LATIN AMERICA
GROWTH FUND, INC.
OCTOBER 31, 1996
ANNUAL REPORT
--------------------
IDS INTERNATIONAL INC.
MEMBER OF IMRO
OFFICES IN LONDON, MINNEAPOLIS,
HONG KONG, SINGAPORE, TOKYO
--------------------
LATIN AMERICA GROWTH FUND, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
From the Portfolio Manager ...................................... 1
Portfolio Highlights ............................................ 5
Portfolio of Investments ........................................ 6
Statement of Assets and Liabilities ............................. 8
Statement of Operations ......................................... 9
Statement of Changes in Net Assets .............................. 10
Financial Highlights ............................................ 11
Notes to Financial Statements ................................... 12
Quarterly Results of Operations ................................. 15
Report of Independent Auditors .................................. 16
Additional Information .......................................... 17
Results of Shareholder Meeting .................................. 18
Election of New Officers ........................................ 18
</TABLE>
--------------------
This report is sent to the shareholders of the Latin America Growth Fund, Inc.
for their information. It is not a Prospectus, circular or representation
intended for use in the purchase or sale of shares of the Fund or of any
securities mentioned in the report.
LATIN AMERICA GROWTH FUND, INC.
FROM THE PORTFOLIO MANAGER OCTOBER, 1996
Dear Shareholder:
MARKET REVIEW
It is my pleasure to present the second annual shareholders' letter for the
Latin America Growth Fund, Inc. (the "Fund").
You will recall that the Fund is a diversified, closed-end management
investment fund designed for investors to participate in the securities markets
in Latin America. The Fund's objective is long-term capital appreciation,
through investments in a broad spectrum of Latin American industries. 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 which cannot be changed without the approval
of the holders of a majority of the Fund's outstanding voting securities.
Because any investment involves risk, achieving this objective cannot be
guaranteed.
During the year ended October 31, 1996, the net asset value per share of the
Fund rose by 5.4% including reinvested dividends. Over the course of the year,
the equity markets of Latin America have slowly emerged from the shadow of the
1994 Mexican peso crisis. However, new portfolio investment in the region has
for the most part been confined to the largest and most liquid stocks, and so
there remains potential for the smaller companies in which the Fund is invested
to regain ground on their larger counterparts.
As an example of this phenomenon, the chart below demonstrates the extent to
which the Brazilian market has been dominated by the state-controlled companies'
stocks over the last year. The share prices of these companies have reacted
favorably to the prospects of being sold into the private domain, pushing up the
main market index, the Bovespa. However, as the chart shows, this strength has
not been seen in the private sector, as represented by the FGV 100 Index.
BRAZIL
PUBLIC VS. PRIVATE SECTOR COMPANIES
<TABLE>
<CAPTION>
Date FGV 100 Bovespa Date FGV 100 Bovespa Date FGV 100 Bovespa
- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/03/95 99.62763 100.385 03/01/96 98.28311 120.0474 06/28/96 94.11485 139.8316
11/10/95 95.15557 95.63729 03/08/96 94.32439 111.4786 07/05/96 96.22052 145.3722
11/17/95 93.92203 98.11755 03/15/96 95.40927 114.2716 07/12/96 94.79162 153.7218
11/24/95 91.76315 98.23816 03/22/96 96.11883 118.8665 07/19/96 92.08042 147.8848
12/01/95 93.19864 104.4804 03/29/96 95.3818 116.5413 07/26/96 88.1119 137.4304
12/08/95 90.37668 103.347 04/05/96 94.22022 117.144 08/02/96 89.52455 146.3541
12/15/95 87.1167 99.86389 04/12/96 92.95539 117.6689 08/09/96 89.64895 142.9037
12/22/95 87.3136 104.0281 04/19/96 93.78937 118.9588 08/16/96 89.87963 145.6611
12/29/95 87.1249 102.7153 04/26/96 94.53604 120.4441 08/23/96 87.42877 141.9673
01/05/96 88.30423 112.1486 05/03/96 95.48081 119.431 08/30/96 88.78602 143.0397
01/12/96 87.91428 115.7015 05/10/96 96.34818 124.8918 09/06/96 88.47607 144.6159
01/19/96 91.59277 117.2176 05/17/96 94.86981 129.7562 09/13/96 88.32853 147.2708
01/26/96 95.38132 116.5638 05/24/96 93.56856 130.5655 09/20/96 88.13859 150.1106
02/02/96 104.1139 128.4891 05/31/96 94.54644 133.3193 09/27/96 86.60032 147.0037
02/09/96 103.5003 125.9581 06/07/96 92.45089 128.6533 10/04/96 87.38291 150.6821
02/16/96 100.0811 122.2628 06/14/96 93.18687 130.7464 10/11/96 87.34869 149.7677
02/23/96 101.9236 124.7863 06/21/96 95.22631 140.2423 10/18/96 89.18667 153.3946
</TABLE>
Source -- Economatica Data rebased to 10/28/95=100
Over the course of the last year, the performance of U.S. asset markets has
had a direct bearing on the performance of Latin American equity markets. The
inexorable rise of Wall Street and the U.S. long bond has provided a firm
underpinning for the markets, as has the flow of liquidity into U.S. mutual
funds. Nonetheless, some of this has been absorbed by the supply of new equity
from the region, including issues by both the Peruvian and Venezuelan state
telephone companies, and a swathe of smaller transactions.
