UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File No. 811-05770
----------------------------------------------------
THE CHILE 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 Chile Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3140
Registrant's telephone number, including area code:(212) 875-3500
Date of fiscal year end: December 31, 2003
Date of reporting period: January 1, 2003 to December 31, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
THE CHILE FUND, INC.
ANNUAL REPORT
DECEMBER 31, 2003
[CH LISTED NYSE(R) LOGO]
3911-AR-03
CONTENTS
Letter to Shareholders 1
Portfolio Summary 4
Schedule of Investments 5
Statement of Assets and Liabilities 7
Statement of Operations 8
Statement of Changes in Net Assets 9
Financial Highlights 10
Notes to Financial Statements 12
Report of Independent Auditors 17
Results of Annual Meeting of Shareholders 18
Tax Information 19
Description of InvestLink(SM) Program 20
Information Concerning Directors and Officers 23
LETTER TO SHAREHOLDERS
February 12, 2004
DEAR SHAREHOLDER:
For the year ended December 31, 2003, The Chile Fund, Inc. (the "Fund") had an
increase in its net asset value ("NAV"), assuming the reinvestment of dividends
and distributions, of 78.12%, vs. an increase of 83.30% for the Morgan Stanley
Capital International Chile Index.* Based on market price, the Fund had a gain
of 100.72% in 2003 for the shares that trade on the New York Stock Exchange,
Inc. As a result, the Fund's discount to its NAV fell from 13.59% to 2.62% in
the period.
The Fund had a strong return in absolute terms, buoyed by upward momentum in
Chile's equity market and by good showings from certain holdings, including the
Fund's banking, telecommunications, chemicals and beverage stocks. On the
negative side, relatively speaking, stocks that underperformed included the
Fund's industrial and metals and mining holdings.
THE MARKET: STRONG PERFORMANCE
In response to several positive internal and external developments, the Chilean
equity market performed well during most of 2003. Among the highlights of the
year were:
FREE TRADE AGREEMENTS. Chile signed a free trade agreement with the European
Union in 2002 and a similar agreement with the United States in June 2003. These
two developed markets represent approximately two-thirds of Chile's commercial
exchange. As such, the free trade agreements should result in a major increase
in exports to these markets (Chile is a net exporter) and drive GDP growth in
2004 and beyond. They could also significantly reduce Chile's country risk.
MACRO- AND MICROECONOMIC IMPROVEMENTS. At the macroeconomic level, the economic
recovery continued to gather pace. The Central Bank recently revised its
estimates for GDP growth in 2004 up to a range of between 4.5% and 5.5%. The
trade surplus is generally expected to grow, despite the strengthening of the
Chilean peso, thanks to stronger commodity prices, particularly those of copper
and pulp. The government continued to demonstrate its commitment to fiscal
responsibility by maintaining a balanced budget. Inflation remained negligible.
The local currency was strong. Interest rates remained low and domestic
consumption showed signs of picking up. At the microeconomic level, the news
appeared even better, as corporations reported fourth quarter sales growth of
10%; operating income grew 20%, and net earnings also grew by 20%.
BRAZIL AND ARGENTINA. The regional backdrop was also supportive, with a more
stable economic environment in neighboring Brazil and Argentina, both countries
in which several Chilean companies have significant investments. Brazil, for
example, was able to pass important reforms, including politically sensitive
pension reform. Local interest rates there also declined significantly in 2003
and could fall further. This, in turn, generated substantial interest in that
country's equities. There is still much uncertainty surrounding the future of
Argentina; however, it appeared by year's end that the government might be able
to reach an agreement with the IMF for much needed new loans.
1
IMPROVING GLOBAL ECONOMY. Throughout most of the year, the global economy picked
up steam, supporting commodity prices and encouraging previously risk-averse
investors to return to the emerging markets in search of higher returns than
were available in the developed markets. This trend benefited several emerging
markets, including Chile's.
OUTLOOK: COUNTING ON CONSUMPTION
The major issue confronting Chile in 2004 is how the marked appreciation of the
local currency will affect corporate performance, specifically which companies
stand to prosper the most from a stronger currency and which will not.
On one hand, many exporters would be hindered by a stronger peso, due to
negative translation effects from a weaker dollar. However, because most
exporters have seen their prices rise in line with increasing demand, this may
partially or wholly offset the currency effect, helping companies to avoid an
earnings shortfall. Even so, the uncertain environment for exporters leads us to
assume a cautious position vis-a-vis the export sectors.
We continue to like the electricity sector, especially power-generating
companies. In our view, current installed capacity is insufficient to satisfy
future demand, especially if, as anticipated, Chilean GDP grows by 5% in each of
the next two years. If new plants have to be built to satisfy this demand,
electricity prices will probably have to increase, and generators will likely be
the main beneficiaries.
We are also optimistic on the beverages and the banking sectors. Both could
benefit from domestic consumption growth. We are underweight the telecom sector.
Telecom companies are facing a tariff setting process that will likely result in
some loss of margins for both fixed line providers and mobile providers.
In the retail arena, we are underweight in department stores and supermarkets.
Even though these types of companies could do well if consumption rises, we
believe that current valuations are stretched. During 2004, we believe there
likely will be several IPOs from retail companies.
Respectfully,
/s/ Matthew J.K. Hickman
Matthew J.K. Hickman
Chief Investment Officer**
2
INTERNATIONAL INVESTING ENTAILS SPECIAL RISK CONSIDERATIONS, INCLUDING CURRENCY
FLUCTUATIONS, LOWER LIQUIDITY, ECONOMIC AND POLITICAL RISKS, AND DIFFERENCES IN
ACCOUNTING METHODS. THERE ARE ALSO RISKS ASSOCIATED WITH INVESTING IN CHILE,
INCLUDING THE RISK OF INVESTING IN A SINGLE-COUNTRY FUND.
