-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RdVci34+DjwxBkmllaNa4dRJx1nkJ1WYp78ie6fVOLd7nCoozK0Ecw4/E+634jBM 0Dn3tQNJRmo0jwSY+aHaLg== 0001047469-04-006864.txt : 20040308 0001047469-04-006864.hdr.sgml : 20040308 20040308102343 ACCESSION NUMBER: 0001047469-04-006864 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040308 EFFECTIVENESS DATE: 20040308 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LATIN AMERICA EQUITY FUND INC /MD CENTRAL INDEX KEY: 0000862599 IRS NUMBER: 133577304 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-06094 FILM NUMBER: 04653707 BUSINESS ADDRESS: STREET 1: C/O CREDIT SUISSE ASSET MGMT, LLC STREET 2: 466 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2128753500 MAIL ADDRESS: STREET 1: CREDIT SUISSE ASSET MGMT, LLC STREET 2: 466 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: LATIN AMERICA INVESTMENT FUND INC DATE OF NAME CHANGE: 19920703 N-CSR 1 a2127136zn-csr.txt N-CSR 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. 811-06094 ----------------------------------------------- THE LATIN AMERICA EQUITY FUND, INC. --------------------------------------------------- (Exact Name of Registrant as Specified in Charter) 466 Lexington Avenue, New York, New York 10017-3140 --------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Hal Liebes, Esq. The Latin America Equity 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, 2003 Date of reporting period: January 1, 2003 to December 31, 2003 ITEM 1. REPORTS TO STOCKHOLDERS. THE LATIN AMERICA EQUITY FUND, INC. ANNUAL REPORT DECEMBER 31, 2003 [LAQ LISTED NYSE(R) LOGO] 3019-AR-03 CONTENTS Letter to Shareholders 1 Portfolio Summary 3 Schedule of Investments 5 Statement of Assets and Liabilities 8 Statement of Operations 9 Statement of Changes in Net Assets 10 Financial Highlights 12 Notes to Financial Statements 14 Report of Independent Auditors 20 Results of Annual Meeting of Shareholders 21 Tax Information 21 Description of InvestLink(SM) Program 22 Information Concerning Directors and Officers 25
LETTER TO SHAREHOLDERS February 17, 2004 DEAR SHAREHOLDER: For the year ended December 31, 2003, The Latin America Equity Fund, Inc. (the "Fund") had a gain of 54.90%, based on net asset value, assuming reinvestment of dividends. By comparison, the Morgan Stanley Capital International EMF (Emerging Markets Free) Latin America Index* had an increase of 73.52% for the period. Latin American markets rallied strongly in the year, performing well in both absolute and relative terms (Latin America was the top-performing region globally in 2003). A confluence of positive forces aided emerging markets and Latin America in particular: optimism regarding the U.S. and global economies; rising commodity prices and strengthening currencies; the prospects for real financial reforms in specific countries; and a generally elevated appetite for risk in the wake of easy monetary policy (and low interest rates) globally. Virtually all of the region's markets rose in the year in local terms, and had generally better results in dollar terms due to appreciation in most of the region's currencies. Brazil and Argentina were the best performers. Brazil continued to benefit from progress on fiscal reforms, evidenced by an extension of an IMF package agreement and an upgrade of its credit rating by a major credit rating agency. In addition, Brazilian assets benefited from a supportive interest-rate backdrop: the country's central bank lowered short-term rates by 10 percentage points in the year, with the first reduction occurring in June. Argentina, meanwhile, was aided by encouraging news on the tax collection, inflation and economic fronts. Mexico had a more modest gain, due in part to less enthusiasm regarding its reform efforts. The Fund benefited from the general rise in Latin American equities in the year, though it trailed its benchmark. This was due in part to a decline in value in the Fund's private equity holdings, mostly as a result of the decline in value of one holding that was subsequently liquidated mid-year. While the performance of this holding was weak in 2003 (due mostly to general weakness in its local stock market), it produced a positive return for the Fund over the six-year holding period. In addition, the Fund's relative return was hindered by its underweighting or avoidance of certain volatile, higher risk stocks (mostly within Brazil) that surged upward in the period. In terms of regional allocation, we continued to concentrate primarily on Mexico and Brazil. Noteworthy recent moves we made in these markets include reducing our exposure to the consumer-staples area (most specifically, beverage and tobacco companies), while adding some electric utilities stocks. Within Mexico, we pared our exposure to certain stocks that were strong performers in 2003 (e.g., a cement company), and purchased a few market laggards that we believe represent better values. In anticipation of an improving Mexican economy over the next year, we also raised our weighting in the media sector. Elsewhere, we marginally increased our exposure to certain smaller markets in the latter part of the period, for example by adding an Argentine energy company. Looking ahead, we believe that Latin American stock markets could be more volatile in 2004, with investors likely to take profits on any disappointing developments. However, we also see grounds for optimism that the region has upside potential, given the positive forces still largely in place. Valuations in these markets, meanwhile, continue to be compelling in our judgment compared with valuations in developed equity markets. Barring an aggressive upward spike in U.S. interest rates, we think the generally positive backdrop of economic growth, high and/or rising commodity prices, and strengthening currencies in many emerging markets should outweigh interest-rate worries. One key local factor we are monitoring is local politics in Brazil. The new administration made progress on reform in 2003, and generally regained credibility from the international financial community. However, much is expected 1 locally in the way of social results this year. Lula supporters have thus far seemed patient, but the consumer has suffered in terms of real wage reductions and increased unemployment. Lula has the enormous challenge of trying to live up to his campaign promises during an electoral year (local elections are scheduled for the end of 2004). Fortunately for now, the global environment appears supportive but we expect social issues and the extent of economic recovery to dominate sentiment in Brazil for the remainder of the year. Respectfully, /s/ Emily Alejos /s/ Matthew J.K. Hickman Emily Alejos Matthew J.K. Hickman Co-Chief Investment Officer** Co-Chief Investment Officer*** INTERNATIONAL INVESTING ENTAILS SPECIAL RISK CONSIDERATIONS, INCLUDING CURRENCY FLUCTUATIONS, LOWER LIQUIDITY, ECONOMIC AND POLITICAL RISKS, AND DIFFERENCES IN ACCOUNTING METHODS; THESE RISKS ARE GENERALLY HEIGHTENED FOR EMERGING-MARKET INVESTMENTS. 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. * The Morgan Stanley Capital International EMF (Emerging Markets Free) Latin America Index is a free float-adjusted market capitalization index that is designed to measure equity-market performance in Latin America. It is the exclusive property of Morgan Stanley Capital International Inc. Investors cannot invest directly in an index. ** Emily Alejos, who is a Director of Credit Suisse Asset Management, LLC ("CSAM") shares primary responsibility for management of the Fund's assets. She has served the Fund in such capacity since November 9, 1999. Ms. Alejos joined CSAM in 1997 from Bankers Trust, where she was an emerging markets portfolio manager. Previously, she focused on Latin American equities at G.T. Capital Management in San Francisco. Ms. Alejos is Co-Chief Investment Officer of the Fund. She is also the Chief Investment Officer of The Brazilian Equity Fund, Inc. and The Emerging Markets Telecommunications Fund, Inc. and an Investment Officer of The Chile Fund, Inc. *** Matthew J.K. Hickman, who is a Vice President of Credit Suisse Asset Management, LLC ("CSAM") shares primary responsibility for management of the Fund's assets. He has served the Fund in such capacity since February 2004. He is a portfolio manager specializing in emerging equity markets. Mr. Hickman joined CSAM 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 Chief Investment Officer of The Chile Fund, Inc. 2 THE LATIN AMERICA EQUITY FUND, INC. PORTFOLIO SUMMARY - AS OF DECEMBER 31, 2003 (UNAUDITED) [CHART] GEOGRAPHIC ASSET BREAKDOWN AS A PERCENT OF NET ASSETS
12/31/2003 12/31/2002 Argentina 0.58% 1.13% Brazil 49.09% 35.44% Chile 9.58% 9.85% Jamaica 0.00% 6.01% Latin America 1.07% 1.59% Mexico 36.14% 43.98% Peru 0.88% 2.05% Venezuela 1.12% 1.13% Global 1.29% 1.90% Cash & Other Assets 0.25% -3.08%
[CHART] SECTOR ALLOCATION AS A PERCENT OF NET ASSETS
12/31/2003 12/31/2002 Banking 7.12% 2.21% Bottling 5.56% 4.04% Broadcast, Radio & Television 3.77% 2.72% Cellular Telecommunications 9.21% 6.55% Cement 3.75% 6.50% Electric-Integrated 5.06% 3.02% Food-Retail 3.97% 0.67% Mining 9.17% 10.50% Oil & Natural Gas 12.73% 10.86% Retail-Major Department Stores 3.76% 5.91% Telephone-Integrated 16.17% 21.39% Other 19.73% 25.63%
3 TOP 10 HOLDINGS, BY ISSUER
PERCENT OF HOLDING SECTOR COUNTRY NET ASSETS - --------------------------------------------------------------------------------------------------------- 1. Petroleo Brasileiro S.A. Oil & Natural Gas Brazil 12.7 2. Telefonos de Mexico, S.A. de C.V. Telephone-Integrated Mexico 8.3 3. Companhia Vale do Rio Doce Mining Brazil 8.3 4. America Movil, S.A. de C.V. Cellular Telecommunications Mexico 8.0 5. Companhia de Bebidas das Americas Bottling Brazil 5.6 6. Cemex, S.A. de C.V. Cement Mexico 3.8 7. Grupo Televisa, S.A. Broadcast, Radio & Television Mexico 3.3 8. Banco Itau Holding Financeira S.A. Banking Brazil 3.3 9. Wal-Mart de Mexico, S.A. de C.V. Retail-Major Department Stores Mexico 3.3 10. Gerdau S.A. Steel Brazil 2.9
4 THE LATIN AMERICA EQUITY FUND, INC. SCHEDULE OF INVESTMENTS - DECEMBER 31, 2003
