UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File No. 811-05770
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THE CHILE FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
466 Lexington Avenue, New York, New York 10017-3140
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(Address of Principal Executive Offices) (Zip Code)
Hal Liebes, Esq.
The Chile Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3140
Registrant's telephone number, including area code: (212) 875-3500
Date of fiscal year end: December 31
Date of reporting period: January 1, 2004 to June 30, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
THE CHILE FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2004
CH
LISTED
NYSE(R)
3911-SA-04
CONTENTS
Letter to Shareholders 1
Portfolio Summary 3
Schedule of Investments 4
Statement of Assets and Liabilities 6
Statement of Operations 7
Statement of Changes in Net Assets 8
Financial Highlights 10
Notes to Financial Statements 12
Results of Annual Meeting of Shareholders 17
Privacy Policy Notice 18
Description of InvestLink(SM) Program 19
Proxy Voting 22
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LETTER TO SHAREHOLDERS
August 17, 2004
DEAR SHAREHOLDER:
For the six month period ended June 30, 2004, The Chile Fund, Inc. (the "Fund")
had a decrease in its net asset value of 4.42%, vs. a decline of 3.50% for the
Morgan Stanley Capital International Chile Index* and a 6.8% decline in the IPSA
Index**, measured in U.S. dollar terms. Factors that detracted from the Fund's
relative performance during the period included not having had any exposure to a
metals and mining stock that had a strong gain in the period, rising about 70%.
In addition, the Fund's bank holdings collectively had a gain but lagged the
index's bank component. Factors that aided the Fund's relative return included
stock selection in the retail sector.
THE STOCK MARKET IN CHILE: MODESTLY DOWN DESPITE HEALTHY ECONOMY
The world's stock markets performed well over the first half of the period, but
then tumbled on worries that interest rates would begin to rise. In addition,
investor sentiment was dampened by concerns of a "hard landing" in China and by
heightened geopolitical risk factors in general. Emerging stock markets outpaced
developed markets during the initial rally, and underperformed when markets
turned down in April and May. As of the end of June many emerging markets had
positive results for the period, though the best performers were mostly small
markets and the group as a whole posted a slight loss. Within Emerging Markets,
Latin America outperformed; within Latin America the Chilean market was in the
middle of the pack.
From a fundamental point of view, we believe the economy has performed in line
with expectations. The recovery has been led by external demand, aided by high
prices for commodities and in particular copper. There are clear signs of
domestic demand picking up speed; however, the labor market remains subdued and
unemployment relatively high. Most analysts are anticipating GDP growth of
around 5% for the year. Inflation and interest rates remain at very low levels.
The peso weakened steadily throughout the first six months of the year, losing
7% of its value against the U.S. dollar. On the negative side, foreign direct
investment has fallen. The government's proposal to introduce a mining royalty
tax, aimed primarily at foreign owned mining companies, has dampened investor
sentiment generally by sending a negative signal about the government's general
approach to taxation and private sector investment.
THE PORTFOLIO AND OUTLOOK: POSITIONED FOR A RECOVERY OF DOMESTIC DEMAND
We believe that the recovery should feed through to the labor market in due
course and we remain optimistic on stocks sensitive to domestic consumption;
therefore, we were overweight in sectors such as beverages. Also on the domestic
demand theme, one noteworthy addition to the Fund was a major retailer that went
public in May (we participated in its IPO). We continue to believe that the
banking sector should benefit from an increase in domestic consumption, but we
are roughly neutrally weighted there based mainly on valuation concerns. Amongst
exporters, we have maintained exposure to exporters of wood pulp and other
forestry products, which have performed well in the current commodity price
environment.
We think that the Chilean market should be a relative beneficiary of lower
appetite for risk around the world due to its traditional "safe haven" status
and relative immunity to global capital flows. Thanks to the pension fund
system, which continues to grow and mature and which is the lifeblood of the
local capital markets, Chilean companies are increasingly
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1
LETTER TO SHAREHOLDERS
looking internally for equity finance and less to external sources of capital.
In our view, this provides a measure of downside protection in a difficult
market environment.
Respectfully,
/s/ Matthew J.K. Hickman
Matthew J.K. Hickman
Chief Investment Officer***
INTERNATIONAL INVESTING ENTAILS SPECIAL RISK CONSIDERATIONS, INCLUDING CURRENCY
FLUCTUATIONS, LOWER LIQUIDITY, ECONOMIC AND POLITICAL RISKS, AND DIFFERENCES IN
ACCOUNTING METHODS. THERE ARE ALSO RISKS ASSOCIATED WITH INVESTING IN CHILE,
INCLUDING THE RISK OF INVESTING IN A SINGLE-COUNTRY FUND.
IN ADDITION TO HISTORICAL INFORMATION, THIS REPORT CONTAINS FORWARD-LOOKING
STATEMENTS, WHICH MAY CONCERN, AMONG OTHER THINGS, DOMESTIC AND FOREIGN MARKET,
INDUSTRY AND ECONOMIC TRENDS AND DEVELOPMENTS AND GOVERNMENT REGULATION AND
THEIR POTENTIAL IMPACT ON THE FUND'S INVESTMENT PORTFOLIO. THESE STATEMENTS ARE
SUBJECT TO RISKS AND UNCERTAINTIES AND ACTUAL TRENDS, DEVELOPMENTS AND
REGULATIONS IN THE FUTURE AND THEIR IMPACT ON THE FUND COULD BE MATERIALLY
DIFFERENT FROM THOSE PROJECTED, ANTICIPATED OR IMPLIED. THE FUND HAS NO
OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS.
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* The Morgan Stanley Capital International Chile Index is an unmanaged index
(with no defined investment objective) of Chilean equities that includes
reinvestment of net dividends, and is the exclusive property of Morgan Stanley
Capital International Inc. Investors cannot invest directly in an index.
** The IPSA Index is primarily a traded volume-based index. All stocks traded on
the Santiago Stock Exchange are ranked according to a liquidity-indicator proxy
called PRESENCE, which is the number of days the stock was traded, divided by
the total number of trading days. The IPSA Index includes the top 40 names,
according to this indicator. Once the components of the IPSA Index are
determined, their actual weightings in the index are calculated based on market
capitalization adjusted by traded volume.
*** Matthew J.K. Hickman, Vice President, is a portfolio manager specializing in
emerging equity markets and is primarily responsible for management of the
Fund's assets. He joined in 2003 from Compass Group Investment Advisors, where
he was general manager of the private wealth management division based in
Santiago, Chile. Previously, he was a financial advisor in Credit Suisse First
Boston's Private Client Services channel; an equity analyst focusing on Latin
American telecommunications companies and several Latin American country markets
at ABN AMRO, Lehman Brothers, Bear, Stearns & Co. Inc. and James Capel; and an
equity analyst and member of the management team for the Five Arrows Chile Fund
at Rothschild Asset Management. Mr. Hickman holds a B.A. in modern languages
from Cambridge University and a diploma in corporate finance from London
Business School. He is fluent in Spanish, Portuguese and French, and is a
candidate for Level II of the Chartered Financial Analyst Examination in 2004.