1
LATIN AMERICA GROWTH FUND, INC.
FROM THE PORTFOLIO MANAGER (continued) OCTOBER, 1996
ECONOMIC AND POLITICAL REVIEW
After the turmoil of the preceding twelve months, the MEXICAN Peso has
traded for most of the last year in a relatively narrow range, between 7.40 and
8.00 to the dollar. Tight monetary policy held the currency in this range,
slowing the return to growth of the economy, but succeeding in squeezing out
inflationary pressure. Nonetheless, inflation for the year exceeded 25%,
equating to real appreciation of the currency against the dollar. This meant
that, after the support provided to the economy from the export sector in the
severe recession of 1995, the last twelve months have been less easy for
exporters, owing to the erosion of their relative competitiveness. Instead, the
theme throughout the country has been the recovery in the domestic economy, and
the extent to which it appears to be beating even the Mexican government's own
forecast.
MEXICAN PESO VS. U.S. DOLLAR
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
10/27/95 7.065 01/26/96 7.405 04/26/96 7.41 07/26/96 7.59
11/03/95 7.365 02/02/96 7.4 05/03/96 7.47 08/02/96 7.545
11/10/95 7.55 02/09/96 7.475 05/10/96 7.43 08/09/96 7.51
11/17/95 7.63 02/16/96 7.535 05/17/96 7.3975 08/16/96 7.485
11/24/95 7.665 02/23/96 7.54 05/24/96 7.3825 08/23/96 7.492
12/01/95 7.545 03/01/96 7.56 05/31/96 7.445 08/30/96 7.578
12/08/95 7.715 03/08/96 7.59 06/07/96 7.515 09/06/96 7.555
12/15/96 7.745 03/15/96 7.5625 06/14/96 7.575 09/13/96 7.513
12/22/95 7.545 03/22/96 7.545 06/21/96 7.597 09/20/96 7.548
12/29/95 7.695 03/29/96 7.525 06/28/96 7.5825 09/27/96 7.539
01/05/96 7.56 04/05/96 7.52 07/05/96 7.63 10/04/96 7.527
01/12/96 7.515 04/12/96 7.4875 07/12/96 7.625 10/11/96 7.645
01/19/96 7.415 04/19/96 7.395 07/19/96 7.605 10/18/96 7.73
10/25/96 7.915
</TABLE>
Without doubt, one event overshadowed all others in ARGENTINA this year.
This was the resignation of Economy Minister Domingo Cavallo, architect of
Convertibility and the one man inextricably linked by foreign investors to the
emergence of Argentina from the bad old days of hyperinflation. Initial fears of
a crisis to parallel that of Mexico in December 1994 turned to euphoria in a
very short space of time. The reasons for the sudden change centered firstly
around Cavallo's expression of support for his successor, Roque Fernandez, and,
more importantly, the extent to which President Menem assumed greater
responsibility for economic issues. In particular, the President initiated a
process of labor reform that had been long overdue, and, although not popular
with unions, may ultimately lead to greater efficiency in Argentine industry.
After eighteen months of recession, and an unemployment rate over 17%,
Cavallo's position had become increasingly untenable during 1996, but the irony
now is that, in the few months following his departure, economic statistics
showed signs of a stronger than expected recovery. In the Machiavellian world of
Argentine politics, Cavallo's task now will be to keep his name in the press,
and take credit for the likely recovery next year, allowing him to bid for the
presidency in 1999.
Consistently high interest rates over the course of the last year have kept
inflation in BRAZIL firmly in check, but at the same time held back economic
activity. Only towards the end of the year was monetary policy eased somewhat,
allowing for a slight improvement in industrial activity. At the same time the
government has very
2
LATIN AMERICA GROWTH FUND, INC.
FROM THE PORTFOLIO MANAGER (continued) OCTOBER, 1996
slowly moved ahead with the reform process, issuing timetables for the
privatization of certain significant state assets, and presenting, sometimes
unsuccessfully, structural and constitutional reform for discussion. Underlying
all the policy issues thrown open to discussion has been that of President
Cardoso's quest for re-election. The necessary constitutional amendment to allow
the President to stand again should be put before Congress in early 1997. It
seems likely that, in order to garner the necessary support to pass the
legislation, the President will have to make concessions on other reform
legislation, that may slow the necessary structural changes in the Brazilian
economy. However, once he has -- or has not -- succeeded in changing the
constitution, the way is clear to press ahead with economic reform.
BRAZILIAN CPI
MONTH TO MONTH
<TABLE>
<S> <C> <C> <C> <C> <C>
Sep-94 0.82 Jun-95 2.66 Mar-96 0.23
Oct-94 3.17 Jul-95 3.72 Apr-96 1.62
Nov-94 3.02 Aug-95 1.43 May-96 1.34
Dec-94 1.25 Sep-95 0.74 Jun-96 1.41
Jan-95 0.8 Oct-95 1.48 Jul-96 1.31
Feb-95 1.32 Nov-95 1.17 Aug-96 0.34
Mar-95 1.92 Dec-95 1.21 Sep-96 0.07
Apr-95 2.64 Jan-96 1.82
May-95 2.06 Feb-96 0.4
</TABLE>
Source -- Bloomberg/FIPE
The current low level of inflation in Brazil is lasting testimony to the
success of the Real Plan. The other legacies of this plan include a more stable
economy, unlike the days of hyperinflation when the whole Brazilian economy
could experience rapid changes of fortune in a very short space of time.
