LATIN AMERICA EQUITY FUND INC, N-30D, 1997-03-04

LATIN AMERICA EQUITY FUND INC
N-30D, 1997-03-04

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<PAGE>

[GRAPHIC]

THE LATIN AMERICA EQUITY FUND, INC.
- -----------------------------------
ANNUAL REPORT
DECEMBER 31, 1996

<PAGE>
CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders....................................................................... 1

Portfolio Summary............................................................................ 7

Schedule of Investments...................................................................... 9

Statement of Assets and Liabilities.......................................................... 15

Statement of Operations...................................................................... 16

Statement of Changes in Net Assets........................................................... 17

Financial Highlights......................................................................... 18

Notes to Financial Statements................................................................ 19

Report of Independent Accountants............................................................ 23

Results of Annual Meeting of Shareholders.................................................... 24

Tax Information.............................................................................. 24

Description of Dividend Reinvestment and Cash Purchase Plan.................................. 26
</TABLE>

PICTURED ON THE COVER IS THE INTERIOR OF THE MEXICAN STOCK EXCHANGE, BOLSA
MEXICANA DE VALORES, S.A. DE C.V. ("BOLSA"). THE BOLSA, FOUNDED IN 1895, IS
LOCATED IN MEXICO CITY AND IS CURRENTLY THE ONLY STOCK EXCHANGE IN MEXICO.

- --------------------------------------------------------------------------------
<PAGE>
LETTER TO SHAREHOLDERS

February 14, 1997

DEAR SHAREHOLDER:

We are pleased to report on the activities of The Latin America Equity Fund,
Inc. (the "Fund") for the year ended December 31, 1996.

PERFORMANCE

At December 31, 1996, the Fund's net assets were $145.2 million. The Fund's net
asset value ("NAV") was $16.89 per share (net of dividends paid of $0.06 per
share), as compared to $14.93 at December 31, 1995.

For the period January 1, 1996 through December 31, 1996, the Fund's total
return, based on NAV and assuming the reinvestment of dividends was 13.6%. By
comparison, the total return of the Morgan Stanley Capital International
Emerging Markets Latin America Free Index (the "Index") was 22.2%.

The Fund's underperformance relative to the Index can primarily be attributed to
country selection and, to a lesser extent, stock selection. For example, we
significantly overweighted our position in Chile, a market which has
historically been strong but fell short of expectations in 1996. Although the
Chilean stocks in the portfolio outperformed, they underperformed relative to
those in other markets (notably Brazil and Argentina). Stock selection proved
most positive in Mexico. Overall, the Fund's returns were disappointing
principally due to its large Chilean component.

From the commencement of investment operations on October 30, 1991 through
December 31, 1996, the Fund's total return, based on NAV and assuming the
reinvestment of dividends and distributions, was 86.1%. The Index returned 94.5%
during this period.

INVESTMENT PERSPECTIVE

The outperformance of aggregate Latin equities in 1996 was a clear signal that
there has been a strong reversal of the effects of the "Tequila crisis," or
Mexican peso devaluation of December 1994. In fact, we believe both that
macroeconomic fundamentals in Latin America are better now than at any point in
recent years and equities there possess real investment value.

Our conviction is based on a variety of factors. Foremost is the remarkably
strong and swift recovery from the Tequila crisis, which served as a catalyst
for a dramatic shift toward economic and political liberalization throughout the
region. Such change, which was impossible for years, is taking place now at a
relatively rapid rate, most prominently in Brazil and Mexico.

- --------------------------------------------------------------------------------
1
<PAGE>
LETTER TO SHAREHOLDERS

In addition:

- - Latin equity markets are among the world's cheapest in terms of standard
valuation measures such as the price/ book value and price/cash earnings
ratios as well as the valuation of assets in recent transactions.

- - The recent strength of Latin debt markets has positive implications for Latin
equities. First, it indicates that perceptions of sovereign risk have
meaningfully improved. Second, the same economic conditions that have powered
debt performance also are very favorable for stocks; since debt outperformed
stocks in most Latin nations in 1996, it is reasonable to expect that stocks
will catch up.

- - Global economic conditions (E.G., stable interest rates, low inflation,
moderate growth, ample liquidity) are quite conducive to investment in
financial assets.

- - The globalization of communications and business is giving Latin nations much
greater access to foreign capital, technology and business expertise.

All in all, we see much room for optimism about Latin American equities. To best
illustrate our investment approach, we'd now like to discuss a few of our
specific holdings.

CORPORACION INDUSTRIAL SANLUIS, S.A. DE C.V.

Corporacion Industrial SanLuis, S.A. de C.V. ("Sanluis") is a slimmed-down
Mexican conglomerate whose core businesses are auto parts (approximately 75% of
sales) and mining. Since 1990, Sanluis has divested operations in fasteners and
steel, hotels and containers.

The auto parts business is contained in a unit known as Rassini, which produces
suspension systems and brake components. Luismin is the name of the mining
business, which focuses on silver and gold. Roughly 90% of Rassini's and
Luismin's output is exported, the highest export level among Mexican industrial
companies.

Characteristics of both units lead us to believe that there is a compelling case
for the appreciation of Sanluis shares:

- - Rassini is the dominant producer of suspension and brake products in Mexico
while achieving significant penetration of U.S. auto parts sectors.

- - It has contracts with many of the world's biggest auto makers that will
generate substantial growth in revenues and profits over the next few years.

- - It is aggressively making acquisitions and pursuing strategic alliances in the
U.S., Europe and Latin America to expand its customer base, service territory
and product portfolio.

- - It recently became the first Latin American auto parts company to receive the
prestigious QS9000 quality award from the Big Three U.S. auto makers.

- - Luismin is an established producer with dependable earnings and cash flow.

- - Its status as one of the world's lowest-cost producers is a major competitive
advantage.

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2
<PAGE>
LETTER TO SHAREHOLDERS

- - It is involved in several large-scale developmental joint ventures that could
dramatically raise its proven reserves to world-class levels and sustain
growth in production levels for years to come.

There also are strong positives for Sanluis as a whole:

- - Its two units compliment each other well: Rassini stands to prosper as
economic conditions both in North and Latin America become more favorable, and
Luismin acts as a built-in hedge against inflation and Mexican economic
uncertainty.

- - Sanluis substantially improved its financial condition in 1996 via a
successful rights offering and the restructuring of short-term debt into
long-term debt.

- - Both units employ a joint venture approach that enables them to obtain
expertise, technology and capital in exchange for access to resources (E.G.,
land, factories).

- - Some analysts suggest that Sanluis will spin Luismin off into a separate
company, a move that would likely increase shareholder value.

BANCO WIESE LTD.

One of several Peruvian stocks we have added to the Fund since our last report
is Banco Wiese Ltd. ("BW"), the nation's second-largest bank in terms of assets,
deposits, loans and equity.

Banco Wiese (pronounced "Visa") was formed in 1943 by the Wiese family, which
controls about 66% of the company's shares and remains closely involved in
management. In the ensuing five decades, BW has developed deep ties with the
Peruvian business sector, such that it is the premier corporate bank in Peru. It
has operations in securities brokerage, investment banking, investment
management and insurance as well.

BW's American Depositary Receipts have significantly underperformed Peruvian
equities generally since they were listed on the New York Stock Exchange in
1994. Hence our investment thesis that BW is a high-quality, established
financial institution whose considerable strengths have been unduly ignored by
investors.

We believe that BW is an attractive long-term holding, based on a combination of
company-specific and broader environmental factors:

HIGH OPERATING EFFICIENCY. BW is known for its efficient operations. As measured
by the industry-standard ratio of operating expenses to total revenues, its
efficiency is on a level similar to that of many high-quality U.S. regional
banks. This enhances its ability to withstand periods of price-based
competition.

STRONG, FARSIGHTED MANAGEMENT. In 1988, BW's management anticipated that Peru's
economy would improve and took a series of steps that significantly increased
its competitiveness, including a sharp reduction in the number of back-office
employees; a concomitant sharp increase in the number of salespeople; and a
heavy investment in technology that has been independently appraised as among
the most advanced in Latin America.

- --------------------------------------------------------------------------------
3
<PAGE>
LETTER TO SHAREHOLDERS

POSSIBLE TAKEOVER CANDIDATE. Despite its large size among Peruvian banks, BW is
quite small relative to the world's major banks. Already, several leading
Spanish banks have bought meaningful equity stakes in Latin American banks,
notably in Peru. Viewed in the context of an ongoing global consolidation of the
industry, these factors suggest that a foreign institution may easily find BW an
appealing acquisition.