He is also the Co-Chief Investment Officer of The Latin America Equity Fund,
Inc.
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2
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THE CHILE FUND, INC.
PORTFOLIO SUMMARY - AS OF JUNE 30, 2004 (UNAUDITED)
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[CHART]
SECTOR ALLOCATION
AS A PERCENT OF NET ASSETS
JUNE 30, 2004 DECEMBER 31, 2003
Banking 8.69% 9.52%
Chemicals-Diversified 3.03% 3.02%
Diversified Operations 18.89% 18.09%
Electric-Integrated 14.97% 18.30%
Food & Beverages 9.42% 8.88%
Food-Retail 4.87% 1.89%
Infrastructure 2.49% 2.38%
Paper & Related Products 10.33% 10.89%
Retail-Major Department Stores 4.46% 3.89%
Shipping 3.31% 4.81%
Telephone-Integrated 14.81% 14.91%
Other 4.73% 3.42%
TOP 10 HOLDINGS, BY ISSUER
PERCENT OF
HOLDING SECTOR NET ASSETS
------------------------------------------------------------------------------------------------
1. Empresas Copec S.A. Diversified Operations 18.9
2. Empresas CMPC S.A. Paper & Related Products 10.3
3. Compania de Telecomunicaciones de Chile S.A. Telephone-Integrated 10.1
4. Empresa Nacional de Electricidad S.A. Electric-Integrated 6.5
5. Banco Santander Chile S.A. Banking 4.9
6. Cencosud S.A. Food-Retail 4.9
7. Enersis S.A. Electric-Integrated 4.8
8. Empresa Nacional de Telecomunicaciones S.A. Telephone-Integrated 4.7
9. S.A.C.I. Falabella, S.A. Retail-Major Department Stores 4.5
10. Embotelladora Andina S.A. Food & Beverages 4.3
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3
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THE CHILE FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2004 (UNAUDITED)
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NO. OF
DESCRIPTION SHARES VALUE
-------------------------------------------------------------------------------
EQUITY SECURITIES-99.67%
BANKING-8.69%
Banco de Chile 54,616,124 $ 2,729,733
Banco Santander Chile S.A. 271,350,000 6,909,030
Corpbanca S.A. 536,702,630 2,564,363
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12,203,126
--------------
CERAMIC PRODUCTS-0.50%
Ceramicas Cordillera S.A. 67,165 696,721
--------------
CHEMICALS-DIVERSIFIED-3.03%
Sociedad Quimica y Minera de
Chile S.A., Class B 1,045,000 4,253,745
--------------
CONTAINERS-METAL/GLASS-1.22%
Cristalerias de Chile S.A. 209,019 1,708,289
--------------
DIVERSIFIED OPERATIONS-18.89%
Empresas Copec S.A. 3,640,000 26,517,507
--------------
ELECTRIC DISTRIBUTION-0.32%
Compania General de
Electricidad S.A. 115,021 447,429
--------------
ELECTRIC-INTEGRATED-14.97%
Colbun S.A. 51,499,991 5,099,410
Empresa Nacional de
Electricidad S.A. 22,186,840 9,136,271
Enersis S.A.+ 57,257,514 6,771,910
--------------
21,007,591
--------------
EXPLOSIVES-0.32%
Enaex S.A. 110,000 449,509
--------------
FOOD & BEVERAGES-9.42%
Coca-Cola Embonor
S.A., Class A+ 3,118,592 1,445,948
Compania Cervecerias
Unidas S.A. 228,642 966,675
Embotelladora Andina
S.A., PNA 1,491,855 3,048,191
Embotelladora Andina
S.A., PNB 1,438,145 2,712,415
Embotelladora Andina S.A.,
Series B, ADR 19,400 $ 218,638
Vina Concha y Toro S.A. 4,747,011 4,513,857
Vina San Pedro S.A. 35,487,169 312,343
--------------
13,218,067
--------------
FOOD-RETAIL-4.87%
Cencosud S.A.+ 4,631,236 5,713,981
Cencosud S.A., ADR+ 60,300 1,115,966
--------------
6,829,947
--------------
INFRASTRUCTURE-2.49%
Infraestructura 2000*+ 19,568,922 3,489,687
--------------
MINING-0.50%
Antofagasta plc 41,000 699,295
--------------
PAPER & RELATED PRODUCTS-10.33%
Empresas CMPC S.A. 788,522 14,500,130
--------------
PHARMACEUTICALS-0.27%
Farmacias Ahumada S.A. 154,925 374,985
--------------
RETAIL-MAJOR DEPARTMENT STORES-4.46%
S.A.C.I. Falabella, S.A. 3,188,563 6,264,367
--------------
SHIPPING-3.31%
Compania SudAmericana de
Vapores S.A. 3,944,799 4,649,438
--------------
TELEPHONE-INTEGRATED-14.81%
Compania de Telecomunicaciones
de Chile S.A., ADR+ 75,800 924,002
Compania de Telecomunicaciones
de Chile S.A., Class A 4,323,033 13,181,429
Empresa Nacional de
Telecomunicaciones S.A. 1,167,326 6,678,297
--------------
20,783,728
--------------
TEXTILES-0.03%
Zalaquett S.A. 1,496,767 42,345
--------------
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See accompanying notes to financial statements.
4
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THE CHILE FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONCLUDED)
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NO. OF
DESCRIPTION SHARES VALUE
-------------------------------------------------------------------------------
UTILITIES-0.37%
Compania de Consumidores de
Gas de Santiago S.A. 120,000 $ 517,721
--------------
WATER-0.87%
Aguas Andina S.A., Class A 4,711,365 1,221,808
--------------
TOTAL EQUITY SECURITIES
(Cost $89,865,434) 139,875,435
--------------
SHORT-TERM INVESTMENTS-0.65%
CHILEAN MUTUAL FUNDS-0.60%
Fondo Mutuo Moneda Liquidez,
Series A 412,538 666,696
Security Check Fund 40,234 177,649
--------------
TOTAL CHILEAN MUTUAL FUNDS
(Cost $838,477) 844,345
--------------
PRINCIPAL
DESCRIPTION AMOUNT (000'S) VALUE
-------------------------------------------------------------------------------
GRAND CAYMAN-0.05%
Brown Brothers Harriman & Co.,
overnight deposit, 0.51%,
07/01/04** (Cost $66,000) $ 66 $ 66,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $904,477) 910,345
--------------
TOTAL INVESTMENTS-100.32%
(Cost $90,769,911) (Notes A,D,F) 140,785,780
--------------
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS-(0.32)% (445,867)
--------------
NET ASSETS-100.00% $ 140,339,913
==============
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+ Security is non-income producing.
* Not readily marketable security; security is valued at fair value as
determined in good faith under procedures established by the Board of
Directors. (See Note A.)
