<PAGE>
THE BRAZILIAN
EQUITY FUND, INC.
- ------------------
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1997
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders....................................................................... 1
Portfolio Summary............................................................................ 7
Schedule of Investments...................................................................... 8
Statement of Assets and Liabilities.......................................................... 10
Statement of Operations...................................................................... 11
Statement of Changes in Net Assets........................................................... 12
Financial Highlights......................................................................... 13
Notes to Financial Statements................................................................ 14
Results of Annual Meeting for Shareholders................................................... 17
Description of InvestLink-SM- Program........................................................ 18
</TABLE>
PICTURED ON THE COVER IS THE BOLSA DE VALORES DO SAO PAULO STOCK EXCHANGE
("BOVESPA") LOCATED IN SAO PAULO, BRAZIL.
- --------------------------------------------------------------------------------
<PAGE>
LETTER TO SHAREHOLDERS
November 17, 1997
DEAR SHAREHOLDER:
I am pleased to report on the activities of The Brazilian Equity Fund, Inc. (the
"Fund") for the six months ended September 30, 1997.
PERFORMANCE
The Fund's net asset value ("NAV") at September 30, 1997 was $19.38 per share.
The Fund's total return (based on NAV) was 7.9% for the six months ended
September 30, 1997. By contrast, the Morgan Stanley Capital International Brazil
Market Index (the "Index") rose by 20.1% for the same period.
I attribute the Fund's underperformance mainly to a "large-cap effect" and
weakness in its consumer-related holdings. The large-cap effect, in which price
action in the most liquid stocks disproportionately affects the direction of the
overall market, was present in most markets globally and particularly pronounced
in Brazil. Relative to the Index, the Fund owned a lower percentage of
Telecomunicacoes Brasileiras S.A. ("Telebras") and Centrais Eletricas
Brasileiras S.A. ("Eletrobras"), the two stocks that regularly account for a
combined 70% of Brazilian daily trading volume. When Telebras shares experienced
strong appreciation, therefore, the Fund underperformed accordingly. I
underweighted Telebras and Eletrobras in part due to the need for prudent
diversification of Fund assets, as well as my view that better value was
available elsewhere in the telecommunications and electricity sectors. With
regard to consumer-related holdings, I have felt for some time that the
Brazilian consumer would be a key contributor to the resurgence of the nation's
economy. This has not yet occurred, unfortunately, and the Fund's
consumer-related shares have thus been weak.
COMMENTARY
The Brazilian equity market has experienced sharp volatility over the last few
months, including a major sell-off in July which was precipitated by
profit-taking when valuations had become quite stretched. This sell-off,
however, paled in comparison to the severe declines seen more recently. The
causes of the recent declines also are much more serious, since they are rooted
in fundamental concerns about the prospects for the entire stabilization process
seen in Brazil since the introduction of the Plano Real in 1994.
At the heart of the declines was a fear that currency weakness in Asia would
spill over into other economies in which fixed or semi-fixed exchange-rate
mechanisms are in place, and where there is a large dependence upon overseas
investment funding. Until Hong Kong and Korea began to experience problems,
Brazil had escaped most pressures from previous currency dislocation in Asia,
but investor perception shifted when these two "developed" markets experienced
such dislocation. Brazil was not the only market to suffer, as markets around
the world were hit by selling pressures.
The government responded in mid-November with a plan for spending cuts, tax
hikes and drastic increases in interest rates. I believe that the government has
demonstrated that it can act quickly and decisively to stabilize the currency
- --------------------------------------------------------------------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
and put the economy back on track. This stands in sharp contrast to those Asian
nations (e.g., Thailand, Malaysia) that have not yet made the hard choices and
taken the appropriate steps to steer their economies in a more positive
direction.
That is why I see a silver lining in the current cloud of gloom about Brazil's
prospects. I believe the government, at last, is willing to impose considerable
sacrifice in the near-term so as to pave the way for a much brighter future. Key
fiscal reform legislation whose passage had been assumed impossible until after
next year's elections now is being treated with great urgency by Congress. This
includes bills covering important changes in the size and compensation of the
federal bureaucracy as well as reduction of excesses in the social security
system.
All of these measures are intended to restore investor confidence. It is clear,
however, that the nation will experience a significant slowdown in growth for at
least the next year or so. If it succeeds in taming its fiscal and trade
deficits, though, the short-term pain should result in significant long-term
gain.
FEATURED STOCKS
As is my custom, I'd like to highlight a few specific companies in order to
provide some insight into how your money is invested. The following are three
representative illustrations of my stock selection process.
PETROLEO BRASILEIRO S.A.
Petroleo Brasileiro S.A., better-known as "Petrobras," was created in 1953 by
the Brazilian government as the federally-owned oil and gas monopoly. It
controls virtually all of the nation's production, refining, transportation and
importation of oil and gas, and holds a dominant 34% share of distribution. It
simultaneously is Brazil's largest company and only integrated oil company, the
second-largest oil and gas company in South America in terms of sales
(Venezuela's PDVSA is first) and the world's 16th-largest oil and gas company.
The government sold a 26% equity stake in Petrobras to the public in 1993.
Numerous aspects of Brazil's energy profile augur well for Petrobras. For
example, Brazil is South America's largest potential energy market and has huge
proven reserves, but domestic production does not yet meet burgeoning domestic
demand. Brazil's offshore oil and gas basins are among the world's largest,
drilling success rates are high and the size of new discoveries tends to be well
above industry average. The government, furthermore, is actively encouraging the
substitution of natural gas for the more prevalent hydro power as a source of
electricity.
Petrobras's official monopoly ended this past August with the enactment of a new
hydrocarbons law to restructure the oil and gas businesses in Brazil. Close
analysis reveals that, unlike similar legislation targeted at other monopoly
sectors (e.g., telecommunications), the hydrocarbons law is not primarily
motivated by the need to open oil and gas to market-based competition. Instead,
it is designed to more fully develop Brazil's own energy resources in order to
satisfy domestic demand.
