<PAGE>
THE BRAZILIAN INVESTMENT FUND, INC.
- ----------------------------------------------
DIRECTORS AND OFFICERS
Barton M. Biggs R. Charles Tschampion
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS James W. Grisham
Warren J. Olsen VICE PRESIDENT
PRESIDENT AND DIRECTOR Michael F. Klein
Peter J. Chase VICE PRESIDENT
DIRECTOR Harold J. Schaaff, Jr.
John W. Croghan VICE PRESIDENT
DIRECTOR Joseph P. Stadler
David B. Gill VICE PRESIDENT
DIRECTOR Valerie Y. Lewis
Graham E. Jones SECRETARY
DIRECTOR James R. Rooney
John A. Levin TREASURER
DIRECTOR Belinda A. Brady
William G. Morton, Jr. ASSISTANT TREASURER
DIRECTOR
- ----------------------------------------------
INVESTMENT ADVISER
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
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U.S. ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
- -----------------------------------------------------------
BRAZILIAN ADMINISTRATOR AND CUSTODIAN
Unibanco-Uniao de Bancos Brasileiros S.A.
Avenida Eusebio Matoso, 891,
Sao Paulo, S.P., Brazil
- -----------------------------------------------------------
U.S. CUSTODIAN
The Chase Manhattan Bank
770 Broadway
New York, New York 10003
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SHAREHOLDER SERVICING AGENT
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
(800) 548-7786
- -----------------------------------------------------------
LEGAL COUNSEL
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
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INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
- -----------------------------------------------------------
For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726.
------------------------
THE
BRAZILIAN INVESTMENT
FUND, INC.
----------------------
FIRST QUARTER REPORT
MARCH 31, 1997
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- --------
For the three months ended March 31, 1997, The Brazilian Investment Fund, Inc.
(the "Fund") had a total return, based on net asset value per share, of 22.27%
compared to 22.72% for the IFC Total Return Index for Brazil (the "Index"). For
the one year ended March 31, 1997, the Fund had a total return, based on net
asset value per share, of 60.14% compared with 49.06% for the Index. For the
period from commencement of operations on June 4, 1991 through March 31, 1997,
the Fund's total return, based on net asset value per share, was 327.94%
compared to 362.40% for the Index.
The Fund modestly underperformed owing to its overweight in the retail sector
and its underweight in the banking sector.
Brazil is undergoing a dramatic transformation in a core segment of its stock
market. While not much seems to be happening at the fiscal deficit level, and
the trade accounts continue to deteriorate, terrific progress is being made at
the industry level in those sectors in which the government has shareholding
stakes and regulatory oversight. The two most obvious examples are the
telecommunications and electric utilities sectors, but there is terrific
progress being made in the mining and oil and gas sectors as well. All four of
these sectors paced the market for the first quarter, led by market bellwether
Telebras.
Interestingly, all of the above activity is taking place in an economic context
which has been, at best, difficult for private sector participants. Pricing
power is scarce, import competition tough, and demand relatively sluggish. Thus,
we are not terrifically excited by the earnings growth prospects of many private
sector companies, and have positioned the Fund's portfolio in precisely those
sectors and companies which are directly benefitting from the enormously
positive marginal change introduced by the government.
In telecommunications, the government is resetting tariff levels in order to lay
the groundwork for eventual privatization and liberalization. First, the
government will auction off cellular licenses to create duopolistic markets in
10 franchise areas throughout the country. Bid winners will be announced in May,
and the candidates are a "who's who" of international telecommunications
powerhouses. Later, we expect that the government will then spin off its own
cellular companies to allow them to compete more effectively with these new
private sector competitors. Subsequently, we think it will regroup the remaining
fixed wire companies, and privatize them beginning in 1998. This sector is
undergoing enormous secular growth, and we think it will continue through the
decade.
The electric utility sector is being transformed at both the state and federal
level. While the future regulatory and corporate structure is still unclear,
what is clear is that everything is for sale. The government is getting out of
the sector completely, save for some regulatory oversight functions, and with
private capital and management the growth outlook for the sector is awesome.
