As filed with the Securities and Exchange Commission on July 11, 1994
Securities Act File No. 33-
Investment Company Act File No. 811-
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
Form N-2
(Check appropriate box or boxes)
/X/ REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/ / Pre-Effective Amendment No.
/ / Post-Effective Amendment No.
and/or
/X/ REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
/ / Amendment No.
LEHMAN BROTHERS LATIN AMERICA GROWTH FUND, INC.
(Exact Name of Registrant as Specified in Charter)
3 World Financial Center
New York, New York 10285
(Address of Principal Executive Offices
(Number, Street, City, State, Zip Code))
(212) 526-0600
(Registrant's Telephone Number, including Area Code)
Clinton Kendrick
Lehman Brothers Latin America Growth Fund, Inc.
3 World Financial Center, New York, New York 10285
Name and address (Number, Street, City, State, Zip Code)
of Agent for Service
with copies to:
Gary S. Schpero, Esq. Burton M. Leibert, Esq.
Simpson Thacher & Bartlett Willkie Farr & Gallagher
425 Lexington Avenue 153 East 53rd Street
New York, New York 10017-3954 New York, New York 10022
(212) 455-2000 (212) 821-8000
_________________________
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis in reliance on Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with a dividend
reinvestment plan, check the following box. / /
_________________________
<PAGE>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum Amount of
Title of Securities Amount Being Offering Price Aggregate Registration
Being Registered Registered<F1> Per Share<F2> Offering Price<F2> Fee<F3>
------------------------------ ------------------- ------------------ -------------------- -------------
<S> <C> <C> <C> <C>
Common Stock,
par value $.001 8,050,000 $15.00 $120,750,000 $42,638
____________________
<FN>
<F1> Includes 1,050,000 shares of Common Stock issuable upon exercise of the
over-allotment options granted to the U.S. Underwriters and the
International Managers.
<F2> Estimated solely for purpose of calculating the registration fee.
<F3> Includes $1,000 registration fee under the Investment Company Act of
1940.
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
LEHMAN BROTHERS LATIN AMERICA GROWTH FUND, INC.
CROSS-REFERENCE SHEET
Parts A and B of Prospectus<F1>
Items in Parts A and B of Form N-2 Location in Prospectus
Item 1. Outside Front Cover Cover of Prospectus
Item 2. Inside Front and Outside
Back Cover Page Inside Front and Outside Back Cover of
Prospectus
Item 3. Fee Table and Synopsis Prospectus Summary; Summary of
Expenses; Management of the Fund
Item 4. Financial Highlights Not Applicable
Item 5. Plan of Distribution Cover of Prospectus; Management of the
Fund; Underwriting
Item 6. Selling Shareholders Not Applicable
Item 7. Use of Proceeds Use of Proceeds; Investment Objective
and Policies; Additional Investment
Practices
Item 8. General Description of the
Registrant Cover of Prospectus; Prospectus
Summary; The Fund; Investment
Objective and Policies; Additional
Investment Practices; Investment
Restrictions; Risk Factors and Special
Considerations
Item 9. Management Management of the Fund; Custodian,
Transfer Agent, Dividend Paying Agent
and Registrar; Common Stock
Item 10. Capital Stock, Long-Term
Debt, and Other Securities Common Stock; Dividends and
Distributions; Dividend Reinvestment
and Cash Purchase Plan; Taxation
Item 11. Defaults and Arrears on
Senior Securities Not Applicable
Item 12. Legal Proceedings Not Applicable
<PAGE>
Item 13. Table of Contents of the
Statement of Additional
Information Not Applicable
Item 14. Cover Page Not Applicable
Item 15. Table of Contents Not Applicable
Item 16. General Information and
History Not Applicable
Item 17. Investment Objective and
Policies Investment Objective and Policies;
Additional Investment Practices;
Investment Restrictions; Portfolio
Transactions
Item 18. Management Management of the Fund; Custodian,
Transfer Agent, Dividend Paying Agent
and Registrar
Item 19. Control Persons and
Principal Holders of
Securities Common Stock
Item 20. Investment Advisory and
Other Services Management of the Fund
Item 21. Brokerage Allocation and
Other Practices Portfolio Transactions
Item 22. Tax Status Dividends and Distributions; Dividend
Reinvestment and Cash Purchase Plan;
Taxation
Item 23. Financial Statements Experts; Report of Independent
Auditors; Statement of Assets and
Liabilities
____________________
<F1> All information required to be set forth in Part B: Statement of
Additional Information has been included in Part A: The Prospectus. All
Items required to be set forth in Part C are set forth in Part C.
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of Prospectus to be used in
connection with the offering of shares in the United States (the "U.S.
Offering") and the offering of shares outside of the United States (the
"International Offering"). The Prospectus to be used in connection with the
U.S. Offering (the "U.S. Prospectus") is set forth in full following this
explanatory note. The Prospectus to be used in connection with the
International Offering is identical to the U.S. Prospectus except that the
front and back covers are replaced with the alternate versions included herein
following the U.S. Prospectus.
<PAGE>
_______________________________________________________________________________
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
_______________________________________________________________________________
Subject to Completion, dated July 11, 1994
PROSPECTUS
7,000,000 Shares
LEHMAN BROTHERS LATIN AMERICA GROWTH FUND, INC.
Common Stock
_________________________
Lehman Brothers Latin America Growth Fund, Inc. (the "Fund") is a newly
organized, diversified, closed-end management investment company that seeks
long-term capital appreciation through investing, under normal market
conditions, at least 80% of its assets in the equity securities of Latin
American issuers (as defined in this Prospectus) that at the time of purchase
have a market capitalization of less than U.S.$500 million. There can be no
assurance that the Fund's investment objective will be achieved. The Fund may
also invest up to 20% of its assets in (i) equity securities of Latin American
issuers that at the time of purchase have a market capitalization of U.S.$500
million or more, (ii) equity securities of issuers which do not meet the
definition of Latin American issuers but which are likely, in the opinion of
the Investment Adviser, to be affected by economic developments in Latin
America or Latin American international economic relations and (iii) debt
securities (including sovereign debt obligations) issued or guaranteed by Latin
American issuers.
The Fund's investments in securities of Latin American issuers involve
certain special risks and considerations not typically associated with
investments in securities of U.S. companies or the U.S. government, including
greater political, social and economic uncertainty, currency fluctuations,
restrictions on foreign investment and repatriation of capital, higher and more
volatile fluctuations in the rates of inflation, price volatility in and
relative illiquidity of securities markets, greater concentration of economic
wealth and a greater role of the state in the economy and certain other risks
pertaining to investment in the securities of non-U.S. issuers generally. The
Fund may invest in debt obligations rated below investment grade or in
comparable unrated debt obligations, which are considered to be speculative
<PAGE>
with respect to the payment of interest and the repayment of principal. In
addition, although the Fund has no present intention to do so, the Fund may
borrow for certain purposes. There are special risks and considerations
associated with borrowing and with investing in such debt obligations.
Investment in the Fund should be considered speculative. See "Investment
Objective and Policies" and "Risk Factors and Special Considerations."
Of the 7,000,000 shares of Common Stock offered hereby, _______ shares are
initially being offered in the United States by the U.S. Underwriters (the
"U.S. Offering") and _______ shares are initially being offered in a concurrent
international offering outside the United States by the International Managers
(the "International Offering"). Such offerings are collectively referred to as
the "Offerings." The offering price and sales load per share for the U.S.
Offering and the International Offering will be identical. See "Underwriting."
Lehman Brothers Global Asset Management Limited will act as investment
adviser to the Fund.
An application will be made to list the Common Stock on the New York Stock
Exchange under the symbol "_____". Prior to the Offerings there has been no
public market for the Fund's Common Stock. Shares of closed-end investment
companies have in the past frequently traded at discounts from their net asset
values and initial offering prices. The risk of loss associated with this
characteristic of closed-end investment companies may be greater for investors
purchasing shares in the initial public offering and expecting to sell the
shares soon after the completion thereof. There is no restriction on the number
of shares that may be purchased subject to the transfer restriction described
in the footnotes to the table below, except that the Fund will comply, with
respect to non-restricted shares, with the distribution requirements of the New
York Stock Exchange. See "Underwriting." To the extent investors who are
subject to the transfer restriction sell their shares once the transfer
restriction is no longer applicable, the market price of the Common Stock could
be adversely affected. In addition, the transfer restriction will reduce the
number of shares available for sale in the secondary market during the 90 day
restriction period.
The address of the Fund is 3 World Financial Center, New York, New York
10285, and its telephone number is (212) 526-0600. Investors are advised to
read this Prospectus, which sets forth information about the Fund that
investors should know before investing, and to retain it for future reference.
_________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
<CAPTION>
Price to Proceeds to
Public<F1> Sales Load<F1><F2> the Fund<F2>
---------------------- ------------------------ ---------------------
<S> <C> <C> <C>
Per Share $15.00 $ $
Total<F3> $105,000,000 $ $
____________________
<FN>
<F1> The "Price to Public" and "Sales Load" per share will be reduced to $__
and $__, respectively, for purchases in single transactions (as defined
in this Prospectus under "Underwriting") of between ______ and ______
shares of Common Stock, inclusive, and to $__ for purchases in single
transactions of ______ or more shares of Common Stock, subject to the
following sentence. Purchasers who agree to purchase shares of Common
Stock at the reduced price will be restricted from transferring such
shares for a period of 90 days after the closing of the Offerings. See
"Underwriting."
<F2> Before deduction of organizational and offering expenses payable by the
Fund (including $__________ to be paid to the U.S. Underwriters and the
International Managers as reimbursement of certain of their expenses in
connection with the Offerings) estimated at $________.
<F3> The Fund has granted to the U.S. Underwriters an option, exercisable in
one or more installments within 45 days from the date of this
Prospectus, to purchase up to _________ additional shares of Common
Stock to cover over-allotments, if any. The International Managers have
been granted a similar option to purchase up to __________ additional
shares to cover over-allotments, if any. If such options are exercised
in full, the total Price to Public, Sales Load and Proceeds to Fund will
be increased by $120,750,000, $________ and $________, respectively. See
"Underwriting."
</TABLE>
_________________________
The shares of Common Stock offered by this Prospectus are offered by the
U.S. Underwriters subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
U.S. Underwriters and to certain further conditions. It is expected that
delivery of certificates for the shares of Common Stock will be made at the
offices of Lehman Brothers Inc., New York, New York, on or about
_____________ ___, 1994.
_________________________
Lehman Brothers
_____________ __, 1994
<PAGE>
IN CONNECTION WITH THE OFFERINGS, THE U.S. UNDERWRITERS AND THE
INTERNATIONAL MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR
MAINTAIN THE MARKET PRICE OF THE FUND'S COMMON STOCK AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
_________________________
In this Prospectus, unless otherwise specified, all references to
"dollars," "U.S.$" or "$" are to United States dollars. Certain numbers in this
Prospectus have been rounded.
_________________________
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus.
The Fund . . . . . . . . . . The Fund is a newly organized, diversified,
closed-end management investment company
designed for investors desiring to participate
in the securities markets in Latin America. For
purposes of this Prospectus, "Latin America"
includes all of the countries of Central and
South America, and the islands of the
Caribbean, not including Cuba.
Investment in Latin
American Issuers . . . . . The Investment Adviser believes that recent
economic successes in Latin America have not
yet been reflected fully in the equity markets
of Latin American countries, which for the most
part represent only a small portion of the
economy. The substantial debt burden that
crippled economies in the 1980s has been
restructured in certain countries and is in the
process of being restructured in others. Free
trade areas and independent central banks have
developed in the region in recent years.
Inflation in almost all Latin American
countries has fallen in recent years and growth
rates have increased.
The equity markets of Latin America are,
individually, some of the most volatile in the
world. However, the Investment Adviser believes
that a broad range of investments in countries
and issuers across the region may act to reduce
this volatility significantly. The Investment
Adviser intends to maintain a high level of
diversification through investment primarily in
smaller and medium sized companies throughout
Latin America. The Investment Adviser believes
that an emphasis on the small and medium
capitalization segments of the securities
markets in Latin America may offer investors
opportunities that have been largely
overlooked.
Investment Objective and
Policies . . . . . . . . . The Fund's investment objective is long-term
capital appreciation. There can be no assurance
that the Fund's investment objective will be
achieved. See "Investment Objective and
Policies."
<PAGE>
The Fund will, under normal market conditions,
invest at least 80% of its assets in the equity
securities of Latin American issuers (as
defined in this Prospectus) that at the time of
purchase have a market capitalization of less
than U.S.$500 million. Equity securities in
which the Fund will invest include common and
preferred stock (including convertible
preferred stock), American, Global or other
types of Depositary Receipts, bonds, notes and
debentures convertible into common or preferred
stock, equity interests in trusts, partnerships
or joint ventures and common stock purchase
warrants and rights. While most of the equity
securities purchased by the Fund are expected
to be traded on non-U.S. stock exchanges or in
non-U.S. over-the-counter markets, the Fund may
invest up to 20% of its total assets in
securities which are neither listed on a
securities exchange nor traded in an over-the-
counter market. The Fund may, for cash
management or temporary defensive purposes,
pending investment in accordance with the
Fund's investment objective and policies and to
meet operating expenses, invest without
limitation in Temporary Investments (as defined
in this Prospectus). See "Investment Objective
and Policies."
For the purposes of this Prospectus "Latin
American issuers" are (i) companies organized
under the laws of a Latin American country;
(ii) companies whose securities are principally
traded in Latin American countries; (iii)
subsidiaries of companies described in clauses
(i) or (ii) above that issue debt securities
guaranteed by, or securities payable with (or
convertible into) the stock of, companies
described in clauses (i) or (ii); (iv)
companies that finance operations in Latin
America by means of securities denominated in
any Latin American currency; (v) companies that
derive at least 50% of their revenues primarily
from either goods or services produced in Latin
America or sales made in Latin America; (vi)
issuers of depositary shares for Latin American
equity securities; (vii) the government of any
Latin American country and its agencies and
instrumentalities; and (viii) Latin American
public sector entities, including any entity
fully or partly owned by the entities described
in the foregoing clause (vii). Under normal
<PAGE>
market conditions, the Fund will invest in the
securities of issuers in at least three Latin
American countries. The Fund is not limited,
however, with respect to the proportion of its
total assets that may be invested in the
securities of issuers located in any one Latin
American country.
The Fund may also invest up to 20% of its
assets in (i) equity securities of Latin
American issuers that at the time of purchase
have a market capitalization of U.S.$500
million or more, (ii) equity securities of
issuers which do not meet the definition of
Latin American issuers but which are likely, in
the opinion of the Investment Adviser, to be
affected by economic developments in Latin
America or Latin American international
economic relations (which may be issuers which
are organized, whose securities are principally
traded or which are principally based, outside
Latin America) and (iii) debt securities
(including sovereign debt obligations) issued
or guaranteed by Latin American issuers.
The Offerings . . . . . . . . 7,000,000 shares of Common Stock are being
offered in concurrent offerings as follows:
_________ shares in the United States by a
group of underwriters (the "U.S. Underwriters")
represented by Lehman Brothers Inc. and
_________ (the "Representatives") and _________
shares outside of the United States by a group
of managers (the "International Managers")
represented by Lehman Brothers International
and ________ (the "Lead International
Managers"). The initial public offering price
of the shares of Common Stock is $15.00 per
share, which will be reduced to $______ for
purchases in single transactions (as defined
below in "Underwriting") of between ________
and _________ shares of Common Stock,
inclusive, and to $______ for purchases in
single transactions of ________ or more shares
of Common Stock, subject to the following
sentence. Purchasers who agree to purchase
shares of Common Stock at the reduced price
will be restricted from transferring those
shares for a period of 90 days after the
closing of the Offerings. There is no
restriction on the number of shares that may be
purchased subject to the transfer restriction,
except that the Fund will comply, with respect
<PAGE>
to non-restricted shares, with the distribution
requirements of the New York Stock Exchange.
The minimum investment is $1,500 (100 shares).
In addition, the U.S. Underwriters and the
International Managers have been granted
options, exercisable in one or more
installments, to purchase up to ____________
and ________ additional shares, respectively,
to cover over-allotments. See "Underwriting."
Listing . . . . . . . . . . . An application will be made to list the Common
Stock on the New York Stock Exchange.
Symbol . . . . . . . . . . .
Investment Adviser . . . . . Lehman Brothers Global Asset Management Limited
acts as the Fund's investment adviser. The
Investment Adviser is an indirect, wholly-owned
subsidiary of Lehman Brothers Inc., a leading
full service investment firm serving U.S. and
non-U.S. securities and commodities markets.
The Investment Adviser, together with other
Lehman Brothers Inc. investment advisory
affiliates, had in excess of $__ billion in
assets under management as of _________ __,
1994. The Investment Adviser serves as
investment adviser or sub-investment adviser to
several U.S.-registered and offshore investment
funds. The Fund will pay the Investment
Adviser a fee for its advisory services at an
annual rate of _____% of the value of the
Fund's average monthly net assets. See
"Management of the Fund" and "Summary of
Expenses."
Administrators . . . . . . . ____________________ serves as the Fund's
administrator in the United States, for which
it is paid a fee by the Fund at an annual rate
of _____% of the value of the Fund's average
monthly net assets. _______________ serves as
the Fund's administrator in Brazil, for which
it is paid a fee by the Fund at an annual fee
of $_____. _______________ serves as the Fund's
administrator in Chile, for which it is paid a
fee by the Fund at an annual fee of $_____.
_______________ serves as the Fund's
administrator in Colombia, for which it will be
paid a fee by the Fund at the annual fee of
$_____. See "Management of the Fund" and
"Summary of Expenses."
<PAGE>
Expenses . . . . . . . . . . The aggregate advisory and administrative fees
paid by the Fund are higher than those paid by
many investment companies, although they are
comparable to fees paid by other closed-end
investment companies that invest primarily in
the securities of Latin American or other
emerging market issuers. See "Management of the
Fund" and "Summary of Expenses."
Dividends and
Distributions . . . . . . . The Fund intends to distribute annually to
holders of Common Stock substantially all of
its net investment income, and to distribute
any net realized capital gains at least
annually. See "Dividends and Distributions;
Dividend Reinvestment and Cash Purchase Plan."
Under the Fund's Dividend Reinvestment and Cash
Purchase Plan (the "Plan"), all dividends and
distributions will be automatically reinvested
in additional shares of Common Stock of the
Fund unless a shareholder elects to receive
cash. Shareholders whose shares are held in the
name of a broker or nominee should contact such
broker or nominee to confirm that they may
participate in the Plan. See "Dividends and
Distributions; Dividend Reinvestment Plan."
Custodian and
Subcustodians . . . . . . . ____________________ will serve as the Fund's
custodian and may employ subcustodians outside
the United States approved by the Fund's Board
of Directors in accordance with the Investment
Company Act of 1940, as amended (the
"Investment Company Act"). See "Custodian,
Transfer Agent, Dividend Paying Agent and
Registrar."
Transfer and Dividend
Paying Agent . . . . . . . . ____________________ will serve as the Fund's
transfer agent and dividend paying agent. See
"Custodian, Transfer Agent, Dividend Paying
Agent and Registrar."
Antidiscount
Measures . . . . . . . . . If, at any time after the second year following
the Offerings, shares of the Fund's Common
Stock publicly trade for a substantial period
of time at a substantial discount from net
asset value, the Fund's Board of Directors will
consider, at its next regularly scheduled
meeting, authorizing various actions designed
<PAGE>
to eliminate the discount. These actions may
include periodic repurchases of shares, tender
offers or recommending to shareholders
conversion to an open-end investment company.
No assurance can be given that the Board of
Directors will undertake any such actions or
that if repurchases or tender offers are
undertaken, the Fund's shares will trade at a
price that is close or equal to net asset
value. Under certain circumstances, a
shareholder vote may be required to authorize
periodic repurchases or tender offers of the
Fund's shares of Common Stock. Conversion to an
open-end investment company would require a
shareholder vote and may require the Fund to
obtain additional local governmental or
regulatory approvals or limit the Fund's
ability to invest in certain markets. See
"Common Stock -- Future Actions Relating to a
Discount in the Price of the Fund's Shares of
Common Stock."
Risk Factors and Special
Considerations . . . . . . . Investing in Latin America. The Latin American
countries in which the Fund will invest may be
subject to a substantially greater degree of
social, political and economic instability than
is the case in the United States, Japan and
Western European countries. Such instability
may result from, among other things, the
following: (i) authoritarian governments or
military involvement in political and economic
decision-making, and changes in government
through extra-constitutional means; (ii)
popular unrest associated with demands for
improved political, economic and social
conditions; (iii) internal insurgencies and
terrorist activities; (iv) hostile relations
with neighboring countries; and (v) drug
trafficking. Such social, political and
economic instability could disrupt the
principal financial markets in which the Fund
invests and adversely affect the value of the
Fund's assets.
The economies of individual Latin American
countries may differ favorably or unfavorably
and significantly from the U.S. economy in such
respects as the rate of growth of gross
domestic product or gross national product,
rate of inflation, currency depreciation,
capital reinvestment, resource self-
<PAGE>
sufficiency, structural unemployment and
balance of payments position. The Fund's
investments in securities of Latin American
issuers generally involve certain special risks
and considerations not typically associated
with investment in U.S. securities, including
risks relating to (i) economic, political and
social factors; (ii) more substantial
government involvement in the economy; (iii)
restrictions on foreign investment and
repatriation of capital; (iv) foreign exchange
matters, including fluctuations in the rate of
exchange between the dollar and the applicable
foreign currency, exchange control regulations
and costs associated with conversion of
investment principal and income from one
currency to another; (v) higher rates of
inflation; and (vi) differences between the
U.S. and Latin American securities markets,
including greater price volatility in, less
liquidity and smaller market capitalization of
the securities markets, concentration of market
capitalization in a relatively small number of
companies, delays and related administrative
uncertainties in connection with clearance and
settlement of securities transactions, the lack
of sufficient capital to expand market
operations, the possibility of permanent or
temporary termination of trading, greater
spreads between bid and ask prices for
securities, the absence of uniform accounting,
auditing and financial reporting standards,
practices and disclosure requirements, such
that certain material disclosures may not be
made and less information may be available to
investors investing in non-U.S. securities than
to investors investing in U.S. securities, and
less government supervision and regulations.
See "Risk Factors and Special Considerations."
Unlisted Securities. The Fund may invest up to
20% of its total assets in securities which are
neither listed on a securities exchange nor
traded in an over-the-counter market. The Fund
may encounter substantial delays and could
incur losses in attempting to sell such
securities. See "Additional Investment
Practices."
Other Investment Practices. The Fund may use
various other investment practices that involve
special considerations, including purchasing
<PAGE>
and selling options on securities, financial
futures, fixed income indices and other
financial instruments, entering into financial
futures contracts, interest rate transactions,
currency transactions, equity swaps and related
transactions, equity or debt securities
transactions on a when-issued or delayed
delivery basis, and repurchase and reverse
repurchase agreements, selling securities short
and lending portfolio securities. See
"Additional Investment Practices."
Borrowing. Although the Fund has no present
intention to do so, the Fund may, in certain
circumstances, borrow in an amount up to 10% of
the Fund's total assets. Borrowing by the Fund
creates special risks. For example, borrowing
may exaggerate changes in the net asset value
of the Fund's shares and in the return on the
Fund's portfolio. Although the principal of any
borrowing will be fixed, the Fund's assets may
change in value during the time the borrowing
is outstanding. Borrowing will create expenses
for the Fund which can exceed the income from
the assets acquired with the proceeds of the
borrowing. In such a case, the Fund may be
required to liquidate portfolio securities at a
time when it would be disadvantageous to do so,
which could affect the Investment Adviser's
strategy and the ability of the Fund to comply
with certain provisions of the Code in order to
provide "pass through" tax treatment to
shareholders. Furthermore, if the Fund were to
engage in borrowing, an increase in interest
rates could reduce the value of the Fund's
Common Stock by increasing the Fund's interest
expense.
High Yield/High Risk and Unrated Debt. The Fund
has not established any rating criteria for the
debt securities in which it may invest.
Securities rated in medium to low rating
categories of nationally recognized statistical
rating organizations and unrated securities of
comparable credit quality ("high yield/high
risk" securities) are speculative with respect
to the capacity to pay interest and repay
principal in accordance with the terms of the
security and generally involve a greater
volatility of price than securities in higher
rated categories. Ratings criteria established
by nationally recognized statistical ratings
<PAGE>
organizations are included as Appendix A to
this Prospectus. The Investment Adviser may
take advantage of the entire range of
maturities offered for the debt securities in
which the Fund may invest. The Fund's
investments in securities with longer terms to
maturity are subject to greater volatility than
the Fund's investments in shorter term debt
securities. Additionally, the value of debt
securities of Latin American issuers held by
the Fund may be expected to move in the
opposite direction of interest rates. See "Risk
Factors and Special Considerations."
Sovereign Debt. Investment in debt obligations
issued or guaranteed by a government, its
agencies or instrumentalities ("Sovereign
Debt") involves a high degree of risk. The
governmental entity that controls the repayment
of Sovereign Debt may not be willing or able to
repay the principal and/or interest when due in
accordance with the terms of such debt. A
governmental entity's ability or willingness to
repay principal and interest due in a timely
manner may be affected by, among other factors,
its cash flow situation, the availability of
sufficient foreign exchange on the date a
payment is due, the governmental entity's
policy towards the International Monetary Fund,
the extent of its foreign reserves, the
relative size of the debt service burden to the
economy as a whole and the political
constraints to which a governmental entity may
be subject. Consequently, governmental entities
may default on their Sovereign Debt. Holders of
Sovereign Debt, including the Fund, may be
requested to participate in the rescheduling of
such debt and to extend further loans to
governmental entities. Furthermore, a foreign
sovereign itself would not be subject to
traditional bankruptcy proceedings and certain
sovereign entities may not be subject to such
proceedings. See "Risk Factors and Special
Considerations."
