Offer to Purchase for Cash
by
The Brazilian Investment Fund, Inc.
up to 290,439.697 Shares of its Common Stock
at
a Price Net Per Share Equal to the Net Asset Value Per Share
_________________
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON NOVEMBER 6, 1995
UNLESS THE OFFER IS EXTENDED.
________________
THIS OFFER IS CONDITIONED UPON, AMONG OTHER THINGS,
NO MORE THAN 290,439.697 SHARES BEING TENDERED AND NOT
WITHDRAWN AS OF THE EXPIRATION DATE (AS HEREINAFTER
DEFINED). IF MORE THAN 290,439.697 SHARES ARE TENDERED, THE
FUND WILL NOT PURCHASE ANY SHARES IN THE OFFER AND,
PURSUANT TO ARTICLE ELEVENTH OF THE FUND'S ARTICLES OF
INCORPORATION, THE BOARD OF DIRECTORS OF THE FUND SHALL
CONVENE A SHAREHOLDERS MEETING TO CONSIDER A PLAN OF
LIQUIDATION OF THE FUND.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS NOR
XXXXXX XXXXXXX ASSET MANAGEMENT INC. (THE INVESTMENT ADVISER
TO THE FUND) NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING SHARES. THE FUND HAS BEEN ADVISED
THAT NO DIRECTOR OR EXECUTIVE OFFICER OF THE FUND INTENDS TO
TENDER ANY SHARES PURSUANT TO THE OFFER.
IMPORTANT
Any shareholder desiring to tender all or any
portion of his shares of Common Stock of the Fund
should either (1) complete and sign the Letter of Transmittal
or a facsimile thereof in accordance with the instructions
in the Letter of Transmittal, and mail or deliver the
Letter of Transmittal or such facsimile with his
certificates for the tendered Shares if such Shareholder has
been issued physical certificates, signature guarantees for
all shareholders tendering uncertificated Shares and any
other required documents to the Depository,
or (2) request his broker, dealer, commercial bank, trust company
or other nominee to effect the transaction for him.
Shareholders having Shares registered in the name of a
broker, dealer, commercial bank, trust company or other
nominee are urged to contact such broker, dealer,
commercial bank, trust company or other nominee if they
desire to tender Shares so registered.
Questions and requests for assistance may be
directed to the Depository in the manner set forth on page
17 of this Offer to Purchase. Requests for additional
copies of this Offer to Purchase and the Letter of Transmittal
may also be directed to the Depository.
October 10, 1995
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION
ON BEHALF OF THE FUND OR XXXXXX XXXXXXX ASSET MANAGEMENT INC.
AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE
OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE,
ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND.
TABLE OF CONTENTS
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Section Page
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1. Terms of the Offer; Expiration Date 2
2. Acceptance for Payment and
Payment for Shares 3
3. Procedure for Tendering Shares 4
4. Rights of Withdrawal 6
5. Certain United States Federal Income Tax
Consequences of the Offer 6
6. Price Range of Shares; Dividends 9
7. Purpose of the Offer; Certain Effects of
the Offer 9
8. Source and Amount of Funds 10
9. Certain Information Concerning
the Fund 11
10. Interest of Directors and Executive
Officers; Transactions and Arrangements
Concerning the Shares 12
11. Certain Legal Matters; Regulatory
Approvals 12
12. Certain Conditions of the Offer 13
13. Fees and Expenses 15
14. Miscellaneous 15
To the Holders of Common Stock of The Brazilian Investment
-----------------------------------------------------------
Fund, Inc.:
-----------
The Brazilian Investment Fund, Inc., a
Maryland corporation (the "Fund"), hereby offers to purchase
290,439.697 shares of its Common Stock, par value $.01 per share
(the "Shares"), at a price per Share, net to the seller in
cash, equal to the net asset value in U.S. dollars ("NAV") per
share as of 5:00 P.M., New York City time on the Expiration
Date (as herein defined) upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the
related Letter of Trans mittal (which together constitute the
"Offer").
THE OFFER IS CONDITIONED UPON NO MORE THAN
290,439.697 SHARES BEING TENDERED AND NOT WITHDRAWN AS OF
THE EXPIRATION DATE. THE OFFER IS ALSO SUBJECT TO CERTAIN
OTHER CONDITIONS. SEE SECTION 12.
THIS OFFER IS BEING MADE PURSUANT TO ARTICLE
ELEVENTH OF THE FUND'S ARTICLES OF INCORPORATION ("ARTICLE
ELEVENTH"), WHICH REQUIRES THE FUND, FOR SO LONG AS THE FUND'S
COMMON STOCK IS NOT LISTED ON A STOCK EXCHANGE, TO MAKE PERIODIC
OFFERS TO PURCHASE ALL SHARES OF ITS COMMON STOCK. IF MORE THAN
290,439.697 SHARES ARE TENDERED, THE FUND WILL NOT PURCHASE ANY
SHARES IN THE OFFER AND, PURSUANT TO ARTICLE ELEVENTH, THE
BOARD OF DIRECTORS OF THE FUND SHALL CONVENE A SHAREHOLDERS
MEETING TO CONSIDER A PLAN OF LIQUIDATION OF THE FUND.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS NOR
XXXXXX XXXXXXX ASSET MANAGEMENT INC. (THE "INVESTMENT ADVISER")
NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING SHARES. EACH SHAREHOLDER MUST MAKE HIS OWN
DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY
SHARES TO TENDER AND AT WHAT PRICES.THE FUND HAS BEEN ADVISED
THAT NO DIRECTOR OR EXECUTIVE OFFICER OF THE FUND
INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.
As of September 30, 1995, there were outstanding
580,879.395 Shares and there were approximately 65
holders of record of Shares. The Shares are not currently
publicly traded. On October 6, 1995, the NAV per Share was
$72.07 Shareholders are urged to contact Chase Global Funds
Services Company (the "Depository") at (000) 000-0000 to
obtain current NAV quotations for the Shares.
See Section 6. Pursuant to the requirements of Article
Eleventh, the Fund currently
intends each quarter to make a tender offer for its
shares of Common Stock at a price per share equal to the then
current NAV.
Any Shares acquired by the Fund pursuant to the
Offer will become treasury Shares and will be available for
issuance by the Fund without further shareholder action
(except as required by applicable law). Tendering shareholders
will not be obligated to pay brokerage fees or commissions or,
subject to Instruction 6 of the Letter of Transmittal,
transfer taxes on the purchase of Shares by the Fund.
1. Terms of the Offer; Expiration Date. Upon
the terms and subject to the conditions set forth in the
Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), the Fund
will accept for payment, and pay for, all Shares validly
tendered on or prior to the Expiration Date (as herein
defined) and not withdrawn as permitted by Section 4. The
term "Expiration Date" means 12:00 Midnight, New York City
time, on November 6, 1995, unless and until the Fund, in its
sole discretion, shall have extended the period for which the
Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date on which the Offer, as so
extended by the Fund, shall expire.
The Fund expressly reserves the right, in its
sole discretion, at any time or from time to time, to
extend the period of time during which the Offer is open by
giving oral or written notice of such extension to the
Depository. Any such extension will also be publicly
announced by press release issued no later than 9:00 A.M., New
York City time, on the next business day after the previously
scheduled Expiration Date.
The Fund confirms that if it makes a material change
in the terms of the Offer or the information concerning the
Offer, or if it waives a material condition of the Offer, the
Fund will extend the Offer to the extent required by Rules 13e-
4(d)(2) and 13e-4(e)(2) under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
During any extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer,
subject to the right of a tendering shareholder to withdraw
his Shares. See Section 4.
Subject to the applicable regulations of the
Securities and Exchange Commission (the "Commission"),
the Fund also expressly reserves the right, in its sole
discretion, at any time or from time to time (i) to delay
acceptance for payment of, or, regardless
of whether such Shares were therefore accepted for
payment, payment for,
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any Shares or to terminate the Offer and not accept for
payment or pay for any Shares not therefore accepted for
payment, or paid for, upon the occurrence of any of the
conditions specified in Section 12 and (ii) waive any
condition or otherwise amend the Offer in any respect, by
giving oral or written notice of such delay, termination or
amendment to the Depository and by making a public announcement
thereof. The Fund confirms that its reservation of the right
to delay payment for Shares which it has accepted for payment
is limited by Rule 13e-4(f)(5) under the Exchange Act, which
requires that a tender offer or pay the consideration offered
or return the tendered securities promptly after the termination
or withdrawal of a tender offer. If, following the Expiration Date,
the Fund is permitted under applicable law to delay acceptance for
payment of or payment for Shares and does so, the Fund may
not thereafter assert conditions to the Offer to delay or
avoid acceptance for payment of or payment for Shares except
to the extent permitted by applicable law. The Fund has been
advised by the Staff of the Commission that the Exchange Act
and the rules and regulations promulgated thereunder require that
all conditions to the Offer, other than the receipt of certain governmental
approvals, must be satisfied or waived prior to the Expiration
Date.
Any extension, delay, termination or amendment will
be followed as promptly as practicable by public
announcement thereof, such announcement in the case of an
extension to be issued no later than 9:00 A.M., New York
City time, on the next business day after the previously
scheduled Expiration Date. Subject to applicable law
(including Rule 13e-4(e)(2) under the Exchange Act, which
requires that any material change in the information
published, sent or given to shareholders
in connection with the Offer be promptly disseminated
to shareholders in a manner reasonably designed to
inform shareholders of such change) and without limiting the
manner in which the Fund may choose to make any public announcement,
the Fund shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than
by making a release to the Dow Xxxxx News Service.
2. Acceptance for Payment and Payment for Shares.
Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the
Fund will accept for payment, and will pay for, all Shares that are
validly tendered and not withdrawn as promptly as practicable
after the Expiration Date. Subject to applicable rules of the Commission,
the Fund expressly reserves the right to delay acceptance
for payment of, or payment for, Shares in order to comply, in
whole or in part, with any applicable law. See
-3-
Section 1. In all cases, payment for Shares tendered and accepted
for payment pursuant to the Offer will be made only after
timely receipt by the Depository of certificates for such
Shares (unless such Shares are held in uncertificated form),
a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and any other required documents.
For purposes of the Offer, the Fund will be deemed
to have accepted for payment Shares validly tendered and
not withdrawn as, if and when the Fund gives oral or written
notice to the Depository of its acceptance for payment of such
Shares pursuant to the Offer. Payment for Shares accepted for
payment pursuant to the Offer will be made by deposit of the
aggregate purchase price therefor with the Depository, which
will act as agent for the tendering shareholders for
purpose of receiving payments from the Fund and
transmitting such payments to the tendering shareholders.
Under no circumstances will interest on the purchase price for
Shares be paid, regardless of any delay in making such payment.
If any tendered Shares are not accepted for
payment pursuant to the terms and conditions of the Offer for
any reason, or if certificates are submitted for more
Shares than are tendered, certificates for such
unpurchased Shares will be returned, without expense to the
tendering shareholder, as soon as practicable following
expiration or termination of the Offer.
3. Procedure for Tendering Shares. For a
shareholder validly to tender Shares pursuant to the
Offer, a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), together with any required
signature guarantees and any other required documents, must be
transmitted to and received by the Depository at one of its
addresses set forth on page 17 of this Offer to Purchase and,
if such shareholder's tendered Shares are represented by
certificates, the certificates for the tendered Shares
must be received by the Depository at such address, in
each case prior to the Expiration Date.
Signatures on Letters of Transmittal must be
guaranteed by a firm which is a member of a registered
national securities exchange or of the National Association
of Securities Dealers, Inc. (the "NASD") or by a commercial
bank or trust company having an office, branch or agency in
the United States (an "Eligible Institution") in cases where
Shares held in uncertificated form are tendered. If the
certificates are registered in the name of a person other
than the signer of the Letter of Transmittal the certificates
must be endorsed or accompanied by appropriate stock powers, in
either case signed
-4-
exactly as the name or names of the registered owner or owners
appear on the certificates, with the signature(s) on the
certificates or stock powers guaranteed as aforesaid. The method
of delivery of all required documents is at the election and
risk of each tendering shareholder. If delivery is by mail,
registered mail with return receipt requested, properly insured,
is recommended.
To prevent United States federal income tax
backup withholding with respect to the purchase price of
Shares purchased pursuant to the Offer, a shareholder who
does not otherwise establish an exemption from such backup
withholding must provide the Depository with his
correct taxpayer identification number and certify that
he is not subject to backup withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal.
Foreign shareholders who have not previously submitted a Form W-8
to the Fund must do so in order to avoid backup withholding.
See Section 5.
All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for
payment of any tender of Shares will be determined by the
Fund, in its sole discretion, which determination shall be
final and binding. The Fund reserves the absolute right to reject
any and all tenders of Shares it determines not to be in proper
form or the acceptance for payment of which may, in the opinion
of its counsel, be unlawful. The Fund also reserves the absolute
right to waive any of the conditions of the Offer or any
defect or irregularity in the tender of any Shares. No tender
of Shares will be deemed to have been validly made until all defects
and irregularities have been cured or waived. None of the Fund,
the Investment Adviser, the Depository or any other person will be under any
duty to give notification of any defects or irregularities in
tenders or will incur any liability for failure to give any
such notification. The Fund's interpretation of the terms
and conditions of the Offer (including the Letter of
Transmittal and instructions thereto) will be final and
binding.
In all cases, payment for Shares tendered and
accepted for payment pursuant to the Offer will be made only
after timely receipt by the Depository of certificates for such
Shares (unless such Shares are held in uncertificated form),
properly completed and duly executed Letter(s) of
Transmittal (or facsimile(s) thereof) and any other required
documents.
The tender of Shares pursuant to any of the
procedures described above will constitute an agreement
between the tendering shareholder and the Fund upon the terms and
subject to the conditions of the Offer.
-5-
4. Rights of Withdrawal. Tenders of Shares made
pursuant to the Offer are irrevocable except that Shares
tendered pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date, and, unless therefore accepted
for payment by the Fund pursuant to the Offer, may also be
withdrawn at any time after December 6, 1995.
To be effective, a written, telegraphic, telex
or facsimile transmission notice of withdrawal must be
timely received by the Depository at one of its addresses set
forth on page 17 of this Offer to Purchase. Any notice of
withdrawal must specify the name of the person having tendered
the Shares to be withdrawn, the number of Shares to be
withdrawn and the names in which the Shares to be
withdrawn are registered. The signature(s) on the notice of
withdrawal must be guaranteed by an Eligible Institution. If
certificates have been delivered to the Depository, the name
of the registered holder and the serial numbers of the
particular certificates evidencing the Shares withdrawn must
also be furnished to the Depository as aforesaid prior to
the physical release of such certificates. All questions as
to the form and validity (including time of receipt) of any notice of
withdrawal will be determined by the Fund, in its sole
discretion, which determination shall be final and binding.
None of the Fund, the Investment Adviser, the Depository, or
any other person will be under any duty to give notification
of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give such notification.
