<PAGE>
THE LATIN AMERICAN DISCOVERY FUND, INC.
--------------------------------------------------
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
Barton M. Biggs James W. Grisham
CHAIRMAN OF THE BOARD VICE PRESIDENT
OF DIRECTORS Harold J. Schaaff, Jr.
Michael F. Klein VICE PRESIDENT
PRESIDENT AND DIRECTOR Joseph P. Stadler
Peter J. Chase VICE PRESIDENT
DIRECTOR Valerie Y. Lewis
John W. Croghan SECRETARY
DIRECTOR Joanna M. Haigney
David B. Gill TREASURER
DIRECTOR Belinda A. Brady
Graham E. Jones ASSISTANT TREASURER
DIRECTOR
John A. Levin
DIRECTOR
William G. Morton, Jr.
DIRECTOR
</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
73 Tremont Street
Boston, Massachusetts 02108
-----------------------------------------------------------------
CUSTODIANS
Morgan Stanley Trust Company
One Pierrepont Plaza
Brooklyn, New York 11201
The Chase Manhattan Bank
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.
----------
SEMI-ANNUAL REPORT
JUNE 30, 1997
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- --------
For the six months ended June 30, 1997, The Latin American Discovery Fund, Inc.
(the "Fund") had a total return, based on net asset value per share, of 44.89%
compared with 40.50% for the Morgan Stanley Capital International Emerging
Markets Global Latin America Index (the "Index"). For the one year ended June
30, 1997, the Fund had a total return, based on net asset value per share, of
60.27% compared to 45.84% for the Index. For the period since commencement of
operations on June 23, 1992 through June 30, 1997, the Fund's total return,
based on net asset value per share, was 175.36% compared with 112.41% for the
Index. On June 30, 1997, the closing price of the Fund's shares on the New York
Stock Exchange was $19.75 representing a 7.7% discount to the net asset value
per share.
Overall the Latin American equity markets enjoyed a remarkable second quarter of
1997, as the MSCI Latin America Index advanced 22.0% for the quarter. The
favorable performance was the result of a confluence of factors, particularly
positive momentum on the privatization front in Brazil, a broadening of the
economic recovery in Mexico, and an end to the drought in Chile.
ARGENTINA
Argentina did not contain any particularly market-impacting news during the
second quarter, and advanced largely in sympathy with the region. The strong
economic recovery, led by construction and mining, continues to accelerate and
this has provided a sound backdrop for the equity market. There has been little
evidence of a consumer recovery and, with unemployment hovering in the high
teens, we do not expect to see a robust turnaround in the near future. Our
overall outlook remains for the recovery to continue and center on
infrastructure and fixed investment, for the political environment to remain
benign, and the equity market to move more or less in line with the region.
BRAZIL
Brazil again propelled the region, both on the news front as well as the
performance front. Setting the tone for the second quarter was the successful
privatization of mining giant CVRD to a private consortium at a 20% premium to
the minimum price. Another boost was the positive change in tariffs for both the
telecommunications and electric utility industries; this measure not only should
favorably impact profitability in both sectors, but is also a positive step
toward eventual privatization. On the political reform front, there was not much
tangible progress made in the second quarter, but industry level improvements as
well as local liquidity factors -- i.e. a flow of local money from fixed income
funds to equity funds -- dominated the market's performance.
Looking ahead, we think the Brazilian market has perhaps verged on getting ahead
of itself. While we continue to be extremely bullish on the positive fundamental
developments in core segments of the economy, we are beginning to get the sense
that perhaps valuation and sentiment levels have reached the point where too
much good news is "being priced in." As such, we have modestly cut back on our
weighting in the market, and have a market weight position; that market weight
position is represented by stock specific ideas, as we are actually underweight
most of the blue chip "Bras" stocks.
CHILE
Chile, interestingly, is out of step with the rest of the region even though
its stock market has performed in line. The Chilean economy is in the midst of a
Chile-style "slowdown" (i.e. GDP growth of 5%-6%) from an unsustainably brisk
pace last year, as the monetary authorities have engineered a soft landing. As a
result, interest rates have in fact been loosened this year in order to pick up
the economic pace and to acknowledge that inflationary pressures have been
contained. This easing of monetary policy has provided a favorable climate for
equity performance, notwithstanding the fact that overall earnings growth in the
market is lackluster.
Another important item driving the market, and in particular affecting the
all-important electric utility sector (roughly 35% of the total market
capitalization), has been the drought. The drought has had the effect of raising
costs for certain electric generators, thereby dampening profits. As the drought
ended in the second quarter due to a deluge of rain (in fact there were,
ironically enough, floods) the electric utility sector stocks surged as
investors' concerns eased.
COLOMBIA
Colombia was the laggard in the region as its market is the least correlated
with the region and boasted the best performance going in to the second quarter.
Further, economic growth continued to surprise on the downside as the
government's efforts to dampen stubborn inflationary pressures has slowed
economic activity. While valuation levels are still the
2
<PAGE>
cheapest in the region, we feel that the country warrants a discount owing to
its uncertain economic outlook and political woes.