NO. OF DESCRIPTION SHARES VALUE - ---------------------------------------------------------------------------------------------- EQUITY OR EQUITY-LINKED SECURITIES-99.75% ARGENTINA-0.58% TELEPHONE-INTEGRATED-0.58% Telecom Argentina Stet - France Telecom S.A., ADR+ (Cost $475,630) 74,000 $ 647,500 -------------- BRAZIL-49.09% BANKING-5.23% Banco Bradesco S.A., PN 244,500,000 1,285,952 Banco Itau Holding Financeira S.A., PN 36,960,000 3,670,422 Uniao de Bancos Brasileiros S.A., GDR 36,600 913,170 -------------- 5,869,544 -------------- BOTTLING-5.56% Companhia de Bebidas das Americas, PN, ADR 244,600 6,239,746 -------------- BUILDING PRODUCTS-0.50% Duratex S.A., PN 19,500,000 560,102 -------------- CELLULAR TELECOMMUNICATIONS-1.21% Telesp Celular Participacoes S.A., ADR+ 140,000 921,200 Telesp Celular Participacoes S.A., PN+ 167,200,000 437,960 -------------- 1,359,160 -------------- ELECTRIC-INTEGRATED-3.41% Centrais Eletricas Brasileiras S.A., PNB 122,600,000 1,917,481 Companhia Energetica de Minas Gerais, ADR 103,900 1,911,760 -------------- 3,829,241 -------------- FOOD-RETAIL-2.44% Companhia Brasileira de Distribuicao Grupo Pao de Acucar, ADR 108,600 2,731,290 -------------- MINING-8.29% Companhia Vale do Rio Doce, ADR 180,500 $ 9,297,555 -------------- OIL & NATURAL GAS-12.73% Petroleo Brasileiro S.A., ADR 535,700 14,281,762 -------------- PAPER & RELATED PRODUCTS-1.63% Aracruz Celulose S.A., ADR 27,200 953,088 Votorantim Celulose e Papel S.A., ADR 28,000 877,800 -------------- 1,830,888 -------------- STEEL-2.90% Gerdau S.A., ADR 31,600 638,952 Gerdau S.A., PN 123,900 2,615,190 -------------- 3,254,142 -------------- TELEPHONE-INTEGRATED-5.19% Brasil Telecom Participacoes S.A., ADR 40,600 1,534,680 Tele Norte Leste Participacoes S.A., ADR 202,400 3,123,032 Telecomunicacoes de Sao Paulo S.A., PN 74,200,000 1,163,066 -------------- 5,820,778 -------------- TOTAL BRAZIL (Cost $35,601,854) 55,074,208 -------------- CHILE-9.58% BANKING-1.89% Banco de Chile 6,300,000 294,507 Banco Santander Chile S.A 29,273,000 673,840 Banco Santander Chile S.A., ADR 14,900 354,322 Corpbanca S.A., ADR## 30,518 798,294 -------------- 2,120,963 -------------- CHEMICALS-DIVERSIFIED-0.68% Sociedad Quimica y Minera de Chile S.A., Class B 182,100 762,113 -------------- CONTAINERS-METAL/GLASS-0.19% Cristalerias de Chile S.A 22,603 217,428 --------------
See accompanying notes to financial statements. 5
NO. OF DESCRIPTION SHARES/UNITS VALUE - ---------------------------------------------------------------------------------------------- DIVERSIFIED OPERATIONS-1.53% Empresas Copec S.A 238,785 $ 1,720,719 -------------- ELECTRIC-INTEGRATED-1.65% Colbun S.A 4,250,000 580,964 Enersis S.A.+ 2,500,000 362,839 Enersis S.A., ADR 123,000 905,280 -------------- 1,849,083 -------------- FOOD & BEVERAGES-0.85% Compania Cervecerias Unidas S.A., ADR 24,300 522,450 Embotelladora Andina S.A., PNA 47,000 82,491 Vina Concha y Toro S.A 404,311 347,985 -------------- 952,926 -------------- FOOD-RETAIL-0.47% Distribucion y Servicio D&S S.A., ADR 25,200 520,632 -------------- PAPER & RELATED PRODUCTS-0.89% Empresas CMPC S.A 50,000 999,916 -------------- RETAIL-MAJOR DEPARTMENT STORES-0.49% S.A.C.I. Falabella, S.A 310,000 548,274 -------------- TELEPHONE-INTEGRATED-0.94% Compania de Telecomunicaciones de Chile S.A., ADR 33,300 497,835 Compania de Telecomunicaciones de Chile S.A., Class A 98,000 372,120 Empresa Nacional de Telecomunicaciones S.A 30,000 184,794 -------------- 1,054,749 -------------- TOTAL CHILE (Cost $7,044,709) 10,746,803 -------------- LATIN AMERICA-1.07% VENTURE CAPITAL-1.07% J.P. Morgan Latin America Capital Partners (Cayman), L.P.+ ++ 807,719 696,617 J.P. Morgan Latin America Capital Partners (Delaware), L.P.+ ++# 1,363,091 506,266 -------------- 1,202,883 -------------- NO. OF DESCRIPTION SHARES VALUE - ---------------------------------------------------------------------------------------------- TELECOMMUNICATIONS-0.00% International Wireless Communications Holdings Corp.++ 12,636 $ 0 -------------- TOTAL LATIN AMERICA (Cost $2,026,887) 1,202,883 -------------- MEXICO-36.14% BROADCAST, RADIO & TELEVISION-3.77% Grupo Televisa, S.A., ADR 92,200 3,675,092 TV Azteca, S.A. de C.V., ADR 61,200 556,920 -------------- 4,232,012 -------------- CELLULAR TELECOMMUNICATIONS-8.00% America Movil, S.A. de C.V., Series L, ADR 328,400 8,978,456 -------------- CEMENT-3.75% Cemex, S.A. de C.V., ADR 160,700 4,210,340 -------------- DIVERSIFIED OPERATIONS-0.93% Grupo Carso S.A. de C.V., Series A1 295,500 1,038,780 -------------- ENGINEERING & CONSTRUCTION-0.90% Corporacion GEO, S.A. de C.V., Series B+ 197,600 1,007,124 -------------- FINANCIAL SERVICES-3.35% Grupo Financiero Banorte S.A. de C.V., Series O 482,400 1,674,329 Grupo Financiero BBVA Bancomer, S.A. de C.V., Class B+2,430,970 2,076,920 -------------- 3,751,249 -------------- FOOD & BEVERAGES-1.80% Fomento Economico Mexicano, S.A. de C.V., ADR 29,400 1,084,272 Grupo Modelo, S.A. de C.V., Series C 391,022 936,100 -------------- 2,020,372 -------------- FOOD-RETAIL-1.06% Controladora Comercial Mexicana S.A. de C.V 1,179,000 1,185,663 --------------
See accompanying notes to financial statements. 6
NO. OF DESCRIPTION SHARES/UNITS VALUE - ---------------------------------------------------------------------------------------------- REAL ESTATE DEVELOPMENT-0.97% Consorcio ARA, S.A. de C.V.+ 439,300 $ 1,090,773 -------------- RETAIL-MAJOR DEPARTMENT STORES-3.27% Wal-Mart de Mexico, S.A. de C.V., ADR 128,606 3,665,708 -------------- TELEPHONE-INTEGRATED-8.34% Telefonos de Mexico, S.A. de C.V., Class L, ADR 283,300 9,357,399 -------------- TOTAL MEXICO (Cost $33,701,291) 40,537,876 -------------- PERU-0.88% MINING-0.88% Compania de Minas Buenaventura S.A.u., ADR (Cost $370,733) 34,866 986,010 -------------- VENEZUELA-1.12% TELEPHONE-INTEGRATED-1.12% Compania Anonima Nacional Telefonos de Venezuela, ADR (Cost $1,100,649) 82,700 1,262,002 -------------- GLOBAL-1.29% VENTURE CAPITAL-1.29% Emerging Markets Ventures I L.P.+ ++# (Cost $1,648,204) 2,194,792 1,443,515 -------------- TOTAL EQUITY OR EQUITY-LINKED SECURITIES (Cost $81,969,957) 111,900,797 -------------- PRINCIPAL DESCRIPTION AMOUNT (000'S) VALUE - ---------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENT-0.60% GRAND CAYMAN-0.60% Brown Brothers Harriman & Co., overnight deposit, 0.10%, 01/02/04* (Cost $673,000) $ 673 $ 673,000 -------------- TOTAL INVESTMENTS-100.35% (Cost $82,642,957) (Notes A,D,F) 112,573,797 -------------- LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS-(0.35)% (396,204) -------------- NET ASSETS-100.00% $ 112,177,593 ==============
+ Security is non-income producing. ## SEC Rule 144A security. Such securities are traded only among "qualified institutional buyers." ++ Restricted security, not readily marketable; security is valued at fair value as determined in good faith under procedures established by the Board of Directors. (See Notes A and G.) # As of December 31, 2003, the Fund has committed to investing additional capital as follows: J.P. Morgan Latin America Capital Partners (Delaware), L.P. ($3,789,370) and Emerging Markets Ventures I L.P. ($305,208). The aggregate amount of open commitments for the Fund is $4,094,578. * Variable rate account. Rate resets on a daily basis; amounts are available on the same business day. ADR American Depositary Receipts. GDR Global Depositary Receipts. PN Preferred Shares. PNA Preferred Shares, Class A. PNB Preferred Shares, Class B. See accompanying notes to financial statements. 7 THE LATIN AMERICA EQUITY FUND, INC. STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 2003 ASSETS Investments, at value (Cost $82,642,957) (Notes A, D, F) $ 112,573,797 Cash (including $36,514 of foreign currencies with a cost of $32,125) 36,583 Dividends receivable 792,050 Prepaid expenses 15,575 -------------- Total Assets 113,418,005 -------------- LIABILITIES Payables: Distributions (Note A) 885,114 Investment advisory fee (Note B) 220,191 Administration fees (Note B) 41,162 Directors' fees 974 Other accrued expenses 92,971 -------------- Total Liabilities 1,240,412 -------------- NET ASSETS (applicable to 6,322,240 shares of common stock outstanding) (Note C) $ 112,177,593 ============== NET ASSETS CONSIST OF Capital stock, $0.001 par value; 6,322,240 shares issued and outstanding (100,000,000 shares authorized) $ 6,322 Paid-in capital 140,606,867 Distributions in excess of net investment income (209,752) Accumulated net realized loss on investments and foreign currency related transactions (58,161,972) Net unrealized appreciation in value of investments and translation of other assets and liabilities denominated in foreign currencies 29,936,128 -------------- Net assets applicable to shares outstanding $ 112,177,593 ============== NET ASSET VALUE PER SHARE ($112,177,593 DIVIDED BY 6,322,240) $ 17.74 ============== MARKET PRICE PER SHARE $ 15.26 ==============
See accompanying notes to financial statements. 8 THE LATIN AMERICA EQUITY FUND, INC. STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 2003 INVESTMENT INCOME Income (Note A): Dividends $ 3,026,430 Net investment income allocated from partnerships 566,657 Interest 3,874 Less: Foreign taxes withheld (250,183) -------------- Total Investment Income 3,346,778 -------------- Expenses: Investment advisory fees (Note B) 731,621 Administration fees (Note B) 160,916 Audit fees 77,672 Legal fees 72,403 Custodian fees 54,650 Printing (Note B) 51,562 Directors' fees 41,889 Accounting fees 36,182 Transfer agent fees 25,042 NYSE listing fees 23,607 Insurance 9,976 Other 10,623 Brazilian taxes (Note A) 1,697 Chilean repatriation taxes (Note A) (110,958) -------------- Total Expenses 1,186,882 -------------- Net Investment Income 2,159,896 -------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS Net realized gain/(loss) from: Investments 2,741,981 Foreign currency related transactions (72,596) Net change in unrealized depreciation in value of investments and translation of other assets and liabilities denominated in foreign currencies 35,187,981 -------------- Net realized and unrealized gain on investments and foreign currency related transactions 37,857,366 -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 40,017,262 ==============
See accompanying notes to financial statements. 9 THE LATIN AMERICA EQUITY FUND, INC. STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, -------------------------------- 2003 2002 -------------- -------------- INCREASE/(DECREASE) IN NET ASSETS Operations: Net investment income $ 2,159,896 $ 210,693 Net realized gain/(loss) on investments and foreign currency related transactions 2,669,385 (16,468,305) Net change in unrealized appreciation/depreciation in value of investments and translation of other assets and liabilities denominated in foreign currencies 35,187,981 (9,317,510) -------------- -------------- Net increase/(decrease) in net assets resulting from operations 40,017,262 (25,575,122) -------------- -------------- Dividends to shareholders: Net investment income (885,114) (1,327,670) -------------- -------------- Capital share transactions (Note H): Cost of 1,115,689 shares purchased under tender offer -- (12,060,598) -------------- -------------- Total increase/(decrease) in net assets 39,132,148 (38,963,390) -------------- -------------- NET ASSETS Beginning of year 73,045,445 112,008,835 -------------- -------------- End of year $ 112,177,593 $ 73,045,445 ============== ==============
See accompanying notes to financial statements. 10 This page left intentionally blank. 11 THE LATIN AMERICA EQUITY 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 year indicated. This information has been derived from information provided in the financial statements and market price data for the Fund's shares.
