February 10, 2011

Dear Shareholder,

We present this Annual Report which covers the activities of Aberdeen Chile Fund, Inc. (the “Fund”) for the twelve-month period ended December 31, 2010. The Fund’s principal investment objective is to seek total return, consisting of capital appreciation and income, by investing primarily in Chilean securities.

For the year ended December 31, 2010, the total return to shareholders of the Fund based on the net asset value (NAV) of the Fund was 38.6% versus a return of 44.2% for the Fund’s benchmark, the MSCI Chile Index. Based on market price, the Fund’s shares gained 49.5% during the period, assuming reinvestment of dividends and distributions.

Share Price Performance

The Fund’s share price increased 26.6% over the twelve months, from $17.90 on December 31, 2009 to $22.67 on December 31, 2010. The Fund’s share price on December 31, 2010 represented a premium of 2.8% to the NAV per share of $22.05 on that date, compared with a discount of 4.6% to the NAV per share of $18.77 on December 31, 2009. As of February 10, 2011, the share price was $19.97, representing a premium of 2.4% to the NAV per share of $19.50.

Elective Cash Distribution Results

On December 7, 2010 the Board of Directors declared the payment of an elective cash distribution to be paid in the amount of $1.6591 per share of common stock, on January 28, 2011, to shareholders of record at the close of business on December 16, 2010. As announced, the distribution was payable in the Fund’s common stock. However, shareholders had the option to request that their distributions be paid in cash in lieu of common stock. The aggregate amount of cash distributions to all stockholders was limited to 10% of the aggregate dollar amount of the total distribution. Because cash distribution requests exceeded this limit, the Fund pro rated the cash distribution among all stockholders who made such requests. Shareholders who requested cash distributions received $0.28396 per share or 17.11% of the distribution in cash and received the balance in the Fund’s common stock. For purposes of computing the stock portion of the dividend, the common stock distributed was valued at $20.61 per share, which equaled the average closing price of the Fund’s common shares on the NYSE Amex on January 19, 2011 and the two preceding trading days. Following the closing of the elective cash distribution, the Fund’s number of outstanding shares was 8,178,159.

Market Review

In 2010, Chilean equities continued to perform well with the market return being one of the highest of the region. Strength in the market was driven by several factors, including the continued flow of capital into the region, a factor that was amplified in the later stages of the year as the U.S. embarked on a second phase of quantitative easing.

However, notwithstanding the external factors that impacted the market, there were several encouraging developments within Chile that had a positive influence during the year. Early in 2010, Chile saw an orderly election that resulted in a transition of power to the well-regarded businessman, Sebastian Pinera, who stood on a center-right platform. Following the election, he immediately announced several reforms that aim to increase growth in Chile over the coming years, with the goal of Chile becoming a developed economy by 2020.

Following the major earthquake that hit at the end of the first quarter, confidence in Chile was briefly weakened. Immediate disruption to the economy was considerable; however, in the following months, significant boosts to the economy were achieved as the government poured money from the well-capitalized sovereign wealth fund into the reconstruction effort. As the economy rebounded strongly Chile saw particular strength in the domestic economy, driven by robust consumer spending and the continued low interest rate environment.

During the year, the central bank took steps to normalize interest rates, increasing the interest rates several months in a row. As the local currency continued to strengthen versus the U.S. dollar, the pace of the increases was somewhat moderated. To date, there is little inflation in the economy so the moderate increases have been enough to keep inflation well under control. Aberdeen believes that managing the balance between currency appreciation and inflation will be a key challenge for the central bank in 2011.

Following the transition of investment adviser from Credit Suisse Asset Management in July 2009, Aberdeen completed several transactions in an effort to align the Fund with Aberdeen’s investment philosophy. During the period, the Fund sold positions in the utility companies, Endesa and Colbun. Against this, the Fund added to positions in some of the more consumer-oriented companies in the region including Embotelladora Andina, La Polar, and Parque Arauco. The Fund also initiated a position in the IT services company, Sonda.

Outlook

In the short term, Aberdeen believes Chilean equities may rally further, driven by strong fundamentals and continued flush liquidity. However, uncertainty and volatility is likely to persist and it should be noted that today the valuation of Chilean equities is one of the highest in the region.

Whilst the economy in Chile remains extremely robust, the economy will suffer if the developed world recovery falters. Continued currency appreciation also brings the risk that the central bank will introduce

February 10, 2011

more aggressive forms of currency controls, which potentially worsen the investment environment. On balance though, the adviser believes companies in the Fund are generally well managed and are generally in a healthy financial position with robust balance sheets.