SUBSTANTIAL INDUSTRY GROWTH POTENTIAL. Peru is one of Latin America's most
"under-banked" nations. As a major player that can offer a variety of financial
services along with its core banking operations, BW is well-positioned to
participate in the increasing penetration of banks within the nation.

VALUATION. BW shares are highly undervalued by several measures. We believe that
the preceding factors should lead to considerable appreciation in the future.

INVERSIONES Y REPRESENTACIONES S.A.

Among the Fund's Argentine holdings is a company called Inversiones y
Representaciones S.A., best-known simply as "IRSA." We consider IRSA unique in
that it is the largest, most diversified and virtually the only publicly held
Latin American real estate developer whose shares trade on the New York Stock
Exchange. Its two major competitors are non-core units of much larger
conglomerates.

In 1991, a group headed by the world-renowned investor George Soros bought IRSA,
which had traded as a "shell" company in Argentina since 1948. The Soros group
has since used it as its designated vehicle for investment in Argentine real
estate.

IRSA's investment appeal begins with its top management, which is shrewd and
seasoned. A prime example is its response to the Mexican peso crisis. Opting to
protect the company's assets for shareholders, IRSA utilized some of its ample
liquidity to buy back $13 million in debt at a substantial discount and
repurchase about three million shares on the open market for 35% less than their
price just before the crisis began. Management also demonstrated great
opportunism at the time by buying two premier Buenos Aires office buildings at
depressed valuations.

In addition to management, IRSA benefits from these factors:

- - With its dollar-based mortgage portfolio, high liquidity/low debt policy,
access to global capital markets and predictable stream of cash inflows, IRSA
is as much a strong defensive holding as it is a growth story.

- - It has a diversified earnings base consisting of office and retail rental
properties, sales of development properties and profits from equity
investments both in other companies and individual projects.

- - As Argentina's economy continues to grow, rental rates and property prices
should meaningfully increase.

- - The Argentine pension fund system, only about 2-1/2 years old, will provide a
huge source of cash for property ownership and mortgage-based lending.

- - IRSA owns considerable office space in Buenos Aires, where demand is rising as
the economy improves. There has been little construction of new office space
in Buenos Aires in the past 20 years.

- --------------------------------------------------------------------------------
4
<PAGE>
LETTER TO SHAREHOLDERS

- - Mortgage financing has generally been available in Argentina only in the last
few years. Demand for property ownership should grow as access to mortgages
rises.

- - IRSA has already begun to expand its geographic reach by forming joint
ventures with real estate companies in Brazil, Chile and Argentina. Further
growth within Latin America is an important goal over the next few years.

OUTLOOK

Looking ahead, here are our thoughts on several Latin American markets:

- - ARGENTINA's rebound from its 1995 recession began in mid-1996 and remains in
full swing. 1996 GDP grew a bit more than 4%, ahead of the government's own
forecast, and is expected to rise about 5% this year. Industrial production is
very strong. Perhaps most significant, foreign investment in the Argentine
financial markets reached a record-high $16.8 billion in December, indicating
that global investors are quite optimistic.

- - BRAZIL continues to move in a positive direction. President Cardoso's proposed
re-election amendment, widely viewed as the key to enactment of vital economic
legislation, was recently approved by the lower house of Congress and appears
likely to obtain passage in the Senate as well. Growth of GDP in 1996,
furthermore, was announced at the lowest such rate since 1992. This is
favorable because it indicates that the economy is growing at a sustainable,
non-inflationary pace after years of hyperinflation. In our view, Brazil
remains the most attractive of the Latin equity markets.

- - In CHILE, the economy has fallen victim to its own strength. With wages and
consumer spending rising at overheating levels in 1995 and well into 1996, the
Chilean central bank twice raised rates to squeeze out inflation. Equities
responded by declining 13.5% in 1996, by far the worst performance among Latin
markets for the year. We see signs that the situation may be improving,
however: the central bank implemented the first of an anticipated series of
rate cuts in early February 1997 (sooner than expected) and the level of
foreign direct investment is reaching record highs.

- - In the latest demonstration of its economic resurgence, MEXICO completed the
prepayment of its Tequila crisis emergency loan from the U.S. in January 1997.
Privatization appears to be back on track after the government reversed its
intention to sell off its powerful oil company. Interest rates have
substantially declined and will likely drop even more. President Zedillo is
retaking control of the dominant PRI party. We continue to favor shares of
infrastructure-related and selected consumer stocks. Overall, we consider this
market very attractive.

- - Equity valuations in PERU are compelling. At the same time, the economy has
returned to a growth mode after a government-induced slowdown. 1996 GDP growth
rose for the fourth consecutive year, with all sectors of the economy closing
out the year with positive returns in December. We anticipate a strong rally
in Peruvian stocks within the next few months and, because the market is
relatively illiquid, have significantly increased the Fund's holdings in
advance so as to generate optimal performance.

In an important organizational development, Richard Watt of BEA Associates has
been named as the Fund's President and Chief Investment Officer as of January 1,
1997. Richard has contributed his expertise in emerging equity markets to the
Fund and several other BEA closed-end funds since joining BEA in 1995. He
succeeds Emilio Bassini, who

- --------------------------------------------------------------------------------
5
<PAGE>
LETTER TO SHAREHOLDERS

guided the Fund from its 1991 inception through the end of 1996. Emilio resigned
his position in order to focus his efforts exclusively on private equity
investments through his recently organized firm, Bassini, Playfair + Associates
LLC, and will continue to serve BEA as a consultant.

We wish to remind shareholders whose shares are registered in their own name
that they automatically participate in the Fund's dividend reinvestment program.
The automatic Dividend Reinvestment Plan (the "Plan") can be of value to
shareholders in maintaining their proportional ownership interest in the Fund in
an easy and convenient way. A shareholder whose shares are held in the name of a
broker/dealer or nominee should contact that party for details about
participating in the Plan. The Fund also offers shareholders a voluntary Cash
Purchase Plan. The Plan and the Cash Purchase Plan are described on pages 26 and
27 of this report.

As developments occur in the Latin American markets or at BEA that we believe
would be of interest to you, we will be sure to keep you informed. Meanwhile, if
you have questions, please feel free to call upon us at any time.

Respectfully,

[SIG]
Richard W. Watt*
President and Chief Investment Officer

- --------------------------------------------------------------------------------
* Richard Watt, who is a Managing Director of BEA Associates, is primarily
responsible for management of the Fund's assets. Mr. Watt has served the Fund
in such capacity since January 1, 1997. He joined BEA Associates on August 2,
1995. Mr. Watt was formerly associated with Gartmore Investment Limited
("Gartmore") in London, where he was head of emerging markets investments and
research. In this capacity, he led a team of four portfolio managers and was
manager of a closed-end Latin American fund focusing on smaller companies.
Before joining Gartmore in 1992, Mr. Watt was a director of Kleinwort Benson
International Investments in London, where he was responsible for research,
analysis and trading of equities in Latin America and other regions. Mr. Watt
is a Director, President and Chief Investment Officer of the Fund. Mr. Watt is
also a Director, President and Chief Investment Officer of The Brazilian
Equity Fund, Inc., The Chile Fund, Inc., The Emerging Markets Infrastructure
Fund, Inc., The Emerging Markets Telecommunications Fund, Inc., The First
Israel Fund, Inc., The Latin America Investment Fund, Inc. and The Portugal
Fund, Inc.

- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------

THE LATIN AMERICA EQUITY FUND, INC.

PORTFOLIO SUMMARY - AS OF DECEMBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
GEOGRAPHIC ASSET BREAKDOWN

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C>
12/31/1996 12/31/1995
Argentina 4.84% 15.93%
Bolivia 0.00% 0.65%
Brazil 34.36% 22.87%
Chile 21.10% 27.60%
Colombia 2.56% 0.71%
Ecuador 0.99% 0.85%
Latin America 1.27% 2.66%
Mexico 22.01% 15.28%
Peru 6.80% 4.10%
Puerto Rico 0.66% 1.05%
Venezuela 0.72% 2.43%
Other 4.69% 5.87%
</TABLE>

SECTOR ALLOCATION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C>
12/31/1996 12/31/1995
Banking 7.66% 7.26%
Cement 6.74% 2.74%
Electric Distribution 5.16% 3.77%
Electric Generation 2.81% 4.35%
Engineering & Construction 2.50% 2.74%
Financial Services 2.62% 0.82%
Food & Beverages 13.64% 14.70%
Forestry 2.06% 3.09%
Holding Companies 4.78% 5.04%
Mining 2.10% 1.43%
Natural Gas 2.99% 4.99%
Retail 2.89% 3.08%
Steel 3.62% 5.06%
Telecommunications 11.44% 9.39%
Textiles 2.38% 1.74%
Utilities 4.61% 9.60%
Floating Rate Investments 4.10% 4.83%
Other 12.38% 9.38%
Cash & Cash Equivalents 5.52% 5.99%
</TABLE>

- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------

THE LATIN AMERICA EQUITY FUND, INC.