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------- 2003 2002 2001 ------------ ------------ ------------ PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year $ 11.55 $ 15.06 $ 16.60 ------------ ------------ ------------ Net investment income/(loss) 0.34+ 0.01** 0.41* Net realized and unrealized gain/(loss) on investments and foreign currency related transactions 5.99 (3.41) (1.50) ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations 6.33 (3.40) (1.09) ------------ ------------ ------------ Dividends and distributions to shareholders: Net investment income (0.14) (0.21) (0.57) Net realized gain on investments and foreign currency related transactions -- -- -- ------------ ------------ ------------ Total dividends and distributions to shareholders (0.14) (0.21) (0.57) ------------ ------------ ------------ Anti-dilutive impact due to capital shares tendered or repurchased -- 0.10 0.12 ------------ ------------ ------------ Dilutive impact due to capital share rights offering -- -- -- ------------ ------------ ------------ Net asset value, end of year $ 17.74 $ 11.55 $ 15.06 ============ ============ ============ Market value, end of year $ 15.26 $ 9.67 $ 12.15 ============ ============ ============ Total investment return(a) 59.15% (18.83)% (1.07)% ============ ============ ============ RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000 omitted) $ 112,178 $ 73,045 $ 112,009 Ratio of expenses to average net assets (b) 1.37% 3.06% 1.51% Ratio of expenses to average net assets, excluding fee waivers 1.37% 3.06% 1.51% Ratio of expenses to average net assets, excluding taxes 1.49% 1.52% 1.40% Ratio of net investment income/(loss) to average net assets 2.49%(c) 0.21% 2.52% Portfolio turnover rate 62.62% 75.28% 101.73%
# Per share amounts prior to November 10, 2000 have been restated to reflect a conversion factor of 0.9175 for shares issued in connection with the merger of The Latin America Investment Fund, Inc. and The Latin America Equity Fund, Inc. * Based on actual shares outstanding on November 21, 2001 (prior to the 2001 tender offer) and December 31, 2001. ** Based on actual shares outstanding on November 6, 2002 (prior to the 2002 tender offer) and December 31, 2002. + Based on average shares outstanding. ++ Includes a $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 program. See accompanying notes to financial statements. 12
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------------- 2000 1999 1998 1997 ------------ ------------ ------------ ------------ PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year $ 18.57 $ 10.96 $ 18.77 $ 18.41 ------------ ------------ ------------ ------------ Net investment income/(loss) (0.11)+ 0.07+ 0.16 0.16 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions (2.44) 7.07 (7.85)++ 2.01 ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations (2.55) 7.14 (7.69) 2.17 ------------ ------------ ------------ ------------ Dividends and distributions to shareholders: Net investment income (0.08) -- (0.12) (0.17) Net realized gain on investments and foreign currency related transactions -- -- -- (1.64) ------------ ------------ ------------ ------------ Total dividends and distributions to shareholders (0.08) -- (0.12) (1.81) ------------ ------------ ------------ ------------ Anti-dilutive impact due to capital shares tendered or repurchased 0.66 0.47 -- -- ------------ ------------ ------------ ------------ Dilutive impact due to capital share rights offering -- -- -- -- ------------ ------------ ------------ ------------ Net asset value, end of year $ 16.60 $ 18.57 $ 10.96 $ 18.77 ============ ============ ============ ============ Market value, end of year $ 12.875 $ 13.760 $ 7.834 $ 14.918 ============ ============ ============ ============ Total investment return(a) (5.87)% 75.65% (46.63)% 10.29% ============ ============ ============ ============ RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000 omitted) $ 145,281 $ 123,262 $ 86,676 $ 148,130 Ratio of expenses to average net assets (b) 2.13% 2.14% 2.41% 1.89% Ratio of expenses to average net assets, excluding fee waivers 2.19% 2.22% 2.60% 2.02% Ratio of expenses to average net assets, excluding taxes 2.03% 2.05% 1.77% 1.65% Ratio of net investment income/(loss) to average net assets (0.55)% 0.46% 1.12% 0.77% Portfolio turnover rate 125.83% 161.71% 142.35% 111.83% FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------- 1996 1995 1994 ------------ ------------ ------------ PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year $ 16.27 $ 19.53 $ 24.52 ------------ ------------ ------------ Net investment income/(loss) 0.21 0.07 0.01+ Net realized and unrealized gain/(loss) on investments and foreign currency related transactions 2.00 (3.07) 1.05 ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations 2.21 (3.00) 1.06 ------------ ------------ ------------ Dividends and distributions to shareholders: Net investment income (0.07) -- (0.18) Net realized gain on investments and foreign currency related transactions -- (0.26) (3.38) ------------ ------------ ------------ Total dividends and distributions to shareholders (0.07) (0.26) (3.56) ------------ ------------ ------------ Anti-dilutive impact due to capital shares tendered or repurchased -- -- -- ------------ ------------ ------------ Dilutive impact due to capital share rights offering -- -- (2.49) ------------ ------------ ------------ Net asset value, end of year $ 18.41 $ 16.27 $ 19.53 ============ ============ ============ Market value, end of year $ 15.259 $ 14.033 $ 19.210 ============ ============ ============ Total investment return(a) 9.18% (25.65)% (17.78)% ============ ============ ============ RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000 omitted) $ 145,230 $ 128,377 $ 153,128 Ratio of expenses to average net assets (b) 1.69% 2.04% 1.94% Ratio of expenses to average net assets, excluding fee waivers 1.80% 2.15% -- Ratio of expenses to average net assets, excluding taxes -- 1.81% 1.70% Ratio of net investment income/(loss) to average net assets 1.16% 0.42% 0.04% Portfolio turnover rate 43.22% 27.05% 68.46%
(a) Total investment return at market value is based on the changes in market price of a share during the year and assumes reinvestment of dividends and distributions, if any, at actual prices pursuant to the Fund's dividend reinvestment program. (b) Ratios reflect actual expenses incurred by the Fund. Amounts are net of fee waivers and inclusive of taxes. (c) Ratio includes the effect of a reversal of Chilean repatriation tax accrual; excluding the reversal, the ratio would have been 2.36%. 13 THE LATIN AMERICA EQUITY FUND, INC. NOTES TO FINANCIAL STATEMENTS NOTE A. SIGNIFICANT ACCOUNTING POLICIES The Latin America Equity Fund, Inc. (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 revenue 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 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 under procedures established by the Board of Directors. At December 31, 2003, the Fund held 2.36% of its net assets in securities valued at fair value as determined in good faith by the Board of Directors with an aggregate cost of $3,675,091 and fair value of $2,646,398. 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 these securities may be resold in privately negotiated transactions, the prices realized on such sales could differ from the prices originally paid by the Fund or the current carrying values, 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 which will be sufficient to relieve it from all or substantially all U.S. income and excise taxes. Income received by the Fund from sources within Latin America may be subject to withholding and other taxes imposed by such countries. Also, certain Latin American countries impose taxes on funds remitted or repatriated from such countries. 14 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. The amount paid for Chilean repatriation taxes in 2003 was less than the amount accrued in the prior year. The difference of $110,958 is presented in the Statement of Operations. 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. federal 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 dates 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. On December 12, 2003, a dividend in the aggregate amount of $885,114, equal to $0.14 per share from net investment income was declared. This dividend was payable on January 9, 2004 to shareholders of record as of December 23, 2003. 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. PARTNERSHIP ACCOUNTING POLICY: The Fund records its pro-rata share of the income/(loss) and capital 15 gains/(losses) allocated from the underlying partnerships and adjusts the cost of the underlying partnerships accordingly. These amounts are included in the Fund's Statement of Operations. 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 controls or punitive taxes). Other risks of investing in foreign securities include liquidity and valuation risks. Some countries require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, if there is a deterioration in a country's balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad. Amounts repatriated prior to the end of specified periods may be subject to taxes as imposed by a foreign country. The Latin American securities markets are substantially smaller, less liquid and more volatile than the major securities markets in the United States. A high proportion of the securities of many companies in Latin American countries may be held by a limited number of persons, which may limit the number of securities available for the investment by the Fund. The limited liquidity of Latin American country securities markets may also affect the Fund's ability to acquire or dispose of securities at the price and time it wishes to do so. The Fund, subject to local investment limitations, may invest up to 10% 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 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 fSinancial 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 differences 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 1.00% of the first $100 million of the Fund's average weekly market value or net assets (whichever is lower), 0.90% of the next $50 million and 0.80% of amounts over $150 million. For the year ended December 31, 2003, CSAM earned $731,621 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 year ended December 31, 2003, CSAM was reimbursed $11,982 for administrative services rendered to the Fund. CELFIN CAPITAL Servicios Financieros S.A. ("Celfin") serves as the Fund's sub-adviser with respect to Chilean investments. As compensation for its services, Celfin is paid a fee, out of the advisory fees payable to CSAM, calculated weekly and paid quarterly at an annual rate of 0.25% of the assets invested in Chilean securities reduced by a percentage equal to the 16 discount at which the Fund's shares are trading. For the year ended December 31, 2003, these sub-advisory fees amounted to $11,701. For the year ended December 31, 2003, Celfin earned approximately $2,800 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 a monthly fee that is calculated weekly at an annual rate of 0.10% of the first $100 million of the Fund's average weekly net assets and 0.08% of amounts in excess of $100 million. For the year ended December 31, 2003, BSFM earned $86,947 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 an annual fee by the Fund equal to the greater of 2,000 Unidad de Fomentos ("U.F.s") (approximately $56,500 at December 31, 2003) or 0.10% of the Fund's average weekly market value or net assets invested in Chile (whichever is lower) and an annual reimbursement of out-of-pocket expenses not to exceed 500 U.F.s. In addition, an accounting fee is also paid to AFCE. For the year ended December 31, 2003, the administration fees and accounting fees amounted to $61,987 and $5,132, respectively. Merrill Corporation ("Merrill"), an affiliate of CSAM, has been engaged by the Fund to provide certain financial printing services. For the year ended December 31, 2003, Merrill was paid $28,926 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 6,322,240 shares outstanding at December 31, 2003, CSAM owned 13,746 shares. NOTE D. INVESTMENT IN SECURITIES For the year ended December 31, 2003, purchases and sales of securities, other than short-term investments, were $54,702,190 and $54,127,381, respectively. NOTE E. CREDIT FACILITY The Fund, together with other funds/portfolios advised by CSAM (collectively, the "Participating Funds"), participates in a $100 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 borrowing at the Federal Funds rate plus 0.50%. During the year ended December 31, 2003, the Fund had no borrowings under the Credit Facility. NOTE F. FEDERAL INCOME TAXES Income and capital gains 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, Post-October losses (as later defined), and excise tax regulations. The tax character of dividends paid during the years ended December 31 for the Fund were as follows:
ORDINARY INCOME ------------------------- 2003 2002 ---------- ----------- $ 885,114 $ 1,327,670
17 At December 31, 2003, the components of distributable earnings on a tax basis for the Fund were as follows: Undistributed ordinary income $ (209,752) Accumulated net realized loss (53,627,663) Unrealized appreciation 25,401,819 -------------- Total distributable earnings $ (28,435,596) ==============
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 incurred and elected to defer net realized losses of $17,282 from foreign currency related transactions. At December 31, 2003, the Fund had a capital loss carryover for U.S. federal income tax purposes of $53,610,381 of which, $9,424,172, and $674,775 expire in 2006 and 2007, respectively. These amounts are subject to Internal Revenue Code Sections limitations. Capital loss carryforwards of $8,426,620, $154,310, $19,880,258 and $15,050,246 expire in 2005, 2006, 2009 and 2010, respectively. It is uncertain whether the Fund will be able to realize the benefits before they expire. At December 31, 2003, 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 $87,177,266, $26,766,541, $(1,370,010) and $25,396,531, respectively. At December 31, 2003, the Fund reclassified from accumulated net realized loss on investments and foreign currency related transactions of $127,876 to distributions in excess of net investment income. In addition, the Fund reclassified $1,350 of non-deductible expenses from distributions in excess of net investment income to paid-in capital, to adjust for current period permanent book/tax differences. Net assets were not affected by these reclassifications. NOTE G. RESTRICTED SECURITIES Certain of the Fund's investments are restricted as to resale and are valued at fair value as determined in good faith under procedures established by the Board of Directors in the absence of readily ascertainable market values. The table below shows the number of units/shares held, the acquisition dates, aggregate cost, fair value as of December 31, 2003, value per unit/share of such securities and percent of net assets which the securities comprise.