Taxes. Income and capital gains on securities
held by the Fund may be subject to withholding
or other taxes imposed by Latin American
countries or other non-U.S. countries, which
would reduce the return to the Fund on those
securities. The imposition of such taxes and
the rates imposed are subject to change. See
<PAGE>
"Taxation -- Latin American Taxes." The Fund
may elect, when eligible, to "pass-through" to
the Fund's shareholders, as a deduction or
credit, the amount of non-U.S. taxes paid by
the Fund. The taxes passed through to
shareholders would be included in each
shareholder's income. Certain shareholders,
including some non-U.S. shareholders, would not
be entitled to the benefit of a deduction or
credit with respect to non-U.S. taxes paid by
the Fund. If a shareholder is eligible and
elects to credit non-U.S. taxes, such credit is
subject to limitations. Other non-U.S. taxes,
such as transfer taxes, may be imposed on the
Fund, but would not give rise to a credit, or
be eligible to be passed through to
shareholders. See "Taxation -- Non-U.S.Taxes."
Net Asset Value Discount. The Fund is newly
organized, and, accordingly, does not have an
operating history. Prior to the Offerings,
there has been no market for the Fund's shares
of Common Stock. Shares of closed-end
investment companies frequently trade at a
discount from net asset value, but in some
cases have traded at or above net asset value.
This characteristic of shares of a closed-end
fund is a risk separate and distinct from the
risk that the Fund's net asset value will
decrease. The Fund cannot predict whether its
shares will trade at, below or above net asset
value. The risk of purchasing shares of closed-
end funds that might later trade at a discount
is more pronounced for investors who wish to
sell their shares in a relatively short period
of time following completion of the offering.
The Fund is intended primarily for long-term
investors and should not be considered a
vehicle for short-term purposes. See "Risk
Factors and Special Considerations."
Anti-Takeover Provisions. The Fund's Charter
contains certain anti-takeover provisions that
may have the effect of inhibiting the Fund's
possible conversion to open-end status and
limiting the ability of other persons to
acquire control of the Fund. In certain
circumstances, these provisions might also
inhibit the ability of holders of Common Stock
to sell their shares at a premium over
prevailing market prices. The Fund's Board of
Directors has determined that these provisions
<PAGE>
are in the best interests of shareholders
generally. See "Risk Factors and Special
Considerations" and "Common Stock."
Transfer Restrictions. Investors who purchase
shares of Common Stock at a reduced price will
be restricted from transferring such shares for
a period of 90 days after the closing of the
Offerings. There is no restriction on the
number of shares that may be purchased subject
to the transfer restriction described above,
except that the Fund will comply, with respect
to non-restricted shares, with the distribution
requirements of the New York Stock Exchange.
See "Underwriting." To the extent these
investors sell their shares once the transfer
restriction is no longer applicable, the market
price of the Common Stock could be adversely
affected. In addition, the transfer restriction
will reduce the number of shares available for
sale in the secondary market during the 90 day
restriction period.
Investors should carefully consider their
ability to assume the foregoing risks before
making an investment in the Fund. An investment
in shares of Common Stock of the Fund may not
be appropriate for all investors, should not be
considered as a complete investment program,
and should be considered speculative. See "Risk
Factors and Special Considerations."
<PAGE>
SUMMARY OF EXPENSES
Shareholder Transaction Expenses
Sales Load (as a percentage of offering price) %<F1>
Annual Expenses (as a percentage of net assets attributable
to common shares)
Management Fees %
Other Expenses (estimated) %
Total Annual Expenses (estimated) %
_________________
<F1> The sales load is reduced for certain transactions. See "Underwriting."
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly.
As of the date of this Prospectus, the Fund had not commenced investment
operations. The amount set forth in "Other Expenses" is, therefore, based on
estimated amounts for the current fiscal year, assuming no exercise of the
over-allotment options granted to the U.S. Underwriters and the International
Managers. "Other Expenses" will include custodial and transfer agency fees,
administration fees, legal and accounting fees, printing costs and listing
fees. For additional information with respect to the expenses identified in the
table above, see "Management of the Fund."
Example
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in the Fund. These amounts are based upon payment by
an investor of a ____% sales load and payment by the Fund of operating expenses
at the levels set forth in the table above.
An investor would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) reinvestment of all dividends and
distributions at net asset value:
1 Year 3 Years 5 Years 10 Years
$ $ $ $
This example as well as the information set forth in the table above
should not be considered a representation of the future expenses of the Fund,
and actual expenses may be greater or less than those shown. Moreover, while
the example assumes a 5% annual return, the Fund's performance will vary and
may result in a return greater or less than 5%. In addition, while the example
assumes reinvestment of all dividends and distributions at net asset value,
this may not be the case for participants in the Fund's Dividend Reinvestment
<PAGE>
and Cash Purchase Plan (the "Plan"). See "Dividends and Distributions; Dividend
Reinvestment Plan."
<PAGE>
THE FUND
Lehman Brothers Latin America Growth Fund, Inc. (the "Fund") is a newly
organized, diversified, closed-end management investment company designed for
investors desiring to participate in the securities markets in Latin America.
For purposes of this Prospectus, Latin America includes all of the countries of
Central and South America, and the islands of the Caribbean, not including
Cuba. The Fund, which was incorporated under the laws of the State of Maryland
on June 27, 1994, is registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act") and has its principal office at 3 World
Financial Center, New York, New York 10285.
INVESTMENT IN LATIN AMERICAN ISSUERS
The Investment Adviser believes that recent economic successes in Latin
America have not yet been reflected fully in the equity markets of Latin
American countries, which for the most part represent only a small portion of
the economy. The substantial debt burden that crippled economies in the 1980s
has been restructured in certain countries and is in the process of being
restructured in others. Free trade areas and independent central banks have
developed in the region in recent years. Inflation in almost all Latin American
countries has fallen in recent years and growth rates have increased.
The equity markets of Latin America are, individually, some of the most
volatile in the world. However the Investment Adviser believes that a broad
range of investments in countries and issuers across the region may act to
reduce this volatility significantly. The Investment Adviser intends to
maintain a high level of diversification through investment primarily in
smaller and medium-sized companies throughout Latin America. The Investment
Adviser believes that an emphasis on the small and medium capitalization
segments of the securities markets in Latin America may offer investors
opportunities that have been largely overlooked.
USE OF PROCEEDS
The net proceeds of the Offerings, estimated to be $__________ (assuming
no exercise of the over-allotment options granted to the U.S. Underwriters and
the International Managers) after deducting the sales load and offering and
organizational expenses, will be invested in accordance with the policies set
forth under "Investment Objective and Policies." The Fund anticipates that,
under current market conditions, the net proceeds of the Offerings will be
fully invested in accordance with the Fund's investment objective and policies
within six months from the date of this Prospectus; however, it may take up to
one year for the Fund to be fully invested, depending on market conditions and
the availability of appropriate securities, to avoid adversely influencing the
prices paid by the Fund for its portfolio securities. Pending such investment,
the proceeds will be invested in Temporary Investments as described under
"Investment Objective and Policies -- Temporary Investments." Offering
expenses estimated at $________ will be paid from the proceeds of the Offerings
and will be charged to capital. Organizational expenses of the Fund estimated
<PAGE>
at $________ will be amortized on a straight-line basis for a five-year period
beginning at the commencement of operations of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
General
The Fund's investment objective is to seek long-term capital appreciation.
This objective and the Fund's policy to invest, under normal market conditions,
at least 80% of its assets in the equity securities of Latin American issuers
(as defined below) are fundamental policies of the Fund which cannot be changed
without the approval of the holders of a majority of the Fund's outstanding
voting securities (as described below under "Investment Restrictions"). No
assurance can be given that the Fund will realize its investment objective.
Equity securities in which the Fund will invest include common and
preferred stock (including convertible preferred stock), American, Global or
other types of Depositary Receipts, bonds, notes and debentures convertible
into common or preferred stock, equity interests in trusts, partnerships or
joint ventures and common stock purchase warrants and rights. While most of the
equity securities purchased by the Fund are expected to be traded on non-U.S.
stock exchanges or in other non-U.S. over-the-counter markets, the Fund may
invest up to 20% of its total assets in securities which are neither listed on
a securities exchange nor traded in an over-the-counter market. Certain
securities in which the Fund may invest may be considered illiquid due to the
existence of a thin trading market. There is no limitation on the Fund's
ability to invest in such securities.
For the purposes of this Prospectus, "Latin American issuers" are (i)
companies organized under the laws of a Latin American country; (ii) companies
whose securities are principally traded in Latin American countries; (iii)
subsidiaries of companies described in clauses (i) or (ii) above that issue
debt securities guaranteed by, or securities payable with (or convertible into)
the stock of, companies described in clauses (i) or (ii); (iv) companies that
finance operations in Latin America by means of securities denominated in any
Latin American currency; (v) companies that derive at least 50% of their
revenues primarily from either goods or services produced in Latin America or
sales made in Latin America; (vi) issuers of depositary shares for Latin
American equity securities; (vii) the government of any Latin American country
and its agencies and instrumentalities; and (viii) Latin American public sector
entities, including any entity fully or partly owned by the entities described
in the foregoing clause (vii). Under normal market conditions, the Fund will
invest in the securities of issuers in at least three Latin American countries.
The Fund is not limited, however, with respect to the proportion of its total
assets that may be invested in the securities of issuers located in any one
Latin American country.
Up to 20% of the Fund's total assets may be invested in (i) equity
securities of Latin American issuers that at the time of purchase have a market
capitalization of U.S.$500 million or more, (ii) equity securities of issuers
which do not meet the definition of Latin American issuers but which are
<PAGE>
likely, in the opinion of the Investment Adviser, to be affected by economic
developments in Latin America or Latin American international economic
relations (which may be issuers which are organized, whose securities are
principally traded, or which are principally based, outside Latin America) and
(iii) debt securities issued or guaranteed by Latin American issuers . The
Investment Adviser may take advantage of the entire range of maturities offered
for the debt securities in which the Fund may invest. The Fund's investments in
securities with longer terms to maturity are subject to greater volatility than
the Fund's investments in shorter term debt securities. Additionally, the value
of debt securities of Latin American issuers held by the Fund can be expected
to vary inversely in relation to fluctuations in interest rates. Certain of the
debt securities in which the Fund may invest may be rated below investment
grade or unrated. See "Risk Factors and Special Considerations -- The Fund's
Investments and Operations" and "Appendix A: Ratings."
The Fund intends to invest in a broad spectrum of Latin American
industries. In selecting industries and companies for investment by the Fund,
the Investment Adviser will consider factors such as overall growth prospects,
competitive position in domestic and export markets, technology, research and
development, productivity, labor costs, raw material costs and sources, profit
margins, return on investment, capital resources, government regulation and
management.
Temporary Investments
The Fund may, for cash management or temporary defensive purposes, pending
investment in accordance with the Fund's investment objective and policies and
to meet operating expenses, invest without limitation in certain short-term
instruments ("Temporary Investments"). The Temporary Investments in which the
Fund may invest include obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Securities");
obligations issued or guaranteed by other governments, including governments in
Latin America, Japan and the United Kingdom, or one of their agencies or
instrumentalities; obligations issued or guaranteed by international
organizations designed or supported by multiple non-U.S. government entities to
promote economic reconstruction or development; bank obligations, such as
certificates of deposit, time deposits and bankers' acceptances; corporate debt
obligations, including commercial paper; and repurchase agreements (as
described below). To be eligible for investment under the circumstances
described above, such instruments (other than U.S. Government Securities) must
be issued by an issuer having a short-term debt rating of A-1 or better by
Standard & Poor's Corporation, a rating of Prime-1 by Moody's Investors
Service, Inc., a comparable rating from another nationally recognized rating
service or, if unrated, deemed to be of equivalent quality by the Investment
Adviser. See "Appendix A: Ratings."
Other Investments
Repurchase Agreements. The Fund may purchase instruments from Latin
American and non-Latin American financial institutions, such as banks and
broker-dealers, subject to the seller's agreement to repurchase them at an
agreed upon time and price ("repurchase agreements"). The seller under a
<PAGE>
repurchase agreement will be required to maintain the value of the securities
subject to the repurchase agreement at not less than the repurchase price.
Default by the seller would, however, expose the Fund to possible loss because
of adverse market action or delay in connection with the disposition of the
underlying obligations. The Investment Adviser will monitor and mark to market
the value of such securities daily to assure that the value equals or exceeds
the repurchase price. The Investment Adviser also monitors the creditworthiness
of parties to repurchase agreements under the Board of Directors' general
supervision.
Securities Which are Neither Listed on a Securities Exchange nor Traded in
an Over-the-Counter Market. The Fund may invest up to 20% of its total assets
in securities which are neither listed on a securities exchange nor traded in
an over-the-counter market. The Fund may encounter substantial delays and could
incur losses in attempting to sell such securities. In addition, issuers of
such securities may not be subject to the disclosure and other investor
protection requirements that might be applicable if their securities were
listed on an exchange or traded in an over-the-counter market. If any privately
placed securities held by the Fund are required to be registered under the
securities laws of one or more jurisdictions before being resold, the Fund may
be required to bear the expenses of registration. See "Risk Factors and Special
Considerations -- The Fund's Investments and Operations."
Rule 144A Securities. The Fund may purchase without limitation certain
restricted securities ("Rule 144A securities") for which there is a secondary
market of qualified institutional buyers, as contemplated by Rule 144A under
the Securities Act of 1933, as amended (the "Securities Act"). Rule 144A
provides an exemption from the registration requirements of the Securities Act
for the resale of certain restricted securities to qualified institutional
buyers.
Convertible Securities. The Fund may invest in convertible securities,
including such securities that may be unrated or rated below investment grade.
See "Risk Factors and Special Considerations -- The Fund's Investments and
Operations" and "Appendix A: Ratings." A convertible security is a bond,
debenture, note, preferred stock or other security that may be converted into
or exchanged for a prescribed amount of common or preferred stock of the same
or a different issuer within a particular period of time at a specified price
or formula. A convertible security entitles the holder to receive interest
generally paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted or exchanged.
Convertible securities have general characteristics similar to both fixed-
income and equity securities. Although to a lesser extent than with fixed-
income securities generally, the market value of convertible securities tends
to decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with fluctuations in the
market value of the underlying common stocks and therefore also will react to
variations in the general market for equity securities. A unique feature of
convertible securities is that as the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis, and so may not experience market value declines to the same extent as
<PAGE>
the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investment in convertible securities generally
entail less risk than investments in common stock of the same issuer.
A convertible security might be subject to redemption at the option of the
issuer at a price established in the convertible security's governing
instrument. If a convertible security held by the Fund is called for
redemption, the Fund may be required to permit the issuer to redeem the
security, convert it into the underlying common stock or sell it to a third
party.
Warrants. The Fund may invest in warrants, which are securities
permitting, but not obligating, their holder to subscribe for other securities.
Warrants do not carry with them the right to dividends or voting rights with
respect to the securities that they entitle their holder to purchase, and they
do not represent any rights in the assets of the issuer. As a result, an
investment in warrants may be considered more speculative than certain other
types of investments. In addition, the value of a warrant does not necessarily
change with the value of the underlying securities and a warrant ceases to have
value if it is not exercised prior to its expiration date.
ADDITIONAL INVESTMENT PRACTICES
Hedging
The Fund is authorized, without limitation (except as described below with
respect to entering into futures contracts or options thereon for purposes
other than bona fide hedging), to use various hedging and investment strategies
described below to hedge various market risks (such as interest rates, broad or
specific market movements and currency exchange rates), to manage the effective
maturity or duration of debt instruments held by the Fund, or to seek to
increase the Fund's income or gain. Techniques and instruments may change,
however, over time as new instruments and strategies are developed or
regulatory changes occur.
Subject to the constraints described above, the Fund may purchase and sell
interest rate, currency or stock index futures contracts and enter into
currency forward contracts, swaps and related transactions, it may purchase and
sell (or write) exchange listed and over-the-counter put and call options on
debt and equity securities, currencies, futures contracts, fixed income and
stock indices and other financial instruments, it may enter into forward
contracts and related transactions, and it may enter into interest rate swaps
and related transactions, equity swaps and related transactions and other
similar transactions which may be developed to the extent the Investment
Adviser determines that they are consistent with the Fund's investment
objective and policies and applicable regulatory requirements (collectively,
these transactions are referred to in this Prospectus as "Hedging"). These
techniques and strategies are often referred to as "derivatives transactions."
The Fund may enter into futures contracts or options thereon for purposes other
<PAGE>
than bona fide hedging if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open contracts and options would not exceed 5%
of the liquidation value of the Fund's portfolio; provided, that in the case of
an option that is in-the-money at the time of the purchase, the in-the-money
amount may be excluded in calculating the 5% limitation.
Hedging may be used by the Fund to attempt to protect against possible
changes in the market value of securities held in or to be purchased for the
Fund's portfolio resulting from securities markets or currency exchange rate
fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of those securities for investment
purposes, to manage the effective maturity or duration of the Fund's portfolio,
to establish a position in the derivatives markets as a temporary substitute
for purchasing or selling particular debt or equity securities or to seek to
enhance the Fund's income or gain. There can be no guarantee that instruments
suitable for hedging currency or market shifts will be available at the time
when the Fund wishes to use them. Moreover, investors should be aware that in
most countries in Latin America the markets for certain of these hedging
instruments are not highly developed and that in many countries in Latin
America no such markets currently exist. The ability of the Fund to utilize
Hedging successfully will depend on the Investment Adviser's ability to predict
pertinent market movements, which cannot be assured. These skills are different
from those needed to select portfolio securities. The use of Hedging in certain
circumstances will require that the Fund segregate cash, liquid high grade debt
obligations or other assets to the extent the Fund's obligations are not
otherwise "covered" through ownership of the underlying security, financial
instrument or currency.
A detailed discussion of Hedging, including applicable requirements of the
Commodity Futures Trading Commission, the requirement to segregate assets with
respect to these transactions and special risks associated with such
strategies, appears as Appendix B to this Prospectus. See also "Risk Factors
and Special Considerations -- The Fund's Investments and Operations."
The degree of the Fund's use of Hedging may be limited by certain
provisions of the Code. See "Taxation."
When-Issued and Delayed Delivery Securities
The Fund may purchase equity or debt securities on a when-issued or
delayed delivery basis. Securities purchased on a when-issued or delayed
delivery basis are purchased for delivery beyond the normal settlement date at
a stated price. No income accrues to the purchaser of a security on a
when-issued or delayed delivery basis prior to delivery. Such securities are
recorded as an asset and are subject to changes in value based upon changes in
the general level of interest rates. Purchasing a security on a when-issued or
delayed delivery basis can involve a risk that the market price at the time of
delivery may be lower than the agreed-upon purchase price, in which case there
could be an unrealized loss at the time of delivery. The Fund will only make
commitments to purchase securities on a when-issued or delayed delivery basis
with the intention of actually acquiring the securities but may sell them
before the settlement date if it is deemed advisable. The Fund will establish a
<PAGE>
segregated account in which it will maintain liquid assets in an amount at
least equal in value to the Fund's commitments to purchase securities on a
when-issued or delayed delivery basis. If the value of these assets declines,
the Fund will place additional liquid assets in the account on a daily basis so
that the value of the assets in the account is equal to the amount of such
commitments. See "Investment Restrictions."
Loans of Portfolio Securities
The Fund may lend its portfolio securities consistent with its investment
policies. By doing so, the Fund attempts to increase its income. In the event
of the bankruptcy of the other party to a securities loan, the Fund could
experience delays in recovering the securities it lent. To the extent that, in
the meantime, the value of the securities the Fund lent has increased, the Fund
could experience a loss. However, loans will be made only to borrowers deemed
by the Investment Adviser to be of good standing and only when, in the judgment
of the Investment Adviser, the income to be earned from the loans justifies the
attendant risks.
The Fund may lend securities from its portfolio if liquid assets in an
amount at least equal to the current market value of the securities loaned
(including accrued interest thereon) plus the interest payable to the Fund with
respect to the loan is maintained by the Fund in a segregated account. Any
securities that the Fund may receive as collateral will not become a part of
its portfolio at the time of the loan and, in the event of a default by the
borrower, the Fund will, if permitted by law, dispose of such collateral except
for such part thereof that is a security in which the Fund is permitted to
invest. During the time securities are on loan, the borrower will pay the Fund
any accrued income on those securities, and the Fund may receive an agreed-upon
fee from a borrower. The value of securities loaned will be marked to market
daily. Loans of securities by the Fund will be subject to termination at the
Fund's or the borrower's option. The Fund may pay reasonable negotiated fees in
connection with loaned securities, so long as such fees are set forth in a
written contract and approved by the Fund's Board of Directors.
Investment Funds
The Fund may, to the extent permitted by the Investment Company Act,
invest in investment funds, pooled accounts or other investment vehicles
(collectively, "investment funds") other than those for which the Investment
Adviser serves as investment adviser or sponsor and which invest a substantial
portion of their assets in securities in which the Fund is authorized to
invest. The Fund may invest in such investment funds as a means of investing in
other securities in which the Fund is authorized to invest when the Investment
Adviser believes that such investments may be more advantageous to the Fund
than a direct market purchase of such securities. From time to time, such
investment funds may be the most effective available means or the only
permitted method by which the Fund may invest in equity securities of certain
non-U.S. issuers. See "Risk Factors and Special Considerations -- Investment
and Repatriation Restrictions." Under the Investment Company Act, the Fund may
invest a maximum of 10% of its total assets in the securities of other
investment companies. In addition, under the Investment Company Act, not more
<PAGE>
than 5% of the Fund's total assets may be invested in the securities of any one
investment company, and the Fund may not acquire more than 3% of the
outstanding voting stock of any one investment company. By investing in another
investment fund, the Fund bears a ratable share of the investment fund's
expenses, as well as continuing to bear the Fund's advisory and administrative
fees with respect to the amount of the investment. The Fund's investment in
certain investment funds will result in special U.S. Federal income tax
consequences described below under "Taxation."
Borrowing
The Fund may borrow in an amount up to 10% of the Fund's total assets to
finance the repurchase of and/or tenders for its shares, to pay distributions
for purposes of complying with the Code or for temporary or emergency purposes.
See "Risk Factors and Special Considerations -- The Fund's Investments and
Operations," "Common Stock -- Future Actions Relating to a Discount in the
Price of the Fund's Shares of Common Stock" and "Taxation -- The Fund."
The Fund may also enter into reverse repurchase agreements, pursuant to
which it would sell portfolio securities to financial institutions and agree to
repurchase them at an agreed upon date and price. At the time the Fund enters
into a reverse repurchase agreement, it may establish and maintain a segregated
account, with its custodian or a designated subcustodian, containing cash,
securities issued or guaranteed by the U.S. Government or its agencies and
instrumentalities or other liquid, high-grade debt obligations, having a value
not less than the repurchase price (including accrued interest). Reverse
repurchase agreements involve the risk that the market value of the portfolio
securities sold by the Fund may decline below the price of the securities at
which the Fund is obligated to repurchase. In the event the buyer of securities
under a reverse repurchase agreement files for bankruptcy or becomes insolvent,
the buyer or its trustee or receiver may receive an extension of time to
determine whether to enforce the Fund's obligations to repurchase the
securities, and the Fund's use of proceeds of the reverse repurchase agreement
may effectively be restricted pending the decision. Reverse repurchase
agreements will be treated as borrowings for purposes of calculating the Fund's
borrowing limitation. The Investment Adviser monitors the creditworthiness of
parties to reverse repurchase agreements under the Board of Directors' general
supervision.
INVESTMENT RESTRICTIONS
The Fund's investment objective, its policy to invest, under normal market
conditions, at least 65% of its assets in equity securities of Latin American
issuers and the following investment restrictions are the Fund's only
fundamental policies that may not be changed without the prior approval of the
holders of a majority of the Fund's outstanding voting securities. A "majority
of the Fund's outstanding voting securities" for this purpose means the lesser
of (a) 67% or more of the shares of the Fund's Common Stock present at a
meeting of shareholders, if the holders of 50% of the outstanding shares are
present or represented by proxy at the meeting, or (b) more than 50% of the
outstanding shares. Fund policies which are not fundamental may be modified by
<PAGE>
the Board of Directors if, in the reasonable exercise of the Board's business
judgment, modification is determined to be necessary, desirable or appropriate
to carry out the Fund's objective. All percentage limitations contained in the
restrictions listed below or described elsewhere in this Prospectus apply
immediately after a purchase or initial investment, and any subsequent change
in any applicable percentage resulting from market fluctuations does not
require elimination of any security from the Fund's portfolio. Under its
fundamental restrictions, the Fund may not:
(1) purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be
invested in securities of one or more issuers conducting their principal
business activities in the same industry, provided that there is no
limitation with respect to investment in obligations issued or guaranteed
by the U.S. government, its agencies or instrumentalities;
(2) purchase the securities of any one issuer which would cause more
than 5% of the value of the Fund's total assets at the time of such
purchase to be invested in such issuer, provided that there is no
limitation with respect to investment in obligations issued or guaranteed
by the U.S. government, its agencies or instrumentalities; provided
further, that up to 25% of the Fund's total assets may be invested without
regard to this limitation;
(3) issue senior securities or borrow money, except that the Fund
may borrow up to 10% of its total assets (including the amount borrowed)
in order to finance the repurchase of and/or tenders for its shares, to
pay distributions for purposes of complying with the Code, or for
temporary or emergency purposes; provided, however, that the Fund's
obligations under when-issued and delayed delivery transactions and
similar transactions and reverse repurchase agreements are not treated as
senior securities if covering assets are appropriately segregated, and the
use of Hedging shall not be deemed to involve the issuance of a "senior
security" or a "borrowing" if covering assets are appropriately
segregated; for purposes of the foregoing, the term "total assets" shall
be calculated after giving effect to the net proceeds of senior securities
issued by the Fund reduced by any liabilities and indebtedness not
constituting senior securities except for such liabilities and
indebtedness as are excluded from treatment as senior securities under
this item (3);
(4) own more than 10% of the outstanding voting securities of any
one issuer; provided that up to 25% of the Fund's total assets may be
invested without regard to this limitation;
(5) make loans, except that (a) the Fund may (i) purchase and hold
debt instruments (including bonds, debentures or other obligations and
certificates of deposit, bankers' acceptances and fixed time deposits) in
accordance with its investment objective and policies, (ii) enter into
repurchase agreements with respect to portfolio securities, and (iii) make
loans of portfolio securities, as described under "Additional Investment
Practices -- Loans of Portfolio Securities" in this Prospectus; and (b)
<PAGE>
delays in the settlement of securities transactions will not be considered
loans.