PORTFOLIO SUMMARY - AS OF DECEMBER 31, 1996 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS, BY ISSUER

<TABLE>
<CAPTION>
Percent of Net
Holding Sector Country Assets
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
1. Federal Republic of Brazil, Interest Due Bond,
Series A, 6.50%, 01/01/01 Floating Rate Investments Brazil 4.1
- ---------------------------------------------------------------------------------------------------------------------------------
2. Telecomunicacoes do Rio de Janeiro S.A. Telecommunications Brazil 3.2
- ---------------------------------------------------------------------------------------------------------------------------------
3. Cementos Mexicanos, S.A. de C.V. Cement Mexico 3.1
- ---------------------------------------------------------------------------------------------------------------------------------
4. Companhia Paulista de Forca e Luz Utilities Brazil 2.8
- ---------------------------------------------------------------------------------------------------------------------------------
5. Grupo Modelo, S.A. de C.V. Food & Beverages Mexico 2.4
- ---------------------------------------------------------------------------------------------------------------------------------
6. Corporacion Industrial SanLuis, S.A. de C.V. Holding Companies Mexico 2.3
- ---------------------------------------------------------------------------------------------------------------------------------
7. Centrais Eletricas de Santa Catarina S.A. Electric Distribution Brazil 2.1
- ---------------------------------------------------------------------------------------------------------------------------------
8. Santista Alimentos S.A. Food & Beverages Brazil 2.1
- ---------------------------------------------------------------------------------------------------------------------------------
9. Embotelladora Polar S.A. Food & Beverages Chile 2.0
- ---------------------------------------------------------------------------------------------------------------------------------
10. Grupo Elektra, S.A. de C.V. Retail Mexico 2.0
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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8
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

SCHEDULE OF INVESTMENTS - DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Description (000) (Note A)
<S> <C> <C>
- -----------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-90.38%
ARGENTINA-4.84%
BANKING-0.65%
Banco de Galicia
Convertible Bond, 7.00%,
08/01/02................ USD 800 $ 940,000
-----------
FINANCIAL SERVICES-1.02%
Inversiones y
Representaciones S.A.,
4.50%, 08/02/03++....... USD 1,500 1,477,500
-----------
NATURAL GAS-2.99%

<CAPTION>
No. of
Shares
-------------
<S> <C> <C>
Camuzzi Argentina
S.A.*+.................. 1,403,504 2,670,096
Sodigas del Sur S.A.*.... 421,485 782,592
Sodigas Pampeana S.A.*... 583,264 886,935
-----------
4,339,623
-----------
TELECOMMUNICATIONS-0.18%
Argentine Cellular
Communications Holdings
Ltd.*+.................. 237,966 265,042
-----------
TOTAL ARGENTINA (Cost $7,757,843)....... 7,022,165
-----------
BRAZIL-30.26%
BANKING-1.08%
Banco Bradesco S.A. ON... 149,305,327 1,012,995
Banco do Brasil S.A.
PN+..................... 55,382,000 479,682
Banco do Brasil S.A.,
Warrants (expiring
6/30/01)+............... 11,076,400 17,482
Banco do Brasil S.A.,
Warrants (expiring
6/30/06)+............... 16,614,600 25,583
Banco do Brasil S.A.,
Warrants (expiring
6/30/11)+............... 27,691,000 37,309
-----------
1,573,051
-----------
BUSINESS SERVICES-0.83%
Multibras da
Amazonia S.A. PN........ 960,000 1,210,278
-----------
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
CHEMICALS-0.50%
S.A. White Martins ON.... 506,577,000 $ 731,273
-----------
CONSUMER GOODS-1.44%
Dixie Toga S.A. PN....... 1,566,000 1,190,588
Refrigeracao Parana S.A.
PN+..................... 362,420,000 819,639
Tec Toy Industria e
Comercio PN+............ 373,587,000 79,097
-----------
2,089,324
-----------
ELECTRIC DISTRIBUTION-2.09%
Centrais Eletricas de
Santa Catarina S.A.,
Class B PN+............. 3,256,498 3,039,941
-----------
FOOD & BEVERAGES-3.62%
Companhia Cervejaria
Brahma PN............... 3,363,202 1,838,417
Santista Alimentos S.A.
ON+..................... 1,298,000 3,010,471
Serrana S.A. PN.......... 375,240 415,288
-----------
5,264,176
-----------
HOLDING COMPANIES-1.77%
Brasmotor S.A. PN........ 2,116,000 587,495
Investimentos Itau S.A.
PN...................... 2,633,500 1,976,836
-----------
2,564,331
-----------
MANUFACTURING-0.48%
Continental 2001 S.A.
PN...................... 32,712,935 692,604
-----------
RETAIL-0.54%
Globex Utilidades S.A.
PN+..................... 33,000 538,144
Lojas Americanas S.A.
PN...................... 18,527,266 244,273
-----------
782,417
-----------
STEEL-3.09%
Bardella Industrias S.A.
PN...................... 4,065 387,253
Companhia Siderurgica
Nacional ON............. 46,446,840 1,318,624
Usinas Siderurgicas de
Minas Gerais S.A.
ADR++................... 40,000 409,000
Usinas Siderurgicas de
Minas Gerais S.A. PN.... 2,326,203,000 2,372,991
-----------
4,487,868
-----------
</TABLE>

- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS-6.92%
Telecomunicacoes de Minas
Gerais S.A. ON+......... 276,853 $ 34,634
Telecomunicacoes de Minas
Gerais S.A. PNB......... 21,134,000 2,613,530
Telecomunicacoes do
Parana S.A. ON+......... 3,454,000 1,894,697
Telecomunicacoes do
Parana S.A. PN.......... 1,496,000 836,614
Telecomunicacoes do Rio
de Janeiro S.A. ON+..... 1,760,000 223,578
Telecomunicacoes do Rio
de Janeiro S.A. PN+..... 35,135,000 4,446,060
-----------
10,049,113
-----------
TEXTILES-2.38%
Companhia Tecidos Norte
de Minas S.A. PN........ 6,414,500 2,047,072
Wentex Textil S.A. PN+... 450,000 1,407,468
-----------
3,454,540
-----------
TRANSPORTATION-0.91%
Marcopolo S.A. PN+....... 7,870,990 1,318,018
-----------
UTILITIES-4.61%
Companhia Energetica de
Minas Gerais PN......... 77,452,143 2,638,635
Companhia Paulista de
Forca e Luz ON+(a)...... 34,217,450 4,050,377
-----------
6,689,012
-----------
TOTAL BRAZIL (Cost $37,201,281)......... 43,945,946
-----------
CHILE-20.27%
BANKING-1.89%
Banco de Credito e
Inversiones............. 370,029 2,363,093
Banco Santander Chile+... 5,783,975 376,875
-----------
2,739,968
-----------
CONSUMER DURABLES-0.20%
Companias Cic S.A........ 57,385 7,438
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
CONSUMER DURABLES (CONTINUED)
Empresas Almacenes
Paris+.................. 366,549 $ 285,051
-----------
292,489
-----------
CONSUMER GOODS-0.33%
Bata Chile S.A........... 898,387 76,215
Compania Tecno Industrial
S.A..................... 17,883,587 404,577
-----------
480,792
-----------
ELECTRIC DISTRIBUTION-1.84%
Empresas Emel S.A........ 53,155 1,177,464
Sociedad Austral de
Electricidad S.A........ 57,500 1,490,515
-----------
2,667,979
-----------
ELECTRIC GENERATION-2.81%
Chilquinta Energia
S.A..................... 9,639 107,214
Empresa Electrica
Pilmaiquen S.A.......... 366,108 293,335
Empresa Nacional de
Electricidad S.A........ 2,536,553 1,261,253
Empresa Nacional de
Electricidad S.A. ADS... 34,900 540,950
Enersis S.A.............. 3,585,787 1,880,140
-----------
4,082,892
-----------
ENGINEERING & CONSTRUCTION-0.89%
Besalco S.A.............. 66,469 422,920
Maderas y Sinteticos
Sociedad Anonima........ 950,400 427,775
Maderas y Sinteticos
Sociedad Anonima ADR.... 31,700 443,800
-----------
1,294,495
-----------
FERTILIZER-1.37%
Sociedad Quimica y Minera
de Chile S.A., Class
A....................... 357,429 1,659,326
Sociedad Quimica y Minera
de Chile S.A., Class
B....................... 63,571 331,825
-----------
1,991,151
-----------
</TABLE>

- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
FISHERY-0.20%
Pesquera Itata S.A....... 1,204,819 $ 251,270
Sociedad Pesquera Coloso
S.A..................... 64,259 39,372
-----------
290,642
-----------
FOOD & BEVERAGES-4.84%
Compania Cervecerias
Unidas S.A.(b).......... 149,568 468,777
Embotelladora Andina
S.A.(c)................. 403,481 1,958,692
Embotelladora Polar
S.A..................... 3,936,442 2,968,449
Empresas Iansa S.A....... 6,750,000 1,447,508
Empresas Santa Carolina
S.A., Series A.......... 182,729 150,713
Empresas Santa Carolina
S.A., Series B.......... 18,273 15,071
Jugos Concentrados
S.A..................... 451,025 18,866
-----------
7,028,076
-----------
FORESTRY-2.06%
Compania Chilena de
Fosforos S.A............ 93,688 256,105
Compania de Petreoleos de
Chile S.A............... 349,505 1,256,027
Compania Manufacturera de
Papeles y Cartones
S.A..................... 81,159 874,035
Forestal Terranova....... 596,502 604,444
-----------
2,990,611
-----------
INSURANCE-0.16%
Compania de Seguros La
Prevision Vida S.A...... 217,878 226,940
-----------
MACHINERY & ELECTRIC-0.44%
Madeco S.A. NPV ADR...... 26,400 640,200
-----------
MINING-0.85%
Antofagasta Holdings
P.L.C................... 199,000 1,159,083
Sociedad Punta del Cobre
S.A., Class A........... 758 71,897
-----------
1,230,980
-----------
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
PACKAGING-0.10%
Envases del Pacifico
S.A..................... 303,788 $ 151,769
-----------
PHARMACEUTICALS-0.94%
Laboratorio Chile S.A.... 1,653,600 1,363,874
-----------
RETAIL-0.19%
S.A.C.I. Falabella....... 350,994 281,225
-----------
STEEL-0.53%
Compania de Aceros del
Pacifico S.A............ 391,283 765,323
-----------
TELECOMMUNICATIONS-0.62%
Empresa Nacional de
Telecomunicaciones
S.A..................... 133,834 908,311
-----------
WHOLESALE-0.01%
Zona Franca de Iquique
S.A..................... 44,365 15,264
-----------
TOTAL CHILE (Cost $19,045,029).......... 29,442,981
-----------
COLOMBIA-2.56%
BANKING-2.17%
Banco de Bogota.......... 139 801
<CAPTION>
Par (000)
-------------
<S> <C> <C>
Banco de Colombia, Senior
Subordinated Convertible
Note, 5.20%,
02/01/99++.............. USD 1,200 1,116,000
<CAPTION>
No. of
Shares
-------------
<S> <C> <C>
Banco Ganadero, Preferred
C ADR................... 28,200 606,300
Banco Industrial
Colombiano ADR.......... 68,800 1,423,300
-----------
3,146,401
-----------
CEMENT-0.14%
Cementos Paz del Rio S.A.
ADR+,++................. 17,000 208,250
-----------
</TABLE>

- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES-0.08%
Corporacion Financiera
del Valle, S.A. GDR++... 31,669 $ 118,759
-----------
RETAIL-0.17%
Carulla y Compania S.A.
ADR++................... 35,160 145,035
La Gran Cadena de
Almacenes Colombianos
S.A. ADS++.............. 10,900 106,275
-----------
251,310
-----------
TOTAL COLOMBIA (Cost $4,117,829)........ 3,724,720
-----------
ECUADOR-0.99%
CEMENT-0.99%
La Cemento Nacional GDR++
(Cost $1,368,292)....... 6,272 1,436,288
-----------
LATIN AMERICA-1.27%
TELECOMMUNICATIONS-1.27%
International Wireless
Communications, Inc.,
Series D*+.............. 186,400 1,747,500
International Wireless
Communications, Inc.,
Series F*+.............. 10,840 101,625
International Wireless
Communications, Inc.,
Warrants (expiring
12/31/98)*+............. 640 300
-----------
TOTAL LATIN AMERICA (Cost $1,328,824)... 1,849,425
-----------
MEXICO-22.01%
BROADCAST, RADIO & TELEVISION-1.09%
Grupo Televisa S.A.
GDR+,++................. 62,000 1,588,750
-----------
CEMENT-4.45%
Cementos Apasco, S.A. de
C.V..................... 280,660 1,925,259
Cementos Mexicanos, S.A.
de C.V., Class B........ 402,000 1,583,079
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
CEMENT (CONTINUED)
Cementos Mexicanos, S.A.
de C.V. CPO............. 821,000 $ 2,956,726
-----------
6,465,064
-----------
ENGINEERING & CONSTRUCTION-1.61%
Corporacion GEO, S.A. de
C.V. ADR+,++............ 74,300 1,467,425
Corporacion GEO, S.A. de
C.V., Series B+......... 178,160 871,336
-----------
2,338,761
-----------
FINANCIAL SERVICES-0.42%
Grupo Financiero Banamex
Accival, S.A. de
C.V.+................... 287,000 605,938
-----------
FOOD & BEVERAGES-4.45%
Grupo Industrial Maseca,
S.A. de C.V., Series
B....................... 1,809,000 2,293,422
Grupo Modelo, S.A. de
C.V., Series C.......... 602,000 3,494,843
Sigma Alimentos, S.A.,
Class A1................ 76,000 678,709
-----------
6,466,974
-----------
HOLDING COMPANIES-3.01%
Corporacion Industrial
SanLuis, S.A. de C.V.
CPO..................... 527,958 3,353,392
Grupo Carso, S.A. de
C.V., Class A1+......... 193,000 1,022,370
-----------
4,375,762
-----------
MANUFACTURING-0.50%
Elamex, S.A. de C.V.+.... 76,000 731,500
-----------
MINING-0.49%
Grupo Mexico, S.A. de
C.V., Class B+.......... 227,000 703,608
-----------
PAPER PRODUCTS-1.43%
Kimberly Clark de Mexico,
S.A. de C.V., Class A... 105,100 2,076,099
-----------
</TABLE>

- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

TELECOMMUNICATIONS-0.29%
Telefonica del Peru S.A.,
Class B................. 6,932 $ 12,900
<CAPTION>
Par (000)
-------------
<S> <C> <C>
Tele 2000 S.A.,
Convertible Note, 9.75%,
04/14/97++.............. USD 410 405,900
-----------
418,800
-----------
TOTAL PERU (Cost $9,770,327)............ 9,867,034
-----------
PUERTO RICO-0.66%
TELECOMMUNICATIONS-0.66%
<CAPTION>
No. of
Shares
-------------
<S> <C> <C>
Cellular Communications
of Puerto Rico, Inc.+
(Cost $807,249)......... 48,700 961,825
-----------
VENEZUELA-0.72%
FINANCIAL SERVICES-0.34%
<CAPTION>
Par (000)
-------------
<S> <C> <C>
Global Investment
Financial Corp.,
Convertible Note,
11.00%, 03/19/01........ USD 500 500,000
-----------
FOOD & BEVERAGES-0.00%
<CAPTION>
No. of
Shares
-------------
<S> <C> <C>
Mavesa S.A. ADR++........ 14 89
-----------
TELECOMMUNICATIONS-0.38%
Venworld
Telecommunications*=/=+... 40,160 543,780
-----------
TOTAL VENEZUELA (Cost $1,317,164)....... 1,043,869
-----------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES
(Cost $109,263,567).................... 131,262,468
-----------
</TABLE>

- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Description (000) (Note A)
- -----------------------------------------------------
<S> <C> <C>
FLOATING RATE INVESTMENTS-4.10%
ARGENTINA-0.00%
Republic of Argentina,
Bocon Pre 2 PIK, FRN,
5.4609%, 04/01/01(d)
(Cost $403)............. USD 1 $ 539
-----------
BRAZIL-4.10%
Federal Republic of
Brazil IDU, Series A,
6.50%, 01/01/01 (Cost
$5,478,740)............. 6,143 5,954,386
-----------
TOTAL FLOATING RATE INVESTMENTS (Cost
$5,479,143)............................ 5,954,925
-----------
SHORT-TERM INVESTMENTS-0.83%
CHILEAN MUTUAL FUNDS-0.83%
<CAPTION>
No. of
Shares
-------------
<S> <C> <C>
Fondo Mutuo Operacional
BanChile................ 42,667 469,220
Fondo Mutuo Security
Check................... 180,231 728,377
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost
$1,197,295)............................ 1,197,597
-----------

TOTAL INVESTMENTS-95.31%
(Cost $115,940,005) (Notes A,D)........ 138,414,990
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES-4.69%...................... 6,815,133
-----------
NET ASSETS-100.00%...................... $145,230,123
-----------
-----------
- ---------------------------------------------------------
* Not readily marketable security.
+ Security is non-income producing.
++ SEC Rule 144A security. Such securities are traded
only among "qualified institutional buyers".
=/= Restricted security (See Note F).
(a) With an additional 198,837 rights attached, expiring
01/31/97, with no market value.
(b) With an additional 32,627 rights attached, expiring
01/18/97, with no market value.
(c) With an additional 49,205 rights attached, expiring
01/14/97, with no market value.
(d) Adjustable rate; rate resets based on one month
London Interbank Offered Rate (LIBOR).
ADR American Depositary Receipts.
ADS American Depositary Shares.
CPO Ordinary Participation Certificates.
FRN Floating Rate Notes.
GDR Global Depositary Receipts.
IDU Interest Due Bond.
ON Ordinary Shares.
PIK Payment-in-Kind.
PN Preferred Shares.
PNB Preferred Shares, Class B.
USD United States Dollars.
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------

THE LATIN AMERICA EQUITY FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost
$115,940,005) (Note A)................. $138,414,990
Cash (including $2,198,100 of foreign
currencies with a cost of $2,218,163)
(Note A)............................... 8,218,777
Receivables:
Interest.............................. 316,600
Dividends............................. 88,273
Investments sold...................... 11,884
Prepaid expenses........................ 3,063
------------
Total Assets............................ 147,053,587
------------

LIABILITIES
Payables:
Investments purchased................. 1,204,412
Advisory fees (Note B)................ 386,618
Administration fees (Note B).......... 47,136
Other accrued expenses................ 185,298
------------
Total Liabilities....................... 1,823,464
------------
NET ASSETS (applicable to 8,598,377
shares of common stock outstanding)
(Note C)............................... $145,230,123
------------
------------

NET ASSET VALUE PER SHARE ($145,230,123
DIVIDED BY 8,598,377)................. $16.89
------------
------------

NET ASSETS CONSIST OF
Capital stock, $0.001 par value;
8,598,377 shares issued and outstanding
(100,000,000 shares authorized)........ $ 8,598
Paid-in capital......................... 132,516,921
Undistributed net investment income..... 1,375,166
Accumulated net realized loss on
investments and foreign currency
related transactions................... (11,124,258)
Net unrealized appreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currencies..................... 22,453,696
------------
Net assets applicable to shares
outstanding............................ $145,230,123
------------
------------
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends............................. $ 3,199,199
Interest.............................. 1,036,827
Less: Foreign taxes withheld.......... (159,524)
-----------
Total Investment Income............... 4,076,502
-----------
Expenses:
Investment advisory fees (Note B)..... 1,747,792
Custodian fees........................ 264,882
Administration fees (Note B).......... 197,945
Audit and legal fees.................. 84,032
Printing.............................. 70,650
Accounting fees....................... 59,563
Directors' fees....................... 38,076
Insurance............................. 33,720
Amortization of organizational
costs................................ 33,144
Transfer agent fees................... 20,281
NYSE listing fees..................... 16,214
Other................................. 11,771
-----------
Total Expenses........................ 2,578,070
Less: Fee waivers (Note B)............ (160,507)
-----------
Net Expenses........................ 2,417,563
-----------
Net Investment Income................. 1,658,939
-----------

NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments........................... 539,800
Foreign currency related
transactions......................... (242,946)
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities
denominated in foreign currencies...... 15,398,607
-----------
Net realized and unrealized gain on
investments and foreign currency
related transactions................... 15,695,461
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $17,354,400
-----------
-----------
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the Years Ended December
31,
-----------------------------
1996 1995
<S> <C> <C>
-----------------------------

INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income................. $ 1,658,939 $ 551,342
Net realized gain/(loss) on
investments and foreign currency
related transactions................. 296,854 (11,551,955)
Net change in unrealized appreciation
in value of investments and
translation of other assets and
liabilities denominated in foreign
currencies........................... 15,398,607 (12,583,670)
------------ ------------
Net increase/(decrease) in net
assets resulting from operations... 17,354,400 (23,584,283)
------------ ------------
Dividends and distributions to
shareholders:
Net investment income................. (515,844) (46,502)
Net realized gain on investments...... -- (2,015,530)
------------ ------------
Total dividends and distributions to
shareholders....................... (515,844) (2,062,032)
------------ ------------
Capital share transactions (Note C):
Proceeds from 980 shares and 50,687
shares, respectively, issued in
reinvestment of dividends............ 14,459 819,530
Reduction of offering costs charged to
capital.............................. -- 75,659
------------ ------------
Net increase in net assets resulting
from capital share transactions.... 14,459 895,189
------------ ------------
Total increase/(decrease) in net
assets............................. 16,853,015 (24,751,126)
------------ ------------

NET ASSETS
Beginning of year....................... 128,377,108 153,128,234
------------ ------------
End of year (including undistributed net
investment income of $1,375,166 and
$475,017, respectively)................ $145,230,123 $128,377,108
------------ ------------
------------ ------------
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
17
<PAGE>
- --------------------------------------------------------------------------------

THE LATIN AMERICA EQUITY FUND, INC.

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the Period
For the Years Ended December 31, October 30, 1991*
----------------------------------------------------- through
1996 1995 1994+ 1993+ 1992 December 31, 1991
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period................. $14.93 $17.92 $22.50 $14.37 $15.44 $13.85 **
--------- --------- --------- --------- --------- -------
Net investment income................................ 0.19 0.06 0.01 0.11 0.21 0.06
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions........................................ 1.83 (2.81) 0.96 8.75 0.43 1.60
--------- --------- --------- --------- --------- -------
Net increase/(decrease) in net assets resulting from
operations.......................................... 2.02 (2.75) 0.97 8.86 0.64 1.66
--------- --------- --------- --------- --------- -------
Dividends and distributions to shareholders:
Net investment income.............................. (0.06) -- (0.17) -- (0.21) (0.06 )
Net realized gain on investments and foreign
currency
related transactions.............................. -- (0.24) (3.10) (0.75) (1.32) (0.01 )
In excess of net realized gain..................... -- -- -- -- (0.18) --
--------- --------- --------- --------- --------- -------
Total dividends and distributions to shareholders.... (0.06) (0.24) (3.27) (0.75) (1.71) (0.07 )
--------- --------- --------- --------- --------- -------
Effect of reduction of accrued offering costs........ -- -- -- 0.02 -- --
Dilution due to capital share rights offering........ -- -- (2.28) -- -- --
--------- --------- --------- --------- --------- -------
Net asset value, end of period....................... $16.89 $14.93 $17.92 $22.50 $14.37 $15.44
--------- --------- --------- --------- --------- -------
--------- --------- --------- --------- --------- -------
Market value, end of period.......................... $14.000 $12.875 $17.625 $25.625 $14.000 $13.500
--------- --------- --------- --------- --------- -------
--------- --------- --------- --------- --------- -------
Total investment return(a)........................... 9.18% (25.65)% (17.78)% 89.35% 16.49% (2.73 )%
--------- --------- --------- --------- --------- -------
--------- --------- --------- --------- --------- -------