Admittedly a great deal of this favorable outlook has already been reflected in
prices, but we remain optimistic that there is both value and growth in the
stock market in this sector.
In mining the government has proceeded forward with the privatization of iron
ore behemoth CVRD. The stake [sale] to a strategic partner is scheduled for late
April, and we expect it to go smoothly if not hotly contested. The symbolic as
well as financial significance of this sale can not be overstated, and we think
it will solidify the government's reputation as being quite serious about moving
forward with free market reforms. Lastly, the oil and gas sector, chiefly in the
form of monopoly producer Petrobras, has been an area of huge change. The
government has deregulated prices and opened up niche areas for private
investment in partnership with Petrobras.
2
<PAGE>
The chief area for concern remains the trade deficit, which has been steadily
worsening for the last two quarters. We think that it is a manageable problem,
but one that the government will have to handle proactively rather than
reactively to prevent economic dislocation. Further, the fiscal deficit has
remained stubbornly high, and congress is too intransigent for us to hope for
any meaningful improvement on this front anytime soon.
Lastly, we are somewhat concerned that profitability in the private sector has
been lackluster. While as long as public sector change is positive the stock
market will remain buoyant, we would like to see increased economic activity
translate into superior earnings growth in the private sector going forward. We
are constantly scanning for good growth stocks in this segment, and have
strategic positions in the companies whose outlook is favorable at this stage.
Sincerely,
/s/ Warren J. Olsen
Warren J. Olsen
PRESIDENT AND DIRECTOR
/s/ Andy Skov
Andy Skov
PORTFOLIO MANAGER
/s/ Robert L. Meyer
Robert L. Meyer
PORTFOLIO MANAGER
April 1997
3
<PAGE>
The Brazilian Investment Fund, Inc.
Investment Summary as of March 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION
TOTAL RETURN (%)
--------------------------------------------------------
NET ASSET VALUE (1) INDEX (2)
--------------------------- ---------------------------
AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
FISCAL YEAR TO DATE 22.27% -- 22.72% --
ONE YEAR 60.14 60.14% 49.06 49.06%
FIVE YEAR 161.45 21.19 203.48 24.86
SINCE INCEPTION* 327.94 28.34 362.40 29.99
</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:
TOTAL RETURN THREE MONTHS ENDED
1991* 1992 1993 1994 1995 1996 MARCH 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share $ 63.31 $ 55.28 $ 83.58 $ 129.97 $ 64.14 $ 52.72 $ 56.80
Income Dividends - - - $ 1.80 - $ 0.02 -
Capital Gains Distributions - - $ 7.06 $ 6.65 $ 37.73 $ 30.75 $ 6.25
Fund Total Return (1) 26.62% -12.68% 72.52% 68.32% -26.61% 48.54% 22.27%
Index Total Return (2) 3.48% 0.32% 99.45% 69.83% -20.24% 34.36% 22.72%
The Brazilian Investment Fund, Inc.
(1)
IFC Total Return Index for Brazil (2)
</TABLE>
(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 not
traded; therefore, market value total investment return is not calculated.
(2) The IFC Total Return Index for Brazil is an unmanaged index of common
stocks, including dividends.
* The Fund commenced operations on June 4, 1991.
4
<PAGE>
The Brazilian Investment Fund, Inc.
Portfolio Summary as of March 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equity Securities 96.0%
Short-Term Investments 4.0%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Banking 6.2%
Beverages & Tobacco 3.8%
Broadcasting & Publishing 2.1%
Energy Sources 4.6%
Industrial Components 0.2%
Merchandising 14.2%
Metals - Non-Ferrous 4.7%
Telecommunications 33.9%
Textiles & Apparel 3.2%
Utilities - Electrical &
Gas 15.6%
Other 11.5%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<C> <S> <C>
1. Telebras 33.2%
2. Lojas Renner 8.5
3. Eletrobras 6.7
4. Cemig 4.7
5. CVRD 4.7
<CAPTION>
PERCENT OF
NET ASSETS
----------
<C> <S> <C>
6. Lojas Arapua 4.6%
7. Petrobras 4.6
8. Brahma 3.5
9. Coteminas 3.2
10. Itaubanco 3.1
-----
76.8%
-----
-----
</TABLE>
* Excluding short-term investments.
