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.
---------------------------------------------------
(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)
J. Kevin Gao, 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, 2005 to June 30, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
THE CHILE FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2005
(UNAUDITED)
[CH LISTED NYSE(R) LOGO]
CH-SAR-0605
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 and Portfolio Holdings Information 22
LETTER TO SHAREHOLDERS
July 29, 2005
DEAR SHAREHOLDER:
For the six-month period ended June 30, 2005, The Chile Fund, Inc. (the "Fund")
had an increase in its net asset value (NAV) of 8.48%, vs. an increase of 9.88%
(with net dividends) for the Morgan Stanley Capital International Chile
Index.(1) Based on market price, the Fund's shares rose 5.43% for the six-month
period. As a result, the Fund's discount to its NAV stood at 13.29% on June 30,
2005, compared with a discount of 10.78% at the beginning of the period.
CHILE: AIDED BY DOMESTIC AND EXPORT DEMAND
The period was a positive one for emerging stock markets as a group, both in
absolute terms and compared with developed stock markets, at least for
US-dollar-based investors. Emerging markets initially rallied, but then turned
sharply down in March on worries that rising US interest rates could threaten
global growth. These fears subsided in the latter part of the period, with
inflation appearing to be under control and as long-term US interest rates
remained fairly stable. Investors' appetite for risk in general returned and
emerging markets ended the period on a solid note.
Latin America outperformed the broader emerging markets group by a handy margin,
reflecting continued healthy economic fundamentals and a positive earnings
backdrop.
From a fundamental perspective, the Chilean economy performed well, buoyed by
continuing high copper prices as well as improving domestic demand. Its equity
market was further aided by ample liquidity. On the earnings front,
first-quarter 2005 results were supportive, with particular robust results in
the retail, electric utilities, and pulp and paper industries.
PERFORMANCE: CONSUMER STAPLES OFFSETS CONSUMER DISCRETIONARY
Within this environment, the Fund benefited from the favorable market
conditions, though it trailed its benchmark for the six-month period. Good
showings from the Fund's consumer discretionary and health care holdings were
offset by the underperformance of its materials and industrials stocks. The
Fund's overweighting in the consumer staples sector also hindered its relative
return, as the group had only a modest gain overall. With regard to the Fund's
private equity investments (which accounted for about 1.91% of the Fund's assets
as of June 30, 2005), we continued to hold a toll road operator that, although
it has performed relatively well in the time we've owned it, tends to detract
from portfolio performance during periods of market outperformance, due to its
more limited liquidity.
OUTLOOK: THE ECONOMY IS KEY
Our outlook on Chile and its stock market remains generally positive. The
economy has made significant progress over the past year and a half, and we
think it has potential to deliver sustained growth into 2006, driven primarily
by expanding domestic consumption. The economic growth has also been boosting
corporate cash flows, resulting in a related rise in investment plans.
Inflation, meanwhile, appears to be under control, staying within a range (2% to
4%) targeted by the country's central bank. The bank has been incrementally
increasing short-term interest rates this year,
1
to 3.5% as of late July, citing the positive trend of Chile's output growth. As
for commodity prices, in particular copper, we believe that the supply/demand
balance could continue to work in Chile's favor.
Regarding market risk, valuations in Chile remain on the high side compared with
most emerging market countries, and near the top end of their own historical
trading range. This could make the market relatively vulnerable to any
disappointing news, especially with regard to external risks in our view, such
as a slowdown in global growth or a spike in long-term US interest rates. That
said, we believe that should Chile maintain good economic performance, its stock
market could continue to enjoy premium valuations.
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 MARKETS,
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.
----------
(1) The Morgan Stanley Capital International Chile Index is an unmanaged index
(with no defined investment objective) of Chilean equities that includes
reinvestment of dividends (net of taxes), and is the exclusive property of
Morgan Stanley Capital International Inc. Investors cannot invest directly in an
index.