** Variable rate account. Rate resets on a daily basis; amounts are available
on the same business day.
ADR American Depositary Receipts.
PNA Preferred Shares, Class A.
PNB Preferred Shares, Class B.
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
5
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THE CHILE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 2004 (UNAUDITED)
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ASSETS
Investments, at value (Cost $90,769,911) (Notes A,D,F) $ 140,785,780
Cash (including $184,238 of foreign currencies with a cost
of $184,238) 184,676
Receivables:
Investments sold 138,641
Dividends 2,640
Prepaid expenses 15,647
--------------
Total Assets 141,127,384
--------------
LIABILITIES
Payables:
Investments purchased 163,496
Investment advisory fees (Note B) 348,809
Administration fees (Note B) 34,586
Directors' fees 16,801
Other accrued expenses 134,005
Chilean repatriation taxes (Note A) 89,774
--------------
Total Liabilities 787,471
--------------
NET ASSETS (applicable to 10,139,926 shares of common
stock outstanding) (Note C) $ 140,339,913
==============
NET ASSETS CONSIST OF
Capital stock, $0.001 par value; 10,139,926 shares
issued and outstanding (100,000,000 shares authorized) $ 10,140
Paid-in capital 81,037,892
Undistributed net investment income 1,927,703
Accumulated net realized gain on investments and foreign
currency related transactions 7,348,493
Net unrealized appreciation in value of investments and
translation of other assets and liabilities denominated
in foreign currencies 50,015,685
--------------
Net assets applicable to shares outstanding $ 140,339,913
==============
NET ASSET VALUE PER SHARE ($140,339,913 DIVIDED BY 10,139,926) $ 13.84
==============
MARKET PRICE PER SHARE $ 12.10
==============
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See accompanying notes to financial statements.
6
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THE CHILE FUND, INC.
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Income (Note A):
Dividends $ 2,616,646
Interest 218
Less: Foreign taxes withheld (5,072)
--------------
Total Investment Income 2,611,792
--------------
Expenses:
Investment advisory fees (Note B) 749,597
Custodian fees 140,629
Administration fees (Note B) 97,859
Legal fees 36,743
Audit fees 35,059
Printing (Note B) 25,986
Accounting fees 25,287
Directors' fees 23,491
Transfer agent fees 14,172
NYSE listing fees 13,750
Insurance 11,169
Miscellaneous 7,183
Chilean repatriation taxes (Note A) 132,271
--------------
Total Expenses 1,313,196
--------------
Net Investment Income 1,298,596
--------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments 6,063,037
Foreign currency related transactions (77,644)
Net change in unrealized appreciation in value of investments
and translation of other assets and liabilities denominated
in foreign currencies (13,783,527)
--------------
Net realized and unrealized loss on investments and foreign
currency related transactions (7,798,134)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (6,499,538)
==============
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See accompanying notes to financial statements.
7
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THE CHILE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 2004 ENDED
(UNAUDITED) DECEMBER 31, 2003
------------------- -------------------
INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income $ 1,298,596 $ 725,373
Net realized gain on investments and foreign currency related transactions 5,985,393 8,997,484
Net change in unrealized appreciation in value of investments and
translation of other assets and liabilities denominated in
foreign currencies (13,783,527) 56,597,737
------------------- -------------------
Net increase/(decrease) in net assets resulting from operations (6,499,538) 66,320,594
------------------- -------------------
Dividends and distributions to shareholders:
Net investment income -- (811,194)
Net realized gain on investments -- (3,751,773)
------------------- -------------------
Total dividends and distributions to shareholders -- (4,562,967)
------------------- -------------------
Total increase/(decrease) in net assets (6,499,538) 61,757,627
------------------- -------------------
NET ASSETS
Beginning of period 146,839,451 85,081,824
------------------- -------------------
End of period* $ 140,339,913 $ 146,839,451
=================== ===================
----------
* Includes undistributed net investment income of $1,927,703 and $629,107,
respectively.
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See accompanying notes to financial statements.
8
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9
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THE CHILE FUND, INC.
FINANCIAL HIGHLIGHTS~
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Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
--------------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, 2004 -------------------------------------------
(UNAUDITED) 2003 2002 2001
------------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 14.48 $ 8.39 $ 9.93 $ 11.43
------------- ---------- ---------- ----------
Net investment income/(loss) 0.13 0.07 0.09* 0.21
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions (0.77) 6.47 (1.70) (0.70)
------------- ---------- ---------- ----------
Net increase/(decrease) in net assets resulting
from operations (0.64) 6.54 (1.61) (0.49)
------------- ---------- ---------- ----------
Dividends and distributions to shareholders:
Net investment income -- (0.08) (0.09) (0.15)
Net realized gain on investments and
foreign currency related transactions -- (0.37) -- (0.86)
In excess of net investment income -- -- -- --
------------- ---------- ---------- ----------
Total dividends and distributions to shareholders -- (0.45) (0.09) (1.01)
------------- ---------- ---------- ----------
Anti-dilutive impact due to capital shares tendered
or repurchased -- -- 0.16 --
------------- ---------- ---------- ----------
Net asset value, end of period $ 13.84 $ 14.48 $ 8.39 $ 9.93
============= ========== ========== ==========
Market value, end of period $ 12.10 $ 14.10 $ 7.25 $ 8.43
============= ========== ========== ==========
Total investment return (a) (14.18)% 100.72% (12.93)% 13.18%
============= ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 140,340 $ 146,839 $ 85,082 $ 134,289
Ratio of expenses to average net assets (b) 1.84%(d) 1.74% 1.11% 2.71%
Ratio of expenses to average net assets, excluding taxes 1.65%(d) 1.74% 2.01% 1.54%
Ratio of net investment income/(loss) to average net assets 1.82%(d) 0.65% 1.28%(c) 1.91%
Portfolio turnover rate 12.71% 31.94% 31.94% 29.81%
----------
~ Per share amounts prior to July 17, 1995 have been restated to reflect a
two-for-one stock split on July 17, 1995.
* Based on actual shares outstanding on February 4, 2002 (prior to the tender
offer) and December 31, 2002.
+ Based on average shares outstanding.
++ Includes a $0.08 and $0.01 per share decrease to the Fund's net asset value
per share resulting from the dilutive impact of shares issued pursuant to
the Fund's automatic Dividend Reinvestment Plan in 1998 and 1995,
respectively.
(a) Total investment return at market value is based on the changes in market
price of a share during the period and assumes reinvestment of dividends
and distributions, if any, at actual prices pursuant to the Fund's dividend
reinvestment program.
(b) Ratios include the effect of Chilean repatriation taxes.
(c) Ratio includes the effect of a reversal of Chilean repatriation tax
accrual; excluding the reversal, the ratio would have been 0.18%.
(d) Annualized.
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
10
--------------------------------------------------------------------------------
THE CHILE FUND, INC.