- --------------------------------------------------------------------------------
2
<PAGE>
LETTER TO SHAREHOLDERS
The new law is at the heart of my investment thesis for Petrobras. I believe
that the specific circumstances of the company's de-monopolization should
greatly enhance, rather than detract from, its future prospects:
- - The law releases Petrobras not only from its reliance on government approval
of most decisions, but also from its obligations as a vehicle for social and
political policies, notably in the form of onerous price subsidies. As a
result, the company will have unprecedented scope to charge market prices and
reduce costs.
- - The law effectively preserves Petrobras's monopoly in oil refining and gas
processing by allowing only companies with head offices in Brazil to build
and operate new refineries and processing facilities.
- - The law gives Petrobras a three-year window in which to select and
exclusively develop its most profitable projects. When the three years end,
oil and gas prices will be permitted to freely fluctuate at international
levels.
- - The law allows Petrobras to engage in joint ventures with foreign companies.
This gives it access to new sources of capital and expertise while allowing
it to defray costs. In return for its cooperation, Petrobras should receive
opportunities to participate in attractive projects elsewhere in the world.
Several other company-specific factors should be cited as well. Petrobras has 40
years of near-exclusive knowledge of Brazilian energy and geology. Its history
as a government entity gives it unrivalled political access. It is a world
leader in deep-water offshore drilling technology. Its dominance in distribution
means that it will earn riskless fees from other companies' dependence on its
pipeline network. For potential competitors, each of these serves as a major
barrier to entry into the Brazilian market while, simultaneously, conferring
great appeal on Petrobras as a joint venture partner.
Finally, I note that the government plans to reduce its equity ownership of
Petrobras at some point in 1998, down to the legally required minimum of 50%
plus one share from the current 72.3%. It is reasonable to conclude that the
government will do everything in its power to maximize the company's value in
anticipation of the sale. Investors should benefit accordingly.
COMPANHIA DE GAS DE SAO PAULO
Another combination energy/privatization play in the Fund is Companhia de Gas de
Sao Paulo ("Comgas"), the natural gas distributor in much of the state of Sao
Paulo. Comgas was founded by British entrepreneurs in 1869 as the Sao Paulo Gas
Company to provide gas for street illumination. Over time, the company expanded
into a wider variety of gas applications and was nationalized in 1959. The state
government passed equity control on to Companhia Energetica de Sao Paulo
("CESP"), the state's electricity generator, in 1984.
Major ownership of Comgas is divided among CESP (59.1% of voting equity), Shell
do Brasil (19.9%), the Sao Paulo state government (17.0%) and Companhia Paulista
de Forca e Luz ("CPFL"), the state electricity distributor (3.9%). Full
privatization is slated to occur in April or May 1998, when the state will
auction its shares to a strategic buyer. [Note: most public ownership consists
of 2.1 million locally traded preferred shares.]
- --------------------------------------------------------------------------------
3
<PAGE>
LETTER TO SHAREHOLDERS
Some of the same factors that make Petrobras such a promising opportunity also
apply to Comgas:
1) The supply and demand equation works squarely in the company's favor. With
the nation chronically short of electricity and gas's proportion of total
energy consumption in Brazil expected to rise to 12.0% in 2010 from 2.6%
currently, it is clear that gas will play a prominent role in satisfying
national demand. The industrial sector is Brazil's largest consumer of gas,
furthermore, and Comgas's service area in Sao Paulo state is Brazil's most
industrialized region.
2) Comgas's inability to meet demand in its territory means that it can sell any
gas it can obtain. When a huge gas pipeline connecting Bolivia to Sao Paulo
city becomes fully operational in late 1998, therefore, the company's 50%
share of the piped-in Bolivian gas should cause revenues and profits to surge
for several years. I view this access to new supply as a major growth driver
for Comgas.
3) One of the by-products of Comgas's longtime status as a government entity is
a low level of efficiency/productivity, implying that substantial upside
exists in this area.
4) Privatization should be beneficial for shareholders. It will give Comgas free
rein to cut costs, thus enhancing its potential profitability. The state
government's interests, in addition, are best served by maximizing the value
of Comgas shares.
I see even further cause for investor optimism about Comgas. It has significant
strategic appeal for potential acquirors. Not only is it the dominant
distributor in what arguably is South America's most attractive gas market, but
it also is the only pure Latin American gas distributor whose shares trade
publicly. The preference of many industrial users for natural gas should help
attract increased foreign-company presence to Comgas's service area. Finally,
recent privatizations in Rio de Janeiro state established valuation parameters
for gas distributors that far exceeded investor expectations.
UNIAO DE BANCOS BRASILEIROS S.A.
Since our last report, I have added shares in Uniao de Bancos Brasileiros S.A.
("Unibanco") to the portfolio. Unibanco is Brazil's third-largest private bank
in terms of assets and loans and traces its origins back to 1924, when a trading
company established by Joao Moreira Salles obtained permission to operate a
bank. The institution now known as Unibanco was formed in 1967 with the merger
of the Moreira Salles Bank and Banco Agricola Mercantil. The late-1995
acquisition of selected assets and liabilities of the defunct Banco Nacional
doubled the size of Unibanco's branch network and client base.
The Moreira Salles family still controls Unibanco via its majority stake in
Unibanco Holdings, which owns 49% of Unibanco. Other large shareholders include
Germany's Commerzbank (7.2%) and Japan's Dai-Ichi Kangyo Bank (2.3%). The fact
that Unibanco can attract and maintain such long-term investment from major
foreign institutions is indicative of its stability and performance over the
years.
- --------------------------------------------------------------------------------
4
<PAGE>
LETTER TO SHAREHOLDERS
I like Unibanco because it combines several attractive characteristics:
- - DIVERSIFICATION - Unibanco's grouping of core businesses is unlike that of any
other Brazilian bank and includes retail banking, commercial banking,
insurance and investment management. This level of diversification gives
Unibanco a much wider potential earnings stream and serves as a defense
against economic cyclicality.