Any Shares properly withdrawn will be deemed not to have
been validly tendered for purposes of the Offer. However,
withdrawn Shares may be retendered by following the
procedures described in Section 3 at any time prior to the
Expiration Date.
If the Fund is delayed in its acceptance for payment
of Shares, or is unable to accept for payment Shares
tendered pursuant to the Offer, for any reason, then, without
prejudice to the Fund's rights under this Offer, the Depository
may, nevertheless, on behalf of the Fund, retain tendered Shares,
and such Shares may not be withdrawn except to the extent
that tendering shareholders are entitled to withdrawal rights
as set forth in this Section 4.
5. Certain United States Federal Income Tax
Consequences of the Offer. The discussion below is a summary
of the material United States federal income tax consequences
of a sale of Shares pursuant to the Offer. Certain
shareholders (including insurance companies, tax-exempt
organizations and financial institutions or broker-dealers)
may be subject to special rules not discussed below.
-6-
The sale of Shares pursuant to the Offer will
be treated as a "sale or exchange" if the sale (a) is
"not essentially equivalent to a dividend" with respect
to the shareholder, (b) is "substantially disproportionate"
with respect to the shareholder, or (c) results in a "complete
termination" of all of the shareholder's interest in the
Fund. In determining whether any of these tests is met, Xxxxxx
considered to be owned by the shareholder by reason of
certain constructive ownership rules, as well as Shares
actually owned, will be taken into account. Thus,
a shareholder may be deemed to own Shares
actually owned, and in some cases constructively owned,
by certain related individuals and certain entities in which
the shareholder has an interest (or which have an interest
in the shareholder) and Shares which such shareholder has the
right to acquire by exercise of an option. In addition, each
shareholder should be aware that, under certain
circumstances, a sale or purchase of Shares contemporaneous
with the Offer may be taken into account in determining
whether any of the tests is satisfied.
Whether a sale will be "not essentially equivalent to
a dividend" with respect to any shareholder will depend on
the shareholder's facts and circumstances and on the
response of other shareholders to the Offer, but will, in any
event, require a "meaningful reduction" in a shareholder's
interest in the Fund. The sale of Shares by a shareholder
will be "substantially disproportionate" with respect to such
shareholder if after the sale (i) the percentage of the
outstanding Shares that the shareholder actually and
constructively owns is less than 80% of the percentage of
the outstanding Shares actually and
constructively owned by such shareholder immediately before
the sale, and (ii) the shareholder owns less than 50%
of the outstanding Shares. Finally, if a shareholder sells
all the Shares actually owned by him, such shareholder may be
eligible to waive certain constructive ownership provisions
and, thus, meet the requirements for a "complete termination"
of his interest in the Fund.
If any of the above tests is satisfied, the
shareholder will recognize gain (or loss) in the amount by
which the purchase price received by the shareholder
pursuant to the Offer is greater (or less) than the
shareholder's tax basis in the Shares sold. Such gain (or
loss) will be capital gain (or loss) if the Shares are held
as a capital asset and will be long-term capital gain (or
loss) if the Shares have been held for more than one year.
However, any such loss will be treated as a long-term
capital loss to the extent of any long-term capital
gain dividends and undistributed long-term capital gains
included in income by the shareholder with respect to such
Shares, if the Shares have been held for 6 months or less.
-7-
Additionally, any such loss will be disallowed to the extent
the Shares sold are replaced within the 61-day period
beginning 30 days before the Shares are sold, and the
disallowed loss will be reflected in an adjustment to the
basis of the Shares acquired.
If none of the above tests is satisfied, (i)
the shareholder will be treated as having received a dividend
in the amount of the cash received for the Shares sold
pursuant to the Offer, assuming that the Fund's current or
accumulated earnings and profits equal or exceed the cash
paid to shareholders which is treated as a dividend and (ii)
the shareholder's tax basis in the Shares sold to the Fund
will be transferred to any remaining Shares held by the shareholder.
If the shareholder does not actually own any remaining Shares,
such shareholder may be permitted to transfer such basis to
Shares owned by a related person or may lose such basis entirely.
The amount treated as a dividend will not be eligible for the
dividends-received deduction allowed to domestic corporate shareholders.
The Depository may be required to backup
withhold United States federal income tax at the rate of 31% of
the gross payment made pursuant to the Offer to shareholders
who fail to provide their correct taxpayer identification
number or to make required certifications, or who have
been notified by the Internal Revenue Service that they
are subject to backup withholding. Corporate shareholders
and certain other shareholders are exempt from
such backup withholding. Any amounts withheld may be credited
against a shareholder's United States federal income tax liability.
The Depository will withhold 30% of the gross
payment to a shareholder that is a nonresident alien
individual, fiduciary of a foreign trust or estate, foreign
corporation or foreign partnership (a "foreign shareholder")
unless the Depository determines that a reduced rate of withholding or
an exemption from withholding is applicable pursuant to
an applicable income tax treaty. (Exemption from backup
withholding does not exempt a foreign shareholder from the 30%
withholding). The Depository will determine a shareholder's
status as a foreign shareholder and eligibility for a
reduced rate of, or an exemption from, withholding, by
reference to the shareholder's address and to any valid
certificates or statements concerning eligibility for a
reduced rate of, or exemption from, withholding, unless
facts and circumstances indicate that such reliance is not
warranted. A foreign shareholder that has not previously
submitted the appropriate certificates or statements with
respect to a reduced rate of, or exemption from, withholding
for which such shareholder may be eligible should consider
doing so in
-8-
order to avoid over-withholding. A foreign shareholder may be
eligible to obtain a refund of tax withheld if such shareholder
meets one of the three tests for sale or exchange treatment
described above or is otherwise able to establish that no tax,
or a reduced amount of tax, was due.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION
SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY.
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE SALE
OF SHARES PURSUANT TO THE OFFER, INCLUDING THE APPLICATION
AND EFFECT OF STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND
ANY POSSIBLE CHANGES IN TAX LAWS.
6. Price Range of Shares; Dividends. The Shares
are not currently publicly traded. During the past two years
the NAVs per Share as of 5:00 P.M. on the last day of each
of the Fund's fiscal quarters are as follows:
September 30, 1993 $78.89
December 31, 1993 $83.58
March 31, 1994 $112.47
June 30, 1994 $89.21
September 30, 1994 $154.78
December 31, 1994 $129.97
March 31, 1995 $57.82
June 30, 1995 $68.06
September 30, 1995 $73.96
The NAV per Share as of 5:00 P.M., October 6, 1995 was
$72.07 per Share.
IT IS ANTICIPATED THAT NO CASH DIVIDEND WILL
BE DECLARED BY THE BOARD OF DIRECTORS WITH A RECORD DATE
OCCURRING BEFORE THE EXPIRATION OF THE OFFER AND THAT,
ACCORDINGLY, HOLDERS OF SHARES PURCHASED PURSUANT TO THE
OFFER WILL NOT RECEIVE ANY SUCH DIVIDEND WITH RESPECT TO
SUCH SHARES. THE AMOUNT AND FREQUENCY OF DIVIDENDS IN THE
FUTURE WILL DEPEND ON CIRCUMSTANCES EXISTING AT THAT TIME.
7. Purpose of the Offer; Certain Effects of the
Offer. The purpose of the Offer is to fulfill the Fund's
obligation pursuant to Article Eleventh. Article Eleventh
provides for so long as the Shares are not listed on a stock
exchange, the Fund must make a tender offer, on the Monday
following the first Friday of each of
-9-
January, April, July and October, to purchase all of the outstanding
Shares at a price per Share equal to the NAV per Share. Pursuant to
Article Eleventh, in the event that 50% or more of the then
outstanding Shares are tendered in any one tender offer, the
Fund shall not purchase any Shares in the tender offer and
the Fund's Board of Directors shall convene a shareholders'
meeting to consider a resolution to liquidate the Fund.
Any Shares acquired by the Fund pursuant to the
Offer will become treasury Shares and will be available for
issuance by the Fund without further shareholder action
(except as required by applicable law or the rules of national
securities exchanges on which the Shares are listed).
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS NOR
THE INVESTMENT ADVISER NOR ITS BOARD OF DIRECTORS MAKES
ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER
OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH SHAREHOLDER'S
SHARES AND NONE OF SUCH PERSONS HAS AUTHORIZED ANY PERSON TO
MAKE ANY SUCH RECOMMENDATION. SHAREHOLDERS ARE URGED
TO EVALUATE CAREFULLY ALL INFORMATION IN THE OFFER,
CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR
OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY
SHARES TO TENDER AND AT WHAT PRICE OR PRICES.
8. Source and Amount of Funds. If 290,439.697
Shares were to be purchased pursuant to the Offer, the cost to
the Fund (excluding expenses) would be approximately $20,931,988.96
based on a NAV per Share of $72.07 as of October 6, 1995. The
actual cost to the Fund cannot be determined at this time
because the number of Shares to be purchased will depend
on the number tendered, and the price will be based on the
NAV per Share on the Expiration Date, which may be more or less
than $72.07.
The monies to be used by the Fund to purchase
Shares pursuant to the Offer will be obtained from cash and
from sales of securities in the investment portfolios of the
Fund and BIFFundo de Investimento-Capital Estrangeiro
(the "Investment Fund"). The selection of which portfolio
securities to sell will be governed by principles of prudent
portfolio management, taking into account investment merit,
relative liquidity and applicable legal requirements. In
accordance with its stated investment policies, the Fund has
concentrated its investments in the equity securities of
companies that are registered with the Commisao de Valores
Mobili xxxx, the Brazilian Securities Commission. The
Brazilian securities markets are subject to price volatility
and limited liquidity. If the Fund must sell a substantial
amount of portfolio
-10-
securities to raise cash, the market prices
of portfolio securities, and hence the Fund's net asset value,
can be expected to decline. If such a decline occurs, the
Fund cannot predict what its magnitude might be, or whether
such a decline would be temporary or continue to the
Expiration Date. Because the Fund's tender offer price is
dependent upon NAV per Share as determined on the Expiration
Date, if such a decline continued to the Expiration Date, the
consideration received by a tendering shareholder would be
reduced.
The Fund will sell portfolio securities during
the pendency of the Offer to raise cash for the purchase of
Shares. Thus, during the pendency of the Offer, and possibly
for a short time thereafter, the Fund will hold a greater
than normal percentage of its net assets in cash and cash
equivalents. The Fund is required by law to pay for tendered
Shares it accepts for payment promptly after the Expiration
Date of this Offer. Because the Fund will not know the number
of Shares tendered until the Expiration Date, the Fund will not
know until the Expiration Date the amount of cash required to
pay for such Shares. If on or prior to the Expiration Date
the Fund does not have, or believes it is unlikely to have,
sufficient cash to pay for all Shares tendered, it may
extend the Offer to allow additional time to sell portfolio
securities and raise sufficient cash. As of October 6, 1995, the
Fund had no position in cash and cash equivalents.
If the Fund purchases a substantial number of
Shares pursuant to the Offer, the net assets of the Fund
would be reduced accordingly. In such case the Fund would
have a higher expense ratio and possibly less investment
flexibility than it currently has.
9. Certain Information Concerning the Fund. The
Fund is a non-diversified, closed-end management investment
company incorporated under the laws of the State of
Maryland and registered under the Investment Company Act
of 1940. Its investment objective is long-term capital appreciation
through investment primarily in equity securities of Brazilian
companies.
Exhibit A to this Offer contains the Fund's
audited financial statements for the fiscal years ended
December 31, 1993 and December 31, 1994 and unaudited
financial statements for the six-month period ended June 30, 1995.
The Fund is subject to the information and
reporting requirements of the Investment Company Act of
1940 and in accordance therewith is obligated to file
reports and other information with the Commission
relating to its business, financial condition and other
-11-
matters. The Fund has also filed an Issuer Tender Offer
Statement on Schedule 13E-4 with the Commission. Such
reports and other information should be
available for inspection at the public reference room at
the Commission's office 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxx
Xxxxx, Xxxxxxxxxx, X.X., and also should be available for
inspection and copying at the following regional offices of
the Commission: Northwestern Atrium Center, 000 Xxxx Xxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx; 7 World Trade Center,
New York, New York. Copies may be obtained, by mail, upon
payment of the Commission's customary charges, by writing to
its principal office at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxx
Xxxxx, Xxxxxxxxxx, X.X. 00000.
10. Interest of Directors and Executive
Officers; Transactions and Arrangements Concerning the Shares.
Neither the Fund nor any subsidiary of the Fund nor, to the
best of the Fund's knowledge, any of the Fund's
executive officers or directors or associates of any of the
foregoing, has effected any transaction in Shares during the
past 40 business days.
Except as set forth in this Offer to Purchase,
neither the Fund, nor, to the best of the Fund's knowledge,
any of the Fund's executive officers or directors, or any of
the executive officers or directors of any of its subsidiaries,
is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly
to the Offer with respect to any securities of the Fund, including, but
not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any
such securities, joint ven tures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties
against loss or the giving or withholding of proxies,
consents or authorizations.
11. Certain Legal Matters; Regulatory Approvals. The Fund's
investment in Brazilian securities has been registered
as foreign investment with the Central Bank of Brazil, which
has issued a Certificate of Registration for the foreign
currency value of such investment. Based on the Certificate of
Registration, the Fund's current investment in
Brazilian securities may be repatriated in order to permit the Fund
to purchase Shares in the Offer. The Fund is not aware of
any approval or other action by any government or
governmental, administrative or regulatory authority or
agency, domestic or foreign, that would be required for the
acquisition or ownership of Shares by the Fund as contemplated
herein. Should any such approval or other action be required,
the Fund presently contemplates that such approval or other action
will be sought. The Fund is unable to predict whether it may determine
that it is
-12-
required to delay the acceptance for payment of, or
payment for, Shares tendered pursuant to the Offer pending the
outcome of any such matter. There can be no assurance that
any such approval or other action, if needed, would be
obtained without substantial conditions or that the failure
to obtain any such approval or other action might not
result in adverse consequences to the Fund's business. The
Fund's obligations under the Offer to accept for payment
and pay for Shares are subject to certain conditions. See
Section 12.
