
(3)Beginning with fiscal year 1996, the Fund is required to disclose the average
commission rate per share it paid for portfolio trades on which commissions
were charged during the period.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 (UNAUDITED)
- ----------
The Brazilian Investment Fund, Inc. (the "Fund") was incorporated on
November 7, 1990, and is registered as a non-diversified, closed-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's common stock is not registered under the Securities Act of 1933. The
Fund's investment objective is long-term capital appreciation through
investments primarily in equity securities. The Fund makes its investments in
Brazil through an investment fund established in compliance with Brazilian law.
The accompanying financial statements are prepared on a consolidated basis and
present the financial position and results of operations of the investment fund
and the Fund.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: In valuing the Fund's assets, all listed securities,
including purchased options, for which market quotations are readily
available are valued at the last sales price on the valuation date, or if
there was no sale on such date, at the mean between the current bid and
asked prices. Securities which are traded over-the-counter are valued at the
average of the mean of current bid and asked prices obtained from reputable
brokers. Short-term securities which mature in 60 days or less are valued at
amortized cost. Other securities and assets for which market values are not
readily available (including investments which are subject to limitations as
to their sale or for which a ready market for the securities in the
quantities owned by the Fund does not exist) are valued at fair value as
determined in good faith by the Board of Directors (the "Board"), although
the actual calculations may be done by others.
2. TAXES: It is the Fund's intention to continue to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial
statements.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as custodian for the Fund takes possession of the
underlying securities, with a market value at least equal to the amount of
the repurchase transaction, including principal and accrued interest. To the
extent that any repurchase transaction exceeds one business day, the value
of the collateral is marked-to-market on a daily basis to determine the
adequacy of the collateral. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the counter-party to the agreement, realization and/or
retention of the collateral or proceeds may be subject to legal proceedings.
4. FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are
maintained in U.S. dollars. Amounts denominated in Brazilian currency are
translated into U.S. dollars at the mean of the bid and asked prices of such
currency against U.S. dollars last quoted by a major bank as follows:
- investments, other assets and liabilities at the prevailing rates of
exchange on the valuation date;
- investment transactions and investment income at the prevailing rates
of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rate and market values at the close of the period, the Fund does not isolate
that portion of the results of operations arising as a result of changes in
the foreign exchange rates from the fluctuations arising from changes in the
market prices of the securities held at period end. Similarly, the Fund does
not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of securities sold
during the period. Accordingly, realized and unrealized foreign currency
gains (losses) are included in the reported net realized and unrealized
gains (losses) on investment transactions and balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from sales and maturities of forward foreign
currency exchange contracts, disposition of foreign currency and currency
gains or losses realized between the trade and settlement dates on
securities transactions. Foreign currency gains (losses) also occur due to
the difference between the amount of investment income and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized currency gains
(losses) from valuing foreign currency denominated assets and liabilities at
period end exchange
10
<PAGE>
rates are reflected as a component of unrealized appreciation (depreciation)
in the Statement of Net Assets. The change in net unrealized currency gains
(losses) for the period is reflected in the Statement of Operations.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into
forward foreign currency exchange contracts to attempt to protect securities
and related receivables and payables against changes in future foreign
exchange rates. A forward foreign currency exchange contract is an agreement
between two parties to buy or sell currency at a set price on a future date.
The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is marked-to-market daily and the change in
market value is recorded by the Fund as unrealized gain or loss. The Fund
records realized gains or losses when the contract is closed, equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. Risk may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms
of their contracts and is generally limited to the amount of unrealized gain
on the contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
6. PURCHASED OPTIONS: The Fund may purchase call and put options on indices or
securities. The Fund may purchase call options to protect against an
increase in the price of the underlying index or security. The Fund may
purchase put options on indices or securities to protect against a decline
in the value of the underlying index or security. Possible losses from
purchased options cannot exceed the total amount invested. Realized gains or
losses on purchased options are included with net gain (loss) on securities
sold in the financial statements.
7. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Interest
income is recognized on the accrual basis. Dividend income is recorded on
the ex-dividend date (except certain dividends which may be recorded as soon
as the Fund is informed of such dividend) net of applicable withholding
taxes where recovery of such taxes is not reasonably assured. Distributions
to shareholders are recorded on the ex-date.
The amount and character of income and capital gain distributions to be paid
are determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing book and tax treatments for foreign currency
transactions, net operating losses and of the timing of the recognition of
losses on securities.
Permanent book and tax basis differences relating to shareholder
distributions may result in reclassifications to undistributed net
investment income (loss), accumulated net realized gain (loss) and capital
surplus.
Adjustments for permanent book-tax differences, if any, are not reflected in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. Morgan Stanley Asset Management Inc. (the "Adviser") provides investment
advisory services to the Fund under the terms of an Investment Advisory
Agreement (the "Agreement"). Under the Agreement, the Adviser is paid a fee
computed weekly and payable monthly at an annual rate of .90% of the Fund's
first $50 million of average weekly net assets, .70% of the Fund's next $50
million of average weekly net assets and .50% of the Fund's average weekly net
assets in excess of $100 million.
