LEHMAN BROTHERS LATIN AMERICA GROWTH FUND INC, 497, 1994-11-01

LEHMAN BROTHERS LATIN AMERICA GROWTH FUND INC
497, 1994-11-01

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<PAGE> 1
Filed pursuant to Rule 497(h)
Registration No. 33-54525

PROSPECTUS
4,000,000 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 total 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
(Continued on following page)

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 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, but not including for leveraging 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 4,000,000 shares of Common Stock being offered, 2,000,000 shares are
initially being offered hereby in the United States and internationally (other
than in Japan) by the U.S. Underwriters (the "U.S. Offering"), and 2,000,000
shares are initially being offered in a concurrent offering to non-U.S.
investors in Japan (the "Japanese Offering"). Such offerings are collectively
referred to as the "Offerings." The Common Stock has been approved for listing
on the New York Stock Exchange under the symbol "LLF" subject to official
notification of issuance. The closing of each offering is a condition to the
closing of each other offering. The Fund has applied to list the shares of
Common Stock on the Osaka Securities Exchange. There can be no assurance that
such application for listing will be granted.

Lehman Brothers Global Asset Management Limited will act as investment
adviser to the Fund.

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.
---------------------------

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.

<TABLE>
<S> <C> <C> <C>
===============================================================================================================
Price to Proceeds to
Public Sales Load the Fund(1)
- ---------------------------------------------------------------------------------------------------------------
Per Share.................................... $15.00 $1.05 $13.95
- ---------------------------------------------------------------------------------------------------------------
Total(2)..................................... $60,000,000 $4,200,000 $55,800,000
===============================================================================================================
</TABLE>
(Footnotes on following page)

---------------------------
GLOBAL COORDINATORS
LEHMAN BROTHERS THE NIKKO SECURITIES CO., LTD.

---------------------------
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 in the U.S. Offering
will be made at the offices of Lehman Brothers Inc., New York, New York, on or
about November 7, 1994.
---------------------------
LEHMAN BROTHERS THE NIKKO SECURITIES CO. INTERNATIONAL, INC.

ADVEST, INC. DAIN BOSWORTH FAHNESTOCK & CO. INC.
INCORPORATED

FIRST OF MICHIGAN CORPORATION PRINCIPAL FINANCIAL SECURITIES, INC.
RAUSCHER PIERCE REFSNES, INC.

October 28, 1994
<PAGE> 2

IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS 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.

---------------------------
(Continued from previous page)

achieved. The Fund may also invest up to 20% of its total 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 and (ii) debt securities (including
sovereign debt obligations) issued or guaranteed by Latin American issuers.

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.

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

(Notes from prior page)

(1) Before deduction of organizational and offering expenses payable by the Fund
estimated at $1,243,313, which includes certain marketing expenses that the
Fund has agreed to bear, estimated at $80,000. See "Underwriting."

(2) 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 600,000 additional shares of Common Stock to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Sales Load and Proceeds to Fund will be $69,000,000,
$4,830,000 and $64,170,000, respectively. See "Underwriting."

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus.

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" consists of the
countries of Argentina, Bolivia, Brazil, Chile,
Colombia, Costa Rica, the Dominican Republic,
Ecuador, El Salvador, Guatemala, Honduras, Mexico,
Nicaragua, Panama, Paraguay, Peru, Uruguay and
Venezuela.

Investment in Latin
American Issuers......... Latin America has emerged from a decade of
difficult economic circumstances in the 1980s to
become, in the view of Lehman Brothers Global Asset
Management Limited (the "Investment Adviser"), one
of the more vibrant economic regions in the world
today. Certain Latin American economies appear to
be overcoming the adverse consequences of years of
high inflation and massive external debt and have
shown an ability to sustain growth in real gross
domestic product. 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
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 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 issuers and
industries 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 Latin American companies. The
Investment Adviser believes that major
institutional investors frequently emphasize the
larger capitalization companies in a particular
market. Thus, emphasis on smaller and medium-sized
companies may present significant opportunities. In
addition, the Investment Adviser believes that
smaller and medium-sized companies generally are
under-researched in their local markets and that
many of these companies trade at a discount
relative to larger capitalization companies despite
potential for higher earnings growth. It is the
Investment Adviser's view that the market
valuations of these companies will grow over time
as a result of factors such as continued
development of local capital markets, greater
access by such companies to external sources of
capital and the development of local pension funds,
which will provide additional internal sources of
investment capital. Industries anticipated to be
represented in the Fund's portfolio include, among
others, building materials, chemicals, commodities,
finance, household goods, oil, paper, textiles,
transportation and utilities.

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<PAGE> 4

Investment Objective and
Policies................. The Fund's investment objective is long-term
capital appreciation through investing, under
normal market conditions, at least 80% of its total
assets in the equity securities of Latin American
issuers 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. See
"Investment Objective and Policies."

Equity securities in which the Fund will invest
include common and preferred stock (including
convertible preferred stock), American, Global,
European or other similar 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 temporary defensive purposes when
the Investment Adviser determines that market
conditions so warrant and pending initial
investment in Latin American issuers, invest
without limitation in Temporary Investments (as
defined in this Prospectus). The Fund may also
invest up to 25% of its total assets in Temporary
Investments for cash management purposes and to
meet operating expenses. 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) companies that derive at least 50%
of their revenues from either goods or services
produced in Latin America or sales made in Latin
America; and (iv) the government of any Latin
American country and its agencies and
instrumentalities and any public sector entity
fully or partly owned by any such government,
agency or instrumentality. Under normal market
conditions, the Fund will invest in the securities
of issuers in at least three Latin American
countries. Based on current market conditions and
investment opportunities, the Investment Adviser
anticipates that initially at least 65% of the
Fund's total assets invested in equity securities
of Latin American issuers will be invested in
issuers located in Argentina, Brazil, Chile,
Colombia, Mexico, Peru and Venezuela. 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 total
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 and
(ii) debt securities (including sovereign debt
obligations) issued or guaranteed by Latin American
issuers.

The Offerings.............. 4,000,000 shares of Common Stock are being offered
in concurrent offerings as follows: 2,000,000
shares in the United States and internationally
(other than in Japan) by a group of underwriters
(the "U.S. Underwriters") represented by Lehman
Brothers Inc., The Nikko Secu-

4
<PAGE> 5

rities Co. International, Inc., Advest, Inc., Dain
Bosworth Incorporated, Fahnestock & Co. Inc., First
of Michigan Corporation, Principal Financial
Securities, Inc. and Rauscher Pierce Refsnes, Inc.
(the "Representatives") and 2,000,000 shares to
non-U.S. investors in Japan through several
underwriters (the "Japanese Underwriters") for whom
The Nikko Securities Co., Ltd. and Lehman Brothers
Japan Inc. are acting as Managers (the "Japanese
Managers"). Such offerings are collectively
referred to as the "Offerings."

The closing of each offering is a condition to the
closing of each other offering. No assurance can be
given that the Offerings will not be made
substantially outside the United States, except
that the U.S. Underwriters have undertaken to
distribute the shares of Common Stock in a manner
that complies with the distribution requirements of
the New York Stock Exchange.

The minimum investment is $1,500 (100 shares). In
addition, the U.S. Underwriters have been granted
the option, exercisable in one or more
installments, to purchase up to 600,000 additional
shares to cover over-allotments. See
"Underwriting."

Listing.................... The Common Stock has been approved for listing on
the New York Stock Exchange, subject to official
notification of issuance. The Fund has applied to
list the shares of Common Stock on the Osaka
Securities Exchange. There can be no assurance that
such application for listing will be granted.

New York Stock Exchange
Symbol................... LLF

Investment Adviser......... 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,
together with other Lehman Brothers Inc. investment
advisory affiliates, had approximately $11 billion
in assets under management as of September 30,
1994, of which over $600 million was invested in
equity and fixed income securities of issuers
located in emerging market countries. 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 1.25% of the value of
the Fund's average weekly net assets. See
"Management of the Fund" and "Summary of Expenses."

Administrators............. The Shareholder Services Group, Inc. ("TSSG") will
serve as the Fund's administrator in the United
States, for which it will be paid a fee

5
<PAGE> 6

by the Fund at an annual rate of .10% of the value
of the Fund's average weekly net assets, subject to
a minimum annual fee of $100,000. Banco Geral,
Boston Inversiones Servicios and Fiducomercio will
serve as the Fund's local administrators in Brazil,
Chile and Colombia, respectively, pursuant to
arrangements established by Boston Safe Deposit and
Trust Company, the Fund's custodian. See
"Management of the Fund" and "Summary of Expenses."

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
Plan."

Under the Fund's Dividend Reinvestment 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............ Boston Safe Deposit and Trust Company 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............. TSSG 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 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

6
<PAGE> 7

certain securities and 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.
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-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, less liquidity and
smaller market capitalization of the securities
markets, the fact that a relatively small number of
companies may represent a substantial portion of
market capitalization, 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 regulation. See "Risk Factors and
Special Considerations."

Smaller Companies. The Fund will emphasize smaller
and medium-sized companies, which may be less
seasoned, have more limited product lines and be
more susceptible to adverse market conditions than
larger companies. In addition, companies traded on
securities markets in emerging market countries are
generally smaller, newer and less sea-

7
<PAGE> 8

soned than companies whose securities are traded on
securities markets in the United States.

Other Investment Practices. The Fund may use
various other investment practices that involve
special considerations, including purchasing 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, repurchase and reverse repurchase
agreements, and lending portfolio securities. See
"Additional Investment Practices."

Borrowing. Although the Fund has no present
intention to do so, 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 Internal Revenue Code of 1986,
as amended (the "Code"), or for temporary or
emergency purposes. 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.
The Fund may be required to liquidate portfolio
securities at a time when it would be
disadvantageous to do so in order to make payments
with respect to any borrowing, 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 organizations are included as Appendix B to
this Prospectus. Under rating agency guidelines,
these lower-rated securities will likely have some
quality and protective characteristics that are
outweighed by large uncertainties or major risk
exposures to adverse conditions. The Fund may
invest in securities having the lowest ratings for
non-subordinated debt instruments assigned

8
<PAGE> 9

by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Ratings Group ("S&P") (i.e.,
rated in the category "C" by Moody's or "CCC" or
lower by S&P) or in comparable unrated securities.
Under rating agency guidelines, these securities
are considered to have extremely poor prospects of
ever attaining any real investment standing, to
have a current identifiable vulnerability to
default, and to be unlikely to have the capacity to
pay interest and repay principal when due in the
event of adverse business, financial or economic
conditions. Unrated securities deemed by the
Investment Adviser to be comparable to these lower-
and lowest-rated securities will have similar
characteristics. The Fund is not required to
dispose of securities in the event of a decline in
their credit quality or ratings. 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. Included in the Sovereign Debt
obligations in which the Fund may invest are U.S.
dollar-denominated Brady Bonds, which have been
issued only recently, and, accordingly, do not have
a long payment history. 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 "Taxation -- Latin American Taxation."
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

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<PAGE> 10

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 -- U.S.
Taxation."

Secondary Market and 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 public market for the Fund's
Common Stock. There can be no assurance that an
active trading market will develop or be sustained.
The Fund cannot predict what effect, if any, the
relative sizes of the U.S. and Japanese Offerings
will have on secondary market trading of the shares
of Common Stock in the United States and Japan or
on the value of the shares. In addition, 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 are
in the best interests of shareholders generally.
See "Risk Factors and Special Considerations" and
"Common Stock."

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."

10
<PAGE> 11

SUMMARY OF EXPENSES

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Sales Load (as a percentage of offering price)................................ 7.00%
</TABLE>

ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSETS ATTRIBUTABLE TO COMMON SHARES)

<TABLE>
<S> <C>
Management Fees............................................................... 1.25%
Other Expenses (estimated).................................................... 1.13%
----
Total Annual Expenses (estimated)............................................. 2.38%
</TABLE>

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 hereof, 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
option granted to the U.S. Underwriters. "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 7% 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:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$ 92 $ 139 $ 188 $323
</TABLE>

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 Plan.
See "Dividends and Distributions; Dividend Reinvestment Plan."

11
<PAGE> 12

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 consists of the countries of
Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic,
Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay,
Peru, Uruguay and Venezuela. 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

Latin America has emerged from a decade of difficult economic circumstances
in the 1980s to become, in the view of Lehman Brothers Global Asset Management
Limited (the "Investment Adviser"), one of the more vibrant economic regions in
the world today. Certain Latin American economies appear to be overcoming the
adverse consequences of years of high inflation and massive external debt and
have shown an ability to sustain growth in real gross domestic product. 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 Investment Adviser
believes that recent economic successes in Latin America, which it anticipates
will continue for the foreseeable future, 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. In addition, in the Investment
Adviser's view, Latin American markets are still undervalued when compared with
both their emerging market counterparts and equity markets of developed nations.

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 issuers and industries across the region may act to
reduce this volatility significantly, when compared with individual stock market
indexes which tend to be dominated by large capitalization companies in a small
number of industries. The Investment Adviser intends to maintain a high level of
diversification through investment primarily in smaller and medium-sized Latin
American companies, which may complement a shareholder's other portfolio
holdings. The Investment Adviser believes that major institutional investors
frequently emphasize the larger capitalization companies in a particular market.
Thus, emphasis on smaller and medium-sized companies may present significant
opportunities. In addition, the Investment Adviser believes that smaller and
medium-sized companies generally are under-researched in their local markets and
that many of these companies trade at a discount relative to larger
capitalization companies despite potential for higher earnings growth. It is the
Investment Adviser's view that the market valuations of these companies will
grow over time as a result of factors such as continued development of local
capital markets, greater access by such companies to external sources of capital
and the development of local pension funds, which will provide additional
internal sources of investment capital. Industries anticipated to be represented
in the Fund's portfolio include, among others, building materials, chemicals,
commodities, finance, household goods, oil, paper, textiles, transportation and
utilities.

USE OF PROCEEDS

The net proceeds of the U.S. Offering and the Japanese Offering
(collectively the "Offerings"), estimated to be $54,556,687 (assuming no
exercise of the over-allotment option granted to the U.S. Underwriters) 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

12
<PAGE> 13

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 $1,108,313
will be paid from the proceeds of the Offerings and will be charged to capital.
Organizational expenses of the Fund estimated at $135,000 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 long-term capital appreciation. This
objective and the Fund's policy to invest, under normal market conditions, at
least 80% of its total assets in the equity securities of Latin American issuers
that at the time of purchase have a market capitalization of less than U.S. $500
million, 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
European Depositary Receipts (or, subject to notice to shareholders, 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 listed and over-the-counter
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. The Fund will treat an investment in Depositary
Receipts as an investment in the issuer of the underlying securities for
purposes of its investment 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)
companies that derive at least 50% of their revenues from either goods or
services produced in Latin America or sales made in Latin America; and (iv) the
government of any Latin American country and its agencies and instrumentalities
and any public sector entity fully or partly owned by any such government,
agency or instrumentality. Under normal market conditions, the Fund will invest
in the securities of issuers in at least three Latin American countries. Based
on current market conditions and investment opportunities, the Investment
Adviser anticipates that initially at least 65% of the Fund's total assets
invested in equity securities of Latin American issuers will be invested in
issuers located in Argentina, Brazil, Chile, Colombia, Mexico, Peru and
Venezuela. 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 and (ii) 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 B: 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 utilize a comprehensive screening process that takes
into consideration 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.
The

13
<PAGE> 14

Investment Adviser believes that this comprehensive screening process will
provide above average return potential to the Fund.

TEMPORARY INVESTMENTS

The Fund may for temporary defensive purposes when the Investment Adviser
determines that market conditions so warrant, and pending initial investment in
Latin American issuers, invest without limitation in certain short-term
instruments ("Temporary Investments"). The Fund may also invest up to 25% of its
total assets in Temporary Investments for cash management purposes and to meet
operating expenses. 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 Ratings
Group ("S&P"), a rating of Prime-1 by Moody's Investors Service Inc.
("Moody's"), a comparable rating from another nationally recognized rating
service or, if unrated, deemed to be of equivalent quality by the Investment
Adviser. See "Appendix B: Ratings." To the extent that the Fund invests in
Temporary Investments, it will not be pursuing its investment objective.

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
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 B: 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

14
<PAGE> 15

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 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.

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 AND DERIVATIVES

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. There can be no guarantee that instruments
suitable for these purposes 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 instruments are not highly developed
and that in many countries in Latin America no such markets currently exist.
Techniques and instruments may change, however, over time as new instruments and
strategies are developed or regulatory changes occur. The Fund will not invest
in such new instruments and strategies without prior notification to
shareholders.

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, currency 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 and it may enter into interest
rate and 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 herein
as "Hedging and Derivatives"). 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, 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. The Fund's interest rate

15
<PAGE> 16

transactions may take the form of swaps, caps, floors and collars, currency
forward contracts, currency futures contracts, currency swaps and options on
currency or currency futures contracts.

Hedging and Derivatives 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 or to establish a position in the derivatives markets as a temporary
substitute for purchasing or selling particular debt or equity securities. The
ability of the Fund to utilize Hedging and Derivatives 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 and Derivatives in certain
circumstances will require that the Fund segregate cash, U.S. Government
Securities or other liquid high grade debt obligations 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 and Derivatives, 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 C hereto. See also "Risk Factors and
Special Considerations -- The Fund's Investments and Operations."

The degree of the Fund's use of Hedging and Derivatives may be limited by
certain provisions of the Internal Revenue Code of 1986, as amended (the
"Code"). See "Taxation -- U.S. 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 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

16
<PAGE> 17

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 that would result in the Fund's shareholders
paying duplicative management fees. 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 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 -- U.S.
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 -- U.S. Taxation."

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, U.S.
Government Securities 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 80% of its total assets in equity securities of Latin
American issuers that at the time of purchase have a market capitalization of
less than U.S. $500 million, 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

17
<PAGE> 18

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 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 that 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 (including on margin if margin securities are owned) up to 10% of
its total assets 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 and Derivatives shall not be deemed to involve the issuance of a
"senior security" or a "borrowing" if covering assets are appropriately
segregated;

(4) own more than 10% of the outstanding voting securities of any one
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; and provided, further, 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" herein; and (b) 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 position (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 and Derivatives;

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<PAGE> 19

(10) invest for the purpose of exercising control over management of
any company.

As a matter of operating policy, which may be changed by the Fund's Board
of Directors without a shareholder vote, the Fund will not purchase or borrow
securities from or sell or lend securities to "interested persons," as defined
in the Investment Company Act, except as permitted by the Investment Company
Act.

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. 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.

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.