* Matthew J.K. Hickman, Vice President, is a portfolio manager specializing in
Latin American equities 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 BA 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 2005. He is also the
Chief Investment Officer of The Latin America Equity Fund, Inc.
2
THE CHILE FUND, INC.
PORTFOLIO SUMMARY - AS OF JUNE 30, 2005 (UNAUDITED)
[CHART]
SECTOR ALLOCATION
JUNE 30, 2005 DECEMBER 31, 2004
Banking 5.02% 5.49%
Chemicals-Diversified 3.91% 4.35%
Diversified Operations 14.57% 16.86%
Electric-Integrated 20.73% 18.24%
Food & Beverages 15.40% 16.48%
Food-Retail 7.13% 4.98%
Infrastructure 1.91% 1.91%
Paper & Related Products 10.37% 11.78%
Retail-Diversified 2.20% 0.00%
Retail-Major Department Stores 2.32% 3.36%
Shipping 0.00% 4.80%
Telephone-Integrated 8.56% 8.44%
Other 7.88% 3.31%
TOP 10 HOLDINGS, BY ISSUER
PERCENT OF
HOLDING SECTOR NET ASSETS
----------------------------------------------------------------------------------------------------
1. Empresas Copec S.A. Diversified Operations 14.6
2. Empresa Nacional de Electricidad S.A. Electric-Integrated 12.9
3. Empresas CMPC S.A. Paper & Related Products 10.4
4. Enersis S.A. Electric-Integrated 7.8
5. Compania de Telecomunicaciones de Chile S.A. Telephone-Integrated 4.9
6. Banco Santander Chile S.A. Banking 4.7
7. Compania Cervecerias Unidas S.A. Food & Beverages 4.7
8. Embotelladora Andina S.A. Food & Beverages 4.6
9. Cencosud S.A. Food-Retail 4.4
10. Vina Concha y Toro S.A. Food & Beverages 4.4
3
THE CHILE FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2005 (UNAUDITED)
NO. OF
DESCRIPTION SHARES/UNITS VALUE
---------------------------------------------------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-97.14%
BANKING-5.02%
Banco de Credito e Inversiones 23,829 $ 516,367
Banco Santander Chile S.A. 263,500,000 8,144,091
---------------
8,660,458
---------------
CEMENT-0.79%
Cementos Bio-Bio S.A. 585,626 1,365,096
---------------
CERAMIC PRODUCTS-0.44%
Ceramicas Cordillera S.A. 67,165 765,413
---------------
CHEMICALS-DIVERSIFIED-3.91%
Enaex S.A. 110,000 546,059
Sociedad Quimica y Minera
de Chile S.A., Class B 404,000 4,038,954
Sociedad Quimica y Minera
de Chile S.A., Class B, ADR 21,600 2,160,000
---------------
6,745,013
---------------
CONTAINERS-METAL/GLASS-0.62%
Cristalerias de Chile S.A. 109,787 1,061,568
---------------
COSMETICS & TOILETRIES-0.75%
Laboratorios Andromaco S.A. 7,477,011 1,291,032
Laboratorios Andromaco S.A.,
rights (expiring 07/18/05)+ 572,917 9,892
---------------
1,300,924
---------------
DIVERSIFIED OPERATIONS-14.57%
Empresas Copec S.A. 3,130,000 25,130,795
---------------
ELECTRIC-INTEGRATED-20.73%
Empresa Nacional de
Electricidad S.A. 25,400,000 21,226,971
Empresa Nacional de
Electricidad S.A., ADR 41,900 1,043,310
Enersis S.A. 60,200,001 12,579,477
Enersis S.A., ADR 86,700 905,148
---------------
35,754,906
---------------
FOOD & BEVERAGES-15.40%
Coca-Cola Embonor S.A. ,
Class A+ 3,118,592 2,153,910
Compania Cervecerias
Unidas S.A. 1,535,000 $ 7,394,716
Compania Cervecerias
Unidas S.A., ADR 30,500 732,000
Embotelladora Andina S.A.,