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted).............. $145,230 $128,377 $153,128 $135,573 $86,359 $92,751
Ratio of expenses to average net assets(d)........... 1.69% 1.81% 1.70% 2.00% 2.20% 2.35 %(b)
Ratio of expenses to average net assets,
excluding fee waivers............................... 1.80% 2.15% -- -- -- --
Ratio of net investment income to average net
assets.............................................. 1.16% 0.64% 0.28% 0.63% 1.27% 2.46 %(b)
Portfolio turnover rate.............................. 43.22% 27.05% 68.46% 49.48% 68.70% 11.58 %(c)
Average commission rate per share(e)................. $0.0001 -- -- -- -- --
</TABLE>

- ---------------------------------------------------------------------------
* Commencement of investment operations.
** Initial public offering price of $15.00 per share less underwriting
discount of $1.05 per share and offering expenses of $0.10 per share.
+ Based on average shares outstanding.
(a) Total investment return at market value is based on the changes in
market price of a share during the period and assumes reinvestment of
dividends and distributions, if any, at actual prices pursuant to the
to the Fund's Dividend Reinvestment Plan. Total investment return does
not reflect brokerage commissions or initial underwriting discounts
and has not been annualized.
(b) Annualized.
(c) Not annualized.
(d) Ratios reflect actual expenses incurred by the Fund. Amounts are net
of fee waivers and inclusive of taxes.
(e) Disclosure is required for fiscal years beginning on or after
September 1, 1995. Represents average commission rate per share
charged to the Fund on purchases and sales of investments during the
period.

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
18
<PAGE>
- --------------------------------------------------------------------------------

THE LATIN AMERICA EQUITY FUND, INC.

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE A. SIGNIFICANT ACCOUNTING POLICIES

The Latin America Equity Fund, Inc. (the "Fund") was incorporated in Maryland on
September 16, 1991 and commenced investment operations on October 30, 1991. The
Fund is registered under the Investment Company Act of 1940, as amended, as a
closed-end, non-diversified management investment company. Significant
accounting policies are as follows:

MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make certain
estimates and assumptions that may affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.

PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All equity securities for which market quotations are
readily available are valued at the last sales price or lacking any sales, at
the closing price last quoted for the securities (but if bid and asked
quotations are available, at the mean between the current bid and asked prices).
Securities that are traded over-the-counter are valued at the mean between the
current bid and the asked prices. All other securities and assets are valued at
fair value as determined in good faith by the Board of Directors. Short-term
investments having a maturity of 60 days or less are valued on the basis of
amortized cost. The Board of Directors has established general guidelines for
calculating fair value of non-publicly traded securities. At December 31, 1996,
the Fund held 6.05% of its net assets in securities valued in good faith by the
Board of Directors with an aggregate cost of $9,037,463 and fair value of
$8,787,927. The net asset value per share of the Fund is calculated weekly, at
the end of each month and at any other times determined by the Board of
Directors.

CASH: Deposits held at Brown Brothers Harriman & Co., the Fund's custodian, in a
variable rate account are classified as cash. At December 31, 1996, the interest
rate was 5.00% which resets on a daily basis. Amounts on deposit are generally
available on the same business day.

INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and U.S.
federal income tax purposes. Interest income is recorded on an accrual basis;
dividend income is recorded on the ex-dividend date.

TAXES: No provision is made for U.S. federal income or excise taxes as it is the
Fund's intention to continue to qualify as a regulated investment company and to
make the requisite distributions to its shareholders which will be sufficient to
relieve it from all or substantially all U.S. federal income and excise taxes.

At December 31, 1996, the Fund had a capital loss carryover of $11,029,324 of
which $7,132,493 expires in 2003 and $3,896,831 expires in 2004.

Income received by the Fund from sources within Latin America may be subject to
withholding and other taxes imposed by such countries. Also, certain Latin
American countries impose taxes on funds remitted or repatriated from such
countries.

The Fund is subject to a 10% Chilean repatriation tax with respect to all
remittances from Chile in excess of original invested capital. For the year
ended December 31, 1996, the Fund incurred no such tax.

FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:

- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and

(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.

The Fund does not isolate that portion of gains and losses in investments in
equity securities which is due to changes in the foreign exchange rates from
that which is due to changes in market prices of equity securities. Accordingly,
realized and unrealized foreign currency gains and losses with respect to such
securities are included in the reported net realized and unrealized gains and
losses on investment transactions balances. However, the Fund does isolate the
effect of fluctuations in foreign exchange rates when determining the gain or
loss upon the sale or maturity of foreign currency denominated debt obligations
pursuant to U.S. federal income tax regulations, with such amount categorized as
foreign exchange gain or loss for both financial reporting and U.S. federal
income tax reporting purposes.

Net currency gains from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation/depreciation on investments, foreign currency holdings,
and other assets and liabilities denominated in foreign currencies.

Net realized foreign exchange losses represent foreign exchange gains and losses
from sales and maturities of debt securities, transactions in foreign currencies
and forward foreign currency contracts, exchange gains or losses realized
between the trade date and settlement date on security transactions, and the
difference between the amounts of interest and dividends recorded on the Fund's
books and the U.S. dollar equivalent of the amounts actually received.

DISTRIBUTIONS OF INCOME AND GAINS: The Fund distributes at least annually to
shareholders, substantially all of its net investment income and net realized
short-term capital gains, if any. The Fund determines annually whether to
distribute any net realized long-term capital gains in excess of net realized
short-term capital losses, including capital loss carryovers, if any. An
additional distribution may be made to the extent necessary to avoid the payment
of a 4% U.S. federal excise tax. Dividends and distributions to shareholders are
recorded by the Fund on the ex-dividend date.

The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.

At December 31, 1996, the Fund reclassified $242,946 of net realized losses from
foreign currency related transactions to undistributed net investment income.

OTHER: Securities denominated in currencies other than U.S. dollars are subject
to changes in value due to fluctuations in exchange rates.

Some countries require governmental approval for the repatriation of investment
income, capital or the proceeds of sales of securities by foreign investors. In
addition, if there is a deterioration in a country's balance of payments or for
other reasons, a country may impose temporary restrictions on foreign capital
remittances abroad. Amounts repatriated prior to the end of specified periods
may be subject to taxes as imposed by a foreign country.

The Latin American securities markets are substantially smaller, less liquid and
more volatile than the major securities markets in the United States.
Consequently, acquisition and disposition of securities by the Fund

- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
may be inhibited. A significant proportion of the aggregate market value of
equity securities listed on the major securities exchange are held by a small
number of investors. This may limit the number of shares for acquisition or
disposition by the Fund.

The Fund, subject to local investment limitations, may invest up to 10% of its
assets in non-publicly traded equity securities which may involve a high degree
of business and financial risk and may result in substantial losses. Because of
the current absence of any liquid trading market for these investments, the Fund
may take longer to liquidate these positions than would be the case for publicly
traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized on such sales could be less than
those originally paid by the Fund. Further, companies whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements applicable to companies whose securities are publicly
traded.

The Fund is permitted to engage in the trading of sovereign debt of Latin
American countries which involves a high degree of risk. The issuer of the debt
or the governmental authorities that control the repayment of the debt may be
unable or unwilling to repay principal and/or interest when due in accordance
with the terms of such debt. Sovereign debt in which the Fund will invest is
widely considered to have a credit quality below investment grade as determined
by U.S. rating agencies. As a result, sovereign debt may be regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations and involves
major risk exposure to adverse conditions.
NOTE B. AGREEMENTS

BEA Associates ("BEA") serves as the Fund's investment adviser, with respect to
all investments. As compensation for its advisory services, BEA receives from
the Fund an annual fee, calculated weekly and paid quarterly, equal to 1.25% of
the first $100 million of the Fund's average weekly net assets, 1.15% of the
next $50 million of the Fund's average weekly net assets and 1.05% of the Fund's
average weekly net assets in excess of $150 million. BEA has agreed to waive its
portion of the advisory fee previously payable to the Fund's former
sub-advisers. For the year ended December 31, 1996, BEA earned $1,747,792 for
advisory services, of which BEA waived $160,507. BEA also provides certain
administrative services to the Fund and is reimbursed by the Fund for costs
incurred on behalf of the Fund. For the year ended December 31, 1996, BEA was
reimbursed $11,555 for administrative services rendered to the Fund.

Celfin Servicios Financieros Limitada (formerly Celfin Agente de Valores
Limitada) ("Celfin") serves as the Fund's sub-adviser with respect to Chilean
investments. In return for its services, Celfin is paid a fee out of the
advisory fees payable to BEA, computed weekly and paid quarterly at an annual
rate of 0.25% of the Fund's average weekly net assets invested in Chile. For the
year ended December 31, 1996, Celfin earned $78,781 for sub-advisory services.