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<PAGE> 20

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 or countries and may increase the
costs and expenses of the Fund. For example, certain countries require
governmental approval prior to investments by foreign persons in the country or
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. As indicated above under "Investment Objective and
Policies -- General", the Investment Adviser anticipates that initially at least
65% of the Fund's total assets invested in equity securities of Latin American
issuers will be invested in issuers located in Argentina, Brazil, Chile,
Colombia, Mexico, Peru and Venezuela. Local approvals or arrangements, where
necessary, have been obtained for the Fund with respect to investment in each of
the above countries, except for Chile and Venezuela. Based on the advice of the
Fund's agents in Chile and Venezuela, the Investment Adviser believes that the
remaining approvals will be obtained in the near future, although there can be
no assurance as to the timing or the receipt of such approvals. 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 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. Taxation."

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. Taxation."

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

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<PAGE> 21

that the Fund has insufficient cash in dollars to meet distribution
requirements. Likewise, if the value of a Latin American currency falls relative
to the dollar between the time the Fund incurs expenses in dollars and the time
it pays such expenses, the amount of such currency required to be converted into
dollars to pay such expenses will be greater than if such expenses originally
had been incurred in such currency. The liquidation of investments, if required,
may have an adverse impact on the Fund's performance. In addition, 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. Taxation."

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. Some
Latin American countries also may have managed currencies, which are not free
floating against the dollar. In addition, there is risk that certain Latin
American countries may restrict the free conversion of their currencies into
other 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 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 and with respect to such companies, which may
contribute to increased volatility and reduced liquidity of such markets or such
securities. Accordingly, each of these markets and companies 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

21
<PAGE> 22

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
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 Latin American Securities Markets; Legal
Systems. Disclosure and regulatory standards in Latin American countries are in
many respects less stringent than U.S. standards. 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. Brokers in Latin
American countries may not be as well capitalized as those in the United States,
so that they may be more susceptible to financial failure in times of market,
political, or economic stress. Less information may be available to the Fund
than in respect of investments in the United States and, in certain of these
countries, less information may be available to the Fund than to local market
participants. The prices at which the Fund may acquire investments also 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. 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.

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

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<PAGE> 23

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.

THE FUND'S INVESTMENTS AND OPERATIONS

Smaller Companies. The Fund will emphasize smaller and medium-sized
companies, which may be less seasoned, have more limited product lines, markets,
financial resources and management depth, and be more susceptible to adverse
market conditions than larger companies. See "Market Characteristics" above.

Unlisted and 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 listed and
over-the-counter 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. Although these securities may be resold in privately negotiated
transactions, the price realized on such sales could be less than that
originally paid by the Fund or less than the Investment Adviser's most recent
estimate of their fair value. If such securities 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. 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 and Derivatives. Risks and special considerations of certain of
the investment practices in which the Fund may engage are described above under
"Additional Investment Practices." Hedging and Derivatives involve 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 and Derivatives
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. To the extent that the Fund uses
futures and options transactions for hedging, such transactions should tend to
minimize the risk of loss due to a decline in the value of the hedged position
and, at the same time, 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 and

23
<PAGE> 24

Derivatives will reduce the Fund's net asset value, and possibly income, and the
losses can be greater than if Hedging and Derivatives had not been used.
Additional information regarding the risks and special consideration associated
with Hedging and Derivatives appears in Appendix C to this Prospectus.

Borrowing. Although the Fund has no present intention to do so, 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 "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. The Fund may be required to liquidate portfolio securities at a
time when it would be disadvantageous to do so in order to make payments with
respect to any borrowing, 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 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 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 "Taxation -- Latin American Taxation." 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 -- U.S. Taxation."

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. Under rating
agency guidelines, these lower-rated securities will likely have some quality
and protective characteristics that are outweighed by large uncertainties or
major risk exposures to adverse conditions. The Fund may invest in securities
having the lowest ratings for non-subordinated debt instruments assigned by
Moody's or S&P (i.e., rated in the category "C" by Moody's or "CCC" or lower by
S&P) or in comparable unrated securities. Under rating agency guidelines, these
securities are considered to have extremely poor prospects of ever attaining any
real investment standing, to have a current identifiable vulnerability to
default and to be unlikely to have the capacity to pay interest and repay
principal when due in the event of adverse business, financial or economic
conditions. Unrated securities deemed by the Investment Adviser to be comparable
to these lower-and lowest-rated securities will have similar characteristics. 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. The Fund is not required to dispose of
securities in the event of a decline in their credit quality or ratings. 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

24
<PAGE> 25

American issuers held by the Fund may be expected to move in the opposite
direction of interest rates. Ratings criteria established by nationally
recognized statistical ratings organizations are included as Appendix B to this
Prospectus.

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 Board of 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.

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'

25
<PAGE> 26

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.

Included in the Sovereign Debt obligations in which the Fund may invest are
U.S. dollar-denominated Brady Bonds. Brady Bonds are debt securities issued
under the framework of the Brady Plan, an initiative announced by former U.S.
Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations
to restructure their outstanding external commercial bank indebtedness. In
restructuring its external debt under the Brady Plan framework, a debtor nation
negotiates with its existing bank lenders as well as multilateral institutions
such as the World Bank and the IMF. The Brady Plan framework, as it has
developed, contemplates the exchange of commercial bank debt for newly issued
bonds (Brady Bonds). Brady Bonds may also be issued in respect of new money
being advanced by existing lenders in connection with the debt restructuring.
The World Bank and/or the IMF support the restructuring by providing funds
pursuant to loan agreements or other arrangements which enable the debtor nation
to collateralize the new Brady Bonds or to repurchase outstanding bank debt at a
discount. Under these arrangements with the World Bank and/or the IMF, debtor
nations have been required to agree to the implementation of certain domestic
monetary and fiscal reforms.

Agreements implemented under the Brady Plan to date are designed to achieve
debt and debt-service reduction through specific options negotiated by a debtor
nation with its creditors. As a result, the financial packages offered by each
country differ. Regardless of the stated face amount and stated interest rate of
the various types of Brady Bonds, the Fund will purchase Brady Bonds in
secondary markets, as described below, in which the price and yield to the
investor reflect market conditions at the time of purchase. Brady Bonds issued
to date have traded at a deep discount from their face value. The Fund may
purchase Brady Bonds with no or limited collateralization, and will be relying
for payment of interest and (except in the case of certain principal
collateralized Brady Bonds) principal primarily on the willingness and ability
of the foreign government to make payment in accordance with the terms of the
Brady Bonds. Brady Bonds have been issued only recently and, accordingly, do not
have a long payment history.

Secondary Market and Net Asset Value Discount. The Fund is a newly
organized closed-end investment company with no previous operating history.
Prior to the Offerings, there has been no public market for the Fund's Common
Stock. The Fund cannot predict what effect, if any, the relative sizes of the
U.S. Offering and the Japanese Offering will have on the secondary market
trading of the shares of Common Stock in the United States and in Japan or on
the value of the shares. There can be no assurance that an active trading market
will develop or be sustained. In addition, 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 Directors has
determined that these provisions are in the best interests of shareholders
generally.

26
<PAGE> 27

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.

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.

27
<PAGE> 28

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 companies and organizations.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS AND OTHER
NAMES AND ADDRESSES POSITION WITH FUND AFFILIATIONS
- -------------------------------- ----------------------- --------------------------------------
<S> <C> <C>
Andrew D. Gordon* Chairman and Director Managing Director, Lehman Brothers
3 World Financial Center Inc.
New York, New York 10285
</TABLE>

<TABLE>
<S> <C> <C>
Kirk Hartman* President and Director Managing Director, Lehman Brothers
3 World Financial Center Inc.
New York, New York 10285

Philip H. Didriksen, Jr. Director Consultant, PHDI; formerly President
140 Indian Head Road and Chief Executive Officer, Quest
Riverside, Connecticut 06878 Cash Management Services division of
Oppenheimer Capital LP; formerly
Chairman of the Board and Chief
Executive Officer, Alliance Cash
Management Services.

Rodman L. Drake Director President, Rodman L. Drake & Co.,
KMR Power Corporation Inc.; formerly Managing Director and
30 Rockefeller Plaza Chief Executive Officer, Cresap, a
New York, New York 10112 Towers Perrin Company; Co-Chairman of
the Board, KMR Power Corporation;
Director, Mueller Industries; Trustee,
Lebanese America University; Trustee,
Excelsior Funds, Hyperion Government
Mortgage Trust II; Director, Hyperion
Total Return Fund, Hyperion 1997 Term
Trust, Hyperion 1999 Term Trust,
Hyperion 2002 Term Trust, Hyperion
2005 Opportunity Term Trust; Member of
the Advisory Board, Garantia Partners
(L.P.), Argentina Private Equity Fund
(L.P.).

William Kunkler Director Vice President, Pines Trailer, L.P.
222 North LaSalle Street (manufacturing); formerly Executive
Chicago, Illinois 60601 Vice President, Marblehead Lime
Company (manufacturing).

Kathleen C. Holmes McClave Director Managing Director, Wharton School
Wharton Financial Institutions Financial Institutions Center,
Center University of Pennsylvania; Senior
3602 Locust Walk Partner and Management Consultant,
3304 SH-DH Furash & Company.
Philadelphia, Pennsylvania 19104

Peer Pedersen Director Managing Partner, Pedersen & Houpt
161 North Clark Street (law firm); Director, Aon Corporation,
Suite 3100 Boston Chicken, Inc., Delray Farms,
Chicago, Illinois 60601 Inc., Discovery Zone, Fishy Things,
Inc., H2O Plus, Inc., Spraying
Systems, Inc., Tempel Steel Company,
Tennis Corporation of America, WMX
Technologies, Inc.
</TABLE>

28
<PAGE> 29

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS AND OTHER
NAMES AND ADDRESSES POSITION WITH FUND AFFILIATIONS
- -------------------------------- ----------------------- --------------------------------------
<S> <C> <C>
Michael Kardok Treasurer Vice President, The Shareholder
53 State Street Services Group, Inc.
Boston, Massachusetts 02108

Patricia L. Bickimer Secretary Vice President and General Counsel,
53 State Street The Shareholder Services Group, Inc.
Boston, Massachusetts 02108
</TABLE>

- ---------------
* Director who is an "interested person" within the meaning of the Investment
Company Act.

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 $7,000, plus $1,000 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 Andrew D. Gordon, Kirk Hartman and any
one of Philip H. Didriksen, Jr., Rodman L. Drake, William Kunkler, Kathleen C.
Holmes McClave and Peer Pedersen. The Fund also has an Audit Committee composed
currently of Philip H. Didriksen, Jr., Rodman L. Drake, William Kunkler,
Kathleen C. Holmes McClave and Peer Pedersen.

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
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 1.25% of the value of the Fund's average weekly
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, provides asset management services to institutional
investors and high net worth individuals worldwide through offices in New York,
London and Tokyo. At September 30, 1994, the Investment Adviser and its Lehman
Brothers Inc. investment advisory affiliates had approximately $11 billion in
assets under management, of which over $600 million was invested in equity and
fixed income securities of issuers located in emerging markets. 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. In managing
the Fund, the Investment Adviser will draw upon the expertise of its emerging
markets portfolio managers and analysts which provide research and analysis
capabilities and a global market presence often beyond the realm of individual
investors.

29
<PAGE> 30

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 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

The Shareholder Services Group, Inc. will serve 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 Exchange Place, 53 State Street, Boston, Massachusetts 02109. As
compensation for its services, the Fund will pay the U.S. Administrator a fee
that is computed and paid monthly at an annual rate of .10% of the value of the
Fund's average weekly net assets, subject to a minimum annual fee of $100,000.

On May 6, 1994, the U.S. Administrator acquired the third party mutual fund
administration business of The Boston Company Advisors, Inc., an indirect
wholly-owned subsidiary of Mellon Bank Corporation ("Mellon"). In connection
with this transaction, Lehman Brothers assigned to the U.S. Administrator its
agreement with Mellon that Lehman Brothers Inc. and its affiliates, consistent
with any fiduciary duties and assuming certain service quality standards are
met, would recommend the U.S. Administrator as the provider of administration
services to investment companies affiliated with Lehman Brothers Inc. This duty
to recommend expires on May 21, 2000. In addition, under the terms of the Stock
Purchase Agreement dated September 14, 1992 between Mellon and Lehman Brothers
Inc. (then named Shearson Lehman Brothers Inc.), Lehman Brothers Inc. agreed to
recommend Boston Safe Deposit and Trust Company, an indirect wholly-owned
subsidiary of Mellon, as custodian of investment companies affiliated with
Lehman Brothers Inc. until May 21, 2000, to the extent consistent with its
fiduciary duties and other applicable law.

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
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.

LOCAL ADMINISTRATORS

The Fund is required under the laws of Brazil, Chile and Colombia to
appoint a local administrator in connection with the Fund's investments in each
such country. Banco Geral, Boston Inversiones Servicios, and Fiducomercio will
act as administrators for the Fund in Brazil, Chile and Colombia, respectively,
pursuant to arrangements established by Boston Safe Deposit and Trust Company,
the Fund's custodian.

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

30
<PAGE> 31

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.

The services of the Investment Adviser and the U.S. 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 and the U.S. 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 borrowing; 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.
over-the-counter markets include an undisclosed dealer spread. In placing
orders, it is the policy of the Fund to obtain the best results taking into
account the general execution and operational facilities of the broker or
dealer, the type of transaction involved and other factors such as the risk of
the broker or dealer in positioning the securities involved. 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. With respect to brokerage transactions (but not
principal transactions), as contemplated by Section 28(e) of the Securities
Exchange Act of 1934, as amended, 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

31
<PAGE> 32

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 or accounts 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 or accounts,
transactions will be averaged as to price, and available investments allocated
as to amount, to the extent feasible, in a manner which the Investment Adviser
believes to be equitable to each portfolio and account, 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 or accounts in order to obtain best execution. In addition,
because of different investment objectives, a particular security may be
purchased for one or more portfolios or accounts when one or more portfolios or
accounts are selling the same security.

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 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 Shareholder
Services Group, Inc. (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 The
Shareholder Services Group, Inc., as dividend paying agent. In the case of
shareholders, such as banks,

32
<PAGE> 33

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
valuation date will be the dividend or distribution payment date or, if that
date is not a trading day on the exchange on which the Fund's shares are listed,
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, 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 -- U.S. Taxation."

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 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 P.O. Box 1376,
Boston, Massachusetts 02104.

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<PAGE> 34

TAXATION

U.S. 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 related 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; 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 or derivatives transactions involving
foreign currencies, forward contracts, options and futures contracts (including
options and futures contracts on foreign currencies). See "Additional Investment
Practices -- Hedging and Derivatives." 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

34
<PAGE> 35

"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
and derivatives 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, make the appropriate tax elections and make the
appropriate entries in its books and records when it acquires any foreign
currency, forward contract, option, futures contract, or hedged or derivative
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.

Under current federal income tax law, the Fund will include in income as
interest each year, in addition to stated interest received on obligations held
by the Fund, amounts attributable to the Fund from holding (i) discount
obligations (i.e., stated redemption price at maturity exceeds issue price of
the obligation) and (ii) securities (including many Brady Bonds) purchased by
the Fund at a price less than their stated face amount or, in the case of
discount obligations, at a price less than their issue price plus the portion of
"original issue discount" previously accrued thereon, i.e., purchased at a
"market discount." Current federal tax law requires that a holder (such as the
Fund) of a discount obligation accrue as income each year a portion of the
discount at which the obligation was purchased by the Fund even though the Fund
does not receive interest payments in cash on the security during the year which
reflect the accrued discount. The Fund will elect to likewise accrue and include
in income each year a portion of the market discount with respect to a discount
obligation or other obligation even though the Fund does not receive interest
payments in cash on the securities that reflect the accrued discount.

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 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 herein 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

35
<PAGE> 36

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.

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 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
capital loss to the extent of any capital gain dividends received by the
shareholder with respect to such share. A loss

36
<PAGE> 37

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 Taxation." 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 be treated
as 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 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 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. 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."

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<PAGE> 38

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
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 of 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 TAXATION

The following is a general summary of certain Latin American tax
considerations affecting the Fund and its shareholders. No attempt is made to
present a detailed explanation of all Latin American 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.

Argentinean Taxes. The following discussion of the Argentine tax laws is
based on the advice of Bruchou, Fernandez, Madero & Lombardi, Argentinean
counsel to the Fund.

Dividends received by the Fund with respect to Argentinean investments will
not be subject to tax in Argentina. Interest received by the Fund with respect
to Argentinean public debt and certain private debt will not be subject to tax
in Argentina. Interest received with respect to all other Argentinean debt is
subject to a 12% withholding tax and value-added tax in Argentina. Capital gains
realized by the Fund with respect to Argentinean investments will generally not
be subject to tax in Argentina. There are no other Argentinean taxes applicable
to the Fund or its shareholders (who are not Argentinean residents) in
connection with the Fund's proposed activities in Argentina.

Brazilian Taxes. The following discussion of the Brazilian tax laws is
based on the advice of Machado, Meyer, Sendacz e Opice, Brazilian counsel to the
Fund.

Dividends received by the Fund with respect to Brazilian investments will
be subject to a 15% withholding tax in Brazil. Interest received by the Fund
with respect to Brazilian investments will also be subject to a 15% withholding
tax. Capital gains realized by the Fund with respect to Brazilian investments
will generally not be subject to tax in Brazil. There are no other Brazilian
taxes applicable to the Fund or its shareholders in connection with the Fund's
proposed activities in Brazil other than the possible application of

38
<PAGE> 39

(i) a 0.25% tax imposed on certain banking transactions and (ii) a 1% to 9% tax
imposed on certain foreign exchange transactions.

Chilean Taxes. The following discussion of the Chilean tax laws is based
on the advice of Carey y Cia, Chilean counsel to the Fund.

Dividends received by foreign investors with respect to Chilean investments
are generally subject to a 23.5% withholding tax in Chile based on a 35% rate
reduced by a credit available for the 15% corporate-level tax paid on such
income. Interest received by foreign investors with respect to Chilean
investments is also generally subject to a 35% withholding tax. Capital gains
realized by foreign investors with respect to Chilean investments will generally
be subject to tax in Chile at a 35% rate. There are no other Chilean income
taxes applicable to the Fund or its shareholders in connection with the Fund's
proposed activities.

Colombian Taxes. The following discussion of the Colombian tax laws is
based on the advice of Gomez, Pinzon & Asociados, Colombian counsel to the Fund.