IN ADDITION TO HISTORICAL INFORMATION, THIS REPORT CONTAINS FORWARD-LOOKING
STATEMENTS, WHICH MAY CONCERN, AMONG OTHER THINGS, DOMESTIC AND FOREIGN MARKET,
INDUSTRY AND ECONOMIC TRENDS AND DEVELOPMENTS AND GOVERNMENT REGULATION AND
THEIR POTENTIAL IMPACT ON THE FUND'S INVESTMENT PORTFOLIO. THESE STATEMENTS ARE
SUBJECT TO RISKS AND UNCERTAINTIES AND ACTUAL TRENDS, DEVELOPMENTS AND
REGULATIONS IN THE FUTURE AND THEIR IMPACT ON THE FUND COULD BE MATERIALLY
DIFFERENT FROM THOSE PROJECTED, ANTICIPATED OR IMPLIED. THE FUND HAS NO
OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS.
* The Morgan Stanley Capital International Chile Index is an unmanaged index
(with no defined investment objective) of Chilean equities that includes
reinvestment of net dividends, and is the exclusive property of Morgan Stanley
Capital International Inc. Investors cannot invest directly in an index.
** Matthew J.K. Hickman, who is a Vice President of Credit Suisse Asset
Management, LLC ("CSAM"), is primarily responsible 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
Co-Chief Investment Officer of The Latin America Equity Fund, Inc.
3
THE CHILE FUND, INC.
PORTFOLIO SUMMARY - AS OF DECEMBER 31, 2003 (UNAUDITED)
[CHART]
SECTOR ALLOCATION
AS A PERCENT OF NET ASSETS
DECEMBER 31, 2003 DECEMBER 31, 2002
Banking 9.52% 8.31%
Chemicals-Diversified 3.22% 4.00%
Diversified Operations 18.09% 17.07%
Electric-Integrated 18.30% 11.97%
Food & Beverages 8.88% 10.66%
Infrastructure 2.38% 4.10%
Paper & Related Products 10.89% 9.10%
Retail-Major Department Stores 3.89% 4.90%
Shipping 4.81% 0.00%
Telephone-Integrated 14.91% 17.28%
Water 1.00% 4.55%
Other 4.31% 8.06%
TOP 10 HOLDINGS, BY ISSUER
PERCENT OF
HOLDING SECTOR NET ASSETS
------------------------------------------------------------------------------------------------------
1. Empresas Copec S.A. Diversified Operations 18.1
2. Compania de Telecomunicaciones de Chile S.A. Telephone-Integrated 10.9
3. Empresas CMPC S.A. Paper & Related Products 10.9
4. Enersis S.A. Electric-Integrated 9.7
5. Empresa Nacional de Electricidad S.A. Electric-Integrated 5.0
6. Compania SudAmericana de Vapores S.A. Shipping 4.8
7. Banco de Chile Banking 4.0
8. Empresa Nacional de Telecomunicaciones S.A. Telephone-Integrated 4.0
9. S.A.C.I. Falabella, S.A. Retail-Major Department Stores 3.9
10. Colbun S.A. Electric-Integrated 3.6
4
THE CHILE FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2003
NO. OF
DESCRIPTION SHARES VALUE
----------------------------------------------------------------------------------------------
EQUITY SECURITIES-102.58%
AIRLINES-0.27%
Lan Chile S.A. 110,000 $ 389,841
---------------
BANKING-9.52%
Banco de Chile 126,356,631 5,906,807
Banco Santander Chile S.A. 200,441,545 4,613,995
Banco Santander Chile S.A., ADR. 7,200 171,216
Corpbanca S.A.+ 629,258,439 3,292,045
---------------
13,984,063
---------------
CERAMIC PRODUCTS-0.51%
Ceramicas Cordillera S.A. 67,165 748,104
---------------
CHEMICALS-DIVERSIFIED-3.02%
Sociedad Quimica y Minera de
Chile S.A., Class B 1,058,208 4,428,740
---------------
CONTAINERS-METAL/GLASS-1.37%
Cristalerias de Chile S.A. 209,019 2,010,646
---------------
DIVERSIFIED OPERATIONS-18.09%
Empresas Copec S.A. 3,686,848 26,567,954
---------------
ELECTRIC-INTEGRATED-18.30%
Colbun S.A. 38,926,510 5,321,150
Empresa Nacional de
Electricidad S.A.+ 18,700,000 7,353,135
Enersis S.A.+ 97,800,180 14,194,271
---------------
26,868,556
---------------
ENGINEERING & CONSTRUCTION-0.03%
MASISA S.A. 99,913 40,805
---------------
FOOD & BEVERAGES-8.88%
Coca-Cola Embonor S.A.,
Class A+ 3,168,592 1,577,478
Compania Cervecerias
Unidas S.A. 555,500 2,470,243
Embotelladora Andina S.A., PNA 1,506,855 2,644,721
Embotelladora Andina S.A., PNB 1,245,273 2,228,062
Vina Concha y Toro S.A. 4,400,499 3,787,452
Vina San Pedro S.A. 35,937,169 330,533
---------------
13,038,489
---------------
FOOD-RETAIL-1.89%
Distribucion y Servicio
D&S S.A. 1,313,745 $ 1,840,196
Distribucion y Servicio
D&S S.A., ADR 45,100 931,766
---------------
2,771,962
---------------
INFRASTRUCTURE-2.38%
Infraestructura 2000*+ 19,568,922 3,489,687
---------------
MINING-1.40%
Antofagasta plc 109,500 2,059,939
---------------
PAPER & RELATED PRODUCTS-10.89%
Empresas CMPC S.A. 799,873 15,996,110
---------------
PHARMACEUTICALS-0.32%
Farmacias Ahumada S.A.+ 155,290 476,969
---------------
RETAIL-DIVERSIFIED-0.57%
Comercial Siglo XXI S.A.+ 738,798 832,870
---------------
RETAIL-MAJOR DEPARTMENT STORES-3.89%
S.A.C.I. Falabella, S.A. 3,227,838 5,708,842
---------------
SHIPPING-4.81%
Compania SudAmericana de
Vapores S.A. 5,440,000 7,069,108
---------------
TELEPHONE-INTEGRATED-14.91%
Compania de Telecomunicaciones
de Chile S.A., Class A 4,224,893 16,042,544
Empresa Nacional de
Telecomunicaciones S.A. 949,250 5,847,207
---------------
21,889,751
---------------
TEXTILES-0.03%
Zalaquett S.A. 1,496,767 50,519
---------------
UTILITIES-0.50%
Compania de Consumidores
de Gas de Santiago S.A. 120,000 729,052
---------------
See accompanying notes to financial statements.