12. Certain Conditions of the Offer.
Notwithstanding any other provision of the Offer except as
otherwise provided in Section 1, the Fund shall not be
required to accept for payment or pay for any Shares, may
postpone the acceptance for payment of, or payment for,
tendered Shares, and may, in its sole discretion,
terminate or amend the Offer as to any Shares not then paid
for if (i) more than 290,439.697 Shares are tendered and not
withdrawn as of the Expiration Date, or (ii) in the
judgment of the Investment Adviser, the assets of the Fund
are not sufficiently liquid to fund the purchase of the Shares
in the Offer, or (iii) the Fund would not be able to liquidate
portfolio securities in a manner that is orderly and
consistent with the Fund's investment objectives and
policies in order to purchase Shares tendered pursuant to the
Offer, or (iv) at or prior to the time of payment for any
such Shares (whether or not any Shares have therefore been
accepted for payment or paid for pursuant to the Offer), any
of the following events shall occur:
(a) there shall be threatened,
instituted or pending any action, proceeding or
application before any court or governmental
authority or other regulatory or administrative
agency or commission, domestic or foreign, by any
government or governmental authority or other
regulatory or administrative agency or commission,
domestic or foreign, or by any other person,
domestic or foreign challenging the acquisition by
the Fund of the Shares or seeking to restrain,
delay or prohibit the making of the Offer, or the
acceptance for payment, purchase of, or payment
for, some or all of the Shares or resulting in a
delay in, or restricting, the ability of the Fund,
or rendering the Fund unable, to accept for
payment, purchase or pay for some or all of the
Shares, or otherwise directly or indirectly
relating in any manner to or affecting the Offer;
or
-13-
(b) any statute, rule, regulation or order
or injunction shall be sought, proposed,
enacted, promulgated, entered, enforced or deemed
or become applicable to the Offer or any other
action shall have been taken, proposed or threatened,
by any government, governmental authority or
other regulatory or administrative agency or
commission or court, or any other person, domestic
or foreign, that, in the sole judgment of the
Fund, might, directly or indirectly, result in any
of the consequences referred to in paragraph (a)
above; or
(c) there shall have occurred
(i) any general suspension of, or limitation on
times or prices for, trading in securities on any
national securities exchange or in the over-the
counter market or in any securities exchange in
Brazil, (ii) a declaration of a banking moratorium
or any suspension of payments in respect of banks
in the United States or Brazil, (iii) a
commencement of a war, armed hostilities or other
international or national calamity directly or
indirectly involving the United States or Brazil,
(iv) any limitation (whether or not mandatory) by
any governmental authority on, or any other event
which, in the sole judgment of the Fund, might
affect, the extension of credit by banks or other
lending institutions or foreign currency
transactions by such institutions or (v) in the
case of any of the foregoing existing at the time
of the commencement of the Offer, in the sole
judgment of the Fund, a material acceleration or
worsening thereof; or
(d) any change (or any condition,
event or development involving a prospective
change) shall have occurred or be threatened in
the general economic, financial, currency exchange
or market conditions in the United States, in
Brazil or abroad that, in the sole judgment of the
Fund, has or may have a material adverse effect
upon the value of the assets of the Fund; or
(e) any other event shall have
occurred or condition shall exist which in the
judgment of the Fund would have a material adverse
effect on the Fund, its assets or its shareholders
or any such
-14-
event will occur or such condition shall exist if
the Fund were to purchase Shares in the Offer
which in the sole judgment of the Fund with respect to each and
every matter referred to above and regardless of the circum
stances (including any action or inaction by the Fund) giving
rise to any such condition, makes it inadvisable to proceed with
the Offer or with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of
the Fund and may be asserted by the Fund regardless of the circum
stances (including any action or inaction by the Fund) giving
rise to any such conditions or may be waived by the Fund in whole
or in part at any time and from time to time in its sole
discretion. The failure by the Fund at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time. Any
determination by the Fund concerning the events described in this
Section shall be final and binding on all parties.
A public announcement shall be made of a material
change in, or waiver of, such conditions, and the Offer may, in
certain circumstances, be extended in connection with any such
change or waiver.
13. Fees and Expenses. The Depository is not charging
compensation for its services in connection with the Offer. The
Fund has agreed to indemnify the Depository against certain
liabilities and expenses in connection with the Offer, including
liabilities under the federal securities laws. Brokers, dealers,
commercial banks and trust companies will be reimbursed by the
Fund for customary mailing and handling expenses incurred by them
in forwarding material to their customers.
Chase Global Funds Services Company, which is the
Depository for the Offer, is an affiliate of Chase Manhattan
Bank, N.A.("Chase"), which provides administrative services to the
Fund pursuant to an Administration Agreement. As part of such
agreement, the Fund has agreed to pay to Chase an annual fee
of $75,000 plus .08% of the average weekly net assets of the
Fund, computed weekly and payable monthly.
14. Miscellaneous. The Offer is not being made to
(nor will tenders be accepted from or on behalf of) holders of
Shares in any jurisdiction in which the making of the Offer or
the acceptance thereof would not be in compliance with the laws
of such
-15-
jurisdiction. The Fund may, in its sole discretion, take
such action as it may deem necessary to make the Offer in any
such jurisdiction.
The Fund is not aware of any jurisdiction in which the
making of the Offer or the acceptance of Shares in connection
therewith would not be in compliance with the laws of such
jurisdiction. Consequently, the Offer is currently being made to
all holders of Shares. However, the Fund reserves the right to
exclude shareholders in any jurisdiction in which it is asserted
that the Offer cannot lawfully be made. So long as the Fund
makes a good faith effort to comply with any state law deemed
applicable to the Offer, the Fund believes that the exclusion of
shareholders residing in such jurisdiction is permitted under
Rule 13e-4(f)(9) promulgated under the Exchange Act.
The Fund has filed with the Commission an Issuer Tender
Offer Statement on Schedule l3E-4 pursuant to Section 13(e)(1) of
the Exchange Act and Rule l3e-4 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional
information with respect to the Offer, and may file amendments
thereto. Such Statement and any amendments thereto, including
exhibits, may be examined and copies may be obtained from the
principal office of the Commission in Washington, D.C. in the
manner set forth in Section 9.
No person has been authorized to give any information
or make any representation on behalf of the Fund not contained in
this Offer to Purchase or in the Letter of Transmittal and, if
given or made, such information or representation must not be
relied upon as having been authorized.
THE BRAZILIAN INVESTMENT FUND, INC.
October 10, 1995
-16-
Facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for the Shares
and any other required documents should be sent by each
shareholder of the Fund or his broker-dealer, commercial bank,
trust company or other nominee to the Depository as follows:
The Depository for the Offer is:
--------------------------------
Chase Global Funds Services Company
By Mail, Overnight Courier or Hand:
-----------------------------------
73 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
By Facsimile Transmission: Confirm by Telephone:
-------------------------- ---------------------
(000) 000-0000 (000) 000-0000
Any questions or requests for assistance or additional
copies of the Offer to Purchase and the Letter of Transmittal may
be directed to Xxxxx XxXxxx at the Depository at the following
telephone number: (000) 000-0000. You may also contact your
broker, dealer, commercial bank or trust company or other nominee
for assistance concerning the Offer.
-17-
FINANCIAL STATEMENTS (UNAUDITED)
---------
STATEMENT OF NET ASSETS
---------
JUNE 30, 1995
VALUE
SHARES
(000)
---------------------------------------------------------
------------
BRAZILIAN INVESTMENT FUND (99.0%)
--------------------------------------------------
----------
BRAZILIAN PREFERRED STOCKS (97.7%)
(Unless otherwise noted)
------------------------------------------------------------
-----
-------------
APPLIANCES & HOUSEHOLD DURABLES
(6.5%)
Brasmotor 2,181,800
U.S.$ 403
Multibras 748,500
619
Refripar 459,357,927
893
WEG 1,061,000
484
-----
-------
2,399
-----
-------
------------------------------------------------------------
-----
-------------
BANKING (15.2%)
Banco Bradesco 271,309,400
2,299
Banco do Brasil 92,650,000
1,107
Banco do Estado Sao Paulo 43,810,000
248
Banco Itau 4,632,500
1,409
Banco Nacional 26,693,664
519
-----
-------
5,582
-----
-------
------------------------------------------------------------
-----
-------------
BEVERAGES & TOBACCO (4.9%)
Brahma 5,422,700
1,779
Brahma (Receipts) 97,783
32
-----
-------
1,811
-----
-------
------------------------------------------------------------
-----
-------------
CHEMICALS (2.1%)
Rhodia Ster ADS 55,810
781
-----
-------
------------------------------------------------------------
-----
-------------
ENERGY SOURCES (6.0%)
Petrobras 26,157,333
2,216
-----
-------
------------------------------------------------------------
-----
-------------
FOOD & HOUSEHOLD PRODUCTS (2.0%)
Xxxxx Lalekla 941,291
736
-----
-------
------------------------------------------------------------
-----
-------------
INDUSTRIAL COMPONENTS (1.9%)
Xxxxxx 18,000,000
704
-----
-------
------------------------------------------------------------
-----
-------------
MERCHANDISING (0.1%)
+ Lojas Americanas (Bonus Rights) 183,270
26
-----
-------
------------------------------------------------------------
-----
-------------
METALS -- NON-FERROUS (2.3%)
CVRD 5,513,800
833
-----
-------
------------------------------------------------------------
-----
-------------
METALS - STEEL (7.4%)
Acesita 71,900,000
466
Acesita (Common) 9,610,000
72
CSN (Common) 50,800,000
1,158
Usiminas 918,576,300
1,038
-----
-------
2,734
-----
-------
------------------------------------------------------------
-------
----------------
VALUE
SHARES
(000)
---------------------------------------------------------
------------
MULTI-INDUSTRY (1.5%)
+ Itausa Investimentos Itau 970,000 U.S.$
546
-----
-------
------------------------------------------------------------
-----
-------------
TELECOMMUNICATIONS (17.0%)
Telebras 113,223,890
3,727
Telebras (Common) 45,200,000
1,282
Telesp 7,483,601
927
Telesp (Common) 2,520,500
320
-----
-------
6,256
-----
-------
------------------------------------------------------------
-----
-------------
TEXTILES & APPAREL (6.5%)
Brasperola 'A' 700,000
434
Lojas Xxxxxx 21,920,000
371
Moinho Santista 110,000
120
Wentex 966,000
1,469
-----
-------
2,394
-----
-------
------------------------------------------------------------
-----
-------------
UTILITIES -- ELECTRICAL & GAS
(24.3%)
+ CELESC 'B' 955,000
772
Cemig ADR 47,357
923
CESP 4,440,090
176
CESP ADR 18,100
206
CESP (Common) 11,400,000
371
CPFL 5,780,000
190
CPFL (Common) 16,140,000
808
Eletrobras 'B' 11,022,000
2,934
Eletrobras (Common) 8,598,000
2,242
Light (Common) 1,099,000
346
-----
-------
8,968
-----
-------
------------------------------------------------------------
-----
-------------
TOTAL BRAZILIAN PREFERRED STOCKS
(Cost U.S. $32,189)
35,986
-----
-------
------------------------------------------------------------
-----
-------------
PURCHASED OPTIONS (0.1%)
Utilities -- Electrical & Gas
+ CPFL call, expiring 10/16/95, strike price
BRL 70.00 (Cost U.S. $0) 18,700,000
29
-----
-------
------------------------------------------------------------
-----
AMOUNT
(000)
---------------------------------------------------------
------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (1.2%)
Brazilian Real
(Cost U.S. $450) BRL 412
448
-----
-------
------------------------------------------------------------
-----
-------------
TOTAL BRAZILIAN INVESTMENT FUND
(Cost U.S. $32,639)
36,463
-----
-------
------------------------------------------------------------
-----
-------------
TOTAL INVESTMENTS (99.0%)
(Cost U.S. $32,639)
36,463
-----
-------
------------------------------------------------------------
-----
-------------
The accompanying notes are an integral part of the
financial statements.
4
AMOUNT
VALUE
(000)
(000)
---------------------------------------------------------
------------
OTHER ASSETS (5.3%)
Receivable for Investments Sold U.S.$ 1,748
Receivable for Shares Sold 35
Dividends Receivable 83
Deferred Organization Costs 83
Other Assets 6 U.S.$
1,955
---------------- -----
-------
------------------------------------------------------------
-----
-------------
LIABILITIES (-4.3%)
Payable For:
Investments Purchased (1,385)
Professional Fees (71)
Bank Overdraft (46)
Investment Advisory Fees (22)
Directors' Fees and Expenses (19)
U.S. Administrative Fees (15)
Shareholder Reporting Expenses (7)
Brazilian Administrative and
Custodian Fees (4)
U.S. Custodian Fees (3)
(1,572)
---------------- -----
-------
------------------------------------------------------------
-----
-------------
NET ASSETS (100%)
Applicable to 560,206 issued and outstanding U.S.
$.01 par value shares (50,000,000 shares
authorized) U.S.$
36,846
------
-------
------------------------------------------------------------
-----
-------------
NET ASSET VALUE PER SHARE U.S.$
65.77
------
-------
------------------------------------------------------------
-----
-------------
ADR -- American Depositary Receipt
ADS -- American Depositary Share
+ -- Non-income producing
June 30, 1995 exchange rate--Brazilian Real (BRL)
0.9205=U.S. $1.00
AMOUNT
(000)
---------------------------------------------------------
------------
AT JUNE 30, 1995, NET ASSETS
CONSISTED OF:
------------------------------------------------------------
-------
Common Stock
U.S.$ 6
Capital Surplus
20,844
Accumulated Undistributed Net
Investment Income
54
Accumulated Net Realized Gain
12,118
Unrealized Appreciation on
Investments and Foreign Currency
3,824
------------------------------------------------------------
-------
TOTAL NET ASSETS U.S.$
36,846
------------------------------------------------------------
-------
------------------------------------------------------------
-------
FORWARD FOREIGN CURRENCY CONTRACT INFORMATION:
Under the terms of forward foreign currency contracts open
at June 30, 1995,
the Fund is obligated to deliver or is to receive foreign
currency in exchange
for U.S. dollars as indicated below:
IN
NET
CURRENCY TO EXCHANGE
UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE
GAIN
(000) (000) DATE (000) (000)
(000)
------------------------------------------------------------
------------
BRL 150 U.S.$ 163 7/3/95 U.S.$ 163 U.S.$ 163
U.S.$ --
U.S.$ 98 98 7/3/95 BRL 90 98
--
--------- ---------
-----------
U.S.$ 261 U.S.$ 261
U.S.$ --
--------- ---------
-----------
--------- ---------
-----------
The accompanying notes are an integral part of the
financial statements.
5
SIX
MONTHS
ENDED
JUNE
30, 1995
(UNAUDITED)
STATEMENT OF OPERATIONS
(000)
------------------------------------------------------------
----------
INVESTMENT INCOME:
Dividends.....................................
U.S.$ 626
Interest......................................
21
Less Foreign Taxes Withheld...................
(93)
------------------------------------------------------------
----------
Total Income................................
554
------------------------------------------------------------
----------
EXPENSES
U.S. Investment Advisory Fees.................
196
U.S. Administrative Fees......................
65
Amortization of Organization Costs............
44
Legal Fees....................................
34
Brazilian Administrative and Custodian Fees...
33
Audit Fees....................................
29
Directors' Fees and Expenses..................
24
Brazilian Taxes...............................
15
Shareholder Reporting Expenses................
10
Custodian Fees................................
2
Other Expenses................................
12
------------------------------------------------------------
----------
Total Expenses..............................
464
------------------------------------------------------------
----------
Net Investment Income.....................
90
------------------------------------------------------------
----------
NET REALIZED GAIN
Investment Securities Sold....................
10,442
Foreign Currency Transactions.................
77
------------------------------------------------------------
----------
Net Realized Gain...........................