C. The Chase Manhattan Bank, through its affiliate Chase Global Funds Services
Company (the "U.S. Administrator"), provides administrative and shareholder
services to the Fund under an Administration Agreement. Under the Administration
Agreement, the U.S. Administrator is paid a fee computed weekly and payable
monthly at an annual rate of .08% of the Fund's average weekly net assets, plus
$75,000 per annum. In addition, the Fund is charged certain out-of-pocket
expenses by the U.S. Administrator. The Chase Manhattan Bank, acts as custodian
for the Fund's assets held in the United States.
D. Unibanco - Uniao de Bancos Brasileiras S.A. ("the Brazilian Administrator
and Custodian") provides Brazilian administrative and custodian services to the
Fund under the terms of an agreement. Under the agreement, the Brazilian
Administrator and Custodian is paid a fee computed weekly and payable monthly at
an annual rate of .15% of the Fund's first $50 million of average weekly net
assets, .125% of the Fund's next $50 million of average weekly net assets and
.10% of the Fund's average weekly net assets in excess of $100 million.
E. During the six months ended June 30, 1996, the Fund made purchases and sales
totaling $38,360,000 and $43,077,000, respectively, of investment securities
other than long-term U.S. Government securities and short term investments.
There were no purchases and sales of long-term U.S. Government securities. At
June 30, 1996,
11
<PAGE>
the U.S. Federal income tax cost basis of securities was $35,803,000 and
accordingly, net unrealized appreciation for U.S. Federal income tax purposes
was $8,453,000, of which $11,159,000 related to appreciated securities and
$2,706,000 related to depreciated securities.
F. In connection with its organization, the Fund incurred $445,000 of
organization costs which are being amortized on a straight-line basis over a
five year period beginning June 4, 1991, the date the Fund commenced operations.
G. A significant portion of the Fund's net assets consist of securities
denominated in Brazilian currency. Changes in currency exchange rates will
affect the value of and investment income from such securities. Brazilian
securities are subject to greater price volatility, limited capitalization and
liquidity, and higher rates of inflation than securities of companies based in
the United States. In addition, Brazilian securities may be subject to
substantial governmental involvement in the economy and greater social, economic
and political uncertainty.
H. The Fund's Articles of Incorporation provide that, commencing January 6,
1992 and on each calendar quarter thereafter, the Fund will make a tender offer
to repurchase its outstanding shares of Common Stock at a price equal to the net
asset value per share at the time of repurchase.
During the six months ended June 30, 1996, the Fund repurchased the
following shares:
<TABLE>
<CAPTION>
U.S.
DATE SHARES (000)
- --------- --------- ---------
<S> <C> <C>
2/5/96 15,131 $ 653
5/6/96 7,040 $ 300
</TABLE>
On August 5, 1996, the Fund repurchased 2,000 shares totaling $104,000.
I. Shareholders of the Fund may purchase shares of Common Stock from the Fund
at a price equal to the net asset value at the beginning of the month. Purchases
are not allowed during each month the Fund makes a tender offer to repurchase
its outstanding shares. During the six months ended June 30, 1996, the Fund
issued 35,440 shares totaling $1,525,000.
J. Each Director of the Fund who is not an officer of the Fund or an affiliated
person as defined under the Investment Company Act of 1940, as amended, may
elect to participate in the Directors' Deferred Compensation Plan (the "Plan").
Under the Plan, such Directors may elect to defer payment of a percentage of
their total fees earned as a Director of the Fund. These deferred portions are
treated, based on an election by the Director, as if they were either invested
in the Fund's shares or invested in U.S. Treasury Bills, as defined under the
Plan. The deferred fees payable, under the Plan, at June 30, 1996 totaled $3,000
and are included in Payable for Directors' Fees and Expenses on the Statement of
Net Assets.
12
<PAGE>
EXHIBIT (a)(2)
<PAGE>
LETTER OF TRANSMITTAL
TO ACCOMPANY SHARES OF COMMON STOCK
OR ORDER TENDER OF UNCERTIFICATED SHARES OF
THE BRAZILIAN INVESTMENT FUND, INC.
TENDERED PURSUANT TO THE OFFER TO PURCHASE
DATED OCTOBER 7, 1996
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME,
ON NOVEMBER 5, 1996, UNLESS THE OFFER IS EXTENDED.
TO: CHASE GLOBAL FUNDS SERVICES COMPANY, DEPOSITORY
BY HAND, OVERNIGHT COURIER OR MAIL:
73 Tremont Street
Boston, MA 02108
<TABLE>
<S> <C>
BY FACSIMILE: FOR CONFIRMATION OF RECEIPT:
(617) 557-8697 (800) 221-6726
</TABLE>
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4.)
- ---------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S)
(PLEASE FILL IN EXACTLY AS APPEAR(S) ON
CERTIFICATE(S)OR SHARE(S) TENDERED
SHARE REGISTER.) (ATTACH SIGNED LIST IF NECESSARY.)