(6) underwrite the securities of other issuers, except to the extent
that, in connection with the disposition of portfolio securities, it may
be deemed to be an underwriter;
(7) purchase real estate, real estate mortgage loans or real estate
limited partnership interests (other than securities secured by real
estate or interests therein or securities issued by companies that invest
in real estate or interests therein);
(8) purchase securities on margin, make short sales of securities or
maintain a short portion (except as provided in (3) above and except for
delayed delivery or when-issued transactions, such short-term credits as
are necessary for the clearance of transactions, and margin deposits in
connection with transactions in futures contracts, options on futures
contracts, options on securities, securities indices and currencies);
(9) purchase or sell commodities or commodity contracts, including
futures contracts and options thereon, except that the Fund may engage in
Hedging; or
(10) invest for the purpose of exercising control over management of
any company.
RISK FACTORS AND SPECIAL CONSIDERATIONS
The Fund's assets will be invested primarily in non-U.S. issuers.
Investors should recognize that investing in securities of non-U.S.issuers
involves certain risks and special considerations, including those set forth
below, which are not typically associated with investing in securities of U.S.
issuers. Further, certain investments that the Fund may purchase, and
investment techniques in which the Fund may engage, involve risks, including
those set forth below.
Social, Political and Economic Factors
The Latin American countries in which the Fund will invest may be subject
to a substantially greater degree of social, political and economic instability
than is the case in the United States, Japan and Western European countries.
Such instability may result from, among other things, the following: (i)
authoritarian governments or military involvement in political and economic
decision-making, and changes in government through extra-constitutional means;
(ii) popular unrest associated with demands for improved political, economic
and social conditions; (iii) internal insurgencies and terrorist activities;
(iv) hostile relations with neighboring countries; and (v) drug trafficking.
Such social, political and economic instability could significantly disrupt the
principal financial markets in which the Fund invests and adversely affect the
value of the Fund's assets.
<PAGE>
The economies of individual Latin American countries may differ favorably
or unfavorably and significantly from the U.S. economy in such respects as the
rate of growth of gross domestic product or gross national product, rate of
inflation, currency depreciation, capital reinvestment, resource self-
sufficiency, structural unemployment and balance of payments position.
Governments of many Latin American countries have exercised and continue to
exercise substantial influence over many aspects of the private sector. In some
cases, the government owns or controls many companies, including some of the
largest in the country. Accordingly, government actions in the future could
have a significant effect on economic conditions in a Latin American country,
which could affect private sector companies and the Fund, and on market
conditions, prices and yields of securities in the Fund's portfolio. There may
be the possibility of nationalization, asset expropriations or future
confiscatory levels of taxation affecting the Fund. In the event of
nationalization, expropriation or other confiscation, the Fund may not be
fairly compensated for its loss and could lose its entire investment in the
country involved.
The economies of most Latin American countries are heavily dependent upon
international trade and accordingly are affected by protective trade barriers
and the economic conditions of their trading partners. The enactment by the
United States or other principal trading partners of protectionist trade
legislation, reduction of foreign investment in the local economies and general
declines in the international securities markets could have a significant
adverse effect upon the securities markets of these countries. The economies of
Latin American countries are vulnerable to weaknesses in world prices for their
commodity exports and natural resources.
Certain of the Latin American countries are among the largest debtors to
commercial banks and foreign governments. Currently, Brazil is the largest
debtor among developing countries followed by Mexico. Since 1982, certain Latin
American countries, including Argentina, Brazil, Chile and Mexico, have
experienced difficulty in servicing their sovereign debt obligations in a
timely manner. Many such countries have negotiated with foreign creditors to
restructure such sovereign debt and may enter into such negotiations in the
future. Obligations arising from past restructuring agreements have affected,
and those arising from future restructuring agreements may affect, the economic
performance and political and social stability of Latin American countries.
Investment and Repatriation Restrictions
Investment by the Fund in Latin American issuers may be restricted or
controlled to varying degrees. These restrictions may limit or preclude
investment in certain Latin American issuers and may increase the costs and
expenses of the Fund. For example, certain countries require governmental
approval prior to investments by foreign persons in a particular company or
industry sector or limit investment by foreign persons to only a specific class
of securities of a company which may have less advantageous terms (including
price) than securities of the company available for purchase by nationals.
Certain countries may also restrict or prohibit investment opportunities in
issuers or industries deemed important to national interests. In addition, the
repatriation of both investment income and capital from some of these countries
<PAGE>
requires governmental approval and if there is a deterioration in a country's
balance of payments or for other reasons, a country may impose temporary
restrictions on foreign capital remittances abroad. Capital invested by the
Fund in Chile currently cannot be repatriated for one year. Accordingly, the
Fund treats investments in countries with repatriation restrictions as illiquid
for purposes of any applicable restrictions under the Investment Company Act.
As a closed-end investment company, the Fund is not currently limited in the
amount of illiquid securities it may acquire. Even where there is no outright
restriction on repatriation of capital, the mechanics of repatriation may
affect certain aspects of the operation of the Fund.
The Fund could be adversely affected by delays in, or a refusal to grant
any required governmental approval for repatriation of capital, as well as by
the application to the Fund of any restrictions on investments. If, because of
restrictions on repatriation or conversion, the Fund were unable to distribute
substantially all of its net investment income and long-term capital gains
within applicable time periods, the Fund could be subject to U.S. Federal
income and excise taxes which would not otherwise be incurred and may cease to
qualify for the favorable tax treatment afforded to regulated investment
companies under the Code, in which case it would become subject to U.S. Federal
income tax on all of its income and gains. See "Taxation -- U.S. Shareholders."
Some countries in Latin America have laws and regulations that currently
preclude direct foreign investment in the securities of their companies.
However, indirect foreign investment is permitted in certain countries in Latin
America through investment funds that have been specially authorized. From time
to time, such investment funds may be the only or most effective available
means by which the Fund may invest in Latin American issuers. Investment in
such investment funds may involve the payment of management expenses and, in
connection with some purchases, sales loads, and payment of substantial
premiums above the value of such companies' portfolio securities. The Fund does
not intend to invest in such investment funds unless, in the judgment of the
Investment Adviser, the potential benefits of such investment outweigh the
payment of any applicable premium, sales load and expenses. In addition, the
Fund's investments in such investment funds are subject to limitations under
the Investment Company Act and market availability, and may result in special
U.S. Federal income tax consequences. See "Additional Investment Practices --
Investment Funds" and "Taxation -- U.S. Shareholders."
Currency Fluctuations
The Fund's assets will be invested primarily in securities of Latin
American issuers and substantially all income will be received by the Fund in
foreign currencies. However, the Fund will compute and distribute its income in
dollars, and the computation of income will be made on the date of its receipt
by the Fund at the applicable foreign exchange rate in effect on that date.
Therefore, if the value of the foreign currencies in which the Fund receives
its income falls relative to the dollar between receipt of the income and the
making of Fund distributions, the Fund will be required to liquidate securities
in order to make distributions in the event that the Fund has insufficient cash
in dollars to meet distribution requirements. The liquidation of investments,
if required, may have an adverse impact on the Fund's performance. In addition,
<PAGE>
if the liquidated investments include securities that have been held less than
three months, such sales may jeopardize the Fund's status as a regulated
investment company under the Code. See "Taxation--U.S. Federal Income Taxes."
The value of the assets of the Fund as measured in dollars also may be
affected favorably or unfavorably by fluctuations in currency rates and
exchange control regulations. Some of the currencies of countries in which the
Fund may make investments have experienced devaluations relative to the dollar,
and major adjustments have been made periodically in certain of such
currencies. Further, the Fund may incur costs in connection with conversions
between various currencies. Foreign exchange dealers realize a profit based on
the difference between the prices at which they are buying and selling various
currencies. Thus, a dealer normally will offer to sell a foreign currency to
the Fund at one rate, while offering a lesser rate of exchange should the Fund
desire immediately to resell that currency to the dealer. The Fund will conduct
its foreign currency exchange transactions either on a spot (i.e., cash) basis
at the spot rate prevailing in the foreign currency exchange market, or through
entering into forward, futures or options contracts to purchase or sell foreign
currencies or through entering into currency swap transactions.
Inflation
Most Latin American countries have experienced substantial, and in some
periods extremely high and volatile, rates of inflation. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of Latin American countries. In
an attempt to control inflation, wage and price controls have been imposed at
times in certain countries.
Market Characteristics
Differences in Securities Markets. The securities markets in Latin America
generally have substantially less volume than the New York Stock Exchange, and
equity securities of most companies listed on such markets may be less liquid
and more volatile than equity securities of U.S. companies of comparable size.
Some of the stock exchanges in Latin American countries, to the extent that
established securities markets even exist, are in the earlier stages of their
development. A high proportion of the shares of many Latin American companies
may be held by a limited number of persons, which may limit the number of
shares available for investment by the Fund. A limited number of issuers in
most, if not all, Latin American securities markets may represent a
disproportionately large percentage of market capitalization and trading value.
In addition, the application of certain Investment Company Act provisions may
limit the Fund's ability to invest in certain Latin American issuers and to
participate in public offerings in Latin America. The limited liquidity of
Latin American securities markets may also affect the Fund's ability to acquire
or dispose of securities at the price and time it wishes to do so.
Many companies traded on securities markets in such countries are smaller,
newer and less seasoned than companies whose securities are traded on
securities markets in the United States. Investments in smaller companies
involve greater risk than is customarily associated with investing in larger
<PAGE>
companies. Smaller companies may have limited product lines, markets or
financial or managerial resources and may be more susceptible to losses and
risks of bankruptcy. Additionally, market making and arbitrage activities are
generally less extensive in such markets, which may contribute to increased
volatility and reduced liquidity of such markets. Accordingly, each of these
markets may be subject to greater influence by adverse events generally
affecting the market, and by large investors trading significant blocks of
securities, than is usual in the United States. To the extent that any of these
countries experiences rapid increases in its money supply and investment in
equity securities for speculative purposes, the equity securities traded in any
such country may trade at price-earning multiples higher than those of
comparable companies trading on securities markets in the United States, which
may not be sustainable. In addition, risks due to the lack of modern
technology, the lack of a sufficient capital base to expand business
operations, the possibility of permanent or temporary termination of trading,
and greater spreads between bid and ask prices may exist in such markets.
Trading practices in certain Latin American countries are also
significantly different from those in the United States. Commercial,
corporation and securities laws govern the sale and resale of securities in
Latin American countries, and contractual and corporate restrictions may also
apply.
Brokerage commissions and other transaction costs on the securities
exchanges in Latin American countries are generally higher than in the United
States. In addition, securities settlements and clearance procedures in Latin
American countries are less developed and less reliable than those in the
United States, and the Fund may be subject to delays or other material
difficulties. This problem is particularly severe in Venezuela, where the
procedures established to satisfy physical delivery requirements are often
insufficient to accommodate the volume in the markets. Delays in settlement
could result in temporary periods when assets of the Fund are uninvested and no
return is earned thereon. The inability of the Fund to make intended security
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. The inability to dispose of a portfolio security due
to settlement problems could result either in losses to the Fund due to
subsequent declines in the value of such portfolio security or, if the Fund has
entered into a contract to sell the security, could result in possible
liability to the purchaser.
Non-U.S. Subcustodians. Rules adopted under the Investment Company Act
permit the Fund to maintain its non-U.S. securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Certain banks in
non-U.S. countries may not be eligible subcustodians for the Fund, in which
event the Fund may be precluded from purchasing securities in which it would
otherwise invest, and other banks that are eligible subcustodians may be
recently organized or otherwise lack extensive operating experience. At
present, custody arrangements complying with the requirements of the Securities
and Exchange Commission (the "Commission") are available in each of the Latin
American countries in which the Investment Adviser intends to invest. In
certain countries in which the Fund may make investments, there may be legal
<PAGE>
restrictions or limitations on the ability of the Fund to recover assets held
in custody by subcustodians in the event of the bankruptcy of the subcustodian.
Government Supervision of Non-U.S. Securities Markets; Legal Systems.
There may be less government supervision and regulation of securities
exchanges, listed companies and brokers in Latin American countries than exists
in the United States. Less information may, therefore, be available to the Fund
than in respect of investments in the United States. Further, in certain of
these countries, less information may be available to the Fund than to local
market participants. Brokers in Latin American countries may not be as well
capitalized as those in the United States, so that they are more susceptible to
financial failure in times of market, political, or economic stress. In
addition, existing laws and regulations are often inconsistently applied.
Foreign investors may be adversely affected by new laws and regulations,
changes to existing laws and regulations and preemption of local laws and
regulations by national laws. In circumstances where adequate laws exist, it
may not be possible to obtain swift and equitable enforcement of the law.
Consequently, the prices at which the Fund may acquire investments may be
affected by other market participants' anticipation of the Fund investing, by
trading by persons with material non-public information and by securities
transactions by brokers in anticipation of transactions by the Fund in
particular securities.
Financial Information and Standards. Latin American issuers may be subject
to accounting, auditing and financial standards and requirements that differ,
in some cases significantly, from those applicable to U.S. issuers. In
particular, the assets and profits appearing on the financial statements of
Latin American issuers may not reflect their financial position or results of
operations in the way they would be reflected had the financial statements been
prepared in accordance with U.S. generally accepted accounting principles. In
addition, for an issuer that keeps accounting records in local currency,
inflation accounting rules may require, for both tax and accounting purposes,
that certain assets and liabilities be restated on the issuer's balance sheet
in order to express items in terms of currency of constant purchasing power.
Inflation accounting may indirectly generate losses or profits. Consequently,
financial data may be materially affected by restatements for inflation and may
not accurately reflect the real condition of those issuers and securities
markets. Moreover, substantially less information may be publicly available
about Latin American issuers than is available about U.S. issuers.
Comparability of Statistical Economic Data in Latin American Countries.
Although statistics with respect to the economies of Latin American countries
generally track well with observed economic trends, some statistics may not
correlate with U.S. measures, or may be flawed by ineffective collection
methods or other problems. Due to such factors, statistical information
regarding the economies of Latin American countries may be inaccurate or not
comparable to statistical information with respect to the U.S. or other
economies. Particular statistical areas that may not be comparable or accurate
include data regarding unemployment, industrial output and inflation. In
addition, there may be substantial delays in publishing official statistics in
certain Latin American countries.
<PAGE>
The Fund's Investments and Operations
Illiquid Securities. The Fund may invest up to 20% of its total assets in
securities which are neither listed on a securities exchange nor traded in an
over-the-counter market. In addition, certain securities in which the Fund may
invest may be considered illiquid due to the existence of a thin trading
market, and there is no limitation on the Fund's ability to invest in such
securities. The Fund may encounter substantial delays and could incur losses in
attempting to sell such securities. Companies whose securities are neither
listed on an exchange nor traded in an over-the-counter market may not be
subject to the same disclosure and other legal requirements that are applicable
to companies whose securities are either listed on an exchange or traded in an
over-the-counter market, and, therefore, there may be less public information
available with respect to such issuers.
Hedging. Risks and special considerations of certain of the investment
practices in which the Fund may engage are described above under "Additional
Investment Practices." Hedging involves special risks, including possible
default by the other party to the transaction, illiquidity and, to the extent
the Investment Adviser's view as to certain market movements is incorrect, the
risk that the use of Hedging could result in losses greater than if they had
not been used. Use of put and call options could result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, or cause the Fund to hold a security it
might otherwise sell. The use of currency transactions could result in the
Fund's incurring losses as a result of the imposition of exchange controls,
suspension of settlements, or the inability to deliver or receive a specified
currency. The use of options and futures transactions entails certain special
risks. In particular, the variable degree of correlation between price
movements of futures contracts and price movements in the related portfolio
position of the Fund could create the possibility that losses on the hedging
instrument will be greater than gains in the value of the Fund's position. In
addition, futures and options markets could be illiquid in some circumstances
and certain over-the-counter options could have no markets. As a result, in
certain markets, the Fund might not be able to close out a position without
incurring substantial losses. Although the Fund's use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time it will tend to
limit any potential gain to the Fund that might result from an increase in
value of the position. Finally, the daily variation margin requirements for
futures contracts create a greater ongoing potential financial risk than would
purchases of options, in which case the exposure is limited to the cost of the
initial premium and transaction costs. Losses resulting from the use of hedging
will reduce the Fund's net asset value, and possibly income, and the losses can
be greater than if Hedging had not been used. Additional information regarding
the risks and special consideration associated with Hedging appears in Appendix
B to this Prospectus.
Borrowing. The Fund may borrow in an amount up to 10% of the Fund's total
assets, to finance the repurchase of and/or tenders for its shares, to pay
distributions for purposes of complying with the Code or for temporary or
<PAGE>
emergency purposes. See "Common Stock -- Future Actions Relating to a Discount
in the Price of the Fund's Shares of Common Stock." Borrowing creates an
opportunity for the Fund to finance the limited activities described above
without the requirement that portfolio securities be liquidated at a time when
it would be disadvantageous to do so, but, at the same time, creates special
risks. For example, borrowing may exaggerate changes in the net asset value of
the Fund's shares and in the return on the Fund's portfolio. Although the
principal of any borrowing will be fixed, the Fund's assets may change in value
during the time the borrowing is outstanding. Borrowing will create expenses
for the Fund which can exceed the income from the assets acquired with the
proceeds of the borrowing. In such a case, the Fund may be required to
liquidate portfolio securities at a time when it would be disadvantageous to do
so, which could affect the Investment Adviser's strategy and the ability of the
Fund to comply with certain provisions of the Code in order to provide "pass
through" tax treatment to shareholders. Furthermore, if the Fund were to engage
in borrowing, an increase in interest rates could reduce or eliminate the
benefits of borrowing and could reduce the value of the Fund's shares by
increasing the Fund's interest expense.
Taxes. Income and capital gains on securities held by the Fund may be
subject to withholding or other taxes imposed by Latin American countries,
which would reduce the return to the Fund on those securities. The imposition
of such taxes and the rates imposed are subject to change. The Fund may elect,
when eligible, to "pass-through" to the Fund's shareholders, as a deduction or
credit, the amount of non-U.S. taxes paid by the Fund. The taxes passed through
to shareholders would be included in each shareholders's income. Certain
shareholders, including some non-U.S. shareholders, would not be entitled to
the benefit of a deduction or credit with respect to non-U.S. taxes paid by the
Fund. If a shareholder is eligible and elects to credit non-U.S. taxes, such
credit is subject to limitations. Other non-U.S. taxes, such as transfer taxes,
may be imposed on the Fund, but would not give rise to a credit, or be eligible
to be passed through to shareholders. See "Taxation -- Non-U.S. Taxes."
High Yield/High Risk and Unrated Debt. The Fund may invest in convertible
securities which are unrated or rated below investment grade. In addition, the
Fund has not established any rating criteria for the debt securities in which
it may invest and such securities may not be rated at all for creditworthiness.
Securities rated in medium to low rating categories of nationally recognized
statistical rating organizations and unrated securities of comparable quality
(such securities are referred to herein as "high yield/high risk securities")
are speculative with respect to the capacity to pay interest and repay
principal in accordance with the terms of the security and generally involve a
greater volatility of price than securities in higher rated categories. In
purchasing such securities, the Fund will rely on the Investment Adviser's
analysis, judgment and experience in evaluating the creditworthiness of an
issuer of such securities. The Investment Adviser will take into consideration,
among other things, the issuer's financial resources, its operating history,
its sensitivity to economic conditions and trends, the quality of the issuer's
management and regulatory matters. Ratings criteria established by nationally
recognized statistical ratings organizations are included as Appendix A to this
Prospectus.
<PAGE>
The market values of high yield/high risk securities tend to reflect
individual issuer developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Issuers of high yield/high risk securities may be highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with higher rated securities. For
example, during a sustained period of rising interest rates or an economic
downturn, issuers of high yield/high risk securities may be more likely to
experience financial stress, especially if such issuers are highly leveraged.
During such periods, service of debt obligations also may be adversely affected
by the issuer's inability to meet specific projected business forecasts,
specific issuer developments or the unavailability of additional financing. The
risk of loss due to default by the issuer is significantly greater for the
holders of high yield/high risk securities because such securities may be
unsecured and may be subordinated to other creditors of the issuer.
High yield/high risk securities may have redemption or call features which
would permit an issuer to repurchase the securities from the Fund. If a call
were exercised by the issuer during a period of declining interest rates, the
Fund in all likelihood would have to replace the called securities with lower
yielding securities, thus decreasing the net investment income to the Fund and
dividends to shareholders.
The Fund may have difficulty disposing of certain high yield/high risk
securities, as there may be a thin trading market for such securities. To the
extent that a secondary trading market for high yield/high risk securities does
exist, it is generally not as liquid as the secondary market for higher rated
securities. Reduced secondary market liquidity may have an adverse impact on
market price and the Fund's ability to dispose of particular issues when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event, such as a deterioration in the creditworthiness of the issuer.
Reduced secondary market liquidity for certain high yield/high risk securities
may also make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing the Fund's portfolio. Market quotations are
generally available on many high yield/high risk securities only from a limited
number of dealers and may not necessarily represent firm bids of such dealers
of prices for actual sales. The Fund's Directors or the Investment Adviser will
carefully consider the factors affecting the market for high yield/high risk
securities in determining whether any particular security is liquid or illiquid
and whether current market quotations are readily available. Adverse publicity
and investor perceptions, which may not be based on fundamental analysis, also
may decrease the value and liquidity of high yield/high risk securities,
particularly in a thinly traded market. Factors adversely affecting the market
value of high yield/high risk securities are likely to adversely affect the
Fund's net asset value. In addition, the Fund may incur additional expenses to
the extent it is required to seek recovery upon a default on a portfolio
holding or participate in the restructuring of the obligations.
Sovereign Debt. Investment in debt obligations of a government, its
agencies or instrumentalities involves a high degree of risk. The governmental
entity that controls the repayment of Sovereign Debt may not be willing or able
<PAGE>
to repay the principal and/or interest when due in accordance with the terms of
such debt. A governmental entity's ability or willingness to repay principal
and interest due in a timely manner may be affected by, among other factors,
its cash flow situation, the availability of sufficient foreign exchange on the
date a payment is due, the governmental entity's policy towards the
International Monetary Fund, the extent of its foreign reserves, the relative
size of the debt service burden to the economy as a whole and the political
constraints to which a governmental entity may be subject.
Governmental entities may also be dependent on expected disbursements from
multilateral agencies, foreign governments and others abroad to reduce
principal and interest arrearages. The commitment on the part of these
agencies, governments and others to make such disbursements may be conditioned
on a governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may result in the cancellation of such third
parties' commitments to lend funds to the governmental entity, which may
further impair such debtor's ability or willingness to timely service its
debts. Consequently, governmental entities may default on their Sovereign Debt.
Holders of Sovereign Debt, including the Fund, may be requested to
participate in the rescheduling of such debt and to extend further loans to
governmental entities. A foreign sovereign itself would not be subject to
traditional bankruptcy proceedings by which Sovereign Debt on which it has
defaulted may be collected in whole or in part, and certain sovereign entities
may not be subject to such proceedings.
The Sovereign Debt instruments in which the Fund may invest involve great
risk and are deemed to be the equivalent in terms of quality to high yield/high
risk securities discussed above and are therefore subject to many of the same
risks as such securities. Similarly, the Fund may have difficulty disposing of
certain Sovereign Debt obligations, as there may be a thin trading market for
such securities.
Net Asset Value Discount. The Fund is a newly organized closed-end company
with no previous operating history. Shares of closed-end investment companies
frequently trade at a discount from net asset value, but in certain instances
have traded at or above net asset value. This characteristic of shares of a
closed-end fund is a risk separate and distinct from the risk that the Fund's
net asset value will decrease. The Fund cannot predict whether its Common Stock
will trade at, above or below net asset value. The risk of purchasing shares of
a closed-end fund that might later trade at a discount is more pronounced for
investors who wish to sell their shares in a relatively short period of time
following completion of the offering.
Anti-Takeover Provisions. The Fund's Charter contains certain
anti-takeover provisions that may have the effect of inhibiting the Fund's
possible conversion to open-end status and limiting the ability of other
persons to acquire control of the Fund. In certain circumstances, these
provisions might also inhibit the ability of holders of Common Stock to sell
their shares at a premium over prevailing market prices. The Fund's Board of
<PAGE>
Directors has determined that these provisions are in the best interests of
shareholders generally.
Operating Expenses. The Fund's estimated operating expenses are higher
than those of many other investment companies which invest exclusively in U.S.
securities. These expenses reflect the specialized nature of the Fund's
investment polices and strategies and the Investment Adviser believes that they
are comparable to fees paid by other closed-end investment companies registered
under the Investment Company Act that invest primarily in the securities of
issuers located in Latin America or other emerging market countries.
Transfer Restrictions. Investors who purchase shares of Common Stock at a
reduced price will be restricted from transferring such shares for a period of
90 days after the closing of the Offerings. See "Underwriting." There is no
restriction on the number of shares that may be purchased subject to the
transfer restriction described above, except that the Fund will comply, with
respect to non-restricted shares, with the distribution requirements of the New
York Stock Exchange. See "Underwriting." To the extent these investors sell
their shares once the transfer restriction is no longer applicable, the market
price of the Common Stock could be adversely affected. In addition, the
transfer restriction will reduce the number of shares available for sale in the
secondary market during the 90-day restriction period.
Investors should carefully consider their ability to assume the foregoing
risks before making an investment in the Fund. An investment in shares of
Common Stock of the Fund may not be appropriate for all investors, should not
be considered as a complete investment program and should be considered
speculative.
MANAGEMENT OF THE FUND
Directors and Officers
The names of the directors and principal officers of the Fund are set
forth below, together with their positions and their principal occupations
during the past five years and in the case of the directors, their positions
with certain other international organizations and publicly held companies.