5
<PAGE>
INVESTMENTS (UNAUDITED)
- ---------
MARCH 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ----------------------------------------------------------
- ------------------------
BRAZILIAN INVESTMENT FUND (92.1%)
- ----------------------------------------------------------
- ------------------------
BRAZILIAN NON-VOTING PREFERRED
STOCKS (88.5%)
(Unless otherwise noted)
- ----------------------------------------------------------
- ------------------------
APPLIANCES & HOUSEHOLD DURABLES (0.0%)
Brasmotor S.A. 100,000 U.S.$29
-------
BANKING (6.2%)
Banco Bradesco 215,243,000 1,778
Banco Nacional 112,483,664 5
Itaubanco 3,546,000 1,835
-------
3,618
-------
BEVERAGES & TOBACCO (3.8%)
Brahma 3,171,000 2,067
Souza Cruz (Common) 17,700 148
-------
2,215
-------
BROADCASTING & PUBLISHING (2.1%)
TV Filme ADR 98,000 1,213
-------
ENERGY SOURCES (4.6%)
Petrobras 13,400,000 2,663
-------
INDUSTRIAL COMPONENTS (0.2%)
Schulz 7,018,000 123
-------
MERCHANDISING (14.2%)
Bompreco GDR 144A 23,630 585
Casa Anglo 1,900,000 76
Lojas Arapua 113,789,000 2,686
Lojas Renner 94,474,000 4,950
-------
8,297
-------
METALS -- NON-FERROUS (4.7%)
CVRD 84,603 1,925
CVRD ADR 34,830 792
-------
2,717
-------
TELECOMMUNICATIONS (33.9%)
Telebras 153,099,895 15,841
Telebras ADR 8,450 865
Telebras (Common) 26,853,000 2,707
Telesp 245,601 62
Telesp (Common) 1,200,473 300
-------
19,775
-------
TEXTILES & APPAREL (3.2%)
Coteminas 4,632,000 1,854
-------
- ----------------------------------------------------------
- ------------------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ----------------------------------------------------------
- ------------------------
UTILITIES -- ELECTRICAL & GAS (15.6%)
Celesc GDR 144A 14,600 U.S.$1,664
Cemig 52,330,000 2,154
Cemig ADR 14,360 594
CESP 90 --@
Cia Paranaense de Energia-Copel 55,750,000 789
CPFL 68,343 8
Eletrobras 'B' 2,628,000 1,131
Eletrobras 'B' (Common) 5,252,000 2,172
Eletrobras (Common) ADR 30,000 623
Eletrobras ADR 250 5
-------
9,140
-------
- ----------------------------------------------------------
- ------------------------
TOTAL BRAZILIAN NON-VOTING PREFERRED STOCKS
(Cost U.S. $38,710) 51,644
-------
- ----------------------------------------------------------
- ------------------------
<CAPTION>
AMOUNT
(000)
<S> <C> <C>
- ----------------------------------------------------------
- ------------------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (3.6%)
Brazilian Real
(Cost U.S. $2,142) BRL 2,255 2,129
-------
- ----------------------------------------------------------
- ------------------------
TOTAL BRAZILIAN INVESTMENT FUND
(Cost U.S. $40,852) 53,773
-------
- ----------------------------------------------------------
- ------------------------
OTHER ASSETS AND LIABILITIES (7.9%)
Other Assets U.S.$ 7,249
Liabilities (2,628) 4,621
------------ -------
- ----------------------------------------------------------
- ------------------------
NET ASSETS (100%)
Applicable to 1,028,088 issued and outstanding
U.S. $0.01 par value shares (50,000,000
shares authorized) U.S.$58,394
-------
-------
- ----------------------------------------------------------
- ------------------------
NET ASSET VALUE PER SHARE U.S.$56.80
-------
-------
- ----------------------------------------------------------
- ------------------------
</TABLE>
@ -- Value is less than U.S. $500.
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
6