PNA 1,620,000 3,384,615
Embotelladora Andina S.A.,
PNB 1,950,000 4,478,114
Embotelladora Andina S.A.,
Series B, ADR 11,900 163,625
Vina Concha y Toro S.A. 4,850,000 7,536,908
Vina San Pedro S.A. 65,000,000 730,640
---------------
26,574,528
---------------
FOOD-RETAIL-7.13%
Cencosud S.A.+ 3,622,312 6,070,023
Cencosud S.A., ADR++ 60,300 1,516,479
Distribucion y Servicio
D&S S.A. 14,350,000 4,720,150
---------------
12,306,652
---------------
INFRASTRUCTURE-1.91%
Infraestructura 2000*+ 19,568,922 3,302,941
---------------
MINING-0.64%
Antofagasta plc 9,500 207,745
Aur Resources Inc. 75,200 414,435
Meridian Gold Inc.+ 26,300 473,400
---------------
1,095,580
---------------
PAPER & RELATED PRODUCTS-10.37%
Empresas CMPC S.A. 770,000 17,882,241
---------------
RETAIL-DIVERSIFIED-2.20%
Comercial Siglo XXI S.A.+ 1,686,924 3,786,586
---------------
RETAIL-MAJOR DEPARTMENT STORES-2.32%
S.A.C.I. Falabella, S.A. 1,723,961 4,003,674
---------------
SHIPPING-1.69%
Compania SudAmericana de
Vapores S.A. 1,286,073 2,920,117
---------------
See accompanying notes to financial statements.
4
NO. OF
DESCRIPTION SHARES VALUE
---------------------------------------------------------------------------------------------------------------
STEEL-0.07%
CAP S.A. 9,986 $ 116,128
---------------
TELEPHONE-INTEGRATED-8.55%
Compania de Telecomunicaciones
de Chile S.A., Class A 3,190,000 8,096,866
Compania de Telecomunicaciones
de Chile S.A., Class A, ADR 34,300 348,831
Empresa Nacional de
Telecomunicaciones S.A. 715,000 6,296,296
---------------
14,741,993
---------------
TEXTILES-0.03%
Zalaquett S.A. 1,496,767 51,688
---------------
TOTAL EQUITY OR EQUITY-LINKED
SECURITIES (Cost $102,340,888) 167,566,301
---------------
SHORT-TERM INVESTMENTS-2.84%
CHILEAN MUTUAL FUNDS-1.48%
Fondo Mutuo Bice Dreyfus
Manager 336,082 1,058,822
Fondo Mutuo Cruz Moneda
Liquidez (A) 285,433 518,700
Fondo Mutuo Security
Check 198,876 984,617
---------------
TOTAL CHILEAN MUTUAL FUNDS
(Cost $2,554,747) 2,562,139
---------------
PRINCIPAL
DESCRIPTION AMOUNT (000'S) VALUE
---------------------------------------------------------------------------------------------------------------
GRAND CAYMAN-1.36%
HSBC Bank USA, overnight
deposit, 2.45%, 07/01/05**
(Cost $2,341,000) $ 2,341 $ 2,341,000
---------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $4,895,747) 4,903,139
---------------
TOTAL INVESTMENTS-99.98%
(Cost $107,236,635) (Notes B,E,G) 172,469,440
---------------
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES-0.02% 36,612
---------------
NET ASSETS-100.00% $ 172,506,052
===============
-------------
+ Non-income producing security.
++ SEC Rule 144A security. Such securities are traded only among "qualified
institutional buyers."
* Not readily marketable security; security is 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. (See Note
B).
** Variable rate account. Rate resets on a daily basis; amounts are available
on the same business day.
ADR American Depository Receipts.
PNA Preferred Shares, Class A.
PNB Preferred Shares, Class B.
See accompanying notes to financial statements.