- ----------------------------------------------------------------------------------------------------
NUMBER
OF SHARES
REPRESENTED BY NUMBER OF
NUMBER OF CERTIFICATE(S) SHARES
SHARES AND CERTIFICATE NOT REPRESENTED
TENDERED* NUMBER(S) BY CERTIFICATES
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
TOTAL SHARES
TENDERED
- ----------------------------------------------------------------------------------------------------
* IF YOU DESIRE TO TENDER FEWER THAN ALL SHARES EVIDENCED BY ANY CERTIFICATES LISTED ABOVE, PLEASE
INDICATE IN THIS COLUMN THE NUMBER OF SHARES YOU WISH TO TENDER. OTHERWISE, ALL SHARES EVIDENCED
BY SUCH CERTIFICATES WILL BE DEEMED TO HAVE BEEN TENDERED. SEE INSTRUCTION 4.
- ----------------------------------------------------------------------------------------------------
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE SHOWN ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THOSE LISTED
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
This Letter of Transmittal is to be used only (a) if certificates for Shares
(as defined below) are to be forwarded with it or (b) if a tender of
uncertificated Shares registered on the share register maintained by the
Depository is to be made through notification hereby to the Depository.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to The Brazilian Investment Fund, Inc., a
Maryland corporation (the "Fund"), the above-described shares of the Fund's
Common Stock, $.01 par value per share (the "Shares"), at a price per Share, net
to the seller in cash, equal to the net asset value in U.S. dollars ("NAV") per
Share as of 5:00 P.M., New York City time on the Expiration Date, as herein
defined, (the "Purchase Price") upon the terms and subject to the conditions set
forth in the Fund's Offer to Purchase, dated October 7, 1996 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which together with the Offer to Purchase constitute the "Offer").
The term "Expiration Date" means 12:00 midnight, New York City time, on November
5, 1996, unless and until the Fund, in its sole discretion, shall have extended
the period for which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date on which the Offer, as so extended by
the Fund, shall expire.
Subject to and effective upon acceptance for payment of the Shares tendered
hereby in accordance with the terms of the Offer (including, if the Offer is
extended or amended, the terms or conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Fund all right, title and interest in and to all Shares tendered
hereby and hereby irrevocably constitutes and appoints the Depository as
attorney-in-fact of the undersigned with respect to such Shares, with full power
of substitution (such power of attorney being an irrevocable power coupled with
an interest), to:
a. deliver certificates for such Shares, or transfer ownership of such
Shares on the share register of the Fund maintained by the Depository,
together in either such case with all accompanying evidences of transfer and
authenticity, to or upon the order of the Fund, upon receipt by the
Depository, as the undersigned's agent, of the Purchase Price with respect
to such Shares;
b. present certificates for such Shares for cancellation and transfer
on the Fund's books; and
c. receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares all in accordance with the terms of the Offer.
The undersigned here represents and warrants that:
(a) the undersigned "owns" the Shares tendered hereby within the meaning
of Rule 10b-4 promulgated under the Securities Exchange Act of 1934, as
amended, and has full power and authority to validly tender, sell, assign
and transfer the Shares tendered hereby;
(b) when and to the extent that the Fund accepts for purchase the Shares
tendered hereby, the Fund will acquire good, marketable and unencumbered
title to such Shares, free and clear of all security interests, liens,
charges, encumbrances, conditional sales agreements or other obligations
relating to their sale or transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any additional
documents the Depository or the Fund deems necessary or desirable to
complete the assignment, transfer and purchase of the Shares tendered
hereby; and
(d) the undersigned has read and agrees to all of the terms of the
Offer.
The names and addresses of the registered owners should be printed, if they
are not already printed above, as they appear on the certificates representing
Shares tendered hereby. The number of Shares that the undersigned wishes to
tender and the certificates, if any, that are being tendered should be indicated
in the appropriate boxes.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, the Fund may terminate or amend the Offer or may not be
required to purchase the Shares tendered hereby. The undersigned understands
that certificate(s) for any Shares not tendered or not purchased will be
returned to the undersigned at the address indicated above.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, the Fund may terminate or amend the Offer or may not be
required to purchase any of the Share tendered hereby. The undersigned
understands that certificate(s) for any shares not tendered or not purchased
will be returned to the undersigned at the address indicated above.
<PAGE>
The undersigned understands that acceptance of Shares by the Fund for
payment will constitute a binding agreement between the undersigned and the Fund
upon the terms and subject to the conditions of the Offer.
A check for the Purchase Price for tendered Shares that are purchased will
be issued to the order of the undersigned and mailed to the address indicated
above in the case of Shares represented by certificates or to the address
contained in the share register of the Fund in the case of uncertificated
Shares.
All authority conferred or agreed to be conferred in this letter of
Transmittal shall survive the death or incapacity of the undersigned, and any
obligations of the undersigned under this Letter of Transmittal shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
SHAREHOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 1 AND 5.)
PLEASE COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN.
Must be signed by registered owner(s) exactly as name(s) appear(s) on
certificate(s) or on the share register of the Fund or by person(s) authorized
to become registered owner(s) by certificate(s) and documents transmitted with
this Letter of Transmittal. If signature is by attorney-in-fact, executor,
administrator, trustee, guardian, officer of a corporation or another acting in
a fiduciary or representative capacity, please set forth the full title. See
Instruction 5.
...............................................................................
(Signature(s) of Owner(s))
Dated: ................................................................. , 1996
Name(s): ......................................................................
...............................................................................
(Please Print)
...............................................................................