Provided the tenets of the Real Plan remain in place, this will mean that Brazil
should behave in a similar fashion to other market economies. The prospects are
for a return to steady growth in 1997, which should feed through to good company
performance.
After very strong gross domestic product ("GDP") growth in the preceding two
years, PERU experienced a slowdown in 1996 to around 2%. At the same time there
was little progress on the external account, with the current account deficit
remaining at around 6% of GDP. This continues to raise fears that the country
will follow the path of Mexico, and be obliged to devalue in the near fixture.
Although the nuevo sol has fallen slowly this year, there seems little
likelihood of a sharp fall, since Peru's deficit is financed by longer term
capital flows.
The challenges faced by CHILE in 1996 were met with customary prudence.
Modest inflationary pressure earlier in the year was met with tight monetary
policy, which slowed down the economy in the third quarter after two quarters of
very strong growth. Consumer price inflation is currently running at about 6%,
but there may be greater cause for concern in the wholesale price index, which
remains at a slightly higher level. This is in spite of the weak price of
copper, which continues to be a significant influence on the whole economy.
3
LATIN AMERICA GROWTH FUND, INC.
FROM THE PORTFOLIO MANAGER (continued) OCTOBER, 1996
PROSPECTS AND CHALLENGES FOR 1997
The first stage of the emergence of the major Latin American countries from
the economic quagmire of the 1980s is now complete. Inflation has been tamed,
and the countries have focused their efforts on international integration and
competitiveness. The North American Free Trade Agreement ("NAFTA") and Mercosur
have evolved from this outward-looking attitude, which is in sharp contrast to
the introspection and import substitution of the so-called "lost decade". The
challenge for the last few years of the millennium will be to ensure that the
reforms of recent years spread further throughout the region's societies, to
ensure that the benefit of the reform process is not confined to a small section
of the populace. This serves an important political end, as it garners support
for the whole process, enabling incumbent governments to be re-elected, and
promoting broader reform.
This issue will be particularly important in Mexico in July 1997 when
congressional elections take place. In spite of the power of its political
apparatus, the incumbent Institutional Revolutionary Party ("PRI") is clearly
concerned about the threat to its position from the Right Wing National Action
Party ("PAN"). It may be that there is excessive reflation of the economy in the
run-up to the election, to deepen the economic recovery. Recent social unrest in
some Mexican states is evidence of the disillusionment at the reform process in
some strata of society. The PRI will doubtless use every means at its disposal
to safeguard its overall majority. However, there is the possibility that, for
the first time since the revolution, the PRI will not be able to railroad
through policy issues, without recourse to debate and the democratic process.
In Brazil, 1997 should see further progress on the reform of the economy
through the privatization of various state assets. The sale of the largest iron
ore exporter in the world, CVRD, is scheduled for the first half of next year,
and there should be greater steps made to prepare parts of the
telecommunications sector for sale. However, privatization has proven to be an
emotive issue in the past, and this is certainly not likely to be any exception.
The issue is complicated by President Cardoso's push to amend the constitution
to enable him to stand for a second term in office. It would definitely be to
the detriment of Brazil's long-term development if vested political interests
were to interfere with structural reform.
CONCLUSION
The evolution of all the Latin American economies in the 'Nineties will be
dominated by the impact of the peso crisis of December 1994. The effect of this
one event in Mexico was to push GDP back to levels last seen at the end of the
1980s, undoing much of the progress of the early l990s. The recoveries that are
now beginning will help to ease some of the pressure in the region's economies,
but reform needs to be strengthened, and extended to other areas of the
economies. One of the key issues in 1997 will be whether the political
environment, in Mexico in particular, will remain favorable for such a
development. Popular antipathy towards the reform processes in the continent may
hold back such a move, resulting in policy stalemate and the failure to address
the region's structural problems. This represents the greatest risk to the
region, but is one of which policy-makers are keenly aware.
Notwithstanding this threat, the longer term prospects for Latin America
remain bright. The ability to withstand a crisis of the magnitude of the peso
devaluation, and recover in a relatively short space of time, is testimony to
the significant improvement in the economic health of the region. At the same
time, equities remain significantly undervalued on both an absolute basis, and
when compared to their recent history. As the economies continue their
development in 1997, this should feed through to stronger equity markets,
benefiting the stock prices of those companies in which the Fund is invested.
Sincerely,
/s/ Ian J. King
IAN KING
Portfolio Manager
4
LATIN AMERICA GROWTH FUND, INC.