Bear Stearns Funds Management Inc. ("BSFM") serves as the Fund's U.S.
administrator. The Fund pays BSFM a monthly fee for its services rendered that
is computed weekly at an annual rate of 0.10% of the first $100 million of the
Fund's average weekly net assets and 0.08% of amounts in excess of $100 million.
For the year ended December 31, 1996, BSFM earned $134,629 for administrative
services.

BEA Administration, Administradora de Fondos de Inversion de Capital Extranjero
S.A. ("AFICE") serves as the Fund's Chilean administrator. For its services,
AFICE is paid an annual fee by the Fund equal to the greater of 2,000 U.F.'s
(approximately $62,700 at December 31, 1996) or 0.10% of the Fund's average
weekly net assets invested in Chile and an annual reimbursement of out-of-pocket
expenses not to exceed

- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
500 U.F.'s. Such fees are paid by AFICE to Celfin for certain administrative
services. An accounting fee is also paid to Celfin which is calculated and paid
quarterly at an annual rate of 205.32 U.F.'s (approximately $6,400 at December
31, 1996). For the year ended December 31, 1996, the Fund accrued $51,761 and
$6,522 for Celfin administration and accounting services, respectively.
NOTE C. CAPITAL STOCK

The authorized capital stock of the Fund is 100,000,000 shares of common stock,
$0.001 par value. Of the 8,598,377 shares outstanding at December 31, 1996, BEA
owned 7,169 shares.
NOTE D. INVESTMENT IN SECURITIES

For U.S. federal income tax purposes, the cost of securities owned at December
31, 1996 was $116,034,939. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currencies) of
$22,380,051, was composed of gross appreciation of $33,226,084 for those
investments having an excess of value over cost and gross depreciation of
$10,846,033 for those investments having an excess of cost over value.

For the year ended December 31, 1996, purchases and sales of securities, other
than short-term investments, aggregated $59,516,383 and $59,028,612,
respectively.
NOTE E. CREDIT AGREEMENT

The Fund, along with 18 other U.S. regulated management investment companies for
which BEA serves as investment adviser, has a credit agreement with The First
National Bank of Boston. The agreement provides that each fund is permitted to
borrow an amount equal to the lesser of $50,000,000 or 25% of the net assets of
the fund. However, at no time shall the aggregate outstanding principal amount
of all loans to any of the 19 funds exceed $50,000,000. The line of credit will
bear interest at (i) the greater of the bank's prime rate or the Federal Funds
Effective Rate plus 0.50% or (ii) the Adjusted Eurodollar Rate plus 1.50%. The
Fund had no amounts outstanding under the credit agreement during the year ended
December 31, 1996.

NOTE F. RESTRICTED SECURITIES

Certain of the Fund's investments are restricted as to resale and are valued at
the direction of the Fund's Board of Directors in good faith, at fair value,
after taking into consideration appropriate indications of value. The table
below shows the number of shares held, the acquisition dates, aggregate cost,
fair value as of December 31, 1996, share value of such security and percentage
of net assets which the security comprises.

<TABLE>
<CAPTION>
NUMBER FAIR VALUE AT VALUE PERCENT OF
SECURITY OF SHARES ACQUISITION DATES COST DECEMBER 31, 1996 PER SHARE NET ASSETS
- ----------------------------------- ----------- ------------------- ---------- ------------------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Venworld Telecommunications 40,160 7/30/92 & 8/07/92 $ 817,105 $ 543,780 $ 13.54 0.38
</TABLE>

The Fund may incur certain costs in connection with the disposition of the above
security.

- --------------------------------------------------------------------------------
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors
of The Latin America Equity Fund, Inc.:

We have audited the accompanying statement of assets and liabilities of The
Latin America Equity Fund, Inc., including the schedule of investments, as of
December 31, 1996 and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1996 by correspondence with the custodian, brokers and issuers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Latin America Equity Fund, Inc., as of December 31, 1996, 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 periods presented, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 21, 1997

- --------------------------------------------------------------------------------
23
<PAGE>
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)

On April 23, 1996, the annual meeting of shareholders of The Latin America
Equity Fund, Inc. (the "Fund") was held and the following matters were voted
upon:

(1) To re-elect five directors to the Board of Directors of the Fund.

<TABLE>
<CAPTION>
NAME OF DIRECTOR FOR WITHHELD NON-VOTES
- ----------------------------------------------------------------------------------- ---------- --------- ----------
<S> <C> <C> <C>
Dr. Enrique R. Arzac* 6,488,683 196,865 1,911,850
Peter A. Gordon 6,480,180 205,368 1,911,850
Daniel Sigg** 6,472,109 213,439 1,911,850
Martin M. Torino 6,476,544 209,004 1,911,850
Richard W. Watt 6,477,606 207,942 1,911,850
</TABLE>

- --------------
* On February 13, 1996, the Board of Directors increased the size of the Fund's
Board of Directors and Dr. Enrique R. Arzac was elected to fill the newly
created vacancy. The election of Dr. Arzac was submitted to the Fund's
shareholders for their ratification at the annual meeting of shareholders.
** Resigned effective February 11, 1997.

In addition to the directors re-elected at the meeting, James J. Cattano and
George W. Landau continue to serve as directors of the Fund. Emilio Bassini
resigned as a director of the Fund effective January 1, 1997.

(2) To ratify the selection of Coopers & Lybrand L.L.P. as independent public
accountants for the year ending December 31, 1996.

<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
6,525,578 116,852 43,118 1,911,850
</TABLE>

TAX INFORMATION (UNAUDITED)

The Fund is required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise its shareholders within 60 days of the Fund's fiscal year end
(December 31, 1996) as to the U.S. federal tax status of distributions received
by the Fund's shareholders in respect of such fiscal year. The $0.06 per share
dividend paid in respect of such fiscal year was from ordinary income. There
were no dividends which would qualify for the dividend received deduction
available to corporate shareholders.

The Fund does not intend to make an election under Section 853 to pass through
foreign taxes paid by the Fund to its shareholders. This information is given to
meet certain requirements of the Internal Revenue Code of 1986, as amended.
Shareholders should refer to their Form 1099-DIV to determine the amount
includable on their respective tax returns for 1996.

Notification for calendar year 1996 was mailed in January 1997. The notification
reflected the amount to be used by calendar year taxpayers on their U.S. federal
income tax returns along with Form 1099-DIV.

- --------------------------------------------------------------------------------
24
<PAGE>
TAX INFORMATION (UNAUDITED) (CONTINUED)

Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of their dividend and distributions. They will generally not be entitled
to a foreign tax credit or deduction for the foreign withholding taxes paid by
the Fund.

In general, dividends and distributions received by tax-exempt recipients (e.g.,
IRAs and Keoghs) need not be reported as taxable income for U.S. federal income
tax purposes. However, some retirement trusts (e.g., corporate, Keoghs and
403(b)(7) plans) may need this information for their annual information
reporting.

Shareholders are advised to consult their own tax advisers with respect to the
tax consequences of their investment in the Fund.

- --------------------------------------------------------------------------------
25
<PAGE>
DESCRIPTION OF DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN

Pursuant to The Latin America Equity Fund, Inc.'s (the "Fund") Dividend
Reinvestment and Cash Purchase Plan (the "Plan"), each shareholder will be
deemed to have elected, unless the Fund's transfer agent, as the Plan Agent (the
"Plan Agent"), is otherwise instructed by the shareholder in writing, to have
all distributions, net of any applicable U.S. withholding tax, automatically
reinvested in additional shares of the Fund. Shareholders who do not participate
in the Plan will receive all dividends and distributions in cash, net of any
applicable U.S. withholding tax, paid in dollars by check mailed directly to the
shareholder by the Plan Agent, as dividend-paying agent. Shareholders who do not
wish to have dividend and distributions automatically reinvested should notify
the Plan Agent for the Fund, at the address set forth below. Dividends and
distributions with respect to shares registered in the name of a broker-dealer
or other nominee (i.e., in "street name") will be reinvested under the Plan
unless such service is not provided by the broker or nominee or the shareholder
elects to receive dividends and distributions in cash. A shareholder whose
shares are held by a broker or nominee that does not provide a dividend
reinvestment program may be required to have his shares registered in his own
name to participate in the Plan. Investors who own shares of the Fund's common
stock registered in street name should contact the broker or nominee for details
concerning participation in the Plan.