NUMBER FAIR PERCENT OF VALUE AT VALUE PER OF NET SECURITY UNITS/SHARES ACQUISITION DATES COST 12/31/03 UNIT/SHARE ASSETS - -------- ------------ ----------------- ------------ ------------ ---------- ------- Emerging Markets Ventures I L.P. 2,172,510 01/22/98 - 10/01/02 $ 1,627,997 $ 1,428,861 $ 0.66 1.27 11,141 06/30/03 9,066 7,327 0.66 0.01 11,141 12/30/03 11,141 7,327 0.66 0.01 ---------- ------------ ------------ ---- 2,194,792 1,648,204 1,443,515 1.29 ---------- ------------ ------------ ---- International Wireless Communications Holdings Corp. 12,636 12/08/97 274,680 0 0.00 0.00 ---------- ------------ ------------ ----
18
NUMBER FAIR PERCENT OF VALUE AT VALUE PER OF NET SECURITY UNITS/SHARES ACQUISITION DATES COST 12/31/03 UNIT/SHARE ASSETS - -------- ------------ ------------------- ----------- ----------- ---------- ------- J.P. Morgan Latin America Capital Partners (Cayman), L.P. 609,755 04/10/00 - 6/28/01 $ 593,760 $ 525,883 $ 0.86 0.47 34,010 04/17/03 33,829 29,332 0.86 0.02 163,954 05/28/03 163,079 141,402 0.86 0.13 --------- ----------- ----------- ---- 807,719 790,668 696,617 0.62 --------- ----------- ----------- ---- J.P. Morgan Latin America Capital Partners (Delaware), L.P. 1,288,029 04/10/00 - 12/09/02 898,863 478,387 0.37 0.43 75,062 04/17/03 62,676 27,879 0.37 0.02 --------- ----------- ----------- ---- 1,363,091 961,539 506,266 0.45 --------- ----------- ----------- ---- Total $ 3,675,091 $ 2,646,398 2.36 =========== =========== ====
The Fund may incur certain costs in connection with the disposition of the above securities. NOTE H. SELF-TENDER OFFER In November 2002, the Fund completed a tender offer for 15% of its outstanding shares (1,115,689 shares) at a price of $10.81 per share, pursuant to a previously announced annual self-tender program. On December 4, 2003, the Board of Directors announced that it was suspending the program, and had authorized management to take the necessary actions to make the Fund's shares eligible for sale to Chilean pension plans in Chile through a local market listing in the belief that such eligibility may provide long term and sustained investment interest in the Fund and thus afford both additional liquidity to existing shareholders as well as a possible reduction in the discount from net asset value at which the Fund's shares currently trade. If the Chilean listing (which is expected to be completed in 2004) does not have its anticipated affect within a reasonable period of time, the Board will consider other actions, which may include a reinstitution of the annual self-tender offer program, share repurchases, the combination of the Fund with another fund, open-ending, liquidation or such other actions as the Board deems appropriate under the circumstances. NOTE I. 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. 19 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders of The Latin America Equity Fund, Inc.: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations, of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The Latin America Equity Fund, Inc. (the "Fund") at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the ten years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and issuers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania February 17, 2004 20 RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED) On April 24, 2003, the Annual Meeting of Shareholders of The Latin America Equity Fund, Inc. (the "Fund") was held and the following matters were voted upon: (1) To re-elect two directors to the Board of Directors of the Fund. NAME OF DIRECTOR FOR WITHHELD - ---------------- --------- -------- Enrique R. Arzac 3,887,210 135,775 George W. Landau 3,881,236 141,749
In addition to the directors re-elected at the meeting, James J. Cattano, William W. Priest, Jr., Riordan Roett and Martin M. Torino continued as directors of the Fund. Effective May 21, 2003, Joseph D. Gallagher was appointed as Chairman of the Fund, Chief Executive Officer and President. Laurence R. Smith who previously held these positions resigned effective May 21, 2003. TAX INFORMATION (UNAUDITED) The Fund is required by Subchapter M of the Internal Revenue Code of 1986, as amended, to advise its shareholders within 60 days of the Fund's year end (December 31, 2003) as to the U.S. federal tax status of dividends and distributions received by the Fund's shareholders in respect of such year. The $0.14 per share dividend paid in respect of such year, is represented entirely by net investment income. The entire amount of the ordinary income dividend represents qualifying dividend income, which is subject to a maximum tax rate of 15%. Please note that to utilize the lower tax rate for qualifying dividend income, shareholders must have held their shares in the Fund for 60 days or more. There were no distributions which qualified for the dividend received deduction available to corporate shareholders. The Fund has made an election under Section 853 to pass through foreign taxes paid by the Fund to its shareholders. The total amount of foreign taxes that were passed through to shareholders for the year ended December 31, 2003, were $226,026, equal to $0.04 per share from Brazil. The entire amount of foreign source income is from qualifying dividend income. This information is given to meet certain requirements of the Internal Revenue Code of 1986, as amended. Shareholders should refer to their Form1099-DIV to determine the amount includable on their respective tax returns for 2003. Notification for calendar year 2003 was mailed in January 2004. The notification along with Form 1099-DIV reflects the amount to be used by calendar year taxpayers on their U.S. federal income tax returns. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of the actual ordinary dividends paid by the Fund. They will generally not be entitled to foreign tax credit or deduction for the withholding taxes paid by the Fund. In general, distributions received by tax-exempt recipients (e.g., IRAs and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans)may need this information for their annual information reporting. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Fund. 21 DESCRIPTION OF INVESTLINK(SM) PROGRAM (UNAUDITED) The InvestLink(SM) Program is sponsored and administered by EquiServe, L.P., not by The Latin America Equity 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 expected to be submitted in 22 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 information as 23 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. 24 INFORMATION CONCERNING DIRECTORS AND OFFICERS (UNAUDITED)
TERM NUMBER OF OF OFFICE PORTFOLIOS IN AND FUND POSITION(S) LENGTH PRINCIPAL COMPLEX OTHER NAME, ADDRESS AND HELD WITH OF TIME OCCUPATION(S) DURING OVERSEEN BY DIRECTORSHIPS DATE OF BIRTH FUND SERVED PAST FIVE YEARS DIRECTOR HELD BY DIRECTOR - ---------------------------- --------------- ------------ -------------------- ------------- --------------------- INDEPENDENT DIRECTORS Enrique R. Arzac Lead Director; Since 1996; Professor of Finance 8 Director of The Adams c/o Credit Suisse Asset Nominating current term and Economics, Express Company (a Management, LLC Committee ends at the Graduate School of closed-end investment Attn: General Counsel Chairman and 2006 annual Business, Columbia company); Director of 466 Lexington Avenue Audit Committee meeting University since Petroleum and New York, New York Member 1971 Resources Corporation 10017-3140 (a closed-end investment company) Date of Birth: 10/02/41 James J. Cattano Director; Since 1990; President, Primary 4 None c/o Primary Resources, Inc. Nominating current term Resources, Inc. (an 55 Old Field Point Road Committee ends at the international Greenwich, Connecticut Member and 2005 annual trading and 06830 Audit Committee meeting manufacturing Chairman company specializing Date of Birth: 06/24/43 in the sale of agricultural commodities throughout Latin American markets) since October 1996 George W. Landau Director and Since 1990; Senior Advisor, 5 Director of GAM c/o Credit Suisse Asset Audit Committee current term Latin America, The Funds, Inc. Management, LLC Member ends at the Coca-Cola Company Attn: General Counsel 2006 annual since 1987; Advisor 466 Lexington Avenue meeting of Guardian New York, New York Industries (a glass 10017-3140 manufacturer) since 1992 Date of Birth: 03/04/20 Riordan Roett Director; Since 1999; Sarita and Don 1 Director of The Johns Hopkins University Nominating and current term Johnston Professor investment companies 1740 Massachusetts Audit Committee ends at the of Political advised by Citigroup Avenue N.W. Member 2005 annual Science, The Johns Asset Management Washington, Hopkins University District of Columbia 20036 since meeting 1973 Date of Birth: 09/10/38 Martin M. Torino Director; Since 1990; Chief Executive 3 None c/o Credit Suisse Asset Nominating and current term Officer and Director Management, LLC Audit Committee ends at the of Celsur Logistica Attn: General Counsel Member 2004 annual S.A. (Logistics) 466 Lexington Avenue meeting since 2002; Chairman New York, New York of the Board of 10017-3140 Ingenio y Refineria San Martin Del Date of Birth: 08/14/49 Tabacal S.A. (a sugar refinery) from August 1996 to 2000