PORTFOLIO HIGHLIGHTS OCTOBER 31, 1996
ASSET DISTRIBUTION (BY COUNTRY)
Percentages based on total investments
Argentina 21.5%
United States 9.3%
Brazil 24.4%
Peru 15.0%
Mexico 20.8%
Chile 6.6%
Colombia 2.4%
ASSET DISTRIBUTION (BY INSTRUMENT)
Percentages based on total investments
Common Stocks 68.3%
Preferred Stocks 22.4%
U.S. Government Agency Obligation 7.1%
Commercial Paper 2.2%
INDUSTRY BREAKDOWN
Percentages based on total investments
Banking/Finance 8.8%
Utility 6.0%
Food and Beverages 9.2%
Transportation 6.9%
Construction and Building Materials 8.9%
U.S. Government Agency Obligations 7.1%
Metals and Mining 8.2%
Household Appliances 7.1%
Capital Goods 3.4%
Automobile and Accessories 4.7%
Chemicals 4.2%
Other Stocks 23.3%
Commercial Paper 2.2%
PERCENTAGE
OF
TOP TEN HOLDINGS NET ASSETS
--------------------------------------------------------------
1. Federal Home Loan Mortgage Corporation,
Discount Note 7.3%
2. Cementos Lima Common 3.6
3. Refrigeracao Parana (REFRIPAR) 3.6
4. Tubos de Acero de Mexico, ADR (TAMSA) 3.4
5. Credicorp Ltd. 3.4
6. Corporaci|Aton Cementaria Argentina (CORCEMAR) 3.3
7. Transportacion Maritima Mexicana, ADR (TMM) 3.3
8. Industrias Campos Hermanos, Series B 3.0
9. Maderas y Sint|Aaeticas, ADR (MASISA) 3.0
10. Enrique Ferreyros 2.8
----
36.7%
SEE NOTES TO FINANCIAL STATEMENTS.
5
LATIN AMERICA GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
--------------------------------------------------------------------------------
COMMON STOCKS -- 69.9%
ARGENTINA -- 22.0%
600,000 Atanor $ 990,148
683,594 Astra Compania Argentina de Petroleo 1,230,654
150,000 Capex 1,087,663
Compania Interamericana de Automoviles
116,306 (CIADEA) 521,130
Corporacion Cementaria Argentina
374,497 (CORCEMAR)+ 1,591,851
220,000 Fiplasto+ 880,132
2,000,000 Indupa 1,066,160
308,642 Inversiones y Representaciones (IRSA) 944,586
130,080 Juan Minetti 390,299
291,667 Molinos Rio de la Plata+ 918,889
400,000 Sociedad Comercial del Plata 944,142
-----------
10,565,654
-----------
BRAZIL -- 2.0%
70,000 Multicanal Participacoes, ADR 980,000
-----------
CHILE -- 6.7%
40,000 Chilquinta, ADR 620,000
74,000 Laboratorios de Chile, ADR 1,174,750
100,000 Maderas y Sint|Aaeticas, ADR (MASISA) 1,425,000
-----------
3,219,750
-----------
COLOMBIA -- 2.5%
86,400 Carulla 509,658
Corporacion Financiera del Valle, Series B,
71,422 ADR (CORFIVALLE) 392,464
Gran Cadena de Almacenes Colombianos
300,000 (CADENALCO) 275,945
-----------
1,178,067
-----------
MEXICO -- 21.3%
2,000,000 Camesa, Series B 895,392
40,000 Grupo Bufete Industrial, ADR 650,000
50,000 Grupo Casa Autrey, ADR 943,750
1,250,000 Grupo Financiero del Norte, Series B 1,245,330
60,000 Grupo Radio Centro, ADR 412,500
469,000 Industrias Campos Hermanos, Series B+ 1,448,468
175,000 Sanluis Corporacion 909,869
520,000 Sistema Argos, Series B 467,547
225,000 Transportacion Maritima Mexicana, ADR (TMM) 1,575,000
148,600 Tubos de Acero de Mexico, ADR (TAMSA)+ 1,653,175
-----------
10,201,031
-----------
PERU -- 15.4%
200,000 Banco Wiese, ADR 1,050,000
126,951 Cementos Lima Common 1,732,693
1 Cementos Norte Pacasmayo 2
94,103 Credicorp Ltd. 1,646,802
1,343,278 Enrique Ferreyros 1,322,196
469,485 Indeco Peruana+ 223,781
1,091,254 Industrias Pacocha 714,675
76,808 Minsur Trabajo 689,054
-----------
7,379,203
-----------
TOTAL COMMON STOCKS (COST $32,395,169) 33,523,705
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
LATIN AMERICA GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS (continued) OCTOBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
---------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS -- 22.9%
BRAZIL -- 22.9%
52,100,000 Bombril $1,014,211
8,000,000 Casa Anglo 330,894
1,476,047 Celesc, Series B+ 1,249,913
80,000,000 Ceval 751,411
32,300,000 Continental 2001 746,666
1,200,000 Frigobras 554,798
3,750,000 Iochpe-Maxion 361,349
4,000,000 Marcopolo 790,345
120,000,000 Organizacao Sistemas Aplicas, (OSA) 875,998
600,000,000 Perdigao 1,121,277
2,000,000,000 Randon Participacoes 1,031,730
700,000,000 Refrigeracao Parana (REFRIPAR) 1,703,329
202,000 Renner Herrmann 185,799
4,160,000 Sao Paulo Alpargatas 259,139
-----------
TOTAL PREFERRED STOCKS (COST $16,808,526) 10,976,859
-----------
FACE VALUE
--------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS -- 9.5%
COMMERCIAL PAPER -- 2.2% (COST $1,087,000)
General Electric Capital Corporation IB,
$ 1,087,000 5.570% due 11/01/1996 1,087,000
-----------
U.S. GOVERNMENT AGENCY OBLIGATION -- 7.3% (COST $3,490,953)
Federal Home Loan Mortgage Corporation,
Discount Note,
3,500,000 5.170%++ due 11/19/1996 3,490,953
-----------
TOTAL SHORT-TERM INSTRUMENTS (COST $4,577,953) 4,577,953
--------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $53,781,648*) 102.3 % 49,078,517
OTHER ASSETS AND LIABILITIES (NET) (2.3) (1,125,363)
--------------------------------------------------------------------------------
NET ASSETS 100.0 % $47,953,154
--------------------------------------------------------------------------------
</TABLE>
- ---------
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
++ Interest rate represents annualized yield at date of purchase.