Area Code and Telephone Number: ................................................
...............................................................................
(Tax Identification or Social Security Number(s))
...............................................................................
...............................................................................
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5.)
Authorized Signature: .........................................................
Name: .........................................................................
(Please Print)
Title: ........................................................................
Name of Firm: .................................................................
Address: ......................................................................
.......................................................................
(Include Zip Code)
Area Code and Telephone Number: ...............................................
Dated: ................................................................. , 1996
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required if
(a) this Letter of Transmittal is signed by the registered owner of the
Shares (which term, for purposes of this document, shall include any nominee
(for a beneficial owner)) and certificates representing the tendered Shares
are delivered with this Letter of Transmittal;
(b) such Shares are tendered for the account of a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc. or a commercial bank or trust
company having an office, branch or agency in the United States (each being
referred to as an "Eligible Institution").
In all other cases, including if Shares are tendered for which certificates
have not been issued, an Eligible Institution must guarantee all signatures on
this Letter of Transmittal. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; LOST
CERTIFICATES. This Letter of Transmittal is to be used only if certificates are
delivered with it to the Depository or if tenders are to be made through
notification hereby to the Depository to tender uncertificated Shares registered
on the share register of the Fund maintained by the Depository. Certificates for
all physically tendered Shares, a properly completed and duly executed Letter of
Transmittal or duly executed photocopy of it, and any other documents required
by this Letter of Transmittal, should be mailed or delivered to the Depository
at the appropriate address set forth herein and must be delivered to the
Depository on or before the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
The Fund will not accept any alternative, conditional or contingent tenders,
nor will it purchase any fractional Shares. All tendering shareholders, by
execution of this Letter of Transmittal (or a photocopy of it), waive any right
to receive any notice of the acceptance of their tender.
Any shareholder wishing to tender Shares for which the certificate(s) have
been lost, stolen or mutilated should contact Susan DiBona of the Depository at
(800) 221-6726.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Shares Tendered" is inadequate, the certificate numbers and/or
the number of Shares should be listed on a separate signed schedule and attached
to this Letter of Transmittal.
4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to shareholders
who tender uncertificated Shares.) If fewer than all of the Shares evidenced by
any certificate are to be tendered, fill in the number of Shares which are to be
tendered in the column entitled "Number of Shares Tendered." In such case, if
tendered Shares are purchased, a new certificate for the remainder of the Shares
evidenced by the old certificate(s) will be issued and sent to the registered
owner(s). All Shares represented by the certificate(s) listed and delivered to
the Depository are deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered owner(s)
of the Shares tendered hereby, the signature(s) must correspond exactly with
the name(s) as written on the face of the certificate(s), if any, or on the
share register maintained by the Depository without any change whatsoever.
(b) If the Shares are registered in the names of two or more joint
owners, each such owner must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or photocopies of it) as there are
different registrations of certificates.
(d) When this Letter of Transmittal is signed by the registered owner(s)
of the Shares listed and transmitted hereby, no endorsements of
certificate(s) representing such Shares or separate stock powers are
required. If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, signed exactly as the
name(s) of the registered owner(s) appear on the certificate(s), and the
signature(s) on such certificate(s) or stock power(s) must be guaranteed by
an Eligible Institution. See Instruction 1.
<PAGE>
(e) If this Letter of Transmittal or any certificates or stock powers
are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing and
must submit proper evidence satisfactory to the Fund of their authority so
to act.
6. STOCK TRANSFER TAXES. Except as provided in this Instruction, no stock
transfer tax stamps or funds to cover such stamps need accompany this Letter of
Transmittal. The Fund will pay or cause to be paid any stock transfer taxes
payable on the transfer to it of Shares purchased pursuant to the Offer. If,
however tendered certificates are registered in the name(s) of any person(s)
other than the person(s) signing this Letter of Transmittal, the Depository will
deduct from the Purchase Price the amount of any stock transfer taxes (whether
imposed on the registered owner or such other person) payable on account of the
transfer to such person unless satisfactory evidence of the payment of such
taxes, or an exemption from them, is submitted.
7. IRREGULARITIES. All questions as to the number of Shares to be
accepted, the price to be paid therefor and the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Fund in its sole discretion, which determination shall
be final and binding on all parties. The Fund reserves the absolute right to
reject any or all tenders of Shares it determines not to be in proper form or
the acceptance of which or payment for which may, in the opinion of the Fund's
counsel, be unlawful. The Fund also reserves the absolute right to waive any of
the conditions of the Offer and any defect or irregularity in the tender of any
particular Shares. No tender of Shares will be deemed to be made properly until
all defects and irregularities have been cured or waived. Neither the Fund, the
Depository nor any other person is or will be obligated to give notice of any
defects or irregularities in tenders, and none of them will incur any liability
for failure to give any such notice.
8. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Depository at the address and
telephone number set forth in the Offer to Purchase. Requests for additional
copies of the Offer to Purchase and this Letter of Transmittal may be directed
to the Depository or to brokers, dealers, commercial banks or trust companies.
9. SUBSTITUTE FORM W-9. Each tendering shareholder who does not otherwise
establish an exemption from backup federal income tax withholding is required to
provide the Depository with a correct taxpayer identification number ("TIN") on
the Substitute Form W-9 which is provided, and to indicate that the shareholder
is not subject to backup withholding by checking the box in Part 2 of the form.