FINANCIAL HIGHLIGHTS~
--------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------
2000 1999 1998 1997
---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 15.22 $ 12.59 $ 21.61 $ 22.59
---------- ---------- ---------- ----------
Net investment income/(loss) (0.06)+ 0.09 0.38 0.10
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions (3.36) 3.19 (6.88)++ 2.32
---------- ---------- ---------- ----------
Net increase/(decrease) in net assets resulting
from operations (3.42) 3.28 (6.50) 2.42
---------- ---------- ---------- ----------
Dividends and distributions to shareholders:
Net investment income (0.01) (0.07) (0.32) --
Net realized gain on investments and
foreign currency related transactions (0.58) (0.58) (2.20) (3.40)
In excess of net investment income -- -- -- --
---------- ---------- ---------- ----------
Total dividends and distributions to shareholders (0.59) (0.65) (2.52) (3.40)
---------- ---------- ---------- ----------
Anti-dilutive impact due to capital shares tendered
or repurchased 0.22 -- -- --
---------- ---------- ---------- ----------
Net asset value, end of period $ 11.43 $ 15.22 $ 12.59 $ 21.61
========== ========== ========== ==========
Market value, end of period $ 8.438 $ 11.250 $ 9.063 $ 17.813
========== ========== ========== ==========
Total investment return (a) (20.04)% 31.45% (33.00)% 3.56%
========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 154,473 $ 218,027 $ 180,357 $ 303,944
Ratio of expenses to average net assets (b) 2.98% 2.16% -- 3.34%
Ratio of expenses to average net assets, excluding taxes 1.73% 1.64% 1.62% 1.50%
Ratio of net investment income/(loss) to average net assets (0.45)% 0.61% 2.29% 0.38%
Portfolio turnover rate 24.25% 12.01% 5.39% 35.59%
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 26.45 $ 26.26 $ 20.13
---------- ---------- ----------
Net investment income/(loss) 0.47 0.65 0.42+
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions (3.44) 0.41++ 6.24
---------- ---------- ----------
Net increase/(decrease) in net assets resulting
from operations (2.97) 1.06 6.66
---------- ---------- ----------
Dividends and distributions to shareholders:
Net investment income (0.47) (0.65) (0.47)
Net realized gain on investments and
foreign currency related transactions (0.26) (0.22) (0.06)
In excess of net investment income (0.16) -- --
---------- ---------- ----------
Total dividends and distributions to shareholders (0.89) (0.87) (0.53)
---------- ---------- ----------
Anti-dilutive impact due to capital shares tendered
or repurchased -- -- --
---------- ---------- ----------
Net asset value, end of period $ 22.59 $ 26.45 $ 26.26
========== ========== ==========
Market value, end of period $ 20.875 $ 26.000 $ 23.063
========== ========== ==========
Total investment return (a) (16.43)% 16.66% 6.05%
========== ========== ==========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 317,012 $ 370,275 $ 367,047
Ratio of expenses to average net assets (b) 1.96% -- --
Ratio of expenses to average net assets, excluding taxes 1.48% 1.46% 1.39%
Ratio of net investment income/(loss) to average net assets 1.79% 2.39% 1.74%
Portfolio turnover rate 4.82% 2.38% 0.86%
--------------------------------------------------------------------------------
11
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THE CHILE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE A. SIGNIFICANT ACCOUNTING POLICIES
The Chile Fund, Inc. (the "Fund") was incorporated in Maryland on January 30,
1989 and commenced investment operations on September 27, 1989. The Fund is
registered under the Investment Company Act of 1940, as amended, as a
closed-end, non-diversified management investment company.
USE OF ESTIMATES: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
SECURITY VALUATION: The net asset value of the Fund is determined daily as of
the close of regular trading on the New York Stock Exchange, Inc. (the
"Exchange") on each day the Exchange is open for business. The Fund's equity
investments are valued at market value, which is generally determined using the
closing price on the exchange or market on which the security is primarily
traded at the time of valuation (the "Valuation Time"). If no sales are
reported, equity investments are generally valued at the most recent bid
quotation as of the Valuation Time or at the lowest ask quotation in the case of
a short sale of securities. Debt securities with a remaining maturity greater
than 60 days are valued in accordance with the price supplied by a pricing
service, which may use a matrix, formula or other objective method that takes
into consideration market indices, yield curves and other specific adjustments.
Debt obligations that will mature in 60 days or less are valued on the basis of
amortized cost, which approximates market value, unless the Board of Directors
determines that using this method would not reflect an investment's value.
Securities and other assets for which market quotations are not readily
available or whose values have been materially affected by events occurring
before the Fund's Valuation Time, but after the close of the securities' primary
market, are valued at fair value as determined in good faith by, or under the
direction of, the Board of Directors under procedures established by the Board
of Directors. The Fund may utilize a service provided by an independent third
party which has been approved by the Board of Directors to fair value certain
securities. At June 30, 2004, the Fund held 2.49% of its net assets in a
security valued at fair value as determined in good faith by the Board of
Directors with an aggregate cost of $4,392,311 and fair value of $3,489,687. The
Fund's estimate of fair value assumes a willing buyer and a willing seller
neither acting under a compulsion to buy or sell. Although this security may be
resold in privately negotiated transactions, the prices realized on such sales
could differ from the price originally paid by the Fund or the current carrying
value, and the difference could be material.
SHORT-TERM INVESTMENT: The Fund sweeps available cash into a short-term deposit
issued by Brown Brothers Harriman & Co., the Fund's custodian. The short-term
time deposit is a variable rate account classified as a short-term investment.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on a trade date basis. The cost of investments sold is determined
by use of the specific identification method for both financial reporting and
U.S. income tax purposes. Interest income is accrued as earned; dividend income
is recorded on the ex-dividend date.
TAXES: No provision is made for U.S. income or excise taxes as it is the Fund's
intention to continue to qualify as a regulated investment company and to make
the requisite distributions to its shareholders sufficient to relieve it from
all or substantially all U.S. income and excise taxes.
--------------------------------------------------------------------------------
12
--------------------------------------------------------------------------------
THE CHILE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
The Fund accrues foreign taxes on realized gains and repatriation taxes in an
amount equal to what the Fund would owe if the securities were sold and the
proceeds repatriated on the valuation date as a liability and reduction of
realized/unrealized gains. Taxes on foreign income are recorded when the related
income is recorded. For the six months ended June 30, 2004, the Fund accrued
$132,271 of such expense.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(I) market value of investment securities, assets and liabilities at the
valuation date rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The Fund does not isolate that portion of gains and losses on investments in
equity securities which is due to changes in the foreign exchange rates from
that which is due to changes in market prices of equity securities. Accordingly,
realized and unrealized foreign currency gains and losses with respect to such
securities are included in the reported net realized and unrealized gains and
losses on investment transactions balances.
The Fund reports certain foreign currency related transactions and foreign taxes
withheld on security transactions as components of realized gains for financial
reporting purposes, whereas such foreign currency related transactions are
treated as ordinary income for U.S. income tax purposes.