ADR -- American Depositary Receipt.
SEE NOTES TO FINANCIAL STATEMENTS.
7
LATIN AMERICA GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $53,781,648) (Note 1)
See accompanying schedule $49,078,517
Cash and foreign currency (Cost $348) 522
Unamortized organization costs (Note 5) 95,666
Dividends and interest receivable 22,556
-----------------------------------------------------------------------------------------
TOTAL ASSETS 49,197,261
-----------------------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities purchased $ 980,000
Legal and audit fees payable 61,539
Investment advisory fee payable (Note 2) 52,393
Custodian fees payable (Note 2) 37,715
Administration fee payable (Note 2) 8,448
Accrued Directors' fees and expenses (Note 2) 7,467
Transfer agent fees payable (Note 2) 5,281
Accrued expenses and other payables 91,264
-----------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,244,107
-----------------------------------------------------------------------------------------
NET ASSETS $47,953,154
-----------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Distributions in excess of net investment income $ (106,053)
Accumulated net realized loss on securities, forward
foreign currency contracts and foreign currencies (2,205,545)
Net unrealized depreciation of securities, foreign
currencies and net other assets (4,704,117)
Par value of common stock 4,007
Paid-in capital in excess of par value of common stock 54,964,862
-----------------------------------------------------------------------------------------
TOTAL NET ASSETS $47,953,154
-----------------------------------------------------------------------------------------
NET ASSET VALUE:
Net asset value per share
($47,953,154 / 4,007,169 shares of common stock
outstanding) $ 11.97
-----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
LATIN AMERICA GROWTH FUND, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE YEAR ENDED OCTOBER 31, 1996
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $37,223) $ 748,966
Interest 336,594
-----------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,085,560
-----------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee (Note 2) $ 599,626
Legal and audit fees 108,303
Administration fee (Note 2) 100,000
Transfer agent fees (Note 2) 61,726
Shareholder reports expense 60,318
Directors' fees and expenses (Note 2) 57,848
Amortization of organization costs (Note 5) 31,686
Custodian fees (Note 2) 19,639
Other 27,061
-----------------------------------------------------------------------------------------
TOTAL EXPENSES 1,066,207
-----------------------------------------------------------------------------------------
NET INVESTMENT INCOME 19,353
-----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(Notes 1 and 3):
Net realized loss on:
Securities (1,486,193)
Forward foreign currency contracts (23,215)
Foreign currencies (9,440)
-----------------------------------------------------------------------------------------
Net realized loss on investments during the year (1,518,848)
-----------------------------------------------------------------------------------------
Net change in unrealized appreciation of:
Securities 3,929,464
Forward foreign currency contracts 23
Foreign currencies and net other assets 620
-----------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments
during the year 3,930,107
-----------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 2,411,259
-----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,430,612
-----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
LATIN AMERICA GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
10/31/96 10/31/95*
-----------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 19,353 $ 840,930
Net realized loss on securities, forward foreign currency
contracts and foreign currencies during the year (1,518,848) (856,690)
Net change in unrealized appreciation/(depreciation) of
securities, forward foreign currency contracts, foreign
currencies and net other assets during the year 3,930,107 (8,634,224)
-----------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from
operations 2,430,612 (8,649,984)
-----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (803,558) --
Net increase in net assets from Fund share transactions
(Note 4) -- 55,799,992
Offering costs reimbursed/(charged) to paid-in capital (Note
4) 12,575 (936,491)
-----------------------------------------------------------------------------------------
Net increase in net assets 1,639,629 46,213,517
-----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 46,313,525 100,008
-----------------------------------------------------------------------------------------
End of year (including distributions in excess of net
investment income/
undistributed net investment income ($106,053) and
$710,807, respectively) $47,953,154 $46,313,525
-----------------------------------------------------------------------------------------
</TABLE>
* The Fund commenced operations on November 7, 1994.
SEE NOTES TO FINANCIAL STATEMENTS.