- - INSURANCE AND INVESTMENT MANAGEMENT - Unibanco Seguros, the bank's insurance
business, is Brazil's sixth-largest in terms of written premiums. Unibanco
Asset Management is the third-largest Brazilian investment manager and a major
player among institutional and retail investors alike. Both units are in
businesses with tremendous growth potential within Brazil and are Unibanco's
fastest-growing operations.
- - COST-REDUCTION AND EFFICIENCY - Attentiveness to costs and efficiency has long
been a hallmark of Unibanco management and is most recently demonstrated by
the rapid integration of the Banco Nacional acquisition. The bank's
world-class technology is instrumental in this regard.
- - CONSERVATIVE LENDING POLICY - The loan portfolio is well-diversified. Most
loans are predominantly short-term and made to high-credit corporations,
resulting in a low default rate. Relative to other Brazilian banks, asset
quality is among the highest and loan non-performance among the lowest.
- - STRATEGIC REDIRECTION - Unibanco has focused its retail business on
high-income individuals for the past decade. With the acquisition of Banco
Nacional and a majority stake in consumer lender Fininvest, however, it has
extended its reach to the much larger universe of middle- and lower-income
customers, who tend to utilize more services at higher profit margins. This
should be of particular benefit to Unibanco's credit card operations, which
already are the largest in Brazil.
I add to the above that Unibanco shares are attractively valued at current
prices. The company's recent $1 billion issue of Global Depositary Receipts,
furthermore, will greatly increase trading liquidity and visibility among
investors worldwide. Overall, we consider Unibanco a stock with excellent
potential for long-term appreciation.
OUTLOOK
Prudence suggests that, at least for the next few months, a cautious stance on
Brazilian equities is most realistic. There is no doubt that the market will
remain prone to weakness if there is another series of shocks in Asia. With the
market likely to experience further volatility, it is probable that many stocks
will be unfairly tarred, regardless of the strength of individual company
fundamentals. The fact that some stocks have experienced aggressive selling in
recent weeks should give rise to great buying opportunities, which I fully
intend to exploit.
In addition, it is not necessarily accurate to say that prospects are poor for
all sectors of the market. Telecommunications, for example, should not suffer as
much as some believe, since demand for basic telephone service is sufficiently
high to support good revenue gains. In addition, growth in 1998 is unlikely to
be dampened by the government's slashing of funds budgeted for Telebras's
capital investment, since 1998 will benefit from investments already made in
1996 and 1997. Similar factors apply to electricity as well. As for the major
Brazilian
- --------------------------------------------------------------------------------
5
<PAGE>
LETTER TO SHAREHOLDERS
banks, their commitment to strong capital structures and conservative lending
policies provides reasonable protection against most negative scenarios.
Overall, many sectors have reconfigured their costs and balance sheets, so the
fallout may be less severe than currently perceived.
Longer-term, I remain optimistic. Both the number and pace of privatizations are
set to significantly increase in 1998. The recent announcements of the
respective plans for Telebras and Eletrobras are very positive in this regard.
The government's tough fiscal measures should result in a marked decline in the
fiscal deficit, which also will allow room for interest rates to fall. Finally,
I believe that President Cardoso will be re-elected in 1998 and, as a result,
commitment to the Plano Real will be maintained at the highest levels of
government. At current prices, there is clear value available in a wide range of
stocks in Brazil, and absent a serious global crisis, investors should be
well-rewarded over the medium term.
I appreciate your investment in the Fund and would be pleased to respond to your
questions or comments.
Respectfully,
[SIG]
Richard W. Watt
President and Chief Investment Officer*
- --------------------------------------------------------------------------------
*Richard W. 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 August 15, 1995. He joined BEA Associates on August 2, 1995.
Mr. Watt was formerly associated with Gartmore Investment Limited in London,
where he was head of emerging markets investments and research. In this
capacity, he led a team of four portfolio managers and was manager of a
closed-end Latin American fund focusing on smaller companies. Before joining
Gartmore Investment Limited in 1992, Mr. Watt was a director of Kleinwort Benson
International Investments in London, where he was responsible for research,
analysis and trading of equities in Latin America and other regions. Mr. Watt is
a Director, President and Chief Investment Officer of The Chile Fund, Inc., The
Emerging Markets Infrastructure Fund, Inc., The Emerging Markets
Telecommunications Fund, Inc., The First Israel Fund, Inc., The Latin America
Equity Fund, Inc., The Latin America Investment Fund, Inc., and The Portugal
Fund, Inc.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
THE BRAZILIAN EQUITY FUND, INC.
PORTFOLIO SUMMARY - AS OF SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
AS A PERCENT OF NET ASSETS --
Banking --
Cable Television --
--
--
Electric Distribution --
Electric Generation --
Food & Beverages --
Holding Companies --
Other --
--
--
Retail --
Steel --
Telecommunications --
Textiles --
TOP 10 HOLDINGS, BY ISSUER
<TABLE>
<CAPTION>
Percent of Net
Holding Sector Assets
<C> <S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
1. Companhia de Saneamento Basico do Estado de Sao Paulo Utilities 9.6
- --------------------------------------------------------------------------------------------------------------------------
2. Telecomunicacoes Brasileiras S.A. Telecommunications 8.9
- --------------------------------------------------------------------------------------------------------------------------
3. Petroleo Brasileiro S.A. Oil & Natural Gas 7.1
- --------------------------------------------------------------------------------------------------------------------------
4. Companhia Energetica de Minas Gerais Utilities 6.1
- --------------------------------------------------------------------------------------------------------------------------
5. Companhia Paulista de Forca e Luz Utilities 6.1
- --------------------------------------------------------------------------------------------------------------------------
6. Companhia Tecidos Norte de Minas S.A. Textiles 5.3
- --------------------------------------------------------------------------------------------------------------------------
7. Santista Alimentos S.A. Food & Beverages 5.2
- --------------------------------------------------------------------------------------------------------------------------
8. Companhia de Eletricidade do Estado de Rio de Janeiro Electric Distribution 4.7
- --------------------------------------------------------------------------------------------------------------------------
9. Banco do Estado de Sao Paulo S.A. Banking 4.0
- --------------------------------------------------------------------------------------------------------------------------
10. Companhia Riograndense Telecom Telecommunications 3.3
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
THE BRAZILIAN EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
<S> <C> <C>
- --------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-96.78%
BANKING-9.54%
Banco do Estado de Sao Paulo S.A. PN+... 106,965,000 $ 5,077,066
Banco Itau S.A. PN...................... 4,526,000 2,924,931
Uniao de Bancos Brasileiros S.A. GDR+... 112,860 4,133,498
-----------
12,135,495
-----------
BUSINESS SERVICES-0.74%
Multibras da Amazonia S.A. PN........... 1,132,000 940,277
-----------
CABLE TELEVISION-2.08%
Multicanal Participacoes S.A. ADR+...... 249,000 2,645,625
-----------
CAPITAL GOODS-1.79%
Trafo Equipamentos Electricos S.A.