10,519
------------------------------------------------------------
----------
UNREALIZED APPRECIATION ON INVESTMENTS AND FOREIGN
CURRENCY
Beginning of Period...........................
32,415
End of Period.................................
3,824
------------------------------------------------------------
----------
Change in Unrealized Appreciation...........
(28,591)
------------------------------------------------------------
----------
Total Net Realized Gain and Change in Unrealized
Appreciation.....................................
(18,072)
------------------------------------------------------------
----------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS....................................
U.S.$ (17,982)
------------------------------------------------------------
----------
------------------------------------------------------------
----------
SIX MONTHS
YEAR
ENDED ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
STATEMENT OF CHANGES IN NET ASSETS
(000) (000)
------------------------------------------------------------
---------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss).................. U.S.$
(446) U.S.$ 90
Net Realized Gain.............................
24,028 10,519
Change in Unrealized Appreciation.............
10,907 (28,591)
------------------------------------------------------------
---------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations....................
34,489 (17,982)
------------------------------------------------------------
---------------------------
Distributions:
In Excess of Net Investment Income............
(1,122) --
Net Realized Gain.............................
(4,148) (21,810)
------------------------------------------------------------
---------------------------
Total Distributions...........................
(5,270) (21,810)
------------------------------------------------------------
---------------------------
Capital Share Transactions:
Subscription of Shares (4,128 and 25,602
shares, respectively)........................
445 1,846
Reinvestment of Distributions (50,471 and
262,986 shares, respectively)................
5,220 21,467
Repurchase of Shares (53,929 and 353,656
shares, respectively)........................
(5,827) (27,939)
------------------------------------------------------------
---------------------------
Net Decrease in Net Assets Resulting From
Capital Share Transactions...................
(162) (4,626)
------------------------------------------------------------
---------------------------
Total Increase (Decrease).....................
29,057 (44,418)
Net Assets:
Beginning of Period...........................
52,207 81,264
------------------------------------------------------------
---------------------------
End of Period (including accumulated
undistributed net investment income (loss) of
U.S. ($36) and U.S. $54, respectively)....... U.S.$
81,264 U.S.$ 36,846
------------------------------------------------------------
---------------------------
------------------------------------------------------------
---------------------------
The accompanying notes are an integral part of the
financial statements.
6
FINANCIAL HIGHLIGHTS
SIX MONTHS
PERIOD FROM
ENDED
JUNE 4, 1991* TO
YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31,
----------------------------------------- 1995
SELECTED PER SHARE DATA AND RATIOS: 1991
1992 1993 1994 (UNAUDITED)
------------------------------------------------------------
------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD...... U.S.$ 50.00
U.S.$ 63.31 U.S.$55.28 U.S.$ 83.58 U.S.$129.97
------------------------------------------------------------
------------------------------------------------------------
Offering Costs............................ (0.21)
-- -- -- --
------------------------------------------------------------
------------------------------------------------------------
Net Investment Income (Loss).............. 0.84
(0.09) 1.42 (0.71) 0.15
Net Realized and Unrealized Gain (Loss) on
Investments.............................. 12.68
(7.94) 33.94 54.72 (27.41)
------------------------------------------------------------
------------------------------------------------------------
Total from Investment Operations...... 13.52
(8.03) 35.36 54.01 (27.26)
------------------------------------------------------------
------------------------------------------------------------
Distributions:
In Excess of Net Investment Income.... --
-- -- (1.80) --
Net Realized Gain..................... --
-- (6.89) (6.65) (34.88)
In Excess of Net Realized Gain........ --
-- (0.17) -- --
------------------------------------------------------------
------------------------------------------------------------
Total Distributions................... --
-- (7.06) (8.45) (34.88)
------------------------------------------------------------
------------------------------------------------------------
Increase (Decrease) in Net Asset Value due
to Shares Issued on Reinvestment of
Distributions............................ --
-- -- 0.83 (2.06)
------------------------------------------------------------
------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............ U.S.$ 63.31
U.S.$ 55.28 U.S.$83.58 U.S.$129.97 U.S.$ 65.77
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Net Asset Value (1)................... 26.62%
(12.68)% 72.52 % 68.32% (27.77)%
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
------------------------------------------------------------
------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS)..... U.S.$51,159
U.S.$46,687 U.S.$52,207 U.S.$81,264 U.S.$36,846
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
Ratio of Expenses to Average Net Assets...
2.00%**(2) 2.27%(2) 2.22 % 1.82%
2.14%**
Ratio of Net Investment Income (Loss) to
Average Net Assets....................... 3.49%**
(0.07)% 1.57 % (0.61)% 0.42%**
Portfolio Turnover Rate................... 1%
36% 40 % 52% 17%
------------------------------------------------------------
------------------------------------------------------------
*Commencement of operations
**Annualized
(1)Total investment return based on per share net asset
value reflects the
effects of changes in net asset value on the performance
of the Fund during
each period, and assumes dividends and
distributions, if any, were
reinvested. The Fund's shares are issued in a private
placement and are not
traded, therefore market value total investment return is
not calculated.
(2)Reflects a voluntary expense limitation in effect
during the period. As a
result of such limitation, expenses of the Fund for
the periods ended
December 31, 1991 and 1992 reflect a benefit of $.10 and
$.14, respectively.
The accompanying notes are an integral part of the
financial statements.
7
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1995
----------
The Brazilian Investment Fund, Inc. (the "Fund")
was incorporated on
November 7, 1990, and is registered as a non-diversified,
closed-end management
investment company under the Investment Company Act of
1940, as amended. The
Fund's common stock is not registered under the Securities
Act of 1933. The Fund
makes its investments in Brazil through an investment
fund established in
compliance with Brazilian law. The accompanying
financial statements are
prepared on a consolidated basis and present the financial
position and results
of operations of the investment fund and the Fund.
A. The following significant accounting policies are
in conformity with
generally accepted accounting principles for investment
companies. Such policies
are consistently followed by the Fund in the
preparation of its financial
statements.
1. SECURITY VALUATION: In valuing the
Fund's assets, all
listed securities, including purchased options, for
which market quotations
are readily available are valued at the last sales
price on the valuation
date, or if there was no sale on such date, at the mean
between the current
bid and asked prices. Securities which are traded
over-the-counter are
valued at the average of the mean of current bid and
asked prices obtained
from reputable brokers. All non-equity securities
as to which market
quotations are readily available are valued at
their market values.
Short-term securities which mature in 60 days or
less are valued at
amortized cost. Other securities and assets for which
market values are not
readily available (including investments which are
subject to limitations as
to their sale or for which a ready market for the
securities in the
quantities owned by the Fund does not exist) are
valued at fair value as
determined in good faith by the Board of Directors
(the "Board"), although
the actual calculations may be done by others.
2. TAXES: It is the Fund's intention to continue to
qualify as a regulated investment company and distribute
all of its taxable
income. Accordingly, no provision for U.S. Federal
income taxes is required
in the financial statements.
Through December 31, 1993, the Fund was
subject to a Brazilian
repatriation tax with respect to remittances
outside of Brazil of its
dividend and interest income, net of applicable
expenses. Effective January
1, 1994, this tax on dividend and interest income is
being withheld at the
source.
Accumulated undistributed net investment income and
accumulated realized
gain have been adjusted for permanent book-tax
differences.
3. REPURCHASE AGREEMENTS: In connection with
transactions in repurchase agreements, a bank as custodian
for the Fund takes
possession of the underlying securities, the value
of which equals or
exceeds the principal amount of the repurchase
transaction, including
accrued interest. To the extent that any repurchase
transaction exceeds one
business day, the value of the collateral is marked-to-
market on a daily
basis to determine the adequacy of the collateral. In
the event of default
on the obligation to repurchase, the Fund has the
right to liquidate the
collateral and apply the proceeds in satisfaction of
the obligation. To the
extent that proceeds from the sale of the underlying
securities are less
than the repurchase price under the agreement, the Fund
may incur a loss. In
the event of default or bankruptcy by the other
party to the agreement,
realization and/or retention of the collateral or
proceeds may be subject to
legal proceedings.
4. FOREIGN CURRENCY TRANSLATION: The books and
records of the Fund are maintained in U.S. dollars.
Amounts denominated in
Brazilian currency are translated into U.S. dollars at
the mean of the bid
and asked prices of such currency against U.S.
dollars last quoted by a
major bank as follows:
- investments, other assets and liabilities at the
prevailing rates of
exchange on the valuation date;
- investment transactions and investment income at
the prevailing rates
of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at
the foreign exchange
rate and market values at the close of the period, the
Fund does not isolate
that portion of the results of operations arising as a
result of changes in
the foreign exchange rates from the fluctuations arising
from changes in the
market prices of the securities held at period end.
Similarly, the Fund does
not isolate the effect of changes in foreign
exchange rates from the
fluctuations arising from changes in the market prices
of securities sold
during the period. Accordingly, realized and
unrealized foreign currency
gains (losses) are included in the reported net
realized and unrealized
gains (losses) on investment transactions and balances.
Net realized gains (losses) on foreign currency
transactions represent
net foreign exchange gains (losses) from sales and
maturities of forward
currency contracts, disposition of foreign currency
and currency gains or
losses realized between the trade and settlement
dates on securities
transactions. Foreign currency gains (losses) also
occur due to the
difference between the amount of investment income and
8
foreign withholding taxes recorded on the Fund's books
and the U.S. dollar
equivalent amounts actually received or paid. Net
unrealized currency gains
(losses) from valuing foreign currency denominated
assets and liabilities at
period end exchange rates are reflected as a
component of unrealized
appreciation (depreciation).
5. FORWARD FOREIGN CURRENCY CONTRACTS: The Fund
may enter into forward foreign currency contracts to
protect securities and
related receivables and payables against changes in
future foreign exchange
rates. A forward currency contract is an agreement
between two parties to
buy or sell currency at a set price on a future date.
The market value of
the contract will fluctuate with changes in currency
exchange rates. The
contract is marked-to-market daily and the change
in market value is
recorded by the Fund as unrealized gain or loss. The
Fund records realized
gains or losses when the contract is closed equal to the
difference between
the value of the contract at the time it was opened
and the value at the
time it was closed. Risk may arise upon entering into
these contracts from
the potential inability of counterparties to meet
the terms of their
contracts and is generally limited to the amount of
unrealized gain on the
contracts, if any, at the date of default. Risks
may also arise from
unanticipated movements in the value of a foreign
currency relative to the
U.S. dollar.
6. PURCHASED OPTIONS: The Fund may purchase
options. In purchasing a call (put) option, the Fund will
seek to benefit from
an increase (decline) in the market price of the
underlying index or
security. Risks may arise in the event of default by
the counterparty or
unanticipated movements in the market price of the
underlying index or
security, however, the maximum exposure to loss for any
purchased option is
limited to the premium initially paid for the option.
Realized gains or
losses on purchased options are included with net gain
(loss) on securities
sold in the financial statements.
7. OTHER: Security transactions are accounted for on
the date the securities are purchased or sold. Realized
gains and losses on
the sale of investment securities are determined on the
specific identified
cost basis. Interest income is recognized on the
accrual basis. Dividend
income and distributions to shareholders are recorded on
the ex-date. Income
distributions and capital gain distributions are
determined in accordance
with U.S. Federal income tax regulations which may
differ from generally
accepted accounting principles.
X. Xxxxxx Xxxxxxx Asset Management Inc. (the "U.S.
Adviser") provides
investment advisory services to the Fund under the
terms of an Investment
Advisory Agreement (the "Agreement"). Under the Agreement,
the U.S. Adviser is
paid a fee computed weekly and payable monthly at an annual
rate of .90% of the
Fund's first $50 million of average weekly net assets,
.70% of the Fund's next
$50 million of average weekly net assets and .50% of the
Fund's average weekly
net assets in excess of $100 million.
C. The United States Trust Company of New York ("U.S.
Trust"), through its
wholly owned subsidiary Mutual Funds Service Company,
provides administrative
and shareholder services to the Fund under an
Administration Agreement. Under
the Administration Agreement, U.S. Trust is paid a fee
computed weekly and
payable monthly at an annual rate of .08% of the Fund's
average weekly net
assets, plus $75,000 per annum. U.S. Trust also acts as
custodian for the Fund's
assets held in the United States.
D. Unibanco - Uniao de Bancos Brasileiras S.A. ("the
Brazilian Administrator
and Custodian") provides Brazilian administrative and
custodian services to the
Fund under the terms of an agreement. Under the
agreement, the Brazilian
Administrator and Custodian is paid a fee computed weekly
and paid monthly at an
annual rate of .15% of the Fund's first $50 million of
average weekly net
assets, .125% of the Fund's next $50 million of average
weekly net assets and
.10% of the Fund's average weekly net assets in excess of
$100 million.
E. During the six months ended June 30, 1995, the Fund made
purchases and sales
totaling $8,156,000 and $34,165,000, respectively, of
investment securities
other than U.S. Government securities and short term
investments. At June 30,
1995, the U.S. Federal income tax cost basis of securities
was the same as that
for financial reporting purposes and accordingly, net
unrealized appreciation
for U.S. Federal income tax purposes was $3,826,000, of
which $6,950,000 related
to appreciated securities and $3,124,000 related to
depreciated securities. For
the year ended December 31, 1994, the Fund expects to defer,
to January 1, 1995
for U.S. Federal income tax purposes, post-October currency
losses of $36,000.
F. In connection with its organization the Fund
incurred $445,000 of
organization costs which are being amortized on a straight-
line basis over a
five year period beginning June 4, 1991, the date the Fund
commenced operations.
G. At June 30, 1995, 99.0% of the Fund's net assets
consist of securities
denominated in Brazilian currency. Changes in currency
exchange rates will
affect the value of and investment income from such
securities. Brazilian
9
securities are subject to greater price volatility, limited
capitalization and
liquidity, and higher rates of inflation than securities
of companies based in
the United States.
H. The Fund's Articles of Incorporation provide that,
commencing January 6,
1992 and on each calendar quarter thereafter, the Fund will
make a tender offer
to repurchase its outstanding shares of Common Stock at a
price equal to the net
asset value per share at the time of repurchase.
During the six months ended June 30, 1995, the
Fund repurchased the
following shares:
U.S.
DATE SHARES (000)
--------- --------- ---------
2/10/95 312,637 $ 24,964
5/8/95 41,019 $ 2,975
On November 6, 1995 the Fund repurchased 2,544 shares
totaling $179,577.
I. Shareholders of the Fund may purchase shares of common
stock from the Fund
at a price equal to the net asset value at the beginning of
the month. Purchases
are not allowed during each month the Fund makes a tender
offer to repurchase
its outstanding shares. During the six months ended June
30, 1995, the Fund
issued 25,602 shares totaling $1,846,000.