Failure to provide the information on the form or to check the box in Part 2 of
the form may subject the tendering shareholder to 31% federal income tax
withholding on the payments made to the shareholder or other payee with respect
to Shares purchased pursuant to the Offer. The box in Part 3 of the form may be
checked if the tendering shareholder has not been issued a TIN and has applied
for a TIN or intends to apply for a TIN in the near future. If the box in Part 3
is checked and the Depository is not provided with a TIN within sixty (60) days,
the Depository will withhold 31% on all such payments thereafter until a TIN is
provided to the Depository.
10. WITHHOLDING ON FOREIGN SHAREHOLDERS. The Depository will withhold
federal income taxes equal to 30% of the gross payments payable to a foreign
shareholder unless the Depository determines that a reduced rate of withholding
or an exemption from withholding is applicable. (Exemption from backup
withholding does not exempt a foreign shareholder from the 30% withholding.) For
this purpose, a foreign shareholder is any shareholder that is not (i) a citizen
or resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof or (iii) an estate or trust the income of which is
subject to United States federal income taxation regardless of the source of
such income. The Depository will determine a shareholder's status as a foreign
shareholder and eligibility for a reduced rate of, or an exemption from,
withholding by reference to the shareholder's address and to any outstanding
certificates or statements concerning eligibility for a reduced rate of, or
exemption from, withholding unless facts and circumstances indicate that
reliance is not warranted. A foreign shareholder who has not previously
submitted the appropriate certificates or statements with respect to a reduced
rate of, or exemption from, withholding for which such shareholder may be
eligible should consider doing so in order to avoid over-withholding. A foreign
shareholder may be eligible to obtain a refund of tax withheld if such
shareholder meets one of the exceptions for capital gain or loss treatment
described in Section 5 of the Offer to Purchase or is otherwise able to
establish that no tax or a reduced amount of tax was due.
IMPORTANT: This Letter of Transmittal or a manually signed photocopy of it
(together with certificate(s) for Shares or confirmation of book-entry
transfer and all other required documents) must be received by the Depository
on or before the Expiration Date.
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required by law to provide the Depository with such
shareholder's correct TIN (E.G., social security number or employer
identification number) on Substitute Form W-9 below. If the Depository is not
provided with the correct TIN, the Internal Revenue Service may subject the
shareholder or other payee to a $50 penalty. In addition, payments that are made
to such shareholder or other payee with respect to Shares purchased pursuant to
the Offer may be subject to backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the shareholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depository. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depository is required to withhold 31% of
any such payments made to the shareholder or other payee. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made to a shareholder or other
payee with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depository of the shareholder's correct TIN by completing
the form below, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such shareholder is awaiting a TIN) and that:
(a) the shareholder has not been notified by the Internal Revenue
Service that the shareholder is subject to backup withholding as a result of
failure to report all interest or dividends; or
(b) the Internal Revenue Service has notified the shareholder that the
shareholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITORY
The shareholder is required to give the Depository the TIN of the record
owner of the Shares. If the Shares are in more than one name or are not in the
name of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
<PAGE>
PAYER'S NAME: CHASE GLOBAL FUNDS SERVICES COMPANY
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Social security number or
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN IN Employer identification
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY number
SIGNING AND DATING BELOW -------------------------------
----------------------------------------------------------------------
Part 2--Check the box if you are NOT subject to backup withholding
DEPARTMENT OF THE under the provisions of Section 3406(a)(1)(C) of the Internal Revenue
TREASURY, Code because (1) you have not been notified that you are subject to
INTERNAL REVENUE SERVICE backup withholding as a result of failure to report all interest or
Payer's Request for dividends or (2) the Internal Revenue Service has notified you that
Taxpayer
Identification Number you are no longer subject to backup withholding / /
(TIN)
----------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM Part 3--
IS TRUE, CORRECT AND COMPLETE
SIGNATURE DATE Awaiting TIN / /
- --------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECK BOX IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number.
_____________________ ____________________________________
Signature Date
<PAGE>
EXHIBIT (a)(3)
<PAGE>
THE BRAZILIAN INVESTMENT FUND, INC.
OFFER TO PURCHASE FOR CASH UP TO 509,154.977 SHARES OF ITS
COMMON STOCK AT NET ASSET VALUE PER SHARE
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We are enclosing the material listed below relating to an offer by The
Brazilian Investment Fund, Inc. (the "Fund") to purchase up to 509,154.977
shares of its Common Stock, par value $.01 per share (the "Shares"), for cash at
a price per Share, net to the seller, equal to the net asset value in U.S.
dollars per Share determined as of 5:00 P.M. New York City time on November 5,
1996 or such later date to which the Offer is extended, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated October 7,
1996 and in the related Letter of Transmittal (which together constitute the
"Offer").
The following documents are enclosed:
(1) Offer to Purchase dated October 7, 1996;
(2) Letter of Transmittal to be used to tender all Shares;
(3) Guidelines for Certification of Taxpayer Identification Number; and
(4) Letter to Clients, which should be sent to your clients for whose
account you hold Shares registered in your name (or in the name of your
nominee) with space provided for obtaining such clients' instructions with
regard to the Offer.