MEXICO
Mexico staged a dramatic turnaround in the latter part of the second
quarter. After having fallen precipitously early in the quarter on the back of
disappointing first quarter corporate earnings published in April, sentiment
subsequently reversed itself as a) signs of a broadening of the economic
recovery began to emerge, and b) investors began to realize that the
congressional and mayoral elections in July would be a benign event. These two
processes restored confidence to the market and it paced the region in the
latter part of the second quarter.
We feel strongly that Mexico has made great strides to restore balance to its
fiscal, trade, and current accounts. The economy is on a solid footing,
employment levels are picking up, and the consumer is (albeit slowly)
recovering. Further, the political arena has opened up considerably. Free,
democratic elections will take place in July in what is widely viewed to be the
fairest electoral process Mexico has seen in this century. Although an opening
up of the political arena is not without risks, we believe that it is healthy
for the long-run sustainability of the economic program.
PERU
Peru had a strong second quarter, stemming in large part from a dramatic
turnaround in the economy as well as from a dramatic end to the hostage crisis.
GDP growth is expected to recover quite strongly from the slowdown in 1996, and
this should bode well for earnings growth. However, the economy suffers from a
natural resource dependence which makes it vulnerable to commodity price swings,
and the political scenario is relatively uncertain. President Fujimori, while
enjoying a short spurt in popularity after the successful rescue of the
hostages, continues to plummet in popularity ratings and this has engendered a
decline in confidence in the country. We continue to underweight the market.
VENEZUELA
After lagging in the first quarter, Venezuela played catch-up and paced the
region in the second quarter. Strong first quarter earnings by bellwether
telephone stock CANTV buoyed the market, and this was subsequently followed by a
successful resolution of the long-awaited "severance program," which will entail
short-term costs for private and government companies, but is a long-term
positive as it helps liberalize the labor markets. Overall we are constructive
on the Venezuelan market as the government appears genuinely committed to
following through on its reform program.
Sincerely,
[SIGNATURE]
Michael F. Klein
PRESIDENT AND DIRECTOR
[SIGNATURE]
Robert L. Meyer
PORTFOLIO MANAGER
[SIGNATURE]
Andy Skov
PORTFOLIO MANAGER
July 1997
3
<PAGE>
The Latin American Discovery Fund, Inc.
Investment Summary as of June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION
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 58.00% -- 44.89% -- 40.50% --
ONE YEAR 71.17 71.17% 60.27 60.27% 45.84 45.84%
SINCE INCEPTION* 154.13+ 20.78+ 175.36+ 22.35+ 112.41 16.18
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
A BAR CHART REFLECTING THE DATA BELOW IS REFLECTED HERE.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31:
TOTAL RETURN
SIX MONTHS ENDED
1992* 1993 1994 1995 1996 JUNE 30, 1997
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share $15.23 $23.31 $17.16 $10.98 $14.77 $21.40
Market Value Per Share $13.25 $27.13 $18.25 $9.88 $12.50 $19.75
Premium/(Discount) -13.0% 16.4% 6.4% -10.0% -15.4% -7.7%
Income Dividends - - $0.00# - $0.16 -
Capital Gains Distributions - - $5.74 $0.45 $1.14 -
Fund Total Return (2) 8.01% 65.36%+ -0.14% -27.61%+ 47.19% 44.89%
Index Total Return (3) -2.26% 52.29% -3.69% -13.53% 21.96% 40.50%
The Latin American Discovery Fund, Inc. (2)
MSCI EMG Latin America Index (3)
</TABLE>
(1) Assumes dividends and distributions, if any, were reinvested.
(2) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. 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) The Morgan Stanley Capital International Emerging Markets Global Latin
America Index (MSCI EMG Latin America Index) is a broad based market cap
weighted composite index covering at least 60% of markets in Mexico,
Argentina, Brazil, Chile, Colombia, Peru and Venezuela, including
dividends.
* The Fund commenced operations on June 23, 1992.
# Amount is less than $0.01 per share.
+ This return excludes the effect of the rights issued in connection with the
Rights Offerings.
4
<PAGE>
The Latin American Discovery Fund, Inc.