J. Effective January 1, 1995, each Director of the Fund
who is not an officer
of the Fund or an affiliated person as defined under the
Investment Company Act
of 1940, as amended, may elect to participate in the
Directors' Deferred
Compensation Plan (the "Plan"). Under the Plan, such
Directors may elect to
defer payment of a percentage of their total fees earned
as a Director of the
Fund. These deferred portions are treated, based on an
election by the Director,
as if they were either invested in the Fund's shares
or invested in U.S.
Treasury Bills, as defined under the Plan. The deferred fees
payable, under the
Plan, at June 30, 1995 totaled $4,000 and are included in
Payable for Directors'
Fees and Expenses on the Statement of Net Assets.
K. SUPPLEMENTAL PROXY INFORMATION
The Annual Meeting of the Stockholders of the
Brazilian Investment Fund,
Inc. was held on June 26, 1995. The following is a
summary of each proposal
presented and the total number of shares voted:
VOTES IN VOTES VOTES
PROPOSAL:
FAVOR OF AGAINST WITHHELD
------------------------------------------------------------
--------------------- ----------- ----------- -----------
--
1. To elect the following Directors: Xxxxxx X. Xxxxx, Xxxxx
X. Xxxxx, Xxxx X.
Xxxxxxx, Xxxxx X. Xxxx, Xxxxxx X. Xxxxx, Xxxx X. Xxxxx,
Xxxxxxx X. Xxxxxx,
Xx., Xxxxxx X. Xxxxx, X. Xxxxxxx Xxxxxxxxxx and Xxxxxxxxx
X. Xxxxxxxxxx 332,506 -- --
2. To ratify the selection of Price Waterhouse LLP as
independent public
accountants of the Fund.
332,506 -- --
3. To approve the voting, in the discretion of the persons
named as Proxies, on
any matter that may properly come before the meeting.
332,506 -- --
VOTES
PROPOSAL:
ABSTAINED
------------------------------------------------------------
--------------------- -------------
1. To elect the following Directors: Xxxxxx X. Xxxxx, Xxxxx
X. Xxxxx, Xxxx X.
Xxxxxxx, Xxxxx X. Xxxx, Xxxxxx X. Xxxxx, Xxxx X. Xxxxx,
Xxxxxxx X. Xxxxxx,
Xx., Xxxxxx X. Xxxxx, X. Xxxxxxx Xxxxxxxxxx and Xxxxxxxxx
X. Xxxxxxxxxx --
2. To ratify the selection of Price Waterhouse LLP as
independent public
accountants of the Fund.
--
3. To approve the voting, in the discretion of the persons
named as Proxies, on
any matter that may properly come before the meeting.
--
10
FINANCIAL STATEMENTS
---------
STATEMENT OF NET ASSETS
---------
DECEMBER 31, 1994
VALUE
SHARES (000)
---------------------------------------------------------
------------
BRAZILIAN INVESTMENT FUND (98.7%)
--------------------------------------------------
----------
BRAZILIAN PREFERRED STOCKS (96.8%)
(Unless otherwise noted)
---------------------------------------------------------
-------------
APPLIANCES & HOUSEHOLD DURABLES (9.2%)
Brasmotor 4,441,800 U.S.$ 1,799
Continental 2001 7,600,000 205
Multibras 1,274,500 1,670
Refripar 1,143,557,920 3,780
-----------
7,454
-----------
---------------------------------------------------------
-------------
AUTOMOBILES (4.3%)
Iochpe Maxion 4,850,000 3,378
Xxxxxxxxx 'B' 500,000 134
-----------
3,512
-----------
---------------------------------------------------------
-------------
BANKING (11.3%)
Banco Bradesco 360,509,400 3,065
Banco do Brasil 115,000,000 2,267
Banco Nacional 45,653,664 1,159
Banco Nacional (Common) 11,801,600 311
Itaubanco 8,639,000 2,417
-----------
9,219
-----------
---------------------------------------------------------
-------------
BEVERAGES & TOBACCO (1.0%)
Brahma 2,385,700 785
-----------
---------------------------------------------------------
-------------
CHEMICALS (2.9%)
Rhodia-Ster GDR 165,000 2,372
-----------
---------------------------------------------------------
-------------
ENERGY SOURCES (9.1%)
Petrobras 58,477,320 7,387
-----------
---------------------------------------------------------
-------------
FOOD & HOUSEHOLD PRODUCTS (2.5%)
Ceval Alimentos 12,000,000 177
+Xxxxx Lalekla 1,811,290 1,818
-----------
1,995
-----------
---------------------------------------------------------
-------------
INDUSTRIAL COMPONENTS (1.0%)
SECTIONS Xxxxxx 'B' 18,000,000 850
-----------
---------------------------------------------------------
-------------
MERCHANDISING (1.6%)
+Lojas Americanas (Bonus Rights) 183,270 26
+Mesbla 6,982,050 1,253
-----------
1,279
-----------
---------------------------------------------------------
-------------
METALS -- NON-FERROUS (1.5%)
Vale do Rio Doce 6,163,800 1,179
-----------
---------------------------------------------------------
-------------
METALS -- STEEL (7.9%)
Cia Siderurgica Nacional
(Common) 78,800,000 U.S.$ 2,684
+Cosipa 'B' 194,000 564
Usiminas 2,361,123,300 3,206
-----------
6,454
-----------
---------------------------------------------------------
-------------
RECREATION, OTHER CONSUMER GOODS (0.8%)
Manufatura Brinquedos de
Estrela 198,000,000 502
Tec Toy 175,000,000 182
-----------
684
-----------
---------------------------------------------------------
-------------
TELECOMMUNICATIONS (17.8%)
Telebras 168,700,000 7,549
Telebras 'D' 6,323,895 235
Telebras (Common) 80,700,000 3,478
Telesp 22,157,978 3,152
Telesp 'P' 92,602 41
-----------
14,455
-----------
---------------------------------------------------------
-------------
TEXTILES & APPAREL (4.9%)
Brasperola 'A' 1,000,000 1,346
Xxxxxx Xxxxxxxx 261,000 647
SECTIONS Wentex 1,670,000 1,972
-----------
3,965
-----------
---------------------------------------------------------
-------------
UTILITIES -- ELECTRICAL & GAS (21.0%)
Cemig ADR 67,500 1,637
+Centrais Eletricas de Santa Catarina
'B' 1,435,000 1,355
Cia Energetica de Sao Paulo 11,930 16
Cia Energetica de Sao Paulo
(Common) 138,236 180
Cia Paulista de Forca e
Xxx 7,050,000 483
+Cia Paulista de Forca e
Xxx (Common) 26,120,000 2,313
Eletrobras 'B' 21,097,000 7,323
Eletrobras (Common) 9,008,000 3,180
Light (Common) 1,575,000 569
-----------
17,056
-----------
---------------------------------------------------------
-------------
TOTAL BRAZILIAN PREFERRED STOCKS
(Cost U.S. $46,960) 78,646
-----------
---------------------------------------------------------
-------------
PURCHASED OPTIONS (1.9%)
+Cia Paulista de Forca e
Xxx call, expiring
10/16/95, strike price
BRL 70.00 18,700,000 194
+Eletrobras call,
expiring 6/19/95,
strike price BRL 30.58 11,660,000 1,322
-----------
(Cost U.S. $794) 1,516
-----------
---------------------------------------------------------
-------------
The accompanying notes are an integral part of the financial
statements.
4
AMOUNT VALUE
(000) (000)
---------------------------------------------------------
------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (0.0%)
Brazilian Real
(Cost U.S. $28) BRL 23 U.S.$ 28
-----------
---------------------------------------------------------
-------------
TOTAL BRAZILIAN INVESTMENT FUND
(Cost U.S. $47,782) 80,190
-----------
---------------------------------------------------------
-------------
TOTAL INVESTMENTS (98.7%)
(Cost U.S. $47,782) 80,190
-----------
---------------------------------------------------------
-------------
OTHER ASSETS (2.6%)
Receivable for Investments Sold U.S.$1,954
Dividends Receivable 54
Deferred Organization Costs 127
Other Assets 31 2,166
--------- -----------
---------------------------------------------------------
-------------
LIABILITIES (-1.3%)
Payable For:
Bank Overdraft (850)
Investments Purchased (90)
Investment Advisory Fees (52)
Professional Fees (49)
Shareholder Reporting
Expenses (18)
U.S. Administrative Fees (12)
Directors' Fees and Expenses (10)
Brazilian Administrative and
Custodian Fees (9)
U.S. Custodian Fees (2) (1,092)
--------- -----------
---------------------------------------------------------
-------------
NET ASSETS (100%)
Applicable to 625,274 issued and
outstanding U.S. $.01 par value shares
(50,000,000 shares authorized) U.S.$ 81,264
-------------
----------------------------------------------------------------
-------------
NET ASSET VALUE PER SHARE U.S.$ 129.97
-------------
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
+ -- Non-income producing
SECTIONS -- Security acquired through an initial public offering of
shares and
fair valued at cost pending listing -- see Note A-1 to
financial
statements
December 31, 1994 exchange rate--Brazilian Real (BRL) 0.847=U.S. $1.00
AMOUNT
(000)
--------------------------------------------------------
------------
AT DECEMBER 31, 1994, NET ASSETS CONSISTED OF:
-----------------------------------------------------------------
Common Stock U.S.$ 6
Capital Surplus 25,470
Accumulated Net Investment
Loss (36)
Accumulated Net Realized Gain 23,409
Unrealized Appreciation on
Investments and Foreign
Currency 32,415
-----------------------------------------------------------------
TOTAL NET ASSETS U.S.$ 81,264
----------------------------------------------------------------
----------------------------------------------------------------
The accompanying notes are an integral part of the financial
statements.
5
YEAR
ENDED
DECEMBER
31, 1994
STATEMENT OF OPERATIONS
(000)
-----------------------------------------------------------------------
----------
INVESTMENT INCOME
Dividends................................................. U.S.$
969
Interest..................................................
6
Less Foreign Taxes Withheld...............................
(86)
-----------------------------------------------------------------------
----------
Total Income............................................
889
-----------------------------------------------------------------------
----------
EXPENSES
U.S. Investment Advisory Fees.............................
607
U.S. Administrative Fees..................................
154
Brazilian Administrative and Custodian Fees...............
103
Brazilian Taxes...........................................
92
Amortization of Organization Costs........................
89
Legal Fees................................................
68
Audit Fees................................................
49
Directors' Fees and Expenses..............................
47
Brazilian Investment Advisory Fees........................
39
Shareholder Reporting Expenses............................
17
Custodian Fees............................................
5
Other Expenses............................................
65
-----------------------------------------------------------------------
----------
Total Expenses..........................................
1,335
-----------------------------------------------------------------------
----------
Net Investment Loss...................................
(446)
-----------------------------------------------------------------------
----------
NET REALIZED GAIN (LOSS)
Investment Securities Sold................................
24,552
Foreign Currency Transactions.............................
(524)
-----------------------------------------------------------------------
----------
Net Realized Gain.......................................
24,028
-----------------------------------------------------------------------
----------
UNREALIZED APPRECIATION ON INVESTMENTS AND FOREIGN CURRENCY
Beginning of Year.........................................
21,508
End of Year...............................................
32,415
-----------------------------------------------------------------------
----------
Change in Unrealized Appreciation.......................
10,907
-----------------------------------------------------------------------
----------
Total Net Realized Gain and Change in Unrealized
Appreciation.................................................
34,935
-----------------------------------------------------------------------
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....... U.S.$
34,489
-----------------------------------------------------------------------
----------
-----------------------------------------------------------------------
----------
YEAR ENDED
YEAR ENDED
DECEMBER 31, 1993
DECEMBER 31, 1994
STATEMENT OF CHANGES IN NET ASSETS (000)
(000)
-----------------------------------------------------------------------
----------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss).................. U.S.$ 851
U.S.$ (446)
Net Realized Gain............................. 10,349
24,028
Change in Unrealized Appreciation............. 18,449
10,907
-----------------------------------------------------------------------
----------------------
Net Increase in Net Assets Resulting from
Operations................................... 29,649
34,489
-----------------------------------------------------------------------
----------------------
Distributions:
In Excess of Net Investment Income............ --
(1,122)
Net Realized Gain............................. (5,821)
(4,148)
In Excess of Net Realized Gain................ (141)
--
-----------------------------------------------------------------------
----------------------
Total Distributions........................... (5,962)
(5,270)
-----------------------------------------------------------------------
----------------------
Capital Share Transactions:
Subscription of Shares (2,355 and 4,128
shares, respectively)........................ 196
445
Reinvestment of Distributions (113,719 and
50,471 shares, respectively)................. 5,991
5,220
Repurchase of Shares (335,992 and 53,929
shares, respectively)........................ (24,354)
(5,827)
-----------------------------------------------------------------------
----------------------
Net Decrease in Net Assets Resulting From
Capital Share Transactions................... (18,167)
(162)
-----------------------------------------------------------------------
----------------------
Total Increase................................ 5,520
29,057
Net Assets:
Beginning of Year............................. 46,687
52,207
-----------------------------------------------------------------------
----------------------
End of Year (including accumulated net
investment loss of
U.S. $15 and U.S. $36, respectively)......... U.S.$52,207
U.S.$81,264
-----------------------------------------------------------------------
----------------------
-----------------------------------------------------------------------
----------------------
The accompanying notes are an integral part of the financial
statements.
6
FINANCIAL HIGHLIGHTS
PERIOD FROM
JUNE 4, 1991* TO
YEAR ENDED DECEMBER 31,
DECEMBER 31, -----------
---------------------------------------------
SELECTED PER SHARE DATA AND RATIOS: 1991 1992
1993 1994
-----------------------------------------------------------------------
---------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.... U.S.$ 50.00 U.S.$63.31
U.S.$ 55.28 U.S.$ 83.58
-----------------------------------------------------------------------
---------------------------------------------
Offering Costs.......................... (0.21) --
-- --
-----------------------------------------------------------------------
---------------------------------------------
Net Investment Income (Loss)............ 0.84 (0.09)
1.42 (0.71)
Net Realized and Unrealized Gain (Loss)
on Investments......................... 12.68 (7.94)
33.94 54.72
-----------------------------------------------------------------------
---------------------------------------------
Total from Investment Operations.... 13.52 (8.03)
35.36 54.01
-----------------------------------------------------------------------
---------------------------------------------
Distributions:
In Excess of Net Investment
Income............................. -- --
-- (1.80)
Net Realized Gain................... -- --
(6.89) (6.65)
In Excess of Net Realized Gain...... -- --
(0.17) --
-----------------------------------------------------------------------
---------------------------------------------
Total Distributions................. -- --
(7.06) (8.45)
-----------------------------------------------------------------------
---------------------------------------------
Increase in Net Asset Value due to
Shares Issued on Reinvestment of
Distributions.......................... -- --
-- 0.83
-----------------------------------------------------------------------
---------------------------------------------
NET ASSET VALUE, END OF PERIOD.......... U.S.$ 63.31 U.S.$55.28
U.S.$ 83.58 U.S.$ 129.97
-----------------------------------------------------------------------
---------------------------------------------
-----------------------------------------------------------------------
---------------------------------------------
TOTAL INVESTMENT RETURN:
Net Asset Value (1)................. 26.62% (12.68)%
72.52% 68.32%
-----------------------------------------------------------------------
---------------------------------------------
-----------------------------------------------------------------------
---------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
-----------------------------------------------------------------------
---------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS)... U.S.$51,159 U.S.$46,687
U.S.$52,207 U.S.$81,264
-----------------------------------------------------------------------
---------------------------------------------
-----------------------------------------------------------------------
---------------------------------------------
Ratio of Expenses to Average Net
Assets................................. 2.00%**(2) 2.27
%(2 2.22% 1.82%
Ratio of Net Investment Income (Loss) to
Average Net Assets..................... 3.49%**
(0.07)% 1.57% (0.61)%
Portfolio Turnover Rate................. 1% 36%
40% 52%
-----------------------------------------------------------------------
---------------------------------------------
*Commencement of operations
**Annualized
(1)Total investment return based on per share net asset value
reflects the
effects of changes in net asset value on the performance of the
Fund during
each period, and assumes dividends and distributions, if
any, were
reinvested. The Fund's shares are issued in a private placement and
are not
traded, therefore market value total investment return is not
calculated.