We have provided you with a sufficient number of copies of each of the above
documents for each of the beneficial owners for whom you hold Shares to receive
a copy. Please forward a copy of each of these documents to each beneficial
owner.
PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT
EASTERN TIME ON NOVEMBER 5, 1996, UNLESS THE OFFER IS EXTENDED.
No fees or commissions will be payable to brokers, dealers or other persons
for soliciting tenders of Shares pursuant to the Offer. The Fund will pay all
transfer taxes on its purchase of Shares, subject to Instruction 6 of the Letter
of Transmittal. Backup tax withholding at a 31% rate may be required unless an
exemption is provided or unless the required tax identification information is
or has previously been provided. Certain withholdings may also apply with
respect to payments to foreign Shareholders. See Instructions 9 and 10 to the
Letter of Transmittal.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) Shareholders residing in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. To the extent that the securities laws of any jurisdiction would
require the Offer to be made by a licensed broker dealer, the Offer shall be
deemed to be made on the Fund's behalf by one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
Any question you have with respect to the Offer should be directed to the
Depository at (800) 221-6726.
Very truly yours,
THE BRAZILIAN INVESTMENT FUND, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF EITHER THE FUND OR THE DEPOSITORY OR AUTHORIZE
YOU OR ANY OTHER PERSON (A) TO MAKE ANY STATEMENTS WITH RESPECT TO THE OFFER,
OTHER THAN THE STATEMENTS SPECIFICALLY SET FORTH IN THE OFFER TO PURCHASE AND
THE LETTER OF TRANSMITTAL, OR (B) TO DISTRIBUTE ANY MATERIAL WITH RESPECT TO THE
OFFER OTHER THAN AS SPECIFICALLY AUTHORIZED HEREIN.
<PAGE>
EXHIBIT (a)(4)
<PAGE>
THE BRAZILIAN INVESTMENT FUND, INC.
OFFER TO PURCHASE FOR CASH UP TO 509,154.977 SHARES OF ITS COMMON
STOCK AT NET ASSET VALUE PER SHARE
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated October 7,
1996, of The Brazilian Investment Fund, Inc. (the "Fund") and the related Letter
of Transmittal pursuant to which the Fund is offering to purchase up to
509,154.977 shares of its Common Stock, par value $.01 per share (the "Shares"),
for cash at a price per Share, net to the seller, equal to the net asset value
in U.S. dollars ("NAV") per Share determined as of 5:00 P.M. New York City time
on November 5, 1996, or such later date to which the Offer is extended, upon the
terms and subject to the conditions set forth in the Offer to Purchase and in
the related Letter of Transmittal (which together constitute the "Offer"). The
Offer is being made pursuant of Article Eleventh of the Fund's Articles of
Incorporation ("Article Eleventh"), which requires the Fund, for so long as the
Fund's Common Stock is not listed on a stock exchange, to make periodic offers
to purchase all Shares of its Common Stock. If more than 509,154.977 Shares are
tendered, the Fund will not purchase any Shares in the Offer and, pursuant to
Article Eleventh, the Board of Directors of the Fund shall convene a
shareholders meeting to consider a plan of liquidation of the Fund. Information
regarding this obligation as well as information regarding possible future
offers by the Fund, is set forth in the Offer to Purchase. The Offer to
Purchase and the Letter of Transmittal are being forwarded to you as the
beneficial owner of Shares held by us for your account but not registered in
your name. We are sending you the Letter of Transmittal for your information
only; you cannot use it to tender Shares we hold for your account. A tender of
such Shares can be made only by us as the holder of record and only pursuant to
your instructions.
Your attention is called to the following:
1. The purchase price is the NAV determined as of 5:00 P.M. New York
City time on November 5, 1996, unless the Offer is extended.
2. The Offer is conditioned on no more than 509,154.977 Shares being
tendered and not withdrawn as of the time the offer expires. The Fund is
not required to accept for payment, purchase or pay for any Shares
tendered, and the Fund may terminate or amend the Offer or may postpone the
acceptance for payment of, payment for or purchase of any Shares, as
described in the Offer to Purchase.
3. The Offer and withdrawal rights expire at 12:00 midnight Eastern
Time on November 5, 1996, unless extended.
4. Tendering Shareholders will not be obligated to pay brokerage
commissions or, subject to Instruction 6 of the Letter of Transmittal,
transfer taxes on the purchase of Shares by the Fund pursuant to the Offer;
however, a broker, dealer or other person may charge a fee for processing
the transactions on behalf of Shareholders.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form on the
reverse side hereof. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME
TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION OF
THE OFFER. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT EASTERN TIME
ON NOVEMBER 5, 1996, UNLESS THE OFFER IS EXTENDED.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) owners of Shares in any jurisdiction in which the Offer or its
acceptance would violate the laws of such jurisdiction. To the extent that the
securities laws of any jurisdiction would require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on the Fund's
behalf by one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
<PAGE>
INSTRUCTIONS REGARDING THE OFFER BY
THE BRAZILIAN INVESTMENT FUND, INC.