25
TERM NUMBER OF OF OFFICE PORTFOLIOS IN AND FUND POSITION(S) LENGTH PRINCIPAL COMPLEX OTHER NAME, ADDRESS AND HELD WITH OF TIME OCCUPATION(S) DURING OVERSEEN BY DIRECTORSHIPS DATE OF BIRTH FUND SERVED PAST FIVE YEARS DIRECTOR HELD BY DIRECTOR - ---------------------------- --------------- ------------ -------------------- ------------- --------------------- INTERESTED DIRECTOR William W. Priest, Jr.* Director Since 1997; Co-Managing Partner, 49 Director of Globe Steinberg Priest & Sloane current term Steinberg Priest & Wireless, L.L.C. (a Capital Management, LLC ends at the Sloane Capital maritime 12 East 49th Street 2004 annual Management, LLC communications 12th Floor meeting since March 2001; company); Director of New York, New York Chairman and InfraRed X (a medical 10017 Managing Director of device company) CSAM from 2000 to Date of Birth: 09/24/41 February 2001, Chief Executive Officer and Managing Director of CSAM from 1990 to 2000
POSITION(S) LENGTH NAME, ADDRESS AND HELD WITH OF TIME DATE OF BIRTH FUND SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS - ---------------------------- --------------- ------------ ---------------------------------------------- OFFICERS Joseph D. Gallagher** Chairman of the Since 2003 Managing Director, Chief Executive Officer of c/o Credit Suisse Asset Fund, Chief CSAM and Global Chief Operating Officer of Management, LLC Executive Credit Suisse Asset Management since 2003; 466 Lexington Avenue Officer and Global Chief Financial Officer, Credit Suisse New York, New York President Asset Management from 1999 to 2003; Chief 10017-3140 Executive Officer and Director of Credit Suisse Asset Management Limited, London, Date of Birth: 12/14/62 England, from June 2000 to 2003; Director of Credit Suisse Asset Management Funds (UK) Limited, London, England, from June 2000 to 2003; Managing Director, Head-Asian Corporate Finance and M&A, Credit Suisse First Boston, Hong Kong, China, from January 1998 to May 1999; Officer of other Credit Suisse Funds Emily Alejos*** Co-Chief Since 1999 Director of CSAM since January 1999; Vice c/o Credit Suisse Asset Investment President of CSAM from 1997 to January 1999; Management, LLC Officer Associated with CSAM since 1997; Officer of 466 Lexington Avenue other Credit Suisse Funds New York, New York 10017-3140 Date of Birth: 10/27/63 Matthew J.K. Hickman*** Co-Chief Since 2004 Vice President of CSAM since December 2003; c/o Credit Suisse Asset Investment Financial Advisor with Global Advisors from Management, LLC Officer July 2003 to November 2003; General Manager of 466 Lexington Avenue Compass Group Investment Advisors S.A. from New York, New York February 2002 to July 2003; Financial Advisor 10017-3140 with Credit Suisse First Boston from August 2000 to February 2002; Director of ABN AMRO Date of Birth: 01/21/64 from September 1998 to August 2000; Officer of other Credit Suisse Funds
26
POSITION(S) LENGTH NAME, ADDRESS AND HELD WITH OF TIME DATE OF BIRTH FUND SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS - ---------------------------- --------------- ------------ ---------------------------------------------- OFFICERS--(CONCLUDED) Hal Liebes Senior Vice Since 1997 Managing Director and Global General Counsel c/o Credit Suisse Asset President of CSAM; Associated with CSAM since 1997; Management, LLC Officer of other Credit Suisse Funds 466 Lexington Avenue New York, New York 10017-3140 Date of Birth: 07/06/64 Michael A. Pignataro Chief Financial Since 1993 Director and Director of Fund Administration c/o Credit Suisse Asset Officer and of CSAM; Associated with CSAM since 1984; Management, LLC Secretary Officer of other Credit Suisse Funds 466 Lexington Avenue New York, New York 10017-3140 Date of Birth: 11/15/59 Rocco A. Del Guercio Vice President Since 1997 Vice President of CSAM; Associated with CSAM c/o Credit Suisse Asset since 1996; Officer of other Credit Suisse Management, LLC Funds 466 Lexington Avenue New York, New York 10017-3140 Date of Birth: 04/28/63 Robert M. Rizza Treasurer Since 1999 Assistant Vice President of CSAM since January c/o Credit Suisse Asset 2001; Associated with CSAM since 1998; Officer Management, LLC of other Credit Suisse Funds 466 Lexington Avenue New York, New York 10017-3140 Date of Birth: 12/09/65
- ---------- * Designates a director who is an "interested person" of the Fund as defined under the Investment Company Act of 1940, as amended. Mr. Priest is an interested person of the Fund because up to December 31, 2002 he was retained by CSAM to provide consulting services. ** Effective May 21, 2003, Joseph D. Gallagher was appointed as Chairman of the Fund, Chief Executive Officer and President. Laurence R. Smith who previously held these positions has resigned effective May 21, 2003. *** Effective February 12, 2004, Emily Alejos and Matthew Hickman were appointed as Co-Chief Investment Officers of the Fund. 27 OTHER FUNDS MANAGED BY CREDIT SUISSE ASSET MANAGEMENT, LLC Credit Suisse Capital Appreciation Fund Credit Suisse Cash Reserve Fund Credit Suisse Emerging Growth 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 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. 28 SUMMARY OF GENERAL INFORMATION The Fund--The Latin America Equity 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 long-term capital appreciation through investments primarily in Latin American equity 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 December 31, 2003, CSAM managed over $51 billion in the U.S. and, together with its global affiliates, managed assets of over $317 billion in 14 countries. SHAREHOLDER INFORMATION The market price is published in: THE NEW YORK TIMES (daily) under the designation "LatAmerEq" and The WALL STREET JOURNAL (daily), and BARRON'S (each Monday) under the designation "LatAmEq". The Fund's New York Stock Exchange, Inc. trading symbol is LAQ. Weekly comparative net asset value (NAV) and market price information about The Latin America Equity 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. CLOSED-END FUNDS SINGLE COUNTRY The Brazilian Equity Fund, Inc. (BZL) The Chile Fund, Inc. (CH) The First Israel Fund, Inc. (ISL) The Indonesia Fund, Inc. (IF) MULTIPLE COUNTRY The Emerging Markets Telecommunications Fund, Inc. (ETF) 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 Latin America Equity 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 William W. Priest, Jr. Director Riordan Roett Director Martin M. Torino Director Joseph D. Gallagher Chairman of the Fund, Chief Executive Officer and President Emily Alejos Co-Chief Investment Officer Matthew J.K. Hickman Co-Chief Investment Officer Hal Liebes Senior Vice President Michael A. Pignataro Chief Financial Officer and Secretary Rocco A. Del Guercio Vice President Robert M. Rizza 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 Fleet National Bank (c/o EquiServe, L.P.) P.O. Box 43010 Providence, RI 02940 INDEPENDENT AUDITORS 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. 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. [LAQ LISTED NYSE(R) LOGO] 3019-AR-03 ITEM 2. CODE OF ETHICS. The registrant has adopted a code of ethics applicable to its Chief Executive Officer, President, Chief Financial Officer and Chief Accounting Officer, or persons performing similar functions. A copy of the code is filed as Exhibit 11(a)(1) to this Form. There were no amendments to the code during the fiscal year ended December 31, 2003. There were no waivers or implicit waivers from the code granted by the registrant during the fiscal year ended December 31, 2003. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's governing board has determined that it has one audit committee financial expert serving on its audit committee: Enrique R. Arzac. The audit committee financial expert is "independent" for purposes of this item. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) through (d). The information in the table below is provided for services rendered to the registrant by its principal auditors, PricewaterhouseCoopers LLP ("PwC"), for its fiscal years ended December 31, 2002 and December 31, 2003.
2002 2003 - -------------------------------------------------------------------------------- Audit Fees $ 49,900 $ 54,741 Audit-Related Fees(1) -- 3,000 Tax Fees(2) 8,600 7,482 All Other Fees -- -- Total $ 58,500 $ 65,223
(1) Services include agreed-upon procedures in connection with the registrant's semi-annual financial statements. (2) Tax services in connection with the registrant's excise tax calculations and review of the registrant's applicable tax returns. The information in the table below is provided with respect to non-audit services that directly relate to the registrant's operations and financial reporting and that were rendered by PwC to the registrant's investment adviser, Credit Suisse Asset Management, LLC ("CSAM"), and any service provider to the registrant controlling, controlled by or under common control with CSAM that provided ongoing services to the registrant ("Covered Services Provider"), for the registrant's fiscal years ended December 31, 2002 and December 31, 2003.