Dividend Reinvestment and Direct Stock Purchase Plan

As part of a broad effort to enhance available services to Shareholders, we are pleased to announce the availability of a Dividend Reinvestment and Direct Stock Purchase Plan (the “Plan”) that is sponsored and administered by Computershare Trust Company, N.A. (“Computershare”), the Fund’s transfer agent. For both purchases and reinvestment purposes, shares will be purchased in the open market at the current share price and cannot be issued directly by the Fund.

The new Plan has similar features to the previous Dividend Reinvestment Plan that was administered by Computershare, but it also offers some enhancements that enable new investors to purchase initial shares through the Plan as a new investor, authorize recurring monthly purchases through the automatic investment feature and purchase shares over the Internet at www.computershare.com/aberdeen or by check.

For more information about the Plan and a brochure that includes the terms and conditions of the Plan, please contact Computershare at 1-800-647-0584 or visit www.computershare.com/buyaberdeen.

Investor Relations Information

For information about the Fund, daily updates of share price, NAV and details of recent distributions, please contact Aberdeen by:

For additional information on the Aberdeen Closed-End Funds, Aberdeen invites you to visit our recently redesigned website and Closed-End Investor Center at: www.aberdeen-asset.us/cef.

From the site you will also be able to review fund performance, download literature and sign up for email services. The site houses most topical information about the Aberdeen Closed-End Funds, including fact sheets from Morningstar that are updated daily and monthly manager reports. If you sign up for our email service online, we can ensure that you are among the first to know about Aberdeen’s latest closed-end fund news.

Included within this report is a reply card with postage paid envelope. Please complete and mail the card if you would like to be added to our enhanced email service and receive future communications from Aberdeen.

Yours sincerely,

Christian Pittard

President

December 31, 2010 (unaudited)

December 31, 2010 (unaudited)

December 31, 2010 (unaudited)

December 31, 2010

December 31, 2010

Aberdeen Chile Fund, Inc. (the “Fund”), formerly The Chile Fund, Inc., 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.

The Fund seeks total return, consisting of capital appreciation and income, by investing primarily in Chilean securities.

On March 29, 2010, the Board of Directors of the Fund (the “Board”) approved a name change for the Fund in order to align the Fund more closely with the investment adviser and to differentiate the Fund in a competitive market with many known brands. The Fund’s investment objective and NYSE Amex ticker symbol, CH, remain unchanged.

1. Significant Accounting Policies

The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The financial statements of the Fund are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The U.S. dollar is used as both the functional and reporting currency.

(a) Security Valuation:

Securities for which market quotations are readily available are valued at current market value as of “Valuation Time.” Valuation Time is as of the close of regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time). Equity securities are typically valued at the last quoted sale price or, if there is no sale price, the last quoted bid price provided by an independent pricing service approved by the Board. Securities traded on NASDAQ are valued at the NASDAQ official closing price. Prices are taken from the primary market or exchange in which each security trades. Investment companies are valued at net asset value as reported by such company.

Most securities listed on a foreign exchange are valued either at fair value (see description below) or at the last sale price at the close of the exchange on which the security is principally traded. Foreign securities, currencies, and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rate of said currencies against the U.S. dollar, as of Valuation Time, as provided by an independent pricing service approved by the Board.

Debt and other fixed-income securities (other than short-term obligations) are valued at the last quoted bid price and/or by using a combination of daily quotes and matrix evaluations provided by an independent pricing service, the use of which has been approved by the Board. In the event such quotes are not available from such pricing agents, then the security may be priced based on bid quotations from broker-dealers. Short-term debt securities of sufficient credit quality such as commercial paper and U.S. Treasury Bills having a remaining maturity of 60 days or less at the time of purchase are valued at amortized cost.

Securities for which market quotations are not readily available, or for which an independent pricing service does not provide a value or provides a value that does not represent fair value in the judgment of the Fund’s investment adviser or designee, are valued at fair value under procedures approved by the Board. In addition, fair value determinations are required for securities whose value is affected by a “significant” event that materially affects the value of a domestic or foreign security which occurs subsequent to the time of the close of the principal market on which such domestic or foreign security trades and before the Valuation Time (i.e., a “subsequent event”). Typically, this will involve events occurring after the close of a foreign market on which a security trades and before the next Valuation Time.