TO PURCHASE FOR CASH UP TO 509,154.977 SHARES OF ITS COMMON STOCK
AT NET ASSET VALUE PER SHARE
THIS FORM IS NOT TO BE USED TO TENDER SHARES DIRECTLY TO THE DEPOSITORY.
IT SHOULD BE SENT TO YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR
OTHER NOMINEE ONLY IF SUCH FIRM IS THE HOLDER OF RECORD OF YOUR SHARES AND WILL
BE EFFECTING THE TENDER ON YOUR BEHALF.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated October 7, 1996 and the related Letter of Transmittal
(which together constitute the "Offer") in connection with the offer by The
Brazilian Investment Fund, Inc. (the "Fund"), to purchase up to 509,154.977
shares of its Common Stock, par value $.01 per share (the "Shares"), for cash at
a price, net to the seller, equal to the net asset value in U.S. dollars per
Share as of 5:00 P.M. New York City time on the Expiration Date (as defined in
the Offer to Purchase), on the terms and subject to the conditions of the Offer.
The undersigned hereby instructs you to tender to the Fund the number of
Shares indicated below, which are held by you for the account of the
undersigned, upon the terms and subject to the conditions of the Offer.
Shares to be tendered / / Tender all Shares held by you
/ / Tender partial Shares held by you
(If partial, complete below)
Shares _________________________
(Number)
Account Number:_______________________________________________________________
Tax Identification or
Social Security Number: ______________________________________________________
Name(s) of Beneficial Owner(s):_______________________________________________
______________________________________________________________________________
Address: _____________________________________________________________________
______________________________________________________________________________
Area Code and Telephone Number: ______________________________________________
_________________________________ ___________________________________
(Signature of beneficial owner) (Signature of additional
beneficial owner, if any)
Date: _________________________________
<PAGE>
EXHIBIT (a)(5)
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- -------------------------- --------------------------
<S> <C>
1. An individual's The individual
account
2. Two or more The actual owner of the
individuals (joint account or, if combined
account) funds, the first
individual on the
account(1)
3. Husband and wife The actual owner of the
(joint account) account or, if joint
funds, the first
individual on the
account(1)
4. Custodian account of The minor(2)
a minor (Uniform Gift
to Minors Act)
5. Adult and minor The adult or, if the minor
(joint account) is the only contributor,
the minor(1)
6. Account in the name The ward, minor, or
of guardian of incompetent person(3)
committee for a
designated ward,
minor, or incompetent
person
7. a The usual revocable The guarantor-trustee(1)
savings trust
account (grantor is
also trustee)
b So-called trust The actual owner(1)
account that is not
a legal or valid
trust under State
law
8. Sole proprietorship The owner(4)
account
<CAPTION>
GIVE THE
EMPLOYER IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- -------------------------- --------------------------
<S> <C>
9. A valid trust Legal entity (Do not
estate, or pension furnish the identifying
trust number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.)(5)
10. Corporate account The corporation
11. Association, club, The organization
religious,
charitable,
educational, or other
tax-exempt
organization
12. Partnership account The partnership
held in the name of
the business
13. A broker or The broker of nominee
registered nominee
14. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- ------------------------
1 List first and circle the name of the person whose number you furnish.
2 Circle the minor's name and furnish the minor's social security number.
3 Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
4 Show the name of the owner.
5 List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-4, Application for Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration of the Internal Revenue Service (IRS) and apply
for a number.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP
WITHHOLDING.--The following is a list of payees exempt from backup withholding
and for which no information reporting is required. For interest and dividends,
all listed payees are exempt except item (9). For broker transactions, payees
listed in (1) through (13), and a person registered under the Investment
Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject
to reporting under sections 6041 and 6041A are generally exempt from backup
withholding only if made to payees described in items (1) through (7), except
that a corporation that provides medical and health care services or bills and
collects payments for such services is not exempt from backup withholding or
information reporting:
(1) A corporation.
(2) An organization exempt from tax under
section 501(a), or an individual retirement plan (IRA), or a custodial
account under 403(b)(7).
(3) The United States or any of its agencies or
instrumentalities.
(4) A state, the District of Columbia, a possession
of the United States, or any of their political subdivisions or
instrumentalities.
(5) A foreign government or any of its political
subdivisions, agencies or instrumentalities.
(6) An international organization or any of its
agencies or instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required
to register in the U.S. or a possession of the U.S.
(9) A futures commission merchant registered
with the Commodity Futures Trading Commission.
(10)A real estate investment trust.
(11)An entity registered at all times during the tax
year under the Investment Company Act of 1940.
(12)A common trust fund operated by a bank
under section 584(a).
(13)A financial institution.
(14)A middleman known in the investment
community as a nominee or listed in the most recent publication of the
American Society of Corporate Secretaries, Inc., Nominee List.
(15)A trust exempt from tax under section 664 or
described in section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding also include the following:
-Payments to non resident aliens subject to
withholding under section 1441.
-Payments to partnerships not engaged in a
trade or business in the U.S. and which have at least one nonresident
partner.
-Payments of patronage dividends not paid
in money.
-Payments made by certain foreign
organizations.