2002 2003 - --------------------------------------------------------------------------------- Audit-Related Fees N/A N/A Tax Fees N/A N/A All Other Fees N/A N/A Total N/A N/A
(e)(1) Pre-Approval Policies and Procedures. The Audit Committee ("Committee") of the registrant is responsible for pre-approving (i) all audit and permissible non-audit services to be provided by the independent auditors to the registrant and (ii) all permissible non-audit services to be provided by the independent auditors to CSAM and any Covered Services Provider if the engagement relates directly to the operations and financial reporting of the registrant. The Committee may delegate its responsibility to pre-approve any such audit and permissible non-audit services to the Chairperson of the Committee, and the Chairperson shall report to the Committee, at its next regularly scheduled meeting after the Chairperson's pre-approval of such services, his or her decision(s). The Committee may also establish detailed pre-approval policies and procedures for pre-approval of such services in accordance with applicable laws, including the delegation of some or all of the Committee's pre-approval responsibilities to other persons (other than CSAM or the registrant's officers). Pre-approval by the Committee of any permissible non-audit services shall not be required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the registrant, CSAM and any Covered Services Provider constitutes not more than 5% of the total amount of revenues paid by the registrant to its independent auditors during the fiscal year in which the permissible non-audit services are provided; (ii) the permissible non-audit services were not recognized by the registrant at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit. (e)(2) The information in the table below sets forth the percentages of fees for services (other than audit, review or attest services) rendered by PwC to the registrant for which the pre-approval requirement was waived pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X:
2002 2003 - --------------------------------------------------------------------------------- Audit-Related Fees N/A N/A Tax Fees N/A N/A All Other Fees N/A N/A Total N/A N/A
The information in the table below sets forth the percentages of fees for services (other than audit, review or attest services) rendered by PwC to CSAM and any Covered Services Provider required to be approved pursuant to Rule 2-01(c)(7)(ii)of Regulation S-X, for the registrant's fiscal years ended December 31, 2002 and December 31, 2003:
2002 2003 - --------------------------------------------------------------------------------- Audit-Related Fees N/A N/A Tax Fees N/A N/A All Other Fees N/A N/A Total N/A N/A
(f) Not Applicable. (g) The aggregate fees billed by PwC for non-audit services rendered to the registrant, CSAM and Covered Service Providers for the fiscal years ended December 31, 2002 and December 31, 2003 were $8,600 and $10,482, respectively. (h) Not Applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. The registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The members of the committee are Enrique R. Arzac, James J. Cattano, George W. Landau, Riordan Roett and Martin M. Torino. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. CREDIT SUISSE ASSET MANAGEMENT, LLC CSAM CAPITAL INC. CREDIT SUISSE FUNDS CREDIT SUISSE INSTITUTIONAL FUNDS CSAM CLOSED-END FUNDS PROXY VOTING POLICY AND PROCEDURES Introduction Credit Suisse Asset Management, LLC and CSAM Capital Inc. (collectively, "CSAM") are fiduciaries that owe each of its clients duties of care and loyalty with respect to proxy voting. The duty of care requires CSAM to monitor corporate events and to vote proxies. To satisfy its duty of loyalty, CSAM must cast proxy votes in the best interests of each of its clients. The Credit Suisse Funds, Credit Suisse Institutional Funds, and CSAM Closed-End Funds (the "Funds"), which have engaged Credit Suisse Asset Management, LLC as their investment adviser, are of the belief that the proxy voting process is a means of addressing corporate governance issues and encouraging corporate actions both of which can enhance shareholder value. Policy The Proxy Voting Policy (the "Policy") set forth below is designed to ensure that proxies are voted in the best interests of CSAM's clients. The Policy addresses particular issues and gives a general indication of how CSAM will vote proxies. The Policy is not exhaustive and does not include all potential issues. Proxy Voting Committee The Proxy Voting Committee will consist of a member of the Portfolio Management Department, a member of the Legal and Compliance Department, and a member of the Operations Department (or their designees). The purpose of the Proxy Voting Committee is to administer the voting of all clients' proxies in accordance with the Policy. The Proxy Voting Committee will review the Policy annually to ensure that it is designed to promote the best interests of CSAM's clients. For the reasons disclosed below under "Conflicts," the Proxy Voting Committee has engaged the services of an independent third party (initially, Institutional Shareholder Services ("ISS")) to assist in issue analysis and vote recommendation for proxy proposals. Proxy proposals addressed by the Policy will be voted in accordance with the Policy. Proxy proposals addressed by the Policy that require a case-by-case analysis will be voted in accordance with the vote recommendation of ISS. Proxy proposals not addressed by the Policy will also be voted in accordance with the vote recommendation of ISS. To the extent that the Proxy Voting Committee proposes to deviate from the Policy or the ISS vote recommendation, the Committee shall obtain client consent as described below. CSAM investment professionals may submit a written recommendation to the Proxy Voting Committee to vote in a manner inconsistent with the Policy and/or the recommendation of ISS. Such recommendation will set forth its basis and rationale. In addition, the investment professional must confirm in writing that he/she is not aware of any conflicts of interest concerning the proxy matter or provide a full and complete description of the conflict. Conflicts CSAM is the institutional and mutual fund asset management arm of Credit Suisse First Boston, which is part of Credit Suisse Group, one of the world's largest financial organizations. As part of a global, full service investment-bank, broker-dealer, and asset-management organization, CSAM and its affiliates and personnel may have multiple advisory, transactional, financial, and other interests in securities, instruments, and companies that may be purchased or sold by CSAM for its clients' accounts. The interests of CSAM and/or its affiliates and personnel may conflict with the interests of CSAM's clients in connection with any proxy issue. In addition, CSAM may not be able to identify all of the conflicts of interest relating to any proxy matter. Consent In each and every instance in which the Proxy Voting Committee favors voting in a manner that is inconsistent with the Policy or the vote recommendation of ISS (including proxy proposals addressed and not addressed by the Policy), it shall disclose to the client conflicts of interest information and obtain client consent to vote. Where the client is a Fund, disclosure shall be made to any one director who is not an "interested person," as that term is defined under the Investment Company Act of 1940, as amended, of the Fund. Recordkeeping CSAM is required to maintain in an easily accessible place for five years all records relating to proxy voting. These records include the following: a copy of the Policy; a copy of each proxy statement received on behalf of CSAM clients; a record of each vote cast on behalf of CSAM clients; a copy of all documents created by CSAM personnel that were material to making a decision on a vote or that memorializes the basis for the decision; and a copy of each written request by a client for information on how CSAM voted proxies, as well as a copy of any written response. CSAM reserves the right to maintain certain required proxy records with ISS in accordance with all applicable regulations. Disclosure CSAM will describe the Policy to each client. Upon request, CSAM will provide any client with a copy of the Policy. CSAM will also disclose to its clients how they can obtain information on their proxy votes. ISS will capture data necessary for Funds to file Form N-PX on an annual basis concerning their proxy voting record in accordance with applicable law. Procedures The Proxy Voting Committee will administer the voting of all client proxies. CSAM has engaged ISS as an independent third party proxy voting service to assist in the voting of client proxies. ISS will coordinate with each client's custodian to ensure that proxy materials reviewed by the custodians are processed in a timely fashion. ISS will provide CSAM with an analysis of proxy issues and a vote recommendation for proxy proposals. ISS will refer proxies to the Proxy Voting Committee for instructions when the application of the Policy is not clear. The Proxy Voting Committee will notify ISS of any changes to the Policy or deviating thereof. PROXY VOTING POLICY Operational Items Adjourn Meeting Proposals to provide management with the authority to adjourn an annual or special meeting will be determined on a case-by-case basis. Amend Quorum Requirements Proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding will be determined on a case-by-case basis. Amend Minor Bylaws Generally vote for bylaw or charter changes that are of a housekeeping nature. Change Date, Time, or Location of Annual Meeting Generally vote for management proposals to change the date/time/location of the annual meeting unless the proposed change is unreasonable. Generally vote against shareholder proposals to change the date/time/location of the annual meeting unless the current scheduling or location is unreasonable. Ratify Auditors Generally vote for proposals to ratify auditors unless: (1) an auditor has a financial interest in or association with the company, and is therefore not independent; (2) fees for non-audit services are excessive, or (3) there is reason to believe that the independent auditor has rendered an opinion, which is neither accurate nor indicative of the company's financial position. Generally vote on a case-by-case basis on shareholder proposals asking companies to prohibit their auditors from engaging in non-audit services (or capping the level of non-audit services). Generally vote on a case-by-case basis on auditor rotation proposals taking into consideration: (1) tenure of audit firm; (2) establishment and disclosure of a renewal process whereby the auditor is regularly evaluated for both audit quality and competitive price; (3) length of the rotation period advocated in the proposal, and (4) significant audit related issues. Board of Directors Voting on Director Nominees in Uncontested Elections Generally votes on director nominees on a case-by-case basis. Votes may be withheld: (1) from directors who attended less than 75% of the board and committee meetings without a valid reason for the absences; (2) implemented or renewed a dead-hand poison pill; (3) ignored a shareholder proposal that was approved by a majority of the votes cast for two consecutive years; (4) ignored a shareholder proposal approved by a majority of the shares outstanding; (5) have failed to act on takeover offers where the majority of the shareholders have tendered their shares; (6) are inside directors or affiliated outside directors and sit on the audit, compensation, or nominating committee; (7) are inside directors or affiliated outside directors and the full board serves as the audit, compensation, or nominating committee or the company does not have one of these committees; or (8) are audit committee members and the non-audit fees paid to the auditor are excessive Cumulative Voting Proposals to eliminate cumulative voting will be determined on a case-by-case basis. Proposals to restore or provide for cumulative voting in the absence of sufficient good governance provisions and/or poor relative shareholder returns will be determined on a case-by-case basis. Director and Officer Indemnification and Liability Protection Proposals on director and officer indemnification and liability protection generally evaluated on a case-by-case basis. Generally vote against proposals that would: (1) eliminate entirely directors' and officers' liability for monetary damages for violating the duty of care; or (2) expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligation than mere carelessness. Generally vote for only those proposals providing such expanded coverage in cases when a director's or officer's legal defense was unsuccessful if: (1) the director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company, and (2) only if the director's legal expenses would be covered. Filling Vacancies/Removal of Directors Generally vote against proposals that provide that directors may be removed only for cause. Generally vote for proposals to restore shareholder ability to remove directors with or without cause. Proposals that provide that only continuing directors may elect replacements to fill board vacancies will be determined on a case-by-case basis. Generally vote for proposals that permit shareholders to elect directors to fill board vacancies. Independent Chairman (Separate Chairman/CEO) Generally vote for shareholder proposals requiring the position of chairman be filled by an independent director unless there are compelling reasons to recommend against the proposal, including: (1) designated lead director, elected by and from the independent board members with clearly delineated duties; (2) 2/3 independent board; (3) all independent key committees; or (4) established governance guidelines. Majority of Independent Directors Generally vote for shareholder proposals requiring that the board consist of a majority or substantial majority (two-thirds) of independent directors unless the board composition already meets the adequate threshold. Generally vote for shareholder proposals requiring the board audit, compensation, and/or nominating committees be composed exclusively of independent directors if they currently do not meet that standard. Generally withhold votes from insiders and affiliated outsiders sitting on the audit, compensation, or nominating committees. Generally withhold votes from insiders and affiliated outsiders on boards that are lacking any of these three panels. Generally withhold votes from insiders and affiliated outsiders on boards that are not at least majority independent. Term Limits Generally vote against shareholder proposals to limit the tenure of outside directors. Proxy Contests Voting on Director Nominees in Contested Elections Votes in a contested election of directors should be decided on a case-by-case basis, with shareholders determining which directors are best suited to add value for shareholders. The major decision factors are: (1) company performance relative to its peers; (2) strategy of the incumbents versus the dissidents; (3) independence of directors/nominees; (4) experience and skills of board candidates; (5) governance profile of the company; (6) evidence of management entrenchment; (7) responsiveness to shareholders; or (8) whether takeover offer has been rebuffed. Amend Bylaws without Shareholder Consent Proposals giving the board exclusive authority to amend the bylaws will be determined on a case-by-case basis. Proposals giving the board the ability to amend the bylaws in