Portfolio Summary as of June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equity Securities 99.6%
Short-Term Investments 0.4%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Banking 4.3%
Beverages & Tobacco 14.4%
Broadcasting & Publishing 3.0%
Building Materials & Components 3.5%
Energy Sources 4.7%
Forest Products & Paper 4.5%
Merchandising 8.0%
Metals -- Steel 3.7%
Telecommunications 30.9%
Utilities -- Electrical & Gas 15.7%
Other 7.3%
</TABLE>
- --------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Brazil 48.1%
Mexico 27.9%
Chile 8.9%
Argentina 7.5%
Venezuela 3.2%
Colombia 2.2%
Peru 2.1%
Other 0.1%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
-------------
<C> <S> <C>
1. CRT 12.5%
2. Telebras 9.5
3. Eletrobras 6.8
4. FEMSA 5.5
5. Kimberly 4.5
<CAPTION>
PERCENT OF
NET ASSETS
-------------
<C> <S> <C>
6. Cemig 4.4%
7. Telmex 3.9
8. Santa Isabel 3.8
9. Cemex 3.5
10. Petrobras 3.3
---
57.7%
---
---
</TABLE>
5
<PAGE>
FINANCIAL STATEMENTS
- ---------
STATEMENT OF NET ASSETS (UNAUDITED)
- ---------
JUNE 30, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------------
- -------------
COMMON STOCKS (99.6%)
(Unless otherwise noted)
- --------------------------------------------------
- ----------
ARGENTINA (7.5%)
BANKING
Banco del Suquia 482,938 U.S.$ 1,879
--------------
BEVERAGES & TOBACCO
Quilmes ADR 91,124 1,059
Quilmes ADR (Registered) 38,290 393
--------------
1,452
--------------
ENERGY SOURCES
YPF ADR 113,410 3,487
--------------
MERCHANDISING
(a)Disco ADR 33,906 1,344
--------------
METALS -- STEEL
(a)Acindar 1,320,180 3,380
Siderar 'A' 560,921 2,300
Siderar ADR 31,274 1,016
--------------
6,696
--------------
TELECOMMUNICATIONS
(a,b)Argentine Cellular Communications 454,000 0
Telecom Argentina ADR 18,870 991
Telefonica Argentina ADR 78,565 2,720
--------------
3,711
--------------
18,569
--------------
- -----------------------------------------------------------------
- -------------
BRAZIL (48.1%)
BANKING
(a,b,c)Banco Nacional (Preferred) 95,420,000 4
(c)Unibanco (Preferred) GDR 64,665 2,401
--------------
2,405
--------------
BEVERAGES & TOBACCO
(c)Brahma (Preferred) 7,814,000 5,952
(c)Brahma (Preferred) ADR 119,070 1,823
--------------
7,775
--------------
ENERGY SOURCES
(c)Petrobras (Preferred) 29,337,000 8,148
--------------
MERCHANDISING
(c)Lojas Arapua (Preferred) 123,558,400 2,008
(c)Lojas Arapua (Preferred) GDR 20,775 345
(a,b)Lojas Arapua (Preferred Rights) 423 0
(c)Lojas Renner (Preferred) 57,398,000 2,943
(c)Pao de Acucar (Preferred) ADR 144A 67,830 1,556
--------------
6,852
--------------
METALS -- NON-FERROUS
(c)CVRD (Preferred) 94,720 2,095
(c)CVRD (Preferred) ADR 16,770 374
CVRD Bonus 116,420 0
--------------
2,469
--------------
MULTI-INDUSTRY
(c)Iven (Preferred) 1,773,000 1,210
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
TELECOMMUNICATIONS
(a,c)CRT (Preferred) 'A' 20,709,705 U.S.$ 31,163
(a,b)CRT (Rights) 9,467 2
Ericsson 42,520,000 2,528
Telebras 36,913,000 5,006
(c)Telebras (Preferred) 88,892,740 13,483
(c)Telebras (Preferred) ADR 34,435 5,225
--------------
57,407
--------------
TEXTILES & APPAREL
(c)Coteminas (Preferred) 7,958,000 3,105
(a)ENCORPAR 8,492,000 0
--------------
3,105
--------------
UTILITIES -- ELECTRICAL & GAS
(c)Cemig (Preferred) 179,068,000 9,231
(c)Cemig (Preferred) ADR 34,840 1,754
(c)CPFL (Preferred) 7,075,969 1,176
Eletrobras 20,247,000 11,322
Eletrobras ADR 139,115 3,881
(c)Eletrobras (Preferred) 'B' 2,008,000 1,197
(c)Eletrobras (Preferred) 'B' ADR 14,640 435
Lightpar 3,001,000 1,196
--------------
30,192
--------------
119,563
--------------
- -----------------------------------------------------------------
- -------------
CHILE (8.6%)
BEVERAGES & TOBACCO
Andina 'B' ADR 46,025 961
CCU ADR 179,200 3,931
--------------
4,892
--------------
INVESTMENT COMPANY
(a)UBB 4,138 79
--------------
MERCHANDISING
Santa Isabel ADR 292,909 9,446
Unimarc ADR 64,155 1,203
--------------
10,649
--------------
MULTI-INDUSTRY
Quinenco ADR 60,520 1,120
--------------
UTILITIES -- ELECTRICAL & GAS
Chilectra ADR 117,260 3,375
Enersis ADR 33,853 1,204
--------------
4,579
--------------
21,319
--------------
- -----------------------------------------------------------------
- -------------
COLOMBIA (2.2%)
BANKING
Banco de Colombia 6,190,974 2,270
--------------
BEVERAGES & TOBACCO
Bavaria 454,225 3,260
--------------
MULTI-INDUSTRY
Corfivalle 2 --@
--------------
5,530
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
MEXICO (27.9%)
BANKING
(a)Banacci 'B' 310,620 U.S.$ 799
(a)Banacci 'L' 645,651 1,507
(a)Bancomer 'B' 939,240 454
(a)Bancomer 'B' ADR 144A 28,743 280