<PAGE>
<TABLE>
<CAPTION>
Principal Occupations and Other
Names and Addresses Position with Fund Affiliations
------------------- ------------------ -------------------------------
<S> <C> <C>
Clinton Kendrick<F1> Chairman of the Board and Chief Operating Officer, Lehman
World Financial Center President Brothers Global Asset Management
New York, New York 10285 Inc.; formerly President and
Chief Executive Officer, Hyperion
Capital Management; formerly
President and Director, Alliance
Capital Management.
Andrew D. Gordon<F1> Director, Treasurer and Secretary Managing Director, Lehman
World Financial Center Brothers Inc.
New York, New York 10285
____________________
<FN>
<F1> Director who is an "interested person" within the meaning of the Investment Company Act.
</TABLE>
The Fund intends to pay each of its directors who is not a director,
officer or employee of the Investment Adviser (as defined below) or any
affiliate thereof an annual fee of $_________, plus $______ for each Board of
Directors meeting attended. In addition, the Fund will reimburse these
directors for travel and out-of-pocket expenses incurred in connection with
Board of Directors meetings.
The Fund's Board of Directors has an Executive Committee, which may
exercise the powers of the Board to conduct and supervise the current and
ordinary business of the Fund while the Board is not in session. The current
members of the Executive Committee are _______. The Fund also has an Audit
Committee composed currently of ________.
The Charter and Bylaws of the Fund provide that the Fund will indemnify
directors and officers and may indemnify employees or agents of the Fund
against liabilities and expenses incurred in connection with litigation in
which they may be involved because of their offices with the Fund to the
fullest extent permitted by law. In addition, the Fund's Charter provides that
the Fund's directors and officers will not be liable to shareholders for money
damages, except in limited instances. However, nothing in the Charter or the
Bylaws of the Fund protects or indemnifies a director, officer, employee or
agent against any liability to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Commencing with the first annual meeting of shareholders, the Board of
Directors will be divided into three classes, having terms of one, two and
three years, respectively. At the annual meeting of shareholders in each year
thereafter, the term of one class will expire and directors will be elected to
<PAGE>
serve in that class for terms of three years. See "Common Stock -- Special
Voting Provisions."
Investment Adviser
Lehman Brothers Global Asset Management Limited serves as investment
adviser to the Fund. Subject to the supervision and direction of the Fund's
Board of Directors, the Investment Adviser manages the portfolio of the Fund in
accordance with the Fund's stated investment objective and policies, makes
investment decisions for the Fund and places orders to purchase and sell
securities. As compensation for the services of the Investment Adviser as
investment adviser to the Fund, the Investment Adviser is paid a monthly fee by
the Fund at the annual rate of __% of the value of the Fund's average daily net
assets pursuant to an Advisory Agreement between the Investment Adviser and the
Fund.
The Investment Adviser, together with other Lehman Brothers Inc.
investment advisory affiliates, had in excess of $__ billion in assets under
management as of _________ __, 1994. In addition to the Fund, the Investment
Adviser serves as investment adviser or sub-investment adviser to several U.S.-
registered and offshore investment funds.
Mr. Ian King, CFA, Investment Manager - Equities of the Investment
Adviser, will have primary responsibility for the day-to-day management of the
Fund's investment portfolio. Mr. King joined the Investment Adviser in
September 1992 and is currently responsible for Latin American investments.
Prior to September 1992, Mr. King was a fund manager with Invesco Management.
The Investment Adviser is an affiliate of Lehman Brothers Inc., a leading
full service investment firm serving U.S. and non-U.S. securities and
commodities markets. The Investment Adviser operates principally from the
United Kingdom, is a member of the United Kingdom Investment Management
Regulatory Organization and is registered with the Commission as an investment
adviser under the U.S. Investment Advisers Act of 1940, as amended (the
"Advisers Act"). The Investment Adviser is an indirect wholly owned subsidiary
of Lehman Brothers Holdings, Inc. ("Holdings"). Holdings is a publicly-owned
corporation. Nippon Life Insurance Company owns approximately 11.2% of the
outstanding voting stock of Holdings on a fully diluted basis. The Investment
Adviser is located at Two Broadgate, London EC2M 7HA, England.
U.S. Administrator
____________________ serves as the Fund's administrator in the United
States (the "U.S. Administrator") pursuant to an agreement with the Fund (the
"U.S. Administration Agreement"). The U.S. Administrator is located at
____________________. As compensation for its services, the Fund pays the U.S.
Administrator a fee that is computed ____________ and paid ________________ at
an annual rate of __% of the value of the Fund's average monthly net assets.
The U.S. Administrator will provide office facilities and personnel
adequate to perform certain services for the Fund including oversight of the
determination and publication of the Fund's net asset value in accordance with
<PAGE>
policies adopted from time to time by the Board of Directors; maintenance of
the books and records of the Fund required under the Investment Company Act;
preparation of the Fund's U.S. Federal, state and local income tax returns;
preparation of financial information for the Fund's proxy statements and
semiannual and annual reports to shareholders; and preparation of the Fund's
reports to the Commission.
Brazilian Administrator
The Fund is required under Brazilian law to have a local administrator in
Brazil. _______________ serves as the Fund's administrator in Brazil (the
"Brazilian Administrator") pursuant to an agreement with the Fund (the
"Brazilian Administration Agreement"). As compensation for its services, the
Brazilian Administrator is paid an annual fee equal to $_____. Under the
Brazilian Administration Agreement, the Brazilian Administrator performs
certain services for the Fund, including [ ].
Chilean Administrator
Under Chilean law, the Fund is required to have an administrator in Chile.
__________ serves as the Fund's administrator and legal representative in Chile
(the "Chilean Administrator") pursuant to an agreement (the "Chilean
Administration Agreement") with the Fund. As compensation for its services, the
Chilean Administrator is paid an annual fee by the Fund equal to $_______.
Under the Chilean Administration Agreement, the Chilean Administrator performs
certain services for the Fund, including [ ].
Colombian Administrator
Under Colombian law, the Fund is required to have an administrator in
Colombia. __________ serves as the Fund's administrator in Colombia (the
"Colombian Administrator") pursuant to an agreement (the "Colombian
Administration Agreement") with the Fund. As compensation for its services, the
Colombian Administrator is paid an annual fee by the Fund equal to $_______.
Under the Colombian Administration Agreement, the Colombian Administrator
performs certain services for the Fund, including [ ].
Duration and Termination; Non-Exclusive Services
Unless earlier terminated as described below, the Advisory Agreement is
effective on the date the Fund's registration statement is declared effective
by the Commission and will remain in effect for two years and from year to year
thereafter if approved annually (1) by the Board of Directors of the Fund or by
the holders of a majority of the Fund's outstanding voting securities and (2)
by a majority of the Directors who are not parties to the Advisory Agreement or
"interested persons" (as defined in the Investment Company Act) of any such
party. The Advisory Agreement will terminate on its assignment by either party.
The Advisory Agreement is terminable without penalty on 60 days' written notice
by the Fund or by vote of the shareholders of the Fund or on 60 days' written
notice by the Investment Adviser.
<PAGE>
The services of the Investment Adviser, the U.S. Administrator, the
Brazilian Administrator, the Chilean Administrator and the Colombian
Administrator are not deemed to be exclusive, and nothing in the relevant
service agreements will prevent any of them or their affiliates from providing
similar services to other investment companies and other clients (whether or
not their investment objectives and policies are similar to those of the Fund)
or from engaging in other activities.
Expenses
The Investment Adviser, the U.S. Administrator, the Brazilian
Administrator, the Chilean Administrator and the Colombian Administrator are
each obligated to pay expenses associated with providing the services
contemplated by the agreements with the Fund to which they are parties,
including compensation of and office space for their respective officers and
employees connected with investment and economic research, trading and
investment management and administration of the Fund, as well as the fees of
all directors of the Fund who are affiliated with those companies or any of
their affiliates. The Fund pays all other expenses incurred in the operation of
the Fund including, among other things, organizational and offering expenses
(which will include out-of-pocket expenses, but not overhead or employee costs
of the Investment Adviser); expenses for legal, accounting and auditing
services; taxes and governmental fees; dues and expenses incurred in connection
with membership in investment company organizations; fees and expenses incurred
in connection with listing the Fund's shares on any stock exchange; expenses of
leverage; costs of printing and distributing shareholder reports, proxy
materials, prospectuses, stock certificates and distributions of dividends;
charges of the Fund's custodians, subcustodians, administrators, registrars,
transfer agents, dividend disbursing agents and dividend reinvestment plan
agents; payment for portfolio pricing services to a pricing agent, if any;
registration and filing fees of the Commission; expenses of registering or
qualifying securities of the Fund for sale in the various states; freight and
other charges in connection with the shipment of the Fund's portfolio
securities; fees and expenses of non-interested directors; travel expenses or
an appropriate portion thereof of directors and officers of the Fund who are
directors; officers or employees of the Investment Adviser to the extent such
expenses relate to attendance at meetings of the Board of Directors or any
committee thereof; salaries of shareholder relations personnel; costs of
shareholders meetings; insurance; interest; brokerage costs; and litigation and
other extraordinary or non-recurring expenses.
PORTFOLIO TRANSACTIONS
Subject to the general control of the Fund's Board of Directors, the
Investment Adviser is responsible for, makes decisions with respect to, and
places orders for all purchases and sales of portfolio securities for the Fund.
Transactions on United States and some non-U.S. stock exchanges involve the
payment of negotiated brokerage commissions, which may vary among different
brokers and dealers. The cost of securities purchased from underwriters
includes an underwriter's commission or concession, and the prices at which
securities are purchased from and sold to dealers in the U.S. and some non-U.S.
<PAGE>
over-the-counter markets include an undisclosed dealer spread. While the
Investment Adviser generally seeks the best price in placing its orders, the
Fund may not necessarily be paying the lowest price available. Securities firms
which provide supplemental research to the Investment Adviser may receive
orders for transactions by the Fund. In these circumstances, as contemplated by
Section 28(e) of the Securities Exchange Act of 1934, the commissions paid may
be higher than those which the Fund might otherwise have paid to another broker
if those services had not been provided. Information so received will be in
addition to and not in lieu of the services required to be performed by the
Investment Adviser under the Advisory Agreement, and the expenses of the
Investment Adviser will not necessarily be reduced as a result of the receipt
of such supplemental information. Research services furnished to the Investment
Adviser by brokers who effect securities transactions for the Fund may be used
by the Investment Adviser in servicing other investment companies and accounts
which it manages. Similarly, research services furnished to the Investment
Adviser by brokers who effect securities transactions for other investment
companies and accounts which the Investment Adviser manages may be used by the
Investment Adviser in servicing the Fund. Not all of these research services
are used by the Investment Adviser in managing any particular account,
including the Fund.
With respect to over-the-counter transactions, the Fund, where possible,
will deal directly with the dealers who make a market in the securities
involved except in those circumstances where better prices and execution are
available elsewhere.
Investment decisions for the Fund are made independently from those for
the other investment company portfolios or accounts advised by the Investment
Adviser. Such other portfolios may also invest in the same securities as the
Fund. When purchases or sales of the same security are made at substantially
the same time on behalf of such other portfolios, transactions are averaged as
to price, and available investments allocated as to amount, in a manner which
the Investment Adviser believes to be equitable to each portfolio, including
the Fund. In some instances, this investment procedure may adversely affect the
price paid or received by the Fund or the size of the position obtainable for
the Fund. To the extent permitted by law, the Investment Adviser may aggregate
the securities to be sold or purchased for the Fund with those to be sold or
purchased for such other portfolios in order to obtain best execution.
Lehman Brothers Inc. and other affiliated persons (as defined in the
Investment Company Act) of the Fund, or affiliated persons of such persons, may
from time to time be selected to perform brokerage services for the Fund,
subject to the considerations discussed above and the applicable provisions of
the Investment Company Act, but are prohibited by the Investment Company Act
from dealing with the Fund as principal in the purchase or sale of securities.
However, pursuant to an exemption granted by the Commission, the Fund may
engage in transactions involving certain money market instruments with Lehman
Brothers Inc. and certain of its affiliates acting as principal. The Fund will
not purchase securities during the existence of any underwriting or selling
group relating thereto of which Lehman Brothers Inc. or any affiliate thereof
is a member, except to the extent permitted by the Commission. Under certain
circumstances, the Fund may be at a disadvantage because of these limitations
<PAGE>
in comparison with other investment company portfolios which have a similar
investment objective but are not subject to such limitations.
It is anticipated that the Fund's annual portfolio turnover rate generally
will not exceed 75%. This rate is calculated by dividing the lesser of sales or
purchases of portfolio securities for any given year by the average monthly
value of the Fund's portfolio securities for that year. For purposes of this
calculation, no regard is given to securities having a maturity or expiration
date at the time of acquisition of one year or less. Portfolio turnover
directly affects the amount of transaction costs that are borne by the Fund. In
addition, the sale of securities held by the Fund for not more than one year
will give rise to short-term capital gain or loss for U.S. federal income tax
purposes. The U.S. federal income tax requirement that the Fund derive less
than 30% of its gross income from the sale or other disposition of stock or
securities held less than three months may limit the Fund's ability to dispose
of its securities.
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN
The Fund intends to distribute annually to shareholders substantially all
of its net investment income, and to distribute any net realized capital gains
at least annually. Net investment income for this purpose is income other than
net realized long and short-term capital gains net of expenses.
Pursuant to the Dividend Reinvestment Plan (the "Plan"), shareholders
whose shares of Common Stock are registered in their own names will be deemed
to have elected to have all distributions automatically reinvested by
____________________ (the "Plan Agent") in Fund shares pursuant to the Plan,
unless such shareholders elect to receive distributions in cash. Shareholders
who elect to receive distributions in cash will receive all distributions in
cash paid by check in dollars mailed directly to the shareholder by
____________________, as dividend paying agent. In the case of shareholders,
such as banks, brokers or nominees, that hold shares for others who are
beneficial owners, the Plan Agent will administer the Plan on the basis of the
number of shares certified from time to time by the shareholders as
representing the total amount registered in such shareholders' names and held
for the account of beneficial owners that have not elected to receive
distributions in cash. Investors that own shares registered in the name of a
bank, broker or other nominee should consult with such nominee as to
participation in the Plan through such nominee, and may be required to have
their shares registered in their own names in order to participate in the Plan.
The Plan Agent serves as agent for the shareholders in administering the
Plan. If the directors of the Fund declare an income dividend or a capital
gains distribution payable either in the Fund's Common Stock or in cash,
nonparticipants in the Plan will receive cash and participants in the Plan will
receive Common Stock, to be issued by the Fund or purchased by the Plan Agent
in the open market, as provided below. If the market price per share on the
valuation date equals or exceeds net asset value per share on that date, the
Fund will issue new shares to participants at net asset value; provided,
however, if the net asset value is less than 95% of the market price on the
valuation date, then such shares will be issued at 95% of the market price. The
<PAGE>
valuation date will be the dividend or distribution payment date or, if that
date is not a New York Stock Exchange trading day, the next preceding trading
day. If net asset value exceeds the market price of Fund shares at such time,
or if the Fund should declare an income dividend or capital gains distribution
payable only in cash, the Plan Agent will, as agent for the participants, buy
Fund shares in the open market, on the New York Stock Exchange or elsewhere,
for the participants' accounts on, or shortly after, the payment date. If,
before the Plan Agent has completed its purchases, the market price exceeds the
net asset value of a Fund share, the average per share purchase price paid by
the Plan Agent may exceed the net asset value of the Fund's shares, resulting
in the acquisition of fewer shares than if the distribution had been paid in
shares issued by the Fund on the dividend payment date. Because of the
foregoing difficulty with respect to open-market purchases, the Plan provides
that if the Plan Agent is unable to invest the full dividend amount in
open-market purchases during the purchase period or if the market discount
shifts to a market premium during the purchase period, the Plan Agent will
cease making open-market purchases and will receive the uninvested portion of
the dividend amount in newly issued shares at the close of business on the last
purchase date.
The Plan Agent maintains all shareholder accounts in the Plan and
furnishes written confirmations of all transactions in an account, including
information needed by shareholders for personal and tax records. Shares in the
account of each Plan participant will be held by the Plan Agent in the name of
the participant, and each shareholder's proxy will include those shares
purchased pursuant to the Plan.
There is no charge to participants for reinvesting dividends or capital
gains distributions. The Plan Agent's fees for the reinvestment of dividends
and capital gains distributions will be paid by the Fund. There will be no
brokerage charges with respect to shares issued directly by the Fund as a
result of dividends or capital gains distributions payable either in stock or
in cash. However, each participant will pay a pro rata share of brokerage
commissions incurred with respect to the Plan Agent's open market purchases in
connection with the reinvestment of dividends and capital gains distributions
made by the participant. Brokerage charges for purchasing small amounts of
stock for individual accounts through the Plan are expected to be less than the
usual brokerage charges for such transactions, because the Plan Agent will be
purchasing stock for all participants in blocks and prorating the lower
commission thus attainable.
The receipt of dividends and distributions under the Plan will not relieve
participants of any income tax which may be payable on such dividends or
distributions. See "Taxation -- Shareholders."
Experience under the Plan may indicate that changes in the Plan are
desirable. Accordingly, the Fund and the Plan Agent reserve the right to
terminate the Plan as applied to any dividend or distribution paid subsequent
to notice of the termination sent to members of the Plan at least 30 days
before the record date for such dividend or distribution. The Plan also may be
amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
<PAGE>
authority) only by at least 30 days' written notice to participants in the
Plan. All correspondence concerning the Plan should be directed to the Plan
Agent at ____________________.
TAXATION
The following is a general summary of certain United States federal income
tax considerations affecting the Fund and U.S. shareholders. No attempt is made
to present a detailed explanation of all federal, state, local and non-U.S.
income tax considerations, and this discussion is not intended as a substitute
for careful tax planning. Accordingly, potential investors are urged to consult
their own tax advisors regarding an investment in the Fund.
The Fund
The Fund intends to qualify and elect to be treated as a "regulated
investment company" for federal income tax purposes under Subchapter M of the
Code. In order to so qualify, the Fund must, among other things, (a) derive in
each taxable year at least 90% of its gross income from dividends, interest,
payments with respect to loans of securities, gains from the sale or other
disposition of stock or securities, or foreign currencies, or other income
derived with respect to its business of investing in such stock, securities or
currencies (including, but not limited to, gains from options, futures or
forward contracts); (b) derive in each taxable year less than 30% of its gross
income from the sale or other disposition of any of the following that are held
for less than three months (the "30% limitation"): (i) stock or securities,
(ii) options, futures or forward contracts, or (iii) foreign currencies (or
foreign currency options, futures or forward contracts) that are not directly
related to its principal business of investing in stock or securities (or
options and futures with respect to stocks or securities); and (c) diversify
its holdings so that, at the end of each quarter of each taxable year, (i) at
least 50% of the value of the Fund's assets is represented by cash, cash items,
U.S. Government securities, securities of other regulated investment companies,
and other securities which, with respect to any one issuer, do not represent
more than 5% of the value of the Fund's assets nor more than 10% of the voting
securities of such issuer, and (ii) not more than 25% of the value of the
Fund's assets is invested in the securities of any issuer (other than
U.S. Government securities or the securities of other regulated investment
companies).
If the Fund qualifies as a regulated investment company and distributes to
its shareholders at least 90% of its investment company taxable income
(including any short-term capital gain but not net capital gain, which is the
excess of net long-term capital gains over net short-term capital losses), then
the Fund will not be subject to federal income tax on the income so
distributed. However, the Fund would be subject to corporate income tax at a
rate of 35% on any undistributed income. If in any year the Fund should fail to
qualify as a regulated investment company, the Fund would be subject to federal
income tax in the same manner as an ordinary corporation, and distributions to
shareholders would be taxable to such holders as ordinary dividend income to
the extent of the current or accumulated earnings and profits of the Fund;
<PAGE>
distributions in excess of earnings and profits would be treated as a tax-free
return of capital to the extent of a holder's basis in its shares, and any
excess as a long-or short-term capital gain. In addition, the Fund will be
subject to a nondeductible 4% excise tax on the amount by which the aggregate
income it distributes in any calendar year is less than the sum of: (a) 98% of
the Fund's ordinary income for such calendar year; (b) 98% of the excess of
capital gains over capital losses for the one-year period ending on October 31
of each year; and (c) 100% of the undistributed ordinary income and capital
gains from prior years.
The Fund intends to distribute sufficient income so as to avoid both
corporate income tax and the excise tax.
The Fund may engage in hedging involving foreign currencies, forward
contracts, options and futures contracts (including options and futures
contracts on foreign currencies). See "Additional Investment Practices --
Hedging." Such transactions will be subject to special provisions of the Code
that, among other things, may affect the character of gains and losses realized
by the Fund (that is, may affect whether gains or losses are ordinary or
capital), accelerate recognition of income to the Fund and defer recognition of
certain of the Fund's losses. These rules could therefore affect the character,
amount and timing of distributions to shareholders. In addition, these
provisions (1) will require the Fund to "mark-to-market" certain types of
positions in its portfolio (that is, treat them as if they were closed out) and
(2) may cause the Fund to recognize income without receiving cash with which to
pay dividends or make distributions in amounts necessary to satisfy the
distribution requirements for avoiding income and excise taxes. The extent to
which the Fund may be able to use such hedging techniques and continue to
qualify as a regulated investment company may be limited by the 30% limitation
discussed above. The Fund intends to monitor its transactions, will make the
appropriate tax elections and will make the appropriate entries in its books
and records when it acquires any foreign currency, forward contract, option,
futures contract, or hedged investment in order to mitigate the effect of these
rules and prevent disqualification of the Fund as a regulated investment
company.
The Fund will maintain accounts and calculate income by reference to the
dollar for U.S. federal income tax purposes. Investments generally will be
maintained and income therefrom calculated by reference to certain foreign
currencies and such calculations will not necessarily correspond to the Fund's
distributable income and capital gains for U.S. federal income tax purposes as
a result of fluctuations in currency exchange rates.
Furthermore, exchange control regulations may restrict the ability of the
Fund to repatriate investment income or the proceeds of sales of securities.
These restrictions and limitations may limit the Fund's ability to make
sufficient distributions to satisfy the 90% distribution requirement and avoid
the 4% excise tax.
The tax treatment of certain investments of the Fund is not free from
doubt and it is possible that an Internal Revenue Service (the "IRS")
examination of the issuers of such securities or of the Fund could result in
<PAGE>
adjustments to the income of the Fund. An upward adjustment by the IRS to the
income of the Fund may result in the failure of the Fund to satisfy the 90%
distribution requirement described in the Prospectus necessary for the Fund to
maintain its status as a regulated investment company under the Code. In such
event, the Fund may be able to make a "deficiency dividend" distribution to its
shareholders with respect to the year under examination to satisfy this
requirement. Such distribution will be taxable as a dividend to the
shareholders receiving the distribution (whether or not the Fund has sufficient
current or accumulated earnings and profits for the year in which such
distribution is made) in the taxable year in which such dividends are received.
A downward adjustment by the IRS to the income of the Fund may cause a portion
of the previously made distribution with respect to the year under examination
not to be treated as a dividend. In such event, the portion of distributions to
each shareholder not treated as a dividend would be recharacterized as a return
of capital and reduce the shareholder's basis in the shares held at the time of
the previously made distributions. Accordingly, this reduction in basis could
cause a shareholder to recognize additional gain upon the sale of such
shareholder's shares.
If the Fund purchases shares in certain foreign investment entities,
called "passive foreign investment companies" ("PFICs"), the Fund may be
subject to U.S. Federal income tax on a portion of any "excess distribution" or
gain from the disposition of the shares even if the income is distributed as a
taxable dividend by the Fund to its shareholders. Additional charges in the
nature of interest may be imposed on the Fund with respect to deferred taxes
arising from the distributions or gains. If the Fund were to invest in a PFIC
and the PFIC made the necessary information available, and the Fund were to
elect to treat the PFIC as a "qualified electing fund" under the Code, in lieu
of being taxed in the manner described above the Fund would be required to
include in income each year a portion of the ordinary earnings and net capital
gains of the PFIC, even if not distributed to the Fund, and the amounts would
be subject to the 90% and calendar year distribution requirements described
above.
Proposed regulations have been issued which may allow the Fund to make an
election to mark to market its shares of PFIC stock in lieu of being subject to
U.S. Federal income tax. At the end of each taxable year to which the election
applies, the Fund would report as ordinary income the amount by which the fair
market value of the PFIC's stock exceeds the Fund's adjusted basis in these
shares. No mark-to-market losses may be recognized. The effect of the election
would be to treat excess distributions and gain on dispositions as ordinary
income which is not subject to a fund level tax when distributed to
shareholders as a dividend.
Legislation currently pending before the U.S. Congress could require a
mark-to-market regime similar to the proposed regulations. It is impossible to
predict if or when the legislation will become law and, if so enacted, what
form it will ultimately take.
<PAGE>
U.S. Shareholders
Distributions. Distributions to shareholders of net investment income will
be taxable as ordinary income whether paid in cash or reinvested in additional
shares. It is not anticipated that a significant portion of such dividends, if
any, will qualify for the dividends-received deduction generally available for
corporate shareholders under the Code. Shareholders receiving distributions
from the Fund in the form of additional shares pursuant to the dividend
reinvestment plan should be treated for U.S. Federal income tax purposes as
receiving a distribution in an amount equal to the amount of cash that the
shareholders receiving cash dividends or distributions will receive and should
have a cost basis in the shares received equal to such amount.
Distributions to shareholders of net capital gain that are designated by
the Fund as "capital gain dividends" will be taxable as long-term capital
gains, whether paid in cash or additional shares, regardless of how long the
shares have been held by such shareholders. Capital gain dividends will not be
eligible for the dividends-received deduction. The current maximum federal
income tax rate imposed on individuals with respect to long-term capital gains
is limited to 28%, whereas the current maximum federal income tax rate imposed
on individuals with respect to ordinary income (and short-term capital gains,
which are taxed at the same rates as ordinary income) is 39.6%. With respect to
corporate taxpayers, long-term capital gains are currently taxed at the same
federal income tax rates as ordinary income and short-term capital gains.