5
NO. OF
DESCRIPTION SHARES VALUE
----------------------------------------------------------------------------------------------
WATER-1.00%
Aguas Andina S.A., Class A 4,841,620 $ 1,474,833
---------------
TOTAL EQUITY SECURITIES
(Cost $86,811,872) 150,626,840
---------------
SHORT-TERM INVESTMENT-0.33%
CHILEAN MUTUAL FUND-0.33%
Security Check Fund
(Cost $472,753) 102,544 481,590
---------------
TOTAL INVESTMENTS-102.91%
(Cost $87,284,625) (Notes A, D, F) 151,108,430
---------------
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS-(2.91)% (4,268,979)
---------------
NET ASSETS-100.00% $ 146,839,451
===============
+ Security is non-income producing.
* Not readily marketable security; security is valued at fair value as
determined in good faith under procedures established by the Board of
Directors. (See Note A.)
ADR American Depositary Receipts.
PNA Preferred Shares, Class A.
PNB Preferred Shares, Class B.
See accompanying notes to financial statements.
6
THE CHILE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 2003
ASSETS
Investments, at value (Cost $87,284,625) (Notes A, D, F) $ 151,108,430
Receivables:
Investments sold 281,800
Dividends 56,901
Prepaid expenses 17,013
---------------
Total Assets 151,464,144
---------------
LIABILITIES
Due to custodian 18,631
Payables:
Distributions (Note A) 3,853,172
Investment advisory fees (Note B) 382,673
Administration fees (Note B) 42,135
Directors' fees 683
Other accrued expenses 142,455
Chilean repatriation taxes (Note A) 184,944
---------------
Total Liabilities 4,624,693
---------------
NET ASSETS (applicable to 10,139,926 shares of common stock
outstanding) (Note C) $ 146,839,451
===============
NET ASSETS CONSIST OF
Capital stock, $0.001 par value; 10,139,926 shares issued and outstanding
(100,000,000 shares authorized) $ 10,140
Paid-in capital 81,037,892
Undistributed net investment income 629,107
Accumulated net realized gain on investments and foreign currency
related transactions 1,363,100
Net unrealized appreciation in value of investments and translation
of other assets and liabilities denominated in foreign currencies 63,799,212
---------------
Net assets applicable to shares outstanding $ 146,839,451
===============
NET ASSET VALUE PER SHARE ($146,839,451 DIVIDED BY 10,139,926) $ 14.48
===============
MARKET PRICE PER SHARE $ 14.10
===============
See accompanying notes to financial statements.
7
THE CHILE FUND, INC.
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 2003
INVESTMENT INCOME
Income (Note A):
Dividends $ 2,659,851
Interest 216
Less: Foreign taxes withheld (989)
---------------
Total Investment Income 2,659,078
---------------
Expenses:
Investment advisory fees (Note B) 1,152,571
Custodian fees 241,831
Administration fees (Note B) 166,564
Legal fees 104,639
Audit fees 70,580
Accounting fees 41,870
Printing (Note B) 38,427
Directors' fees 34,376
NYSE listing fees 33,251
Transfer agent fees 26,992
Insurance 13,442
Miscellaneous 9,162
---------------
Total Expenses 1,933,705
---------------
Net Investment Income 725,373
---------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gain from:
Investments 8,968,745
Foreign currency related transactions 28,739
Net change in unrealized appreciation in value of investments and translation
of other assets and liabilities denominated in foreign currencies 56,597,737
---------------
Net realized and unrealized gain on investments and foreign currency
related transactions 65,595,221
---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 66,320,594
===============
See accompanying notes to financial statements.
8
THE CHILE 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 $ 725,373 $ 1,220,980
Net realized gain/(loss) on investments and foreign currency related
transactions 8,997,484 (1,660,080)
Net change in unrealized appreciation in value of investments and
translation of other assets and liabilities denominated in
foreign currencies 56,597,737 (17,368,255)
--------------- ---------------
Net increase/(decrease) in net assets resulting from operations 66,320,594 (17,807,355)
--------------- ---------------
Dividends and distributions to shareholders:
Net investment income (811,194) (912,593)
Net realized gain on investments (3,751,773) --
--------------- ---------------
Total dividends and distributions to shareholders (4,562,967) (912,593)
--------------- ---------------
Capital share transactions:
Cost of 3,379,976 shares purchased under tender offer (Note G) -- (30,487,384)
--------------- ---------------
Total increase/(decrease) in net assets 61,757,627 (49,207,332)
--------------- ---------------
NET ASSETS
Beginning of year 85,081,824 134,289,156
--------------- ---------------
End of year* $ 146,839,451 $ 85,081,824
=============== ===============
----------
* Includes undistributed net investment income of $629,107 and $686,054,
respectively.
See accompanying notes to financial statements.
9
THE CHILE FUND, INC.