--------------
3,040
--------------
BEVERAGES & TOBACCO
Coke-FEMSA ADR 51,235 2,645
FEMSA 'B' 2,198,000 13,107
FEMSA ADR 91,830 546
Grupo Modelo 'C' 83,625 580
Panamco 47,916 1,575
--------------
18,453
--------------
BROADCASTING & PUBLISHING
(a)Televisa CPO GDR 243,645 7,401
--------------
BUILDING MATERIALS & COMPONENTS
Cemex 'B' 417,905 2,044
Cemex 'B' ADR 291,020 2,803
Cemex CPO 910,887 3,962
--------------
8,809
--------------
FINANCIAL SERVICES
(a)Banorte 'B' 984,966 1,026
--------------
FOOD & HOUSEHOLD PRODUCTS
Maseca 'B' 347,685 381
Maseca 'B' ADR 129,835 2,142
--------------
2,523
--------------
FOREST PRODUCTS & PAPER
Kimberly 'A' 2,771,105 11,110
--------------
MERCHANDISING
Cifra 'B' ADR 263,319 483
Cifra 'C' 325,270 521
--------------
1,004
--------------
METALS -- STEEL
Hylsamex ADR (Registered) 39,250 1,172
(a)Tamsa ADR 66,625 1,228
--------------
2,400
--------------
MULTI-INDUSTRY
Carso 'A1' 192,585 1,343
--------------
RECREATION, OTHER CONSUMER GOODS
(a)Blockbuster de Mexico 40,000 7
--------------
RETAIL -- MAJOR DEPARTMENT STORE
Soriana 'B' 1,030,320 2,590
--------------
TELECOMMUNICATIONS
Telmex ADR 203,210 9,703
--------------
69,409
--------------
- -----------------------------------------------------------------
- -------------
PERU (2.1%)
BANKING
Banco Wiese ADR 158,070 1,027
--------------
ENGINEERING
Ferreyros 1,044,300 1,201
Luz del Sur Servicios 44,740 53
--------------
1,254
--------------
FINANCIAL SERVICES
Credicorp Ltd. 19,520 429
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
TELECOMMUNICATIONS
Tel Peru 'B' ADR 97,675 U.S.$ 2,558
--------------
5,268
--------------
- -----------------------------------------------------------------
- -------------
VENEZUELA (3.2%)
FOOD & HOUSEHOLD PRODUCTS
Mavesa ADR 21,420 217
--------------
TELECOMMUNICATIONS
CANTV ADR 78,515 3,386
--------------
UTILITIES -- ELECTRICAL & GAS
Electricidad de Caracas 2,652,645 4,250
--------------
7,853
--------------
- -----------------------------------------------------------------
- -------------
TOTAL COMMON STOCKS
(Cost U.S. $204,156) 247,511
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
SHORT-TERM INVESTMENT (0.3%)
- ---------------------------------------------------------
- ------------
CHILE (0.3%)
TIME DEPOSIT
Pacto Citicorp A.V. 0.72%, 7/14/97 (Cost
U.S.$742) CLP 308,900 742
--------------
- -----------------------------------------------------------------
- -------------
FOREIGN CURRENCY ON DEPOSIT
WITH CUSTODIAN (0.1%)
Argentine Peso ARP 4,287 4
Chilean Peso CLP 94,306 --@
Colombian Peso COP 156,287,025 143
Mexican Peso MXP 635,125 80
Peruvian New Sol PSS 124,135 47
Venezuelan Bolivar VEB 7,656,698 16
--------------
(Cost U.S. $292) 290
--------------
- -----------------------------------------------------------------
- -------------
TOTAL INVESTMENTS (100.0%)
(Cost U.S. $205,190) 248,543
--------------
- ---------------------------------------------------------
- ------------
OTHER ASSETS (4.0%)
Receivable for Investments Sold U.S.$ 9,039
Dividends Receivable 1,002
Other Assets 55 10,096
--------------- --------------
- -----------------------------------------------------------------
- -------------
LIABILITIES (-4.0%)
Deferred Chilean Tax (43)
Payable for:
Investments Purchased (8,019)
Bank Overdraft (772)
Chilean Taxes (624)
Investment Advisory Fees (212)
Custodian Fees (115)
Professional Fees (72)
Shareholder Reporting Expenses (69)
Directors' Fees and Expenses (39)
Administrative Fees (32)
Other Liabilities (2) (9,956)
--------------- --------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
VALUE
(000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
NET ASSETS (100%)
Applicable to 11,617,984 issued and outstanding U.S. $0.01 par
value shares (100,000,000 shares authorized) U.S.$ 248,640
--------------
--------------
- -----------------------------------------------------------------
- -------------
NET ASSET VALUE PER SHARE U.S.$ 21.40
--------------
--------------
- -----------------------------------------------------------------
- -------------
AT JUNE 30, 1997, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------
Common Stock U.S.$ 116
Capital Surplus 152,705
Accumulated Net Investment Loss (362)
Accumulated Net Realized Gain 52,881
Unrealized Appreciation on Investments
and Foreign Currency Translations (net of accrued foreign tax
of U.S.$43 on unrealized appreciation) 43,300
- -----------------------------------------------------------------
- -------------
TOTAL NET ASSETS U.S.$ 248,640
--------------
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
(a) -- Non-income producing.