Payments of interest not generally subject to backup withholding including
the following:
-Payments of interest on obligations issued
by individuals. NOTE: You may be subject to backup withholding if this
interest is $600 or more and is paid in the course of the payer's trade or
business and you have not provided your correct taxpayer identification
number to the payer.
-Payments of tax-exempt interest (including
exempt interest dividends under section 852).
-Payments described in section 6049(b)(5) to
nonresident aliens.
-Payments on tax-free covenant bonds under
section 1451.
-Payments made by certain foreign
organizations.
-Mortgage interest paid by you.
<PAGE>
Exempt payees described above should complete substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER IN PART 1, WRITE "EXEMPT" ON THE FACE OF THE
FORM, AND SIGN AND DATE THE FORM.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see the regulations under sections 6041,
6041A(a), 6042, 6044, 6049, 6050A, and 6050N.
PRIVACY ACT NOTICE.--Section 6109 requires you to furnish your correct taxpayer
identification number (TIN) to persons who must file information returns with
IRS to report interest, dividends, and certain other income paid to you,
mortgage interest you paid, the acquisition or abandonment of secured property,
or contributions you made to an individual retirement arrangement (IRA). IRS
uses the numbers for identification purposes and to help verify the accuracy of
your tax return. You must provide your TIN whether or not you are required to
file a tax return. Payers must generally withhold 20% of taxable interest,
dividend, and certain other payments to a payee who does not furnish a TIN to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO INCLUDE CERTAIN ITEMS ON YOUR TAX RETURN.--If you fail to
include property on your tax return certain items reported to IRS, such failure
will be treated as being due to negligence and will be subject to a penalty of
5% on any portion of an underpayment of tax attributable to that failure unless
there is clear and convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis that results in no imposition of
backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE>
EXHIBIT (a)(6)
<PAGE>
THE BRAZILIAN INVESTMENT FUND, INC.
OFFER TO PURCHASE FOR CASH UP TO 509,154.977 SHARES OF ITS
COMMON STOCK AT NET ASSET VALUE PER SHARE
Dear Shareholder:
We are enclosing the material listed below relating to an offer of The
Brazilian Investment Fund, Inc. (the "Fund") to purchase up to 509,154.977
shares of its Common Stock, par value $.01 per share (the "Shares"), for cash at
a price per Share, net to the seller, equal to the net asset value in U.S.
dollars ("NAV") per Share determined as of 5:00 P.M., New York City time on
November 5, 1996, or such later date to which the Offer is extended, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
October 7, 1996 and in the related Letter of Transmittal (which together
constitute the "Offer"). THE OFFER IS BEING MADE PURSUANT TO ARTICLE ELEVENTH OF
THE FUND'S ARTICLES OF INCORPORATION ("ARTICLE ELEVENTH"), WHICH REQUIRES THE
FUND, FOR SO LONG AS THE FUND'S COMMON STOCK IS NOT LISTED ON A STOCK EXCHANGE,
TO MAKE PERIODIC OFFERS TO PURCHASE ALL SHARES OF ITS COMMON STOCK. If more than
509,154.977 Shares are tendered, the Fund will not purchase any Shares in the
Offer and, pursuant to Article Eleventh, the Board of Directors of the Fund
shall convene a shareholders meeting to consider a plan of liquidation of the
Fund. Information regarding this obligation, as well as information regarding
possible future offers by the Fund, is set forth in the Offer to Purchase.
The following documents are enclosed:
(1) Offer to Purchase dated October 7, 1996;
(2) Letter of Transmittal to be used to tender Shares registered in your
name; and
(3) Guidelines for Certification of Taxpayer Identification Number.
PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT
EASTERN TIME ON NOVEMBER 5, 1996, UNLESS THE OFFER IS EXTENDED.
Neither the Fund nor its Board of Directors nor Morgan Stanley Asset
Management Inc. (the Fund's Investment Adviser) nor its Board of Directors is
making any recommendation to any holder of Shares as to whether to tender or
refrain from tendering Shares. If, after carefully evaluating all information
set forth in the Offer, you wish to tender Shares pursuant to the Offer, please
either follow the instructions contained in the Offer to Purchase and Letter of
Transmittal or, if your Shares are held of record in the name of a broker,
dealer, commercial bank, trust company or other nominee, contact such firm to
effect the tender for you. Shareholders are urged to consult their own
investment and tax advisers and make their own decisions whether to tender any
Shares and, if so, how many Shares to tender.
Your attention is called to the following:
1. The purchase price is the NAV per Share determined as of 5:00 P.M.
on November 5, 1996, unless the Offer is extended.
2. The Offer is conditioned on no more than 509,154.977 Shares being
tendered and not withdrawn as of the time the Offer expires.
3. The Offer and withdrawal rights expire at 12:00 midnight Eastern
Time on November 5, 1996, unless extended.
4. Tendering Shareholders will not be obligated to pay brokerage
commissions or, subject to Instruction 6 of the Letter of Transmittal,
transfer taxes on the purchase of Shares by the Fund pursuant to the Offer.
Should you have any questions on the enclosed material, please call Warren
Olsen, President of the Fund, at (212) 296-7236 or the Depository at (800)
221-6726.
Very truly yours,
THE BRAZILIAN INVESTMENT FUND, INC.