Net unrealized currency gains or losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected as
a component of net unrealized appreciation/depreciation in value of investments,
and translation of other assets and liabilities denominated in foreign
currencies.
Net realized foreign exchange gains or losses represent foreign exchange gains
and losses from transactions in foreign currencies and forward foreign currency
contracts, exchange gains or losses realized between the trade date and
settlement date on security transactions, and the difference between the amounts
of interest and dividends recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received.
DISTRIBUTIONS OF INCOME AND GAINS: The Fund distributes at least annually to
shareholders substantially all of its net investment income and net realized
short-term capital gains, if any. The Fund determines annually whether to
distribute any net realized long-term capital gains in excess of net realized
short-term capital losses, including capital loss carryovers, if any. An
additional distribution may be made to the extent necessary to avoid the payment
of a 4% U.S. federal excise tax. Dividends and distributions to shareholders are
recorded by the Fund on the ex-dividend date.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
income tax purposes due to U.S. generally accepted accounting principles/tax
differences in the character of income and expense recognition.
OTHER: The Fund may invest in securities of foreign countries and governments
which involve certain risks in addition to those inherent in domestic
investments. Such risks generally include, among others currency risks
(fluctuations in currency exchange rates), information risk (key information may
be inaccurate or unavailable) and political risk (expropriation, nationalization
or the imposition of capital or currency
--------------------------------------------------------------------------------
13
--------------------------------------------------------------------------------
THE CHILE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
controls or punitive taxes). Other risks of investing in foreign securities
include liquidity and valuation risks.
Securities denominated in currencies other than U.S. dollars are subject to
changes in value due to fluctuations in exchange rates.
The Chilean securities markets are substantially smaller, less liquid and more
volatile than the major securities markets in the United States. Consequently,
acquisition and disposition of securities by the Fund may be inhibited. A
significant proportion of the aggregate market value of equity securities listed
on the Santiago Exchange are held by a small number of investors and are not
publicly traded. This may limit the number of shares available for acquisition
or disposition by the Fund.
Investments in Chile may involve certain considerations and risks not typically
associated with investments in the United States, including the possibility of
future political and economic developments and the level of Chilean governmental
supervision and regulation of its securities markets.
The Fund, subject to local investment limitations, may invest up to 20% of its
assets (at the time of commitment) in illiquid equity securities, including
securities of private equity funds (whether in corporate or partnership form)
that invest primarily in the emerging markets. When investing through another
investment fund, the Fund will bear its proportionate share of the expenses
incurred by the fund, including management fees. Such securities are expected to
be illiquid, which may involve a high degree of business and financial risk and
may result in substantial losses. Because of the current absence of any liquid
trading market for these investments, the Fund may take longer to liquidate
these positions than would be the case for publicly traded securities. Although
these securities may be resold in privately negotiated transactions, the prices
realized on such sales could be substantially less than those originally paid by
the Fund or the current carrying values and this difference could be material.
Further, companies whose securities are not publicly traded may not be subject
to the disclosure and other investor protection requirements applicable to
companies whose securities are publicly traded.
NOTE B. AGREEMENTS
Credit Suisse Asset Management, LLC ("CSAM") serves as the Fund's investment
adviser with respect to all investments. CSAM receives as compensation for its
advisory services from the Fund, an annual fee, calculated weekly and paid
quarterly, equal to 1.20% of the first $50 million of the Fund's average weekly
market value or net assets (whichever is lower), 1.15% of the next $50 million
and 1.10% of amounts in excess of $100 million. For the six months ended June
30, 2004, CSAM earned $749,597 for advisory services. CSAM also provides certain
administrative services to the Fund and is reimbursed by the Fund for costs
incurred on behalf of the Fund (up to $20,000 per annum). For the six months
ended June 30, 2004, CSAM was reimbursed $9,945 for administrative services
rendered to the Fund.
CELFIN CAPITAL Servicios Financieros S.A. ("Celfin") serves as the Fund's
Chilean sub-adviser. Celfin receives as compensation for its sub-advisory
services, an annual fee, out of the advisory fee payable to CSAM, calculated
weekly and paid quarterly, equal to 0.20% of the Fund's average weekly market
value or net assets (whichever is lower). For the six months ended June 30,
2004, these sub-advisory fees amounted to $129,738.
For the six months ended June 30, 2004, Celfin earned approximately $49,100 in
brokerage commissions from portfolio transactions executed on behalf of the
Fund.
Bear Stearns Funds Management Inc. ("BSFM") serves as the Fund's U.S.
administrator. The Fund pays BSFM
--------------------------------------------------------------------------------
14
--------------------------------------------------------------------------------
THE CHILE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
a monthly fee that is calculated weekly at an annual rate of 0.08% of the first
$100 million of the Fund's average weekly net assets, 0.06% of the next $50
million and 0.04% of amounts in excess of $150 million. For the six months ended
June 30, 2004, BSFM earned $52,608 for administrative services.
Celfin Capital S.A. Administradora de Fondos de Capital Extranjero ("AFCE")
serves as the Fund's Chilean administrator. For its services, AFCE is paid a
fee, out of the advisory fee payable to CSAM, that is calculated weekly and paid
quarterly at an annual rate of 0.05% of the Fund's average weekly market value
or net assets (whichever is lower). In addition, AFCE receives a supplemental
administration fee, an annual reimbursement of out-of-pocket expenses and an
accounting fee. For the six months ended June 30, 2004, the administration fees,
supplemental administration fees and accounting fees amounted to $32,101,
$35,306 and $2,983, respectively.
Merrill Corporation ("Merrill"), an affiliate of CSAM, has been engaged by the
Fund to provide certain financial printing services. For the six months ended
June 30, 2004, Merrill was paid $32,507 for its services to the Fund.
The Independent Directors receive fifty percent (50%) of their annual retainer
in the form of shares purchased by the Fund's transfer agent in the open market.
Directors as a group own less than 1% of the Fund's outstanding shares.
NOTE C. CAPITAL STOCK
The authorized capital stock of the Fund is 100,000,000 shares of common stock,
$0.001 par value. Of the 10,139,926 shares outstanding at June 30, 2004, CSAM
owned 14,615 shares.
NOTE D. INVESTMENT IN SECURITIES
For the six months ended June 30, 2004, purchases and sales of securities, other
than short-term investments, were $18,115,420 and $21,307,178, respectively.
NOTE E. CREDIT FACILITY
The Fund, together with other funds/portfolios advised by CSAM (collectively,
the "Participating Funds"), participates in a $75 million committed, unsecured,
line of credit facility ("Credit Facility") with Deutsche Bank, A.G. as
administrative agent and syndication agent and State Street Bank and Trust
Company as operations agent for temporary or emergency purposes. Under the terms
of the Credit Facility, the Participating Funds pay an aggregate commitment fee
at a rate of 0.10% per annum on the average unused amount of the Credit
Facility, which is allocated among the Participating Funds in such manner as is
determined by the governing Boards of the Participating Funds. In addition, the
Participating Funds pay interest on borrowings at the Federal Funds rate plus
0.50%. The maximum amount outstanding under the Credit Facility and periodic
overdrafts for the Fund was $2,700,000 with an average daily loan balance of
$45,022 with an average daily interest rate of 1.50% during the six months ended
June 30, 2004. The Fund had no borrowings under the Credit Facility or overdraft
at June 30, 2004.