Dividends received by the Fund with respect to Colombian investments will
generally not be subject to withholding tax in Colombia. If the Fund receives
certain taxable dividends, however, such dividends will be subject to 30%
withholding tax. Interest received by the Fund with respect to Colombian
investments will also be subject to a 30% withholding tax. If, prior to 1997,
the Fund receives either dividends or interest which are subject to withholding
tax, the Fund must (i) file an income tax return and (ii) pay an additional
Special Contribution equal to 25% of the tax. Thus, the total tax on such income
will be 37.5%. Capital gains realized by the Fund with respect to Colombian
investments will not be subject to tax in Colombia. There are no other Colombian
taxes applicable to the Fund or its shareholders in connection with the Fund's
proposed activities in Colombia.

Mexican Taxes. The following discussion of Mexican federal tax laws is
based on the advice of Ritch, Heather y Mueller, S.C., Mexican counsel to the
Fund.

Dividends paid to the Fund with respect to shares issued by Mexican
companies will not be subject to Mexican withholding or other taxes. The sale of
such shares by the Fund will not be subject to Mexican tax if the transaction is
carried out through the Mexican Stock Exchange ("MSE") or another securities
market approved, from time to time by the Ministry of Finance and Public Credit
(the "Ministry") and such shares deemed placed among the investment public at
large in general rules issued from time to time by the Ministry; the sale or
other disposition of shares made in other circumstances will be subject to
Mexican tax. However, under the U.S.-Mexico treaty for the Avoidance of Double
Taxation (the "Treaty"), a holder that is eligible to claim the benefits of the
Treaty will be exempt from gains realized on the sale or other disposition of
shares issued by Mexican companies, in a transaction that is not carried out
through the MSE or other approved securities market, so long as the holder did
not own, directly or indirectly, 25% or more of the shares of the relevant
company within the 12-month period preceding such sale or other disposition. The
Fund may claim the aforementioned exemption to the extent eligible to claim the
benefits of the Treaty.

Payments of interest made to the Fund by the Mexican government, in
connection with debt instruments issued thereby, will not be subject to Mexican
withholding or other taxes. Payments of interest (which includes payments in
excess of the original issue price) made to the Fund by Mexican companies and
other governmental entities, in connection with debt instruments issued thereby,
and included in certain general rules issued by the Ministry from time to time,
will be subject to Mexican withholding taxes at a rate equal to 15%; such rate
may be reduced to 4.9% until December 31, 1995, if certain conditions are
satisfied by the Fund. In addition, under the Treaty, payments of interest on
debt securities issued by Mexican companies and other governmental entities, and
regularly and substantially traded in a recognized market, would be subject to a
10% Mexican withholding tax, applicable until December 31, 1998, if (i) the Fund
were entitled to the benefits of the Treaty and (ii) the Fund were the effective
beneficiary of the relevant interest payment; thereafter, such rate would be
reduced to 4.9%. Payments of interest with respect to instruments different from
those above would be subject to withholding taxes imposed by Mexico at rates of
up to 35%. Capital gains realized on the sale or other disposition of debt
issued by Mexican companies and other governmental entities,

39
<PAGE> 40

(other than debt instruments issued by the Mexican government) by the Fund may
be subject to Mexican withholding taxes.

Peruvian Taxes. The following discussion of the Peruvian tax laws is based
on the advice of Rodrigo, Elias & Medrano, Peruvian counsel to the Fund.

Dividends received by the Fund with respect to Peruvian investments will
not be subject to withholding tax in Peru. Interest received by the Fund with
respect to certain Peruvian investments will be subject to a 1% or 30%
withholding tax, depending on the investment. Capital gains realized by the Fund
with respect to Peruvian investments will generally not be subject to tax in
Peru. Interest paid on certain registered bonds, however, is exempt from income
withholding tax until December 31, 2000. Capital gains realized by the Fund with
respect to Peruvian investments (i) other than shares and securities and (ii)
which are not listed on a Peruvian Stock Exchange, will be subject to a 30% tax
in Peru. There are no other Peruvian taxes applicable to the Fund or its
shareholders in connection with the Fund's proposed activities in Peru other
than a sales tax imposed with respect to fees and commissions on the sale of
securities.

Venezuelan Taxes. The following discussion of the Venezuelan tax laws is
based on the advice of Rodner, Martinez & Asociados, Venezuelan counsel to the
Fund.

Dividends received by the Fund with respect to Venezuelan investments will
not be subject to withholding tax in Venezuela. Interest received by the Fund
with respect to Brady Bonds is not subject to withholding, although other
interest income received with respect to Venezuelan debt is subject to a 34%
tax. Capital gains realized by the Fund with respect to the sale of Venezuelan
equity securities on a stock exchange in Venezuela will be subject to a flat tax
of 1% on the gross sales value of the securities. Off-exchange sales of
Venezuelan equity securities are subject to a 34% capital gains tax on gains
above a value of Bs. 3,000,000 (approximately U.S. $15,000). Capital gains
realized on the sale of Venezuelan debt will, if the sale is completed in
Venezuela, in some circumstances, be subject to tax at a 34% rate, if the annual
net Venezuelan income of the Fund is above Bs. 3,000,000 (approximately U.S.
$15,000); for net income less than Bs. 3,000,000, the tax rate is slightly
lower. There are no other Venezuelan taxes applicable to the Fund or its
shareholders in connection with the Fund's proposed activities in Venezuela.

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 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

40
<PAGE> 41

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.

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 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

41
<PAGE> 42

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. 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. 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 or
the Osaka Securities Exchange. In addition, conversion to an open-end investment
company may require the Fund to obtain additional local governmental or
regulatory approvals or limit the Fund's ability to invest in certain securities
and certain markets.

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 the
holders of at least 75% of the votes entitled to be cast for the election of
directors. 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 an 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 October 24, 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 2/3% 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
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

42
<PAGE> 43

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, issuances of securities of
the Fund upon the exercise of any stock subscription rights distributed by
the Fund, transfers by the Fund of securities or other property to a
corporation, trust, partnership or other entity which is wholly-owned 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, excluding sales,
exchanges, transfers or other dispositions by the Fund to any person or
entity which is wholly-owned by the Fund, and 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,
the affirmative vote of such number of votes entitled to be cast thereon as is
required to approve the matter under applicable law shall be necessary, assuming
that a vote is required under applicable law. 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
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

Boston Safe Deposit and Trust Company 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. The Shareholder Services Group, Inc. will act as the
transfer agent, dividend paying agent and registrar for the Fund's Common Stock.

The Toyo Trust and Banking Company, Limited, 4-3, Marunouchi; 1-chome,
Chiyoda-ku, Tokyo, Japan will act as the Fund's dividend paying agent and
shareholder servicing agent for the Fund's Common Stock beneficially owned by
investors in Japan.

43
<PAGE> 44

UNDERWRITING

The underwriters of the U.S. Offering named below (the "U.S.
Underwriters"), for whom Lehman Brothers Inc., The Nikko Securities Co.
International, Inc., Advest, Inc., Dain Bosworth Incorporated, Fahnestock & Co.
Inc., First of Michigan Corporation, Principal Financial Securities, Inc. and
Rauscher Pierce Refsnes, Inc. 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:

<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITERS OF SHARES
- ---------------------------------------------------------------------------------- ---------
<S> <C>
Lehman Brothers Inc............................................................... 126,000
The Nikko Securities Co. International, Inc....................................... 126,000
Advest, Inc....................................................................... 126,000
Dain Bosworth Incorporated........................................................ 126,000
Fahnestock & Co. Inc.............................................................. 126,000
First of Michigan Corporation..................................................... 126,000
Principal Financial Securities, Inc............................................... 126,000
Rauscher Pierce Refsnes, Inc...................................................... 126,000
Dillon, Read & Co. Inc............................................................ 45,000
A.G. Edwards & Sons, Inc.......................................................... 45,000
Kemper Securities, Inc............................................................ 45,000
Kidder, Peabody & Co. Incorporated................................................ 45,000
Lucky Securities International Ltd................................................ 45,000
Oppenheimer & Co., Inc............................................................ 45,000
PaineWebber Incorporated.......................................................... 45,000
Wertheim Schroder & Co. Incorporated.............................................. 45,000
</TABLE>

<TABLE>
<S> <C>
Arnhold and S. Bleichroeder, Inc.................................................. 20,000
William Blair & Company........................................................... 20,000
J.C. Bradford & Co................................................................ 20,000
Cowen & Company................................................................... 20,000
Crowell, Weedon & Co.............................................................. 20,000
Gruntal & Co., Incorporated....................................................... 20,000
Interstate/Johnson Lane Corporation............................................... 20,000
Janney Montgomery Scott Inc....................................................... 20,000
Ladenburg, Thalmann & Co. Inc..................................................... 20,000
Legg Mason Wood Walker, Incorporated.............................................. 20,000
McDonald & Company Securities, Inc................................................ 20,000
Morgan Keegan & Company, Inc...................................................... 20,000
Piper Jaffray Inc................................................................. 20,000
Raymond James & Associates, Inc................................................... 20,000
The Robinson-Humphrey Company, Inc................................................ 20,000
Sutro & Co. Incorporated.......................................................... 20,000
Tucker Anthony Incorporated....................................................... 20,000
Wedbush Morgan Securities......................................................... 20,000
Wheat, First Securities, Inc...................................................... 20,000
L. H. Alton & Company............................................................. 12,000
Brean Murray, Foster Securities Inc............................................... 12,000
The Chicago Corporation........................................................... 12,000
Allen C. Ewing & Co............................................................... 12,000
</TABLE>

44
<PAGE> 45

<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITERS OF SHARES
- ---------------------------------------------------------------------------------- ---------
<S> <C>
Ferris, Baker Watts, Incorporated................................................. 12,000
First Albany Corporation.......................................................... 12,000
First Equity Corporation of Florida............................................... 12,000
First Southwest Company........................................................... 12,000
Hanifen, Imhoff Inc............................................................... 12,000
Huntleigh Securities Corporation.................................................. 12,000
Johnston, Lemon & Co. Incorporated................................................ 12,000
Josephthal Lyon & Ross Incorporated............................................... 12,000
Laidlaw Equities, Inc............................................................. 12,000
McGinn, Smith & Co., Inc.......................................................... 12,000
The Ohio Company.................................................................. 12,000
Parker/Hunter Incorporated........................................................ 12,000
Pennsylvania Merchant Group Ltd................................................... 12,000
Ragen MacKenzie Incorporated...................................................... 12,000
Rodman & Renshaw, Inc............................................................. 12,000
Scott & Stringfellow, Inc......................................................... 12,000
Van Kasper & Company.............................................................. 12,000
---------
Total................................................................... 2,000,000
========
</TABLE>

The U.S. Underwriting Agreement provides that if any of the foregoing
shares are purchased by the U.S. Underwriters pursuant to the U.S. Underwriting
Agreement, all the shares of Common Stock agreed to be purchased by the U.S.
Underwriters pursuant to the U.S. Underwriting Agreement must be so purchased,
and that the obligations of the U.S. Underwriters thereunder are subject to
approval of certain legal matters by counsel and to various other conditions.

The Fund has also entered into a subscription agreement (the "Japanese
Subscription Agreement" and, together with the U.S. Underwriting Agreement, the
"Underwriting Agreements") with the Japanese Underwriters (the "Japanese
Underwriters" and, together with the U.S. Underwriters, the "Underwriters"), for
whom The Nikko Securities Co., Ltd. and Lehman Brothers Japan Inc. are acting as
Managers (the "Japanese Managers"), providing for the concurrent offer and sale
by the Fund of 2,000,000 shares of Common Stock to non-U.S. investors in Japan.
The closing of each offering is a condition to the closing of each other
offering.

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 an additional 600,000 shares of Common Stock, at the price to
public set forth on the cover page of this Prospectus less the sales load, to
cover over-allotments, if any. To the extent that the U.S. Underwriters exercise
such option, each of the U.S. Underwriters will be committed, subject to certain
conditions, to purchase a number of shares proportionate to such U.S.
Underwriter's initial commitment as indicated in the preceding table.

The Fund has been advised by the Representatives and the Japanese Managers
that the Underwriters propose to offer the shares of Common Stock in the U.S.
and Japanese Offerings to the public initially at the price to public set forth
on the cover page of this Prospectus. Investors must pay for any shares of
Common Stock purchased in the initial public offering on or before November 7,
1994. The sales load of $1.05 per share is equal to 7% of the initial public
offering price.

The Representatives have also advised the Fund that the U.S. Underwriters
to offer the Common Stock to certain selected dealers (which may include the
U.S. Underwriters) at the initial offering price per share set forth on the
cover page of this Prospectus less a concession not in excess of $.65 per share.
After the initial public offering, the price to public and concession to
selected dealers may be changed by the Representatives.

45
<PAGE> 46

The Underwriters have entered into an Agreement Between U.S. Underwriters
and Japanese Underwriters. Pursuant to this Agreement, each U.S. Underwriter has
agreed that, as part of the distribution of the 2,000,000 shares of Common Stock
offered in the U.S. Offering, (a) it is not purchasing any of such shares for
the account of any Japanese Person and (b) it has not offered or sold, and will
not offer, sell, resell or deliver, directly or indirectly, such shares or
distribute any prospectus relating to the U.S. Offering to any Japanese Person;
and each Japanese Underwriter has agreed that, as part of the distribution of
the shares of Common Stock offered in the Japanese Offering, (a) it is not
purchasing any of such shares for the account of anyone other than a Japanese
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 Japanese Offering outside Japan or to any person other than a
Japanese 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 Japanese
Underwriters, including (i) certain purchases and sales among the Underwriters,
(ii) certain offers, sales, resales, deliveries or distributions to or through
investment advisers or other persons exercising investment discretion and (iii)
other transactions specifically approved by the Underwriters. 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. As used herein, "Japanese Person" means any national or resident
of Japan, or any corporation, pension, profit-sharing or other trust or other
entity organized under the laws of Japan (other than a U.S. Person, as such term
is defined in Regulation S of the Securities Act of 1933, as amended, and other
than a branch located outside Japan of any Japanese Person) and includes any
Japanese branch of a person (other than a U.S. Person) who is otherwise not a
Japanese Person.

Each U.S. Underwriter has represented and agreed that (i) it has not
offered or sold and that it will not offer or sell any shares of Common Stock in
the United Kingdom, by means of any document, other than to persons whose
ordinary business it is to buy or sell shares or debentures, whether as
principal or agent (other than in 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; (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;
and (iv) it will send to any dealer who purchases from it any of such shares of
Common Stock a confirmation stating in substance that such dealer may not
purchase any of such shares of Common Stock for the account of a Japanese Person
and that such dealer may not offer or resell such shares of Common Stock,
directly or indirectly, in Japan or to a Japanese Person.

Each Japanese Underwriter has represented and agreed that it has not
offered or sold, and will not offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any shares of Common Stock
acquired in connection with the distribution contemplated hereby, except
pursuant to the registration requirements of the Securities and Exchange Law of
Japan or otherwise in compliance with the Securities and Exchange Law of Japan
and any other applicable laws and regulations of Japan.

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 public market for the shares of
Common Stock. The Common Stock has been approved for listing on the New York
Stock Exchange under the symbol "LLF" subject to official notification of
issuance. 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 distribute
the shares of Common Stock in a manner that complies with the New York Stock
Exchange distribution criteria.

46
<PAGE> 47

The Fund has applied to list the Common Stock on the Osaka Securities
Exchange. There can be no assurance that such application for listing will be
granted. In order to satisfy one of the requirements for the listing of the
Common Stock on the Osaka Securities Exchange, the Japanese Underwriters will
undertake to distribute the shares of Common Stock in a manner which complies
with the Osaka Securities Exchange distribution criteria.

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 Underwriters 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 Japan Inc. (a Japanese 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." Andrew
Gordon, a director and officer of the Fund, and Kirk Hartman, a director and
officer of the Fund, are each affiliated with Lehman Brothers Inc.

In the U.S. Underwriting Agreement, the Fund has agreed to bear certain
expenses of marketing the Fund's Common Stock, estimated at $80,000. In
addition, the U.S. Underwriting Agreement provides that the Fund and, to a
certain extent, the Investment Adviser, on the one hand, and the U.S.
Underwriters, on the other hand, will indemnify each other against certain
liabilities, including liabilities under the Securities Act, and contribute to
payments that they may be required to make in respect thereof.

The Fund cannot predict what effect, if any, the relative sizes of the U.S.
Offering and the Japanese Offering will have on the secondary market trading of
the shares of Common Stock in the United States and Japan or on the value of the
shares.

This Prospectus may be used by underwriters and dealers in connection with
sales of Common Stock into the United States.

EXPERTS

The financial statement of the Fund included in the Prospectus has been so
included in reliance on the report of Ernst & Young LLP, independent auditors,
given on the authority of said firm as experts in auditing and accounting.

LEGAL MATTERS

The validity of the shares offered hereby will be passed upon 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 Underwriters by Willkie Farr & Gallagher, New York, New York. Counsel
for the Fund and the Underwriters will rely, as to matters of Maryland law, on
Piper & Marbury, Baltimore, Maryland. Certain matters of Argentinean law will be
passed on for the Fund by Bruchou, Fernandez, Madero & Lombardi, Buenos Aires,
Argentina; certain matters of Brazilian law by Machado, Meyer, Sendacz e Opice,
Sao Paolo, Brazil; certain matters of Chilean law by Carey y Cia, Santiago,
Chile; certain matters of Colombian law by Gomez Pinzon & Asociados, Bogota,
Colombia; certain matters of Mexican law by Ritch, Heather y Muller, S.C.,
Mexico City, Mexico; certain matters of Peruvian law by Rodrigo, Elias &
Medrano, Lima, Peru; and certain matters of Venezuelan law by Rodner, Martinez &
Asociados, Caracas, Venezuela.

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.

47
<PAGE> 48

REPORT OF ERNST & YOUNG LLP, 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 October 26,
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 October 26, 1994, in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

Boston, Massachusetts
October 27, 1994

48
<PAGE> 49

LEHMAN BROTHERS LATIN AMERICA GROWTH FUND, INC. (NOTE 1)

STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 26, 1994

<TABLE>
<S> <C>
ASSETS:
Cash........................................................................ $ 100,008
Deferred organization expenses (Note 2)..................................... 135,000
Deferred offering costs (Note 2)............................................ 1,108,313
----------
1,343,321
LIABILITIES:
Accrued organization expenses (Note 2)...................................... 135,000
Accrued offering costs (Note 2)............................................. 1,108,313
----------
1,243,313
NET ASSETS, applicable to 7,169 shares of $0.001 par value shares of common
stock issued and outstanding; 100,000,000 shares authorized.................. $ 100,008
=========
NET ASSET VALUE PER SHARE...................................................... $ 13.95
=========
</TABLE>

49
<PAGE> 50

NOTES TO STATEMENT OF ASSETS AND LIABILITIES

(Note 1) Lehman Brothers Latin America Growth Fund, Inc. (the "Fund") was
incorporated as a Maryland corporation on June 27, 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 7,169 shares of its common
stock for an aggregate purchase price of $100,008. 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 $135,000, 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 $1,108,313, will be paid
from the proceeds of the Offering 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. The Shareholder Services Group, Inc. will
serve as the Fund's U.S. Administrator (the "U.S. Administrator") pursuant to an
administration agreement entered into between the Fund and the Administrator.