PN+.................................... 906,205 2,274,715
-----------
CHEMICALS-0.20%
S.A. White Martins ON................... 110,100 256,269
-----------
CONSUMER GOODS-0.75%
Dixie Toga S.A. PN...................... 1,768,539 952,433
-----------
ELECTRIC DISTRIBUTION-10.16%
Centrais Eletricas Cachoeira Dourada+... 5,864,000 936,699
Companhia de Electricidade do Estado da
Bahia ON+.............................. 39,642,300 2,858,602
Companhia de Eletricidade do Estado de
Rio de Janeiro ON+..................... 7,886,000,000 5,974,515
Espirito Santo Centrais Eletricas....... 16,800 3,158,961
-----------
12,928,777
-----------
ELECTRIC GENERATION-3.14%
Companhia Paranaense de Energia ADR+.... 126,185 2,176,691
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
ELECTRIC GENERATION (CONTINUED)
Companhia Paranaense de Energia PNB..... 104,593,000 $ 1,812,990
-----------
3,989,681
-----------
FOOD & BEVERAGES-7.73%
Brazil Fast Food Corp.+................. 500,000 1,062,500
Brazil Fast Food Corp., Warrants
(expiring 9/30/01)+.................... 250,000 31,250
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar ADR................ 90,500 2,036,250
Companhia Cervejaria Brahma ON.......... 57,495 42,247
Santista Alimentos S.A. ON.............. 3,105,000 6,660,353
-----------
9,832,600
-----------
OIL & NATURAL GAS-8.65%
Companhia de Gas de Sao Paulo PN........ 19,000,000 1,959,746
Petroleo Brasileiro S.A. PN............. 31,786,997 9,052,570
-----------
11,012,316
-----------
RETAIL-3.72%
Globex Utilidades S.A. PN+.............. 307,300 3,716,604
Makro Atacadista S.A.................... 773,000 1,023,093
-----------
4,739,697
-----------
TELECOMMUNICATIONS-16.67%
Companhia Riograndense Telecom PN, A
Shares................................. 3,203,800 4,161,387
Telecomunicacoes Brasileiras S.A. ON.... 97,800,000 11,292,684
Telecomunicacoes de Minas Gerais S.A.,
PNB Receipts+.......................... 53,410 7,873
Telecomunicacoes de Sao Paulo S.A. PN... 8,904,725 2,714,862
Telecomunicacoes de Sao Paulo S.A., PN
Receipts+.............................. 388,048 118,308
Telecomunicacoes do Rio de Janeiro S.A.
PN..................................... 18,942,200 2,610,809
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
THE BRAZILIAN EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
Telecomunicacoes do Rio de Janeiro S.A.,
PN, Receipts+.......................... 2,245,774 $ 309,536
-----------
21,215,459
-----------
TEXTILES-6.60%
Companhia Tecidos Norte de Minas S.A.
PN..................................... 17,611,028 6,751,845
Wembly Roupas S.A. PN................... 172,000,000 1,648,487
-----------
8,400,332
-----------
UTILITIES-25.01%
Companhia de Saneamento Basico do Estado
de Sao Paulo ON........................ 46,550,000 12,194,651
Companhia Energetica de Brasilia........ 17,649,000 2,593,664
Companhia Energetica de Minas Gerais
PN..................................... 139,381,404 7,786,173
Companhia Energetica do Ceara PN, A
Shares+................................ 311,125,000 1,519,345
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
Companhia Paulista de Forca e Luz ON+... 42,777,841 $ 7,731,288
-----------
31,825,121
-----------
TOTAL INVESTMENTS-96.78%
(Cost $107,677,928) (Notes A,D)....................... 123,148,797
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES-3.22%...
4,101,359
-----------
NET ASSETS-100.00%..................................... $127,250,156
-----------
-----------
- ---------------------------------------------------------
+ Security is non-income producing.
ADR American Depositary Receipts.
GDR Global Depositary Receipts.
ON Ordinary Shares.
PN Preferred Shares.
PNB Preferred Shares, Class B.
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
9
<PAGE>
- --------------------------------------------------------------------------------
THE BRAZILIAN EQUITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost
$107,677,928) (Note A)................. $123,148,797
Cash (Note A)........................... 4,621,353
Dividends receivable.................... 3,137
Prepaid expenses........................ 26,454
------------
Total Assets............................ 127,799,741
------------
LIABILITIES
Payables:
Advisory fee (Note B)................. 303,844
Administration fees (Note B).......... 14,907
Other accrued expenses................ 230,834
------------
Total Liabilities....................... 549,585
------------
NET ASSETS (applicable to 6,564,841
shares of common stock outstanding)
(Note C)............................... $127,250,156
------------
------------
NET ASSET VALUE PER SHARE ($127,250,156
DIVIDED BY 6,564,841)................. $19.38
------------
------------
NET ASSETS CONSIST OF
Capital stock, $0.001 par value;
6,564,841 shares issued and outstanding
(100,000,000 shares authorized)........ $ 6,565
Paid-in capital......................... 84,174,088
Undistributed net investment income..... 617,948
Accumulated net realized gain on
investments and foreign currency
related transactions................... 26,980,696
Net unrealized appreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currency....................... 15,470,859
------------
Net assets applicable to shares
outstanding............................ $127,250,156
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
THE BRAZILIAN EQUITY FUND, INC.