FINANCIAL HIGHLIGHTS@
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each 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 $ 8.39 $ 9.93 $ 11.43
---------- ----------- -----------
Net investment income/(loss) 0.07 0.09* 0.21
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions 6.47 (1.70) (0.70)
---------- ----------- -----------
Net increase/(decrease) in net assets resulting from operations 6.54 (1.61) (0.49)
---------- ----------- -----------
Dividends and distributions to shareholders:
Net investment income (0.08) (0.09) (0.15)
Net realized gain on investments and
foreign currency related transactions (0.37) -- (0.86)
In excess of net investment income -- -- --
---------- ----------- -----------
Total dividends and distributions to shareholders (0.45) (0.09) (1.01)
---------- ----------- -----------
Anti-dilutive impact due to capital shares tendered or repurchased -- 0.16 --
---------- ----------- -----------
Net asset value, end of year $ 14.48 $ 8.39 $ 9.93
========== =========== ===========
Market value, end of year $ 14.10 $ 7.25 $ 8.43
========== =========== ===========
Total investment return (a) 100.72% (12.93)% 13.18%
========== =========== ===========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $ 146,839 $ 85,082 $ 134,289
Ratio of expenses to average net assets (b) 1.74% 1.11% 2.71%
Ratio of expenses to average net assets, excluding taxes 1.74% 2.01% 1.54%
Ratio of net investment income/(loss) to average net assets 0.65% 1.28%(c) 1.91%
Portfolio turnover rate 31.94% 31.94% 29.81%
@ Per share amounts prior to July 17, 1995 have been restated to reflect a
two-for-one stock split on July 17, 1995.
* Based on actual shares outstanding on February 4, 2002 (prior to the
tender offer) and December 31, 2002.
+ Based on average shares outstanding.
++ Includes a $0.08 and $0.01 per share decrease to the Fund's net asset
value per share resulting from the dilutive impact of shares issued
pursuant to the Fund's automatic Dividend Reinvestment Plan in 1998 and
1995, respectively.
(a) Total investment return at market value is based on the changes in market
price of a share during the year and assumes reinvestment of dividends and
distributions, if any, at actual prices pursuant to the Fund's dividend
reinvestment program.
(b) Ratios include the effect of Chilean repatriation taxes.
(c) Ratio includes the effect of a reversal of Chilean repatriation tax
accrual; excluding the reversal, the ratio would have been 0.18%.
See accompanying notes to financial statements.
10
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------
2000 1999 1998
---------- ----------- -----------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $ 15.22 $ 12.59 $ 21.61
---------- ----------- -----------
Net investment income/(loss) (0.06)+ 0.09 0.38
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions (3.36) 3.19 (6.88)++
---------- ----------- -----------
Net increase/(decrease) in net assets resulting from operations (3.42) 3.28 (6.50)
---------- ----------- -----------
Dividends and distributions to shareholders:
Net investment income (0.01) (0.07) (0.32)
Net realized gain on investments and
foreign currency related transactions (0.58) (0.58) (2.20)
In excess of net investment income -- -- --
---------- ----------- -----------
Total dividends and distributions to shareholders (0.59) (0.65) (2.52)
---------- ----------- -----------
Anti-dilutive impact due to capital shares tendered or repurchased 0.22 -- --
---------- ----------- -----------
Net asset value, end of year $ 11.43 $ 15.22 $ 12.59
========== =========== ===========
Market value, end of year $ 8.438 $ 11.250 $ 9.063
========== =========== ===========
Total investment return (a) (20.04)% 31.45% (33.00)%
========== =========== ===========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $ 154,473 $ 218,027 $ 180,357
Ratio of expenses to average net assets (b) 2.98% 2.16% --
Ratio of expenses to average net assets, excluding taxes 1.73% 1.64% 1.62%
Ratio of net investment income/(loss) to average net assets (0.45)% 0.61% 2.29%
Portfolio turnover rate 24.25% 12.01% 5.39%
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995 1994
---------- ----------- ----------- -----------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $ 22.59 $ 26.45 $ 26.26 $ 20.13
---------- ----------- ----------- -----------
Net investment income/(loss) 0.10 0.47 0.65 0.42+
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions 2.32 (3.44) 0.41++ 6.24
---------- ----------- ----------- -----------
Net increase/(decrease) in net assets resulting from operations 2.42 (2.97) 1.06 6.66
---------- ----------- ----------- -----------
Dividends and distributions to shareholders:
Net investment income -- (0.47) (0.65) (0.47)
Net realized gain on investments and
foreign currency related transactions (3.40) (0.26) (0.22) (0.06)
In excess of net investment income -- (0.16) -- --
---------- ----------- ----------- -----------
Total dividends and distributions to shareholders (3.40) (0.89) (0.87) (0.53)
---------- ----------- ----------- -----------
Anti-dilutive impact due to capital shares tendered or repurchased -- -- -- --
---------- ----------- ----------- -----------
Net asset value, end of year $ 21.61 $ 22.59 $ 26.45 $ 26.26
========== =========== =========== ===========
Market value, end of year $ 17.813 $ 20.875 $ 26.000 $ 23.063
========== =========== =========== ===========
Total investment return (a) 3.56% (16.43)% 16.66% 6.05%
========== =========== =========== ===========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $ 303,944 $ 317,012 $ 370,275 $ 367,047
Ratio of expenses to average net assets (b) 3.34% 1.96% -- --
Ratio of expenses to average net assets, excluding taxes 1.50% 1.48% 1.46% 1.39%
Ratio of net investment income/(loss) to average net assets 0.38% 1.79% 2.39% 1.74%
Portfolio turnover rate 35.59% 4.82% 2.38% 0.86%
11
THE CHILE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A. SIGNIFICANT ACCOUNTING POLICIES
The Chile Fund, Inc. (the "Fund") was incorporated in Maryland on January 30,
1989 and commenced investment operations on September 27, 1989. The Fund is
registered under the Investment Company Act of 1940, as amended, as a
closed-end, non-diversified management investment company.
USE OF ESTIMATES: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
SECURITY VALUATION: The net asset value of the Fund is determined daily as of
the close of regular trading on the New York Stock Exchange, Inc. (the
"Exchange") on each day the Exchange is open for business. The Fund's equity
investments are valued at market value, which is generally determined using the
closing price on the exchange or market on which the security is primarily
traded at the time of valuation (the "Valuation Time"). If no sales are
reported, equity investments are generally valued at the most recent bid
quotation as of the Valuation Time or at the lowest ask quotation in the case of
a short sale of securities. Debt securities with a remaining maturity greater
than 60 days are valued in accordance with the price supplied by a pricing
service, which may use a matrix, formula or other objective method that takes
into consideration market indices, yield curves and other specific adjustments.