Dividends and distributions by the Fund are generally taxable to the
shareholders at the time the dividend or distribution is made (even if paid or
reinvested in additional shares). Any dividend declared by the Fund in
October, November or December of any calendar year, however, which is payable
to shareholders of record on a specified date in such a month and which is not
paid on or before December 31 of such year will be treated as received by the
Shareholders as of December 31 of such year, provided that the dividend is paid
during January of the following year. Distributions in excess of the Fund's
current and accumulated earnings and profits will, as to each of the Fund's
shareholders, be treated as a tax-free return of capital, to the extent of the
shareholder's basis in his shares, and as a capital gain thereafter. The Fund's
dividends and distributions generally will not be taxable to U.S. tax-exempt
entities (unless the entities are subject to the U.S. Federal tax on unrelated
business income and incur indebtedness allocable to the purchase of Fund
shares) and will not be a specified preference item for purposes of the U.S.
Federal alternative minimum tax imposed on individuals and corporations.
A notice detailing the tax status of dividends and distributions paid by
the Fund will be mailed annually to the shareholders of the Fund.
Dispositions and Repurchases. Gain or loss, if any, recognized on the sale
or other disposition of shares of the Fund will be taxed as capital gain or
loss if the shares are capital assets in the shareholder's hands. Generally, a
shareholder's gain or loss will be a long-term gain or loss if the shares have
been held for more than one year. If a shareholder sells or otherwise disposes
of a share of the Fund before holding it for more than six months, any loss on
the sale or other disposition of such share shall be treated as a long-term
<PAGE>
capital loss to the extent of any capital gain dividends received by the
shareholder with respect to such share. A loss realized on a sale or exchange
of shares may be disallowed if other shares of the Fund are acquired (whether
under the Plan or otherwise) within a 61-day period beginning 30 days before
and ending 30 days after the date that the shares are disposed of.
A repurchase by the Fund of shares generally will be treated as a sale of
the shares by a shareholder provided that after the repurchase the shareholder
does not own, either directly or by attribution under Section 318 of the Code,
any shares. If after a repurchase a shareholder continues to own, directly or
by attribution, any shares, it is possible that any amounts received in the
repurchase by such shareholder will be taxable as a dividend to such
shareholder, and there is a risk that shareholders who do not have any of their
shares repurchased would be treated as having received a dividend distribution
as a result of their proportionate increase in the ownership of the Fund.
Non-U.S. Taxes. The Fund may be subject to certain taxes imposed by
countries in which the Fund invests with respect to dividends, interest,
capital gains and other income. See "Latin American Taxes." If the Fund
qualifies as a regulated investment company, if certain distribution
requirements are satisfied and if more than 50% in value of the Fund's total
assets at the close of any taxable year consists of stocks or securities of
non-U.S. corporations, which for this purpose should include obligations issued
by non-U.S. governmental issuers, the Fund may elect to treat any non-U.S.
income taxes paid by it (if such taxes are treated as income taxes under
U.S. income tax principles) as paid by its shareholders. The Fund expects to
qualify for and may make this election. For any year that the Fund makes such
an election, an amount equal to the non-U.S. income taxes paid by the Fund that
can be treated as income taxes under U.S. income tax principles will be
included in the income of its shareholders and each shareholder will be
entitled (subject to certain limitations) to credit the amount included in his
income against his U.S. tax liabilities, if any, or to deduct such amount from
his U.S. taxable income, if any. Shortly after any year for which it makes such
an election, the Fund will report to its shareholders, in writing, the amount
per share of such non-U.S. income taxes that must be included in each
shareholder's gross income and the amount that will be available for deductions
or credit. In general, a shareholder may elect each year whether to claim
deductions or credits for non-U.S. taxes. No deductions for non-U.S. taxes may
be claimed, however, by non-corporate shareholders (including certain non-U.S.
shareholders as described below) who do not itemize deductions. If a
shareholder elects to credit non-U.S. taxes, the amount of credit that may be
claimed in any year may not exceed the same proportion of the U.S. tax against
which such credit is taken that the shareholder's taxable income from non-U.S.
sources (but not in excess of the shareholder's entire taxable income) bears to
his entire taxable income. For this purpose, the Fund expects that the capital
gains it distributes to its shareholders, whether dividends or capital gains
distributions, will not be treated as non-U.S. source taxable income. If the
Fund makes this election, a shareholder will be treated as receiving non-U.S.
source income in an amount equal to the sum of his proportionate share of non-
U.S. income taxes paid by the Fund and the portion of dividends paid by the
Fund representing income earned from non-U.S. sources. This limitation must be
<PAGE>
applied separately to certain categories of income and the related non-U.S.
taxes.
Backup Withholding. The Fund may be required to withhold federal income
tax at a rate of 31% ("backup withholding") from dividends and redemption
proceeds paid to non-corporate shareholders. This tax may be withheld from
dividends if (i) the shareholder fails to furnish the Fund with the
shareholder's correct taxpayer identification number, (ii) the IRS notifies the
Fund that the shareholder has failed to report properly certain interest and
dividend income to the IRS and to respond to notices to that effect, or
(iii) when required to do so, the shareholder fails to certify that he or she
is not subject to backup withholding. Redemption proceeds may be subject to
withholding under the circumstances described in (i) above. Backup withholding
is not an additional tax. Any amounts withheld under the backup withholding
rules from payments made to a shareholder may be credited against such
shareholder's federal income tax liability.
Non-U.S. Shareholders
U.S. taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a non-U.S. trust or estate, a non-U.S.
corporation, or a non-U.S. partnership ("non-U.S. shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S. trade
or business carried on by such shareholder. Ordinarily, income from the Fund
will not be treated as so "effectively connected."
Income not Effectively Connected. If the income from the Fund is not
"effectively connected" with a U.S. trade or business carried on by the non-
U.S. shareholder, distributions of investment company taxable income will be
subject to a U.S. tax of 30% (or lower treaty rate), which tax is generally
withheld from such distributions. Furthermore, non-U.S. shareholders may be
subject to U.S. tax at the rate of 30% (or lower treaty rate) of the income
resulting from the Fund's election to treat any non-U.S. taxes paid by it as
paid by its shareholders, but will not be able to claim a credit or deduction
for the non-U.S. taxes as having been paid by them.
Distributions of capital gain dividends to a non-resident alien who is
present in the United States for fewer than one hundred eighty-three days
during the taxable year will not be subject to the 30% U.S. withholding tax. An
alien individual who is physically present in the United States for more than
one hundred eighty-two days during the taxable year generally is treated as a
resident for U.S. Federal income tax purposes, in which case he or she will be
subject to U.S. Federal income tax on his or her worldwide income including
ordinary income and capital gain dividends at the graduated rates applicable to
U.S. citizens, rather than the 30% U.S. withholding tax. In the case of a non-
U.S. shareholder who is a non-resident alien individual, the Fund may be
required to withhold U.S. Federal income tax at a rate of 31% of distributions
of capital gain dividends under the backup withholding system unless the non-
U.S. shareholder makes required certifications to the Fund on a properly
completed U.S. Internal Revenue Service Form W-8. The amount so withheld could
be applied as a credit against any U.S. tax due from the shareholder or, if no
<PAGE>
tax is due, refunded pursuant to a claim therefor properly filed on an income
tax return.
Income Effectively Connected. If the income from the Fund is "effectively
connected" with a U.S. trade or business carried on by a non-U.S. shareholder,
then distributions of investment company taxable income and net capital gains,
and any gains realized upon the sale of Shares or the Fund, will be subject to
U.S. federal income tax at the graduated rates applicable to U.S. citizens,
residents and domestic corporations. Such shareholders may also be subject to
the 30% branch profits tax.
The tax consequences to a non-U.S. shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Non-U.S. shareholders are advised to consult their own tax advisers
with respect to the particular tax consequences to them of an investment in the
Fund.
Latin American Taxes
Notices
Shareholders will be notified annually by the Fund of the dividends,
distributions and deemed distributions made by the Fund to its shareholders.
Furthermore, shareholders will be sent, if appropriate, various written notices
after the close of the Fund's taxable year regarding certain dividends,
distributions and deemed distributions that were paid (or that were treated as
having been paid) by the Fund to its shareholders during the preceding taxable
year.
NET ASSET VALUE
Net asset value will be determined no less frequently than on the last
business day of each week and at such other times as the Board of Directors may
determine, by dividing the value of the net assets of the Fund (the value of
its assets less its liabilities including borrowings, exclusive of capital
stock and surplus) by the total number of shares of Common Stock outstanding.
In valuing the Fund's assets, all securities for which market quotations are
readily available are valued (i) at the last sale price prior to the time of
determination if there was a sale on the date of determination, (ii) at the
mean between the last current bid and asked prices if there was no sales price
on such date and bid and asked quotations are available, and (iii) at the bid
price if there was no sales price on such date and only bid quotations are
available. Publicly traded government debt securities are typically traded
internationally on the over-the-counter market, and will be valued at the mean
between the last current bid and asked price as at the close of business of
that market. In instances where a price determined above is deemed not to
represent fair market value, the price is determined in such manner as the
<PAGE>
Board of Directors may prescribe. Securities may be valued by independent
pricing services which use prices provided by market-makers or estimates of
market values obtained from yield data relating to instruments or securities
with similar characteristics. Short-term investments having a maturity of
60 days or less are valued at amortized cost, unless the Board of Directors
determines that such valuation does not constitute fair value. In valuing
assets, prices denominated in foreign currencies are converted to dollar
equivalents at the current exchange rate. Securities for which reliable
quotations or pricing services are not readily available and all other
securities and assets are valued at fair value as determined in good faith by,
or under procedures established by, the Board of Directors.
COMMON STOCK
The authorized capital stock of the Fund is 100,000,000 shares of Common
Stock ($.001 par value). The Common Stock, when issued, will be fully paid and
nonassessable. All shares of Common Stock are equal as to dividends,
distributions and voting privileges. There are no conversion, preemptive or
other subscription rights. In the event of liquidation, each share of Common
Stock is entitled to its proportion of the Fund's assets after debts and
expenses. There are no cumulative voting rights for the election of directors.
Prior to the Offerings, The Investment Adviser will own 100% of the outstanding
shares of Common Stock of the Fund and, consequently, will be a controlling
person of the Fund until the shares offered hereby are issued and sold.
The Fund has no present intention of offering additional shares of its
Common Stock. Other offerings of its Common Stock, if made, will require
approval of the Fund's Board of Directors. Any additional offerings will be
subject to the requirements of the Investment Company Act that shares of Common
Stock may not be sold at a price below the then current net asset value
(exclusive of the sales load) except in connection with an offering to existing
shareholders or with the consent of a majority of the Fund's outstanding Common
Stock. The Board of Directors has authorized the officers of the Fund in their
discretion, subject to compliance with the Investment Company Act and other
applicable law, to purchase in the open market up to 5% of the outstanding
Common Stock in the event that the Common Stock trades at a discount to net
asset value. There is no assurance that any such open market purchases will be
made and such authorization may be terminated at any time.
Future Actions Relating to a Discount in the Price of the Fund's Shares of
Common Stock
Shares of closed-end investment companies frequently trade at discounts
from net asset value, especially shortly after the completion of the initial
public offering. The Fund cannot predict whether its shares of Common Stock
will trade above, at or below net asset value. The market price of the Fund's
shares of Common Stock will be determined by, among other things, the supply
and demand for the Fund's shares, the Fund's investment performance and
investor perception of the Fund's overall attractiveness as an investment as
compared with alternative investments. If, at any time after the second year
following the Offerings, shares of the Fund's Common Stock publicly trade for a
<PAGE>
substantial period of time at a substantial discount from the Fund's then
current net asset value per share, the Fund's Board of Directors will consider,
at its next regularly scheduled meeting, authorizing various actions designed
to eliminate the discount. The actions considered by the Board of Directors may
include periodic repurchases of shares, tender offers to purchase shares from
all stockholders at net asset value or recommending to shareholders amendments
to the Fund's Charter to convert the Fund to an open-end investment company.
The Board of Directors would consider all relevant factors in determining
whether to take any such actions, including the effect of such actions on the
Fund's status as a regulated investment company under the Code and the
availability of cash to finance repurchases or tender offers in view of the
restrictions on the Fund's ability to borrow. Shareholders of an open-end
investment company may require the company to redeem their shares at any time
(except in certain circumstances as authorized by or under the Investment
Company Act) at their net asset value, less such redemption charge, if any, as
might be in effect at the time of redemption. No assurance can be given that
the Fund will convert to an open-end investment company or that share
repurchases or tender offers will be made or that, if made, they will reduce or
eliminate market discount. Should any repurchases be made in the future, it is
expected that they would be made at prices at or below the current net asset
value per share. Any repurchases or tender offers would cause the Fund's net
assets to decrease, which may have the effect of increasing the Fund's expense
ratio.
In considering whether to recommend to shareholders the conversion of the
Fund to an open-end investment company, the Fund's Board of Directors would
consider a number of factors, including whether the Fund's ability to operate
in accordance with its investment policies, such as its authority to invest in
securities which may be illiquid, may be impaired as a result. In light of the
position of the Commission that illiquid securities may not exceed 15% of the
total assets of a registered open-end investment company, an attempt to convert
the Fund to such a company would have to take into account the percentage of
such securities in the Fund's portfolio at the time and other factors. The Fund
cannot predict whether on this basis it would be able to effect any such
conversion or whether relief from the Commission's position, if sought, could
be obtained. Under certain circumstances, a shareholder vote may be required to
authorize periodic repurchases or tender offers of the Fund's shares of Common
Stock. In considering whether to recommend to shareholders such authorization,
the Board of Directors similarly would consider a number of factors including
limitations that may be placed on the Fund's investment policies as a
consequence of such repurchase or tender offer policy.
Any amendment to the Fund's Charter that would convert the Fund to an
open-end investment company would require the approval of the holders of the
outstanding Common Stock. See "Special Voting Provisions" below for a
discussion of voting requirements applicable to conversion of the Fund to an
open-end investment company. If the Fund converted to an open-end investment
company, it could be required to liquidate its portfolio investments to meet
requests for redemption, and the Common Stock would no longer be listed on the
New York Stock Exchange. In addition, conversion to an open-end investment
company would require a shareholder vote and may require the Fund to obtain
additional local governmental or regulatory approvals or limit the Fund's
<PAGE>
ability to invest in certain markets. Shareholders of an open-end investment
company may require the company to redeem their shares at any time (except in
certain circumstances as authorized by or under the Investment Company Act) at
the net asset value, less such redemption charge, if any, as might be in effect
at the time of redemption.
Special Voting Provisions
The Fund presently has provisions in its Charter and By-Laws (commonly
referred to as "anti-takeover" provisions) which may have the effect of
limiting the ability of other entities or persons to acquire control of the
Fund, to cause it to engage in certain transactions or to modify its structure.
First, a director may be removed from office only for cause by vote of at
least 75% of the Shares entitled to be voted on the matter. Second, the
affirmative vote of 75% of the entire Board of Directors is required to
authorize the conversion of the Fund from a closed-end to an open-end
investment company. The conversion also requires the affirmative vote of
holders of at least 75% of the Common Stock unless it is approved by a vote of
75% of the Continuing Directors (as defined below), in which event such
conversion requires the approval of the holders of a majority of the Common
Stock. A "Continuing Director" is any member of the board of directors of the
Fund who (i) is not a person or affiliate of a person who enters or proposed to
enter into a Business Combination (as defined below) with the Fund (an
"Interested Party") and (ii) who has been a member of the board of directors
for a period of at least 12 months, or has been a member of the board of
directors since ____ __, 1994, or is a successor of a Continuing Director who
is unaffiliated with an Interested Party and is recommended to succeed a
Continuing Director by a majority of the Continuing Directors then on the Board
of Directors of the Fund.
Third, at the Fund's first annual stockholders meeting, the Board of
Directors will be classified into three classes, each with a term of three
years with only one class of directors standing for election in any year. Such
classification may prevent replacement of a majority of the directors for up to
a two year period. The affirmative vote of at least 75% of the Shares will be
required to amend the Charter or By-Laws to change any of the provisions in the
preceding two paragraphs.
Additionally, the affirmative vote of 75% of the entire Board of Directors
and the holders of at least (i) 80% of the Common Stock and (ii) in the case of
a Business Combination (as defined below), 66% of the Common Stock other than
Common Stock held by an Interested Party who is (or whose affiliate is) a party
to a Business Combination (as defined below) or an affiliate or associate of
the Interested Party, are required to authorize any of the following
transactions:
(i) merger, consolidation or statutory share exchange of the Fund
with or into any other person;
(ii) issuance or transfer by the Fund (in one or a series of
transactions in any 12 month period) of any securities of the Fund to any
<PAGE>
person or entity for cash, securities or other property (or combination
thereof) having an aggregate fair market value of $1,000,000 or more,
excluding issuances or transfers of debt securities of the Fund, sales of
securities of the Fund in connection with a public offering, issuances of
securities of the Fund pursuant to a dividend reinvestment plan adopted by
the Fund and issuances of securities of the Fund upon the exercise of any
stock subscription rights distributed by the Fund and portfolio
transactions effected by the Fund in the ordinary course of its business;
(iii) sale, lease, exchange, mortgage, pledge, transfer or other
disposition by the Fund (in one or a series of transactions in any
12 month period) to or with any person or entity of any assets of the Fund
having an aggregate fair market value of $1,000,000 or more except for
portfolio transactions (including pledges of portfolio securities in
connection with borrowings) effected by the Fund in the ordinary course of
its business (transactions within clauses (i), (ii) and (iii) above being
known individually as a "Business Combination");
(iv) the voluntary liquidation or dissolution of the Fund, or an
amendment to the Fund's Charter to terminate the Fund's existence; or
(v) unless the Investment Company Act or federal law requires a
lesser vote, any stockholder proposal as to specific investment decisions
made or to be made with respect to the Fund's assets as to which
stockholder approval is required under federal or Maryland law.
However, the stockholder vote described above will not be required with
respect to the foregoing transactions (other than those set forth in (v) above)
if they are approved by a vote of 75% of the Continuing Directors. In that
case, if Maryland law requires, the affirmative vote of a majority of the votes
entitled to be cast thereon shall be required. The Fund's By-Laws contain
provisions the effect of which is to prevent matters, including nominations of
directors, from being considered at a stockholders' meeting where the Fund has
not received notice of the matters at least 60 days prior to the meeting (or
10 days following the date notice of such meeting is given by the Fund if less
than 70 days' notice of such meeting is given by the Fund).
Reference is made to the Charter and By-Laws of the Fund, on file with the
Commission, for the full text of these provisions. See "Further Information."
The percentage of votes required under these provisions, which are greater than
the minimum requirements under Maryland law absent the elections described
above or in the Investment Company Act, will make a change in the Fund's
business or management more difficult and may have the effect of depriving
stockholders of an opportunity to sell shares at a premium over prevailing
market prices by discouraging a third party from seeking to obtain control of
the Fund in a tender offer or similar transaction. The Fund's Board of
Directors, however, has considered these anti-takeover provisions and believes
they are in the best interests of stockholders.
In addition, in the opinion of the Investment Adviser, these provisions
offer several advantages. They may require persons seeking control of the Fund
to negotiate with its management regarding the price to be paid for the shares
<PAGE>
required to obtain such control, they promote continuity and stability and they
enhance the Fund's ability to pursue long-term strategies that are consistent
with its investment objective.
CUSTODIAN, TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
_________________________, will act as custodian for the Fund's assets.
The custodian may employ subcustodians outside the United States who are
approved by the Board of Directors in accordance with the provisions of the
Investment Company Act. _________________________, will act as the transfer
agent, dividend paying agent and registrar for the Fund's Common Stock.
UNDERWRITING
The underwriters of the United States Offering named below (the "U.S.
Underwriters"), for whom Lehman Brothers Inc. and ______________ are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions of the U.S. Underwriting Agreement (the form of which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part), to purchase, and the Fund has agreed to sell to them, severally, the
number of shares of Common Stock set forth opposite their names below:
Number
U.S. Underwriters of Shares
Lehman Brothers Inc. . . . . . . . . . . . . . . . . . . . . . . .
_________
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
=========
The managers of the International Offering named below (the "International
Managers"), for whom Lehman Brothers International (Europe) and ______________
are acting as Lead Managers (the "Lead International Managers"), have severally
agreed, subject to the terms and conditions of the International Underwriting
Agreement (the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part), to purchase, and the Fund has
agreed to sell to them, severally, the number of shares of Common Stock set
forth opposite their names below:
<PAGE>
Number
International Managers of Shares
Lehman Brothers International (Europe). . . . . . . . . . . . . . .
_________
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
=========
The U.S. Underwriting Agreement and the International Underwriting
Agreement (collectively, the "Underwriting Agreements") provide that if any of
the foregoing shares are purchased by the U.S. Underwriters pursuant to the
U.S. Underwriting Agreement or by the International Managers pursuant to the
International Underwriting Agreement, all the shares of Common Stock agreed to
be purchased by the U.S. Underwriters or the International Managers, as the
case may be, pursuant to their respective Underwriting Agreements must be so
purchased, and that the obligations of the U.S. Underwriters or the
International Managers thereunder are subject to approval of certain legal
matters by counsel and to various other conditions. The offering price,
underwriting discounts and commissions for the U.S. Offering and the
International Offering are identical. The closing of each Offering is a
condition to the closing of each other Offering.
The Fund has granted to each of the U.S. Underwriters and the
International Managers an option, exercisable in one or more installments
within 45 days from the date of this Prospectus, to purchase up to an
additional ________ and _______ shares, respectively, of Common Stock, at the
public offering price less the sales load, to cover over-allotments, if any. To
the extent that the U.S. Underwriters and the International Managers exercise
such option, each of the U.S. Underwriters and the International Managers, as
the case may be, will be committed, subject to certain conditions, to purchase
a number of shares proportionate to such U.S. Underwriter's and International
Manager's initial commitment as indicated in the preceding tables.
The Fund has been advised by the Representatives and the Lead
International Managers that the U.S. Underwriters and the International
Managers propose to offer the shares of Common Stock offered by this Prospectus
to the public initially at the price to public set forth on the cover page of
this Prospectus, except that, through a reduction in the sales load, the price
will be reduced to $________ for purchases in single transactions (as defined
below) of between _________ and _______ shares, inclusive, and to $_______ for
purchases in single transactions of ______________ or more shares of Common
Stock, subject to the following. Purchasers who agree to purchase shares of
Common Stock at the reduced price will be restricted from selling, assigning or
otherwise transferring or contracting to sell, assign or otherwise transfer
those shares for a period of 90 days after the closing of the Offerings. There
is no restriction on the number of shares that may be purchased subject to the
transfer restriction, except that the Fund will comply, with respect to non-
restricted shares, with the distribution requirements of the New York Stock
Exchange. The certificates evidencing shares of Common Stock purchased at the
<PAGE>
reduced price will contain a legend stating the transfer restriction. Investors
must pay for any shares of Common Stock purchased in the initial public
offering on or before __________ __, 1994. The sales loads of $__ and $__ are
equal to __% and __%, respectively, of the initial public offering price.
The Representatives and the Lead International Managers have also advised
the Fund that the U.S. Underwriters and the International Managers propose to
offer the Common Stock to certain selected dealers (which may include the U.S.
Underwriters and the International Managers) at the initial offering price per
share set forth on the cover page of this Prospectus less a concession not in
excess of $.___ per share ($.___ per share for purchases in single transactions
of between __________ and ___________ shares, inclusive, and $.____ per share
for purchases in single transactions of ______________ or more shares of Common
Stock). The U.S. Underwriters and the International Managers may allow, and
such dealers may reallow, a discount not in excess of $.____ per share on sales
to other dealers. After the initial public offering, the price to public,
concession and reallowance to dealers may be changed by the Representatives and
the Lead International Managers.
The term "single transaction," as used in this Prospectus, refers to a
single purchase by an individual or to concurrent purchases, which in the
aggregate are at least equal to the prescribed amounts, by an individual, his
parents, spouse, siblings and children purchasing shares for his or their own
account and to single transactions by a trustee, money manager, or other
fiduciary purchasing shares for one or more trust estates, one or more
fiduciary accounts and/or his own account. The term "single transaction" also
includes purchases by any "company," as that term is defined in the Investment
Company Act, its directors, senior executive officers and controlling
shareholders; provided, however, that it does not include purchases by any such
company which has not been in existence for at least six months or which has no
purpose other than the purchase of shares of the Fund or shares of other
registered investment companies at a discount; and provided further, that it
does not include purchases by any group of individuals whose sole
organizational nexus is that the participants therein are credit cardholders of
a company, policyholders of an insurance company or noninvestment advisory
customers of a bank.
The U.S. Underwriters and the International Managers have entered into an
Agreement Between U.S. Underwriters and International Managers. Pursuant to this
Agreement, each U.S. Underwriter has agreed that, as part of the distribution
of the _______ shares (plus any of the _______ shares to cover over-allotments)
of Common Stock offered in the U.S. Offering, (a) it is not purchasing any of
such shares for the account of anyone other than a U.S. Person and (b) it has
not offered or sold, and will not offer, sell resell or deliver, directly or
indirectly, any of such shares or distribute any prospectus relating to the
U.S. Offering to any person other than a U.S. Person; and each International
Manager has agreed that, as part of the distribution of the _________ shares
(plus any of the _______ shares to cover over-allotments) of Common Stock
offered in the International Offering, (a) it is not purchasing any of such
shares for the account of any U.S. Person and (b) it has not offered or sold,
and will not offer, sell, resell or deliver, directly or indirectly, any of
such shares or distribute any prospectus relating to the International Offering
<PAGE>
to any U.S. Person. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Underwriting
Agreements and the Agreement Between U.S. Underwriters and International
Managers, including (i) certain purchases and sales between the U.S.