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends............................. $ 1,648,718
Interest.............................. 106,035
Less: Foreign taxes withheld.......... (45,529)
------------
Total Investment Income............... 1,709,224
------------
Expenses:
Investment advisory fees (Note B)..... 824,168
Custodian fees (Note B)............... 144,598
Administration fees (Note B).......... 66,485
Audit and legal fees.................. 59,803
Accounting fees....................... 39,922
Printing.............................. 35,136
Directors' fees....................... 18,300
Transfer agent fees................... 14,640
NYSE listing fees..................... 8,107
Insurance............................. 6,558
Other................................. 15,871
Brazilian taxes (Note A).............. 194,769
------------
Total Expenses........................ 1,428,357
Less: Fee waivers (Note B)............ (224,723)
------------
Net Expenses........................ 1,203,634
------------
Net Investment Income................. 505,590
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments........................... 22,153,342
Foreign currency related
transactions......................... (252,531)
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities
denominated in foreign currency........ (13,043,350)
------------
Net realized and unrealized gain on
investments and foreign currency
related transactions................... 8,857,461
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $ 9,363,051
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
11
<PAGE>
- --------------------------------------------------------------------------------
THE BRAZILIAN EQUITY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months For the Fiscal Year
Ended September 30, 1997 Ended
(unaudited) March 31, 1997
<S> <C> <C>
-------------------------------------------------
INCREASE IN NET ASSETS
Operations:
Net investment income................. $ 505,590 $ 364,372
Net realized gain on investments and
foreign currency related
transactions......................... 21,900,811 7,673,687
Net change in unrealized appreciation
in value of investments and
translation of other assets and
liabilities denominated in foreign
currency............................. (13,043,350) 24,050,734
------------------------ -------------------
Net increase in net assets resulting
from operations.................... 9,363,051 32,088,793
------------------------ -------------------
Dividends to shareholders:
Net investment income................. -- (137,862)
------------------------ -------------------
Capital share transactions (Note C):
Proceeds from the sale of 1,930,835
shares issued in rights offering..... -- 20,636,740
Offering costs charged to capital..... -- (396,250)
------------------------ -------------------
Net increase in net assets resulting
from capital share transactions.... -- 20,240,490
------------------------ -------------------
Total increase in net assets........ 9,363,051 52,191,421
------------------------ -------------------
NET ASSETS
Beginning of period..................... 117,887,105 65,695,684
------------------------ -------------------
End of period (including undistributed
net investment income of $617,948 and
$112,358, respectively)................ $127,250,156 $117,887,105
------------------------ -------------------
------------------------ -------------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
THE BRAZILIAN 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 Six Months For the Period
Ended For the Fiscal Years Ended March 31, April 10, 1992*
September 30, 1997 ------------------------------------------ through
(unaudited) 1997 1996 1995 1994 March 31, 1993
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period..... $17.96 $14.18 $13.02 $20.80 $11.83 $13.79 **
---------- --------- --------- --------- --------- ---------------
Net investment income/(loss)............. 0.08 0.10+ 0.06 (0.12) (0.04) 0.06
Net realized and unrealized gain/(loss)
on investments and foreign currency
related transactions.................... 1.34 5.69+ 3.32++ (3.80) 9.09 (1.99 )
---------- --------- --------- --------- --------- ---------------
Net increase/(decrease) in net assets
resulting from operations............... 1.42 5.79 3.38 (3.92) 9.05 (1.93 )
---------- --------- --------- --------- --------- ---------------
Dividends and distributions to
shareholders:
Net investment income.................. -- (0.02) -- -- (0.08) (0.03 )
In excess of net investment income..... -- -- -- (0.03) -- --
Net realized gains on investments...... -- -- (2.22) (3.83) -- --
---------- --------- --------- --------- --------- ---------------
Total dividends and distributions to
shareholders............................ -- (0.02) (2.22) (3.86) (0.08) (0.03 )
---------- --------- --------- --------- --------- ---------------
Dilution due to capital share rights
offering................................ -- (1.99) -- -- -- --
---------- --------- --------- --------- --------- ---------------
Net asset value, end of period........... $19.38 $17.96 $14.18 $13.02 $20.80 $11.83
---------- --------- --------- --------- --------- ---------------
---------- --------- --------- --------- --------- ---------------
Market value, end of period.............. $15.625 $14.50 $13.875 $14.75 $19.00 $11.25
---------- --------- --------- --------- --------- ---------------
---------- --------- --------- --------- --------- ---------------
Total investment return(a)............... 7.76 % 4.67 (b) 8.85% (6.79)% 69.55% (19.16 )%
---------- --------- --------- --------- --------- ---------------
---------- --------- --------- --------- --------- ---------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted)................................ $127,250 $117,887 $65,696 $60,156 $95,820 $54,493
Ratio of expenses to average net assets,
net of fee waivers#..................... 1.87 (c) 1.76% 1.76% 1.86% 2.05% 2.45 %(c)
Ratio of expenses to average net assets,
excluding fee waivers................... 2.22 (c) 2.11% 2.11% 2.13% 2.05% 2.45 %(c)
Ratio of expenses to average net assets,
net of fee waivers and excluding
taxes................................... 1.57 (c) 1.69% 1.76% 1.73% 2.02% 2.45 %(c)
Ratio of net investment income/(loss) to
average net assets...................... 0.79 (c) 0.39% 0.39% (0.62)% (0.28)% 0.61 %(c)
Portfolio turnover rate.................. 51 % 74% 55% 69% 73% 50 %
Average commission rate per share(d)..... $0.0001 $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 $0.16 per share.