Debt obligations that will mature in 60 days or less are valued on the basis of
amortized cost, which approximates market value, unless the Board of Directors
determines that using this method would not reflect an investment's value.
Securities and other assets for which market quotations are not readily
available or whose values have been materially affected by events occurring
before the Fund's Valuation Time, but after the close of the securities primary
market are valued at fair value as determined in good faith by the Board of
Directors under procedures established by the Board of Directors. At December
31, 2003, the Fund held 2.38% of its net assets in a security valued at fair
value as determined in good faith by the Board of Directors with an aggregate
cost of $4,392,311 and fair value of $3,489,687. The Fund's estimate of fair
value assumes a willing buyer and a willing seller neither acting under a
compulsion to buy or sell. Although this security may be resold in privately
negotiated transactions, the prices realized on such sales could differ from the
price originally paid by the Fund or the current carrying value, and the
difference could be material.
SHORT-TERM INVESTMENT: The Fund sweeps available cash into a short-term deposit
issued by Brown Brothers Harriman & Co., the Fund's custodian. The short-term
time deposit is a variable rate account classified as a short-term investment.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on a trade date basis. The cost of investments sold is determined
by use of the specific identification method for both financial reporting and
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.
The Fund accrues foreign taxes on realized gains and repatriation taxes in an
amount equal to what the Fund
12
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.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(I) market value of investment securities, assets and liabilities at the
valuation date rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The Fund does not isolate that portion of gains and losses on investments in
equity securities which is due to changes in the foreign exchange rates from
that which is due to changes in market prices of equity securities. Accordingly,
realized and unrealized foreign currency gains and losses with respect to such
securities are included in the reported net realized and unrealized gains and
losses on investment transactions balances.
The Fund reports certain foreign currency related transactions and foreign taxes
withheld on security transactions as components of realized gains for financial
reporting purposes, whereas such foreign currency related transactions are
treated as ordinary income for U.S. income tax purposes.
Net unrealized currency gains or losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected as
a component of net unrealized appreciation/depreciation in value of investments,
and translation of other assets and liabilities denominated in foreign
currencies.
Net realized foreign exchange gains or losses represent foreign exchange gains
and losses from transactions in foreign currencies and forward foreign currency
contracts, exchange gains or losses realized between the trade date and
settlement date on security transactions, and the difference between the amounts
of interest and dividends recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received.
DISTRIBUTIONS OF INCOME AND GAINS: The Fund distributes at least annually to
shareholders substantially all of its net investment income and net realized
short-term capital gains, if any. The Fund determines annually whether to
distribute any net realized long-term capital gains in excess of net realized
short-term capital losses, including capital loss carryovers, if any. An
additional distribution may be made to the extent necessary to avoid the payment
of a 4% U.S. federal excise tax. Dividends and distributions to shareholders are
recorded by the Fund on the ex-dividend date.
On December 12, 2003, a distribution in the aggregate amount of $3,853,172,
equal to $0.01 per share from net investment income and $0.37 per share from net
realized long-term capital gains was declared. This distribution 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.
OTHER: The Fund may invest in securities of foreign countries and governments
which involve certain risks in addition to those inherent in domestic
investments. Such risks generally include, among others currency risks
(fluctuations in currency exchange rates),
13
information risk (key information may be inaccurate or unavailable) and
political risk (expropriation, nationalization or the imposition of capital or
currency controls or punitive taxes). Other risks of investing in foreign
securities include liquidity and valuation risks.
Securities denominated in currencies other than U.S. dollars are subject to
changes in value due to fluctuations in exchange rates.
The Chilean securities markets are substantially smaller, less liquid and more
volatile than the major securities markets in the United States. Consequently,
acquisition and disposition of securities by the Fund may be inhibited. A
significant proportion of the aggregate market value of equity securities listed
on the Santiago Exchange are held by a small number of investors and are not
publicly traded. This may limit the number of shares available for acquisition
or disposition by the Fund.
Investments in Chile may involve certain considerations and risks not typically
associated with investments in the United States, including the possibility of
future political and economic developments and the level of Chilean governmental
supervision and regulation of its securities markets.
The Fund, subject to local investment limitations, may invest up to 20% of its
assets (at the time of commitment) in illiquid equity securities, including
securities of private equity funds (whether in corporate or partnership form)
that invest primarily in emerging markets. When investing through another
investment fund, the Fund will bear its proportionate share of the expenses
incurred by the fund, including management fees. Such securities are expected to
be illiquid, which may involve a high degree of business and financial risk and
may result in substantial losses. Because of the current absence of any liquid
trading market for these investments, the Fund may take longer to liquidate
these positions than would be the case for publicly traded securities. Although
these securities may be resold in privately negotiated transactions, the prices
realized on any such sales could be substantially less than those originally
paid by the Fund or the current carrying values and this difference could be
material. Further, companies whose securities are not publicly traded may not be
subject to the disclosure and other investor protection requirements applicable
to companies whose securities are publicly traded.
NOTE B. AGREEMENTS
Credit Suisse Asset Management, LLC ("CSAM") serves as the Fund's investment
adviser with respect to all investments. CSAM receives as compensation for its
advisory services from the Fund, an annual fee, calculated weekly and paid
quarterly, equal to 1.20% of the first $50 million of the Fund's average weekly
market value or net assets (whichever is lower), 1.15% of the next $50 million
and 1.10% of amounts in excess of $100 million. For the year ended December 31,
2003, CSAM earned $1,152,571 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 $16,729 for administrative services
rendered to the Fund.