Underwriters and the International Managers, (ii) certain offers, sales,
resales, deliveries or distributions to or through investment advisors or other
persons exercising investment direction, (iii) purchases, offers or sales by a
U.S. Underwriter who is also acting as an International Manager, or by an
International Manager who is also acting as a U.S. Underwriter and (iv) other
transactions specifically approved by the U.S. Underwriters and the
International Managers. As used herein, "U.S. Person" means any resident or
citizen of the United States, any corporation or other entity created or
organized in or under the laws of the United States or any estate or trust the
income of which is subject to United States federal income taxation regardless
of the source of its income. The term "United States" means the United States
of America (including the District of Columbia) and its territories, its
possessions and other areas subject to its jurisdiction.
Pursuant to the Agreement Between U.S. Underwriters and International
Managers, sales may be made between the U.S. Underwriters and the International
Managers of such number of shares of Common Stock as may be mutually agreed.
The price of any shares so sold shall be the public offering price as then in
effect for Common Stock being sold by the U.S. Underwriters and the
International Managers, less an amount not greater than the selling concession
allocable to such Common Stock. To the extent that there are sales between the
U.S. Underwriters and the International Managers pursuant to the Agreement
Between U.S. Underwriters and International Managers, the number of shares
initially available for sale by the U.S. Underwriters or by the International
Managers may be more or less than the amount specified on the cover page of
this Prospectus.
Each U.S. Underwriter and International Manager has represented and agreed
that (i) it has not offered or sold, and will not offer or sell, in the United
Kingdom, by means of any document, any shares of Common Stock other than to
persons whose ordinary business it is to buy or sell shares or debentures,
whether as principal or agent (except under circumstances which do not
constitute an offer to the public within the meaning of the Companies Act 1985
of Great Britain); (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything done by
it in relation to the Common Stock in, from or otherwise involving the United
Kingdom, and (iii) it has only issued or passed on, and will only issue or pass
on to any person in the United Kingdom, any document received by it in
connection with the issue of the Common Stock if that person is of a kind
described in Article 9(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1988.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.
Prior to the Offerings, there has been no market for the shares of Common
Stock. An application will be made to list the Common Stock on the New York
<PAGE>
Stock Exchange under the symbol _____. In order to meet the requirements for
listing of the Common Stock on the New York Stock Exchange, the U.S.
Underwriters have undertaken to sell lots of 100 or more shares to a minimum of
2,000 beneficial holders in the United States.
To the extent permitted under the Investment Company Act and the rules and
regulations promulgated thereunder, the Fund anticipates that the
Representatives and certain other U.S. Underwriters may from time to time act
as brokers or dealers in connection with the execution of its portfolio
transactions after they have ceased to be U.S Underwriters and, subject to
certain restrictions under the Investment Company Act, may act as brokers while
they are U.S. Underwriters.
The U.S. Underwriters and the International Managers have taken certain
actions to discourage short term trading of shares of Common Stock during a
period of time following the initial offering date. Included in these actions
is the requirement of physical delivery of certificates representing shares of
Common Stock to transfer their ownership for a certain period and the
withholding of the concession to dealers with shares of Common Stock which were
sold by such dealers and which are repurchased for the account of the
Underwriters during such period.
The Investment Adviser, an affiliate of Lehman Brothers Inc. (a
Representative) and Lehman Brothers International (a Lead International
Manager), will act as the Fund's Investment Adviser and will receive
compensation from the Fund in connection therewith. See "Management of the Fund
- -- Investment Adviser." Clinton Kendrick, a director and officer of the Fund,
and Andrew Gordon, a director and officer of the Fund, are each affiliated with
Lehman Brothers Inc.
In the Underwriting Agreements, the Fund and to a certain extent the
Investment Adviser, on the one hand, and the U.S. Underwriters and the
International Managers, as the case may be, on the other hand, have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act, and to contribute to payments that they may be required to
make in respect thereof.
The Fund has agreed to pay the U.S. Underwriters and the International
Managers an aggregate of up to $_______ as partial reimbursement of their
expenses incurred in connection with the Offerings of the shares of Common
Stock.
EXPERTS
The financial statement of the Fund included in the Prospectus has been so
included in reliance on the report of _______________, independent auditors,
given on the authority of said firm as experts in auditing and accounting.
<PAGE>
LEGAL MATTERS
The validity of the shares offered hereby will be passed on for the Fund
by Simpson Thacher & Bartlett (a partnership which includes professional
corporations), New York, New York, and certain legal matters will be passed
upon for the U.S. Underwriters and the International Managers by Willkie Farr &
Gallagher, New York, New York. Counsel for the Fund, the U.S. Underwriters and
the International Managers will rely, as to matters of Maryland law, on Piper &
Marbury, Baltimore, Maryland.
FURTHER INFORMATION
Further information concerning these securities and their issuer may be
found in the Registration Statement of which this Prospectus constitutes a part
on file with the Commission.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholder
Lehman Brothers Latin America Growth Fund, Inc.
We have audited the accompanying statement of assets and liabilities of Lehman
Brothers Latin America Growth Fund, Inc. (the "Fund") as of _________ __, 1994.
This financial statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets and liabilities is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Lehman
Brothers Latin America Growth Fund, Inc. at __________ __, 1994, in conformity
with generally accepted accounting principles.
___________ __, 1994
<PAGE>
LEHMAN BROTHERS LATIN AMERICA GROWTH FUND, INC. (Note 1)
STATEMENT OF ASSETS AND LIABILITIES
Assets:
Cash
Deferred organization expenses (Note 2)
Total Assets
Liabilities:
Accrued organization expenses (Note 2)
Commitments (Notes 2 and 3) ______
Net Assets (shares of $.___ par value shares
of common stock issued and outstanding;
___________ shares authorized) $
=====
Net asset value per share $
=====
Notes to Financial Statement
NOTE 1
Lehman Brothers Latin America Growth Fund, Inc. (the "Fund") was
incorporated as a Maryland corporation on ________ __, 1994 and has had no
operations to date other than matters relating to its organization and
registration as a diversified, closed-end management investment company under
the Investment Company Act of 1940, as amended, and the sale and issuance to
Lehman Brothers Global Asset Management Limited of ____________ shares of its
common stock for an aggregate purchase price of $________. The books and
records of the Fund will be maintained in U.S. dollars.
NOTE 2
Organization expenses relating to the Fund incurred and to be incurred by
the Investment Adviser will be reimbursed by the Fund. Such expenses, estimated
at $______, will be deferred and amortized on a straight-line basis for a five
year period beginning at the commencement of operations of the Fund. Offering
costs, estimated at $______, will be paid from the proceeds of the Offerings
and charged to capital at the time of the issuance of such shares.
NOTE 3
The Fund will enter into a management agreement with Lehman Brothers
Global Asset Management Limited ("the Investment Adviser") pursuant to which
the Investment Adviser will provide investment advisory services to the Fund
and will be responsible for the management of the Fund's portfolio in
accordance with the Fund's investment policies and for making decisions to buy,
sell, or hold particular securities. _______________ will serve as the Fund's
<PAGE>
U.S. Administrator (the "U.S. Administrator") pursuant to an administration
agreement entered into between the Fund and the Administrator.
__________________ will serve as the Fund's Brazilian Administrator (the
"Brazilian Administrator") pursuant to an administration agreement entered into
between the Fund and the Brazilian Administrator. ________________ will serve
as the Fund's Chilean Administrator (the "Chilean Administrator") pursuant to
an administration agreement entered into between the Fund and the Chilean
Administrator. _________________ will serve as the Fund's Colombian
Administrator (the "Colombian Administrator") pursuant to an agreement entered
into between the Fund and the Colombian Administrator.
The Fund will pay the Investment Adviser a monthly fee for its advisory
services at an annual rate of ____% of the Fund's average monthly net assets.
The Fund will pay the U.S. Administrator a monthly fee for its administration
services at an annual rate of ____% of the Fund's average weekly net assets.
The Fund will pay the Brazilian Administrator _______. The Fund will pay the
Chilean Administrator _______. The Fund will pay the Colombian Administrator
_______.
Lehman Brothers Inc. and ___________________ are acting as the
Representatives of the U.S. Underwriters participating in the U.S. Offering of
the common stock of the Fund.
Lehman Brothers International and ___________________ are acting as the
Lead International Managers of the International Managers participating in the
International Offering of the common stock of the Fund.
Certain officers and/or directors of the Fund are officers and/or
directors of the Investment Adviser.
<PAGE>
APPENDIX A
RATINGS
The following is a description of certain ratings of Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P") that are
applicable to certain obligations in which the Fund may invest.
Moody's Corporate Bond Ratings
Aaa -- Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected
by a large or by an exceptionally stable margin, and principal is secure. While
the various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
A -- Bonds which are rated A possess many favorable investment qualities
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterize bonds in this class.
B -- Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance and
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
<PAGE>
Ca -- Bonds which are rated Ca represent obligations which are speculative
in high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers "1", "2" and "3" to certain of its
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.
S&P Corporate Bond Ratings
AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA -- Bonds rated AA also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A -- Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB-B-CCC-CC -- Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
D -- Bonds rated D are in default. The D category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired. The D rating is also used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
The ratings set forth above may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
<PAGE>
Moody's Commercial Paper Ratings
Prime-1 -- Issuers (or related supporting institutions) rated Prime-1 have
a superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by leading market positions in
well-established industries, high rates or return on funds employed,
conservative capitalization structures with moderate reliance on debt and ample
asset protection, broad margins in earnings coverage of fixed financial charges
and high internal cash generation, and well-established access to a range of
financial markets and assured sources of alternate liquidity.
Prime-2 -- Issuers (or related supporting institutions) rated Prime-2 have
a strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained.
Prime-3 -- Issuers (or related supporting institutions) rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime -- Issuers rated Not Prime do not fall within any of the Prime
rating categories.
S&P Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into four categories, ranging from "A" for the highest
quality obligations to "D" for the lowest. The four categories are as follows:
A -- Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1 -- This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined
to possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2 -- Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated "A-1".
A-3 -- Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
<PAGE>
effects of changes in circumstances than obligations carrying the higher
designations.
B -- Issues rated "B" are regarded as having only an adequate capacity for
timely payment. However, such capacity may be damaged by changing conditions or
short-term adversities.
C -- This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D -- Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
_________________________
Like higher rated bonds, bonds rated in the Baa or BBB categories are
considered to have adequate capacity to pay principal and interest. However,
such bonds may have speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade bonds.
After purchase by the Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund. Neither
event will require a sale of such security by the Fund. However, the Investment
Adviser will consider such event in its determination of whether the Fund
should continue to hold the security. To the extent that the ratings given by
Moody's or S&P may change as a result of changes in such organizations or their
rating systems, the Fund will attempt to use comparable ratings as standards
for investments in accordance with the investment policies contained in this
Prospectus.
<PAGE>
APPENDIX B
GENERAL CHARACTERISTICS AND RISKS OF HEDGING
A detailed discussion of the Hedging (as defined below) that may be done
by the Investment Adviser on behalf of the Fund follows below. The Fund will
not be obligated, however, to do any Hedging and makes no representation as to
the availability of these techniques at this time or at any time in the future.
"Hedging," as used in this Appendix A, refers to the purchase and sale (or
writing) of exchange-listed and over-the-counter ("OTC") put and call options
on currencies and debt and equity securities and indices, entering into
interest rate, currency or stock index futures contracts and options on
interest rate, currency or stock index futures contracts, entering into
interest rate swaps, caps, floors and collars, currency forward contracts and
currency swaps, caps, floors and collars and equity swaps, caps, floors and
collars or trading in other types of derivative instruments.
The Fund's ability to pursue certain of these strategies may be limited by
the U.S. Commodity Exchange Act, as amended, applicable regulations of the
Commodity Futures Trading Commission ("CFTC") thereunder and the federal income
tax requirements applicable to regulated investment companies which are not
operated as commodity pools.
Put and Call Options on Securities and Indices
The Fund may purchase and sell put and call options on debt and equity
securities and indices based upon the prices of debt or equity securities. A
put option on a security gives the purchaser of the option the right to sell
and the writer the obligation to buy the underlying security at the exercise
price during the option period. The Fund may also purchase and sell options on
indices based upon the prices of debt or equity securities ("index options").
Index options are similar to options on securities except that, rather than
taking or making delivery of securities underlying the option at a specified
price upon exercise, an index option gives the holder the right to receive cash
upon exercise of the option if the level of the index upon which the option is
based is greater, in the case of a call, or less in the case of a put, than the
exercise price of the option. The purchase of a put option on a security would
be designed to protect against a substantial decline in the market value of a
security held by the Fund. A call option on a security gives the purchaser of
the option the right to buy and the writer the obligation to sell the
underlying security at the exercise price during the option period. The
purchase of a call option on a security would be intended to protect the Fund
against an increase in the price of a security that it intended to purchase in
the future. In the case of either put or call options that it has purchased, if
the option expires without being sold or exercised, the Fund will experience a
loss in the amount of the option premium plus any related commissions. When the
Fund sells put and call options, it receives a premium as the seller of the
option. The premium that the Fund receives for writing the option will serve as
a partial hedge, in the amount of the option premium, against changes in the
value of the securities in its portfolio. During the term of the option,
however, a covered call seller has, in return for the premium on the option,
given up the opportunity for capital appreciation above the exercise price of
<PAGE>
the option if the value of the underlying security increases, but has retained
the risk of loss should the price of the underlying security decline.
Conversely, a secured put seller retains the risk of loss should the market
value of the underlying security decline below the exercise price of the
option, less the premium received on the sale of the option. The Fund is
authorized to purchase and sell exchange listed options and over-the-counter
options ("OTC Options") which are privately negotiated with the counterparty to
such contract. Listed options are issued by the Options Clearing Corporation
("OCC"), which guarantees the performance of the obligations of the parties to
such options.
All such call options sold (written) by the Fund will be "covered" as long
as the call is outstanding (i.e., the Fund will own the instrument subject to
the call or other securities or assets acceptable under applicable segregation
and coverage rules). All such put options sold (written) by the Fund will be
secured by segregated assets consisting of cash or liquid high grade debt
securities having a value not less than the exercise price.
The Fund's ability to close out its position as a purchaser or seller of
an exchange listed put or call option is dependent upon the existence of a
liquid secondary market. Among the possible reasons for the absence of a liquid
secondary market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange;
(iii) trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities;
(iv) interruption of the normal operations on an exchange; (v) inadequacy of
the facilities of an exchange or the OCC to handle current trading volume; or
(vi) a decision by one or more exchanges to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist, although outstanding options on that exchange that had been listed by
the OCC as a result of trades on that exchange would generally continue to be
exercisable in accordance with their terms. OTC Options are purchased from or
sold to dealers, financial institutions or other counterparties which have
entered into direct agreements with the Fund. With OTC Options, such variables
as expiration date, exercise price and premium will be agreed upon between the
Fund and the counterparty, without the intermediation of a third party such as
the OCC. If the counterparty fails to make or take delivery of the securities
underlying an option it has written, or otherwise settle the transaction in
accordance with the terms of that option as written, the Fund would lose the
premium paid for the option as well as any anticipated benefit of the
transaction. As the Fund must rely on the credit quality of the counterparty
rather than the guarantee of the OCC, it will only enter into OTC options with
counterparties with the highest long-term credit ratings, and with primary
United States government securities dealers recognized by the Federal Reserve
Bank of New York.
The hours of trading for options on securities may not conform to the
hours during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying markets
that cannot be reflected in the option markets.
<PAGE>
Futures Contracts and Options on Futures Contracts
Characteristics. The Fund may purchase and sell futures contracts on
currencies, interest rates and indices of debt and equity securities and
purchase and sell (write) put and call options on such futures contracts traded
on recognized domestic (or, if applicable regulations permit, non-U.S.)
exchanges as a hedge against anticipated interest rate or currency changes or
movements in equity markets. The sale of a futures contract creates an
obligation by the seller to deliver and the buyer to accept delivery of the
specific type of financial instrument or commodity called for in the contract
at a specified future time for a specified price. Options on futures contracts
are similar to options on securities except that an option on a futures
contract gives the purchaser the right in return for the premium paid to assume
a position in a futures contract (a long position if the option is a call and a
short position if the option is a put).
Margin Requirements. At the time a futures contract is purchased or sold,
the Fund must allocate cash or securities as a deposit payment ("initial
margin"). It is expected that the initial margin that the Fund will pay may
range from approximately 1% to approximately 5% of the value of the instruments
underlying the contract. In certain circumstances, however, such as during
periods of high volatility, the Fund may be required by an exchange to increase
the level of its initial margin payment. Additionally, initial margin
requirements may be increased in the future pursuant to regulatory action. An
outstanding futures contract is valued daily and the payment in cash of
"variation margin" may be required, a process known as "marking to the market."
Transactions in listed options and futures are usually settled by entering into
an offsetting transaction, and are subject to the risk that the position may
not be able to be closed without generating significant losses.
Limitations on Use of Futures Contracts and Options on Futures Contracts.
The Fund's use of futures contracts and options on futures contracts will in
all cases be consistent with applicable regulatory requirements and in
particular, the rules and regulations of the CFTC. In addition, the Fund may
not sell futures contracts if the value of such futures contracts exceeds the
total market value of the Fund's portfolio securities.
The Fund will not engage in transactions in futures contracts or options
thereon for speculative purposes but only as a hedge against changes resulting
from market conditions in the values of securities in its portfolio; provided,
however, that the Fund may enter into futures contracts or options thereon for
purposes other than bona fide hedging if, immediately thereafter, the sum of
the amount of its initial margin and premiums on such open contracts and
options would not exceed 5% of the liquidation value of the Fund's portfolio;
provided, further, that in the case of an option that is in-the-money at the
time of the purchase, the in-the-money amount may be excluded in calculating
the 5% limitation. Also, when required, a segregated account of cash or cash
equivalents will be maintained and marked to market in an amount equal to the
market value of the contract. The Investment Adviser reserves the right to
comply with such different standards as may be established from time to time by
CFTC or SEC rules and regulations with respect to the purchase and sale of
futures contracts and options thereon.
<PAGE>
Interest Rate Transactions
The Fund may engage in interest rate transactions with counterparties to
hedge against changes in the value of portfolio securities which the Fund
anticipates purchasing. Interest rate transactions include options on debt
securities and indices of debt securities, futures contracts on interest rates
and options on such futures contracts and interest rate swaps, caps, floors and
collars.
The Fund may enter into interest rate swaps and may purchase or sell
interest rate caps, floors and collars. Interest rate swaps involve the
exchange by the Fund with another party of their respective commitments to pay
or receive interest. The purchase of an interest rate cap entitles the
purchaser to receive payments on a notional principal amount from the party
selling the cap to the extent that a specified index exceeds a predetermined
interest rate. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling the interest rate floor to the extent that a specified index falls
below a predetermined interest rate. A collar is a combination of a cap and a
floor that preserves a certain return with a predetermined range of interest
rates or values. The Fund would enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to manage the duration of its portfolio or to protect against any
increase in the price of the securities the Fund anticipates purchasing at a
later date. The Fund will not sell interest rate caps, floors or collars that
it does not own.
The Fund may enter into interest rate swaps, caps, floors or collars on
either an asset-based or liability-based basis, depending on whether it is
hedging its assets or liabilities, and will usually enter into interest rate
swaps on a net basis (i.e., the two payment streams are netted out), with the
Fund receiving or paying, as the case may be, only the net amount of the two
payments on the payment date. The Fund will not enter into any interest rate
swap, cap, floor or collar transaction unless the unsecured senior debt or the
claims-paying ability of the other party thereto is rated in the highest rating
category of at least one nationally recognized rating organization at the time
of entering into such transaction. If there is a default by the other party to
such a transaction, the Fund will have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms
acting both as principals and as agents utilizing standardized swap
documentation. Caps, floors and collars are more recent innovations for which
standardized documentation has not yet been developed and, accordingly, they
are even less liquid than swaps.
Currency Transactions
The Fund may engage in currency transactions with counterparties to hedge
the value of portfolio securities denominated in particular currencies against
fluctuations in relative value. Currency transactions include currency forward
contracts, exchange listed currency futures contracts, exchange listed and OTC
options on currencies and currency swaps, caps, floors and collars. A forward
<PAGE>
currency contract involves a privately negotiated obligation to purchase or
sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described above. Currency caps, floors and collars operate similarly to
interest rate caps, floors and collars, which are also described above. The
Fund may enter into currency transactions with counterparties that have
received (or the guarantors of the obligations of that have received) a credit
rating of P-1 or A-1 by Moody's or S&P, respectively, or that have an
equivalent rating from an NRSRO or (except for OTC currency options) are
determined to be of equivalent credit quality by the Investment Adviser.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures contracts, options, options on futures contracts
and swaps will be limited to hedging involving either specific transactions or
portfolio positions. Transaction hedging is entering into a currency
transaction with respect to specific assets or liabilities of the Fund, which
will generally arise in connection with the purchase or sale of the Fund's
portfolio securities or the receipt of income from them. Position hedging is
entering into a currency transaction with respect to portfolio security
positions denominated or generally quoted in that currency. The Fund will not
enter into a transaction to hedge currency exposure to an extent greater, after
netting all transactions intended wholly or partially to offset other
transactions, than the aggregate market value (at the time of entering into the
transaction) of the securities held in the Fund's portfolio that are
denominated or generally quoted in or currently convertible into the currency,
other than with respect to proxy hedging as described below.
The Fund may cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure. To reduce the effect of currency fluctuations on
the value of existing or anticipated holdings of portfolio securities, the Fund
may also engage in proxy hedging. Proxy hedging is often used when the currency
to which the Fund's portfolio is exposed is difficult to hedge or to hedge
against the dollar. Proxy hedging entails entering into a forward contract to
sell a currency, the changes in the value of which are generally considered to
be linked to a currency or currencies in which some or all of the Fund's
portfolio securities are or are expected to be denominated, and to buy dollars.
The amount of the contract would not exceed the value of the Fund's securities
denominated in linked currencies. Currency hedging involves some of the same
risks and considerations as other transactions with similar instruments,
Currency transactions can result in losses to the Fund if the currency being
hedged fluctuates in value to a degree or in a direction that is not
anticipated. Further, the risk exists that the perceived linkage between
various currencies may not be present or may not be present during the
particular time that the Fund is engaging in proxy hedging. If the Fund enters
into a currency hedging transaction, the Fund will comply with the asset
segregation requirements described below.
<PAGE>
Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be adversely affected by
government exchange controls, limitations or restrictions on repatriation of
currency, and manipulations or exchange restrictions imposed by governments.
These forms of governmental actions can result in losses to the Fund if it is
unable to deliver or receive currency or monies in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transaction costs.
Buyers and sellers of currency futures are subject to the same risks that apply
to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on these options is subject to the
maintenance of a liquid market that may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
Equity Swaps and Related Transactions
The Fund may enter into equity swaps and may purchase or sell equity caps,
floors and collars. An equity swap is an agreement to exchange cash flows based
on the price of an equity index and operates similarly to an interest rate
swap, which is described above. Equity caps, floors and collars operate
similarly to interest rate caps, floors and collars, which are also described
above. The Fund would enter into these transactions primarily to preserve a
return or spread on a particular investment or portion of its portfolio, or to
protect against any increase in the price of the securities the Fund
anticipates purchasing at a later date. The Fund will not sell equity caps,
floors or collars that it does not own.
The Fund may enter into equity swaps, caps, floors and collars on either
an asset-based or liability-based basis, depending on whether it is hedging its
assets or liabilities, and will usually enter into equity swaps on a net basis,
i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments on the
payment date. The Fund will not enter into any equity swap, cap, floor or
collar transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is rated in the highest rating category of
at least one nationally recognized rating organization at the time of entering
into such transaction. If there is a default by the other party to such a
transaction, the Fund will have contractual remedies pursuant to the agreements
related to the transaction. The swap market has grown substantially in recent
years with a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. Caps,
floors and collars are more recent innovations for which standardized
documentation has not yet been developed and, accordingly, they are even less
liquid than swaps.
<PAGE>
Risks of Hedging
Hedging involves special risks, including possible default by the other
party to the transaction, illiquidity and, to the extent the Investment
Adviser's view as to certain market movements is incorrect, the risk that the
use of Hedging could result in losses greater than if such investment
strategies had not been used. Use of put and call options could result in
losses to the Fund, force the sale or purchase of portfolio securities at an
inopportune time or for prices higher than (in the case of put options) or
lower than (in the case of call options) current market values, or cause the
Fund to hold a security it might otherwise sell. The use of currency
transactions could result in the Fund's incurring losses as a result of the
imposition of exchange controls, suspension of settlements, or the inability to
deliver or receive a specified currency. The use of options and futures
transactions entails certain special risks. In particular, the variable degree
of correlation between price movements of futures contracts and price movements
in the related portfolio position of the Fund could create the possibility that
losses on the hedging instrument are greater than gains in the value of the
Fund's position. In addition, futures and options markets could be illiquid in
some circumstances and certain over-the-counter options could have no markets.
As a result, in certain markets, the Fund might not be able to close out a
position without incurring substantial losses. Although the Fund's use of
futures and options transactions for hedging purposes should tend to minimize
the risk of loss due to a decline in the value of the hedged position at the
same time it will tend to limit any potential gain to the Fund that might
result from an increase in value of the position. Finally, the daily variation
margin requirements for futures contracts create a greater ongoing potential
financial risk than would purchases of options, in which case the exposure is
united to the cost of the initial premium and transaction costs. Losses
resulting from Hedging will reduce the Fund's net asset value, and possibly
income, and the losses can be greater than if the Hedging had not been used.
When conducted outside the United States, Hedging may not be regulated as
rigorously as in the United States, may not involve a clearing mechanism and
related guarantees, and will be subject to the risk of governmental actions
affecting trading in, or the prices of, non-U.S. securities, currencies and
other instruments. The value of positions taken as part of non-U.S. Hedging
also could be adversely affected by: (1) other complex non-U.S. political,
legal and economic factors; (2) lesser availability of data on which to make
trading decisions than in the United States; (3) delays in the Fund's ability
to act upon economic events occurring in non-U.S. markets during non-business
hours in the United States; (4) the imposition of different exercise and
settlement terms and procedures and margin requirements than in the United
States; and (5) lower trading volume and liquidity.