+ Based on average shares outstanding from April 1, 1996 through August
16, 1996, the pricing date of the rights offering, and from August 17,
1996 through March 31, 1997.
++ Includes a $0.01 per share increase to the Fund's net asset value per
share resulting from the anti-dilutive impact of shares issued
pursuant to the Fund's automatic Dividend Reinvestment Plan in 1996.
# Ratios shown are inclusive of taxes, if any.
(a) Total investment return at market value is based on the changes in
market price of a share during the period and assumes reinvestment of
dividends and distributions, if any, at actual prices pursuant to the
Fund's dividend reinvestment program. Total investment return does not
reflect brokerage commissions or initial underwriting discounts and
has not been annualized.
(b) Assumes shareholder did not participate in the rights offering. The
total investment retrun would have been 10.19% assuming the
shareholder did participate in the rights offering.
(c) Annualized.
(d) Computed by dividing the total amount of brokerage commissions paid by
the total shares of investment securities purchased and sold during
the respective periods for which commissions were charged, as required
by the SEC for fiscal years beginning on or after September 1, 1995.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
13
<PAGE>
- --------------------------------------------------------------------------------
THE BRAZILIAN EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE A. SIGNIFICANT ACCOUNTING POLICIES
The Brazilian Equity Fund, Inc. (the "Fund") was incorporated in Maryland on
February 10, 1992 and commenced investment operations on April 10, 1992. 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 prior to the time of
determination, or, if no sales price is available at that time, at the closing
price quoted for the securities (but if bid and asked quotations are available,
at the mean between the current bid and asked prices). Securities that are
traded over-the-counter are valued at the mean between the current bid and the
asked prices, if available. All other securities and assets are valued at the
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 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 September 30, 1997, the
interest rate was 5.125% which resets on a daily basis. Amounts on deposit are
generally available on the same business day.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and 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.
No Brazilian income tax is imposed on capital gains. For the calendar year
ending December 31, 1994, the Brazilian Congress imposed a 0.25% withholding tax
on financial transactions. Effective January 23, 1997, Brazil has imposed a
0.20% Contribucao sobre Movimentacao Financiera ("CPMF") tax that applies to
most debit transactions carried out by financial institutions. Stock exchange
transactions are not affected by this 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:
(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
THE BRAZILIAN EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
(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.
The Fund reports certain foreign currency related transactions and foreign taxes
withheld on security transactions as components of realized gains for financial
reporting purposes, whereas such components are treated as ordinary income for
U.S. federal income tax 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 in value of investments and translation of
other assets and liabilities denominated in foreign currency.
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.
OTHER: Securities denominated in currencies other than U.S. dollars are subject
to changes in value due to fluctuations in exchange rates.
The Brazilian securities markets are substantially smaller, less liquid and more
volatile than the major securities markets in the United States. A significant
proportion of the aggregate market value of equity securities listed on the
Brazilian Exchanges are held by a small number of investors and are not publicly
traded. Consequently, acquisition and disposition of securities by the Fund may
be inhibited.
Investments in Brazil may involve certain considerations and risks not typically
associated with investments in the United States, including the possibility of
future political and economic developments and the level of Brazilian
governmental supervision and regulation of its securities markets.
NOTE B. AGREEMENTS
BEA Associates ("BEA") serves as the Fund's investment adviser with respect to
all investments. As
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
THE BRAZILIAN EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
compensation for its advisory services, BEA receives from the Fund an annual
fee, calculated weekly and paid quarterly, equal to 1.35% of the first $100
million of the Fund's average weekly net assets and 1.05% of the Fund's average
weekly net assets in excess of $100 million. BEA has agreed to waive its portion
of the advisory fee previously payable to former sub-advisers, equal to an
annual rate of 0.35% of the Fund's average weekly net assets. For the six months
ended September 30, 1997, BEA earned $824,168 for advisory services, of which
BEA waived $224,723. 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 six months ended September 30, 1997, BEA was reimbursed $5,124 for
administrative services rendered to the Fund.
The First National Bank of Boston, Sao Paulo ("FNBB") serves as the Fund's
Brazilian administrator. FNBB is paid for its services, out of the custody fee
payable to Brown Brothers Harriman & Co., the Fund's accounting agent and
custodian, a quarterly fee based on an annual rate of 0.12% of the average
month-end assets of the Fund held in Brazil. For the six months ended September
30, 1997, FNBB earned $97,297 for administrative services.
Bear Stearns Funds Management Inc. ("BSFM") serves as the Fund's administrator.
The Fund pays BSFM a monthly fee that is computed weekly at an annual rate of
0.10% of the first $100 million of the Fund's average weekly net assets and
0.08% of amounts in excess of $100 million. For the six months ended September
30, 1997, BSFM earned $61,361 for administrative services.
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 6,564,841 shares outstanding at September 30, 1997, BEA
owned 7,169 shares.
During the fiscal year ended March 31, 1997, the Fund issued 1,930,835 shares in
connection with a rights offering of the Fund's shares. Shareholders of record
on July 17, 1996 were issued one nontransferable right for each share of common
stock owned, entitling shareholders the opportunity to acquire one newly issued
share of common stock for every three rights held at a subscription price of
$11.09 per share. Shareholders who fully exercised all the rights issued to them
in the primary subscription were allowed to purchase additional shares at the
same price under an overallotment agreement. Offering costs of $396,250 for
expenses attributable to the rights offering were charged to additional
paid-in-capital. In addition, the Fund incurred $776,220 in dealer manager and
solicitation fees that were netted against the proceeds of the subscription.