The Fund will pay the Investment Adviser a monthly fee for its advisory
services at an annual rate of 1.25% 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 .10% of the Fund's average weekly net assets,
subject to a minimum annual fee of $100,000.

Lehman Brothers Inc., The Nikko Securities Co. International, Inc., Advest,
Inc., Dain Bosworth Incorporated, Fahnestock & Co. Inc., First of Michigan
Corporation, Principal Financial Securities, Inc. and Rauscher Pierce Refsnes,
Inc. are acting as the Representatives of the U.S. Underwriters participating in
the U.S. Offering of the common stock of the Fund.

The Nikko Securities Co., Ltd. and Lehman Brothers Japan Inc. are acting as
the managers for the Japanese Underwriters participating in the Japanese
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.

50
<PAGE> 51

APPENDIX A

SECURITIES MARKETS AND ECONOMIC DATA:
SELECTED LATIN AMERICAN COUNTRIES

The information set forth below has been extracted from various
multinational organization publications and private sources. The Fund, its Board
of Directors and the Investment Adviser make no representation as to the
accuracy of the information, nor has the Fund, its Board of Directors or the
Investment Adviser attempted to verify it. Statistical data may vary from source
to source as a result of differences in the underlying assumptions or
methodology used. Furthermore, no representation is made that any correlation
exists or will exist between Latin American countries discussed or their
economies in general and the performance of the Fund.

LATIN AMERICAN SECURITIES MARKETS DATA

The following table shows the market capitalization for the stock markets
of seven Latin American countries at the end of each year from 1989 through
1993, and at June 30, 1994. The market capitalization for the United States is
shown for comparative purposes.

MARKET CAPITALIZATION
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
JUNE 30,
1989 1990 1991 1992 1993 1994
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Argentina....................... 4,225 3,268 18,509 18,633 43,967 41,291
Brazil.......................... 44,368 16,354 42,759 45,261 99,430 105,918
Chile........................... 9,587 13,645 27,984 29,644 44,622 52,080
Colombia........................ 1,136 1,416 4,036 5,681 9,237 13,595
Mexico.......................... 22,550 32,725 98,178 139,061 200,671 174,582
Peru............................ 931 812 1,118 2,630 5,113 5,848
Venezuela....................... 1,472 8,361 11,214 7,600 8,010 3,849
United States................... 3,505,686 3,089,651 4,099,479 4,497,833 5,223,768 5,235,040
</TABLE>

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

Sources: International Finance Corporation ("IFC"), Emerging Stock Markets
Factbook 1994; IFC, Quarterly Review of Emerging Markets, Second
Quarter 1994; New York Stock Exchange; American Stock Exchange;
National Association of Securities Dealers, Inc.

A-1
<PAGE> 52

The following table shows the percentage of market capitalization of
indexes represented by the ten largest stocks in the seven Latin American
countries listed below at June 30, 1994. Information for the Standard & Poor's
500 Index is provided for comparison.

MARKET CONCENTRATION

<TABLE>
<CAPTION>
TEN LARGEST STOCKS AS A MARKET
PERCENTAGE OF MARKET NUMBER OF LISTED CAPITALIZATION
CAPITALIZATION COMPANIES (BILLIONS OF U.S. DOLLARS)
JUNE 30, 1994(A) JUNE 30, 1994 JUNE 30, 1994
----------------------- ---------------- --------------------------
<S> <C> <C> <C>
Argentina.......................... 42.1% 166 41.3
Brazil............................. 37.0% 538 105.9
Chile.............................. 49.6% 278 52.1
Colombia........................... 80.1% 90 13.6
Mexico............................. 33.8% 201 174.6
Peru............................... 63.3% 213 5.8
Venezuela.......................... 75.1% 93 3.8
United States(b)................... 17.1% 500 3,204.0
</TABLE>

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

Source: IFC, Quarterly Review of Emerging Markets, Second Quarter 1994.

(a) Based upon stocks included in the International Finance Corporation Global
Composite Index. IFCG Indexes are intended to represent the performance of
the most active stocks in their respective stock markets, and to be the
broadest indicator of market movements. Market capitalization excludes
certain exchanges.

(b) Based upon stocks included in the Standard & Poor's 500 Index.

The total value of shares traded during the years 1989-1993 are shown
below. The value of trading for the United States is shown for comparison.

VALUE OF TRADING
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Argentina......................... 1,916 852 4,824 15,679 10,339
Brazil............................ 16,762 5,598 13,373 20,525 57,409
Chile............................. 866 783 1,900 2,029 2,797
Colombia.......................... 74 71 203 554 732
Mexico............................ 6,232 12,212 31,723 44,582 62,454
Peru.............................. 90 99 130 417 1,672
Venezuela......................... 93 2,232 3,240 2,631 1,874
United States..................... 2,015,544 1,815,476 2,254,983 2,678,523 3,507,223
</TABLE>

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

Source: IFC, Emerging Stock Markets Factbook, 1994.

A-2
<PAGE> 53

The year end changes in the local stock market indexes in U.S. dollar terms
are shown in the following table. Data for the United States, Japan and the
United Kingdom are provided for comparison.

PERCENTAGE CHANGES IN LOCAL STOCK MARKET INDEXES
(U.S. Dollar Terms)

<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
INDEX 1989 1990 1991 1992 1993 6/30/94
---------------------- ----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Bolsa Indice
Argentina General............... 107.7% -26.3% 360.1% -24.7% 53.2% -12.7%
Brazil BOVESPA............... 32.9% -71.3% 256.7% -0.7% 111.2% 12.6%
Chile IGPA.................. 39.8% 34.5% 91.3% 7.9% 27.1% 14.2%
Colombia IBB................... -11.1% 15.4% -80.9% 21.3% 49.8% 32.2%
Mexico BMV General........... 71.2% 36.6% 117.3% 21.8% 48.3% -20.2%
Peru IGBVL................. 269.6% -24.8% 115.0% 122.4% 89.8% 14.6%
Venezuela New BYC............... -39.1% 467.9% 34.1% -47.3% -17.5% -34.3%
United States S&P 500............... 27.3% -6.6% 26.3% 4.5% 7.1% -4.8%
Japan Nikkei 225............ 48.6% -42.2% -11.3% -26.4% -9.3% 6.3%
United Kingdom FT 100................ 51.5% -26.0% 20.2% 40.8% 22.9% -18.2%
</TABLE>

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

Sources: IFC, Emerging Markets Factbook, 1994; IFC, Quarterly Review of Emerging
Markets, Second Quarter 1994; Dow Jones News/Retrieval: Tradeline.

The average price/earnings ratio and price-to-book value ratio of certain
Latin American securities markets on June 30, 1993, December 31, 1993 and June
30, 1994, are shown below. Data for the United States, Japan and the United
Kingdom and certain regional indexes are provided for comparison.

SELECTED DATA FOR LATIN AMERICAN STOCK MARKETS(A)

<TABLE>
<CAPTION>
PRICE/EARNINGS RATIO PRICE/BOOK VALUE RATIO
---------------------------------- ----------------------------------
JUNE 30, DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31, JUNE 30,
1993 1993 1994 1993 1993 1994
-------- ------------ -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Argentina................................... 32.6 41.9 26.6 1.2 1.9 1.7
Brazil...................................... 16.7 12.6 14.4 0.5 0.5 0.6
Chile....................................... 16.8 20.0 20.5 1.6 2.1 2.2
Colombia.................................... 14.6 25.5 30.8 1.3 1.8 2.3
Mexico...................................... 12.4 19.4 16.6 1.7 2.6 2.2
Peru........................................ 22.4 44.0 30.8 3.0 3.6 3.1
Venezuela................................... 18.6 17.4 14.1 1.7 1.8 2.1
IFCG Latin American
Index..................................... 14.9 18.4 17.4 1.0 1.3 1.3
IFCG Asia Index............................. 21.2 33.3 29.5 2.2 3.3 3.0
IFCG Composite Index........................ 18.0 25.9 23.5 1.5 2.2 2.1
United States (S&P 500)..................... 22.5 22.1 18.8 2.6 2.6 2.4
Japan (Nikkei 225).......................... 60.7 67.8 93.7 2.1 2.0 2.3
United Kingdom (FT 100)..................... 21.0 20.7 15.1 2.2 2.6 2.2
</TABLE>

- ---------------
Sources: IFC, Quarterly Review of Emerging Markets, Second Quarter, 1994; IFC,
Emerging Stock Markets Factbook, 1994.

(a) Certain stock exchanges are excluded. Figures for the Latin American stock
markets are as of June 30, 1994. Figures for indexes reflect the number of
companies comprising each respective index.

A-3
<PAGE> 54

ECONOMIC DATA

The relative size of the seven countries in terms of area, population (as
of December 31, 1993) and real gross domestic product (GDP) and per capita GDP
(for the year ended December 31, 1992) are shown in the following table.

<TABLE>
<CAPTION>
REAL GDP
AREA POPULATION (BILLIONS OF GDP PER
(THOUSANDS OF SQ. MI.) (MILLIONS) U.S. DOLLARS) CAPITA
---------------------- ---------- ----------------- -------
<S> <C> <C> <C> <C>
Argentina................................. 1,068 34 $ 167.3 $6,912
Brazil.................................... 3,300 159 $ 479.3 $2,619
Chile..................................... 303 14 $ 35.3 $3,030
Colombia.................................. 440 34 $ 42.6 $1,303
Mexico.................................... 760 91 $ 260.2 $3,728
Peru...................................... 496 23 $ 34.3 $2,016
Venezuela................................. 354 21 $ 57.0 $2,984
</TABLE>

- ---------------
Sources: International Monetary Fund ("IMF"), International Financial
Statistics, August 1994 (Haver Analytics); World Almanac, 1994.

Economic growth among these countries has been erratic, but in recent years
there have been improvements in the rates of growth of certain countries. The
following table shows the annual change in real GDP for the years 1989 through
1993.

PERCENTAGE CHANGES IN REAL GROSS DOMESTIC PRODUCT

<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
------- ------ ----- ------- ------
<S> <C> <C> <C> <C> <C>
Argentina................................... -6.2% 0.1% 8.9% 8.7% 6.0%
Brazil...................................... 3.3% -4.1% 1.2% -0.9% 5.0%
Chile....................................... 10.2% 3.0% 6.1% 10.3% 6.0%
Colombia.................................... 3.4% 4.3% 2.1% 3.5% 5.2%
Mexico...................................... 3.3% 4.4% 3.6% 2.8% 0.4%
Peru........................................ -11.0% -4.3% 2.8% -2.3% 6.4%
Venezuela................................... -7.8% 6.9% 9.7% 6.8% -1.0%
</TABLE>

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

Sources: IMF, International Financial Statistics, August 1994; IMF, World
Economic Outlook, May 1994.

A-4
<PAGE> 55

The table below sets forth external debt as a percentage of nominal GDP in
the Latin American countries below from 1989 through 1993.

EXTERNAL DEBT AS A PERCENTAGE OF NOMINAL GDP

<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Argentina...................................... 85.2% 44.0% 34.5% 29.5% 25.8%
Brazil......................................... 24.5% 24.4% 29.0% 29.6% 24.1%
Chile.......................................... 64.2% 63.7% 52.8% 46.9% 47.2%
Colombia....................................... 42.7% 42.8% 41.8% 39.5% 35.8%
Mexico......................................... 45.5% 43.4% 40.2% 34.4% 33.0%
Peru........................................... 46.7% 58.8% 48.7% 48.3% 49.2%
Venezuela...................................... 75.6% 68.3% 63.7% 61.5% 64.9%
</TABLE>

- ---------------
Sources: The World Bank, World Debt Tables, 1993-1994 (Haver Analytics); IMF,
International Financial Statistics, August 1994 (Haver Analytics).

Most of these countries have experienced substantial and, in some periods,
extremely high rates of inflation for many years. Argentina, Peru and Brazil
have experienced hyperinflation. Inflation and rapid fluctuations of inflation
rates have had and may continue to have adverse effects on the economies and
securities markets of certain Latin American countries. In an attempt to control
inflation, certain countries have imposed wage and price controls. The following
table shows the changes in the consumer price indexes for the period 1989
through 1993.

PERCENTAGE CHANGES IN CONSUMER PRICE INDEXES
(December to December)

<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
--------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Argentina............................. 3,086.9% 2,313.7% 172.0% 24.6% 10.6%
Brazil................................ 1,287.2% 2,937.9% 400.0% 1,100.0% 2,146.7%
Chile................................. 16.2% 26.6% 22.0% 15.6% 12.1%
Colombia.............................. 25.9% 29.2% 30.4% 27.0% 22.6%
Mexico................................ 20.1% 26.6% 22.7% 15.5% 9.7%
Peru.................................. 3,371.1% 7,481.5% 410.0% 73.3% 48.6%
Venezuela............................. 84.4% 40.8% 34.2% 31.4% 38.1%
</TABLE>

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

Source: IMF, International Financial Statistics, August 1994.

A-5
<PAGE> 56

THE REPUBLIC OF ARGENTINA

The Republic of Argentina consists of 23 provinces and the federal capital
of Buenos Aires. It is the second largest country in Latin America in area and
has the highest real GDP per capita.

Of a population of approximately 34 million, approximately 11 million live
in the greater Buenos Aires area and approximately 86% of the population is
urban. The population is 95% literate and mostly of European heritage. During
the 1980 to 1990 period, Argentina's population grew at a 1.5% average annual
rate.

THE ECONOMY

General

Argentina has a well diversified, mechanized agricultural sector which
benefits from a favorable climate and some of the world's richest soils. It is a
major producer of grains and livestock. Argentina's exports have historically
been concentrated in primary products and agricultural goods (mainly
agricultural products and processed foods). Argentina also has significant oil
and gas reserves and is the third largest oil and gas producer in Latin America
after Venezuela and Mexico. Intermediate goods, including chemicals, metals and
plastics, have historically accounted for a large percentage of Argentina's
imports.

Despite its strengths, the Argentine economy in recent decades has had a
record of low and erratic growth, declining investment rates and high and rapid
inflation. During the 1980s and into the 1990s, the Argentine government
instituted several economic plans to stabilize the economy and foster real
growth. However, during this period, the Argentine government was unable to
sustain reduction in the public deficit and the plans ultimately failed to
reduce inflation and stimulate growth. The Argentine economy experienced a 1.7%
average annual increase in GDP during 1987 to 1992, and inflation, as measured
by the increase in consumer prices, was 3086.9% in 1989 and 2313.7% in 1990. As
a result of high inflation, Argentina's currency experienced devaluation
relative to the U.S. dollar at the rates of 98.8%, 76.0% and 43.2% in 1989, 1990
and 1991, respectively.

In March 1991, Minister of Economy Domingo Cavallo announced the
Convertibility Plan, which is designed to reduce inflation and achieve long-term
economic growth. The Convertibility Law passed by the Argentine Congress in
March 1991 effectively established the convertibility of the Peso, obligated the
Central Bank to sell U.S. dollars at a fixed exchange rate of one Peso per U.S.
dollar, reduced the outstanding stock of Pesos and, to that end, required full
international reserve backing for Argentina's monetary base.

Since the implementation of the Convertibility Plan, real GDP grew 8.9% in
1991, 8.7% in 1992, and 6.0% in 1993, and the annualized rate of inflation
declined from 2,313.7% in 1990 to 172.0% in 1991, 24.6% in 1992 and to 10.6% in
1993. Argentina's currency, relative to the U.S. dollar, appreciated at the
annual rate of 0.1% in 1992 and depreciated at the annual rate of 0.2% in 1993.

In connection with the reforms implemented by the Convertibility Plan, the
Government has undertaken a program for the removal of economic restrictions and
regulations and the promotion of competition, including deregulation of the
domestic market for goods, services and transportation, abolition of
restrictions on imports and exports and a reduction of pervasive Government
regulation of the private sector. All quantitative import restrictions on trade,
except those on automobiles, have been eliminated, and the average tariff has
been substantially reduced. In the financial sector, all stamp taxes relating to
public offerings of listed securities, all capital gains taxes on stocks and
bonds held by non-resident investors and fixed commissions on the stock
exchanges were abolished. In January 1993, the remaining stamp taxes were
abolished with the exception of those for real estate transactions.

In addition to the Convertibility Plan, the Argentine Government has
commenced a privatization program pursuant to which more than 32 state
enterprises are eligible for privatization. In addition to increasing the
efficiency and quality of services provided by public-sector enterprises, the
privatization program is also intended to provide cash proceeds to reduce the
public-sector deficit, reduce the Argentine Government's external debt through
selective use of debt-equity conversions, and increase tax revenues from the new
owners of the enterprises.

Through both direct sales and share offerings, Argentina's privatization
program has allowed the Argentine Government to raise cash and reduce external
debt in excess of U.S. $17.1 billion as of April 1994.

A-6
<PAGE> 57

The privatization program has also served to attract direct foreign investment
into Argentina from Asia, Europe, North America and South America.

The following table shows the major components of Argentina's GDP and the
percentage changes in real GDP.

GROSS DOMESTIC PRODUCT
(Millions of Pesos)

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Private Consumption....................... 87 2,531 55,326 151,531 192,261
Government Consumption.................... -- -- -- -- --
Gross Fixed Capital Formation............. 21 503 9,647 26,478 37,854
Increase/Decrease in Stocks............... -- -- -- -- --
Exports of Goods and Services............. 11 424 7,140 13,884 14,954
Imports of Goods and Services............. (7) (213) (3,192) (10,995) (18,432)
GROSS DOMESTIC PRODUCT.................... 112 3,245 68,921 180,898 226,637
REAL GDP (1990 PRICES).................... 73,444 68,878 68,921 75,059 81,554
Change in Real GDP...................... -1.9% -6.2% 0.1% 8.9% 8.7%
</TABLE>

- ---------------
Source: IMF, International Financial Statistics, August 1994.

External Debt

Argentina has, in the past, defaulted on and rescheduled loans from
official creditors and from commercial banks, and on bonds issued as part of
previous debt restructurings with commercial banks. Interest payments to bank
creditors ceased in April 1988 and were resumed on a partial basis in June 1990.
As part of the negotiations for the rescheduling of the debt denominated in
foreign currency in early 1992, partial payment of interest to bank creditors
was raised to U.S. $70 million per month, representing 55% of bank interest
falling due.