5
THE CHILE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 2005 (UNAUDITED)
ASSETS
Investments, at value (Cost $107,236,635) (Notes B,E,G) $ 172,469,440
Cash (including $389,550 of foreign currencies with a cost of $409,407) 390,085
Receivables:
Investments sold 679,322
Dividends 108,591
Prepaid expenses 13,417
-------------
Total Assets 173,660,855
-------------
LIABILITIES
Payables:
Investment advisory fees (Note C) 398,499
Investments purchased 293,534
Administration fees (Note C) 52,076
Directors' fees 15,402
Other accrued fees 148,252
Deferred Chilean repatriation taxes (Note B) 247,040
-------------
Total Liabilities 1,154,803
-------------
NET ASSETS (applicable to 10,139,926 shares of common stock outstanding) (Note D) $ 172,506,052
=============
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 2,072,763
Accumulated net realized gain on investments and foreign currency related transactions 24,225,912
Net unrealized appreciation in value of investments and translation of other
assets and liabilities denominated in foreign currencies 65,159,345
-------------
Net assets applicable to shares outstanding $ 172,506,052
=============
NET ASSET VALUE PER SHARE ($172,506,052 DIVIDED BY 10,139,926) $ 17.01
=============
MARKET PRICE PER SHARE $ 14.75
=============
See accompanying notes to financial statements.
6
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 2005 (UNAUDITED)
INVESTMENT INCOME
Income (Note B):
Dividends $ 3,452,966
Interest 8,591
Less: Foreign taxes withheld (34,829)
-------------
Total Investment Income 3,426,728
-------------
Expenses:
Investment advisory fees (Note C) 825,728
Custodian fees 158,853
Administration fees (Note C) 100,954
Audit fees 54,452
Legal fees 29,232
Accounting fees 26,343
Directors' fees 18,617
Printing (Note C) 14,591
Transfer agent fees 12,148
NYSE listing fees 11,778
Insurance 2,842
Miscellaneous 4,532
Chilean repatriation taxes (Note B) 333,364
-------------
Total Expenses 1,593,434
-------------
Net Investment Income 1,833,294
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments 12,951,083
Foreign currency related transactions (400,534)
Net change in unrealized appreciation in value of investments and translation of
other assets and liabilities denominated in foreign currencies (includes
$53,104 of Chilean repatriation taxes on unrealized gains) (Note B) (860,747)
-------------
Net realized and unrealized gain on investments and foreign currency related transactions 11,689,802
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 13,523,096
=============
See accompanying notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS
FOR THE
SIX MONTHS
ENDED FOR THE
JUNE 30, 2005 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2004
------------- -----------------
INCREASE IN NET ASSETS
Operations:
Net investment income $ 1,833,294 $ 1,650,072
Net realized gain on investments and foreign currency related transactions 12,550,549 30,884,588
Net change in unrealized appreciation in value of investments and
translation of other assets and liabilities denominated in
foreign currencies (860,747) 2,220,880
------------- -----------------
Net increase in net assets resulting from operations 13,523,096 34,755,540
------------- -----------------
Dividends and distributions to shareholders:
Net investment income -- (2,027,985)
Net realized gain on investments and foreign currency related transactions -- (20,584,050)
------------- -----------------
Total dividends and distributions to shareholders -- (22,612,035)
------------- -----------------
Total increase in net assets 13,523,096 12,143,505
------------- -----------------
NET ASSETS
Beginning of period 158,982,956 146,839,451
------------- -----------------
End of period* $ 172,506,052 $ 158,982,956
============= =================
----------
* Includes undistributed net investment income of $2,072,763 and $239,469,
respectively.
See accompanying notes to financial statements.
8
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9
THE CHILE FUND, INC.