(2)Reflects a voluntary expense limitation in effect during the
period. As a
result of such limitation, expenses of the Fund for the
periods ended
December 31, 1991 and 1992 reflect a benefit of $.10 and $.14,
respectively.
The accompanying notes are an integral part of the financial
statements.
7
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
----------
The Brazilian Investment Fund, Inc. (the "Fund") was
incorporated on
November 7, 1990, and is registered as a non-diversified, closed-end
management
investment company under the Investment Company Act of 1940, as
amended. The
Fund's common stock is not registered under the Securities Act of 1933.
The Fund
makes its investments in Brazil through an investment fund
established in
compliance with Brazilian law. The accompanying financial
statements are
prepared on a consolidated basis and present the financial position and
results
of operations of the investment fund and the Fund.
A. The following significant accounting policies are in
conformity with
generally accepted accounting principles for investment companies. Such
policies
are consistently followed by the Fund in the preparation of its
financial
statements.
1. SECURITY VALUATION: In valuing the Fund's assets, all listed
securities,
including purchased options, for which market quotations are readily
available
are valued at the last sales price on the valuation date, or if
there was no
sale on such date, at the mean between the current bid and asked
prices.
Securities which are traded over-the-counter are valued at the
average of the
mean of current bid and asked prices obtained from reputable
brokers. All
non-equity securities as to which market quotations are readily
available are
valued at their market values. Short-term securities which mature in 60
days or
less are valued at amortized cost. Other securities and assets for
which market
values are not readily available (including investments which are
subject to
limitations as to their sale or for which a ready market for the
securities in
the quantities owned by the Fund does not exist) are valued at fair
value as
determined in good faith by the Board of Directors (the "Board"),
although the
actual calculations may be done by others.
2. TAXES: It is the Fund's intention to continue to qualify as a
regulated
investment company and distribute all of its taxable income.
Accordingly, no
provision for U.S. Federal income taxes is required in the financial
statements.
Through December 31, 1993, the Fund was subject to a
Brazilian
repatriation tax with respect to remittances outside of Brazil
of its
dividend and interest income net of applicable expenses. Effective
January
1, 1994, this tax on dividend and interest income is being withheld
at the
source.
Effective January 1, 1994, the Brazilian Government announced a
0.25%
tax on banking transaction debits (withdrawals). The tax was
subsequently
repealed on January 1, 1995. This tax is included in Brazilian Taxes on
the
Statement of Operations.
Capital surplus, accumulated net investment loss and
accumulated
realized gain have been adjusted for permanent book-tax differences.
3. REPURCHASE AGREEMENTS: In connection with transactions in
repurchase
agreements, a bank as custodian for the Fund takes possession of the
underlying
securities, the value of which equals or exceeds the principal
amount of the
repurchase transaction, including accrued interest. To the extent
that any
repurchase transaction exceeds one business day, the value of the
collateral is
marked-to-market on a daily basis to determine the adequacy of the
collateral.
In the event of default on the obligation to repurchase, the Fund has
the right
to liquidate the collateral and apply the proceeds in
satisfaction of the
obligation. To the extent that proceeds from the sale of the
underlying
securities are less than the repurchase price under the agreement, the
Fund may
incur a loss. In the event of default or bankruptcy by the other
party to the
agreement, realization and/or retention of the collateral or
proceeds may be
subject to legal proceedings.
4. FOREIGN CURRENCY TRANSLATION: The books and records of the
Fund are
maintained in U.S. dollars. Amounts denominated in Brazilian
currency are
translated into U.S. dollars at the mean of the bid and asked prices
of such
currency against U.S. dollars last quoted by a major bank as follows:
- investments, other assets and liabilities at the prevailing
rates of
exchange on the valuation date;
- investment transactions and investment income at the
prevailing rates
of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign
exchange
rate and market values at the close of the period, the Fund does not
isolate
that portion of the results of operations arising as a result of
changes in
the foreign exchange rates from the fluctuations arising from changes
in the
market prices of the securities held at period end. Similarly, the Fund
does
not isolate the effect of changes in foreign exchange rates
from the
fluctuations arising from changes in the market prices of securities
sold
during the period. Accordingly, realized and unrealized foreign
currency
gains (losses) are included in the reported net realized and
unrealized
gains (losses) on investment transactions and balances.
Net realized gains (losses) on foreign currency transactions
represent
net foreign exchange gains
8
(losses) from sales and maturities of forward currency contracts,
disposition of foreign currency and currency gains or losses realized
between the trade and settlement dates on securities
transactions.
Foreign currency gains (losses) also occur due to the difference
between the
amount of investment income and foreign withholding taxes recorded on
the
Fund's books and the U.S. dollar equivalent amounts actually received
or
paid. Net unrealized currency gains (losses) from valuing foreign
currency
denominated assets and liabilities at period end exchange rates are
reflected as a component of unrealized appreciation (depreciation).
5. FORWARD FOREIGN CURRENCY CONTRACTS: The Fund may enter into
forward foreign
currency contracts to protect securities and related receivables and
payables
against changes in future foreign exchange rates. A forward currency
contract is
an agreement between two parties to buy or sell currency at a set
price on a
future date. The market value of the contract will fluctuate with
changes in
currency exchange rates. The contract is marked-to-market daily and
the change
in market value is recorded by the Fund as unrealized gain or loss.
The Fund
records realized gains or losses when the contract is closed
equal to the
difference between the value of the contract at the time it was opened
and the
value at the time it was closed. Risk may arise upon entering
into these
contracts from the potential inability of counterparties to meet the
terms of
their contracts and is generally limited to the amount of unrealized
gain on the
contracts, if any, at the date of default. Risks may also
arise from
unanticipated movements in the value of a foreign currency relative to
the U.S.
dollar.
6. PURCHASED OPTIONS: The Fund may purchase options. In purchasing a
call (put)
option, the Fund will seek to benefit from an increase (decline) in
the market
price of the underlying index or security. Risks may arise in the
event of
default by the counterparty or unanticipated movements in the market
price of
the underlying index or security, however, the maximum exposure to
loss for any
purchased option is limited to the premium initially paid for the
option.
Realized gains or losses on purchased options are included with net
gain (loss)
on securities sold in the financial statements.
7. OTHER: Security transactions are accounted for on the date the
securities are
purchased or sold. Realized gains and losses on the sale of
investment
securities are determined on the specific identified cost basis.
Interest income
is recognized on the accrual basis. Dividend income and
distributions to
shareholders are recorded on the ex-date. Income distributions and
capital gain
distributions are determined in accordance with U.S. Federal
income tax
regulations which may differ from generally accepted accounting
principles.
These differences are primarily due to differing treatments for foreign
currency
transactions and deferral of post-October losses.
X. Xxxxxx Xxxxxxx Asset Management Inc. (the "U.S. Adviser")
provides
investment advisory services to the Fund under the terms of an
Investment
Advisory Agreement (the "Agreement"). Under the Agreement, the U.S.
Adviser is
paid a fee computed weekly and payable monthly at an annual rate of
.90% of the
Fund's first $50 million of average weekly net assets, .70% of the
Fund's next
$50 million of average weekly net assets and .50% of the Fund's
average weekly
net assets in excess of $100 million.
C. For the period January 1, 1994 to June 14, 1994, Unibanco
Consulatoria de
Investmentos S/C Ltda. (the "Brazilian Adviser") provided investment
advice,
research and assistance on behalf of the Fund to Xxxxxx Xxxxxxx Asset
Management
Inc. under terms of a contract. Under the contract, the Brazilian
Adviser was
paid a fee computed weekly and paid monthly at an annual rate of
.15% of the
Fund's first $50 million of average weekly net assets, .125% of the
Fund's next
$50 million of average weekly net assets and .10% of the Fund's
average weekly
net assets in excess of $100 million. On June 14, 1994, the contract
expired and
was not renewed. The Brazilian Adviser is a subsidiary of Unibanco-
Uniao de
Bancos Brasileiros S.A., a Brazilian bank and the Fund's Brazilian
Administrator
and Custodian.
During the period from January 1, 1994 to June 6, 1994, the
Fund made
purchases and sales of $8,746,000 and $8,929,000, respectively, of UBB
Financial
Fund, which is sponsored by Unibanco-Uniao de Bancos Brasileiros
S.A. (the
"Brazilian Administrator and Custodian"), an affiliate of the Brazilian
Adviser.
During the same period, the Fund earned income of $487,000 from UBB
Financial
Fund which was offset by foreign currency losses of $571,000. The
net loss of
$84,000 is included in net realized loss on foreign currency
transactions.
D. The United States Trust Company of New York ("U.S. Trust"),
through its
wholly owned subsidiary Mutual Funds Service Company, provides
administrative
and shareholder services to the Fund under an Administration
Agreement. Under
the Administration Agreement, U.S. Trust is paid a fee computed
weekly and
payable monthly at an annual rate of .08% of the Fund's average
weekly net
assets, plus $75,000 per annum. Effective May 15, 1994,
9
U.S. Trust replaced Xxxxxx Guaranty Trust Company of New York as
custodian for
the Fund's assets held in the United States.
E. The Brazilian Administrator and Custodian provides Brazilian
administrative
and custodian services to the Fund under the terms of an agreement.
Under the
agreement, the Brazilian Administrator and Custodian is paid a fee
computed
weekly and paid monthly at an annual rate of .15% of the Fund's
first $50
million of average weekly net assets, .125% of the Fund's next $50
million of
average weekly net assets and .10% of the Fund's average weekly net
assets in
excess of $100 million.
During the period from January 1, 1994 to June 14, 1994, the Fund
incurred
$5,000 in brokerage commission fees to Unibanco Corretora de Valores
Mobiliarios
S.A., a subsidiary of the Brazilian Administrator and Custodian.
F. During the year ended December 31, 1994, the Fund made purchases
and sales
totaling $37,250,000 and $43,938,000, respectively, of investment
securities
other than U.S. Government securities and short term investments. At
December
31, 1994, the U.S. Federal income tax cost basis of securities was the
same as
that for financial reporting purposes and accordingly, net
unrealized
appreciation for U.S. Federal income tax purposes was $32,408,000,
of which
$33,332,000 related to appreciated securities and $924,000
related to
depreciated securities. For the year ended December 31, 1994, the Fund
expects
to defer, to January 1, 1995 for U.S. Federal income tax purposes,
post-October
currency losses of $36,000.
G. In connection with its organization the Fund incurred
$445,000 of
organization costs which are being amortized on a straight-line
basis over a
five year period beginning June 4, 1991, the date the Fund commenced
operations.
H. At December 31, 1994, 98.7% of the Fund's net assets consist of
securities
denominated in Brazilian currency. Changes in currency exchange
rates will
affect the value of and investment income from such securities.
Brazilian
securities are subject to greater price volatility, limited
capitalization and
liquidity, and higher rates of inflation than securities of companies
based in
the United States.
I. The Fund's Articles of Incorporation provide that, commencing
January 6,
1992 and on each calendar quarter thereafter, the Fund will make a
tender offer
to repurchase its outstanding shares of Common Stock at a price equal
to the net
asset value per share at the time of repurchase.
During the year ended December 31, 1994, the Fund repurchased the
following
shares:
U.S.
DATE SHARES (000)
---------- -------- ----------
2/4/94 45,452 $5,017
4/30/94 7,501 $ 678
8/1/94 242 $ 26
11/7/94 734 $ 106
On February 13, 1995 the Fund repurchased 312,637 shares
totaling
$24,964,000.
J. Shareholders of the Fund may purchase shares of common stock from
the Fund
at a price equal to the net asset value at the beginning of the month.
Purchases
are not allowed during each month the Fund makes a tender offer to
repurchase
its outstanding shares. During the year ended December 31, 1994, the
Fund issued
4,128 shares totaling $445,000.
K. During December 1994, the Board declared a distribution of $34.88
per share,
derived from net realized gains, payable on January 10, 1995, to
shareholders of
record on December 30, 1994.
-----------------------------------------------------------------------
---------
FEDERAL TAX INFORMATION: (UNAUDITED)
For the year ended December 31, 1994, the Fund designates $15,921,000
as
long-term capital gain.
10
REPORT OF INDEPENDENT ACCOUNTANTS
---------
To the Shareholders and Board of Directors of
The Brazilian Investment Fund, Inc.