NOTE F. FEDERAL INCOME TAXES
Income and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments of foreign currency transactions, losses
deferred due to wash sales and Post-October losses (as later defined), and
excise tax regulations.
The tax character of the dividends and distributions paid during the year ended
December 31, 2003 for the
--------------------------------------------------------------------------------
15
--------------------------------------------------------------------------------
THE CHILE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
--------------------------------------------------------------------------------
Fund were ordinary income of $811,194 and long-term capital gains of $3,751,773.
Under current tax law, certain capital losses realized after October 31 within a
taxable year may be deferred and treated as occurring on the first day of the
following tax year ("Post-October losses"). For the tax period ended December
31, 2003, the Fund did not incur Post-October losses.
At June 30, 2004, the identified cost for federal income tax purposes, as well
as the gross unrealized appreciation from investments for those securities
having an excess of value over cost, gross unrealized depreciation from
investments for those securities having an excess of cost over value and the net
unrealized appreciation from investments were $91,556,775, $52,098,654,
$(2,869,649) and $49,229,005, respectively.
NOTE G. CONTINGENCIES
In the normal course of business, the Fund may provide general indemnifications
pursuant to certain contracts and organizational documents. The Fund's maximum
exposure under these arrangements is dependent on future claims that may be made
against the Fund and, therefore, cannot be estimated; however, based on
experience, the risk of loss from such claims is considered remote.
--------------------------------------------------------------------------------
16
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On April 21, 2004, the Annual Meeting of Shareholders of The Chile Fund, Inc.
(the "Fund") (the "Meeting") was held and the following matter was voted upon:
(1) To re-elect two directors to the Board of Directors of the Fund.
NAME OF DIRECTOR FOR WITHHELD
---------------- --------- --------
George W. Landau 6,372,359 96,923
William W. Priest, Jr. 6,362,049 107,233
In addition to the directors re-elected at the Meeting, Enrique R. Arzac, James
J. Cattano and Steven N. Rappaport continue as directors of the Fund.
Effective August 9, 2004, Michael E. Kenneally was appointed as Director,
Chairman of the Board, Chief Executive Officer and President. Joseph D.
Gallagher, who previously held these positions, resigned from the Fund effective
the same day.
--------------------------------------------------------------------------------
17
IMPORTANT PRIVACY CHOICES FOR CONSUMERS (UNAUDITED)
We are committed to maintaining the privacy of every current and prospective
customer. We recognize that you entrust important personal information to us,
and we wish to assure you that we take seriously our responsibilities in
protecting and safeguarding this information.
In connection with making available investment products and services to current
and potential customers, we may obtain nonpublic personal information about you.
This information may include your name, address, e-mail address, social security
number, account number, assets, income, financial situation, transaction history
and other personal information.
We may collect nonpublic information about you from the following sources:
- Information we receive on applications, forms, questionnaires, web sites,
agreements or in the course of establishing or maintaining a customer
relationship; and
- Information about your transactions with us, our affiliates, or others.
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except with your consent or as otherwise permitted
by law.
RESTRICT INFORMATION SHARING WITH AFFILIATES: In cases where we believe that
additional products and services may be of interest to you, we may share the
information described above with our affiliates unless you say "No."
/ / No, please do not share personal and financial information with your
affiliated companies. [If you check this box, you must send this notice
back to us with your name, address and account number to The Chile Fund,
Inc., c/o Credit Suisse Asset Management, LLC, 466 Lexington Avenue, New
York, New York 10017.]
We may also disclose this information to firms that perform services on our
behalf. These agents and service providers are required to treat the information
confidentially and use it only for the purpose for which it is provided.
We restrict access to nonpublic personal information about you to those
employees, agents or other parties who need to know that information to provide
products or services to you or in connection with your investments with or
through us. We maintain physical, electronic and procedural safeguards that
comply with federal standards to guard your nonpublic personal information.
NOTE: THIS NOTICE IS PROVIDED TO CLIENTS AND PROSPECTIVE CLIENTS OF CREDIT
SUISSE ASSET MANAGEMENT, LLC ("CSAM"), CSAM CAPITAL INC., AND CREDIT SUISSE
ASSET MANAGEMENT SECURITIES, INC., AND SHAREHOLDERS AND PROSPECTIVE SHAREHOLDERS
IN CSAM SPONSORED AND ADVISED INVESTMENT COMPANIES, INCLUDING CREDIT SUISSE
FUNDS, AND OTHER CONSUMERS AND CUSTOMERS, AS APPLICABLE. THIS NOTICE IS NOT
INTENDED TO BE INCORPORATED IN ANY OFFERING MATERIALS BUT IS MERELY A STATEMENT
OF OUR CURRENT PRIVACY POLICY, AND MAY BE AMENDED FROM TIME TO TIME UPON NOTICE
TO YOU. THIS NOTICE IS DATED AS OF MAY 19, 2004.
--------------------------------------------------------------------------------
18
DESCRIPTION OF INVESTLINK(SM) PROGRAM (UNAUDITED)
The InvestLink(SM) Program is sponsored and administered by EquiServe, L.P., not
by The Chile Fund, Inc. (the "Fund"). EquiServe, L.P., will act as program
administrator (the "Program Administrator") of the InvestLink(SM) Program (the
"Program"). The purpose of the Program is to provide existing shareholders with
a simple and convenient way to invest additional funds and reinvest dividends in
shares of the Fund's common stock ("Shares") at prevailing prices, with reduced
brokerage commissions and fees.
In order to participate in the Program, you must be a registered holder of at
least one Share of stock of the Fund. Purchases of Shares with funds from a
participant's cash payment or automatic account deduction will begin on the next
day on which funds are invested. All cash payments must be drawn on a U.S. bank
and payable in U.S. dollars. Checks must be made payable to EquiServe. If a
participant selects the dividend reinvestment option, automatic investment of
dividends generally will begin with the next dividend payable after the Program
Administrator receives his enrollment form. Once in the Program, a person will
remain a participant until he terminates his participation or sells all Shares
held in his Program account, or his account is terminated by the Program
Administrator. A participant may change his investment options at any time by
requesting a new enrollment form and returning it to the Program Administrator.
A participant will be assessed certain charges in connection with his
participation in the Program. All optional cash deposit investments will be
subject to a service charge. Sales processed through the Program will have a
service fee deducted from the net proceeds, after brokerage commissions. In
addition to the transaction charges outlined above, participants will be
assessed per share processing fees (which include brokerage commissions.)
Participants will not be charged any fee for reinvesting dividends.