FINANCIAL HIGHLIGHTS
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, 2005 ----------------------------------------
(UNAUDITED) 2004 2003 2002
------------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 15.68 $ 14.48 $ 8.39 $ 9.93
------------- ---------- ---------- ----------
Net investment income/(loss) 0.18 0.16 0.07 0.09*
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions 1.15 3.27 6.47 (1.70)
------------- ---------- ---------- ----------
Net increase/(decrease) in net assets resulting from operations 1.33 3.43 6.54 (1.61)
------------- ---------- ---------- ----------
Dividends and distributions to shareholders:
Net investment income -- (0.47) (0.08) (0.09)
Net realized gain on investments and
foreign currency related transactions -- (1.76) (0.37) --
In excess of net investment income -- -- -- --
------------- ---------- ---------- ----------
Total dividends and distributions to shareholders -- (2.23) (0.45) (0.09)
------------- ---------- ---------- ----------
Anti-dilutive impact due to capital shares tendered or repurchased -- -- -- 0.16
------------- ---------- ---------- ----------
Net asset value, end of period $ 17.01 $ 15.68 $ 14.48 $ 8.39
============= ========== ========== ==========
Market value, end of period $ 14.75 $ 13.99 $ 14.10 $ 7.25
============= ========== ========== ==========
Total investment return (a) 5.43% 14.93% 100.72% (12.93)%
============= ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 172,506 $ 158,983 $ 146,839 $ 85,082
Ratio of expenses to average net assets (b) 2.00%(d) 1.85% 1.74% 1.11%
Ratio of expenses to average net assets, excluding taxes 1.58%(d) 1.62% 1.74% 2.01%
Ratio of net investment income/(loss) to average net assets 2.72%(d) 1.12% 0.65% 1.28%(c)
Portfolio turnover rate 20.96% 35.54% 31.94% 31.94%
----------
* 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
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------
2001 2000 1999 1998
---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 11.43 $ 15.22 $ 12.59 $ 21.61
---------- ---------- ---------- ----------
Net investment income/(loss) 0.21 (0.06)+ 0.09 0.38
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions (0.70) (3.36) 3.19 (6.88)++
---------- ---------- ---------- ----------
Net increase/(decrease) in net assets resulting from operations (0.49) (3.42) 3.28 (6.50)
---------- ---------- ---------- ----------
Dividends and distributions to shareholders:
Net investment income (0.15) (0.01) (0.07) (0.32)
Net realized gain on investments and
foreign currency related transactions (0.86) (0.58) (0.58) (2.20)
In excess of net investment income -- -- -- --
---------- ---------- ---------- ----------
Total dividends and distributions to shareholders (1.01) (0.59) (0.65) (2.52)
---------- ---------- ---------- ----------
Anti-dilutive impact due to capital shares tendered or repurchased -- 0.22 -- --
---------- ---------- ---------- ----------
Net asset value, end of period $ 9.93 $ 11.43 $ 15.22 $ 12.59
========== ========== ========== ==========
Market value, end of period $ 8.43 $ 8.438 $ 11.250 $ 9.063
========== ========== ========== ==========
Total investment return (a) 13.18% (20.04)% 31.45% (33.00)%
========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 134,289 $ 154,473 $ 218,027 $ 180,357
Ratio of expenses to average net assets (b) 2.71% 2.98% 2.16% --
Ratio of expenses to average net assets, excluding taxes 1.54% 1.73% 1.64% 1.62%
Ratio of net investment income/(loss) to average net assets 1.91% (0.45)% 0.61% 2.29%
Portfolio turnover rate 29.81% 24.25% 12.01% 5.39%
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 22.59 $ 26.45 $ 26.26
---------- ---------- ----------
Net investment income/(loss) 0.10 0.47 0.65
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions 2.32 (3.44) 0.41++
---------- ---------- ----------
Net increase/(decrease) in net assets resulting from operations 2.42 (2.97) 1.06
---------- ---------- ----------
Dividends and distributions to shareholders:
Net investment income -- (0.47) (0.65)
Net realized gain on investments and
foreign currency related transactions (3.40) (0.26) (0.22)
In excess of net investment income -- (0.16) --
---------- ---------- ----------
Total dividends and distributions to shareholders (3.40) (0.89) (0.87)
---------- ---------- ----------
Anti-dilutive impact due to capital shares tendered or repurchased -- -- --
---------- ---------- ----------
Net asset value, end of period $ 21.61 $ 22.59 $ 26.45
========== ========== ==========
Market value, end of period $ 17.813 $ 20.875 $ 26.000
========== ========== ==========
Total investment return (a) 3.56% (16.43)% 16.66%
========== ========== ==========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 303,944 $ 317,012 $ 370,275
Ratio of expenses to average net assets (b) 3.34% 1.96% --
Ratio of expenses to average net assets, excluding taxes 1.50% 1.48% 1.46%
Ratio of net investment income/(loss) to average net assets 0.38% 1.79% 2.39%
Portfolio turnover rate 35.59% 4.82% 2.38%
11
THE CHILE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE A. ORGANIZATION
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.