(b) -- Securities valued at fair value - see note A-1 to financial statements.
(c) -- Non-voting stock.
@ -- Value is less than U.S. $500.
144A -- Certain conditions for public sale may exist.
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
<TABLE>
<S> <C> <C>
- ---------------------------------------------
- ---------
JUNE 30, 1997 EXCHANGE RATES:
- --------------------------------------------------
ARP Argentine Peso 1.000 = U.S. $1.00
BRL Brazilian Real 1.077 = U.S. $1.00
CLP Chilean Peso 416.250 = U.S. $1.00
COP Colombian Peso 1,091.000 = U.S. $1.00
MXP Mexican Peso 7.932 = U.S. $1.00
PSS Peruvian New Sol 2.652 = U.S. $1.00
Venezuelan
VEB Bolivar 486.805 = U.S. $1.00
- --------------------------------------------------
- -------------
</TABLE>
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY
CLASSIFICATION -- JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
<S> <C> <C>
- ---------------------------------------------------------------
- ------------
Banking U.S.$ 10,621 4.3%
Beverages & Tobacco 35,832 14.4
Broadcasting & Publishing 7,401 3.0
Building Materials & Components 8,809 3.5
Energy Sources 11,635 4.7
Engineering 1,254 0.5
Financial Services 1,455 0.6
Food & Household Products 2,740 1.1
Forest Products & Paper 11,110 4.5
Investment Company 79 0.0
Merchandising 19,849 8.0
Metals -- Non-Ferrous 2,469 1.0
Metals -- Steel 9,096 3.7
Multi-Industry 3,673 1.5
Recreation, Other Consumer Goods 7 0.0
Retail -- Major Dept Sore 2,590 1.0
Telecommunications 76,765 30.9
Textiles & Apparel 3,105 1.2
Utilities -- Electrical & Gas 39,021 15.7
Other 1,032 0.4
------------ -------
U.S.$248,543 100.0%
------------ -------
------------ -------
- ---------------------------------------------------------
- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends............................................................................... U.S.$ 2,147
Interest................................................................................ 75
Less: Foreign Taxes Withheld............................................................ (1)
- ---------------------------------------------------------------------------------------------------------------
Total Income.......................................................................... 2,221
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees................................................................ 1,190
Custodian Fees.......................................................................... 174
U.S. Administrative Fees................................................................ 119
Professional Fees....................................................................... 63
Brazilian Administrative Fees........................................................... 53
Shareholder Reporting Expenses.......................................................... 42
Annual Meeting and Proxy Expense........................................................ 34
Amortization of Organization Costs...................................................... 31
Directors' Fees and Expenses............................................................ 23
Chilean Administrative Fees............................................................. 20
Colombian Administrative Fees........................................................... 16
Other Expenses.......................................................................... 138
- ---------------------------------------------------------------------------------------------------------------
Total Expenses........................................................................ 1,903
- ---------------------------------------------------------------------------------------------------------------
Net Investment Income............................................................. 318
- ---------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities................................................................... 45,576
Foreign Currency Transactions........................................................... (80)
- ---------------------------------------------------------------------------------------------------------------
Net Realized Gain................................................................. 45,496
- ---------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments............................................................. 31,232
Depreciation on Foreign Currency Translations........................................... 8
- ---------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation.................................... 31,240
- ---------------------------------------------------------------------------------------------------------------
Total Net Realized Gain and Change in Unrealized Appreciation/Depreciation.................. 76,736
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... U.S.$ 77,054
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income............................................... U.S.$ 318 U.S.$ 2,059
Net Realized Gain................................................... 45,496 39,591
Change in Unrealized Appreciation/Depreciation...................... 31,240 17,387
- ---------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations................ 77,054 59,037
- ---------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income............................................... -- (1,816)
Net Realized Gain................................................... -- (13,255)
- ---------------------------------------------------------------------------------------------------------------
Total Distributions................................................. -- (15,071)
- ---------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Offering Costs on Rights Offering................................... -- 4
- ---------------------------------------------------------------------------------------------------------------
Total Increase...................................................... 77,054 43,970
Net Assets:
Beginning of Period................................................. 171,586 127,616
- ---------------------------------------------------------------------------------------------------------------
End of Period (including accumulated net investment loss of U.S.$362
and U.S.$680, respectively)........................................ U.S.$248,640 U.S.$171,586
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, PERIOD FROM
SELECTED PER SHARE DATA JUNE 30, 1997 -------------------------------------------------------------- JUNE 23, 1992* TO
AND RATIOS: (UNAUDITED) 1996 1995 1994 1993 DECEMBER 31, 1992
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD..... U.S.$ 14.77 U.S.$ 10.98 U.S.$ 17.16 U.S.$ 23.31 U.S.$ 15.23 U.S.$ 14.10
- ------------------------------------------------------------------------------------------------------------------------------