NOTE D. INVESTMENT IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at September
30, 1997 was $107,677,928. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currency) of
$15,470,869, was composed of gross appreciation of $22,557,059 for those
investments having an excess of value over cost and gross depreciation of
$7,086,190 for those investments having an excess of cost over value.
For the six months ended September 30, 1997, purchases and sales of securities,
other than short-term obligations, were $65,052,827 and $61,831,813,
respectively.
NOTE E. CREDIT AGREEMENT
The Fund, along with 18 other U.S. registered 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
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
THE BRAZILIAN EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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 amount outstanding under the credit agreement for the Fund
averaged $32,787 with an average interest rate of 8.50% during the six months
ended September 30, 1997. The Fund had no amounts outstanding under the credit
agreement at September 30, 1997.
RESULTS OF ANNUAL MEETING FOR SHAREHOLDERS (UNAUDITED)
On July 22, 1997, the annual meeting of shareholders of The Brazilian Equity
Fund, Inc. (the "Fund") was held and the following matters were voted upon:
(1) To re-elect four directors to the Board of Directors of the Fund.
<TABLE>
<CAPTION>
NAME OF DIRECTOR FOR WITHHELD NON-VOTES
- ----------------------------------------------------------------------------------- ---------- --------- ----------
<S> <C> <C> <C>
Peter A. Gordon 4,478,952 149,957 1,935,932
William W. Priest, Jr. 4,531,500 97,409 1,935,932
Martin M. Torino 4,530,034 98,875 1,935,932
Richard W. Watt 4,543,207 85,702 1,935,932
</TABLE>
In addition to the directors re-elected at the meeting, Dr. Enrique R. Arzac,
James J. Cattano and George W. Landau continue to serve as directors of the
Fund.
(2) To ratify the selection of Coopers & Lybrand L.L.P. as independent public
accountants for the fiscal year ending March 31, 1998.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
3,668,861 44,520 915,528 1,935,932
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
DESCRIPTION OF INVESTLINK* PROGRAM
The InvestLink Program is sponsored and administered by The First National Bank
of Boston, not by The Brazilian Equity Fund, Inc. (the "Fund"). The First
National Bank of Boston will act as program administrator (the "Program
Administrator") of the InvestLink Program (the "Program"). The purpose of the
Program is to provide interested investors with a simple and convenient way to
invest funds and reinvest dividends in Shares of the Fund's common stock
("Shares") at prevailing prices, with reduced brokerage commissions and fees.
An interested investor may join the Program at any time. Purchases of Shares
with funds from a participant's cash payment or automatic account deduction will
begin on the next day on which funds are invested. If a participant selects the
dividend reinvestment option, automatic investment of dividends generally will
begin with the next dividend payable after the Program Administrator receives
his enrollment form. Once in the Program, a person will remain a participant
until he terminates his participation or sells all Shares held in his Program
account, or his account is terminated by the Program Administrator. A
participant may change his investment options at any time by requesting a new
enrollment form and returning it to the Program Administrator.
A participant will be assessed certain charges in connection with his
participation in the Program. First-time investors will be subject to an initial
service charge which will be deducted from their initial cash deposit. All
optional cash deposit investments will be subject to a service charge. Sales
processed through the Program will have a service fee deducted from the net
proceeds, after brokerage commissions. In addition to the transaction charges
outlined above, participants will be assessed per share processing fees (which
in-
clude brokerage commissions.) Participants will not be charged any fee for
reinvesting dividends.
The number of Shares to be purchased for a participant depends on the amount of
his dividends, cash payments or bank account or payroll deductions, less
applicable fees and commissions, and the purchase price of the Shares. The
Program Administrator uses dividends and funds of participants to purchase
Shares of Company Common Stock in the open market. Such purchases will be made
by participating brokers as agent for the participants using normal cash
settlement practices. All Shares purchased through the Program will be allocated
to participants as of the settlement date, which is usually three business days
from the the purchase date. In all cases, transaction processing will occur
within 30 days of the receipt of funds, except where temporary curtailment or
suspension of purchases is necessary to comply with applicable provisions of the
Federal Securities laws or when unusual market conditions make prudent
investment impracticable. In the event the Program Administrator is unable to
purchase Shares within 30 days of the receipt of funds, such funds will be
returned to the participants.
The average price of all Shares purchased by the Program Administrator with all
funds received during the time period from two business days preceding any
investment date up to the second business day preceding the next investment date
shall be the price per share allocable to a participant in connection with the
Shares purchased for his account with his funds or dividends received by the
Program Administrator during such time period. The average price of all Shares
sold by the Program Administrator pursuant to sell orders received during such
time period shall be the price per share allocable to a participant in
connection with the Shares sold for his account pursuant to his sell orders
received by the Program Administrator during such time period.
The First National Bank of Boston, as Program Administrator, administers the
Program for participants, keeps records, sends statements of account to
participants and performs other duties relating to the Program. Each participant
in the Program will receive a statement of his account following each purchase
of Shares. The statements will also show the amount of
- --------------------------------------------------------------------------------
18
<PAGE>
DESCRIPTION OF INVESTLINK* PROGRAM (CONTINUED)
dividends credited to such participant's account (if applicable), as well as the
fees paid by the participant. In addition, each participant will receive copies
of the Fund's Annual Report to shareholders, proxy statements and, if
applicable, dividend income information for tax reporting purposes.
If the Fund is paying dividends on the Shares, a participant will receive
dividends through the Program for all Shares held on the dividend record date on
the basis of full and fractional Shares held in his account, and for all other
Shares of the Fund registered in his name. The Program Administrator will send
checks to the participants for the amounts of their dividends that are not
to be automatically reinvested at no cost to the participants.
Shares of the Fund purchased under the Program will be registered in the name of
the accounts of the respective participants. Unless requested, the Fund will not
issue to participants certificates for Shares of the Fund purchased under the
Program. The Program Administrator will hold the Shares in book-entry form until
a Program participant chooses to withdraw his Shares or terminate his
participation in the Program. The number of Shares purchased for a participant's
account under the Program will be shown on his statement of account. This
feature protects against loss, theft or destruction of stock certificates.
