<PAGE>
THE LATIN AMERICAN DISCOVERY FUND, INC.
---------------------------------------------
OFFICERS AND DIRECTORS
<TABLE>
<S> <C>
Barton M. Biggs John A. Levin
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS William G. Morton, Jr.
Frederick B. Whittemore DIRECTOR
VICE-CHAIRMAN OF THE BOARD James W. Grisham
OF DIRECTORS VICE PRESIDENT
Warren J. Olsen Harold J. Schaaff, Jr.
PRESIDENT AND DIRECTOR VICE PRESIDENT
Peter J. Chase Joseph P. Stadler
DIRECTOR VICE PRESIDENT
John W. Croghan Valerie Y. Lewis
DIRECTOR SECRETARY
David B. Gill James R. Rooney
DIRECTOR TREASURER
Graham E. Jones Joanna M. Haigney
DIRECTOR ASSISTANT TREASURER
</TABLE>
--------------------------------------------------------
INVESTMENT ADVISER
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
--------------------------------------------------------
U.S. ADMINISTRATOR
The Chase Manhattan Bank, N.A.
73 Tremont Street
Boston, Massachusetts 02108
--------------------------------------------------------
CUSTODIANS
Morgan Stanley Trust Company (International)
One Pierrepont Plaza
Brooklyn, New York 11201
The Chase Manhattan Bank, N.A. (Domestic)
770 Broadway
New York, New York 10003
--------------------------------------------------------
SHAREHOLDER SERVICING AGENT
Boston Equiserve
Investor Relations Department
P.O. Box 644
Boston, Massachusetts 02102-0644
(617) 575-3120
--------------------------------------------------------
LEGAL COUNSEL
Rogers & Wells
200 Park Avenue
New York, New York 10166
--------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
--------------------------------------------------------
For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726.
----------
THE
LATIN AMERICAN
DISCOVERY
FUND, INC.
----------
FIRST QUARTER REPORT
MARCH 31, 1996
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- --------
For the three months ended March 31, 1996, the total return for the Fund, based
on net asset value per share, was 15.21% compared with 5.35% for the MSCI
Emerging Markets Global Latin America Index. For the period since commencement
of operations on June 23, 1992 through March 31, 1996, the Fund's total return,
based on net asset value per share, is 48.76% compared with 30.60% for the
Index. On March 29, 1996, the closing price of the Fund's shares on the New York
Stock Exchange was $11 5/8, representing an 8.1% discount to the net asset value
per share.
The two biggest markets in Latin America, Brazil and Mexico, rebounded nicely to
start 1996 after a dismal 1995. Improving economic growth, declining inflation,
falling interest rates, and a steady currency all led to improved investor
sentiment and return of capital inflows. The Fund benefited as Brazil and Mexico
were the biggest positions in the portfolio in both absolute terms and relative
to the MSCI Index.
BRAZIL
The Brazil market rose 11% in the first quarter driven primarily by lower
interest rates. President Cardoso had a bumpy quarter on the political front.
While trying to shepherd various reform measures through congress, he has been
beset with different scandals which have put him on the defensive and used up
scarce political capital. This quarter he narrowly avoided a potentially
time-consuming investigation into a banking crisis. He also recovered from a
defeat of the social security reform amendment in mid-February by massaging a
watered-down version through the first stage of congressional approval three
weeks later. In the process, the President has demonstrated his renowned
negotiating skills, but the latent fear is that he is perpetually reacting to,
rather than leading, events. Constitutional revision in Brazil is a five step
process. The two most important reforms -- the social security and
administrative reforms -- need to make meaningful progress before congress gets
distracted by municipal elections scheduled for October.
The wage bill is the single largest expense in the government budget -- in some
of the more profligate state government budgets, wages are over 100% of revenues
- -- and passage of the administrative reform is vital to reversing the untenable
trend in which public sector wages are spiraling out of control. Administrative
reform would give much more latitude to the government to dismiss workers and
would set maximum salary levels based on the President's salary. More
immediately, we expect the government to hold the line on wage increases in May
to around 10%, a number below accumulated inflation.
Interest rates, as expected, are trending down. Inflation has behaved very well
for the first part of the year -- averaging roughly 0.6% per month -- and this
has allowed the monetary authorities to guide interest rates down from real
levels of 25-30% in 1995 to levels of 15-20%. Real interest rates should
continue to decline and we expect economic growth of around 3% for 1996.