Offering Costs........... -- -- (0.07) -- (0.06) (0.13)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net Investment Income
(Loss).................. 0.03 0.18 0.05 (0.18) 0.04 (0.06)
Net Realized and
Unrealized Gain (Loss)
on Investments.......... 6.60 4.91 (4.63) (0.25) 9.84 1.32
- ------------------------------------------------------------------------------------------------------------------------------
Total from Investment
Operations......... 6.63 5.09 (4.58) (0.43) 9.88 1.26
- ------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment
Income............. -- (0.16) -- (0.00)# -- --
Net Realized Gains... -- (1.14) (0.44) (5.74) -- --
In Excess of Net
Realized Gains..... -- -- (0.01) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total
Distributions...... -- (1.30) (0.45) (5.74) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in
Net Asset Value from
Capital Share
Transactions............ -- -- (1.08)++ 0.02+ (1.74)++ --
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD.................. U.S.$ 21.40 U.S.$ 14.77 U.S.$ 10.98 U.S.$ 17.16 U.S.$ 23.31 U.S.$ 15.23
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE,
END OF PERIOD........... U.S.$ 19.75 U.S.$ 12.50 U.S.$ 9.88 U.S.$ 18.25 U.S.$ 27.13 U.S.$ 13.25
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value......... 58.00% 38.50% (38.78)%+++ (8.75)% 121.17%+++ (8.30)%
Net Asset Value
(1)................ 44.89% 47.19% (27.61)%+++ (0.14)% 65.36%+++ 8.01%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(THOUSANDS)............. U.S.$ 248,640 U.S.$ 171,586 U.S.$ 127,616 U.S.$ 135,273 U.S.$ 180,348 U.S.$ 87,685
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to
Average Net Assets...... 1.83%** 1.81% 2.17% 2.15% 2.23% 2.73%**
Ratio of Net Investment
Income (Loss) to Average
Net Assets.............. 0.31%** 1.24% 0.31% (0.77)% 0.22% (1.02)%**
Portfolio Turnover
Rate.................... 118% 186% 122% 70% 56% 8%
Average Commission Rate
(2):
Per Share.............. U.S.$0.0006 U.S.$0.0004 N/A N/A N/A N/A
As a Percentage of
Trade Amount......... 0.30% 0.31% N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
*Commencement of operations
**Annualized
#Amount is less than U.S.$0.01 per share.
+Increase due to shares issued from reinvestment of distributions.
++Decrease due to shares issued through Rights Offering.
+++This return excludes the effect of the rights issued in connection with the Rights Offering.
(1)Total investment return based on net asset value per share reflects the effects of changes in net asset value on the
performance of the Fund during each period, and assumes dividends and distributions, if any, were reinvested. 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.
(2)For fiscal years beginning on or after September 1, 1995, a fund is required to disclose the average commission rate per
share it paid for portfolio trades on which commissions were charged.
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
- ------------
The Latin American Discovery Fund, Inc. (the "Fund") was incorporated on
November 12, 1991 and is registered as a non-diversified, closed-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's investment objective is long-term capital appreciation through
investments primarily in equity securities.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: In valuing the Fund's assets, all
listed securities, including purchased options, for which market quotations
are readily available are valued at the last sales price on the valuation
date, or if there was no sale on such date at the mean between the current
bid and asked prices. Securities which are traded over-the-counter are
valued at the average of the mean of current bid and asked prices obtained
from reputable brokers. Short-term securities which mature in 60 days or
less are valued at amortized cost. All other securities and assets for which
market values are not readily available (including investments which are
subject to limitations as to their sale) are valued at fair value as
determined in good faith by the Board of Directors ("the Board"), although
the actual calculations may be done by others.
2. TAXES: It is the Fund's intention to continue to
qualify as a regulated investment company and distribute all of its taxable
income. Accordingly, no provision for U.S. Federal income taxes is required
in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests.
Such taxes are generally based on income and/or capital gains earned or
repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation as such income and/or gains
are earned.
3. REPURCHASE AGREEMENTS: In connection with
transactions in repurchase agreements, a bank as custodian for the Fund
takes possession of the underlying securities, with a market value at least
equal to the amount of the repurchase transaction, including principal and
accrued interest. To the extent that any repurchase transaction exceeds one
business day, the value of the collateral is marked-to-market on a daily
basis to determine the adequacy of the collateral. In the event of default
on the obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. In the
event of default or bankruptcy by the counter-party to the agreement,
realization and/or retention of the collateral or proceeds may be subject to
legal proceedings.
4. FOREIGN CURRENCY TRANSLATION: The books and
records of the Fund are maintained in U.S. dollars. Foreign currency amounts
are translated into U.S. dollars at the mean of the bid and asked prices of
such currencies against U.S. dollars last quoted by a major bank as follows:
- investments, other assets and liabilities at the prevailing rates of
exchange on the valuation date;
- investment transactions and investment income at the prevailing rates of
exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the period, the Fund does not
isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of the securities held at period end.
Similarly, the Fund does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market
prices of securities sold during the period. Accordingly, realized and
unrealized foreign currency gains (losses) are included in the reported net
realized and unrealized gains (losses) on investment transactions and
balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from sales and maturities of foreign
currency exchange contracts, disposition of foreign currencies, currency
gains or losses realized between the trade and settlement dates on
securities transactions, and the difference between the amount of investment
income and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent amounts actually received or paid. Net unrealized
currency gains (losses) from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of
unrealized appreciation (depreciation) on investments and foreign currency
translations in the Statement of Net Assets. The change in unrealized
currency gains (losses) for the period is reflected in the Statement of
Operations.
5. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund
may enter into foreign currency exchange contracts to attempt to protect
securities and related receivables and payables against changes in future
foreign
11
<PAGE>
exchange rates. A foreign currency exchange contract is an agreement between
two parties to buy or sell currency at a set price on a future date. The
market value of the contract will fluctuate with changes in currency
exchange rates. The contract is marked-to-market daily and the change in
market value is recorded by the Fund as unrealized gain or loss. The Fund
records realized gains or losses when the contract is closed equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. Risk may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms
of their contracts and is generally limited to the amount of unrealized gain
on the contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
6. PURCHASED OPTIONS: The Fund may purchase call
and put options on listed securities or securities traded over the counter.
The Fund may purchase call options on securities to protect against an
increase in the price of the underlying security. The Fund may purchase put
options on securities to protect against a decline in the value of the
underlying security. Possible losses from purchased options cannot exceed
the total amount invested. Realized gains or losses on purchased options are
included with net gain (loss) on investment securities sold in the financial
statements.
7. OTHER: Security transactions are accounted for on
the date the securities are purchased or sold. Realized gains and losses on
the sale of investment securities are determined on the specific identified
cost basis. Interest income is recognized on the accrual basis. Dividend
income is recorded on the ex-dividend date (except certain dividends which
may be recorded as soon as the Fund is informed of such dividend) net of
applicable withholding taxes where recovery of such taxes is not reasonably
assured. Distributions to shareholders are recorded on the ex-date.
The amount and character of income and capital gain distributions to be paid
are determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing book and tax treatments for foreign currency
transactions, net operating losses, foreign taxes on net realized gains and
gains on certain securities of corporations designated as "passive foreign
investment companies". These differences are also primarily due to differing
book and tax treatments of the timing of the recognition of losses on
securities and the timing of the deductibility of certain foreign taxes.
Permanent book and tax basis differences relating to shareholder
distributions may result in reclassifications to undistributed net
investment income (loss), accumulated net realized gain (loss) and capital
surplus.
Adjustments for permanent book-tax differences, if any, are not reflected in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. Morgan Stanley Asset Management Inc. (the "Adviser") provides investment
advisory services to the Fund under the terms of an Investment Advisory
Agreement (the "Agreement"). Under the Agreement, the Adviser is paid a fee
computed weekly and payable monthly at the annual rate of 1.15% of the Fund's
average weekly net assets.
C. The Chase Manhattan Bank, through its affiliate Chase Global Funds Services
Company (the "Administrator"), provides administrative services to the Fund
under an Administration Agreement. Under the Administration Agreement, the
Administator is paid a fee computed weekly and payable monthly at an annual rate
of .08% of the Fund's average weekly net assets, plus $65,000 per annum. In
addition, the Fund is charged certain out-of-pocket expenses by the
Administrator. The Chase Manhattan Bank acts as custodian for the Fund's assets
held in the United States.
D. Unibanco-Uniao de Bancos Brasileiros S.A. (the "Brazilian Administrator")
provides administrative services to the Fund under the terms of an
Administration Agreement and is paid a fee computed weekly and payable monthly
at an annual rate of .125% of the Fund's average weekly net assets invested in
Brazil. Bice Chileconsult Agente de Valores S.A. (the "Chilean Administrator")
provides administrative services to the Fund under the terms of a separate
Administration Agreement and is paid an annual fee, computed weekly and payable
monthly equal to the greater of .25% of the Fund's average weekly net assets
invested in Chile or $20,000. Cititrust S.A. (the "Colombian Administrator")
provides administrative services to the Fund and is paid a fee computed weekly
and payable monthly at an annual rate of .25% of the Fund's average weekly net
assets invested in Colombia.
E. Morgan Stanley Trust Company (the "International Custodian"), an affiliate
of the Adviser, acts as custodian for the Fund's assets held outside the United
States in accordance with a Custody Agreement. Custody fees are payable monthly
based on assets under custody, investment purchase and sales activity, plus an
account maintenance fee, plus reimbursement for certain out-of-pocket expenses.
Investment transaction fees vary by country and security type. During the six
months ended June 30,
12
<PAGE>
1997, the Fund incurred custodian fees of $170,000 with the International
Custodian, of which $112,000 was payable to the International Custodian at June
30, 1997. In addition, for the six months ended June 30,1997, the Fund has
incurred interest expense of $18,000, on balances with the International
Custodian.
F. During the six months ended June 30, 1997, the Fund made purchases and sales
totaling approximately $242,218,000 and $245,585,000, respectively, of
investment securities other than long-term U.S. Government securities and
short-term investments. There were no purchases or sales of long-term U.S.
Government securities. During the six months ended June 30, 1997, the Fund
placed a portion of its portfolio transactions with affiliated broker/ dealers.
Accordingly, the Fund incurred brokerage commissions of $74,000 with Morgan
Stanley & Co. Incorporated, an affiliate of the Adviser, for the six months
ended June 30, 1997.