In our opinion, the accompanying statement of net assets and
the related
statements of operations and of changes in net assets and the
financial
highlights present fairly, in all material respects, the financial
position of
The Brazilian Investment Fund, Inc. (the "Fund") at December 31,
1994, the
results of its operations for the year then ended, the changes in its
net assets
for each of the two years in the period then ended and the financial
highlights
for each of the three years in the period then ended and for the period
June 4,
1991 (commencement of operations) through December 31, 1991, in
conformity with
generally accepted accounting principles. These financial
statements and
financial highlights (hereafter referred to as "financial
statements") are the
responsibility of the Fund's management; our responsibility is to
express an
opinion on these financial statements based on our audits. We
conducted our
audits of these financial statements in accordance with generally
accepted
auditing standards which require that we plan and perform the audit
to obtain
reasonable assurance about whether the financial statements are free of
material
misstatement. An audit includes examining, on a test basis, evidence
supporting
the amounts and disclosures in the financial statements,
assessing the
accounting principles used and significant estimates made by
management, and
evaluating the overall financial statement presentation. We believe
that our
audits, which included confirmation of securities at December 31,
1994 by
correspondence with the custodians and brokers and the
application of
alternative auditing procedures where confirmations from brokers
were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
0000 Xxxxxx xx xxx Xxxxxxxx
New York, New York 10036
February 17, 1995
11
FINANCIAL STATEMENTS
---------
STATEMENT OF NET ASSETS
---------
DECEMBER 31, 1993
VALUE
SHARES (000)
---------------------------------------------------------
------------
BRAZILIAN INVESTMENT FUND (99.3%) -- NOTE H
--------------------------------------------------
----------
BRAZILIAN PREFERRED STOCKS (98.4%)
(Unless otherwise noted)
-----------------------------------------------------------------
-------------
APPLIANCES & HOUSEHOLD DURABLES (7.5%)
Brasmotor 4,971,800 U.S. $ 1,007
Consul 1,274,500 1,013
Continental 2001 (Common) 7,500,000 106
Refripar 2,157,800,000 1,816
-----------
3,942
-----------
-----------------------------------------------------------------
-------------
BANKING (12.0%)
Banco Bradesco 78,193,256 2,217
Banco Nacional 39,521,000 2,402
Itaubanco 8,545,000 1,624
-----------
6,243
-----------
-----------------------------------------------------------------
-------------
BEVERAGES & TOBACCO (1.7%)
Brahma 4,019,100 864
-----------
-----------------------------------------------------------------
-------------
ENERGY SOURCES (13.4%)
+Petrobras 63,608,000 6,838
Petrobras Distribuidora 4,690,000 184
-----------
7,022
-----------
-----------------------------------------------------------------
-------------
MERCHANDISING (1.1%)
*Lojas Americanas (Bonus
Rights) 183,270 14
Mesbla 1,574,000 564
-----------
578
-----------
-----------------------------------------------------------------
-------------
METALS -- NON-FERROUS (3.9%)
Vale Do Rio Doce 23,863,800 2,045
-----------
-----------------------------------------------------------------
-------------
METALS -- STEEL (5.4%)
Compania Siderurgica
Nacional (Common) 11,500,000 294
Usiminas 3,584,123,300 2,546
-----------
2,840
-----------
-----------------------------------------------------------------
-------------
TELECOMMUNICATIONS (30.0%)
Telebras 381,500,000 13,006
Telesp 7,644,265 2,644
-----------
15,650
-----------
-----------------------------------------------------------------
-------------
UTILITIES -- ELECTRIC & GAS (23.4%)
Cemig 1,142,000,000 2,046
Cia Paulista De Forca E Xxx
(Common) 34,420,000 1,716
+Eletrobras 54,805,000 8,171
Light (Common) 975,000 267
-----------
12,200
-----------
-----------------------------------------------------------------
-------------
TOTAL BRAZILIAN PREFERRED STOCKS
(Cost U.S. $29,819) 51,384
-----------
-----------------------------------------------------------------
-------------
FACE
AMOUNT VALUE
(000) (000)
---------------------------------------------------------
------------
BRAZILIAN CONVERTIBLE DEBENTURE (0.1%)
-----------------------------------------------------------------
-------------
MERCHANDISING
Mesbla Zero Coupon, 1/1/01
(Cost U.S. $72) BCR 690,000 U.S. $ 46
-----------
-----------------------------------------------------------------
-------------
SHORT TERM INVESTMENT (0.8%) SHARES
++UBB Financial Fund
(Cost U.S. $434) 3,527 434
-----------
-----------------------------------------------------------------
-------------
TOTAL BRAZILIAN INVESTMENT FUND
(Cost U.S. $30,325) 51,864
------------
-----------------------------------------------------------------
-------------
REPURCHASE AGREEMENT (0.3%)
X.X. Xxxxxx Securities,
Inc., 2.60%, dated
12/31/93, due 1/3/94, to be
repurchased at U.S. $148
collateralized by $133 U.S. FACE
Treasury Notes, 7.875%, due AMOUNT
11/15/99, valued at $151 (000)
(Cost U.S. $148) U.S. $ 148 148
-----------
-----------------------------------------------------------------
-------------
TOTAL INVESTMENTS (99.6%)
(Cost U.S. $30,473) 52,012
-----------
-----------------------------------------------------------------
-------------
OTHER ASSETS (0.7%)
Receivable from U.S.
Investment Adviser U.S. $ 60
Receivable from U.S.
Administrator 60
Dividends Receivable 5
Deferred Organization
Expense 216
Other Assets 10 351
------------ -----------
-----------------------------------------------------------------
-------------
LIABILITIES (-0.3%)
Payable For:
Professional Fees (50)
U.S. Investment Advisory
Fees (39)
Shareholder Reporting
Expenses (20)
Brazilian Registration
Fees (12)
U.S. Administrative Fees (11)
Directors' Fees and
Expenses (9)
Brazilian Investment
Advisory Fees (7)
Brazilian Administrative
and Custodian Fees (7)
U.S. Custodian Fees (1) (156)
------------ -----------
-----------------------------------------------------------------
-------------
NET ASSETS (100%)
Applicable to 624,604 issued and
outstanding U.S. $.01 par value shares
(50,000,000 shares authorized) U.S.$ 52,207
----
---------
-----------------------------------------------------------------
-------------
NET ASSET VALUE PER SHARE U.S.$ 83.58
----
---------
-----------------------------------------------------------------
-------------
The accompanying notes are an integral part of these financial
statements.
3
AMOUNT
(000)
-----------------------------------------------------------------------
---------
------------
AT DECEMBER 31, 1993, NET ASSETS CONSISTED OF:
-----------------------------------------------------------------------
---------
Common
Stock..................................................................
..............................................
Capital Surplus -- Note A-
6......................................................................
...........................
Accumulated Net Investment Loss -- Note A-
6......................................................................
...........
Accumulated Net Realized Gain -- Note A-
6......................................................................
.............
Unrealized Appreciation on Investments and Foreign
Currency...............................................................
..
Common
Stock..................................................................
.............................. U.S.$ 6
Capital Surplus -- Note A-
6......................................................................
........... 26,243
Accumulated Net Investment Loss -- Note A-
6.................................................................
(15)
Accumulated Net Realized Gain -- Note A-
6...................................................................
4,465
Unrealized Appreciation on Investments and Foreign
Currency.................................................
21,508
-----------------------------------------------------------------------
---------
TOTAL NET ASSETS
U.S.$52,207
-----------------------------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------
* Non-income producing
+ Security valued at fair value -- see Note A-1 to financial
statements
++ Sponsored by an affiliate of the Fund
December 31, 1993 exchange rate -- Brazilian Cruzeiro Real (BCR)
320.91=U.S. $1.00
-----------------------------------------------------------------------
-------------------------------------
-----------------------------------------------------------------------
-------------------------------------
* Non-income producing
+ Security valued at fair value -- see Note A-1 to financial
statements
++ Sponsored by an affiliate of the Fund
December 31, 1993 exchange rate -- Brazilian Cruzeiro Real (BCR)
320.91=U.S. $1.00
YEAR ENDED
DECEMBER 31,
1993
STATEMENT OF OPERATIONS
(000)
-----------------------------------------------------------------------
------------------------------------------------------
INVESTMENT INCOME
Dividends (net of related realized foreign currency loss of
$410).................................... U.S.$ 2,046
Interest...............................................................
.............................. 6
-----------------------------------------------------------------------
------------------------------------------------------
Total
Income.................................................................
...................... 2,052
-----------------------------------------------------------------------
------------------------------------------------------
EXPENSES
U.S. Investment Advisory Fees -- Note
B..............................................................
481
Professional
Fees...................................................................
................. 135
U.S. Administrative Fees -- Note
D...................................................................
132
Amortization of Organization Costs -- Note
G.........................................................
89
Brazilian Administrative and Custodian Fees -- Note
E................................................ 79
Brazilian Investment Advisory Fees -- Note
C.........................................................
79
Directors' Fees and
Expenses...............................................................
.......... 60
Brazilian Registration
Fees...................................................................
....... 37
Shareholder Reporting
Expenses...............................................................
........ 37
Brazilian Repatriation Tax
Expense................................................................
... 14
U.S. Custodian
Fees...................................................................
............... 2
Other
Expenses...............................................................
........................ 56
-----------------------------------------------------------------------
------------------------------------------------------
Total
Expenses...............................................................
...................... 1,201
-----------------------------------------------------------------------
------------------------------------------------------
Net Investment
Income.................................................................
........... 851
-----------------------------------------------------------------------
------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities
Sold...................................................................
........ 11,173
Foreign Currency
Transactions...........................................................
............. (824)
-----------------------------------------------------------------------
------------------------------------------------------
Total Net Realized
Gain...................................................................
......... 10,349
-----------------------------------------------------------------------
------------------------------------------------------
UNREALIZED APPRECIATION ON INVESTMENTS AND FOREIGN CURRENCY
Beginning of
Year...................................................................
................. 3,059
End of
Year...................................................................
....................... 21,508
-----------------------------------------------------------------------
------------------------------------------------------
Change in Unrealized
Appreciation...........................................................
....... 18,449
-----------------------------------------------------------------------
------------------------------------------------------
Total Net Realized Gain and Change in Unrealized
Appreciation............................................
28,798
-----------------------------------------------------------------------
------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS..................................................
U.S.$29,649
-----------------------------------------------------------------------
------------------------------------------------------
-----------------------------------------------------------------------
------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
4
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1992 1993
STATEMENT OF CHANGES IN NET ASSETS
(000) (000)
-----------------------------------------------------------------------
---------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income
(Loss)..................................................... U.S.$
(47) U.S.$ 851
Net Realized Gain
(Loss).........................................................
(513) 10,349
Change in Unrealized Appreciation
(Depreciation)................................. (5,468)
18,449
-----------------------------------------------------------------------
---------
[CAPTION]
Net Increase (Decrease) in Net Assets Resulting from
Operations.............................. (6,028)
Net Increase (Decrease) in Net Assets Resulting from
Operations.............................. 29,649
-----------------------------------------------------------------------
---------
Distributions:
Net Realized
Gain...................................................................
......... --
In Excess of Net Realized
Gain...............................................................
--
Distributions:
Net Realized
Gain...................................................................
......... (5,821)
In Excess of Net Realized
Gain...............................................................
(141)
-----------------------------------------------------------------------
---------
[CAPTION]
Total
Distributions..........................................................
................ --
Total
Distributions..........................................................
................ (5,962)
-----------------------------------------------------------------------
---------
Capital Share Transactions:
Subscription of Shares (160,245 and 2,355 shares, respectively) --
Note K.................... 10,850
Reinvestment of Distributions (113,719
shares)............................................... --
Repurchase of Shares (123,787 and 335,992 shares, respectively) --
Note J.................... (9,294)
Capital Share Transactions:
Subscription of Shares (160,245 and 2,355 shares, respectively) --
Note K.................... 196
Reinvestment of Distributions (113,719
shares)............................................... 5,991
Repurchase of Shares (123,787 and 335,992 shares, respectively) --
Note J.................... (24,354)
-----------------------------------------------------------------------
---------
[CAPTION]
Net Increase (Decrease) in Net Assets Resulting From Capital Share
Transactions.............. 1,556
Net Increase (Decrease) in Net Assets Resulting From Capital Share
Transactions.............. (18,167)
-----------------------------------------------------------------------
---------
Total Increase
(Decrease).............................................................
....... (4,472)
Net Assets:
Beginning of
Year...................................................................
......... 51,159
Total Increase
(Decrease).............................................................
....... 5,520
Net Assets:
Beginning of
Year...................................................................
......... 46,687
-----------------------------------------------------------------------
---------
End of Year (including accumulated undistributed net investment
income (loss) of U.S. $633
and X.X. x(15),
respectively.).........................................................
..... U.S.$ 46,687
-----------------------------------------------------------------------
------------------------------------------------
-----------------------------------------------------------------------
------------------------------------------------
End of Year (including accumulated undistributed net investment
income (loss) of U.S. $633
-----------------------------------------------------------------------
--------------------------
-----------------------------------------------------------------------
--------------------------
and X.X. x(15),
respectively.).........................................................
..... U.S.$ 52,207
FINANCIAL HIGHLIGHTS
PERIOD FROM
JUNE 4, 1991* YEAR ENDED DECEMBER
TO 31,
DECEMBER 31, ----------------------
SELECTED PER SHARE DATA AND RATIOS:
1991 1992 1993
-----------------------------------------------------------------------
---------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD...................................
U.S.$50.00 U.S.$63.31 U.S.$55.28
-----------------------------------------------------------------------
---------------------------------------
Offering Costs.........................................................
(0.21 ) -- --
-----------------------------------------------------------------------
---------------------------------------
Net Investment Income (Loss)...........................................
0.84 (0.09 ) 1.42
Net Realized and Unrealized Gain (Loss) on Investments.................
12.68 (7.94 ) 33.94
-----------------------------------------------------------------------
---------------------------------------
Total from Investment Operations...................................
13.52 (8.03 ) 35.36
-----------------------------------------------------------------------
---------------------------------------
Distributions:
Net Realized Gain..................................................
-- -- (6.89 )
In Excess of Net Realized Gain.....................................
-- -- (.17 )
-----------------------------------------------------------------------
---------
Total
Distributions..........................................................
.......... -- --
-----------------------------------------------------------------------
------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD.............................................................
U.S.$ 63.31 U.S.$ 55.28
-----------------------------------------------------------------------
------------------------------------------------------
-----------------------------------------------------------------------
------------------------------------------------------
TOTAL INVESTMENT RETURN:
Net Asset Value
(1)....................................................................
26.6 % (12.7)%
-----------------------------------------------------------------------
------------------------------------------------------
-----------------------------------------------------------------------
------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
-----------------------------------------------------------------------
------------------------------------------------------
NET ASSETS, END OF PERIOD
(THOUSANDS)......................................................
U.S.$51,159 U.S.$46,687
-----------------------------------------------------------------------
------------------------------------------------------
-----------------------------------------------------------------------
------------------------------------------------------
Ratio of Expenses to Average Net
Assets....................................................
2.00 (2)
2.27%(2)
Ratio of Net Investment Income (Loss) to Average Net
Assets................................ 3.49 %**
(0.07)%
Portfolio Turnover
Rate...................................................................
. 1 % 36%
-----------------------------------------------------------------------
------------------------------------------------------
Total
Distributions..........................................................
.......... (7.06 )
-----------------------------------------------------------------------
--------------------
NET ASSET VALUE, END OF
PERIOD.............................................................
U.S.$ 83.58
-----------------------------------------------------------------------
--------------------
-----------------------------------------------------------------------
--------------------
TOTAL INVESTMENT RETURN:
Net Asset Value
(1)....................................................................
72.5 %
-----------------------------------------------------------------------
--------------------
-----------------------------------------------------------------------
--------------------
RATIOS, SUPPLEMENTAL DATA:
-----------------------------------------------------------------------
--------------------
NET ASSETS, END OF PERIOD
(THOUSANDS)......................................................
U.S.$52,207
-----------------------------------------------------------------------
--------------------
-----------------------------------------------------------------------
--------------------
Ratio of Expenses to Average Net
Assets....................................................
2.22 %
Ratio of Net Investment Income (Loss) to Average Net
Assets................................ 1.57 %
Portfolio Turnover
Rate...................................................................