NOTE B. SIGNIFICANT ACCOUNTING POLICIES
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 it is determined that
this method would not represent fair 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, 2005, the Fund held 1.91% of its net assets in a
security valued at fair value as determined in good faith under procedures
established by the Board of Directors with an aggregate cost of $4,296,118 and
fair value of $3,302,941. 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 time
deposit available through 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
12
relieve it from all or substantially all U.S. income and excise taxes.
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, 2005, the Fund incurred
$333,364 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),
13
information risk (key information may be inaccurate or unavailable) and
political risk (expropriation, nationalization or the imposition of capital or
currency 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 that 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 these 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 C. 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, 2005, CSAM earned $825,728 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, 2005, CSAM was reimbursed $9,917 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,
2005, these sub-advisory fees amounted to $143,370.
For the six months ended June 30, 2005, Celfin earned approximately $65,000 in
brokerage commissions from portfolio transactions executed on behalf of the
Fund.
14
Bear Stearns Funds Management Inc. ("BSFM") serves as the Fund's U.S.
administrator. The Fund pays BSFM a monthly fee that is calculated weekly based
on the Fund's average weekly net assets. For the six months ended June 30, 2005,
BSFM earned $55,829 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, 2005, the administration fees,
supplemental administration fees and accounting fees amounted to $35,843,
$35,208 and $2,974, 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, 2005, Merrill was paid $11,476 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 D. 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, 2005, CSAM
owned 14,615 shares.
NOTE E. INVESTMENT IN SECURITIES
For the six months ended June 30, 2005, purchases and sales of securities, other
than short-term investments, were $33,220,216 and $34,544,015, respectively.
NOTE F. 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%. During the six months ended June 30, 2005, the Fund had no borrowings
under the Credit Facility.
NOTE G. 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 dividends and distributions paid during the year ended
December 31, 2004 were as follows:
Ordinary Income $ 4,765,765
Long-Term Capital Gains $ 17,846,270
Under current tax law, certain capital losses realized after October 31 within a
taxable year may be deferred
15
and treated as occurring on the first day of the following tax year
("Post-October losses"). For the tax period ended December 31, 2004, the Fund
did not incur Post-October losses.
At June 30, 2005, 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 $107,461,619, $66,087,361,
$(1,079,540) and $65,007,821, respectively.
NOTE H. 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, 2005, 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
---------------- --------- --------
James J. Cattano 6,849,944 139,448
Steven N. Rappaport 6,837,417 151,975
In addition to the directors re-elected at the Meeting, Enrique R. Arzac,
Michael E. Kenneally and George W. Landau continued as directors of the Fund.
Effective April 15, 2005, William W. Priest, Jr. resigned as Director of the
Fund.
Effective May 18, 2005, Martin M. Torino was appointed as Director of the Fund
by the Board of Directors.
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") 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 18, 2005.
18
DESCRIPTION OF INVESTLINK(SM) PROGRAM (UNAUDITED)
The InvestLink(SM) Program is sponsored and administered by EquiServe Trust
Company, N.A., with EquiServe, Inc. acting as service agent to the
aforementioned and, not by The Chile Fund, Inc. (the "Fund"). EquiServe Trust
Company, N.A., 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
19
anticipated market value of $100,000.00 or more are 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 Trust Company, N.A., 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
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 Trust Company, N.A.