At June 30, 1997, the U.S. Federal income tax cost basis of securities was
$204,898,000 and accordingly, net unrealized appreciation for U.S. Federal
income tax purposes was $43,355,000 of which $51,701,000 related to appreciated
securities and $8,346,000 related to depreciated securities.
G. In connection with its organization the Fund incurred $308,000 of
organization costs. The organization costs were amortized on a straight-line
basis over a five year period beginning June 23, 1992, the date the Fund
commenced operations.
H. The Fund issued to its shareholders of record as of the close of business on
September 12, 1995 transferable rights to subscribe for up to an aggregate of
3,100,000 shares of Common Stock of the Fund at a rate of one share of Common
Stock for three Rights held at the subscription price of $9.00 per share. During
September and October 1995, the Fund issued, in total, 3,100,000 shares of
Common Stock on exercise of such Rights. Rights offering costs of $460,000 were
charged directly against the proceeds of the Offering. The Fund was advised that
Morgan Stanley & Co. Incorporated received commissions of $825,000 and
reimbursement of its expenses of $100,000 in connection with its participation
in the Rights Offering.
I. A significant portion of the Fund's net assets consist of securities
denominated in Latin American currencies. Changes in currency exchange rates
will affect the value of and investment income from such securities. Latin
American securities are often subject to greater price volatility, limited
capitalization and liquidity, and higher rates of inflation than securities of
companies based in the United States. In addition, Latin American securities may
be subject to substantial governmental involvement in the economy and greater
social, economic and political uncertainty.
J. Each Director of the Fund who is not an officer of the Fund or an affiliated
person as defined under the Investment Company Act of 1940, as amended, may
elect to participate in the Directors' Deferred Compensation Plan (the "Plan").
Under the Plan, such Directors may elect to defer payment of a percentage of
their total fees earned as a Director of the Fund. These deferred portions are
treated, based on an election by the Director, as if they were either invested
in the Fund's shares or invested in U.S. Treasury Bills, as defined under the
Plan. The deferred fees payable under the Plan, at June 30, 1997, totaled
$31,000 and are included in Payable for Directors' Fees and Expenses on the
Statement of Net Assets.
K. Supplemental Proxy Information
The Annual Meeting of the Stockholders of the Latin American Discovery Fund,
Inc. was held on April 30, 1997. The following is a summary of each proposal
presented and the total number of shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES VOTES
PROPOSAL: FAVOR OF AGAINST WITHHELD ABSTAINED
- ----------------------------------------------------- ---------- ------- -------- ---------
<S> <C> <C> <C> <C>
1. To elect the following Directors: John W. Croghan 7,300,463 -- 214,606 --
Graham E. Jones 7,297,682 -- 217,387 --
2.To ratify the selection of Price Waterhouse LLP as
independent public accountants of the Fund. 7,302,615 166,107 -- 46,347
3.To approve an Investment Advisory and Management
Agreement between the Fund and Morgan Stanley Asset
Management Inc. 7,264,203 195,468 -- 55,398
</TABLE>
13
<PAGE>
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each shareholder will be deemed to have elected, unless Boston Equiserve (the
"Plan Agent") is otherwise instructed by the shareholder in writing, to have all
distributions automatically reinvested in Fund shares. Participants in the Plan
have the option of making additional voluntary cash payments to the Plan Agent,
annually, in any amount from $100 to $3,000, for investment in Fund shares.
Dividend and capital gain distributions will be reinvested on the
reinvestment date in full and fractional shares. If the market price per share
equals or exceeds net asset value per share on the reinvestment date, the Fund
will issue shares to participants at net asset value. If net asset value is less
than 95% of the market price on the reinvestment date, shares will be issued at
95% of the market price. If net asset value exceeds the market price on the
reinvestment date, participants will receive shares valued at market price. The
Fund may purchase shares of its Common Stock in the open market in connection
with dividend reinvestment requirements at the discretion of the Board of
Directors. Should the Fund declare a dividend or capital gain distribution
payable only in cash, the Plan Agent will purchase Fund shares for participants
in the open market as agent for the participants.
The Plan Agent's fees for the reinvestment of dividends and distributions
will be paid by the Fund. However, each participant's account will be charged a
pro rata share of brokerage commissions incurred on any open market purchases
effected on such participant's behalf. A participant will also pay brokerage
commissions incurred on purchases made by voluntary cash payments. Although
shareholders in the Plan may receive no cash distributions, participation in the
Plan will not relieve participants of any income tax which may be payable on
such dividends or distributions.
In the case of shareholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are participating in the
Plan.
Shareholders who do not wish to have distributions automatically reinvested
should notify the Plan Agent in writing. There is no penalty for
non-participation or withdrawal from the Plan, and shareholders who have
previously withdrawn from the Plan may rejoin at any time. Requests for
additional information or any correspondence concerning the Plan should be
directed to the Plan Agent at:
The Latin American Discovery Fund, Inc.
Boston Equiserve
Dividend Reinvestment and Cash Purchase Plan
P.O. Box 1681
Boston, MA 02105-1681
1-800-442-2001
14