In April 1992, Argentina announced a new refinancing agreement under the
Brady Plan relating to medium and long-term debt to commercial banks. The Brady
Plan applied to an estimated U.S. $31 billion of debt, including interest
arrears. The Brady Plan effected a reduction in the face amount of debt
denominated in foreign currency of approximately U.S. $3 billion, as well as a
reduction of 35% in the net present value of the interest service. The closing
for the Brady Plan took place on April 7, 1993. Over 99% of the commercial bank
debt was refinanced pursuant to the Brady Plan.

At December 31, 1993, Argentina's total external debt (which is defined as
the sum of gross official debt, gross private non-bank debt and gross bank debt)
was estimated to be U.S. $68.7 billion.

A-7
<PAGE> 58

The following table shows Argentina's external debt for the years 1988
through 1992.

EXTERNAL DEBT
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Total debt................................ 58,741 65,257 62,233 65,396 67,569
Long-term debt............................ 49,346 53,632 48,706 49,368 49,079
Short-term debt........................... 5,717 8,525 10,445 13,546 16,176
Use of IMF credit......................... 3,678 3,100 3,082 2,483 2,314
Total debt service.......................... 4,139 3,033 4,956 4,005 3,882
Debt service/Exports........................ 36.4% 25.2% 32.8% 27.2% 26.1%
</TABLE>

- ---------------
Source: The World Bank, World Debt Tables, 1993-94 (Haver Analytics).

Foreign Trade

Argentina's largest single trading partner in 1993 was the United States,
which accounted for 42.8% of its exports and 56.0% of its imports. Its second
largest trading partner in 1993 was Brazil, which accounted for 17.6% of its
exports and 22.0% of its imports.

The following table shows the distribution of Argentina's merchandise trade
for the years 1990 through 1993.

DISTRIBUTION OF EXPORTS AND IMPORTS
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
EXPORTS IMPORTS
---------------------------------------------- ----------------------------------------------
PERCENT OF PERCENT OF
TOTAL FOR TOTAL FOR
1990 1991 1992 1993 1993 1990 1991 1992 1993 1993
------ ------ ------ ------ ---------- ----- ----- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total......................... 12,339 11,975 12,366 13,530 100% 4,077 8,275 15,557 18,312 100%
Industrial Countries.......... 6,131 5,912 5,897 5,785 42.8% 2,401 4,415 8,908 10,251 56.0%
United States............... 1,699 1,245 1,245 1,180 8.7% 877 1,498 3,544 4,149 22.7%
Japan....................... 395 454 468 450 3.3% 133 602 780 790 4.3%
Germany..................... 637 732 1,063 863 6.4% 406 653 1,137 1,062 5.8%
Netherlands................. 1,375 1,328 407 1,081 8.0% 77 93 142 193 1.1%
Latin American
Countries Below............. 2,610 2,700 3,083 4,197 31.0% 992 2,057 4,179 5,057 27.6%
Brazil...................... 1,423 1,489 1,598 2,385 17.6% 718 1,532 3,377 4,029 22.0%
Chile....................... 462 488 688 528 3.9% 112 236 508 648 3.5%
Colombia.................... 73 78 86 122 0.9% 27 35 38 96 0.5%
Mexico...................... 321 236 259 251 1.8% 115 181 199 231 1.3%
Peru........................ 187 208 231 243 1.8% 12 49 31 23 0.1%
Venezuela................... 144 201 221 218 1.6% 8 24 26 30 0.2%
</TABLE>

- ---------------
Source: IMF, Direction of Trade Statistics, June 1994.

A-8
<PAGE> 59

THE SECURITIES MARKETS

Equity Markets

The Bolsa de Comercio de Buenos Aires ("Buenos Aires Stock Exchange"), the
principal exchange in Argentina, was founded in 1854. There are eleven other
smaller exchanges. Trading in securities is conducted through Mercados de
Valores each affiliated with one of the exchanges. Each Mercado is a corporation
whose shareholders are the individuals and entities entitled to trade in the
securities listed in that particular Mercado. The largest Mercado in Argentina
is the Mercado de Valores de Buenos Aires S.A. which is located in Buenos Aires;
four smaller Mercados are located in the cities of Cordoba, Mendoza, Rosario and
La Plata. The Buenos Aires Stock Exchange accounts for over 90% of the value of
all trades in the Argentine stock markets.

Debt Markets

The Argentine bond market is dominated by the national government's
securities, especially Bonos Externos de la Republica Argentina ("BONEX"). BONEX
are U.S. dollar-denominated bearer bonds issued by Argentina. Prior to 1989, the
Argentine government had issued a variety of indexed, Austral-denominated
securities which traded in liquid markets. On December 28, 1989, however, all
government securities other than BONEX were refinanced pursuant to the BONEX
Plan. Subsequently, the Argentine government issued three Austral-denominated
instruments: BIC ("Bono de Inversion y Crecimiento"), BOCE ("Bono de
Consolidacion Economic") and BOCREX ("Bono de Credito a la Exportacia"). The
Argentine government has made several bond issuances outside Argentina.
Corporate bonds are sold through public offerings as well as private placements.
Since May 1990, corporate bonds have been traded in the Buenos Aires Stock
Exchange, although the market is far less developed than that for public sector
bonds. Short-term investments available in the primary market include bank
certificates of deposit, commercial paper and repurchase agreements.

Market Regulation

The Argentine securities markets are regulated by the Comision Nacional de
Valores (the "CNV"), which was organized in 1937 along the lines of the U.S.
Securities and Exchange Commission, and became autonomous in 1968. The CNV is
headed by a five person Board of Directors, including a Chairman. All five
Directors are appointed by the President of Argentina to seven-year terms. The
CNV has authority over the entire securities market (other than the primary
issuance of Argentine government securities), including powers of regulation,
investigation and the authority to impose disciplinary measures. In addition,
the CNV has the function of promoting and supporting the development of the
corporate securities market in Argentina.

All companies must register with the CNV before issuing and selling
securities to the public. Such registration requires the disclosure of
information about the company including financial reports, compliance with
statutory norms and corporate activities. Listed companies must update the
information on an annual basis and file interim and quarterly reports. Moreover,
any fact or event that may materially affect the company must be immediately
reported by its management to the CNV and the stock exchanges. Such information
is normally released to the public immediately. Noncompliance with these
registration and disclosure rules may subject the company and its management to
penalties provided by law.

The over-the-counter market is also regulated by the CNV and all
transactions effected over-the-counter must be reported. In general, if an
unlisted company's securities are publicly offered, it is subject to regulations
similar to those imposed on listed companies. Each Argentine stock market is
responsible for registering the individual brokers and brokerage companies who
are trading in that particular market, issuing trading regulations, enforcing
compliance with its rules and regulations and for guaranteeing the clearing and
settlement of trades.

Steps have been undertaken in recent years to introduce new, non-bank
financial products into the capital markets, and to create a commercial paper
market, a market for negotiable instruments and a futures and options exchange.
To promote activity in the stock market, the government has ceased the
regulation of brokerage fees and has eliminated transfer taxes and stamp taxes
on securities transactions. The Argentine

A-9
<PAGE> 60

Congress recently enacted legislation permitting the establishment of pension
funds, which is expected to contribute to the growth of the capital markets.

THE POLITICAL SYSTEM

The Argentine federal constitution provides for a tripartite system of
government: an executive branch headed by a President; a legislative branch made
up of a bicameral congress; and a judicial branch, of which the Supreme Court is
the highest body of authority. The President is directly elected and serves for
a four-year term at the end of which he can be re-elected for another four-year
term. The next Presidential election is scheduled to take place in May 1995. The
President directs the general administration of the country and has the power to
veto laws in whole or in part, although Congress may override a veto by a
two-thirds vote.

Since 1983, Argentina has had two successively elected civilian presidents.
Raul Alfonsin, elected in 1983, was the first civilian president in six decades
to stay in office until the scheduled election of a successor. Under Mr.
Alfonsin, the Government re-established civilian rule, including a functioning
National Congress. The current president, Carlos Menem, won the presidential
election in May 1989 and took office in July 1989, six months ahead of the
scheduled inauguration, in the midst of an economic crisis. His term of office
expires in 1995.

President Menem was elected with the backing of organized labor and
business interests that traditionally supported a closed economy and a large
public sector. Shortly after taking office, however, President Menem adopted
market-oriented and reformist policies, including a large privatization program,
a reduction in the size of the public sector and an opening of the economy to
international competition.

A-10
<PAGE> 61

THE FEDERATIVE REPUBLIC OF BRAZIL

The Federative Republic of Brazil is the largest country in South America
with a land area of approximately 8.5 million square kilometers (3.3 million
square miles), about half of the South American continent.

Brazil's population in 1993 was estimated at approximately 159 million.
About 75% of Brazil's population lives in cities. The two most populous cities
are Sao Paulo and Rio de Janeiro, with populations of 17 and 11 million,
respectively. The population is currently growing at an estimated rate of
approximately 2% per year. The literacy rate is estimated to be approximately
76%.

THE ECONOMY

General

In the last 40 years, the Brazilian economy has developed from one highly
dependent on agriculture and mining toward an economy based on industry (which
includes mining and manufacturing) and services. The fastest growing
manufacturing sectors have been metallurgy, machinery, chemical, electrical and
transportation equipment. In addition, Brazil is the world's largest producer of
coffee and the world's second largest producer of sugar cane and soya.

In the 1970s, Brazil experienced steady economic growth, but the late 1980s
were characterized by a faltering economy and a debt crisis in which Brazil
faced rising foreign interest rates, increasing difficulties in servicing its
foreign debt and high domestic inflation. As a result of high inflation,
Brazil's currency devaluation relative to the U.S. dollar averaged in excess of
90% annually for the years 1989 through 1993. In March 1990, then President
Collor announced the New Brazil Stabilization Plan. The Collor Plan, as it
became known, aimed to promote economic growth by reducing inflation and the
role of the state, thereby strengthening the private sector and liberalizing the
country's economy. The plan failed, resulting in a recession, a rise in
unemployment and a 4.1% decline in GDP in 1990. In 1992, President Collor
resigned.

His successors, Itamar Franco and Fernando Henrique Cardoso, have continued
Brazil's recent attempts to restore economic stability. The current plan, called
the Real Plan, was implemented by president-elect Cardoso while he was finance
minister. One of the main tenets of the Real Plan involves currency and price
stability through the introduction of a new currency, the value of which is tied
to the dollar. On July 1, 1994, the new currency, the real, was introduced. Both
the real and the Unit of Real Value (URV) were fixed at CR$2,750 (cruzeiro
reals) on June 30, 1994; the rate of exchange of the real (R$) was approximately
U.S. $1.2 in October 1994. However, exchange rates are freely established by the
market and are impossible to anticipate. The real is not convertible.
President-elect Cardoso promised during the campaign to open Brazil's protected
markets and continue the privatization of state enterprises.

A-11
<PAGE> 62

The table below shows the major components of Brazil's GDP and the
percentage changes in real GDP.

GROSS DOMESTIC PRODUCT
(Millions of Cruzeiros Real)

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992
------ ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Private Consumption...................... 52 735 20,019 106,206 1,152,717
Government Consumption................... 11 181 5,058 23,812 280,325
Gross Fixed Capital Formation............ 20 315 7,037 31,272 352,288
Increase/Decrease in Stocks.............. -- -- -- -- --
Exports of Goods and Services............ 9 105 2,345 14,044 178,249
Imports of Goods and Services............ (5) (64) (1,814) (10,848) (116,766)
GROSS DOMESTIC PRODUCT................... 87 1,272 32,645 164,486 1,846,813
REAL GDP (1990 PRICES)................... 32,963 34,049 32,646 33,031 32,736
Change in Real GDP..................... -0.1% 3.3% -4.1% 1.2% -0.9%
</TABLE>

- ---------------
Source: IMF, International Financial Statistics, August 1994.

External Debt

Over the past several years Brazil has experienced severe external debt
problems. On April 15, 1994, Brazil signed a debt restructuring agreement with
commercial bank creditors. The country now has an extended period of time, up to
30 years, to pay approximately U.S. $45 billion to the banks and reduced the
interest owed by another U.S. $4 billion. The administration has estimated up to
U.S. $4.3 billion in savings as a result of the agreement. Brazil's total debt
burden, including loans from banks and other governments, totaled U.S. $121.1
billion at the end of 1992, the highest debt level in Latin America.

The table below sets forth selected data concerning the external debt of
Brazil and its debt service for the years 1988 through 1992. In recent years,
the growth of Brazil's external debt has been due to the rise in interest
arrears on certain obligations to commercial and government creditors.

EXTERNAL DEBT
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total debt stocks...................... 115,712 111,374 116,417 117,350 121,110
Long-term debt....................... 101,463 90,371 90,432 89,129 99,247
Short-term debt...................... 10,915 18,581 24,165 26,983 21,064
Use of IMF credit.................... 3,334 2,422 1,820 1,238 799
Total debt service..................... 15,373 13,322 7,813 6,694 8,150
Debt service/Exports................... 41.5% 34.3% 21.5% 18.7% 20.9%
</TABLE>

- ---------------
Source: The World Bank, World Debt Tables, 1993-94 (Haver Analytics).

Foreign Trade

Beginning in 1982, Brazil began to register merchandise trade surpluses. In
1990, Brazil's merchandise trade surplus grew to approximately U.S. $8.7
billion. Until March 1990, more than 1,000 types of imports, including cars and
personal computers, were prohibited. As part of the Collor Plan, the government
abolished the list of banned imports, but replaced it with high import tariffs.
Import tariffs have been reduced substantially since that time.

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<PAGE> 63

The following table shows the distribution of Brazil's merchandise trade
for the years 1990 through 1993.

DISTRIBUTION OF EXPORTS AND IMPORTS
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
EXPORTS IMPORTS
---------------------------------------------- ----------------------------------------------
PERCENT OF PERCENT OF
TOTAL FOR TOTAL FOR
1990 1991 1992 1993 1993 1990 1991 1992 1993 1993
------ ------ ------ ------ ---------- ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total......................... 31,358 31,620 36,207 38,783 100% 22,642 23,210 23,260 25,677 100%
Industrial Countries.......... 21,327 20,034 21,267 21,578 55.6% 12,435 13,760 13,992 15,343 59.8%
United States............... 7,734 6,386 7,143 8,026 20.7% 4,505 5,396 5,849 6,063 23.6%
Japan....................... 2,349 2,557 2,324 2,312 6.0% 1,612 1,350 1,300 1,519 5.9%
Germany..................... 1,788 2,158 2,078 1,824 4.7% 1,962 2,030 2,100 2,285 8.9%
Netherlands................. 2,494 2,147 2,347 2,488 6.4% 304 378 461 425 1.7%
Latin American
Countries Below............. 2,211 3,718 6,101 5,895 15.2% 2,813 3,247 3,379 3,918 15.8%
Argentina................... 645 1,476 3,070 2,779 7.2% 1,514 1,747 1,837 2,630 10.2%
Chile....................... 484 677 930 1,110 2.9% 525 528 504 438 1.7%
Colombia.................... 163 156 347 378 1.0% 34 60 70 59 0.2%
Mexico...................... 505 758 1,111 966 2.5% 202 227 317 295 1.1%
Peru........................ 146 222 199 273 0.7% 141 126 50 126 0.5%
Venezuela................... 268 429 444 389 1.0% 397 559 601 370 1.4%
</TABLE>

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

Source: IMF, Direction of Trade Statistics, June 1994.

THE SECURITIES MARKET

Equity Securities

Brazil has nine stock exchanges. Of these, the Sao Paulo Stock Exchange and
the Rio de Janeiro Exchange are the largest and handle a significant portion of
the country's trading volume. Under current practice, once a company is listed,
its shares can trade on any of the Brazilian stock exchanges.

Most of the trading volume and most of the market capitalization of the
Brazilian Exchanges is represented by preferred stock rather than common stock.
Since preferred stock does not carry voting rights, its issuance permits a
company's controlling persons to retain control through the ownership of the
company's ordinary shares (common stock). Pursuant to Brazilian corporate law,
the holders of preferred stock are senior to common stockholders with respect to
the receipt of assets upon liquidation of a corporation. Whether or not the
preferred shareholders have a preference in a relation to the common
stockholders to receive dividends is determined by the by-laws of each company.

Debt Securities

Various types of debt securities are available in the primary market.
Instruments with short-term maturities include bank certificates of deposit,
treasury bills, Central Bank Bills and bills of exchange issued by finance
companies. Treasury bonds and corporate debentures have medium-to long-term
maturities. Debt securities are generally not listed on the Brazilian stock
exchanges and are placed privately, primarily with institutional investors.

Secondary market transactions in treasury bonds are generally made in the
over-the-counter market directly between market intermediaries and investors,
most of whom are institutional. The secondary market for public sector bonds has
been relatively active and liquid as compared to the market for corporate debt
securities. Treasury bonds are also used as collateral in repurchase agreements.

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<PAGE> 64

Public sector foreign debt of Brazilian issuers commonly trades in the
over-the-counter markets outside Brazil, typically in New York. While there are
no data setting forth the amount of trading in such securities, they are
generally considered to be actively traded. A number of Brazilian corporations
have recently issued bonds that are listed and traded on the Luxembourg Stock
Exchange.

Market Regulation

The Central Bank of Brazil licenses and oversees the operations of
Brazilian financial institutions, including the licensing of investment banks,
brokerage firms and securities dealerships. Once licensed with the Central Bank
of Brazil, a financial institution's activities in the Brazilian securities
markets are subject to regulation by the Brazilian Securities Commission (the
"CVM"), in addition to the Central Bank of Brazil. The CVM, which is managed by
appointees of the President of Brazil who serve at the President's discretion,
is responsible for the regulation and supervision of the corporate securities
markets and the protection of investors in those markets.

All companies must register with the CVM before issuing and selling
securities to the public. Companies must update information about their
operations on an annual basis, and, in addition, the interim and quarterly
reports with the CVM, though that information is not required to be distributed
to the companies' shareholders. Moreover, any fact or event that may materially
affect a company must be immediately reported by its management to the CVM and
is usually required to be immediately reported to the Brazilian Exchanges and
the public. Noncompliance with these registration and disclosure rules may
subject a company and its management to penalties provided by law.

THE POLITICAL SYSTEM

Brazil is a federal republic with a representative form of government and
is comprised of 26 states and the federal district of Brasilia. The Government
is comprised of three independent branches: executive, legislative and judicial.
Federal executive power in Brazil is vested in the President, who is elected by
popular vote for a four-year non-renewable term and who appoints Ministers to
preside over the various executive departments. The next presidential vote is
scheduled for October 3, 1994 with a November 15 runoff if necessary. Two of the
leading candidates are Fernando Henrique Cardoso, of the Brazilian Social
Democratic Party, and Luiz Inacio Lula da Silva, of the Worker's Party. The new
President will take office January 1, 1995 and the new legislative session will
begin a month later.