The number of Shares to be purchased for a participant depends on the amount of
his dividends, cash payments or bank account or payroll deductions, less
applicable fees and commissions, and the purchase price of the Shares. The
investment date for cash payments is the 25th day of each month (or the next
trading day if the 25th is not a trading day). The investment date for dividend
reinvestment is the dividend payment date. The Program Administrator uses
dividends and funds of participants to purchase Shares of the Fund in the open
market. Such purchases will be made by participating brokers as agent for the
participants using normal cash settlement practices. All Shares purchased
through the Program will be allocated to participants as of the settlement date,
which is usually three business days from the purchase date. In all cases,
transaction processing will occur within 30 days of the receipt of funds, except
where temporary curtailment or suspension of purchases is necessary to comply
with applicable provisions of the Federal Securities laws or when unusual market
conditions make prudent investment impracticable. In the event the Program
Administrator is unable to purchase Shares within 30 days of the receipt of
funds, such funds will be returned to the participants.
The average price of all Shares purchased by the Program Administrator with all
funds received during the time period from two business days preceding any
investment date up to the second business day preceding the next investment date
shall be the price per share allocable to a participant in connection with the
Shares purchased for his account with his funds or dividends received by the
Program Administrator during such time period. The average price of all Shares
sold by the Program Administrator pursuant to sell orders received during such
time period shall be the price per share allocable to a participant in
connection with the Shares sold for his account pursuant to his sell orders
received by the Program Administrator during such time period. All sale requests
having an anticipated market value of $100,000.00 or more are
--------------------------------------------------------------------------------
19
DESCRIPTION OF INVESTLINK(SM) PROGRAM (UNAUDITED) (CONTINUED)
expected to be submitted in written form. In addition, all sale requests
received by the Program Administrator within thirty (30) days of an address
change are expected to be submitted in written form.
EquiServe L.P., as Program Administrator, administers the Program for
participants, keeps records, sends statements of account to participants and
performs other duties relating to the Program. Each participant in the Program
will receive a statement of his account following each purchase of Shares. The
statements will also show the amount of dividends credited to such participant's
account (if applicable), as well as the fees paid by the participant. In
addition, each participant will receive copies of the Fund's annual and
semi-annual reports to shareholders, proxy statements and, if applicable,
dividend income information for tax reporting purposes.
If the Fund is paying dividends on the Shares, a participant will receive
dividends through the Program for all Shares held on the dividend record date on
the basis of full and fractional Shares held in his account, and for all other
Shares of the Fund registered in his name. The Program Administrator will send
checks to the participants for the amounts of their dividends that are not to be
automatically reinvested at no cost to the participants.
Shares of the Fund purchased under the Program will be registered in the name of
the accounts of the respective participants. Unless requested, the Fund will not
issue to participants certificates for Shares of the Fund purchased under the
Program. The Program Administrator will hold the Shares in book-entry form until
a Program participant chooses to withdraw his Shares or terminate his
participation in the Program. The number of Shares purchased for a participant's
account under the Program will be shown on his statement of account. This
feature protects against loss, theft or destruction of stock certificates.
A participant may withdraw all or a portion of the Shares from his Program
account by notifying the Program Administrator. After receipt of a participant's
request, the Program Administrator will issue to such participant certificates
for the whole Shares of the Fund so withdrawn or, if requested by the
participant, sell the Shares for him and send him the proceeds, less applicable
brokerage commissions, fees, and transfer taxes, if any. If a participant
withdraws all full and fractional Shares in his Program account, his
participation in the Program will be terminated by the Program Administrator. In
no case will certificates for fractional Shares be issued. The Program
Administrator will convert any fractional Shares held by a participant at the
time of his withdrawal to cash.
Participation in any rights offering, dividend distribution or stock split will
be based upon both the Shares of the Fund registered in participants' names and
the Shares (including fractional Shares) credited to participants' Program
accounts. Any stock dividend or Shares resulting from stock splits with respect
to Shares of the Fund, both full and fractional, which participants hold in
their Program accounts and with respect to all Shares registered in their names
will be automatically credited to their accounts.
All Shares of the Fund (including any fractional share) credited to his account
under the Program will be voted as the participant directs. The participants
will be sent the proxy materials for the annual meetings of shareholders. When a
participant returns an executed proxy, all of such Shares will be voted as
indicated. A participant may also elect to vote his Shares in person at the
Shareholders' meeting.
A participant will receive tax information annually for his personal records and
to help him prepare his U.S. federal income tax return. The automatic
reinvestment of dividends does not relieve him of any income tax which may be
payable on dividends. For further
--------------------------------------------------------------------------------
20
DESCRIPTION OF INVESTLINK(SM) PROGRAM (UNAUDITED) (CONCLUDED)
information as to tax consequences of participation in the Program, participants
should consult with their own tax advisors.
The Program Administrator in administering the Program will not be liable for
any act done in good faith or for any good faith omission to act. However, the
Program Administrator will be liable for loss or damage due to error caused by
its negligence, bad faith or willful misconduct. Shares held in custody by the
Program Administrator are not subject to protection under the Securities
Investors Protection Act of 1970.
The participant should recognize that neither the Fund nor the Program
Administrator can provide any assurance of a profit or protection against loss
on any Shares purchased under the Program. A participant's investment in Shares
held in his Program account is no different than his investment in directly held
Shares in this regard. The participant bears the risk of loss and the benefits
of gain from market price changes with respect to all of his Shares. Neither the
Fund nor the Program Administrator can guarantee that Shares purchased under the
Program will, at any particular time, be worth more or less than their purchase
price. Each participant must make an independent investment decision based on
his own judgment and research.
While the Program Administrator hopes to continue the Program indefinitely, the
Program Administrator reserves the right to suspend or terminate the Program at
any time. It also reserves the right to make modifications to the Program.
Participants will be notified of any such suspension, termination or
modification in accordance with the terms and conditions of the Program. The
Program Administrator also reserves the right to terminate any participant's
participation in the Program at any time. Any question of interpretation arising
under the Program will be determined in good faith by the Program Administrator
and any such good faith determination will be final.
Any interested shareholder may participate in the Program. All other cash
payments or bank account deductions must be at least $100.00, up to a maximum of
$100,000.00 annually. An interested shareholder may join the Program by reading
the Program description, completing and signing the enrollment form and
returning it to the Program Administrator. The enrollment form and information
relating to the Program (including the terms and conditions) may be obtained by
calling the Program Administrator at one of the following telephone numbers:
(800) 730-6001 (U.S. and Canada) or (781) 575-3100 (outside U.S. and Canada).
All correspondence regarding the Program should be directed to: EquiServe Trust
Company N.A., InvestLink(SM) Program, P.O. Box 43010, Providence, RI
02940-3010.
InvestLink is a service mark of EquiServe, L.P.
--------------------------------------------------------------------------------
21
PROXY VOTING (UNAUDITED)
The policies and procedures that The Chile Fund, Inc. (the "Fund") uses to
determine how to vote proxies relating to its portfolio securities are
available:
- by calling 1-800-293-1232;
- on the Fund's website, www.csam.com/us; or
- on the website of the Securities and Exchange Commission,
http://www.sec.gov.