10
LATIN AMERICA GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
10/31/96 10/31/95*
-----------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning of year $ 11.56 $ 13.95
-----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.00# 0.21
Net realized and unrealized gain/(loss) on investments 0.61 (2.37)
-----------------------------------------------------------------------------------------
Total from investment operations 0.61 (2.16)
-----------------------------------------------------------------------------------------
Distributions from net investment income (0.20) --
Offering costs reimbursed/(charged) to paid-in capital 0.00# (0.23)
-----------------------------------------------------------------------------------------
Net Asset Value, end of year $ 11.97 $ 11.56
-----------------------------------------------------------------------------------------
Market Value, end of year $ 9.75 $ 9.50
-----------------------------------------------------------------------------------------
Total return+ 4.49% (36.67)%
-----------------------------------------------------------------------------------------
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) $47,953 $46,314
Ratio of operating expenses to average net assets 2.22% 2.43%**
Ratio of net investment income to average net assets 0.04% 1.68%**
Portfolio turnover rate 22% 7%
Average commission rate paid (a) $0.0001 --
</TABLE>
- -------------
* The Fund commenced operations on November 7, 1994. Beginning Net Asset Value
results from initial offering price of $15.00 per share less commissions and
offering expenses of $1.05 per share.
** Annualized.
+ Total return represents aggregate total return for the period based on
market value at period end.
# Amount represents less than $0.01 per share.
(a) Average commission rate paid per share of securities purchased and sold by
the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
11
LATIN AMERICA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Latin America Growth Fund, Inc. (the "Fund") was incorporated as a Maryland
corporation on June 27, 1994. It is a diversified, closed-end management
investment company registered with the Securities and Exchange Commission under
the Investment Company Act of 1940, as amended. The preparation of financial
statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
Portfolio Valuation: 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 are valued at the mean between the last current bid and asked price 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 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 U.S.
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 in good faith by, or under
procedures established by, the Fund's Board of Directors.
Repurchase Agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
This agreement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal at all times to the total amount of the repurchase obligations,
including interest. In the event of counterparty default, the Fund has the right
to use the collateral to offset losses incurred. There is potential loss to the
Fund in the event the Fund is delayed or prevented from exercising its rights to
dispose of the collateral securities, including the risk of a possible decline
in the value of the underlying securities during the period while the Fund seeks
to assert its rights. The Fund's investment adviser, acting under the
supervision of the Fund's Board of Directors, reviews the value of the
collateral and the creditworthiness of those banks and dealers with which the
Fund enters into repurchase agreements to evaluate potential risks.
Foreign Currency: The books and records of the Fund are maintained in U.S.
dollars. Foreign currencies, investments and other assets and liabilities are
translated into U.S. dollars at the exchange rates prevailing at the end of the
period, and purchases and sales of investment securities, income and expenses
are translated on the respective dates of such transactions. Unrealized gains
and losses which result from changes in foreign currency exchange rates have
been included in the unrealized appreciation/(depreciation) of currencies and
net other assets. Net foreign currency gains and losses resulting from changes
in exchange rates include foreign currency gains and losses between trade date
and settlement date on investment securities transactions, foreign currency
transactions and the difference between the amounts of interest and dividends
recorded on the books of the Fund and the amounts actually received. The portion
of foreign currency gains and losses related to fluctuation in the exchange
rates between the initial purchase trade date and subsequent sale trade date is
included in realized gains and losses on investment securities sold.
12
LATIN AMERICA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
Forward Foreign Currency Contracts: The Fund has entered into forward
foreign currency contracts for purposes other than trading in order to reduce
its exposure to fluctuations in foreign currency exchange on its portfolio
holdings. Forward foreign currency contracts are valued at the forward rate and
are marked-to- market daily. The change in market value is recorded by the Fund
as an unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate
fluctuations in the underlying prices of the Fund's investment securities, but
it does establish a rate of exchange that can be achieved in the future.
Although forward foreign currency contracts limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential gain
that might result should the value of the currency increase. In addition, the
Fund could be exposed to risks if the counterparties to the contracts are unable
to meet the terms of their contracts.
Securities Transactions and Investment Income: Securities transactions are
recorded as of the trade date. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis. Dividend income and interest income may be subject to foreign withholding
taxes.
Dividends and Distributions to Shareholders: The Fund intends to distribute
annually to shareholders substantially all of its net investment income and to
distribute any realized capital gains at least annually. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
Federal Income Taxes: The Fund's policy is to comply with the provisions of
the Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and by distributing substantially all of its taxable income
to its shareholders. Therefore, no Federal income tax provision is required.
For the year ended October 31, 1996, permanent differences resulting from
book and tax accounting for forward foreign currency contracts and currency
transactions were reclassified from accumulated net realized loss to
distribution in excess of net investment income in the amount of $32,655.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER RELATED
PARTY TRANSACTIONS
IDS International Inc. ("IDSI") serves as the Fund's investment adviser
pursuant to an investment advisory agreement (the "Advisory Agreement"). IDSI
provides investment advisory services to the Fund and is responsible for the
management of the Fund's portfolio of investments in accordance with the Fund's
investment objectives and policies. Under the Advisory Agreement, IDSI is
entitled to receive a monthly fee at an annual rate of 1.25% of the value of the
Fund's average weekly net assets.
First Data Investor Services Group, Inc. ("FDISG"), a wholly-owned
subsidiary of First Data Corporation, serves as the Fund's U.S. Administrator
(the "U.S. Administrator") pursuant to an administration agreement (the
"Administration Agreement"). Under the Administration Agreement, FDISG is
entitled to receive a monthly fee at an annual rate of 0.10% of the value of the
Fund's average weekly net assets, subject to minimum annual fee of $100,000.
FDISG also acts as the Fund's transfer agent, dividend paying agent and
registrar.