In Brazil we are relatively overweight companies which we feel will grow their
earnings at a faster rate than their peers. An example of this is Lojas Renner.
A small but fast-growing department store in the south of the country, Lojas
Renner has grown its sales at a rate three times as fast as the industry due to
its superior management strategy which targets the working woman and places a
high emphasis on customer satisfaction. It has a proprietary credit card which
is a valuable franchise in itself that boosts sales and provides additional
financial income. The company has recently announced an expansion plan into the
populous, yet competitive, Sao Paulo region, and we are certain that their
pioneering retail strategy will prevail there. The company generated a 30%
return on its equity last year, has doubled profits each year for the last two
years, should increase profits 25% in 1996, and trades at 8 times this years
estimated earnings.
Another of our favorite stocks, which has been a great performer for the Fund,
is the beer company Brahma. Brahma is the leading beer company in Brazil, with
close to 50% market share, and doubled its earnings in 1995 on sales growth of
20%. The brand franchise that Brahma possesses has few peers in the country and
enables it to generate enormous free cash flow in a fast growing market. The
company is investing over $1 billion to increase its brewing capacity by 40%,
and it generates a return on equity of 25%. Further, management has recently
embarked on an internal reorganization to focus its line managers on maximizing
economic value-added (EVA), a management technique whose driving orientation is
superior returns on investment and, thus, enhanced shareholder value. Brahma
should grow its earnings 20% this year, and trades on 11 times estimated 1996
earnings.
In the state company sector, we continue to heavily favor Telebras. Telebras has
a regulated monopoly over
2
<PAGE>
the telecommunications sector in Brazil, and should enjoy outstanding secular
growth through the decade. With an increase in tariffs granted at the end of
last year, the company should easily double earnings in 1996. Although its stock
price is influenced by macro events in Brazil because of its bellwether status
for the market, it is our contention that throughout 1996 the stock will
increasingly trade on the companys own fundamentals and less on speculation
surrounding the fate of macro events in the country. To that extent, given that
the stock trades at 8 times estimated 1996 earnings and 2.5 times cash flow, we
are very confident that its true value will be recognized and it will be a
strong outperformer.
MEXICO
The MSCI Mexico Index rose 10% in the first quarter. The market behaved
disparately throughout the period, benefiting from the flow of funds into
emerging markets at the beginning of the year, slipping as U.S. interest rates
rose in February and recuperating with a shift in sentiment in March.
The market trend mimicked local interest rates, falling in January, rising in
February and settling back to lower levels in March. The 28-day CETES rate (the
local equivalent of a treasury bill) ended the quarter at 39.5%, significantly
below the 45% level at year-end. The currency strengthened in real terms during
the quarter as it hovered around MxP7.5 to the dollar after closing December at
the MxP7.7 level. Given inflation differentials, the peso strengthened by 10% in
real terms against the U.S. dollar. While a strong move, the peso is still down
almost 25% in real terms over the last two years.
The government continued to manage economic variables with discipline, holding
back spending, maintaining tight monetary policy and keeping inflation under
control. Some of the more difficult adjustments, including a raise in the
minimum wage and an increase in the prices of tortillas and milk were
accomplished during March. Corporate fourth quarter results, released during
this period, confirmed that the economy had bottomed out in the third quarter.
An agreement through which Bank of Montreal took an important stake in Grupo
Financiero Bancomer, the nations second largest bank, signaled improving
confidence in the banking system.
During the first three months of the year, we increased our weighting in the
Mexican market and will maintain this overweight position anticipating positive
economic news in the coming quarters as a result of government commitment to the
economic program. Industrial production and retail sales estimates for the first
quarter show signs of recovery. We believe the recovery will be gradual, but
will show strong year over year numbers in the second half of 1996 and into
1997, lifting the market to higher levels. We are overweight the interest
sensitive and consumer sectors which suffered the most after the devaluation and
which should rebound the most in the recovery.
ARGENTINA
The Argentine market finished the first quarter flat. A strong outperformance in
the last quarter of 1995, a continuation of the tension between President Menem
and Economic Minister Cavallo, and an increase in U.S. interest rates all
combined to take the wind out of an early quarter rally.