21
PROXY VOTING AND PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
Information regarding how The Chile Fund, Inc. (the "Fund") voted proxies
related to its portfolio securities during the 12-month period ended June 30 of
each year as well as the policies and procedures that 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
- On the website of the Securities and Exchange Commission,
http://www.sec.gov.
The Fund files a complete schedule of its portfolio holdings for the first and
third quarters of its fiscal year with the SEC on Form N-Q. The Fund's Forms N-Q
are available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the SEC's Public Reference Room may be obtained by calling
1-800-SEC-0330.
22
OTHER FUNDS MANAGED BY CREDIT SUISSE ASSET MANAGEMENT, LLC
Credit Suisse Capital Appreciation Fund
Credit Suisse Cash Reserve Fund
Credit Suisse Commodity Return Strategy Fund
Credit Suisse Emerging Markets Fund
Credit Suisse Fixed Income Fund
Credit Suisse Global Fixed Income Fund
Credit Suisse Global Small Cap Fund
Credit Suisse High Income Fund
Credit Suisse International Focus Fund
Credit Suisse Japan Equity Fund
Credit Suisse Large Cap Blend Fund
Credit Suisse Large Cap Value Fund
Credit Suisse Mid-Cap Growth Fund
Credit Suisse New York Municipal Fund
Credit Suisse Short Duration Bond Fund
Credit Suisse Small Cap Growth Fund
Credit Suisse Small Cap Value 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, private equity, 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
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24
SUMMARY OF GENERAL INFORMATION (UNAUDITED)
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. As of June 30, 2005, CSAM managed over $24 billion in the U.S. and,
together with its global affiliates, managed assets of over $327 billion in 16
countries.
SHAREHOLDER INFORMATION
The market price is published in: THE NEW YORK TIMES (daily) and THE WALL STREET
JOURNAL (daily) under the designation "ChileFd", and BARRON'S (each Monday)
under the designation "Chile". 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 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.
DIRECTORS AND CORPORATE OFFICERS
Enrique R. Arzac Lead Director
James J. Cattano Director
George W. Landau Director
Steven N. Rappaport Director
Martin M. Torino Director
Michael E. Kenneally Director and Chairman of the Board
Steven Plump Chief Executive Officer and President
Matthew J.K. Hickman Chief Investment Officer
J. Kevin Gao Senior Vice President
Ajay Mehra Chief Legal Officer
Emidio Morizio Chief Compliance Officer
Michael A. Pignataro Chief Financial Officer and Secretary
Karen Regan Assistant Secretary
Robert M. Rizza Treasurer
John Smith Assistant Treasurer
INVESTMENT ADVISER
Credit Suisse Asset Management, LLC
466 Lexington Avenue
New York, NY 10017
ADMINISTRATOR
Bear Stearns Funds Management Inc.
383 Madison Avenue
New York, NY 10179
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
SHAREHOLDER SERVICING AGENT
EquiServe Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
Two Commerce Square
Philadelphia, PA 19103
LEGAL COUNSEL
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
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 registered public accountants who do not express an opinion thereon.
It is not a prospectus, circular or representation intended for use in the
purchase or sale of shares of the Fund or of any securities mentioned in this
report.
[CH LISTED NYSE(R) LOGO]
CH-SAR-0605
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.
Included as part of the report to shareholders filed under Item 1 of this Form.
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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None.
ITEM 10. 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, 2005.
ITEM 11. 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 12. 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/Steven Plump
---------------
Name: Steven Plump
Title: Chief Executive Officer
Date: September 1, 2005
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/Steven Plump
---------------
Name: Steven Plump
Title: Chief Executive Officer
Date: September 1, 2005
/s/Michael A. Pignataro
-----------------------
Name: Michael A. Pignataro
Title: Chief Financial Officer
Date: September 1, 2005