addition to shareholders will be determined on a case-by-case basis. Confidential Voting Generally vote for shareholder proposals requesting that corporations adopt confidential voting, use independent vote tabulators and use independent inspectors of election, as long as the proposal includes a provision for proxy contests as follows: In the case of a contested election, management should be permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy may remain in place. If the dissidents will not agree, the confidential voting policy may be waived. Generally vote for management proposals to adopt confidential voting. Cumulative Voting Proposals to eliminate cumulative voting will be determined on a case-by-case basis. Proposals to restore or provide for cumulative voting in the absence of sufficient good governance provisions and/or poor relative shareholder returns will be determined on a case-by-case basis. Antitakeover Defenses and Voting Related Issues Advance Notice Requirements for Shareholder Proposals/Nominations Votes on advance notice proposals are determined on a case-by-case basis. Amend Bylaws without Shareholder Consent Proposals giving the board exclusive authority to amend the bylaws will be determined on a case-by-case basis. Generally vote for proposals giving the board the ability to amend the bylaws in addition to shareholders. Poison Pills (Shareholder Rights Plans) Generally vote for shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it. Votes regarding management proposals to ratify a poison pill should be determined on a case-by-case basis. Plans should embody the following attributes: (1) 20% or higher flip-in or flip-over; (2) two to three year sunset provision; (3) no dead-hand or no-hand features; or (4) shareholder redemption feature Shareholders' Ability to Act by Written Consent Generally vote against proposals to restrict or prohibit shareholders' ability to take action by written consent. Generally vote for proposals to allow or make easier shareholder action by written consent. Shareholders' Ability to Call Special Meetings Proposals to restrict or prohibit shareholders' ability to call special meetings or that remove restrictions on the right of shareholders to act independently of management will be determined on a case-by-case basis. Supermajority Vote Requirements Proposals to require a supermajority shareholder vote will be determined on a case-by-case basis Proposals to lower supermajority vote requirements will be determined on a case-by-case basis. Merger and Corporate Restructuring Appraisal Rights Generally vote for proposals to restore, or provide shareholders with, rights of appraisal. Asset Purchases Generally vote case-by-case on asset purchase proposals, taking into account: (1) purchase price, including earnout and contingent payments; (2) fairness opinion; (3) financial and strategic benefits; (4) how the deal was negotiated; (5) conflicts of interest; (6) other alternatives for the business; or (7) noncompletion risk (company's going concern prospects, possible bankruptcy). Asset Sales Votes on asset sales should be determined on a case-by-case basis after considering: (1) impact on the balance sheet/working capital; (2) potential elimination of diseconomies; (3) anticipated financial and operating benefits; (4) anticipated use of funds; (5) value received for the asset; fairness opinion (if any); (6) how the deal was negotiated; or (6) Conflicts of interest Conversion of Securities Votes on proposals regarding conversion of securities are determined on a case-by-case basis. When evaluating these proposals, should review (1) dilution to existing shareholders' position; (2) conversion price relative to market value; (3) financial issues: company's financial situation and degree of need for capital; effect of the transaction on the company's cost of capital; (4) control issues: change in management; change in control; standstill provisions and voting agreements; guaranteed contractual board and committee seats for investor; veto power over certain corporate actions; (5) termination penalties; (6) conflict of interest: arm's length transactions, managerial incentives. Generally vote for the conversion if it is expected that the company will be subject to onerous penalties or will be forced to file for bankruptcy if the transaction is not approved. Corporate Reorganization Votes on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan are determined on a case-by-case basis, after evaluating: (1) dilution to existing shareholders' position; (2) terms of the offer; (3) financial issues; (4) management's efforts to pursue other alternatives; (5) control issues; (6) conflict of interest. Generally vote for the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved. Reverse Leveraged Buyouts Votes on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan are determined on a case-by-case basis, after evaluating: (1) dilution to existing shareholders' position; (2) terms of the offer; (3) financial issues; (4) management's efforts to pursue other alternatives; (5) control issues; (6) conflict of interest. Generally vote for the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved. Formation of Holding Company Votes on proposals regarding the formation of a holding company should be determined on a case-by-case basis taking into consideration: (1) the reasons for the change; (2) any financial or tax benefits; (3) regulatory benefits; (4) increases in capital structure; (5) changes to the articles of incorporation or bylaws of the company. Absent compelling financial reasons to recommend the transaction, generally vote against the formation of a holding company if the transaction would include either of the following: (1) increases in common or preferred stock in excess of the allowable maximum as calculated a model capital structure; (2) adverse changes in shareholder rights; (3) going private transactions; (4) votes going private transactions on a case-by-case basis, taking into account: (a) offer price/premium; (b) fairness opinion; (c) how the deal was negotiated; (d) conflicts of interest; (e) other alternatives/offers considered; (f) noncompletion risk. Joint Ventures Vote on a case-by-case basis on proposals to form joint ventures, taking into account: (1) percentage of assets/business contributed; (2) percentage ownership; (3) financial and strategic benefits; (4) governance structure; (5) conflicts of interest; (6) other alternatives; (7) noncompletion risk; (8) liquidations. Votes on liquidations should be determined on a case-by-case basis after reviewing: (1) management's efforts to pursue other alternatives such as mergers; (2) appraisal value of the assets (including any fairness opinions); (3) compensation plan for executives managing the liquidation. Generally vote for the liquidation if the company will file for bankruptcy if the proposal is not approved. Mergers and Acquisitions Votes on mergers and acquisitions should be considered on a case-by-case basis, determining whether the transaction enhances shareholder value by giving consideration to: (1) prospects of the combined companies; (2) anticipated financial and operating benefits; (3) offer price; (4) fairness opinion; (5) how the deal was negotiated; (6) changes in corporate governance and their impact on shareholder rights; (7) change in the capital structure; (8) conflicts of interest. Private Placements Votes on proposals regarding private placements should be determined on a case-by-case basis. When evaluating these proposals, should review: (1) dilution to existing shareholders' position; (2) terms of the offer; (3) financial issues; (4) management's efforts to pursue alternatives such as mergers; (5) control issues; (6) conflict of interest. Generally vote for the private placement if it is expected that the company will file for bankruptcy if the transaction is not approved. Prepackaged Bankruptcy Plans Votes on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan are determined on a case-by-case basis, after evaluating: (1) dilution to existing shareholders' position; (2) terms of the offer; (3) financial issues; (4) management's efforts to pursue other alternatives; (5) control issues; (6) conflict of interest. Generally vote for the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved. Recapitalization Votes case-by-case on recapitalizations (reclassifications of securities), taking into account: (1) more simplified capital structure; (2) enhanced liquidity; (3) fairness of conversion terms, including fairness opinion; (4) impact on voting power and dividends; (5) reasons for the reclassification; (6) conflicts of interest; (7) other alternatives considered. Reverse Stock Splits Generally vote for management proposals to implement a reverse stock split when the number of authorized shares will be proportionately reduced. Generally vote for management proposals to implement a reverse stock split to avoid delisting. Votes on proposals to implement a reverse stock split that do not proportionately reduce the number of shares authorized for issue should be determined on a case-by-case basis. Spinoffs Votes on spinoffs should be considered on a case-by-case basis depending on: (1) tax and regulatory advantages; (2) planned use of the sale proceeds; (3) valuation of spinoff; fairness opinion; (3) benefits that the spinoff may have on the parent company including improved market focus; (4) conflicts of interest; managerial incentives; (5) any changes in corporate governance and their impact on shareholder rights; (6) change in the capital structure Value Maximization Proposals Vote case-by-case on shareholder proposals seeking to maximize shareholder value. Capital Structure Adjustments to Par Value of Common Stock Generally vote for management proposals to reduce the par value of common stock unless the action is being taken to facilitate an antitakeover device or some other negative corporate governance action. Generally vote for management proposals to eliminate par value. Common Stock Authorization Votes on proposals to increase the number of shares of common stock authorized for issuance are determined on a case-by-case basis. Generally vote against proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has superior voting rights. Generally vote for proposals to approve increases beyond the allowable increase when a company's shares are in danger of being delisted or if a company's ability to continue to operate as a going concern is uncertain. Dual-class Stock Generally vote against proposals to create a new class of common stock with superior voting rights. Generally vote for proposals to create a new class of nonvoting or subvoting common stock if: (1) it is intended for financing purposes with minimal or no dilution to current shareholders; (2) it is not designed to preserve the voting power of an insider or significant shareholder. Issue Stock for Use with Rights Plan Generally vote against proposals that increase authorized common stock for the explicit purpose of implementing a shareholder rights plan. Preemptive Rights Votes regarding shareholder proposals seeking preemptive rights should be determined on a case-by-case basis after evaluating: (1) the size of the company; (2) the shareholder base; (3) the liquidity of the stock Preferred Stock Generally vote against proposals authorizing the creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights ("blank check" preferred stock). Generally vote for proposals to create "declawed" blank check preferred stock (stock that cannot be used as a takeover defense). Generally vote for proposals to authorize preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable. Generally vote against proposals to increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose. Generally vote case-by-case on proposals to increase the number of blank check preferred shares after analyzing the number of preferred shares available for issue given a company's industry and performance in terms of shareholder returns. Recapitalization Vote case-by-case on recapitalizations (reclassifications of securities), taking into account: (1) more simplified capital structure; (2) enhanced liquidity; (3) fairness of conversion terms, including fairness opinion; (4) impact on voting power and dividends; (5) reasons for the reclassification; (6) conflicts of interest; (7) other alternatives considered. Reverse Stock Splits Generally vote for management proposals to implement a reverse stock split when the number of authorized shares will be proportionately reduced. Generally vote for management proposals to implement a reverse stock split to avoid delisting. Votes on proposals to implement a reverse stock split that do not proportionately reduce the number of shares authorized for issue should be determined on a case-by-case basis. Share Repurchase Programs Generally vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms. Stock Distributions: Splits and Dividends Generally vote for management proposals to increase the common share authorization for a stock split or share dividend, provided that the increase in authorized shares would not result in an excessive number of shares available for issuance. Tracking Stock Votes on the creation of tracking stock are determined on a case-by-case basis, weighing the strategic value of the transaction against such factors as: (1) adverse governance changes; (2) excessive increases in authorized capital stock; (3) unfair method of distribution; (4) diminution of voting rights; (5) adverse conversion features; (6) negative impact on stock option plans; (7) other alternatives such as a spinoff. Executive and Director Compensation Executive and Director Compensation Votes on compensation plans for directors are determined on a case-by-case basis. Stock Plans in Lieu of Cash Votes for plans which provide participants with the option of taking all or a portion of their cash compensation in the form of stock are determined on a case-by-case basis. Generally vote for plans which provide a dollar-for-dollar cash for stock exchange. Votes for plans which do not provide a dollar-for-dollar cash for stock exchange should be determined on a case-by-case basis. Director Retirement Plans Generally vote against retirement plans for nonemployee directors. Generally vote for shareholder proposals to eliminate retirement plans for nonemployee directors. Management Proposals Seeking Approval to Reprice Options Votes on management proposals seeking approval to reprice options are evaluated on a case-by-case basis giving consideration to the following: (1) historic trading patterns; (2) rationale for the repricing; (3) value-for-value exchange; (4) option vesting; (5) term of the option; (6) exercise price; (7) participants; (8) employee stock purchase plans. Votes on employee stock purchase plans should be determined on a case-by-case basis. Generally vote for employee stock purchase plans where: (1) purchase price is at least 85 percent of fair market value; (2) offering period is 27 months or less, and (3) potential voting power dilution (VPD) is ten percent or less. Generally vote against employee stock purchase plans where either: (1) purchase price is less than 85 percent of fair market value; (2) Offering period is greater than 27 months, or (3) VPD is greater than ten percent Incentive Bonus Plans and Tax Deductibility Proposals Generally vote for proposals that simply amend shareholder-approved compensation plans to include administrative features or place a cap on the annual grants any one participant may receive. Generally vote for proposals to add performance goals to existing compensation plans. Votes to amend existing plans to increase shares reserved and to qualify for favorable tax treatment considered on a case-by-case basis. Generally vote for cash or cash and stock bonus plans that are submitted to shareholders for the purpose of exempting compensation from taxes if no increase in shares is requested. Employee Stock Ownership Plans (ESOPs) Generally vote for proposals to implement an ESOP or increase authorized shares for existing ESOPs, unless the number of shares allocated to the ESOP is excessive (more than five percent of outstanding shares.) 