Argentina continues to be bedeviled by a slower than expected recovery in
economic activity. The return of deposits to the banking system has not yet
translated into an increase in domestic lending to spur investment activity, in
large part because demand for loans continues to be anemic. With unemployment at
stubbornly high levels, approximately 15-16%, consumer confidence is low and
this has delayed a recovery. Additionally, because of the country's fixed
exchange rate, the back-up in U.S. interest rates had an additional dampening
effect on the market.
Nevertheless, we are increasingly confident that a recovery is underway.
Telephone traffic is up year over year, loan growth is rising on a sequential
basis, and auto sales are up sequentially. Although we do not expect the
recovery to be robust until the latter part of the year, we are still encouraged
by the momentum and are taking an increasingly constructive stance toward the
market, especially the telecommunications sector.
CHILE
Chile dramatically underperformed the region, as the MSCI Chile Index posted a
9% decline for the first quarter of 1996. Being the most insulated from foreign
capital flows, Chile did not benefit from the increase in foreign portfolio
investment that lifted the regional markets in the early part of the quarter.
Further depressing the market were concerns about forced liquidation of large
blocks of shares on the market as a result of a proxy battle for control of the
GT Chile Fund.
More fundamentally, the most important issue which depressed the market was
tight monetary policy. The
3
<PAGE>
economy has been growing at an unsustainably fast pace at the same time that
monetary authorities have upped the ante in their effort to squelch inertial
inflation. The authorities have taken a public posture in articulating a 6.5%
inflation target (1995 inflation was just above 8%), which, given the overheated
economy, will be difficult to achieve. Thus, we expect monetary conditions to
continue to be tight through the second quarter, and for this to continue to
depress equity market performance. Nevertheless, as valuations pull in to
reasonable levels we will likely warm up to the market.
COLOMBIA
The Colombian market fell prey to political turmoil over the tenure of President
Samper during the first quarter of 1996, as the MSCI Colombia Index shed 4%. A
high interest rate environment prevailed and concern over the economic effects
of the political crisis pushed the market lower.
Allegations that the President knowingly received illegal campaign contributions
from a drug cartel resurfaced in January (after a November exoneration), as the
defense minister resigned and came forth with new evidence. In a related act,
the United States decertified Colombia as an ally in the fight against drugs in
early March, imposing minor economic restrictions and hurting its international
reputation. In 1996, the economy will feel the effects of monetary tightness,
high interest rates and decreased activity linked to political concerns, growing
at a slower yet respectable 4% after 5.7% and 5.3% in 1994 and 1995,
respectively.
PERU
The Peruvian market had a lackluster performance during the first quarter,
ending the period flat. The market soared in January alongside the entire
region, but lost all of its gains throughout the remainder of the quarter.
Economic performance figures for December and the first two months of the year
were disappointing, as effects of the governments efforts to slow down the
economy were felt and the country's accounts recorded sizable deficits.
Concern over the trade and current account deficits, which closed 1995 at 3.7%
and 6.5% of GDP, respectively, escalated during the quarter. Negative GDP growth
numbers for December and January coupled with higher-than-expected inflation
figures exacerbated the preoccupation over the state of the economy. 1996 real
GDP growth is expected around 4%, against 6.9% in 1995 and 13.0% in 1994. The
Peruvian government, however, has responded prudently, tightening monetary
policy and cutting fiscal spending. President Fujimori realigned his cabinet
during the quarter, installing supporters of his disciplined economic approach
in key positions. The President's popularity, while still high at 66%, dropped
in the period from 75% at year-end.
We remain underweight in the Peruvian market, waiting for a better adjustment of
the economy to a slower growth environment and further progress in the trade and
current account deficits. In addition, an expected oversupply of stock resulting
from upcoming equity issues, including the sale of the governments billion-
dollar stake in CPT, the telephone monopoly, has kept market activity and prices
depressed.
VENEZUELA
Venezuela seems to be finally taking the necessary steps to restore its economic
health. Gasoline prices will be raised and interest rates and the exchange rate
will be deregulated. Our position in fixed income has worked well and we will
begin to examine the prospects for local stocks.
SUMMARY
Overall we believe that the Latin markets should perform well over the course of
the year as macroeconomic trends continue to improve and the negative sentiment
that had gripped the region since the Mexican devaluation dissipates.
Sincerely,
[SIGNATURE]
Warren J. Olsen
PRESIDENT AND DIRECTOR
[SIGNATURE]
Robert L. Meyer
SENIOR PORTFOLIO MANAGER
April 19, 1996
4
<PAGE>
The Latin American Discovery Fund, Inc.