Certain distributions of cash attributable to (a) some of the dividends and
interest amounts paid to the Fund and (b) certain capital gains earned by the
Fund that are derived from securities of certain foreign issuers are subject to
taxes payable by the Fund at the time amounts are remitted. Such taxes, if any,
will be borne by the Fund and allocated to all shareholders in proportion to
their interests in the Fund.

The Plan Agent serves as agent for the shareholders in administering the Plan.
If the Board of Directors of the Fund declares an income dividend or a capital
gains distribution payable either in the Fund's common stock or in cash, as
shareholders may have elected, non-participants in the Plan will receive cash
and participants in the Plan will receive common stock to be issued by the Fund.
If the market price per share on the valuation date equals or exceeds net asset
value per share on that date, the Fund will issue new share to the participants
valued at net asset value or, if the net asset value is less than 95% of the
market price on the valuation date, then valued at 95% of the market price. If
net asset value per share on the valuation date exceeds the market price per
share on that date, participants in the Plan will receive shares of stock from
the Fund valued at the market price.

The valuation date is the dividend or distribution payment date or, if that date
is not a New York Stock Exchange trading day, the next preceding trading day. If
the Fund should declare an income dividend or capital gains distributions
payable only in cash, the Plan Agent will, as agent for the participants, buy
Fund shares in the open market, on the New York Stock Exchange or elsewhere, for
the participants' accounts on, or shortly after, the payment date.

Participants in the Plan have the option of making additional cash payments to
the Plan Agent, semi-annually, in any amount from $100 to $3,000, for investment
in the Fund's common stock. The Plan Agent will use all funds received from
participants to purchase Fund shares in the open market on or about February 15
and August 15 of each year. Any voluntary cash payments received more than 30
days prior to these dates will be returned by the Plan Agent and interest will
not be paid on any uninvested cash payments. To avoid unnecessary cash
accumulations, and also to allow ample time for receipt and processing by the
Plan Agent, it is suggested that participants send in voluntary cash payments to
be received by the Plan Agent approximately 10 days before February 15 or August
15, as the case may be. A participant may withdraw a voluntary cash payment by
written notice, if the notice is received by the Agent not less than 48 hours
before the payment is to be invested. A

- --------------------------------------------------------------------------------
26
<PAGE>
DESCRIPTION OF DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)

participant's tax basis in his shares acquired through his optional investment
right will equal his cash payments to the Plan, including any cash payments used
to pay brokerage commissions allocable to his acquired shares.

The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of the
participant and each shareholder's proxy will include those shares purchased
pursuant to the Plan.

In the case of a shareholder, such as a bank, broker or nominee, that holds
shares for other who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are to participate in the
Plan.

There is no charge to participants for reinvesting dividends or capital gains
distributions payable in either stock or cash. The Plan Agent's fees for the
handling of reinvestment of such dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage charges with respect to shares
issued directly by the Fund as a result of dividends or capital gains
distributions payable either in stock of in cash. However, each participant will
be charged by the Plan Agent a pro rata share of brokerage commissions incurred
with respect to the Plan Agent's open market purchases in connection with
voluntary cash payments made by the participant or the reinvestment of dividends
or capital gains distributions payable only in cash. Brokerage charges for
purchasing small amounts of stock for individual accounts through the Plan are
expected to be less than the usual brokerage charges for such transactions
because the Plan agent will be purchasing stock for all participants in blocks
and prorating the lower commission thus obtainable. Brokerage commissions will
vary based on, among other things, the broker selected to effect a particular
purchase and the number of participants on whose behalf such purchase is being
made. The Fund cannot predict, therefore, whether the cost to a participant who
makes a voluntary cash payment will be less than if a participant were to make
an open market purchase of the Fund's common stock on his own behalf.

The receipt of dividends and distributions in stock under the Plan will not
relieve participants of any income tax (including withholding tax) that may be
payable on such dividends or distributions.

Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to notice of the termination sent to the members of the Plan at
least 30 days before the semi-annual contribution date, in the case of voluntary
cash payments, or the record date for dividends or distributions. The Plan also
may be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by at least 30 days written notice to members of the Plan. All
correspondence concerning the Plan should be directed to The First National Bank
of Boston, Investor Relations Department, P.O. Box 644, Mail Stop 45-02-09,
Boston, Massachusetts 02102-0644 or by telephone at 1-800-730-6001.

- --------------------------------------------------------------------------------
27
<PAGE>
SUMMARY OF GENERAL INFORMATION

The Fund--The Latin America Equity Fund, Inc.--is a closed-end, non-diversified
management investment company whose shares trade on the New York Stock Exchange.
Its investment objective is long-term capital appreciation through investments
primarily in Latin American equity securities. The Fund is managed and advised
by BEA Associates ("BEA"). BEA is a diversified asset manager, handling equity,
balanced, fixed income, international and derivative based accounts. Portfolios
include international and emerging market investments, common stocks, taxable
and non-taxable bonds, options, futures and venture capital. BEA manages money
for corporate pension and profit-sharing funds, public pension funds, union
funds, endowments and other charitable institutions and private individuals. As
of December 31, 1996, BEA managed approximately $31.3 billion in assets.

SHAREHOLDER INFORMATION

The market price is published in: THE NEW YORK TIMES (daily) under the
designation "LatAEqt" and THE WALL STREET JOURNAL (daily), and BARRON'S (each
Monday) under the designation "LatinAmEqty". The Fund's New York Stock Exchange
trading symbol is LAQ. Weekly comparative net asset value (NAV) and market price
information about The Latin America Equity Fund, Inc.'s shares are published
each Sunday in THE NEW YORK TIMES and each Monday in THE WALL STREET JOURNAL and
BARRON's, as well as other newspapers, in a table called "Closed End Funds".

THE BEA GROUP OF FUNDS

LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds or a prospectus on any of the open-end mutual funds listed
below. The prospectus contains more complete information, including fees,
charges and expenses, and should be read carefully before investing or sending
money.

<TABLE>
<S> <C>
CLOSED-END FUNDS BEA ADVISOR FUNDS
SINGLE COUNTRY OPEN-END MUTUAL FUNDS
The Brazilian Equity Fund, Inc. (BZL) BEA Emerging Markets Equity Fund
The Chile Fund, Inc. (CH) BEA Global Telecommunications
Fund
The First Israel Fund, Inc. (ISL) BEA High Yield Fund
The Indonesia Fund, Inc. (IF) BEA International Equity Fund
The Portugal Fund, Inc. (PGF)

MULTIPLE COUNTRY
The Emerging Markets Infrastructure Fund, Inc. (EMG)
The Emerging Markets Telecommunications Fund, Inc.
(ETF)
The Latin America Investment Fund, Inc. (LAM)

FIXED INCOME For shareholder information or a
BEA Income Fund, Inc. (FBF) copy of a prospectus for any of
BEA Strategic Income Fund, Inc. (FBI) the open-end mutual funds, please
call, 1-800-401-2230.
For closed-end fund information Visit our website on the
please call, 1-800-293-1232. Internet:
http://www.beafunds.com
</TABLE>

- --------------------------------------------------------------------------------
<PAGE>
DIRECTORS AND CORPORATE OFFICERS

William W. Priest, Chairman of the Board of Directors
Jr.

Richard W. Watt Director, President and Chief
Investment Officer

Dr. Enrique R. Arzac Director

James J. Cattano Director

Peter A. Gordon Director

George W. Landau Director

Martin M. Torino Director

Paul P. Stamler Senior Vice President

Michael A. Pignataro Chief Financial Officer and
Secretary

Rachel D. Manney Vice President and Treasurer

Wendy S. Setnicka Assistant Treasurer

INVESTMENT ADVISER

BEA Associates
One Citicorp Center
153 East 53rd Street
New York, NY 10022

ADMINISTRATOR

Bear Stearns Funds Management Inc.
245 Park Avenue
New York, NY 10167

CUSTODIAN

Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109

SHAREHOLDER SERVICING AGENT

The First National Bank of Boston
P.O. Box 1865
Mail Stop 45-02-62
Boston, MA 02105-1865

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103

LEGAL COUNSEL

Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022

[LOGO]
This report, including the financial statements herein, is sent
to the shareholders of the Fund for their information. It is not
a prospectus, circular or representation intended for use in the
purchase or sale of shares of the Fund or of any securities
mentioned in this report.

- --------------------------------------------------------------------------------