401(k) Employee Benefit Plans Generally vote for proposals to implement a 401(k) savings plan for employees. Shareholder Proposals Regarding Executive and Director Pay Generally vote for shareholder proposals seeking additional disclosure of executive and director pay information, provided the information requested is relevant to shareholders' needs, would not put the company at a competitive disadvantage relative to its industry, and is not unduly burdensome to the company. Generally vote against shareholder proposals seeking to set absolute levels on compensation or otherwise dictate the amount or form of compensation. Generally vote against shareholder proposals requiring director fees be paid in stock only. Generally vote for shareholder proposals to put option repricings to a shareholder vote. Vote for shareholders proposals to exclude pension fund income in the calculation of earnings used in determining executive bonuses/compensation. Vote on a case-by-case basis for all other shareholder proposals regarding executive and director pay, taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook. Performance-Based Option Proposals Generally vote for shareholder proposals advocating the use of performance-based equity awards (indexed, premium-priced, and performance-vested options), unless: (1) the proposal is overly restrictive; or (2) the company demonstrates that it is using a substantial portion of performance-based awards for its top executives. Stock Option Expensing Generally vote for shareholder proposals asking the company to expense stock options unless the company has already publicly committed to start expensing by a specific date. Golden and Tin Parachutes Generally vote for shareholder proposals to require golden and tin parachutes to be submitted for shareholder ratification, unless the proposal requires shareholder approval prior to entering into employment contracts. Vote on a case-by-case basis on proposals to ratify or cancel golden or tin parachutes. January 13, 2004 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 Form N-CSR disclosure requirement not yet applicable to the registrant. 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) The registrant's code of ethics is an exhibit to this report. (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 LATIN AMERICA EQUITY FUND, INC. /s/ Joseph D. Gallagher ----------------------- Name: Joseph D. Gallagher Title: Chief Executive Officer Date: March 5, 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/ Joseph D. Gallagher ----------------------- Name: Joseph D. Gallagher Title: Chief Executive Officer Date: March 5, 2004 /s/ Michael A. Pignataro ------------------------ Name: Michael A. Pignataro Title: Chief Financial Officer Date: March 5, 2004 EX-99.CODEETH 3 a2127136zex-99_codeeth.txt EXHIBIT 99.CODE OF ETHICS EXHIBIT 99.CODE ETH EXHIBIT 11(a)(1) CODE OF ETHICS CREDIT SUISSE FUNDS CREDIT SUISSE INSTITUTIONAL FUNDS CREDIT SUISSE CLOSED-END FUNDS CODE OF ETHICS FOR SENIOR OFFICERS PREAMBLE Section 406 of the Sarbanes-Oxley Act of 2002 directs that rules be adopted disclosing whether a company has a code of ethics for senior financial officers. The Securities and Exchange Commission (the "SEC") has adopted rules requiring annual disclosure of an investment company's code of ethics applicable to the company's principal executive as well as principal financial officers, if such a code has been adopted. In response, the above Funds (each a "Fund", and together the "Funds") have adopted this Code of Ethics. STATEMENT OF POLICY It is the obligation of the senior officers of the Funds to provide full, fair, timely and comprehensible disclosure--financial and otherwise--to Fund shareholders, regulatory authorities and the general public. In fulfilling that obligation, senior officers must act ethically, honestly and diligently. This Code is intended to enunciate guidelines to be followed by persons who serve the Funds in senior officerships. No Code can address every situation that a senior officer might face; however, as a guiding principle, senior officers should strive to implement the spirit as well as the letter of applicable laws, rules and regulations, and to provide the type of clear and complete disclosure and information Fund shareholders have a right to expect. The purpose of this Code of Ethics is to promote high standards of ethical conduct by Covered Persons (as defined below) in their capacities as officers of the Funds, to instruct them as to what is considered to be inappropriate and unacceptable conduct or activities for officers and to prohibit such conduct or activities. This Code supplements other policies that the Funds and their adviser have adopted or may adopt in the future with which Fund officers are also required to comply (e.g., code of ethics relating to personal trading and conduct). COVERED PERSONS This Code of Ethics applies to those persons appointed by the Fund's Board of Directors as Chief Executive Officer, President, Chief Financial Officer and Chief Accounting Officer, or persons performing similar functions. It is recognized that each of such persons currently is a full-time employee of Credit Suisse Asset Management LLC ("CSAM"), each Fund's investment adviser. PROMOTION OF HONEST AND ETHICAL CONDUCT In serving as an officer of the Funds, each Covered Person must maintain high standards of honesty and ethical conduct and must encourage his colleagues who provide services to the Funds, whether directly or indirectly, to do the same. Each Covered Person understands that as an officer of a Fund, he has a duty to act in the best interests of the Fund and its shareholders. The interests of other CSAM clients or CSAM itself or the Covered Person's personal interests should not be allowed to compromise the Covered Person's fulfilling his duties as an officer of the Fund. The governing Boards of the Funds recognize that the Covered Persons are also officers or employees of CSAM. Furthermore, the governing Boards of the Funds recognize that, subject to the Covered Person's fiduciary duties to the Funds, the Covered Persons will in the normal course of their duties (whether formally for the Funds or for CSAM, or for both) be involved in establishing policies and implementing decisions that will have different effects on CSAM and the Funds. The governing Boards of the Funds recognize that the participation of the Covered Persons in such activities is inherent in the contractual relationship between the Funds and CSAM and/or its affiliates, and is consistent with the expectation of the governing Boards of the performance by the Covered Persons of their duties as officers of the Funds. If a Covered Person believes that his responsibilities as an officer or employee of CSAM are likely to materially compromise his objectivity or his ability to perform the duties of his role as an officer of the Funds, he should consult with CSAM's general counsel, the Funds' chief legal officer or outside counsel, or counsel to the independent Directors/Trustees of the relevant Fund or Funds. Under appropriate circumstances, a Covered Person should also consider whether to present the matter to the Directors/Trustees of the relevant Fund or Funds or a committee thereof. No Covered Person shall suggest that any person providing, or soliciting to be retained to provide, services to a Fund give a gift or an economic benefit of any kind to him in connection with the person's retention or the provision of services. PROMOTION OF FULL, FAIR, ACCURATE, TIMELY AND UNDERSTANDABLE DISCLOSURE No Covered Person shall create or further the creation of false or misleading information in any SEC filing or report to Fund shareholders. No Covered Person shall conceal or fail to disclose information within the Covered Person's possession legally required to be disclosed or necessary to make the disclosure made not misleading. If a Covered Person shall become aware that information filed with the SEC or made available to the public contains any false or misleading information or omits to disclose necessary information, he shall promptly report it to CSAM's general counsel or Fund counsel, who shall advise such Covered Person whether corrective action is necessary or appropriate. Each Covered Person, consistent with his responsibilities, shall exercise appropriate supervision over, and shall assist, relevant Fund service providers in developing financial information and other disclosure that complies with relevant law and presents information in a clear, comprehensible and complete manner. Each Covered Person shall use his best efforts within his area of expertise to assure that Fund reports reveal, rather than conceal, the relevant Fund's financial condition. Each Covered Person shall seek to obtain additional resources if he believes that available resources are inadequate to enable the Funds to provide full, fair and accurate financial information and other disclosure to regulators and Fund shareholders. Each Covered Person shall inquire of other Fund officers and service providers, as appropriate, to assure that information provided is accurate and complete and presented in an understandable format using comprehensible language. Each Covered Person shall diligently perform his services to the Funds, so that information can be gathered and assessed early enough to facilitate timely filings and issuance of reports and required certifications. PROMOTION OF COMPLIANCE WITH APPLICABLE GOVERNMENT LAWS, RULES AND REGULATIONS Each Covered Person shall become and remain knowledgeable concerning the laws and regulations relating to the Funds and their operations and shall act with competence and due care in serving as an officer of the Funds. Each Covered Person with specific responsibility for financial statement disclosure will become and remain knowledgeable concerning relevant auditing standards, generally accepted accounting principles, FASB pronouncements and other accounting and tax literature and developments. Each Covered Person shall devote sufficient time to fulfilling his responsibilities to the Funds, recognizing that he will devote substantial time to providing services to other CSAM clients and will perform other activities as an employee of CSAM. Each Covered Person shall cooperate with a Fund's independent auditors, regulatory agencies and internal auditors in their review or inspection of the Fund and its operations. No Covered Person shall knowingly violate any law or regulation relating to the Funds or their operations or seek to illegally circumvent any such law or regulation. No Covered Person shall engage in any conduct involving dishonesty, fraud, deceit or misrepresentation involving the Funds or their operations. PROMOTING PROMPT INTERNAL REPORTING OF VIOLATIONS Each Covered Person shall promptly report his own violations of this Code and violations by other Covered Persons of which he is aware to the Chairman of the relevant Fund's Audit Committee. Any requests for a waiver from or an amendment to this Code shall be made to the Chairman of the relevant Fund's Audit Committee. All waivers and amendments shall be disclosed as required by law. SANCTIONS Failure to comply with this Code will subject the violator to appropriate sanctions, which will vary based on the nature and severity of the violation. Such sanctions may include censure, suspension or termination of position as an officer of the Fund. Sanctions shall be imposed by the relevant Fund's Audit Committee, subject to review by the entire Board of Directors/Trustees of the Fund. Each Covered Person shall be required to certify annually whether he has complied with this Code. NO RIGHTS CREATED This Code of Ethics is a statement of certain fundamental principles, policies and procedures that govern the Funds' senior officers in the conduct of the Funds' business. It is not intended to and does not create any rights in any employee, investor, supplier, competitor, shareholder or any other person or entity. RECORDKEEPING The Funds will maintain and preserve for a period of not less than six (6) years from the date such action is taken, the first two (2) years in an easily accessible place, a copy of the information or materials supplied to the Board (1) that provided the basis for any amendment or waiver to this Code and (2) relating to any violation of the Code and sanctions imposed for such violation, together with a written record of the approval or action taken by the relevant Board. AMENDMENTS The Directors/Trustees will make and approve such changes to this Code of Ethics as they deem necessary or appropriate to effectuate the purposes of this Code. Dated: May 20, 2003 CODE OF ETHICS FOR SENIOR OFFICERS: I HEREBY CERTIFY THAT: (1) I have read and I understand the Code of Ethics for Senior Officers adopted by the Credit Suisse Funds, the Credit Suisse Institutional Funds and the Credit Suisse Closed-End Funds (the "Code of Ethics"); (2) I recognize that I am subject to the Code of Ethics; (3) I have complied with the requirements of the Code of Ethics during the calendar year ending December 31, _______; and (4) I have reported all violations of the Code of Ethics required to be reported pursuant to the requirements of the Code during the calendar year ending December 31, _______. Set forth below exceptions to items (3) and (4), if any: ------------------------------------------- ------------------------------------------- ------------------------------------------- Name: ------------------------------ Date: EX-99.302 4 a2127136zex-99_302.txt EXHIBIT 99.302 EXHIBIT 99.CERT EXHIBIT 11(a)(2) CERTIFICATIONS I, Michael A. Pignataro, certify that: 1. I have reviewed this report on Form N-CSR of The Latin America Equity Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 5, 2004 /s/ Michael A. Pignataro - ------------------------ Michael A. Pignataro Chief Financial Officer I, Joseph D. Gallagher, certify that: 1. I have reviewed this report on Form N-CSR of The Latin America Equity Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected. or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial data information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 5, 2004 /s/ Joseph D. Gallagher - ----------------------- Joseph D. Gallagher Chief Executive Officer EX-99.CERT906 5 a2127136zex-99_cert906.txt EXHIBIT 99.CERT906 EXHIBIT 99.906CERT EXHIBIT 11(b) SECTION 906 CERTIFICATIONS SECTION 906 CERTIFICATION Joseph D. Gallagher, Chief Executive Officer, and Michael A. Pignataro, Chief Financial Officer, of The Latin America Equity Fund, Inc. (the "Fund"), each certify to his knowledge that: (1) The Fund's periodic report on Form N-CSR for the period ended December 31, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. /s/ Joseph D. Gallagher /s/ Michael A. Pignataro ----------------------- ------------------------ Joseph D. Gallagher Michael A. Pignataro Chief Executive Officer Chief Financial Officer March 5, 2004 March 5, 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Fund and will be retained by the Fund and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----