The legislature is composed of the Senate and the Chamber of Deputies.
Senators and Deputies are elected by popular vote for terms of eight years and
four years, respectively. The judicial branch is headed by the Federal Supreme
Court, which is the court of final appeal from both federal and state courts. In
addition, each state has its own executive, legislature and judiciary.

In December, 1989, Fernando Collor de Mello became the first President of
Brazil elected by direct vote since 1960. In September 1992, after a prolonged
investigation of charges of corruption involving then President Collor and
related persons, the Chamber of Deputies voted to initiate impeachment
proceedings against Mr. Collor. In December 1992, Mr. Collor resigned from
office and Vice President Itamar Augusto Franco was sworn in as President.

In October, 1994, Fernando Henrique Cardoso was elected President in the
first presidential election since Mr. Collar's resignation. Mr. Cardoso defeated
socialist Luiz Inacio da Silva by a modest margin after Mr. da Silva ran ahead
of Mr. Cardoso by as much as 24 points in June 1994. Mr. Cardoso was lifted by
the success of the Real Plan, the economic reform plan he implemented while Mr.
Augusto's finance minister.

A-14
<PAGE> 65

THE REPUBLIC OF CHILE

The Republic of Chile has an area of approximately 756,626 square
kilometers (303,000 square miles) situated along the west coast of South
America. Chile's population of approximately 13.8 million, which grew at an
average rate of 1.7% per annum during the 1980s, is highly urbanized and
concentrated in a central valley region. The population has a 94% literacy rate.

THE ECONOMY

General

Chile's economic history has been oriented toward the export of primary

products. Chile's largest export industry is mining, and it is the world's
largest producer of copper and iodine. Chile also produces large quantities of
coal, gold, silver, nitrate, iron ore and molybdenum. Following the collapse of
Chile's export markets and its loss of access to international capital markets
during the 1930s, successive governments sought to reduce the country's
dependence on trade through implementation of
import-substitution-industrialization policies designed to promote the growth
of domestic industry and to discourage imports.

Following the military junta's assumption of power in 1973, the military
government introduced a series of economic reforms designed to open the economy
to market forces and foreign investment, liberalize trade and reduce the size
and influence of the public sector in the economy. The Aylwin administration,
which took over in 1990, continued to follow, in general, liberal trade and
investment policies to promote growth in the private sector. Lower taxes, free
trade policies and a competitive exchange rate have enabled Chilean companies to
prosper in a wide range of non-traditional industries, thereby reducing the
country's historical dependency on exporting copper. Since taking office in
March 1994, current President Eduardo Frei has not made any fundamental change
in the economic policies or governmental regulation in Chile.

The Chilean economy has grown for ten consecutive years beginning in 1984,
with real GDP growing on average approximately 7% per year after 1988. Though
inflation has persisted, it has been low relative to the rest of Latin America,
averaging 18.5% over the past five years. Relatively low inflation is also
reflected in the devaluation of Chile's currency versus the U.S. dollar, which
ranged from 2% to 15.2% during the 1989 to 1993 period. In October 1994, the
Chilean Finance Minister, Eduardo Aminant, estimated that the Chilean economy
will grow at a rate of 4% in 1994, while inflation will fall below 11%.

The table below shows the major components of Chile's GDP and the
percentage changed in real GDP.

GROSS DOMESTIC PRODUCT
(Billions of Pesos)

<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Private Consumption.............................. 4,532 5,749 7,542 9,645 11,707
Government Consumption........................... 720 884 1,150 1,454 1,727
Gross Fixed Capital Formation.................... 1,736 2,265 2,572 3,542 4,683
Increase/Decrease in Stocks...................... 179 11 57 66 (55)
Exports of Goods and Services.................... 2,635 3,159 3,959 4,614 4,915
Imports of Goods and Services.................... (2,300) (2,865) (3,409) (4,364) (5,313)
GROSS DOMESTIC PRODUCT........................... 7,502 9,203 11,871 14,957 17,664
REAL GDP (1990 PRICES)........................... 8,938 9,203 9,761 10,764 11,406
Change in Real GDP............................. 10.2% 3.0% 6.1% 10.3% 6.0%
</TABLE>

- ---------------
Source: IMF, International Financial Statistics, August 1994.

A-15

<PAGE> 66

External Debt

Chile experienced difficulty in meeting contractual principal payments on
its debt in the early 1980s as a result of the rise in real rates of interest
and decline in export prices. Chile reached an agreement with creditors to
reschedule the principal payments of U.S. $3.1 billion of its public and private
debt in July 1983. It has negotiated several rescheduling agreements since then,
the most recent of which extended the maturities and change the timing of annual
interest payments to avoid an uneven amortization schedule on U.S. $4.6 billion
of public and private debt in December 1990. No interest arrears accumulated on
Chilean debt during the 1980s and early 1990s.

The following table shows Chile's external debt at the end of the years
1988 through 1992.

EXTERNAL DEBT
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Total debt................................ 19,582 18,032 19,227 17,947 19,360
Long-term debt............................ 16,058 13,789 14,689 14,790 14,924
Short-term debt........................... 2,202 2,973 3,382 2,199 3,714
Use of IMF credit......................... 1,322 1,270 1,156 958 722
Total debt service.......................... 1,624 2,119 2,135 2,197 2,285
Debt service/Exports........................ 19.2% 21.5% 20.0% 18.8% 17.6%
</TABLE>

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

Source: The World Bank, World Debt Tables, 1993-94 (Haver Analytics).

Foreign Trade

Since 1974, Chile has pursued an export diversification program designed to
reduce the country's dependence on copper. As a result, Chile today is an
exporter of processed food, fishmeal, fresh fruit, paper and wine. Chilean
companies are also becoming involved in the export of quality manufactured
goods, such as high quality furniture, through the use of the country's abundant
timber resources.

Most of Chile's trade is with the industrialized countries, which in 1993
were the destination of approximately 61.2% of Chile's exports and the source of
approximately 56.0% of its imports. Chile's main trading partners are the United
States, Japan, Germany, Italy, the United Kingdom, Brazil and Argentina.

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<PAGE> 67

The following table shows the distribution of Chile's merchandise trade for
the years 1990 through 1993.

DISTRIBUTION OF EXPORTS AND IMPORTS
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
EXPORTS IMPORTS
-------------------------------------------------- ---------------------------------------------------
PERCENT OF PERCENT OF
TOTAL FOR TOTAL FOR
1990 1991 1992 1993 1993 1990 1991 1992 1993 1993
------ ------ ------ ---------- ---------- ------ ------ ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total............... 8,588 9,028 9,956 9,560 100% 7,313 7,683 11,691 10,981 100%
Industrial
Countries......... 6,261 6,325 6,370 5,851 61.2% 4,226 4,133 6,545 6,153 56.0%
United States..... 1,489 1,596 1,650 1,656 17.3% 1,373 1,582 2,390 2,477 22.6%
Japan............. 1,388 1,644 1,588 1,502 15.7% 588 646 1,160 881 8.0%
Germany........... 941 712 587 452 4.7% 523 498 756 620 5.6%
Netherlands....... 315 363 333 262 2.7% 63 55 108 88 0.8%
Latin American
Countries Below... 849 1,004 1,328 1,476 15.4% 1,593 1,812 2,563 2,163 19.7%
Argentina......... 114 257 462 589 6.2% 503 554 757 581 5.3%
Brazil............ 487 448 451 406 4.2% 584 698 1,216 1,060 9.7%
Colombia.......... 80 54 74 72 0.7% 164 160 128 98 0.9%
Mexico............ 58 44 93 131 1.4% 101 138 219 210 1.9%
Peru.............. 74 146 173 204 2.1% 50 64 85 72 0.7%
Venezuela......... 36 55 75 74 0.8% 191 198 158 142 1.3%
</TABLE>

- ---------------
Source: IMF, Direction of Trade Statistics, June 1994.

THE SECURITIES MARKETS

The Chilean stock market is one of the more developed among the emerging
markets. The Chilean government's policy of privatizing state-owned companies,
implemented during the 1980s, has led to an expansion of the private ownership
of shares, resulting in an increase in the importance of stock markets. This
policy of privatization extended to the social security system, which was
converted into a privately managed pension fund system. These pension funds have
been allowed, subject to certain limitations, to invest in stocks and are
currently major investors in the stock market. Certain elements of the market,
including pension fund investors, are highly regulated with respect to
investment and renumeration criteria, but the general market is less regulated
than the U.S. market with respect to disclosure requirements and information
usage. Despite the growing sophistication of market participants and the
continuing evolution of stock market regulation and practices, the Chilean stock
market is still an emerging market.

Equity Securities

The Santiago Stock Exchange was established in 1893. It is Chile's
principal exchange and accounts for approximately 72% of all equities traded in
Chile. Approximately 24% of equity trading is conducted on the Bolsa Electronica
de Chile, an electronic trading market which was created by banks and non-member
brokerage houses. The remaining 4% of equity trading is carried out on the
Valparaiso Stock Exchange.

Equities, closed-end funds, fixed-income securities, short-term and money
market securities, gold and dollars are traded on the Santiago Stock Exchange.

Debt Securities

Trading in Chilean fixed income securities takes place on the Santiago
Stock Exchange's electronic auction system and on the Bolsa Electronica. The
largest portion of the fixed income securities traded are debt securities of the
Central Bank of Chile and the Chilean Treasury, but mortgage-backed securities
and corporate bonds are also traded. The largest investors in Chilean fixed
income debt instruments are Chilean pension funds and the insurance companies.

A-17
<PAGE> 68

Market Regulation

The Chilean securities markets are principally regulated by the
Superintendencia de Valores y Seguros (the "SVS"). The Superintendent of the SVS
is appointed by and reports to the President of Chile and, through the Ministry
of Finance, has an obligation to coordinate his actions with the Chilean
Minister of Finance. The SVS supervises public corporations, stock exchanges,
stock exchange brokers (Corredores de Bolsa), over-the-counter securities
brokers (Agentes de Valores), mutual funds, mutual fund and pension fund
managers, external auditors, insurance companies, foreign capital investment
funds and any entities offering securities to the public.

In executing its supervisory role, the SVS can interpret the law,
investigate claims of investors or other interested parties, initiate judicial
proceedings and act as a consultant to the judicial system. The SVS is
responsible for examining prospectuses, reviewing the books and financial
statements of the entities it regulates and registering all public debt and
equity offerings and all public corporations in the National Securities Registry
(Registro Nacional de Valores). Once a corporation registers in the Registry,
either by virtue of being a "public corporation" or by publicly offering its
securities, it must comply with the disclosure requirements prescribed by the
SVS. The SVS is also responsible for establishing accounting and disclosure
rules for public corporations. The SVS requires quarterly and annual financial
statements from issuers, quarterly reports of shareholders, monthly reports of
shares traded, prior notification of dividend payments and notification of other
material facts. These reports must be made available to the SVS, the stock
exchanges and the public.

The SVS is the sole regulator of the Agentes de Valores, brokers who trade
outside the stock exchanges primarily in bond repurchase agreements and money
market instruments. Minimum capital and coverage ratios and maximum leverage
ratios are specified by the SVS. The SVS also requires the Agentes de Valores to
report daily on their transactions. Bonds can only be traded with the public by
Agentes de Valores, banks or stock exchange brokers.

THE POLITICAL SYSTEM

The Chilean Constitution provides for a tripartite system of government: an
executive branch headed by a President; a legislative branch made up of a
bicameral congress; and a judicial branch, of which the Supreme Court is the
highest authority.

The current President, Eduardo Frei, took office in March 1994 succeeding
Patricio Aylwin. President Frei, who heads a center-left coalition, will serve a
single six-year term. The Congress is made up of a Senate and a Chamber of
Deputies. Senators are elected to eight-year terms and Deputies to four-year
terms. Judges of the Supreme Court are appointed by the President out of a list
of five persons presented by the Supreme Court and serve until age 75.

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<PAGE> 69

THE REPUBLIC OF COLOMBIA

GENERAL

The Republic of Colombia is the fourth largest country in Latin America,
with a national territory of 1.14 million square kilometers (440,000 square
miles).

The country's population is approximately 34 million. Approximately 70% of
the country's people live in cities and towns of more than 1,000 inhabitants.
The annual population growth in the period 1981 to 1990 was 1.8%.

THE ECONOMY

Although Colombia has abundant natural resources, its economy was for a
long time heavily dependant on the export of a single commodity, coffee.
However, since the 1980s there have been advances in diversifying farm and
industrial production. By 1987 coffee's share had fallen to one-third of total
exports. Oil output tripled in the 1980s, and oil export earnings surpassed
those of coffee in 1990. In addition, recent development has made coal
Colombia's third most important export earner, while textiles, clothing and
chemicals are leading the way in the manufacturing sector.

Over the last decade, Colombia's economy has grown steadily. Since the
mid-1980s, conservative macro-economic policies implemented by the central
governments have resulted in nearly balanced public sector budgets, increased
international reserves and a more diversified export base. While facing many of
the external economic shocks that affected Latin America in the 1980s, including
price weakness for key export commodities (coffee in particular) and a large
reduction in inflows of foreign capital, Colombia was able to maintain relative
economic stability. Unlike many countries in the region, Colombia did not
experience hyperinflation or forced restructurings of its external debt.
Colombia has a record of timely payments on foreign public sector debt
obligations.

Since 1990, the government has embarked on a series of economic reforms
designed to liberalize the economy, including deregulation of commercial
activity, relaxation of foreign investment and foreign exchange regulations,
ensuring the autonomy of the Central Bank, liberalization of labor laws,
privatization of certain state-owned companies, reduction of trade barriers
(import tariffs in particular) and changes in the tax system. In addition, the
government has implemented trade pacts with its regional trading partners which
have facilitated trade between Colombia and those countries. Private investment
is now being encouraged by the government in sectors including banking,
electricity, gas, telecommunications, roads and ports.

Recent economic data indicates that the private sector in Colombia is
responding to these economic reforms. Real GDP grew 3.5% in 1992 and 5.2% in
1993, despite lower prices for commodities, especially coffee. In accordance
with other broad policy objectives of raising the country's standard of living
while seeking to control inflation, the government's target over the medium-term
is to achieve real GDP growth of at least 5% per year. The value of Colombia's
currency relative to the U.S. dollar was unchanged at the end of 1993 compared
to the end of 1992, after losing value at annual rates averaging 19.7% in the
period 1989 through 1992.

In June of 1994, the country signed the Group of Three Trade Agreement with
Mexico and Venezuela. President Samper Pizano has advocated a slower approach to
economic opening, pledged to focus on social issues, and promised greater
government intervention in certain sectors, such as agriculture.

A-19
<PAGE> 70

The following tables present information relating to Colombia's GDP and
external debt.

GROSS DOMESTIC PRODUCT
(Billions of Pesos)

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Private Consumption..................... 7,684 9,876 13,239 17,161 22,295
Government Consumption.................. 1,183 1,597 2,076 2,710 3,869
Gross Fixed Capital Formation........... 2,288 2,734 3,365 3,729 5,124
Increase/Decrease in Stocks............. 292 288 387 690 681
Exports of Goods and Services........... 1,911 2,723 4,160 5,526 6,393
Imports of Goods and Services........... (1,626) (2,090) (2,998) (3,575) (5,297)
GROSS DOMESTIC PRODUCT.................. 11,732 15,128 20,229 26,241 33,065
REAL GDP (1990 PRICES).................. 18,757 19,398 20,228 20,653 21,381
Change in Real GDP.................... 4.1% 3.4% 4.3% 2.1% 3.5%
</TABLE>

- ---------------
Source: IMF, International Financial Statistics, August 1994.

EXTERNAL DEBT
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total debt stocks....................... 16,995 16,878 17,232 17,338 17,204
Long-term debt........................ 15,384 15,261 15,793 15,583 14,368
Short-term debt....................... 1,610 1,617 1,438 1,755 2,836
Use of IMF credit..................... 1.0 0 1.0 0 0
Total debt service...................... 2,938 3,535 3,511 3,496 3,640
Debt service/Exports.................... 41.9% 46.5% 38.9% 36.8% 37.4%
</TABLE>

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

Source: The World Bank, World Debt Tables, 1993-94 (Haver Analytics).

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<PAGE> 71

The following table shows the distribution of Colombia's merchandise trade
for the years 1990 through 1993.

DISTRIBUTION OF EXPORTS AND IMPORTS
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
EXPORTS IMPORTS
------------------------------------------ ------------------------------------------
PERCENT OF PERCENT OF
TOTAL FOR TOTAL FOR
1990 1991 1992 1993 1993 1990 1991 1992 1993 1993
----- ----- ----- ----- ---------- ----- ----- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total................................. 6,753 7,244 7,226 7,262 100% 5,589 4,955 8,251 9,023 100%
Industrial Countries.................. 5,304 5,223 5,242 5,346 73.6% 4,125 3,597 6,463 6,719 74.5%
United States....................... 3,007 2,824 2,786 2,973 40.9% 1,979 1,842 3,610 3,552 39.4%
Japan............................... 259 232 208 248 3.4% 496 469 711 1.024 11.3%
Germany............................. 638 547 738 640 8.8% 499 325 533 548 6.1%
Netherlands......................... 293 313 137 166 2.3% 58 43 61 65 0.7%
Latin American
Countries Below..................... 555 943 1,056 1,024 14.1% 955 931 1,221 1,547 17.1%
Argentina........................... 27 36 39 85 1.2% 136 148 158 138 1.5%
Brazil.............................. 30 53 63 54 0.7% 187 168 382 415 1.5%
Chile............................... 164 156 117 89 1.2% 93 53 81 79 .05%
Mexico.............................. 41 55 61 65 0.9% 118 151 166 191 2.1%
Peru................................ 89 213 304 210 2.9% 101 109 97 95 1.1%
Venezuela........................... 204 430 473 521 7.2% 321 306 336 629 7.0%
</TABLE>

- ---------------
Source: IMF, Direction of Trade Statistics, June 1994.

THE SECURITIES MARKETS

The Colombian stock market consists of three exchanges: Bogota, Medellin
and Cali (Occidente). The Bolsa de Bogota is the principal exchange, accounting
for over half of total transactions. Equity trading on the Colombian stock
exchanges takes place from 10:00 a.m. to noon through an open outcry system.
Settlement for equity transactions occurs through physical delivery and is
usually completed in two days, although settlement can be delayed for up to five
days.