Investment Summary as of March 31, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION (UNAUDITED)
TOTAL RETURN (%)
-------------------------------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (1)(3)
--------------------------- --------------------------- -----------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
--------------------------- --------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR TO
DATE 17.72% -- 15.21% -- 5.35% --
ONE YEAR 13.14+ 13.14%+ 37.09+ 37.09%+ 25.35 25.35%
SINCE INCEPTION* 36.71+ 8.64+ 48.76+ 11.10+ 30.60 7.33
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
A BAR CHART REFLECTING THE DATA BELOW IS REFLECTED HERE.
<TABLE>
<S> <C> <C> <C> <C> <C>
Years ended December 31: 3 Months
1992* 1993 1994 1995 Ended March 31, 1996 (Unaudited)
Net Asset Value Per Share $15.23 $23.31 $17.16 $10.98 $12.65
Market Value Per Share $13.25 $27.13 $18.25 $9.88 $11.63
Premium/(Discount) -13.0% -16.4% 6.4% -10.0% -8.10%
Income Dividends - 0.00# -
Capital Gains Distributions - - $5.74 $0.45
Fund Total Return (2) 8.01% 65.36%+ -0.14% -27.61%+ 15.21%
Index Total Return (1)(3)** -2.26% 52.29% -3.69% -13.53% 5.35%
</TABLE>
(1) Assumes dividends and distributions, if any, were reinvested.
(2) Total investment return based on per share net asset value reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. This return does not include the effect of dilution in
connection with the Rights Offering. These percentages are not an
indication of the performance of a shareholder's investment in the Fund
based on market value due to differences between the market price of the
stock and the net asset value per share of the Fund.
(3) Morgan Stanley Capital International Emerging Markets Global Latin America
Index (MSCI EMG Latin America Index)
* The Fund commenced operations on June 23, 1992.
** Unaudited.
# Amount is less than $0.01 per share.
+ Adjusted for Rights Offering.
5
<PAGE>
The Latin American Discovery Fund, Inc.
Portfolio Summary as of March 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equity Securities 94.0%
Debt Instruments 5.3%
Short-Term Investments 0.7%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Banking 17.9%
Beverages & Tobacco 14.6%
Broadcasting & Publishing 1.9%
Building Materials & Components 6.4%
Energy Sources 3.9%
Forest Products & Paper 1.4%
Merchandising 7.9%
Multi-Industry 2.4%
Telecommunications 22.6%
Utilities - Electrical & Gas 11.6%
Other 9.4%
</TABLE>
- --------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Brazil 43.8%
Mexico 35.8%
Argentina 7.4%
Chile 6.7%
Venezuela 4.4%
Colombia 3.5%
Peru 0.6%
Other -2.2%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
-----------------
<C> <S> <C>
1. Telebras 10.0%
2. Eletrobras 6.8
3. Telmex 6.5
4. G. Bancomer 5.1
5. FEMSA 'B' 4.7
<CAPTION>
PERCENT OF
NET ASSETS
-----------------
<C> <S> <C>
6. Brahma 4.4%
7. Republic of Venezuela Debt 4.2
Conversion Bond
8. Cemex 4.0
9. Petrobras (Preferred) 3.4
10. Banco Bradecso (Preferred) 3.4
---
52.5%
---
---
</TABLE>
6
<PAGE>
INVESTMENTS (UNAUDITED)
- ---------
MARCH 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
COMMON STOCKS (96.1%)
(Unless otherwise noted)
- ---------------------------------------------------------
- ------------
ARGENTINA (7.4%)
BANKING
Banco Del Suquia S.A. 619,733 U.S.$ 899
-------------
BEVERAGES & TOBACCO
Buenos Aires Embotelladora S.A.
ADR 16,825 280
Quilmes Industrial S.A. 83,340 1,000
Quilmes Industrial S.A. ADR 171,795 1,847
Quilmes Industrial S.A.