CELFIN CAPITAL Servicios Financieros S.A. ("Celfin") serves as the Fund's
Chilean sub-adviser. Celfin receives as compensation for its sub-advisory
services, an annual fee, out of the advisory fee payable to CSAM, calculated
weekly and paid quarterly, equal to 0.15% of the first $50 million of the Fund's
average weekly market value or net assets (whichever is lower), 0.10% of the
next $50 million and 0.05% of amounts in excess of $100 million. For the year
ended December 31, 2003, these sub-advisory fees amounted to $117,054. Effective
January 1, 2004, Celfin's sub-advisory fee, which is paid out of the advisory
fee payable to CSAM, will be calculated weekly and paid quarterly, equal to
14
0.20% of the Fund's average weekly market value or net assets (whichever is
lower).
For the year ended December 31, 2003, Celfin earned approximately $96,200 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 0.08% of the first $100 million of the Fund's average weekly net
assets, 0.06% of the next $50 million and 0.04% of amounts in excess of $150
million. For the year ended December 31, 2003, BSFM earned $86,062 for
administrative services.
Celfin Capital S.A. Administradora de Fondos de Capital Extranjero ("AFCE")
serves as the Fund's Chilean administrator. For its services, AFCE is paid a
fee, out of the advisory fee payable to CSAM, that is calculated weekly and paid
quarterly at an annual rate of 0.05% of the Fund's average weekly market value
or net assets (whichever is lower). In addition, AFCE receives a supplemental
administration fee, an annual reimbursement of out-of-pocket expenses and an
accounting fee. For the year ended December 31, 2003, the administration fees,
supplemental administration fees and accounting fees amounted to $49,307,
$63,773 and $5,090, 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 $16,828 for its services to the Fund.
The Independent Directors receive fifty percent (50%) of their annual retainer
in the form of shares purchased by the Fund's transfer agent in the open market.
Directors as a group own less than 1% of the Fund's outstanding shares.
NOTE C. CAPITAL STOCK
The authorized capital stock of the Fund is 100,000,000 shares of common stock,
$0.001 par value. Of the 10,139,926 shares outstanding at December 31, 2003,
CSAM owned 14,615 shares.
NOTE D. INVESTMENT IN SECURITIES
For the year ended December 31, 2003, purchases and sales of securities, other
than short-term investments, were $35,634,500 and $36,315,795, 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 borrowings 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 gain distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments of foreign currency transactions, losses
deferred due to wash sales and Post-October losses (as later defined), and
excise tax regulations.
15
The tax character of dividends and distributions paid during the years ended
December 31, for the Fund were as follows:
ORDINARY INCOME
-----------------------
2003 2002
--------- ----------
$ 811,194 $ 912,593
LONG-TERM CAPITAL GAINS
-------------------------
2003 2002
------------ --------
$ 3,751,773 -
At December 31, 2003, the components of distributable earnings on a tax basis,
for the Fund were as follows:
Undistributed ordinary income $ 629,107
Accumulated net realized gain 2,904,897
Unrealized appreciation 62,257,415
---------------
Total distributable earnings $ 65,791,419
===============
Under current tax law, certain capital losses realized after October 31 within a
taxable year may be deferred and treated as occurring on the first day of the
following tax year ("Post-October losses"). For the tax period ended December
31, 2003, the Fund did not incur Post-October losses.
At 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 $88,826,422, $64,898,568,
$(2,616,560) and $62,282,008, respectively.
At December 31, 2003, the Fund reclassified from accumulated net realized gain
on investments and foreign currency related transactions of $28,739 to
undistributed net investment income. In addition, the Fund reclassified $135 of
non-deductible expenses from undistributed 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. SELF-TENDER OFFER
On November 27, 2001, the Fund's Board of Directors approved a tender offer to
acquire up to 25% of the outstanding shares of the Fund's common stock at a per
share cash purchase price equal to 95% of the Fund's net asset value as of the
expiration date of the tender offer period. The Board's actions were taken in
light of the significant discounts at which the Fund's shares were trading. On
January 4, 2002, the Fund commenced a tender offer to acquire up to 25% of its
outstanding shares of common stock at a per share cash purchase price equal to
95% of net asset value per share as of February 4, 2002, the day the offer
expired. Upon expiration of the offer, the Fund accepted for payment 3,379,976
shares of common stock of the Fund at a price of $9.02 per share.
NOTE H. CONTINGENCIES
In the normal course of business, the Fund may provide general indemnifications
pursuant to certain contracts and organizational documents. The Fund's maximum
exposure under these arrangements is dependent on future claims that may be made
against the Fund and, therefore, cannot be estimated; however, based on
experience, the risk of loss from such claims is considered remote.
16
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
of The Chile 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 Chile 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
17
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On September 26, 2003, the Annual Meeting of Shareholders of The Chile Fund,
Inc. (the "Fund") was held and the following matter was voted upon:
(1) To re-elect three directors to the Board of Directors of the Fund.
NAME OF DIRECTOR FOR WITHHELD
---------------- --------- --------
Enrique R. Arzac 6,314,602 163,084
Joseph D. Gallagher 6,270,479 207,207
Steven N. Rappaport 6,307,074 170,612
In addition to the directors re-elected at the meeting, James J. Cattano,
George W. Landau and William W. Priest, Jr. continued as directors of the Fund.
Effective May 21, 2003, Joseph D. Gallagher was appointed as Chairman of the
Board of Directors, Chief Executive Officer and President. Laurence R. Smith who
previously held these positions has resigned effective May 21, 2003.
18
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. Of
the $0.45 per share distribution paid in respect of such year, $0.08 per share
was derived from net investment income and $0.37 per share was derived from net
realized long-term capital gains.
Of the $0.08 per share ordinary income dividend, $0.006 per share 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.
Of the $0.37 per share of long-term capital gain distribution, $0.05 per share
was derived from pre-May 6, 2003 gains and $0.32 per share was derived from post
May 5, 2003 gains. The entire amount of the pre-May 6, 2003 long-term capital
gain distribution is from qualified 5-year gains.
There were no distributions which qualified for the dividend received deduction
available to corporate shareholders.
The Fund does not intend to make an election under Section 853 to pass through
foreign taxes paid by the Fund to its shareholders. 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.