Many of the structural impediments preventing companies from using equity
as a source of finance were removed by President Gaviria in 1991. Capital gains
tax and wealth tax have been eliminated and the tax deductibility of interest
payments is slowly being phased out. Foreign investment regulations were
liberalized in January 1991. Direct foreign investors may take ownership up to
100% of a company. The requirement that capital remains in Colombia for a
minimum of one year has been abolished, and profits and dividends may be freely
repatriated. Foreigners wishing to invest in the stock market must establish a
Foreign Capital Investment Fund, which shall have as sole objective the carrying
out of transactions in the public stock market. Institutional Funds must receive
prior approval from the Superintendency of Securities, and they must appoint a
local administrator who will act as their legal representative in Colombia.
Corporations listed on a stock exchange are required to publish their financial
statements annually in a newspaper and in the bulletin of the appropriate
chamber of commerce and to file quarterly interim information with the
Securities Superintendency.

THE POLITICAL SYSTEM

Colombia is a republic with a multiparty political system. Colombia has a
presidential form of government with three independent branches: executive,
legislative and judicial. The president, the governor and the mayors are chosen
in direct elections. A new president, Ernesto Samper Pizano of the Liberal
Party, took office on August 7, 1994. Legislative power is held by the Congress,
consisting of a 102-member Senate

A-21
<PAGE> 72

and a 163-member House of Representatives. The Supreme Court wields the highest
judicial power in the country.

Colombia has been affected over the last 20 years by the violent activities
of guerrillas and drug cartels. The government has adopted a strong stance
against violence. The President has been granted special legislative powers in
order to deal with these problems, which powers include increasing police and
military budgets, offering reduced sentences for voluntary surrender, offering
rewards for information leading to the capture of criminals and increasing
security measures to protect judges and prosecutors. Negotiations with the
"Coordinadora Guerillera" (an umbrella group made up of most of the guerilla
groups still active in Colombia, most notably the Fuerzas Armadas
Revolucionarias de Colombia and the Ejercito de Liberacion Nacional), which were
designed to integrate these guerilla movements into the political process, were
recently suspended.

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<PAGE> 73

UNITED MEXICAN STATES

The United Mexican States ("Mexico") is comprised of 31 states and a
Federal District (Mexico City). Mexico is the third largest nation in Latin
America, occupying a territory of approximately 2 million square kilometers
(about 760,000 square miles), and is Latin America's second most populous
nation, with a population of approximately 91 million. Approximately 71% of
Mexico's population is located in urban areas.

THE ECONOMY

General

Mexico is rich in natural resources including oil, natural gas and
minerals. It is the leading world producer of silver and fluorspar and a major
producer of lead, zinc and copper. Mexico's oil production is the fourth highest
in the world and its proven reserves are the fifth highest. Its variety of
climate and soil permits the production of a wide range of agricultural
products. In addition, Mexico has extensive forests and jungles, making it the
third largest lumber producer in Latin America and the fifteenth largest in the
world. Finally, its extensive coastline, along with its archaeological,
architectural and cultural attractions, provide the basis for a major tourist
industry.

Mexico has a mixed economic system in which both the public and private
sectors play important roles. The Mexican government maintains control over
certain sectors of the economy, such as energy and basic petrochemicals.
However, during the last several years the public sector has divested its
interest in the automotive, telephone, pharmaceutical and secondary
petrochemical sectors, the state-owned steel industry and all eighteen
state-owned commercial banks, including the country's two largest commercial
banks. According to Banco de Mexico, the number of public enterprises has
declined from 1,155 in 1982 to 210 as of December 31, 1993. Petroleum and
electrical power are the two most important strategic sectors that are required
by the Constitution to remain in government hands.

Through much of the 1980s, the Mexican economy experienced high inflation,
declining savings, investment capital flight and excessive domestic and foreign
indebtedness. With the election of Carlos Salinas as President in 1988, Mexico
embarked on a program to promote economic stability through external debt
reduction, privatization, removal of many price controls, liberalized trade and
the adoption of a strong currency policy.

While the major elements of President Salinas' reform program have been
implemented, recent economic growth has not been high (growth in real GDP for
1993 is estimated to be 0.4%). However, other economic measures appear to
reflect the effects of the new policies. For example, inflation, as measured by
the national consumer price index, has declined from 131.8% in 1987, before the
election of President Salinas, to 9.7% in 1993. In the first nine months of
1994, inflation rose approximately 5% according to the Mexican central bank.
During the period 1989 to 1992, the rate of devaluation of the peso compared to
the U.S. dollar fell from 13.6% to 0.9% per annum. In 1993, however, the peso
increased in value relative to the U.S. dollar at the rate of 0.2%.

On October 17, 1994, the Mexican government announced a new initiative to
encourage foreign investment pursuant to which 52 foreign financial institutions
will be permitted to establish new operations.

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<PAGE> 74

The table below shows the major components of Mexico's GDP and the
percentage changes in real GDP.

GROSS DOMESTIC PRODUCT
(Millions of New Pesos)

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992
------- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Private Consumption................ 270,998 356,900 486,354 621,208 736,137
Government Consumption............. 33,741 42,915 57,798 77,971 102,751
Gross Fixed Capital Formation...... 75,199 92,220 127,728 168,487 211,934
Increase/Decrease in Stocks........ 4,501 16,480 22,544 25,327 25,254
Exports of Goods and Services...... 65,568 81,148 108,299 119,535 128,053
Imports of Goods and Services...... (59,555) (82,045) (116,318) (147,363) (184,972)
GROSS DOMESTIC PRODUCT............. 390,451 507,618 686,406 865,166 1,019,156
REAL GDP (1990 PRICES)............. 635,910 657,200 686,406 711,302 731,258
Change in Real GDP............... 1.2% 3.3% 4.4% 3.6% 2.8%
</TABLE>

- ---------------
Source: IMF, International Financial Statistics, August 1994.

External Debt

Following a debt restructuring in 1946, all external debt issued, assumed
or guaranteed by the Mexican government was fully serviced until August 1982,
when the Mexican government requested and received from its international bank
creditors a 90-day rollover of principal payments on most public-sector external
debt. Thereafter, the Mexican government negotiated the restructuring of certain
public-sector debt in 1983, 1985 and 1987. In March 1990, Mexico implemented a
financing package with its commercial bank creditors under the approach to debt
reduction proposed by then-U.S. Treasury Secretary Brady. The package reduced
Mexico's external debt, converted a major portion of Mexico's external
commercial bank debt into bonds that are fully collateralized as to repayment of
principal at maturity and gave the Mexican government and the public sector
increased flexibility in future financing activities. The Mexican government
also instituted a debt-for-equity conversion program which is aimed at further
reducing external indebtedness.

The following table shows Mexico's external debt at the end of the years
1988 through 1992.

EXTERNAL DEBT
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992
------- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Total debt....................... 99,204 93,817 105,958 115,291 113,378
Long-term debt................... 86,521 80,064 83,325 86,668 82,894
Short-term debt.................. 7,879 8,662 16,082 21,857 24,535
Use of IMF credit................ 4,804 5,091 6,551 6,766 5,949
Total debt service................. 13,740 13,348 8,759 10,636 18,143
Debt service/Exports............... 42.9% 37.1% 21.1% 24.4% 40.8%
</TABLE>

- ---------------
Source: The World Bank, World Debt Tables, 1993-94 (Haver Analytics).

Foreign Trade

The current Mexican trade policy is to enhance international
competitiveness through reductions in quantitative import controls and tariff
rates. In 1982, virtually all imports were subject to import quotas. As of May
1990, less than 20% of imports were subject to some form of quantitative
control. The Mexican

A-24
<PAGE> 75

government has instituted a program of tariff reform to reduce tariff rates and
attain a more uniform tariff structure. The maximum tariff rate was reduced from
100% to 20% in December 1987, and the number of different rates from 10 to 5. By
1991, approximately 98.4% of tariff items and 78.5% of imports by value were
exempt from import permits and other non-tariff barriers.

In December, 1992, the Presidents of the United States and Mexico and the
Prime Minister of Canada signed the North American Free Trade Agreement
("NAFTA"), which is designed to reduce trade barriers among the three countries
and thereby integrate the North American economy. NAFTA took effect on January
1, 1994. NAFTA has reduced or eliminated, and is expected to further reduce or
eliminate, tariffs on NAFTA products and to reduce many non-tariff barriers for
services and investments among NAFTA countries.

The United States is Mexico's most important trading partners. In 1993,
trade with the United States accounted for approximately 78.8% and 70.2% of
total exports and imports, respectively.

The following table shows the distribution of Mexico's merchandise trade
for the years 1990 through 1993.

DISTRIBUTION OF EXPORTS AND IMPORTS
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
EXPORTS IMPORTS
-------------------------------------------------- --------------------------------------------------
PERCENT OF PERCENT OF
1993 TOTAL FOR 1993 TOTAL FOR
1990 1991 1992 EXPORTS 1993 1990 1991 1992 IMPORTS 1993
------ ------ ------ ---------- ---------- ------ ------ ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total................. 27,164 39,175 42,700 47,002 100% 31,791 47,269 58,545 59,340 100%
Industrial
Countries........... 24,444 36,260 39,529 43,566 92.7% 28,671 43,333 53,407 54,040 91.1%
United States....... 18,837 28,969 32,624 37,040 78.8% 20,547 33,276 40,598 41,635 70.2%
Japan............... 1,502 1,583 1,130 980 2.1% 1,473 2,822 3,805 3,979 6.7%
Germany............. 339 598 517 434 0.9% 1,874 2,470 2,797 826 1.4%
Netherlands......... 334 134 110 113 0.2% 239 178 322 319 0.5%
Latin American
Countries Below..... 683 844 1,056 1,196 2.5% 1,265 1,336 1,813 1,718 2.9%
Argentina........... 113 164 181 202 0.4% 417 236 259 249 0.4%
Brazil.............. 167 206 288 268 0.6% 488 758 1,111 996 1.7%
Chile............... 90 126 199 192 0.4% 67 44 92 131 0.2%
Colombia............ 110 137 151 168 0.4% 37 55 61 64 0.1%
Peru................ 68 76 88 108 0.2% 78 65 95 94 0.2%
Venezuela........... 135 135 149 258 0.5% 178 178 195 184 0.3%
</TABLE>

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

Source: IMF, Direction of Trade Statistics, June 1994.

THE SECURITIES MARKETS

Equity Securities

The Bolsa Mexicana de Valores, S.A. de C.V., or Mexican Stock Exchange (the
"MSE"), is the only stock exchange in Mexico. It was founded in 1894 and has
operated continuously since 1907. Both equity and debt instruments are traded
through the MSE. Although there are no formal market makers, companies with the
most actively traded shares have informal understandings that certain brokerage
houses will make a market in their shares.

Debt Securities

The debt market in Mexico began to develop rapidly after the promulgation
of the Securities Market law in 1975. Since then, the government has authorized
a range of Mexican government-issued debt securities, all

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<PAGE> 76

of which are traded on the MSE: (1) Cetes -- short-term discount debt securities
sold through a weekly auction which are regulated by Banco de Mexico; (2)
Bondes -- long-term securities sold through a weekly auction regulated by Banco
de Mexico that may be purchased by foreigners as well as Mexican residents; (3)
Tesobonos -- U.S. dollar-denominated securities sold at a weekly auction which
are paid in pesos equal to the value of the dollar calculated at the market
exchange rate; and (4) Ajustabonos -- three year bonds with a fixed coupon rate
on a variable face amount that is adjusted quarterly in proportion to
fluctuations in the consumer price index.

A variety of other special purpose bonds are traded on the MSE, including
government bonds issued by the Mexican federal government through either Banco
de Mexico or the Ministry of Finance and Public Credit, such as development
bonds, bank indemnity bonds and urban renovation bonds, as well as bank
development bonds and industrial development bonds. Mexican banks issue bankers'
acceptances and certificates of deposit that pay interest either at maturity or
monthly.

Market Regulation

The Mexican securities industry is regulated by the Securities Market Law
(the "Mexican Securities Law"). In addition to providing a regulatory structure
for the securities industry, it sets standards for brokers and empowers the
Mexican Securities Commission to regulate the public offering and trading of
securities and the use of non-public information in the trading of securities.
Pursuant to this authority, the Mexican Securities Commission regulates,
inspects and supervises the securities market and the market participants. The
Ministry of Finance and Public Credit coordinates, supervises and designs policy
for Mexico's financial system. Banco de Mexico formulates and implements
monetary policy. Nacional Financiers, S.N.C., a national development bank, also
plays an active role in the promotion of the securities markets, acting both as
an institutional investor and as a market intermediary.

In order to offer securities to the public in Mexico, an issuer must meet
certain requirements of the Mexican Securities Commission as to assets,
operating history, management and other matters and must be approved. Only
securities approved by the Mexican Securities Commission may be listed on the
MSE. Issuers of listed securities are required to publish and furnish to the
Mexican Securities Commission annual audited financial statements, unaudited
quarterly financial statements and other financial and operating information.

The registration of brokers in the National Registry of Securities and
Intermediaries is a prerequisite to becoming a member of the Mexican Stock
Exchange. Pursuant to provisions in NAFTA, subsidiaries of United States and
Canadian brokerage firms may become members of the Mexican Stock Exchange.

THE POLITICAL SYSTEM

The Constitution establishes Mexico as a Federal Republic and provides for
the separation of the executive, judicial and legislative branches of
government. The President is elected for a six-year term by direct popular vote
and cannot be re-elected. Legislative authority is vested in the federal
Congress, composed of a Senate and a Chamber of Deputies. Following the
congressional election held in August 1991, 61 of 64 Senators and 320 of 500
Deputies were members of the Institutional Revolutionary Party ("PRI"), which
has won every presidential election and has held a majority in the Congress
since 1929. Other parties include the National Action Party ("PAN") and the
Democratic Revolution Party ("PRD").

The current President is Carlos Salinas de Gortari, whose term expires on
December 1, 1994. The next President will be Ernesto Zedillo, who won an
election held on August 21, 1994. It is expected that Mr. Zedillo, a member of
the PRI, will continue many of the same economic policies begun under the
Salinas administration. Mexico has experienced political unrest thus far in
1994, beginning in January with the Chiapas uprising, followed by kidnappings of
businessmen for ransom, drug-related violence, the assassinations of the leading
presidential candidate in March and the PRI's second-highest official and a
central figure in the new Mexican government in September. There is, for the
first time, some doubt that the PRI will continue its complete dominance of the
political scene.

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<PAGE> 77

THE REPUBLIC OF PERU

GENERAL

The Republic of Peru is the third largest nation in South America after
Brazil and Argentina, with a land area of 1.3 million square kilometers (496,225
square miles). The population of Peru has grown rapidly and become increasingly
urban since World War II. The population is now estimated to be close to 23
million persons.

THE ECONOMY

General

Geologically, Peru is one of the richest countries in the world and ranks
among the world's top seven mining countries. It is the second largest producer
of silver, the fourth largest of zinc and the eighth in copper. Peru also has
some of the world's richest deposits of lead, iron, zinc, phosphates and gold.
The mineral sector made up approximately 9% of GDP and accounted for almost
one-half of Peru's exports in 1992. Nevertheless, it is estimated that less than
15% of Peru's mineral reserves are currently being exploited. Peru is also the
world's fourth largest fishing nation and an important producer of textiles. The
United States is Peru's major trading partner, usually accounting for over
one-quarter of imports and one-fifth of exports.

The Peruvian economy has been undergoing a considerable transformation.
Between 1988 and 1990, the economy contracted by over 14% in real terms.
President Alberto Fujimori was elected in July of 1990 and has been credited
with devising policies which led to strong economic growth and reduced
inflation. Inflation reached 7,482% in 1990 while the Sendero Luminoso (Shining
Path) terrorist group caused widespread social disruption through a high profile
campaign that included numerous assassinations and bombings. Reduction of
inflation, liberalization of foreign trade, removal of exchange controls and
foreign investment restrictions and reduction of fiscal deficits have been key
features of the Peruvian economy's rejuvenation. Peru's real GDP, after
declining 2.3% in 1992, grew by 6.4% in 1993, while inflation declined to 48.6%.
Peru's currency devaluation relative to the U.S. dollar was 44.6%, 40.4% and
24.0% in 1991, 1992 and 1993, respectively.

The following tables present, respectively, information relating to Peru's
GDP, government finance and external debt.

GROSS DOMESTIC PRODUCT
(Millions of New Soles)

<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Private Consumption............................... 78 4,972 26,216 41,795 63,788
Government Consumption............................ 7 402 1,803 3,481 5,321
Gross Fixed Capital Formation..................... 18 944 4,711 8,036 13,648
Increase/Decrease in Stocks....................... 1 52 739 680 1,446
Exports of Goods and Services..................... 15 810 3,201 5,389 8,628
Imports of Goods and Services..................... (12) (764) (3,811) (6,983) (11,189)
GROSS DOMESTIC PRODUCT............................ 106 6,416 32,859 52,398 81,641
REAL GDP (1990 PRICES)............................ 6,701 6,416 6,598 6,443 6,858
Change in Real GDP.............................. -11.0% -4.3% 2.8% -2.3% 6.4%
</TABLE>

- ---------------
Source: IMF, International Financial Statistics, August 1994.

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<PAGE> 78

Government Finance

Peru's recent economic progress has been marked by a significant reduction
in the fiscal deficit as a percentage of GDP, as can be seen in the following
table.

GOVERNMENT FINANCE
(Thousands of New Soles)

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992
---- ------ -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues.............................. 403 7,499 597,000 3,025,000 5,838,000
Expenditures.......................... 558 13,455 831,000 3,496,000 6,765,000
Deficit............................... (155) (5,956) (234,000) (471,000) (927,000)
Deficit/GDP........................... -3.9% -5.6% -3.6% -1.4% -1.8%
</TABLE>

- ---------------
Source: IMF, International Financial Statistics, August 1994.

EXTERNAL DEBT
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Total debt................................. 18,245 18,583 20,068 20,720 20,297
Long-term debt............................. 12,723 13,001 13,964 15,519 15,645
Short-term debt............................ 4,721 4,824 5,350 4,495 4,021
Use of IMF credit.......................... 801 758 755 706 631
Total debt service......................... 248 297 258 950 832
Debt service/Exports....................... 6.7% 6.7% 6.2% 22.2% 18.6%
</TABLE>

- ---------------
Source: The World Bank, World Debt Tables, 1993-94 (Haver Analytics).

Peru resumed full interest payment on its debt with the IMF, IADE, World
Bank and the Paris Club in 1991, but has yet to begin negotiations with its
commercial banking creditors to whom it owes some $7 billion. The commercial
debt has not been serviced for 11 years.