(Preferred) ADR 41,670 448
-------------
3,575
-------------
ENERGY SOURCES
Capex ADR 48,665 718
-------------
TELECOMMUNICATIONS
Argentine Cellular Communications 454,000 1,121
Telefonica de Argentina S.A. ADR 174,670 4,476
-------------
5,597
-------------
10,789
-------------
- ---------------------------------------------------------
- ------------
BRAZIL (43.7%)
APPLIANCES & HOUSEHOLD DURABLES
Continental 2001 (Preferred) 27,667,000 473
Multibras (Preferred) 282,000 294
Refripar (Preferred) 124,486,277 329
-------------
1,096
-------------
BANKING
Banco Bradesco (Preferred) 472,478,439 4,951
Banco do Brasil (Preferred) 20,434,000 207
Banco Itau (Preferred) 8,664,100 3,079
Banco Nacional (Preferred) 95,420,000 5
-------------
8,242
-------------
BEVERAGES & TOBACCO
Brahma (Preferred) 13,282,946 6,415
-------------
ENERGY SOURCES
Petrobras (Preferred) 41,758,000 4,989
-------------
FOOD & HOUSEHOLD PRODUCTS
Dixie Toga (Preferred) 985,697 958
-------------
MACHINERY & ENGINEERING
WEG (Preferred) 1,969,000 897
-------------
MERCHANDISING
Cia Brasileira ADR 224,853 3,288
Lojas Americanas (Preferred) 159,383 23
Lojas Arapua GDR 21,763 212
Lojas Renner (Preferred) 81,911,000 2,833
-------------
6,356
-------------
METALS -- NON-FERROUS
CVRD (Preferred) 8,970,000 1,408
-------------
MULTI-INDUSTRY
Itausa Investimentos Itau
(Preferred) 1,179,000 800
-------------
TELECOMMUNICATIONS
Telebras 30,169,000 1,194
Telebras (Preferred) 161,388,740 8,040
Telebras (Preferred) ADR 109,230 5,434
Telesp 4,271,000 649
Telesp (Preferred) 1,591,800 271
-------------
15,588
-------------
- ---------------------------------------------------------
- ------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
TEXTILES & APPAREL
Coteminas (Preferred) 3,877,000 U.S.$ 1,609
-------------
UTILITIES -- ELECTRICAL & GAS
Cemig S.A. ADR 40,100 1,119
Cemig S.A. GDR 35,475 993
Cemig S.A. (Preferred) 41,225,000 1,156
CPFL (Preferred) 69,155,000 2,346
Eletrobras 31,019,000 8,103
Eletrobras 'B' (Preferred) 6,566,000 1,795
Eletrobras (Preferred) ADR 8,925 120
Light (Rights) 3,990,000 283
-------------
15,915
-------------
64,273
-------------
- ---------------------------------------------------------
- ------------
CHILE (6.2%)
BEVERAGES & TOBACCO
Embotelladora Andina S.A. ADR 73,630 2,540
-------------
ELECTRICAL & ELECTRONICS
Empresa Nacional Electricidad
S.A. ADR 75,115 1,446
-------------
FOREST PRODUCTS & PAPER
Maderas y Sinteticos S.A. ADR 17,348 308
-------------
MERCHANDISING
Santa Isabel S.A. ADR 71,910 1,825
-------------
TELECOMMUNICATIONS
Compania de Telefonos de Chile
S.A. ADR 26,220 2,222
-------------
UTILITIES -- ELECTRICAL & GAS
Enersis S.A. ADR 26,790 757
-------------
9,098
-------------
- ---------------------------------------------------------
- ------------
COLOMBIA (2.2%)
BANKING
Banco de Colombia 8,152,307 3,202
-------------
MULTI-INDUSTRY
Corfivalle 2 --
-------------
3,202
-------------
- ---------------------------------------------------------
- ------------
MEXICO (35.8%)
BANKING
G. Banacci 'B' 1,571,770 3,350
G. Banacci 'L' 581,066 1,112
G. Bancomer ADR 873,521 7,043
G. Bancomer 'B' 922,205 371
G. Bancomer 'L' 78,703 26
-------------
11,902
-------------
BEVERAGES & TOBACCO
FEMSA 'B' 2,442,400 6,913
Panamerican Beverages, Inc. 'A' 51,179 2,066
-------------
8,979
-------------
BROADCASTING & PUBLISHING
G. Televisa ADR 112,090 2,788
-------------
BUILDING MATERIALS & COMPONENTS
Apasco 705,580 3,563
Cemex CPO 1,358,972 4,840
Cemex CPO ADR 144,732 1,046
-------------
9,449
-------------
- ---------------------------------------------------------
- ------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
<S> <C> <C>
- ------------
MEXICO (CONTINUED)
CONSTRUCTION & HOUSING
Empresas ICA ADR 158,615 U.S.$ 2,062
-------------
FOREST PRODUCTS & PAPER
Kimberly-Clark de Mexico 'A' 93,000 1,780
-------------
MERCHANDISING
Cifra 'B' 1,531,200 2,031
Controladora Comercial Mexicana
'B' 970,600 805
Farmacias Benavides S.A. de C.V.,
'B' 228,800 316
Grupo Casa Autrey S.A. de C.V.