A participant may withdraw all or a portion of the Shares from his Program
account by notifying the Program Administrator. After receipt of a participant's
request, the Program Administrator will issue to such participant certificates
for the whole Shares of the Fund so withdrawn or, if requested by the
participant, sell the Shares for him and send him the proceeds, less applicable
brokerage commissions, fees, and transfer taxes, if any. If a participant
withdraws all full and fractional Shares in his Program account, his
participation in the Program will be terminated by the Program Administrator. In
no case will certificates for fractional Shares be issued. The Program
Administrator will convert any fractional Shares held by a participant at the
time of his withdrawal to cash.
Participation in any rights offering, dividend distribution or stock split will
be based upon both the Shares of the Fund registered in participants' names and
the Shares (including fractional Shares) credited to participants' Program
accounts. Any stock dividend or Shares resulting from stock splits with respect
to Shares of the Fund, both full and fractional, which participants hold in
their Program accounts and with respect to all Shares registered in their names
will be automatically credited to their accounts.
All Shares of the Fund (including any fractional share) credited to his account
under the Program will be voted as the participant directs. The participants
will be sent the proxy materials for the annual meetings of shareholders. When a
participant returns an executed proxy, all of such Shares will be voted as
indicated. A participant may also elect to vote his Shares in person at the
Shareholders' meeting.
A participant will receive tax information annually for his personal records and
to help him prepare his U.S. federal income tax return. The automatic
reinvestment of dividends does not relieve him of any income tax which may be
payable on dividends. For further information as to tax consequences of
participation in the Program, participants should consult with their own tax
advisors.
The Program Administrator in administering the Program will not be liable for
any act done in good faith or for any good faith omission to act. However, the
Program Administrator will be liable for loss or damage due to error caused by
its negligence, bad faith or willful misconduct. Shares held in custody by the
Program Administrator are not subject to protection under the Securities
Investors Protection Act of 1970.
- --------------------------------------------------------------------------------
19
<PAGE>
DESCRIPTION OF INVESTLINK* PROGRAM (CONTINUED)
The participant should recognize that neither the Fund nor the Program
Administrator can provide any assurance of a profit or protection against loss
on any Shares purchased under the Program. A participant's investment in Shares
held in his Program account is no different than his investment in directly held
Shares in this regard. The participant bears the risk of loss and the benefits
of gain from market price changes with respect to all of his Shares. Neither the
Fund nor the Program Administrator can guarantee that Shares purchased under the
Program will, at any particular time, be worth more or less than their purchase
price. Each participant must make an independent investment decision based on
his own judgment and research.
While the Program Administrator hopes to continue the Program indefinitely, the
Program Administrator reserves the right to suspend or terminate the Program at
any time. It also reserves the right to make modifications to the Program.
Participants will be notified of any such suspension, termination or
modification in accordance with the terms and conditions of the Program. The
Program Administrator also reserves the right to terminate any participant's
participation in the Program at any time. Any question of interpretation arising
under the Program will be determined in good faith by the Program Administrator
and any such good faith determination will be final.
Any interested investor may participate in the Program. To participate in the
Program, an investor who is not already a registered owner of the Shares must
make an initial investment of at least $250.00. All other cash payments or bank
account deductions must be at least $100.00, up to a maximum of $100,000.00
annually. An interested investor may join the Program by reading the Program
description, completing and signing the enrollment form and returning it to the
Program Administrator. The enrollment form and information relating to the
Program (including the terms and conditions) may be obtained by calling the
Program Administrator at one of the following telephone numbers: First Time
Investors--(800) 969-3306; Current Shareholders--(800) 730-6001. All
correspondence regarding the Program should be directed to: The First National
Bank of Boston, InvestLink Program, P.O. Box 1681, Boston, MA 02105-1681.
- ---------------------------------------------
*InvestLink-SM- is a service mark of Boston EquiServe Limited Partnership.
- --------------------------------------------------------------------------------
20
<PAGE>
SUMMARY OF GENERAL INFORMATION
The Fund--The Brazilian 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 Brazilian 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 September 30, 1997, BEA managed approximately $34.6 billion in assets.
SHAREHOLDER INFORMATION
The market price is published in: THE NEW YORK TIMES (daily) under the
designation "BrazilEF" and THE WALL STREET JOURNAL (daily) and BARRON'S (each
Monday) under the designation "BrazEqtyFd". The Fund's New York Stock Exchange
trading symbol is BZL. Weekly comparative net asset value (NAV) and market price
information about The Brazilian 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 Chile Fund, Inc. (CH) BEA Emerging Markets Equity Fund
BEA Global Telecommunications
The First Israel Fund, Inc. (ISL) Fund
The Indonesia Fund, Inc. (IF) BEA High Yield Fund
The Portugal Fund, Inc. (PGF) BEA International Equity Fund
MULTIPLE COUNTRY
The Emerging Markets Infrastructure Fund, Inc. (EMG)
The Emerging Markets Telecommunications Fund, Inc.
(ETF)
The Latin America Equity Fund, Inc. (LAQ)
The Latin America Investment Fund, Inc. (LAM)
For shareholder information or a
FIXED INCOME copy of a prospectus for any of
BEA Income Fund, Inc. (FBF) the open-end mutual funds, please
BEA Strategic Income Fund, Inc. (FBI) call, 1-800-401-2230.
Visit our website on the
For closed-end fund information Internet:
please call, 1-800-293-1232. http://www.beafunds.com
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
DIRECTORS AND CORPORATE OFFICERS
William W. Priest, Jr. Chairman of the Board of Directors
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
Rocco A. Del Guercio Vice President
Wendy S. Setnicka 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
This report, including the financial statements herein, is sent
to the shareholders of the Fund for their information. The
financial information included herein is taken from the records
of the Fund without examination by independent accountants who
do not express an opinion thereon. 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.
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