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<PAGE> 79

The following table shows the distribution of Peru's merchandise trade for
the years 1990 through 1993.

DISTRIBUTION OF EXPORTS AND IMPORTS
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
EXPORTS IMPORTS
------------------------------------------ ------------------------------------------
PERCENT OF PERCENT OF
TOTAL FOR TOTAL FOR
1990 1991 1992 1993 1993 1990 1991 1992 1993 1993
----- ----- ----- ----- ---------- ----- ----- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total................................. 3,276 3,329 3,484 3,464 100% 2,882 2,476 3,744 4,009 100%
Industrial Countries.................. 2,278 2,017 2,226 2,262 65.3% 1,584 1,370 2,040 2,232 55.7%
United States....................... 732 707 745 734 21.2% 801 618 1,020 1,206 30.1%
Japan............................... 440 296 343 352 10.2% 65 141 287 271 6.8%
Germany............................. 267 174 143 200 5.8% 165 158 172 170 4.2%
Netherlands......................... 105 112 134 118 3.4% 18 29 36 43 1.1%
Latin American
Countries Below..................... 399 430 527 468 13.5% 593 764 1,116 1,101 27.5%
Argentina........................... 29 31 28 21 0.6% 204 176 231 243 6.1%
Brazil.............................. 129 103 165 127 3.7% 146 143 193 240 6.0%
Chile............................... 55 44 43 65 1.9% 69 91 172 189 4.7%
Colombia............................ 95 106 88 86 2.5% 72 190 304 210 5.2%
Mexico.............................. 38 65 95 94 2.7% 59 76 88 106 2.7%
Venezuela........................... 55 80 107 75 2.2% 43 88 128 112 2.8%
</TABLE>

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

Source: IMF Direction of Trade Statistics, June 1994.

THE SECURITIES MARKETS

Peru has stock exchanges in the cities of Lima and Arequipa. The Lima Stock
Exchange has been regulated by the National Supervisory Commission for Companies
and Securities ("CONASEV") since 1970.

Common shares and labor shares are the two types of equities traded on the
Peruvian stock exchanges. Much of the market's liquidity is concentrated in
labor shares, which were created in 1970 during the Velasco dictatorship. Mining
and industrial companies were compelled to issue labor shares to their workers,
plus an additional 10% of the company's income in the form of preferential cash
dividends. The labor shares became negotiable in 1980. As a result, few labor
shares remain in the possession of workers and are now traded in the capital
markets.

Trading in the OTC market commenced in 1982. Although it accounted for only
25% of total volume in 1992, the OTC market accounted for 86% of total capital
market volume in 1990 when interest in equity issues was low. Trading is
concentrated in short-term company letters of credit, the majority of which are
dollar-denominated. The government's commitment since August 1990 to a
conservative fiscal policy has resulted in a shortage of public issues in the
Peruvian capital markets. Repurchase agreements are also frequently negotiated
in the stock exchanges.

Trading on the Lima Stock Exchange takes place on business days between the
hours of 10:00 a.m. and 12:30 p.m. Trades take place through an open outcry
system, although trades can be executed for an additional half hour at the day's
closing prices. Settlement of equity trades occurs within two days. The Stock
Exchange also operates a centralized clearing house known as CAVAL (Caja de
Valores), which provides for efficient settlement and maintains computerized
records of all purchases and sales.

THE POLITICAL SYSTEM

Peru has a government headed by a popularly elected president who also
serves as the chief of state and commander of the armed forces. The President
appoints a prime minister, who presides over the Council of

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<PAGE> 80

Ministers (which is also appointed by the president). The Council approves all
presidential law decrees. Supreme decrees and draft bills sent to the
legislature. The current President, Alberto Fujimori, was elected in 1990. He
represented the Change 90 Movement and defeated Mario Vargas Llosa of the
Democratic Front Movement. The next presidential election is scheduled for April
of 1995. A wide range of political parties participates in elections, ranging
from right-wing conservatives to left-wing socialists and communists. Beginning
in 1980, two armed terrorist movements, Sendero Luminoso and Movimiento
Revolucionario Tupac Amaru, began to play an increasingly disruptive role in the
political and economic scene. President Fujimori's government has made progress
in suppressing terrorist activity by these groups, including the arrest of the
leader and other prominent members of each group. In addition, approximately
3,000 persons have surrendered to and aided the government under an amnesty law.

Under the new Constitution drafted by a congressional body elected in 1992
and approved by a public referendum on October 31, 1993, the executive power is
vested in the President, under whom there are two vice-presidents. The
legislature is composed of 120 representatives who are elected nationally and
are not elected from any particular region of Peru. The President and
Congresspersons are each elected for a five year term. The judicial power rests
with the Supreme Court whose members are appointed by a special committee, or
under certain circumstances, may be elected. Provincial and district
municipalities are governed by mayors who are elected for five year terms.

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<PAGE> 81

THE REPUBLIC OF VENEZUELA

GENERAL

The Republic of Venezuela occupies an area of 916,500 square kilometers
(354,000 square miles). Caracas, the nation's capital is the primary center of
industry, commerce, education, and tourism. The country has a population of
approximately 21 million, of which more than 85% live in urban areas.
Venezuela's population is largely urban, with more than 40% of the population
residing in the five cities with over 500,000 persons.

THE ECONOMY

General

Venezuela relies heavily upon revenues from the export of oil and gas,
which accounted for 22.9% of GDP in 1991 and 80.5% exports in 1992. As of
mid-1991, Venezuela was the world's seventh largest oil producer with reserves
estimated at over 63 billion barrels in 1992, equalling 69.8 years of output at
1992 levels.

The country's oil wealth allowed it to develop rapidly in the post-World
War II era, attaining a prosperity greater than most other Latin American
nations. Venezuela's oil wealth allowed the country to sustain a prolonged
period of currency over-valuation, public subsidies and unrestricted public
spending.

The system began to falter in 1983 with the decline in oil prices. The
collapse in oil revenues combined with surging international interest rates
precluded Venezuela from servicing its external debt obligations. The government
introduced reforms, including the liberalization of the foreign currency market
and the reduction of trade restrictions and domestic spending. Although economic
activity subsequently recovered, the reforms proved insufficient. Inflation
accelerated as price controls and subsidies contributed to increased fiscal
spending, while exchange and interest rate controls prompted capital flight and
drained reserves.

In 1989, a comprehensive economic adjustment program was introduced in
Venezuela by then President Carlos Andres Perez. This program consisted of free
market measures including the introduction of a unified, free-floating exchange
rate, the elimination of most subsidies and price controls, trade liberalization
and an easing of foreign investment restrictions. However, the reform process
did not succeed and President Perez was subsequently suspended from office.

In December 1993, former President Rafael Caldera was reelected President
of Venezuela. Since electing President Caldera, Venezuela has experienced a
growing banking crisis following the failure of eleven banks, an increasing
public sector deficit, escalating inflation (reported by Banco Central de
Venezuela to be 60.2% for the 12-month period ended June 30, 1994), a rapidly
depreciating currency (down over 80% in U.S. dollar terms between December 31,
1993 and June 30, 1994) and decreasing international reserves. Venezuela's
currency devaluation relative to the U.S. dollar from 1989 to 1993 ranged from a
low of 12.6% in 1990 to a high of 25.2% in 1993. In addition, the country is
experiencing a recession, and GDP was estimated by the government to have
contracted by 4.8% in the first quarter of 1994. In July 1994, the Caldera
administration responded to these issued by imposing price and currency
controls, suspending many economic and civil rights and appointing an emergency
banking council to regulate the banking system.

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<PAGE> 82

The table below shows the composition of Venezuela's GDP for the years 1989
through 1993 and the percentage changes in real GDP.

GROSS DOMESTIC PRODUCT
(Billions of Bolivares)

<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Private Consumption.................................... 977 1,415 2,021 2,887 3,919
Government Consumption................................. 144 192 293 366 446
Gross Fixed Capital Formation.......................... 255 322 552 852 1,064
Increase/Decrease in Stocks............................ (63) (89) 15 107 (94)
Exports of Goods and Services.......................... 503 899 952 1,082 1,473
Imports of Goods and Services.......................... (331) (460) (797) (1,162) (1,432)
GROSS DOMESTIC PRODUCT................................. 1,486 2,279 3,038 4,133 5,375
REAL GDP (1990 PRICES)................................. 2,133 2,279 2,501 2,672 2,646
Change in Real GDP................................... -7.8% 6.9% 9.7% 6.8% -1.0%
</TABLE>

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

Source: IMF, International Financial Statistics, August 1994.

External Debt

The following table shows Venezuela's external debt at the end of the years
1988 through 1992.

EXTERNAL DEBT
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Total debt................................ 34,738 32,377 33,170 34,046 37,193
Long-term debt............................ 29,464 29,089 28,159 28,513 28,975
Short-term debt........................... 5,274 2,290 2,000 2,284 5,272
Use of IMF credit......................... 0 998 3,012 3,249 2,946
Total debt service.......................... 5,094 3,196 4,741 2,730 2,617
Debt service/Exports........................ 40.1% 20.5% 22.1% 14.7% 15.5%
</TABLE>

- ---------------
Source: The World Bank, World Debt Tables, 1993-94 (Haver Analytics).

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<PAGE> 83

The following table shows the distribution of Venezuela's merchandise trade
for the years 1990 through 1993.

DISTRIBUTION OF EXPORTS AND IMPORTS
(Millions of U.S. Dollars)

<TABLE>
<CAPTION>
EXPORTS IMPORTS
---------------------------------------------- ----------------------------------------------
PERCENT OF PERCENT OF
TOTAL FOR TOTAL FOR
1990 1991 1992 1993 1993 1990 1991 1992 1993 1993
------ ------ ------ ------ ---------- ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total......................... 18,161 15,721 15,710 17,226 100% 6,075 9,998 12,261 10,975 100%
Industrial Countries.......... 12,934 10,538 10,291 10,403 60.4% 5,037 8,117 9,781 8,499 77.4%
United States............... 9,360 7,979 7,851 7,916 45.9% 2,834 4,668 5,438 4,600 41.9%
Japan....................... 508 428 403 328 1.9% 235 529 835 680 6.2%
Germany..................... 666 672 857 547 3.2% 599 609 807 561 5.1%
Netherlands................. 702 85 62 521 3.0% 77 118 124 150 1.4%
Latin American
Countries Below............. 1,128 1,252 1,349 1,352 7.8% 665 1,287 1,421 1,534 14.0%
Argentina................... 7 21 24 24 0.1% 116 201 221 241 2.2%
Brazil...................... 352 502 546 336 1.9% 242 429 444 389 3.5%
Chile....................... 179 180 143 129 0.8% 27 55 75 74 0.7%
Colombia.................... 374 278 306 552 3.2% 134 430 473 517 4.7%
Mexico...................... 183 183 202 199 1.2% 92 92 101 238 2.2%
Peru........................ 33 88 128 112 0.7% 54 80 107 75 0.7%
</TABLE>

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

Source: IMF, Direction of Trade Statistics, June 1994.

THE SECURITIES MARKETS

Equity Markets

There are two stock exchanges in Venezuela. The Caracas Stock Exchange, a
private company regulated by the Comision Nacional de Valores ("CNV"), was
established in 1973. The Maracaibo Stock Exchange accounts for only a small
fraction of the total trade volume. There are no foreign investment restrictions
in Venezuela except in relation to investment in financial services companies.
Almost all of the equities traded are common stocks that can be acquired by
foreigners and national alike.

The market is regulated by the CNV under the Capital Markets Law of 1973.
The Superintendencia de Inversiones Extranjeras ("SIEX") monitors foreign
investment in Venezuela, and all foreign investors must register with SIEX. As
of 1989, foreign investors were allowed to invest in the stock market, although
they were restricted from investing in shares of financial institutions until
early 1994.

Listed companies are required to file annual audited financial statements
presented on a consolidated basis and unaudited quarterly financial statements.
Under the Tax Law effected in September 1991, companies must adopt inflation
accounting beginning on December 31, 1995, and many companies are already
complying with this requirement. Stock exchange regulations require that trades
be settled within five days, but in practice settlement has been erratic. As
part of a modernization plan scheduled to be implemented in 1994, the stock
exchange is establishing an automated clearance and settlement system, which
will include a central clearing house. The securities exchanges are open from
10:30 a.m. to 12:30 p.m.

Debt Markets

A variety of private and public debt instruments are traded on the Caracas
Stock Exchange, but this trading represented less than 3% of total stock market
trading volume in 1993. Public sector instruments include: Treasury bills,
dollar-denominated Central Bank bills, long-term local and central government
issues, and export bonds. Private sector instruments include corporate bonds,
short-term commercial paper and

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mortgage certificates. Most of the fixed income trading takes place outside of
the stock market, in large part through Central Bank zero coupon bonds that are
place directly and traded through dealers. During 1993 the Central Bank placed
243.2 billion bolivars worth of zero coupon bonds.

THE POLITICAL SYSTEM

The constitution prescribes a government which is divided into executive,
legislative, and judicial branches, none of which may prevail over the other.
The President, who is elected every five years, exercises executive power.

The Congress consists of a Senate and a Chamber of Deputies. The Senate is
made up of two senators from each state and the Federal District. Additional
senators are elected for minority representation and former presidents are
awarded lifetime seats in the chamber. The two major parties which have
dominated Venezuelan politics are the Democratic Action Party and the Christian
Socialist Party.

After three years of political continuity, through freely elected
governments, Venezuela experienced two attempted coups in 1992, the suspension
of President Carlos Andres Perez on corruption charges in May 1993, and the
interim presidency of Ramon Velasquez from June 1993 until the inauguration of
Rafael Caldera.

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APPENDIX B

RATINGS

The following is a description of certain ratings of Moody's Investors
Service, Inc. ("Moody") and Standard & Poor's Ratings Group ("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.

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 S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.

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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.

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.

B-2
<PAGE> 87

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
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.

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<PAGE> 88

APPENDIX C

GENERAL CHARACTERISTICS AND RISKS OF HEDGING AND DERIVATIVES

A detailed discussion of the Hedging and Derivatives (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 Derivatives and
makes no representation as to the availability of these techniques at this time
or at any time in the future. "Hedging and Derivatives," as used in this
Appendix C, refers to entering into interest rate, currency or stock index
futures contracts, currency forward contracts and currency swaps, the purchase
and sale (or writing) of exchange-listed and over-the-counter ("OTC") put and
call options on debt and equity securities currencies, interest rate, currency
or stock index futures and fixed income and stock indices and other financial
instruments, entering into various interest rate and equity transactions such as
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 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

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<PAGE> 89

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.

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;

C-2
<PAGE> 90

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 Commission rules and regulations with respect to the purchase and
sale of futures contracts and options thereon.

INTEREST RATE AND EQUITY SWAPS AND RELATED TRANSACTIONS

The Fund may enter into interest rate and equity swaps and may purchase or
sell interest rate and equity caps, floors and collars. Interest rate and equity
swaps are agreements to exchange cash flows based on a notional principal
amount. The purchaser of an interest rate or equity cap receives payment from
the seller to the extent that the selected interest rate or equity index rises
above a predetermined level. The purchaser of an interest rate or equity floor
receives payment to the extent that the selected interest rate or equity index
falls below a predetermined level. A collar is a combination of a cap and a
floor that preserves a certain return with a predetermined range of 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's use of
swaps, caps, floors and collars is subject to segregation and coverage
requirements which are similar to those to which it is subject upon writing
uncovered options. The Fund will not sell interest rate or equity caps or floors
that it does not own.

The Fund may enter into interest rate and equity 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 and 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
interest rate or 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.

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. A forward 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 below. 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

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<PAGE> 91

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.

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.

RISKS OF HEDGING AND DERIVATIVES

Hedging and Derivatives involve 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 and Derivatives 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

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<PAGE> 92

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 and Derivatives will reduce the Fund's net asset value, and possibly
income, and the losses can be greater than if the Hedging and Derivatives had
not been used.

When conducted outside the United States, Hedging and Derivatives 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 and Derivatives 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 and Derivatives 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
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. The Fund will accrue the net amount
of the excess, if any, of the Fund's obligations over its entitlement with
respect to each swap on a daily basis and will segregate with a custodian an
amount of cash, U.S. government securities, or other liquid high grade debt
obligations or liquid securities having an aggregate net asset value at least
equal to the accrued excess.

OTHER LIMITATIONS

The degree of the Fund's use of Hedging and Derivatives may be limited by
certain provisions of the Code. See "Taxation" in the Prospectus.

C-5
<PAGE> 93

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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 A 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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY......................... 3
SUMMARY OF EXPENSES........................ 11
THE FUND................................... 12
INVESTMENT IN LATIN AMERICAN ISSUERS....... 12
USE OF PROCEEDS............................ 12
INVESTMENT OBJECTIVE AND POLICIES.......... 13
ADDITIONAL INVESTMENT PRACTICES............ 15
INVESTMENT RESTRICTIONS.................... 17
RISK FACTORS AND SPECIAL CONSIDERATIONS.... 19
MANAGEMENT OF THE FUND..................... 28
PORTFOLIO TRANSACTIONS..................... 31
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND
REINVESTMENT PLAN........................ 32
TAXATION................................... 34
NET ASSET VALUE............................ 40
COMMON STOCK............................... 41
CUSTODIAN, TRANSFER AGENT, DIVIDEND PAYING
AGENT AND REGISTRAR...................... 43
UNDERWRITING............................... 44
EXPERTS.................................... 47
LEGAL MATTERS.............................. 47
FURTHER INFORMATION........................ 47
REPORT OF ERNST & YOUNG LLP, INDEPENDENT
AUDITORS................................. 48
STATEMENT OF ASSETS AND
LIABILITIES.............................. 49
Appendix A: Securities Markets and
Economic Data: Selected Latin American
Countries................................ A-1
Appendix B: Ratings...................... B-1
Appendix C: General Characteristics and
Risks
of Hedging and Derivatives............... C-1
</TABLE>

UNTIL NOVEMBER 22, 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.

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

- ------------------------------------------------------
- ------------------------------------------------------
4,000,000 SHARES

LEHMAN BROTHERS
LATIN AMERICA GROWTH FUND, INC.

COMMON STOCK
---------------------------
PROSPECTUS
OCTOBER 28, 1994
---------------------------
LEHMAN BROTHERS

THE NIKKO SECURITIES CO.
INTERNATIONAL, INC.

ADVEST, INC.

DAIN BOSWORTH
INCORPORATED

FAHNESTOCK & CO. INC.

FIRST OF MICHIGAN CORPORATION

PRINCIPAL FINANCIAL SECURITIES, INC.

RAUSCHER PIERCE REFSNES, INC.
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