Segregation and Cover Requirements
Much of the Hedging which may be entered into by the Fund is subject to
segregation and coverage requirements established by either the CFTC or the
Commission, with the result that, if the Fund does not hold the instrument
underlying the futures contract or option, the Fund will be required to
segregate on an ongoing basis with its custodian, cash, U.S. government
<PAGE>
securities, or other liquid high grade debt obligations in an amount at least
equal to the Fund's obligations with respect to such instruments. Such amounts
will fluctuate as the market value of the obligations increases or decreases.
The segregation requirement can result in the Fund maintaining positions it
would otherwise liquidate and consequently segregating assets with respect
thereto at a time when it might be disadvantageous to do so. In addition, with
respect to futures contracts purchased by the Fund, the Fund will also be
subject to the segregation requirements with respect to the value of the
instruments underlying the futures contract.
Other Limitations
The degree of the Fund's use of Hedging may be limited by certain
provisions of the Code. See "Taxation" in the Prospectus.
<PAGE>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation in connection with this offering
other than those contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Fund, the Fund's investment adviser or any U.S. Underwriter. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Fund since the date hereof or that the information contained
herein is correct as of any time subsequent to its date. However, if any
material change occurs while this Prospectus is required by law to be
delivered, this Prospectus will be supplemented or amended accordingly. This
Prospectus does not constitute an offer to sell or solicitation of an offer to
buy any of the securities offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer or solicitation in such jurisdiction.
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SUMMARY OF EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
INVESTMENT IN LATIN AMERICAN ISSUERS . . . . . . . . . . . . . . . . . . 23
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . . . . 24
ADDITIONAL INVESTMENT PRACTICES . . . . . . . . . . . . . . . . . . . . . 27
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 30
RISK FACTORS AND SPECIAL CONSIDERATIONS . . . . . . . . . . . . . . . . 32
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . 42
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 46
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN . . . . . . . . . 48
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
CUSTODIAN, TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR . . . . . 61
UNDERWRITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
FURTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . 67
STATEMENT OF ASSETS AND LIABILITIES . . . . . . . . . . . . . . . . . . . 68
Appendix A: Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Appendix B: General Characteristics and
Risks of Hedging . . . . . . . . . . . . . . . . . . . B-1
Until ______ __, 1994 all dealers effecting transactions in the Common Stock,
whether or not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
7,000,000 Shares
LEHMAN BROTHERS
LATIN AMERICA GROWTH FUND, INC.
Common Stock
PROSPECTUS
Lehman Brothers
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(1) Financial Statements
Parts A & B Lehman Brothers Latin America Growth Fund, Inc.
(i) Statement of Assets and Liabilities.
(ii) Report of Independent auditors.
Part C None.
(2) Exhibits
(a) Charter.
(b) By-Laws.
(c) Not applicable.
(d) Form of specimen certificate representing shares of Common Stock, par
value $.001 per share.<F1>
(e) Form of Dividend Reinvestment and Cash Purchase Plan.<F1>
(f) Not applicable.
(g)(A) Form of Advisory Agreement between the Fund and Lehman Brothers
Global Asset Management Limited.<F1>
(g)(B) Form of U.S. Administration Agreement between the Fund and
______________________________.<F1>
(g)(C) Form of Brazilian Administration Agreement between the Fund and
_________________________.<F1>
(g)(D) Form of Chilean Administration Agreement between the Fund and
___________________________.<F1>
(g)(E) Form of Colombian Administration Agreement between the Fund and
_________________________.<F1>
(h)(A) Form of U.S. Underwriting Agreement.<F1>
(h)(B) Form of International Underwriting Agreement.<F1>
(h)(D) Form of Agreement Between U.S. Underwriters and International
Managers.<F1>
<PAGE>
(h)(E) Master Agreement Among U.S. Underwriters.<F1>
(h)(F) Master Selected Dealer Agreement.<F1>
(i) Not applicable.
(j) Form of Custodian Contract between the Fund and
____________________.<F1>
(k)(A) Form of Registrar, Transfer Agency and Service Agreement between the
Fund and ____________________.<F1>
(l)(A) Opinion and consent of Simpson Thacher & Bartlett.<F1>
(l)(B) Opinion and consent of Piper & Marbury.<F1>
(m) Not applicable.
(n) Consent of ____________________, independent auditors.<F1>
(o) Not applicable.
(p) Form of Share Purchase Agreement between the Fund and Lehman Brothers
Global Asset Management Limited.<F1>
(q) Not applicable.
(r) Not applicable.
(s) Powers of attorney.<F1>
____________________
[FN]
<F1> To be filed by amendment.
Item 25. Marketing Arrangements
See Section __ of the U.S. Underwriting Agreement to be filed as
Exhibit (h)(A) to this Registration Statement and Section __ of the
International Underwriting Agreement to be filed as Exhibit (h)(B) to this
Registration Statement.
Item 26. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses expected to be
incurred in connection with the Offerings described in this Registration
Statement:
<PAGE>
<TABLE>
<S> <C>
Registration fees $ 42,638
Blue Sky qualification fees (including fees of counsel) <F1>
Stock exchange listing fees <F1>
Printing (other than stock certificates) <F1>
Engraving and printing stock certificates <F1>
Accounting fees and expenses <F1>
Legal fees and expenses <F1>
Underwriters' expense allowance <F1>
NASD fees <F1>
Miscellaneous ________<F1>
Total
$ <F1>
========
____________________
<FN>
<F1> To be completed by amendment.
</TABLE>
Item 27. Persons Controlled by or under Common Control with Registrant
None.
Item 28. Number of Holders of Securities
As of the effective date of this Registration Statement:
(2)
Number of
(1) Record
Title of Class Holders
Common Stock, par value $.001 1
Item 29. Indemnification
Section 2-418 of the General Corporation Law of the State of Maryland, the
state in which Lehman Brothers Latin America Growth Fund, Inc. (the "Fund") was
organized, empowers a corporation, subject to certain limitations, to indemnify
its directors, officers, employees and agents against expenses (including
attorneys' fees, judgments, penalties, fines and settlements) actually and
reasonably incurred by them in connection with any suit or proceeding to which
they are a party so long as they acted in good faith or without active and
deliberate dishonesty, or they received no actual improper personal benefit in
money, property or services, or, with respect to any criminal proceeding, so
long as they had no reasonable cause to believe their conduct to have been
unlawful.
<PAGE>
Article VII of the Fund's Charter filed as Exhibit (a) provides that the
Fund shall indemnify its currently acting and former directors and officers to
the fullest extent permitted by the Maryland General Corporation Law. The
Fund's Board of Directors may make further provision for indemnification of
directors, officers, employees and agents to the fullest extent permitted by
Maryland law. The Charter provides, however, that the Fund's directors and
officers shall not be indemnified against liability arising from willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their office.
Article VI of the Fund's By-Laws filed as Exhibit (b) indemnifies current
or former directors and officers of the Fund to the full extent permissible
under the Maryland General Corporation Law, the Securities Act of 1933, as
amended ("the 1933 Act") and the Investment Company Act of 1940, as amended
("the Investment Company Act"). Employees and agents who are not officers or
directors of the Fund may be indemnified in the same manner, and to such
further extent as may be provided by action of the Board of Directors or by
contract. In addition, the Fund may purchase insurance on behalf of any
director, officer, employee or agent of the Fund with respect to certain
liabilities.
Section __ of the Advisory Agreement filed as Exhibit g(A) provides that
the Fund shall indemnify Lehman Brothers Global Asset Management Limited (the
"Investment Adviser") from any and all losses, claims, damages, liabilities or
expenses not resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard by it
of its obligations and duties under the Advisory Agreement.
Under Section __ of the U.S. Underwriting Agreement filed as Exhibit h(A)
and Section __ of the International Underwriting Agreement filed as
Exhibit h(B), the Fund will indemnify the U.S. Underwriters and the
International Managers, and the U.S. Underwriters and the International
Managers will indemnify the Fund, with such indemnities also extending to the
directors, certain of the officers, and controlling persons of the
aforementioned indemnified parties, against certain liabilities in connection
with the Offerings, including liabilities under the 1933 Act.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of the Fund,
pursuant to the foregoing provisions or otherwise, the Fund has been advised
that in the opinion of the Securities and Exchange Commission ("the
Commission") such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Fund of
expenses incurred or paid by a director, officer or controlling person of the
Fund in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Fund will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
<PAGE>
Item 30. Business and Other Connections of the Investment Adviser
Information as to the directors and officers of the Investment Adviser are
included in its Form ADV filed with the Commission (Commission File No. 801-
21068) and is incorporated herein by reference thereto.
Item 31. Location of Accounts and Records
Certain accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act and the Rules promulgated
thereunder are maintained by the Investment Adviser at Two Broadgate, London
EC2M 7HA, England. Records relating to the duties of the Registrant's custodian
are maintained by __________________________ and records relating to the duties
of the Registrant's transfer agent are maintained by
__________________________.
Item 32. Management Services
Not applicable.
Item 33. Undertakings
(1) Registrant undertakes to suspend the offering of the shares covered
hereby until it amends its prospectus contained herein if (1) subsequent to the
effective date of this Registration Statement, its net asset value per share
declines more than 10% from its net asset value per share as of the effective
date of this Registration Statement, or (2) its net asset value increases to an
amount greater than its net proceeds as stated in the prospectus contained
herein.
(2) Registrant hereby undertakes:
a. That, for purposes of determining any liability under the Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant under Rule 497(h) under the Act
shall be deemed to be part of this Registration Statement as of the time
it was declared effective.
b. That, for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, on the 8th day
of July, 1994.
LEHMAN BROTHERS LATIN AMERICA GROWTH FUND,
INC.
(Registrant)
By:/s/ Clinton Kendrick
Clinton Kendrick
Chairman of the Board and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
/s/ Clinton Kendrick Chairman of the Board and July 8, 1994
Clinton Kendrick President
(Principal Executive
Officer)
/s/ Andrew Gordon Director, Treasurer and July 8, 1994
Andrew Gordon Secretary
(Principal Financial and
Accounting Officer)
<PAGE>
Exhibit Index
Exhibit
(a) Registrant's Charter
(b) Registrant's By-Laws
Exhibit (a)
CHARTER
OF
LEHMAN BROTHERS LATIN AMERICA GROWTH FUND, INC.
ARTICLE I
THE UNDERSIGNED, Lynn M. Swanson, whose post office address is 425
Lexington Avenue, New York, NY 10017-3909, being at least eighteen years of
age, does hereby act as an incorporator and form a corporation under and by
virtue of the Maryland General Corporation Law.
ARTICLE II
NAME
The name of the corporation (which is hereinafter called the
"Corporation") is Lehman Brothers Latin America Growth Fund, Inc.
ARTICLE III
PURPOSE AND POWER
The purpose for which the Corporation is formed is to conduct and
carry on the business of a closed-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Corporation
shall have all of the powers granted to corporations by the Maryland General
Corporation Law now or hereafter in force.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in
the State of Maryland is c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202. The name of the resident agent of the
Corporation in the State of Maryland is The Corporation Trust Incorporated, a
Maryland corporation. The post office address of the resident agent is 32
South Street, Baltimore, Maryland 21202.
<PAGE>
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock that the Corporation
shall have authority to issue is one hundred million (100,000,000) shares, of
the par value of one mill ($.001) per share and of the aggregate par value of
one hundred thousand dollars ($100,000), all of which one hundred million
(100,000,000) shares are initially classified as "Common Stock".
(2) The Corporation may issue fractional shares. Any fractional
share shall carry proportionately the rights of a whole share including,
without limitation, the right to vote and the right to receive dividends. The
holder of a fractional share shall not, however, have the right to receive a
certificate evidencing it.
(3) All persons who shall acquire shares of capital stock in the
Corporation shall acquire the same subject to the provisions of this Charter
and the By-Laws of the Corporation.
(4) No holder of shares of capital stock of the Corporation by
virtue of being such a holder shall have any preemptive or other right to
purchase or subscribe for any shares of the Corporation's capital stock or any
other security that the Corporation may issue or sell other than a right that
the Board of Directors in its discretion may determine to grant.
(5) The Board of Directors shall have authority by resolution to
classify and reclassify any authorized but unissued shares of capital stock
from time to time by setting or changing in any one or more respects the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of
redemption of the capital stock.
(6) Notwithstanding any provision of law requiring any action to be
taken or authorized by the affirmative vote of the holders of a greater
proportion of the votes of all classes or of any class of stock of the
Corporation, such action shall be effective and valid if taken or authorized by
the affirmative vote of a majority of the total number of votes entitled to be
cast thereon, except as otherwise provided in this Charter.
ARTICLE VI
BOARD OF DIRECTORS
(1) The number of directors constituting the Board of Directors
shall initially be one (1). This number may be changed pursuant to the By-Laws
of the Corporation, but shall at no time be less than the minimum number
required under the Maryland General Corporation Law nor more than twelve (12).
The name of the initial director is: Clinton Kendrick.
(2) Beginning with the first annual meeting of stockholders of the
Corporation (the "first annual meeting") and if at such time, the number of
directors shall be three (3) or more, the Board of Directors of the Corporation
shall be divided into three classes: Class I, Class II and Class III. At the
first annual meeting, directors of Class I shall be elected to the Board of
<PAGE>
Directors for a term expiring at the next succeeding annual meeting of
stockholders, directors of Class II shall be elected to the Board of Directors
for a term expiring at the second succeeding annual meeting of stockholders and
directors of Class III shall be elected to the Board of Directors for a term
expiring at the third succeeding annual meeting of stockholders. At each
subsequent annual meeting of stockholders, the directors chosen to succeed
those whose terms are expiring shall be identified as being of the same class
as the directors whom they succeed and shall be elected for a term expiring at
the time of the third succeeding annual meeting of stockholders subsequent to
their election, or thereafter in each case when their respective successors are
elected and qualified. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes by resolution of the Board of
Directors so as to maintain the number of directors in each class as nearly
equal as possible, but in no case shall a decrease in the number of directors
shorten the term of any incumbent director.
(3) A director of the Corporation may be removed from office only
for cause and then only by vote of the holders of at least seventy-five percent
(75%) of the votes entitled to be cast for the election of directors.
(4) In furtherance, and not in limitation, of the powers conferred
by the laws of the State of Maryland, the Board of Directors is expressly
authorized:
(i) To make, alter or repeal the By-Laws of the Corporation,
except as otherwise required by the 1940 Act.
(ii) From time to time to determine whether and to what extent
and at what times and places and under what conditions and
regulations the books and accounts of the Corporation, or any of them
other than the stock ledger, shall be open to the inspection of the
stockholders. No stockholder shall have any right to inspect any
account or book or document of the Corporation, except as conferred
by law or authorized by resolution of the Board of Directors.
(iii) Without the assent or vote of the stockholders, to
authorize the issuance from time to time of shares of the capital
stock of any class of the Corporation, whether now or hereafter
authorized, and securities convertible into shares of capital stock
of the Corporation of any class or classes, whether now or hereafter
authorized, for such consideration as the Board of Directors may deem
advisable.
(iv) Without the assent or vote of the stockholders, to
authorize and issue obligations of the Corporation, secured or
unsecured, as the Board of Directors may determine, and to authorize
and cause to be executed mortgages and liens upon the real or
personal property of the Corporation.
(v) To establish the basis or method for determining the value
of the assets and the amount of the liabilities of the Corporation
and the net asset value of each share of the Corporation's capital
stock.
(vi) To determine what accounting periods shall be used by the
Corporation for any purpose; to set apart out of any funds of the
Corporation reserves for such purposes as it shall determine and to
<PAGE>
abolish the same; to declare and pay any dividends and distributions
in cash, securities or other property from any funds legally
available therefor, at such intervals as it shall determine; to
declare dividends or distributions by means of a formula or other
method of determination, at meetings held less frequently than the
frequency of the effectiveness of such declarations; and to establish
payment dates for dividends or any other distributions on any basis,
including dates occurring less frequently than the effectiveness of
declarations thereof.
(vii) In addition to the powers and authorities granted in this
Charter and by statute expressly conferred upon it, the Board of
Directors is authorized to exercise all powers and do all acts that
may be exercised or done by the Corporation pursuant to the
provisions of the laws of the State of Maryland, this Charter and the
By-Laws of the Corporation.
(5) Any determination made in good faith, and in accordance with
this Charter, if applicable, by or pursuant to the direction of the Board of
Directors, with respect to the amount of assets, obligations or liabilities of
the Corporation, as to the amount of net income of the Corporation from
dividends and interest for any period or amounts at any time legally available
for the payment of dividends, as to the amount of any reserves or charges set
up and the propriety thereof, as to the time of or purpose for creating
reserves or as to the use, alteration or cancellation of any reserves or
charges (whether or not any obligation or liability for which the reserves or
charges have been created has been paid or discharged or is then or thereafter
required to be paid or discharged), as to the value of any security owned by
the Corporation, as to the determination of the net asset value of shares of
any class of the Corporation's capital stock, or as to any other matters
relating to the issuance, sale or other acquisition or disposition of
securities or shares of capital stock of the Corporation, and any reasonable
determination made in good faith by the Board of Directors whether any
transaction constitutes a purchase of securities on "margin," a sale of
securities "short," or an underwriting or the sale of, or a participation in
any underwriting or selling group in connection with the public distribution
of, any securities, shall be final and conclusive, and shall be binding upon
the Corporation and all holders of shares of its capital stock, past, present
and future, and shares of the capital stock of the Corporation are issued and
sold on the condition and understanding, evidenced by the purchase of shares of
capital stock or acceptance of share certificates, that any and all such
determinations shall be binding as aforesaid. No provision of this Charter
shall be effective to require a waiver of compliance with any provision of the
Securities Act of 1933, as amended, or the 1940 Act, or of any valid rule,
regulation or order of the Securities and Exchange Commission under those Acts.
ARTICLE VII
LIABILITY AND INDEMNIFICATION
(1) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law,
no director or officer of the Corporation shall have any personal liability to
the Corporation or its stockholders for monetary damages. This limitation on
liability applies to events occurring at the time a person serves as a director
<PAGE>
or officer of the Corporation whether or not such person is a director or
officer at the time of any proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to its officers to
the same extent as its directors and may do so to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents to the fullest extent permitted by the Maryland General
Corporation Law. This indemnification applies to events occurring at the time
a person serves as a director or officer of the Corporation whether or not such
person is a director or officer at the time of any proceeding in which
liability is asserted.
(3) No provision of this Charter shall be effective to protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
(4) References to the Maryland General Corporation Law in this
Article VII are to that law as from time to time amended. No amendment to the
Corporation's Charter shall affect any right of any person under this Article
VII based on any event, omission or proceeding prior to such amendment.
ARTICLE VIII
SHAREHOLDER VOTE
(1) Notwithstanding any other provision of this Charter, the
affirmative vote of the holders of (i) eighty percent (80%) of the votes
entitled to be cast thereon by shareholders of the Corporation and (ii) in the
case of a Business Combination (as defined below), 66-2/3% of the votes
entitled to be cast thereon by shareholders of the Corporation other than votes
entitled to be cast thereon by an Interested Party (as defined below) who is
(or whose Affiliate (as defined below) is) a party to a Business Combination
(as defined below) or an Affiliate or associate of the Interested Party, in
addition to the affirmative vote of seventy-five percent (75%) of the entire
Board of Directors, shall be required to advise, approve, adopt or authorize
any of the following:
(i) a merger, consolidation or statutory share exchange of the
Corporation with or into another person;
(ii) issuance or transfer by the Corporation (in one or a series of
transactions in any 12 month period) of any securities of the Corporation
to any person or entity for cash, securities or other property (or
combination thereof) having an aggregate fair market value of $1,000,000
or more, excluding issuances or transfers of debt securities of the
Corporation, sales of securities of the Corporation in connection with a
public offering, issuances of securities of the Corporation pursuant to a
dividend reinvestment plan adopted by the Corporation, issuances of
<PAGE>
securities of the Corporation upon the exercise of any stock subscription
rights distributed by the Corporation and portfolio transactions effected
by the Corporation in the ordinary course of business;
(iii) sale, lease, exchange, mortgage, pledge, transfer or other
disposition by the Corporation (in one or a series of transactions in any
12 month period) to or with any person or entity of any assets of the
Corporation having an aggregate fair market value of $1,000,000 or more
except for portfolio transactions (including pledges of portfolio
securities in connection with borrowings) effected by the Corporation in
the ordinary course of its business (transactions within clauses (i), (ii)
and (iii) above being known individually as a "Business Combination");
(iv) the voluntary liquidation or dissolution of the Corporation, or
an amendment to this Charter to terminate the Corporation's existence; or
(v) unless the 1940 Act or federal law requires a lesser vote, any
shareholder proposal as to specific investment decisions made or to be
made with respect to the Corporation's assets as to which stockholder
approval is required under Federal or Maryland law.
However, the shareholder vote described in paragraph (1) of this
Article VIII will not be required with respect to the foregoing transactions
(other than those set forth in (v) above) if they are approved by a vote of
seventy-five percent (75%) of the Continuing Directors (as defined below). In
that case, if Maryland law requires shareholder approval, the affirmative vote
of a majority of the votes entitled to be cast shall be required.
(i) "Continuing Director" means any member of the Board of Directors
of the Corporation who is not an Interested Party or an Affiliate of an
Interested Party and has been a member of the Board of Directors for a
period of at least 12 months, or has been a member of the Board of
Directors since September 15, 1994 or is a successor of a Continuing
Director who is unaffiliated with an Interested Party and is recommended
to succeed a Continuing Director by a majority of the Continuing Directors
then on the Board of Directors.
(ii) "Interested Party" shall mean any person, other than an
investment company advised by the Corporation's initial investment manager
or any of its Affiliates, which enters, or proposes to enter, into a
Business Combination with the Corporation.
(iii) "Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended.
(2) Notwithstanding any other provision of this Charter, the
affirmative vote of seventy-five percent (75%) of the entire Board of Directors
shall be required to advise, approve, adopt or authorize the conversion of the
Corporation from a closed-end company to an open-end company, and any
amendments necessary to effect the conversion. Such conversion or any such
amendment shall also require the approval of the holders of seventy-five
percent (75%) of the votes entitled to be cast thereon by stockholders of the
Corporation unless approved by a vote of seventy-five percent (75%) of the
Continuing Directors, in which event such conversion shall require the approval
of the holders of a majority of the votes entitled to be cast thereon by
stockholders of the Corporation.
<PAGE>
ARTICLE IX
AMENDMENTS
(1) The Corporation reserves the right from time to time to make any
amendment to this Charter, now or hereafter authorized by law, including any
amendment that alters the contract rights, as expressly set forth in this
Charter, of any outstanding capital stock of the Corporation.
(2) In addition to the voting requirements imposed by law or by any
other provision of this Charter, the provisions set forth in this Article IX,
the provisions of Article III hereof, the provisions of Sections (2) and (3) of
Article VI hereof, the provisions of this Charter setting the maximum number of
Directors at twelve (12), the provisions of Article VIII and the provisions of
Article X (except as provided in Section (1) of Article VIII) hereof, may not
be amended, altered or repealed in any respect, nor may any provision
inconsistent with this Article IX, the provisions of Sections (2) and (3) of
Article VI hereof, the provision setting the maximum number of Directors or the
provisions of Article VIII hereof be adopted, unless such action is advised by
seventy-five percent (75%) of the entire Board of Directors and approved by the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes entitled to be cast by stockholders of the Corporation.
ARTICLE X
PERPETUAL EXISTENCE
The duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, I have adopted and signed this Charter and do
hereby acknowledge that this Charter is my act.
/s/ Lynn M. Swanson
Lynn M. Swanson
Incorporator
Witness: /s/ Leone Wynter
Dated: June 27, 1994
Exhibit (b)
BY-LAWS
OF
LEHMAN BROTHERS LATIN AMERICA GROWTH FUND, INC.
A Maryland Corporation
ARTICLE I
OFFICES
SECTION 1. Principal Office in Maryland. Lehman Brothers Latin
America Growth Fund, Inc. (the "Corporation") shall have a principal office in
the City of Baltimore, State of Maryland.
SECTION 2. Other Offices. The Corporation may have offices also at
such other places within and without the State of Maryland as the Board of
Directors may from time to time determine or as the business of the Corporation
may require.
ARTICLE II
STOCKHOLDERS
SECTION 1. Annual Meetings. The annual meeting of the stockholders
of the Corporation shall be held on a date not less than ninety (90) nor more
than one hundred twenty (120) days following the end of the Corporation's
fiscal year fixed from time to time by the Board of Directors. An annual
meeting may be held at any place in or out of the State of Maryland and at any
time, each as may be determined by the Board of Directors and designated in the
notice of the meeting. Any business of the Corporation may be transacted at an
annual meeting without the purposes having been specified in the notice unless
otherwise provided by statute, the Corporation's Articles of Incorporation, as
amended from time to time (the "Charter"), or these By-Laws.
SECTION 2. Special Meetings. Special meetings of the stockholders
for any purpose or purposes, unless otherwise prescribed by statute or by the
Corporation's Charter, may be held at any place within the United States, and
may be called at any time by the Board of Directors or by the Chairman or the
President, and shall be called by the Secretary (or in his absence, an
Assistant Secretary) at the request in writing of a majority of the Board of
<PAGE>
Directors or at the request in writing of stockholders entitled to cast at
least twenty-five percent (25%) of the votes entitled to be cast at the meeting
upon payment by such stockholders to the Corporation of the reasonably
estimated cost of preparing and mailing a notice of the meeting (which
estimated cost shall be provided to such stockholders by the Secretary of the
Corporation). Notwithstanding the foregoing, unless requested by stockholders
entitled to cast a majority of the votes entitled to be cast at the meeting, a
special meeting of the stockholders need not be called at the request of
stockholders to consider any matter that is substantially the same as a matter
voted on at any special meeting of the stockholders held during the preceding
twelve (12) months. A written request shall state the purpose or purposes of
the proposed meeting.
SECTION 3. Notice of Meetings. Written or printed notice of the
purpose or purposes and of the time and place of every meeting of the
stockholders shall be given by the Secretary of the Corporation to each
stockholder of record entitled to vote at or to notice of the meeting, by
placing the notice in the mail at least ten (10) days, but not more than ninety
(90) days, prior to the date designated for the meeting addressed to each
stockholder at his address appearing on the books of the Corporation or
supplied by the stockholder to the Corporation for the purpose of notice.