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22
OTHER FUNDS MANAGED BY CREDIT SUISSE ASSET MANAGEMENT, LLC
Credit Suisse Capital Appreciation Fund
Credit Suisse Cash Reserve Fund
Credit Suisse Emerging Markets Fund
Credit Suisse Fixed Income Fund
Credit Suisse Global Fixed Income Fund
Credit Suisse Global Post-Venture Capital Fund
Credit Suisse High Income Fund
Credit Suisse International Focus Fund
Credit Suisse Japan Equity Fund
Credit Suisse Large Cap Value Fund
Credit Suisse Mid-Cap Growth Fund
Credit Suisse Municipal Money Fund
Credit Suisse New York Municipal Fund
Credit Suisse New York Tax Exempt Fund
Credit Suisse Select Equity Fund
Credit Suisse Short Duration Bond Fund
Credit Suisse Small Cap Growth Fund
Credit Suisse Small Cap Value Fund
Credit Suisse Strategic Small Cap Fund
Credit Suisse U.S. Government Money Fund
Fund shares are not deposits or other obligations of Credit Suisse Asset
Management, LLC or any affiliate, are not FDIC-insured and are not guaranteed by
Credit Suisse Asset Management, LLC or any affiliate. Fund investments are
subject to investment risks, including loss of your investment. There are
special risk considerations associated with international, global,
emerging-market, small-company, high-yield debt, single-industry, single-country
and other special, aggressive or concentrated investment strategies. Past
performance cannot guarantee future results.
More complete information about a fund, including charges and expenses, is
provided in the Prospectus, which should be read carefully before investing. You
may obtain copies by calling Credit Suisse Funds at 800-927-2874. For up-to-date
performance, please look in the mutual fund section of your newspaper under
Credit Suisse.
Credit Suisse Asset Management Securities, Inc., Distributor.
--------------------------------------------------------------------------------
23
SUMMARY OF GENERAL INFORMATION
The Fund--The Chile Fund, Inc.--is a closed-end, non-diversified management
investment company whose shares trade on the New York Stock Exchange, Inc. Its
investment objective is to seek total return, consisting of capital appreciation
and current income through investments primarily in Chilean equity and debt
securities. Credit Suisse Asset Management, LLC (New York), the Fund's
investment adviser, is part of Credit Suisse Asset Management ("CSAM"), the
institutional and mutual-fund asset-management arm of Credit Suisse First Boston
("CSFB"). As of June 30, 2004, CSAM managed assets of over $335 billion in 14
countries, $12 billion of which is managed in the U.S. by CSFB's Alternative
Capital Division, an affiliate of CSAM.
SHAREHOLDER INFORMATION
The market price is published in: THE NEW YORK TIMES (daily), THE WALL STREET
JOURNAL (daily) and BARRON'S (each Monday) under the designation "ChileFd". The
Fund's New York Stock Exchange, Inc. trading symbol is CH. Weekly comparative
net asset value (NAV) and market price information about The Chile Fund, Inc.'s
shares are published each Sunday in THE NEW YORK TIMES and each Monday in THE
WALL STREET JOURNAL and BARRON'S, as well as other newspapers, in a table called
"Closed-End Funds."
THE CSAM GROUP OF FUNDS
LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds listed below at 1-800-293-1232 or visit our website on the
Internet: http://www.csam.com/us.
CLOSED-END FUNDS
SINGLE COUNTRY
The Brazilian Equity Fund, Inc. (BZL)
The First Israel Fund, Inc. (ISL)
The Indonesia Fund, Inc. (IF)
MULTIPLE COUNTRY
The Emerging Markets Telecommunications Fund, Inc. (ETF)
The Latin America Equity Fund, Inc. (LAQ)
FIXED INCOME
Credit Suisse Asset Management Income Fund, Inc. (CIK)
Credit Suisse High Yield Bond Fund (DHY)
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that The Chile Fund, Inc. may from time to time
purchase shares of its capital stock in the open market.
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DIRECTORS AND CORPORATE OFFICERS ADMINISTRATOR
Enrique R. Arzac Lead Director Bear Stearns Funds Management Inc.
383 Madison Avenue
James J. Cattano Director New York, NY 10179
George W. Landau Director CUSTODIAN
William W. Priest, Jr. Director Brown Brothers Harriman & Co.
40 Water Street
Steven N. Rappaport Director Boston, MA 02109
Michael E. Kenneally Director, Chairman of the SHAREHOLDER SERVICING AGENT
Board, Chief Executive
Officer and President Fleet National Bank
(c/o EquiServe, L.P.)
Matthew J.K. Hickman Chief Investment P.O. Box 43010
Officer Providence, RI 02940
Emily Alejos Investment Officer INDEPENDENT AUDITORS
Hal Liebes Senior Vice President PricewaterhouseCoopers LLP
Two Commerce Square
Michael A. Pignataro Chief Financial Officer and Philadelphia, PA 19103
Secretary
LEGAL COUNSEL
Robert M. Rizza Treasurer
Willkie Farr & Gallagher LLP
INVESTMENT ADVISER 787 Seventh Avenue
New York, NY 10019
Credit Suisse Asset Management, LLC
466 Lexington Avenue
New York, NY 10017
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. The financial information
included herein is taken from the records of the Fund without examination by
independent auditors who do not express an opinion thereon. It is not a CH
prospectus, circular or representation intended for use in the purchase or sale LISTED
of shares of the Fund or of any securities mentioned in this report. NYSE(R)
----------------------------------------------------------------------------------------------------
3911-SA-04
ITEM 2. CODE OF ETHICS.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 6. SCHEDULE OF INVESTMENTS.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors since the registrant
last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(g)
of Schedule 14A in its definitive proxy statement dated March 1, 2004.
ITEM 10. CONTROLS AND PROCEDURES.
(a) As of a date within 90 days from the filing date of this report, the
principal executive officer and principal financial officer concluded that the
registrant's disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940 (the "Act")) were effective based on
their evaluation of the disclosure controls and procedures required by Rule
30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934.
(b) There were no changes in registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the
registrant's second fiscal half-year that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Not applicable.
(a)(2) The certifications of the registrant as required by Rule 30a-2(a) under
the Act are exhibits to this report.
(a)(3) Not applicable.
(b) The certifications of the registrant as required by Rule 30a-2(b) under
the Act are an exhibit to this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
THE CHILE FUND, INC.
/s/ Michael E. Kenneally
------------------------------------
Name: Michael E. Kenneally
Title: Chief Executive Officer
Date: September 1, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ Michael E. Kenneally
------------------------------------
Name: Michael E. Kenneally
Title: Chief Executive Officer
Date: September 1, 2004
/s/ Michael A. Pignataro
------------------------------------
Name: Michael A. Pignataro
Title: Chief Financial Officer
Date: September 1, 2004