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 Fiducomerico act as
local administrators for the Fund in Brazil, Chile and Colombia, respectively,
pursuant to arrangements established by Boston Safe Deposit and Trust Company
("Boston Safe"), the Fund's custodian.
13
LATIN AMERICA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
Boston Safe, an indirect wholly-owned subsidiary of Mellon Bank Corporation,
serves as the Fund's custodian and may employ sub-custodians outside of the
United States.
The Toyo Trust and Banking Company, Limited 4-3, Marunouchi 1-chome,
Chiyoda-ku, Tokyo, Japan, serves as the Fund's dividend paying agent and
shareholder servicing agent for the Fund's common stock that is beneficially
owned by investors in Japan.
No officer, director, or employee of IDSI, FDISG or any parent or subsidiary of
those corporations receives any compensation from the Fund for serving as a
director or officer of the Fund. The Fund pays each director who is not a
director, an officer or employee of IDSI, FDISG or any of their affiliates
$7,000 per annum plus $1,000 for each Regular or Special Board Meeting attended
in person or by telephone, plus related travel and out-of-pocket expenses.
3. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the year ended October 31, 1996, aggregated
$13,185,044 and $9,299,267, respectively.
At October 31, 1996, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $4,991,777 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value was $9,694,908.
4. SHARES OF CAPITAL STOCK
The authorized capital stock of the Fund is 100,000,000 shares of Common
Stock ($0.001 par value). For the year ended October 31, 1996, there were no
share transactions. Transactions in shares outstanding for the Fund were as
follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
October 26, 1994* 7,169 $ 100,008
Initial issuance of shares in public offering** 4,000,000 55,799,992
- ----------------------------------------------------------------------------------------------
Total increase*** 4,007,169 $55,900,000
- ----------------------------------------------------------------------------------------------
</TABLE>
* On October 26, 1994, the Fund sold a total of 7,169 shares to Lehman
Brothers Inc. and proceeds to the Fund amounted to $100,008.
** The Fund commenced operations on November 7, 1994.
*** Offering costs of $936,491 were charged to paid-in capital connection with
the offering of the Fund's shares during the period ended October 31, 1995.
Underwriting discounts and commissions paid directly to Lehman Brothers Inc.
and other underwriters amounted to $4,200,000. For the year ended October
31, 1996, the Fund was reimbursed $12,575 of the original offering costs of
$936,491.
5. ORGANIZATION COSTS
The Fund bears all costs in connection with its organization and offering,
including fees and expenses of registering and qualifying its shares for
distribution under Federal and state securities regulations. All such costs are
being amortized on the straight-line method over a period of five years from the
commencement of operations of the Fund. In the event that any of the initial
shares of the Fund are redeemed during such amortization period, the Fund will
be reimbursed for any unamortized organization costs in the same proportion as
the number of shares redeemed bears to the number of initial shares held at the
time of redemption.
14
LATIN AMERICA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
6. ANTIDISCOUNT MEASURES
If, at any time after the second year following the initial offering of the
Fund's shares of Common Stock, shares of the Fund's Common Stock publicly trade
for a substantial period of time at a significant 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
reduce the discount. These actions may include periodic repurchases of shares,
tender offers to purchase shares from all stockholders at net asset value or
recommending to shareholders conversion to an open-end investment company. No
assurance can be given that the Fund's Board of Directors will convert to an
open-end investment company or that repurchases or tender offers will be made or
that if made, they will reduce or eliminate market discount. The Board regularly
considers means to reduce the discount, including more radical approaches such
as recommending to shareholders that the Fund convert to open-end status.
7. NON-U.S. SECURITIES
At October 31, 1996, 92.8% of the Fund's net assets were invested in Latin
American securities. There are significant differences between Latin American
and U.S. securities markets, including, among others, greater price volatility,
less liquidity, smaller market capitalization and less government supervision
and regulation in the Latin American securities markets. Consequently,
acquisitions and dispositions by the Fund of securities in these markets may be
inhibited.
8. CAPITAL LOSS CARRYFORWARD
At October 31, 1996, the Fund had available for Federal tax purposes
unused capital losses of $719,350 and $1,486,195 expiring on October 31,
2003 and October 31, 2004, respectively, which can be used to offset
future net capital gains. Quarterly Results of Operations (Unaudited)
- --------------------------------------------------------------------------------
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE)
NET INVESTMENT NET REALIZED AND UNREALIZED IN NET ASSETS
INCOME/LOSS GAIN/(LOSS) ON INVESTMENTS RESULTING FROM OPERATIONS
TOTAL TOTAL TOTAL
QUARTER ENDED (000) PER SHARE (000) PER SHARE (000) PER SHARE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR 1995
January 31, 1995* $ 264 $ 0.07 $(3,381) $(0.85) $(3,117) $(0.78)
April 30, 1995 379 0.09 (824) (0.20) (445) (0.11)
July 31, 1995 170 0.04 (523) (0.13) (353) (0.09)
October 31, 1995 28 0.01 (4,763) (1.19) (4,735) (1.18)
- -----------------------------------------------------------------------------------------------------
TOTAL 841 0.21 (9,491) (2.37) (8,650) (2.16)
- -----------------------------------------------------------------------------------------------------
FISCAL YEAR 1996
January 31, 1996 (2) (0.00) 3,276 0.82 3,274 0.82
April 30, 1996 52 0.01 (730) (0.18) (678) (0.17)
July 31, 1996 (7) (0.00) 405 0.10 398 0.10
October 31, 1996 (24) (0.01) (540) (0.13) (564) (0.14)
- -----------------------------------------------------------------------------------------------------
TOTAL 19 0.00 2,411 0.61 2,430 0.61
- -----------------------------------------------------------------------------------------------------
</TABLE>
* For the period November 7, 1994 through January 31, 1995.