Notice of any meeting of stockholders shall be deemed waived by any stockholder
who attends the meeting in person or by proxy, or who before or after the
meeting submits a signed waiver of notice that is filed with the records of the
meeting.
SECTION 4. Notice of Stockholder Business.
(a) At any annual or special meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual or special meeting, the
business must be (i) (A) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (B) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or (C) otherwise properly brought before the meeting by a
stockholder and (ii) a proper subject under applicable law for stockholder
action.
(b) For business to be properly brought before an annual or special
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation. To be timely, any such notice
must be delivered to or mailed and received at the principal executive offices
of the Corporation not later than 60 days prior to the date of the meeting;
provided, however, that if less than 70 days notice or prior public disclosure
of the date of the meeting is given or made to stockholders, any such notice by
a stockholder to be timely must be so received not later than the close of
business on the tenth day following the day on which notice of the date of the
annual or special meeting was given or such public disclosure was made.
(c) Any such notice by a stockholder shall set forth as to each
matter the stockholder proposes to bring before the annual or special meeting
(i) a brief description of the business desired to be brought before the annual
or special meeting and the reasons for conducting such business at the annual
or special meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (iii) the
class and number of shares of the capital stock of the Corporation which are
<PAGE>
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business.
(d) Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at any annual or special meeting except in
accordance with the procedures set forth in this Section 4. The Chairman of
the annual or special meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the
meeting and in accordance with the provisions of this Section 4, and if he
should so determine, he shall so declare to the meeting that any such business
not properly brought before the meeting shall not be considered or transacted.
SECTION 5. Quorum; Voting. Except as otherwise provided by statute
or by the Corporation's Charter, the presence in person or by proxy of
stockholders of the Corporation entitled to cast at least a majority of the
votes entitled to be cast shall constitute a quorum at each meeting of the
stockholders. A majority of the votes cast at a meeting at which a quorum is
present is sufficient to approve any matter which properly comes before the
meeting. In the absence of a quorum, the stockholders present in person or by
proxy at the meeting, by majority vote and without notice other than by
announcement at the meeting, may adjourn the meeting from time to time as
provided in this Section 5 until a quorum shall attend. The stockholders
present at any duly organized meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.
SECTION 6. Adjournment. Any meeting of the stockholders may be
adjourned from time to time, without notice other than by announcement at the
meeting at which the adjournment is taken. At any adjourned meeting at which a
quorum shall be present any action may be taken that could have been taken at
the meeting originally called. A meeting of the stockholders may not be
adjourned to a date more than one hundred twenty (120) days after the original
record date.
SECTION 7. Organization. At every meeting of the stockholders, the
Chairman of the Board, or in his absence or inability to act, the President, or
in his absence or inability to act, a Vice President, or in the absence or
inability to act of all the Vice Presidents, a chairman chosen by the
stockholders, shall act as chairman of the meeting. The Secretary, or in his
or her absence or inability to act, a person appointed by the chairman of the
meeting, shall act as secretary of the meeting and keep the minutes of the
meeting.
SECTION 8. Order of Business. The order of business at all meetings
of the stockholders shall be as determined by the chairman of the meeting.
SECTION 9. Proxies. A stockholder may vote the stock he owns of
record either in person or by written proxy signed by the stockholder or by his
duly authorized attorney-in-fact. No proxy shall be valid after the expiration
of eleven (11) months from the date thereof, unless otherwise provided in the
proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases in which the proxy states that it is
irrevocable and in which an irrevocable proxy is permitted by law.
SECTION 10. Fixing of Record Date for Determining Stockholders
Entitled to Vote at Meeting. The Board of Directors may set a record date for
the purpose of determining stockholders entitled to vote at any meeting of the
<PAGE>
stockholders. The record date for a particular meeting shall be not more than
ninety (90) nor fewer than ten (10) days before the date of the meeting. All
persons who were holders of record of shares as of the record date of a
meeting, and no others, shall be entitled to notice of and to vote at such
meeting and any adjournment thereof.
SECTION 11. Inspectors. The Board of Directors may, in advance of
any meeting of stockholders, appoint one (1) or more inspectors to act at the
meeting or at any adjournment of the meeting. If the inspectors shall not be
so appointed or if any of them shall fail to appear or act, the chairman of the
meeting may appoint inspectors. Each inspector, before entering upon the
discharge of his duties, shall, if required by the chairman of the meeting,
take and sign an oath to execute faithfully the duties of inspector at the
meeting with strict impartiality and according to the best of his ability. The
inspectors, if appointed, shall determine the number of shares outstanding and
the voting power of each share, the number of shares represented at the
meeting, the existence of a quorum and the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do those acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting or any stockholder entitled to vote at
the meeting, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of any
fact found by them. No director or candidate for the office of director shall
act as inspector of an election of directors. Inspectors need not be
stockholders of the Corporation.
SECTION 12. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute or the Corporation's Charter, any action required
or permitted to be taken at any annual or special meeting of stockholders may
be taken without a meeting, without prior notice and without a vote, if the
following are filed with the records of stockholders' meetings: (a) a
unanimous written consent that sets forth the action and is signed by each
stockholder entitled to vote on the matter and (b) a written waiver of any
right to dissent signed by each stockholder entitled to notice of the meeting
but not entitled to vote at the meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. Except as otherwise provided in the
Corporation's Charter, the business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the stockholders by law, by the
Corporation's Charter or by these By-Laws.
SECTION 2. Number, Election and Term of Directors. The number of
directors constituting the entire Board of Directors (which initially was fixed
at one (1) in the Corporation's Charter) may be changed from time to time by a
majority of the entire Board of Directors; provided, however, that the number
of directors shall in no event be fewer than that required by law, nor more
than twelve (12). Beginning with the first annual meeting of stockholders of
the Corporation and if at such time, the number of directors shall be three (3)
<PAGE>
or more, (the "First Annual Meeting"), the Board of Directors of the
Corporation shall be divided into three classes: Class I, Class II and Class
III. At the First Annual Meeting, directors of Class I shall be elected to the
Board of Directors for a term expiring at the next succeeding annual meeting of
stockholders, directors of Class II shall be elected to the Board of Directors
for a term expiring at the second succeeding annual meeting of stockholders and
directors of Class III shall be elected to the Board of Directors for a term
expiring at the third succeeding annual meeting of stockholders. At each
subsequent annual meeting of stockholders, the directors chosen to succeed
those whose terms are expiring shall be identified as being of the same class
as the directors whom they succeed and shall be elected for a term expiring at
the time of the third succeeding annual meeting of stockholders subsequent to
their election. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 5 of this Article III, and each
director elected shall hold office for the term provided above and until his
successor shall have been elected and shall have qualified, or until his death,
or until he shall have resigned or have been removed as provided in these By-
Laws, or as otherwise provided by statute or the Corporation's Charter. Any
vacancy created by an increase in directors may be filled in accordance with
Section 5 of this Article III. No reduction in the number of directors shall
have the effect of removing any director from office prior to the expiration of
his term unless the director is specifically removed pursuant to Section 4 of
this Article III at the time of the decrease.
SECTION 3. Resignation. A director of the Corporation may resign at
any time by giving written notice of his resignation to the Board of Directors
or the Chairman of the Board or to the Vice-Chairman of the Board or the
President or the Secretary of the Corporation. Any resignation shall take
effect at the time specified in it or, should the time when it is to become
effective not be specified in it, immediately upon its receipt. Acceptance of
a resignation shall not be necessary to make it effective unless the
resignation states otherwise.
SECTION 4. Removal of Directors. A director of the Corporation may
be removed from office only for cause and only by vote of the holders of at
least seventy-five percent (75%) of the votes entitled to be cast for the
election of directors.
SECTION 5. Vacancies. Subject to the provisions of the Investment
Company Act of 1940 (the "1940 Act"), any vacancies in the Board of Directors,
whether arising from death, resignation, removal or any other cause except an
increase in the number of directors, shall be filled by a vote of the majority
of the remaining Directors whether or not sufficient to constitute a quorum. A
majority of the entire Board may fill a vacancy that results from an increase
in the number of directors. Notwithstanding the foregoing, if the stockholders
of any class of the Corporation's capital stock are entitled separately to
elect one or more directors, a majority of the remaining directors elected by
that class or the sole remaining director elected by that class may fill any
vacancy among the number of directors elected by that class. Any director
appointed by the Board of Directors to fill a vacancy shall hold office only
until the next annual meeting of stockholders of the Corporation and until a
successor has been elected and qualifies. Any director elected by the
stockholders to fill a vacancy shall hold office for the balance of the term of
the director he replaced.
<PAGE>
SECTION 6. Place of Meetings. Meetings of the Board may be held at
any place that the Board of Directors may from time to time determine or that
is specified in the notice of the meeting.
SECTION 7. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at the time and place determined by the
Board of Directors.
SECTION 8. Special Meetings. Special meetings of the Board of
Directors may be called by two (2) or more directors of the Corporation or by
the Chairman of the Board or the President.
SECTION 9. Annual Meeting. The annual meeting of the newly elected
and other directors shall be held as soon as practicable after the meeting of
stockholders at which the newly elected directors were elected. No notice of
such annual meeting shall be necessary if such meeting is held immediately
after the adjournment, and at the site, of the meeting of stockholders. If not
so held, notice shall be given as hereinafter provided for special meetings of
the Board of Directors.
SECTION 10. Notice of Special Meetings. Notice of each special
meeting of the Board of Directors shall be given by the Secretary as
hereinafter provided. Each notice shall state the time and place of the
meeting and shall be delivered to each director, either personally or by
telephone or other standard form of telecommunication, at least twenty-four
(24) hours before the time at which the meeting is to be held, or by first-
class mail, postage prepaid, addressed to the director at his residence or
usual place of business, and mailed at least three (3) days before the day on
which the meeting is to be held.
SECTION 11. Waiver of Notice of Meetings. Notice of any special
meeting need not be given to any director who shall, either before or after the
meeting, sign a written waiver of notice that is filed with the records of the
meeting or who shall attend the meeting.
SECTION 12. Quorum and Voting. A majority of the entire Board of
Directors shall constitute a quorum for the transaction of business, and except
as otherwise expressly required by statute, the Corporation's Charter or these
By-Laws, the act of a majority of the directors present at any meeting at which
a quorum is present shall be the act of the Board. In the absence of a quorum
at any meeting of the Board, a majority of the directors present may adjourn
the meeting to another time and place until a quorum shall be present. Notice
of the time and place of any adjourned meeting shall be given to the directors
who were not present at the time of the adjournment and, unless the time and
place were announced at the meeting at which the adjournment was taken, to the
other directors.
SECTION 13. Organization. The Chairman of the Board shall preside
at each meeting of the Board. In the absence or inability of the Chairman of
the Board to act, the President (if he is a director), or, in his absence or
inability to act, another director chosen by a majority of the directors
present, shall act as chairman of the meeting and preside at the meeting. The
Secretary (or, in his or her absence or inability to act, any person appointed
by the chairman) shall act as secretary of the meeting and keep the minutes of
the meeting.
<PAGE>
SECTION 14. Committees. The Board of Directors may designate one
(1) or more committees of the Board of Directors, including an executive
committee, each consisting of two (2) or more directors. To the extent
provided in the resolutions adopted by the Board of Directors, and permitted by
law, the committee or committees shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
Corporation. Any committee or committees shall have the name or names
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and provide those
minutes to the Board of Directors when required. The members of a committee
present at any meeting, whether or not they constitute a quorum, may appoint a
director to act in the place of an absent member.
SECTION 15. Written Consent of Directors in Lieu of a Meeting.
Subject to the provisions of the l940 Act, any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee of the
Board may be taken without a meeting if all members of the Board or committee,
as the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of the Board or committee.
SECTION 16. Telephone Conference. Members of the Board of Directors
or any committee of the Board may participate in any Board or committee meeting
by means of a conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other at the
same time. Participation by such means shall constitute presence in person at
the meeting, provided, however, that such participation shall not constitute
presence in person with respect to matters which the 1940 Act, and the rules
thereunder require the approval of directors by vote cast in person at a
meeting.
SECTION 17. Compensation. Each director shall be entitled to
receive compensation, if any, as may from time to time be fixed by the Board of
Directors, including a fee for each meeting of the Board or any committee
thereof, regular or special, he attends. Directors may also be reimbursed by
the Corporation for all reasonable expenses incurred in traveling to and from
the place of a Board or committee meeting.
ARTICLE IV
OFFICERS, AGENTS AND EMPLOYEES
SECTION 1. Number and Qualifications. The officers of the
Corporation shall be a Chairman, a President, a Secretary, a Treasurer, and an
Assistant Secretary, each of whom shall be elected by the Board of Directors.
The Board of Directors may elect or appoint a Chairman of the Board of
Directors, and one (1) or more Vice Presidents and may also appoint any other
officers, assistant officers, agents and employees it deems necessary or
proper. Any two (2) or more offices may be held by the same person, except the
offices of President and Vice President, but no officer shall execute,
acknowledge or verify in more than one (1) capacity any instrument required by
law to be executed, acknowledged or verified by more than one officer.
Officers shall be elected by the Board of Directors each year at its first
meeting held after the annual meeting of stockholders, each to hold office
until the meeting of the Board following the next annual meeting of the
stockholders and until his successor shall have been duly elected and shall
have qualified, or until his death, or until he shall have resigned or have
<PAGE>
been removed, as provided in these By-Laws. The Board of Directors may from
time to time elect such officers (including one or more Assistant Vice
Presidents, one or more Assistant Treasurers and one or more Assistant
Secretaries) and may appoint, or delegate to the President the power to
appoint, such agents as may be necessary or desirable for the business of the
Corporation. Such other officers and agents shall have such duties and shall
hold their offices for such terms as may be prescribed by the Board or by the
appointing authority.
SECTION 2. Resignations. Any officer of the Corporation may resign
at any time by giving written notice of his resignation to the Board of
Directors, the Chairman of the Board, the President or the Secretary. Any
resignation shall take effect at the time specified therein or, if the time
when it shall become effective is not specified therein, immediately upon its
receipt. The acceptance of a resignation shall not be necessary to make it
effective unless otherwise stated in the resignation.
SECTION 3. Removal of Officer, Agent or Employee. Any officer,
agent or employee of the Corporation may be removed by the Board of Directors
with or without cause at any time, and the Board may delegate the power of
removal as to agents and employees not elected or appointed by the Board of
Directors. Removal shall be without prejudice to the person's contract rights,
if any, but the appointment of any person as an officer, agent or employee of
the Corporation shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office, whether arising from
death, resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office that shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to the
office.
SECTION 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer with respect to other officers under his control.
SECTION 6. Bonds or Other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in an amount and with any
surety or sureties as the Board may require.
SECTION 7. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall be the chief executive officer of the Corporation and
shall have, subject to the control of the Board of Directors, general and
active management and supervision of the business, affairs, and property of the
Corporation and its several officers and may employ and discharge employees and
agents of the Corporation, except those elected or appointed by the Board, and
he may delegate these powers. The Chairman shall preside at all meetings of
the stockholders and of the Board of Directors. He shall execute on behalf of
the Corporation all instruments requiring such execution except to the extent
that signing and execution thereof shall be required by the President of the
Corporation or shall be expressly delegated by the Board of Directors to some
other officer or agent of the Corporation.
SECTION 8. Vice-Chairman of the Board of the Directors. The Vice-
Chairman of the Board of Directors shall, in the absence of the Chairman of the
Board, preside at all meetings of the stockholders and directors. He shall
have and exercise all the powers and authority of the Chairman of the Board in
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the event of the Chairman's absence or inability to act or during a vacancy in
the office of Chairman of the Board. He shall also have such other duties and
responsibilities as shall be assigned to him by the Chairman or the Board of
Directors.
SECTION 9. President. The President shall, in the absence of the
Chairman and Vice-Chairman of the Board of Directors, preside at all meetings
of the stockholders and directors. He shall have and exercise all the powers
and authority of the Chairman of the Board in the event of the Chairman's and
Vice-Chairman's absence or inability to act or during a vacancy in the offices
of Chairman and Vice-Chairman of the Board. He shall sign and execute all
instruments required to be signed and executed by the President of the
Corporation. He shall also have such other duties and responsibilities as
shall be assigned to him by the Chairman or the Board of Directors.
SECTION 10. Vice President. Each Vice President shall have the
powers and perform the duties that the Board of Directors or the Chairman of
the Board may from time to time prescribe.
SECTION 11. Treasurer. Subject to the provisions of any contract
that may be entered into with any custodian pursuant to authority granted by
the Board of Directors, the Treasurer shall have charge of all receipts and
disbursements of the Corporation and shall have or provide for the custody of
the Corporation's funds and securities; he shall have full authority to receive
and give receipts for all money due and payable to the Corporation, and to
endorse checks, drafts, and warrants, in its name and on its behalf and to give
full discharge for the same; he shall deposit all funds of the Corporation,
except those that may be required for current use, in such banks or other
places of deposit as the Board of Directors may from time to time designate;
and, in general, he shall perform all duties incident to the office of
Treasurer and such other duties as may from time to time be assigned to him by
the Board of Directors or the Chairman of the Board.
SECTION 12. Assistant Treasurers. The Assistant Treasurers in the
order of their seniority, unless otherwise determined by the Chairman of the
Board or the Board of Directors, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer. They
shall perform such other duties and have such other powers as the Chairman or
the Board of Directors may from time to time prescribe.
SECTION 13. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation
(unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation under its
seal;
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(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to
him by the Board of Directors or the Chairman of the Board.
SECTION 14. Assistant Secretaries. The Assistant Secretaries in the
order of their seniority, unless otherwise determined by the Chairman of the
Board or the Board of Directors, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary. They
shall perform such other duties and have such other powers as the President or
the Board of Directors may from time to time prescribe.
SECTION 15. Delegation of Duties. In case of the absence of any
officer of the Corporation, or for any other reason that the Board of Directors
may deem sufficient, the Board may confer for the time being the powers or
duties, or any of them, of such officer upon any other officer or upon any
director.
ARTICLE V
STOCK
SECTION 1. Stock Certificates. Unless otherwise provided by the
Board of Directors and permitted by law, each holder of stock of the
Corporation shall be entitled upon specific written request to such person as
may be designated by the Corporation to have a certificate or certificates, in
a form approved by the Board, representing the number of shares of stock of the
Corporation owned by him; provided, however, that certificates for fractional
shares will not be delivered in any case. The certificates representing shares
of stock shall be signed by or in the name of the Corporation by the Chairman
of the Board, the Vice-Chairman of the Board, the President or a Vice President
and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer and may be sealed with the seal of the Corporation. Any or all of
the signatures or the seal on the certificate may be facsimiles. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before the certificate is issued, it may
be issued by the Corporation with the same effect as if the officer, transfer
agent or registrar was still in office at the date of issue.
SECTION 2. Stock Ledger. There shall be maintained a stock ledger
containing the name and address of each stockholder and the number of shares of
stock of each class the shareholder holds. The stock ledger may be in written
form or any other form which can be converted within a reasonable time into
written form for visual inspection. The original or a duplicate of the stock
ledger shall be kept at the principal office of the Corporation or at any other
office or agency specified by the Board of Directors.
SECTION 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder of the shares, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary or with a transfer
agent or transfer clerk, and on surrender of the certificate or certificates,
<PAGE>
if issued, for the shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of the share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions and
to vote as the owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the part
of any other person.
SECTION 4. Regulations. The Board of Directors may authorize the
issuance of uncertificated securities if permitted by law. If stock
certificates are issued, the Board of Directors may make any additional rules
and regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. The Board may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more transfer clerks
and one or more registrars and may require all certificates for shares of stock
to bear the signature or signatures of any of them.
SECTION 5. Lost, Destroyed or Mutilated Certificates. The holder of
any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of its loss, destruction or mutilation and
the Corporation may issue a new certificate of stock in the place of any
certificate issued by it that has been alleged to have been lost or destroyed
or that shall have been mutilated. The Board may, in its discretion, require
the owner (or his legal representative) of a lost, destroyed or mutilated
certificate to give to the Corporation a bond in a sum, limited or unlimited,
and in a form and with any surety or sureties, as the Board in its absolute
discretion shall determine, to indemnify the Corporation against any claim that
may be made against it on account of the alleged loss or destruction of any
such certificate, or issuance of a new certificate. Anything herein to the
contrary notwithstanding, the Board of Directors, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
SECTION 6. Fixing of Record Date for Dividends, Distributions, etc.
The Board may fix, in advance, a date not more than ninety (90) days preceding
the date fixed for the payment of any dividend or the making of any
distribution or the allotment of rights to subscribe for securities of the
Corporation, or for the delivery of evidences of rights or evidences of
interests arising out of any change, conversion or exchange of common stock or
other securities, as the record date for the determination of the stockholders
entitled to receive any such dividend, distribution, allotment, rights or
interests, and in such case only the stockholders of record at the time so
fixed shall be entitled to receive such dividend, distribution, allotment,
rights or interests.
SECTION 7. Information to Stockholders and Others. Any stockholder
of the Corporation or his agent may inspect and copy during the Corporation's
usual business hours these By-Laws, minutes of the proceedings of its
stockholders, annual statements of its affairs and voting trust agreements on
file at its principal office.
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ARTICLE VI
INDEMNIFICATION AND INSURANCE
SECTION 1. Indemnification of Directors and Officers. Any person
who was or is a party or is threatened to be made a party in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is a
current or former director or officer of the Corporation, or is or was serving
while a director or officer of the Corporation at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, enterprise
or employee benefit plan, shall be indemnified by the Corporation against
judgments, penalties, fines, excise taxes, settlements and reasonable expenses
(including attorneys' fees) actually incurred by such person in connection with
such action, suit or proceeding to the full extent permissible under the
Maryland General Corporation Law, the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act, as those statutes are now or hereafter in force,
except that such indemnity shall not protect any such person against any
liability to the Corporation or any stockholder thereof to which such person
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office ("disabling conduct").
SECTION 2. Advances. Any current or former director or officer of
the Corporation claiming indemnification within the scope of this Article VI
shall be entitled to advances from the Corporation for payment of the
reasonable expenses incurred by him in connection with proceedings to which he
is a party in the manner and to the full extent permissible under the Maryland
General Corporation Law, the 1933 Act, and the 1940 Act, as those statutes are
now or hereafter in force; provided, however, that the person seeking
indemnification shall provide to the Corporation a written affirmation of his
good faith belief that the standard of conduct necessary for indemnification by
the Corporation has been met and a written undertaking to repay any such
advance, if it should ultimately be determined that the standard of conduct has
not been met, and provided further that at least one of the following
additional conditions is met: (a) the person seeking indemnification shall
provide a security in form and amount acceptable to the Corporation for his
undertaking; (b) the Corporation is insured against losses arising by reason of
the advance; or (c) a majority of a quorum of directors of the Corporation who
are neither "interested persons" as defined in Section 2(a)(19) of the 1940
Act, nor parties to the proceeding ("disinterested non-party directors"), or
independent legal counsel, in a written opinion, shall determine, based on a
review of facts readily available to the Corporation at the time the advance is
proposed to be made, that there is reason to believe that the person seeking
indemnification will ultimately be found to be entitled to indemnification.
SECTION 3. Procedure. At the request of any current or former
director or officer, or any employee or agent whom the Corporation proposes to
indemnify, the Board of Directors shall determine, or cause to be determined,
in a manner consistent with the Maryland General Corporation Law, the 1933 Act,
and the 1940 Act, as those statutes are now or hereafter in force, whether the
standards required by this Article VI have been met; provided, however, that
indemnification shall be made only following: (a) a final decision on the
merits by a court or other body before whom the proceeding was brought, finding
that the person to be indemnified was not liable by reason of disabling conduct
or (b) in the absence of such a decision, a reasonable determination, based
<PAGE>
upon a review of the facts, that the person to be indemnified was not liable by
reason of disabling conduct, by (i) the vote of a majority of a quorum of
disinterested non-party directors or (ii) an independent legal counsel in a
written opinion.
SECTION 4. Indemnification of Employees and Agents. Employees and
agents who are not officers or directors of the Corporation may be indemnified,
and reasonable expenses may be advanced to such employees or agents, in
accordance with the procedures set forth in this Article VI to the extent
permissible under the Maryland General Corporation Law, the 1933 Act, and the
1940 Act, as those statutes are now or hereafter in force, and to such further
extent, consistent with the foregoing, as may be provided by action of the
Board of Directors or by contract.
SECTION 5. Other Rights. The indemnification provided by this
Article VI shall not be deemed exclusive of any other right, with respect to
indemnification or otherwise, to which those seeking such indemnification may
be entitled under any insurance or other agreement, vote of stockholders or
disinterested directors or otherwise, both as to action by a director or
officer of the Corporation in his official capacity and as to action by such
person in another capacity while holding such office or position, and shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 6. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or who, while a
director, officer, employee or agent of the Corporation, is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation, partnership, joint
venture, trust, enterprise or employee benefit plan, against any liability
asserted against and incurred by him in any such capacity, or arising out of
his status as such, provided that no insurance may be obtained by the
Corporation for liabilities against which it would not have the power to
indemnify him under this Article VI or applicable law.
ARTICLE VII
SEAL
The seal of the Corporation shall be circular in form and shall bear
the name of the Corporation, the year of its incorporation, the words
"Corporate Seal" and "Maryland" and any emblem or device approved by the Board
of Directors. The seal may be used by causing it or a facsimile to be
impressed or affixed or in any other manner reproduced. In lieu of affixing
the seal, it shall be sufficient to meet the requirements of any law, rule or
regulation relating to a corporate seal to place the word "(seal)" adjacent to
the signature of the person authorized to sign the document on behalf of the
Corporation.
<PAGE>
ARTICLE VIII
AMENDMENTS
These By-Laws may be amended by the Board of Directors, subject to
the requirements of the 1940 Act; provided, however, that no amendment of these
By-Laws shall affect any right of any person under Article VI hereof based on
any event, omission or proceeding prior to the amendment. These By-Laws may
not be amended by the stockholders of the Corporation.