19
DESCRIPTION OF INVESTLINK(SM) PROGRAM (UNAUDITED)
The InvestLink(SM) Program is sponsored and administered by EquiServe, L.P., not
by The Chile Fund, Inc. (the "Fund"). EquiServe, L.P., will act as program
administrator (the "Program Administrator") of the InvestLink(SM) Program (the
"Program"). The purpose of the Program is to provide existing shareholders with
a simple and convenient way to invest additional funds and reinvest dividends in
shares of the Fund's common stock ("Shares") at prevailing prices, with reduced
brokerage commissions and fees.
In order to participate in the Program, you must be a registered holder of at
least one Share of stock of the Fund. Purchases of Shares with funds from a
participant's cash payment or automatic account deduction will begin on the next
day on which funds are invested. All cash payments must be drawn on a U.S. bank
and payable in U.S. dollars. Checks must be made payable to EquiServe. If a
participant selects the dividend reinvestment option, automatic investment of
dividends generally will begin with the next dividend payable after the Program
Administrator receives his enrollment form. Once in the Program, a person will
remain a participant until he terminates his participation or sells all Shares
held in his Program account, or his account is terminated by the Program
Administrator. A participant may change his investment options at any time by
requesting a new enrollment form and returning it to the Program Administrator.
A participant will be assessed certain charges in connection with his
participation in the Program. All optional cash deposit investments will be
subject to a service charge. Sales processed through the Program will have a
service fee deducted from the net proceeds, after brokerage commissions. In
addition to the transaction charges outlined above, participants will be
assessed per share processing fees (which include brokerage commissions.)
Participants will not be charged any fee for reinvesting dividends.
The number of Shares to be purchased for a participant depends on the amount of
his dividends, cash payments or bank account or payroll deductions, less
applicable fees and commissions, and the purchase price of the Shares. The
investment date for cash payments is the 25th day of each month (or the next
trading day if the 25th is not a trading day). The investment date for dividend
reinvestment is the dividend payment date. The Program Administrator uses
dividends and funds of participants to purchase Shares of the Fund in the open
market. Such purchases will be made by participating brokers as agent for the
participants using normal cash settlement practices. All Shares purchased
through the Program will be allocated to participants as of the settlement date,
which is usually three business days from the purchase date. In all cases,
transaction processing will occur within 30 days of the receipt of funds, except
where temporary curtailment or suspension of purchases is necessary to comply
with applicable provisions of the Federal Securities laws or when unusual market
conditions make prudent investment impracticable. In the event the Program
Administrator is unable to purchase Shares within 30 days of the receipt of
funds, such funds will be returned to the participants.
The average price of all Shares purchased by the Program Administrator with all
funds received during the time period from two business days preceding any
investment date up to the second business day preceding the next investment date
shall be the price per share allocable to a participant in connection with the
Shares purchased for his account with his funds or dividends received by the
Program Administrator during such time period. The average price of all Shares
sold by the Program Administrator pursuant to sell orders received during such
time period shall be the price per share allocable to a participant in
connection with the Shares sold for his account pursuant to his sell orders
received by the Program Administrator during such time period. All sale requests
having an
20
anticipated market value of $100,000.00 or more are expected to be submitted in
written form. In addition, all sale requests received by the Program
Administrator within thirty (30) days of an address change are expected to be
submitted in written form.
EquiServe 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.
21
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 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.
22
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 and 8 Director of The
c/o Credit Suisse Asset Nominating current term Economics, Graduate Adams Express
Management, LLC Committee ends at the School of Business, Company (a closed-
Attn: General Counsel Chairman and 2006 annual Columbia University end investment
466 Lexington Avenue Audit Committee meeting since 1971 company); Director
New York, New York Member of Petroleum and
10017-3140 Resources Corpora-
tion (a closed-end
investment company)
Date of Birth: 10/02/41
James J. Cattano Director; Since 1989; President, Primary Resources, 4 None
c/o Primary Resources,Inc. Nominating current term Inc. (an international
55 Old Field Point Road Committee ends at the trading and manufacturing
Greenwich, Connecticut Member and 2005 annual company specializing in the
06830 Audit Committee meeting sale of agricultural com-
Chairman modities throughout Latin
Date of Birth: 06/24/43 American markets) since
October 1996
George W. Landau Director and Since 1989; Senior Advisor, Latin 5 Director of GAM
c/o Credit Suisse Asset Audit Committee current term America, The Coca-Cola Funds, Inc.
Management, LLC Member ends at the Company since 1987;
Attn:General Counsel 2004 annual Advisor of Guardian Indus-
466 Lexington Avenue meeting tries(a glass manufacturer)
New York, New York since 1992
10017-3140
Date of Birth: 03/04/20
Steven N. Rappaport Director;Nomi- Since 2003; Partner of Lehigh Court, LLC 44 Director of
Lehigh Court, LLC nating and Audit current term and RZ Capital (private invest- Presstek, Inc.(a
40 East 52nd Street Committee ends at the ment firms) since July 2002; digital imaging
New York, New York Member 2006 annual Consultant to SunGard Se- technologies com-
10022 meeting curities Finance, Inc. from pany);Director of
February 2002 to July 2002; Wood Resources,
Date of Birth: 07/10/48 President of SunGard Secu- LLC (a plywood
rities Finance, Inc. from manufacturing
2001 to February 2002; company)
President of Loanet, Inc.