15
LATIN AMERICA GROWTH FUND, INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Directors of Latin America Growth Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
Latin America Growth Fund, Inc., including the schedule of portfolio
investments, as of October 31, 1996, the related statement of operations for the
year then ended, and the statement of changes in net assets and financial
highlights for the year then ended and for the period from November 7, 1994
(commencement of operations) to October 31, 1995. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996, by correspondence with the custodian and brokers, or other
appropriate auditing procedures where replies from brokers were not received. 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Latin America Growth Fund, Inc., at October 31, 1996, the results of its
operations for the year then ended, and the changes in its net assets and
financial highlights for the year then ended and for the period from November 7,
1994 (commencement of operations) to October 31, 1995, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 6, 1996
16
LATIN AMERICA GROWTH FUND, INC.
ADDITIONAL INFORMATION (unaudited)
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 First Data Investor Services
Group, Inc. ("FDISG"), (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 U.S. dollars mailed directly to the shareholder by FDISG,
as dividend paying agent. In the case of shareholders, such as banks, brokers or
nominees, that hold shares for others who are beneficial owners, the Plan Agent
will administer the Plan on the basis of the number of shares certified from
time to time by the shareholders as representing the total amount registered in
such shareholders' names and held for the account of beneficial owners that have
not elected to receive distributions in cash. Investors that own shares
registered in the name of a bank, broker or other nominee should consult with
such nominee as to participation in the Plan through such nominee, and may be
required to have their shares registered in their own names in order to
participate in the Plan.
The Plan Agent serves as agent for the shareholders in administering the
Plan. If the Directors of the Fund declare an income dividend or a capital gains
distribution payable either in the Fund's Common Stock or in cash,
non-participants 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 assets 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 participant's 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 the account, including information
needed by shareholders for personal and U.S. Federal 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 handling of 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.
17
LATIN AMERICA GROWTH FUND, INC.
ADDITIONAL INFORMATION (unaudited)(continued)
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 pro-rating the lower commission thus attainable.
The receipt of dividends and distributions under the Plan will not relieve
participants of any U.S. Federal income tax which may be payable on such
dividends or distributions.
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 thirty days
before the record date for such dividend or distribution. The Plan also may be
amended by the Fund or Plan Agent, but (except when necessary or appropriate to
comply with applicable law, rules of policies of a regulatory authority) only by
at least thirty 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.
RESULTS OF SHAREHOLDER MEETING
On February 12, 1996, the Fund held an Annual Meeting of Shareholders to
consider (1) the election of five directors and (2) the ratification of the
selection of Ernst & Young LLP as independent auditors. The results of each
proposal are as follows:
PROPOSAL 1: ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
<S> <C> <C>
NAME FOR AGAINST
---- --- -------
Peter L. Lamaison 3,254,359 75,360
Philip H. Didriksen, Jr. 3,256,939 72,780
Rodman L. Drake 3,255,759 73,960
Kathleen C. McClave 3,253,659 76,060
Peer Pederson 3,255,059 74,660
</TABLE>
PROPOSAL 2: SELECTION OF INDEPENDENT AUDITORS
<TABLE>
<CAPTION>
<S> <C>
Voted:
FOR 3,306,845
AGAINST 14,379
ABSTAIN 8,495
</TABLE>
ELECTION OF NEW OFFICERS
On November 13, 1996, the Fund held a meeting of the Board of Directors to
consider the election of two officers. The results are as follows:
William Westhoff President
Christine P. Ritch Secretary
18
LATIN AMERICA GROWTH FUND, INC.
One Exchange Place
Boston, MA 02109
DIRECTORS AND OFFICERS INVESTMENT ADVISER
Peter L. Lamaison IDS International Inc.
Chairman of the Board 11th Floor Dashwood House
William Westhoff 69 Old Broad Street
President London EC2M 1QS
Philip H. Didriksen, Jr. United Kingdom
Director INFORMATION NUMBERS
Rodman L. Drake 1-800-310-8239
Director 1-612-671-2334
Kathleen C. McClave ADMINISTRATOR AND
Director TRANSFER AGENT
Peer Pedersen First Data Investor Services
Director Group, Inc.
Ian King One Exchange Place
Vice President Boston, MA 02109-2873
and Investment Officer SHAREHOLDER SERVICE NUMBER
Christine P. Ritch, Esq. 1-800-331-1710
Secretary INDEPENDENT AUDITORS
Michael Kardok Ernst & Young LLP
Treasurer 200 Clarendon Street
FUND COUNSEL Boston, MA 02116
Shereff, Friedman, Hoffman & CUSTODIAN
Goodman Boston Safe Deposit & Trust
919 Third Avenue Company
New York, NY 10022 One Boston Place
Boston, MA 02108