ADR 3,730 69
Sears Roebuck de Mexico S.A. de
C.V., 'B1' 60,000 159
-------------
3,380
-------------
MULTI-INDUSTRY
Alfa `A' 111,445 1,481
G. Carso ADR 79,550 1,237
-------------
2,718
-------------
RECREATION, OTHER CONSUMER GOODS
G. Mexicano de Videos 'B' ADR 40,000 30
-------------
TELECOMMUNICATIONS
Telmex 'L' ADR 289,910 9,531
-------------
52,619
-------------
- ---------------------------------------------------------
- ------------
PERU (0.6%)
BANKING
Banco Wiese ADR 53,350 360
-------------
FINANCIAL SERVICES
Credicorp Ltd. 15,040 271
-------------
TELECOMMUNICATIONS
CPT Telefonica del Peru 'B' 137,800 275
-------------
906
-------------
- ---------------------------------------------------------
- ------------
VENEZUELA (0.2%)
UTILITIES -- ELECTRICAL & GAS
Electricidad de Caracas 282,861 328
-------------
- ---------------------------------------------------------
- ------------
TOTAL COMMON STOCKS
(Cost U.S. $133,158) 141,215
-------------
- ---------------------------------------------------------
- ------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
DEBT INSTRUMENTS (5.4%)
- ---------------------------------------------------------
- ------------
COLOMBIA (1.2%)
BANKING
Banco de Colombia (Convertible)
5.20%, 2/1/99 U.S.$ 1,910 1,695
-------------
- ---------------------------------------------------------
- ------------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
VENEZUELA (4.2%)
BONDS
Republic of Venezuela Debt
Conversion Bond 'DL' 6.5625%,
12/18/07 U.S.$ 10,250 U.S.$ 6,214
-------------
- ---------------------------------------------------------
- ------------
TOTAL DEBT INSTRUMENTS
(Cost U.S. $7,492) 7,909
-------------
- ---------------------------------------------------------
- ------------
<CAPTION>
SHARES
<S> <C> <C>
- ---------------------------------------------------------
- ------------
SHORT-TERM INVESTMENTS (0.5%)
- ---------------------------------------------------------
- ------------
CHILE (0.5%)
INVESTMENT COMPANY
Financiero Mutual Fund 524 9
-------------
<CAPTION>
FACE
AMOUNT
(000)
---------------
<S> <C> <C>
TIME DEPOSIT
Pacto Citicorp A.V. 6.00%, 4/9/96 CLP 296,800 721
-------------
- ---------------------------------------------------------
- ------------
TOTAL SHORT-TERM INVESTMENTS
(Cost U.S. $730) 730
-------------
- ---------------------------------------------------------
- ------------
FOREIGN CURRENCY ON DEPOSIT
WITH CUSTODIAN (0.2%)
Argentine Peso ARP 24,820 25
Brazilian Real BRC 71,085 72
Chilean Peso CLP 51,238 --
Colombian Peso COP 181,378,561 174
Peruvian New Sol PSS 17,731 7
Venezuelan Bolivar VEB 10,084,199 35
-------------
(Cost U.S. $344) 313
-------------
- ---------------------------------------------------------
- ------------
TOTAL INVESTMENTS (102.2%)
(Cost U.S. $141,724) 150,167
-------------
- ---------------------------------------------------------
- ------------
OTHER ASSETS AND LIABILITIES (-2.2%)
Other Assets U.S.$ 4,502
Liabilities (7,725) (3,223)
--------------- -------------
- ---------------------------------------------------------
- ------------
NET ASSETS (100%)
Applicable to 11,617,984 issued and outstanding
U.S. $0.01 par value shares (100,000,000 shares
authorized) U.S.$ 146,944
------------
- ---------------------------------------------------------
- ------------
NET ASSET VALUE PER SHARE U.S.$ 12.65
------------
- ---------------------------------------------------------
- ------------
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
</TABLE>
8