(anon-line accounting serv-
ice) from 1997 to 2001
INTERESTED DIRECTORS
William W. Priest, Jr.* Director Since 1997; Co-Managing Partner, 49 Director of Globe
Steinberg Priest & Sloane current term Steinberg Priest & Sloane Wireless, L.L.C. (a
Capital Management, LLC ends at the Capital Management, LLC maritime commu-
12 East 49th Street 2004 annual since March 2001; Chairman nications company);
12th Floor meeting and Managing Director of Director of InfraRed
New York, New York CSAM from 2000 to X (a medical device
10017 February 2001, Chief company)
Executive Officer and Man-
Date of Birth: 09/24/41 aging Director of CSAM
from 1990 to 2000
23
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 DIRECTORS--(CONCLUDED)
Joseph D. Gallagher*/** Chairman of the Since 2003; Managing Director, Chief 45 None
c/o Credit Suisse Asset Board of Direc- current term Executive Officer of CSAM
Management, LLC tors, Chief ends at the and Global Chief Operating
466 Lexington Avenue Executive 2006 annual Officer of Credit Suisse As-
New York, New York Officer and meeting set Management since
10017-3140 President 2003; Global Chief Finan-
cial Officer, Credit Suisse
Date of Birth: 12/14/62 Asset Management from
1999 to 2003; Chief Execu-
tive Officer and Director of
Credit Suisse Asset Man-
agement Limited, London,
England, from June 2000 to
2003; Director of Credit
Suisse Asset Management
Funds (UK) Limited, Lon-
don, England, from June
2000 to 2003; Managing Di-
rector, Head-Asian Corpo-
rate Finance and M&A,
Credit Suisse First Boston,
Hong Kong, China, from
January 1998 to May 1999;
Officer of other Credit
Suisse Funds
POSITION(S) LENGTH
NAME, ADDRESS AND HELD WITH OF TIME
DATE OF BIRTH FUND SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
-------------------- ----------- -------- -------------------------------------------------------------------------
OFFICERS
Matthew J.K.Hickman*** Chief Since 2004 Vice President of CSAM since December 2003; Financial Advisor with
c/o Credit Suisse Asset Investment Global Advisors from July 2003 to November 2003; General Manager of
Management, LLC Officer Compass Group Investment Advisors S.A. from February 2002 to July
466 Lexington Avenue 2003; Financial Advisor with Credit Suisse First Boston from
New York, New York August 2000 to February 2002; Director of ABN AMRO from September 1998 to
10017-3140 August 2000; Officer of other Credit Suisse Funds
Date of Birth: 01/21/64
Emily Alejos Investment Since 1999 Director of CSAM since January 1999; Vice President of CSAM from 1997
c/o Credit Suisse Asset Officer to January 1999; Associated with CSAM since 1997; Officer of other
Management, LLC Credit Suisse Funds
466 Lexington Avenue
New York, New York
10017-3140
Date of Birth: 10/27/63
24
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 of CSAM; Associated
c/o Credit Suisse Asset President with CSAM since 1997; Officer of other Credit Suisse Funds
Management, LLC
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 of CSAM; Associated with
c/o Credit Suisse Asset Officer and CSAM since 1984; Officer of other Credit Suisse Funds
Management, LLC Secretary
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 since 1996; Officer of
c/o Credit Suisse Asset other Credit Suisse Funds
Management, LLC
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 2001; Associated with
c/o Credit Suisse Asset CSAM since 1998; Officer of other Credit Suisse Funds
Management, LLC
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. Gallagher is an
interested person of the Fund by virtue of his current positions as
director and/or officer of CSAM. 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 Board of Directors, Chief Executive Officer and President.
Laurence R. Smith who previously held these positions has resigned
effective May 21, 2003.
*** Effective February 12, 2004, Matthew J.K. Hickman was appointed as Chief
Investment Officer. Yaroslaw Aranowicz who previously held the position
has resigned from CSAM.
25
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.
26
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SUMMARY OF GENERAL INFORMATION
The Fund--The Chile Fund, Inc.--is a closed-end, non-diversified management
investment company whose shares trade on the New York Stock Exchange, Inc. Its
investment objective is to seek total return, consisting of capital appreciation
and current income through investments primarily in Chilean equity and debt
securities. Credit Suisse Asset Management, LLC (New York), the Fund's
investment adviser, is part of Credit Suisse Asset Management ("CSAM"), the
institutional and mutual-fund asset-management arm of Credit Suisse First
Boston. 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), THE WALL STREET
JOURNAL (daily) and BARRON'S (each Monday) under the designation "ChileFd". The
Fund's New York Stock Exchange, Inc. trading symbol is CH. Weekly comparative
net asset value (NAV) and market price information about The Chile Fund, Inc.'s
shares are published each Sunday in THE NEW YORK TIMES and each Monday in
THE WALL STREET JOURNAL and BARRON'S, as well as other newspapers, in a table
called "Closed-End Funds."
THE CSAM GROUP OF FUNDS
LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds listed below at 1-800-293-1232 or visit our website on the
Internet: http://www.csam.com.
CLOSED-END FUNDS
SINGLE COUNTRY
The Brazilian Equity Fund, Inc. (BZL)
The First Israel Fund, Inc. (ISL)
The Indonesia Fund, Inc. (IF)
MULTIPLE COUNTRY
The Emerging Markets Telecommunications Fund, Inc. (ETF)
The Latin America Equity Fund, Inc. (LAQ)
FIXED INCOME
Credit Suisse Asset Management Income Fund, Inc. (CIK)
Credit Suisse High Yield Bond Fund (DHY)
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that The Chile Fund, Inc. may from time to time
purchase shares of its capital stock in the open market.
DIRECTORS AND CORPORATE OFFICERS
Enrique R. Arzac Lead Director
James J. Cattano Director
George W. Landau Director
William W. Priest, Jr. Director
Steven N. Rappaport Director
Joseph D. Gallagher Chairman of the Board of Directors, Chief Executive
Officer and President
Matthew J.K. Hickman Chief Investment Officer
Emily Alejos 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.
[CH LISTED NYSE(R) LOGO]
3911-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 two audit committee
financial experts serving on its audit committee: Enrique R. Arzac and Steven N.
Rappaport. The audit committee financial experts are "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 accountant, PricewaterhouseCoopers
LLP ("PwC"), for its fiscal years ended December 31, 2002 and December 31, 2003.
2002 2003
----------------------------------------------------------------
Audit Fees $ 48,300 $ 56,022
Audit-Related Fees(1) -- 3,000
Tax Fees(2) 8,600 7,482
All Other Fees -- --
Total $ 56,900 $ 66,504
(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 and Steven N. Rappaport.
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 CHILE 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