. 40 %
-----------------------------------------------------------------------
--------------------
*Commencement of Operations
**Annualized
(1)Total investment return based on per share net asset value
reflects the
effects of changes in net asset value on the performance of the
Fund during
each period, and assumes dividends and distributions, if
any, were
reinvested. The Fund's shares are issued in a private placement and
are not
traded, therefore market value total investment return is not
calculated.
(2)Reflects a voluntary expense limitation in effect during the
period. As a
result of such limitation, expenses of the Fund for the
periods ended
December 31, 1991 and 1992 reflect a benefit of $.10 and $.14,
respectively.
The accompanying notes are an integral part of these financial
statements.
5
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
----------
The Brazilian Investment Fund, Inc. (the "Fund") was
incorporated on
November 7, 1990, and is registered as a non-diversified, closed-end
management
investment company under the Investment Company Act of 1940. The
Fund's common
stock is not registered under the Securities Act of 1933. The Fund
makes its
investments in Brazil through an investment fund established in
compliance with
Brazilian law. The accompanying financial statements are
prepared on a
consolidated basis and present the financial position and results of
operations
of the investment fund and the Fund.
A. The following significant accounting policies are in
conformity with
generally accepted accounting principles for investment companies. Such
policies
are consistently followed by the Fund in the preparation of its
financial
statements.
1. SECURITY VALUATION: In valuing the Fund's
assets, all
listed securities for which market quotations are readily
available are
valued at the last sales price on the valuation date, or if
there was no
sale on such date, at the mean between the current bid and
asked prices.
Securities which are traded over-the-counter are valued by
averaging the
mean between the current bid and asked prices obtained from
reputable
brokers. All non-equity securities as to which market quotations
are readily
available are valued at their market values. Short-term
securities which
mature in 60 days or less are valued at amortized cost. Other
securities and
assets for which market values are not readily available
(including
investments which are subject to limitations as to their sale or
for which a
ready market for the securities in the quantities owned by the Fund
does not
exist) are valued at fair value as determined in good faith by the
Board of
Directors, although the actual calculations may be done by others.
At December 31, 1993, the Fund's total investments
include two
securities, Eletrobras and Petrobras, totaling $15,009,000 (29%
of net
assets) which are stated at fair value as determined by the
Valuation
Committee of the Board of Directors. The value for each security
reflects a
discount from the prevailing market quotation resulting from the
size of the
Fund's holding relative to the daily trading volume of the
security.
2. TAXES: It is the Fund's policy to continue to
qualify
as a regulated investment company and distribute all of its taxable
income.
Accordingly, there is no provision for U.S. Federal income
taxes in the
financial statements.
Through December 31, 1993, the Fund was subject to a
Brazilian
repatriation tax with respect to remittances outside of
Brazil of its
dividend and interest income net of applicable expenses. Effective
January
1, 1994, this tax on dividend and interest income will instead be
withheld
at the source.
Effective January 1, 1994, the Brazilian Government announced
a 0.25%
tax on banking transaction debits (withdrawals). The tax will be
treated as
an expense for financial reporting purposes.
3. REPURCHASE AGREEMENTS: In connection with
transactions in repurchase agreements, a bank as custodian for the
Fund takes
possession of the underlying securities, the value of which
equals or
exceeds the principal amount of the repurchase transaction,
including
accrued interest. To the extent that any repurchase transaction
exceeds one
business day, the value of the collateral is marked-to-market on
a daily
basis to determine the adequacy of the collateral. In the event
of default
on the obligation to repurchase, the Fund has the right to
liquidate the
collateral and apply the proceeds in satisfaction of the
obligation. To the
extent that proceeds from the sale of the underlying securities
are less
than the repurchase price under the agreement, the Fund may incur a
loss. In
the event of default or bankruptcy by the other party to the
agreement,
realization and/or retention of the collateral or proceeds may be
subject to
legal proceedings.
4. FOREIGN CURRENCY TRANSLATION: The books and
records of the Fund are maintained in United States dollars.
Amounts
denominated in Brazilian cruzeiro real are translated into U.S.
dollars at
the bid price of such currency against U.S. dollars last quoted by
a major
bank as follows:
- investments, other assets and liabilities at the prevailing
rates of
exchange on the valuation date;
- investment transactions and investment income at the
prevailing rates
of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign
exchange
rate and market values at the close of the period, the Fund does
not isolate
that portion of the results of operations arising as a result of
changes in
the foreign exchange rates from the fluctuations arising from
changes in the
market prices of the securities held at period end. Similarly, the
Fund does
not isolate the effect of changes in foreign exchange rates
from the
fluctuations arising from changes in the market prices of
securities sold
during the period. Accordingly, realized and unrealized foreign
currency
gains (losses) are included in the reported net realized and
unrealized
gains (losses) on investment transactions and balances.
Net realized gains (losses) on foreign currency transactions
represent
net foreign exchange gains (losses) from sales and maturities of
forward
currency
6
contracts, disposition of foreign currency and currency gains
or losses
realized between the trade and settlement dates on securities
transactions.
Foreign currency gains (losses) also occur due to the difference
between the
amount of investment income and foreign withholding taxes
recorded on the
Fund's books and the U.S. dollar equivalent amounts actually
received or
paid. Because interest rates of Brazilian cruzeiro real denominated
interest
bearing securities reflect the rate of inflation, interest income
is netted
against foreign currency losses. Similarly, foreign currency
losses on
dividends are included in dividend income on the Fund's
statement of
operations. Net unrealized currency gains (losses) from valuing
foreign
currency denominated assets and liabilities at period end exchange
rates are
reflected as a component of unrealized appreciation (depreciation).
5. FORWARD FOREIGN CURRENCY CONTRACTS: The Fund
may enter into forward foreign currency contracts to protect
securities and
related receivables and payables against changes in future foreign
exchange
rates. A forward currency contract is an agreement between two
parties to
buy or sell currency at a set price on a future date. The market
value of
the contract will fluctuate with changes in currency exchange
rates. The
contract is marked-to-market daily and the change in market
value is
recorded by the Fund as unrealized gain or loss. The Fund records
realized
gains or losses when the contract is closed equal to the difference
between
the value of the contract at the time it was opened and the
value at the
time it was closed. Risks may arise upon entering into these
contracts from
the potential inability of counterparties to meet the terms
of their
contracts and from unanticipated movements in the value of a
foreign
currency relative to the U.S. dollar.
6. STATEMENT OF POSITION 93-2: During the
current year,
the Fund adopted Statement of Position 93-2, DETERMINATION,
DISCLOSURE, AND
FINANCIAL STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN, AND
RETURN OF
CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES. Accordingly,
permanent book
and tax basis differences relating to shareholder distributions
have been
reclassified to capital surplus. As of January 1, 1993, the
cumulative
effect of such differences totaling $(498,000) and
$780,000 were
reclassified from accumulated undistributed net investment
income and
accumulated net realized gain, respectively, to capital surplus.
Net assets,
net investment income and net realized gain for the current year
were not
affected by this change.
7. OTHER: Security transactions are accounted for on
the date the securities are purchased or sold. Realized gains and
losses on
the sale of investment securities are determined on the specific
identified
cost basis. Interest income is recognized on the accrual basis.
Dividend
income and distributions to shareholders are recorded on the ex-
date. Income
distributions and capital gain distributions are determined in
accordance
with U.S. Federal income tax regulations which may differ from
generally
accepted accounting principles. These differences are
primarily due to
differing treatments for foreign currency transactions and
deferral of
losses on wash sale transactions.
X. Xxxxxx Xxxxxxx Asset Management Inc. (the "U.S. Adviser")
provides
investment advisory services to the Fund under the terms of an
Investment
Advisory Agreement (the "Agreement"). Under the Agreement, the U.S.
Adviser is
paid a fee, computed weekly and payable monthly at an annual rate of
.90% of the
Fund's first $50 million of average weekly net assets, .70% of the
Fund's next
$50 million of average weekly net assets and .50% of the Fund's
average weekly
net assets in excess of $100 million. For the year ended December 31,
1993, U.S.
advisory fees incurred by the Fund amounted to $481,000, of which
$39,000 was
payable to the U.S. Adviser at December 31, 1993.
C. Unibanco Consulatoria de Investmentos S/C Ltda. (the "Brazilian
Adviser")
provides investment advice, research and assistance on behalf of the
Fund to
Xxxxxx Xxxxxxx Asset Management Inc. under terms of a contract.
Under the
contract, the Brazilian Adviser is paid a fee, computed weekly and paid
monthly
at an annual rate of .15% of the Fund's first $50 million of average
weekly net
assets, .125% of the Fund's next $50 million of average weekly net
assets and
.10% of the Fund's average weekly net assets in excess of $100
million. The
Brazilian Adviser is a subsidiary of Unibanco-Uniao de Bancos
Brasileiros S.A.,
a Brazilian bank and the Fund's Brazilian Administrator and
Custodian. For the
year ended December 31, 1993, Brazilian advisory fees incurred by
the Fund
amounted to $79,000, of which $7,000 was payable to the Brazilian
Adviser at
December 31, 1993.
During the year ended December 31, 1993, the Fund made purchases
and sales
of $24,923,000 and $24,899,000, respectively, of UBB Financial Fund,
which is
sponsored by Unibanco-Uniao de Bancos Brasileiros S.A. (the
"Brazilian
Administrator and Custodian"), an affiliate of the Brazilian Adviser.
During the
year ended December 31, 1993, the Fund earned income of $2,185,000
from UBB
Financial Fund which was offset by foreign currency losses of
$2,572,000. The
net loss of $387,000 is included in net realized loss on foreign
currency
transactions.
D. The United States Trust Company of New York ("U.S. Trust"),
through its
wholly owned subsidiary Mutual Funds Service Company, provides
administrative
and shareholder services to the Fund under an Administration
Agreement. Under
the Agreement, U.S. Trust is paid a fee, computed weekly and payable
monthly at
an annual rate of .08% of the Fund's average weekly net assets plus
$75,000 per
annum. For the year ended December 31, 1993, such fees totaled
$132,000, of
which $11,000 was payable to U.S. Trust at December 31, 1993.
7
E. The Brazilian Administrator and Custodian provides Brazilian
administrative
and custodian services to the Fund under the terms of an agreement.
Under the
agreement, the Brazilian Administrator and Custodian is paid a fee,
computed
weekly and paid monthly at an annual rate of .15% of the Fund's
first $50
million of average weekly net assets, .125% of the Fund's next $50
million of
average weekly net assets and .10% of the Fund's average weekly net
assets in
excess of $100 million. For the year ended December 31, 1993 the Fund
incurred
fees under the agreement of $79,000, of which $7,000 was
payable to the
Brazilian Administrator and Custodian at December 31, 1993.
F. During the year ended December 31, 1993, the Fund made purchases
of U.S.
$20,798,000 and sales of U.S. $44,678,000 of investment securities
other than
U.S. Government securities and short term investments. At December 31,
1993, the
Federal income tax cost basis of investments was the same as that for
financial
reporting purposes and accordingly, net unrealized appreciation
for Federal
income tax purposes was U.S. $21,539,000 of which U.S. $21,566,000
related to
appreciated securities and U.S. $27,000 related to depreciated
securities.
G. In connection with its organization the Fund incurred
$445,000 of
organization costs which are being amortized using the straight-line
basis over
a five year period from the date the Fund commenced operations.
H. At December 31, 1993, 99.3% of the Fund's net assets consisted of
securities
denominated in Brazilian cruzeiro real. Changes in currency exchange
rates will
affect the value of and investment income from such securities.
Brazilian
securities are subject to greater price volatility, limited
capitalization and
liquidity, and higher rates of inflation than securities of companies
based in
the United States.
I. During the year ended December 31, 1993, the Fund incurred U.S.
$71,000 in
brokerage commission fees to Unibanco Corretora de Valores Mobiliarios
S.A., a
subsidiary of the Brazilian Administrator and Custodian.
J. The Fund's Articles of Incorporation provide that, commencing
January 6,
1992 and on each calendar quarter thereafter, the Fund will make a
tender offer
to repurchase its outstanding shares of Common Stock at a price equal
to the net
asset value per share at the time of repurchase.
During the year ended December 31, 1993 the Fund repurchased the
following
shares:
U.S.
DATE SHARES (000)
--------- --------- ---------
2/1/93 1,140 $ 54
4/30/93 28,833 $ 1,657
8/23/93 260,446 $ 18,869
11/1/93 45,573 $ 3,774
On February 4, 1994 the Fund repurchased 45,409 shares totaling
$5,148,000.
K. Shareholders of the Fund may purchase shares of common stock from
the Fund
at a price equal to the net asset value at the beginning of the month.
Purchases
are not allowed during each month the Fund makes a tender offer to
repurchase
its outstanding shares. During the year ended December 31, 1993, the
Fund issued
2,355 shares totaling $196,000.
L. During December 1993, the Board of Directors of the Fund
voted to pay
shareholders of record on December 31, 1993 a total distribution of
$7.15 per
share derived from net realized gains of $5.35 per share and from net
investment
income of $1.80 per share, payable on January 17, 1994.
8
REPORT OF INDEPENDENT ACCOUNTANTS
---------
To the Shareholders and Board of Directors of
The Brazilian Investment Fund, Inc.
In our opinion, the accompanying statement of net assets and the
related
statements of operations and of changes in net assets and the
financial
highlights present fairly, in all material respects, the financial
position of
The Brazilian Investment Fund, Inc. (the "Fund") at December 31,
1993, the
results of its operations for the year then ended, the changes in its
net assets
for each of the two years in the period then ended and the financial
highlights
for each of the two years in the period then ended and for the
period June 4,
1991 (commencement of operations) through December 31, 1991, in
conformity with
generally accepted accounting principles. These financial
statements and
financial highlights (hereafter referred to as "financial statements")
are the
responsibility of the Fund's management; our responsibility is to
express an
opinion on these financial statements based on our audits. We
conducted our
audits of these financial statements in accordance with generally
accepted
auditing standards which require that we plan and perform the audit
to obtain
reasonable assurance about whether the financial statements are free of
material
misstatement. An audit includes examining, on a test basis, evidence
supporting
the amounts and disclosures in the financial statements,
assessing the
accounting principles used and significant estimates made by
management, and
evaluating the overall financial statement presentation. We believe
that our
audits, which included confirmation of securities at December 31,
1993 by
correspondence with the custodians, provide a reasonable basis for the
opinion
expressed above.
As explained in Note A-1, the financial statements include securities
valued at
$15.0 million (29 percent of net assets) whose values have been
estimated by the
Valuation Committee of the Board of Directors. We have reviewed the
procedures
used by the Valuation Committee in arriving at its estimate of value
and have
inspected underlying documentation, and, in the circumstances, we
believe the
procedures are reasonable and the documentation appropriate. However,
because of
the inherent uncertainty of valuation, these estimated values
may differ
significantly from the values that would have been used had a ready
market for
these securities in the quantities owned by the Fund existed,
and the
differences could be material to the financial statements.
PRICE WATERHOUSE
0000 Xxxxxx xx xxx Xxxxxxxx
New York, New York 10036
March 30, 1994
9