The Fund’s equity securities that are traded on a foreign exchange or market which closes prior to the Fund’s Valuation Time are fair valued by an independent pricing service. The fair value of each such security generally is calculated by applying a valuation factor provided by the independent pricing service to the last sales price for that security. If the pricing service is unable to provide a fair value for a security, the security will continue to be valued at the last sale price at the close of the exchange on which it is principally traded, subject to adjustment by the Fund’s Pricing Committee. When the fair value prices are utilized, the value assigned to the foreign securities may not be the quoted or published prices of the securities on their primary markets.

For the year ended December 31, 2010, there have been no significant changes to the valuation procedures approved by the Board.

Equity securities are valued at the most recent sale price or official closing price reported on the exchange (US or foreign) or over-the-counter market on which they trade and are categorized as Level 1 securities. Securities for which no sales are reported are valued at the calculated bid. For certain international equity securities, in order to adjust for events which may occur between the close of the foreign exchange they are traded on and the close of the New York Stock Exchange, a fair valuation model may be used (as described above). This fair valuation model takes into account comparisons to the valuation of American Depository Receipts (ADRs), exchange-traded funds, futures contracts and certain indices and these securities are categorized as Level 2.

December 31, 2010

The Fund is required to disclose information regarding the fair value measurement of its assets and liabilities. Fair value is defined as the price that the Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. This disclosure requirement establishes a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classifications of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable.

Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the

reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.

Level 1 – quoted prices in active markets for identical securities.

Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments, information provided by the General Partner or investee companies such as publicly traded prices, financial statements, capital statements, recent transactions, and general market conditions.)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

December 31, 2010

(b) Short-Term Investment:

The Fund sweeps available cash into a short-term time deposit available through Brown Brothers Harriman & Co. (“BBH & Co.”), the Fund’s custodian. The short-term time deposit is a variable rate account classified as a short-term investment.

(c) Foreign Currency Transactions:

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:

The Fund does not isolate that portion of gains and losses on investments in equity securities which is due to changes in the foreign exchange rates from that which is due to changes in market prices of equity securities. Accordingly, realized and unrealized foreign currency gains and losses with respect to such securities are included in the reported net realized and unrealized gains and losses on investment transactions balances.

The Fund reports certain foreign currency related transactions and foreign taxes withheld on security transactions as components of realized gains for financial reporting purposes, whereas such foreign currency related transactions are treated as ordinary income for U.S. federal income tax purposes.

Net unrealized currency gains or losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation/depreciation in value of investments, and translation of other assets and liabilities denominated in foreign currencies.

Net realized foreign exchange gains or losses represent foreign exchange gains and losses from transactions in foreign currencies and forward foreign currency contracts, exchange gains or losses realized between the trade date and settlement 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.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the U.S. dollar. Generally, when the U.S. dollar rises in value against foreign currency, the Fund’s investments denominated in that currency will lose value because its currency is worth fewer U.S. dollars; the

opposite effect occurs if the U.S. dollar falls in relative value.

(d) Security Transactions and Investment Income:

Securities transactions are recorded on the trade date. Realized and unrealized gains/(losses) from security and currency transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date except for certain dividends on foreign securities, which are recorded as soon as the Fund is informed after the ex-dividend date. Interest income is recorded on an accrual basis. Expenses are recorded on an accrual basis.

(e) Distributions:

The Fund has a managed distribution policy of paying quarterly distributions at an annual rate, set once a year, that is a percentage of the rolling average of the Fund’s prior four quarter-end NAV’s. In June 2010, the Board determined the rolling distribution rate to be 10% for the 12 month period commencing with the distribution payable in July 2010. This policy will be subject to regular review by the Fund’s Board. The distributions will be made from current income, supplemented by realized capital gains and, to the extent necessary, paid-in capital.

On an annual basis, the Fund intends to distribute its net realized capital gains, if any, by way of a final distribution to be declared during the calendar quarter ending December 31. Dividends and distributions to shareholders are recorded by the Fund on the ex-dividend date.

Dividends and distributions to shareholders are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments for foreign currencies.

(f) Recent Accounting Pronouncements:

In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update 2010-06 (“ASU 2010-06”) to ASC 820-10, “Fair Value Measurements and Disclosures – Overall.” This amendment requires the disclosure of input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 and Level 3 positions. In addition, transfers between all levels must be disclosed on a gross basis including the reason(s) for the transfer(s). Purchases, sales, issuances and settlements in the Level 3 rollforward must be disclosed on a gross basis. The amendment is effective for interim and annual reporting periods beginning after December 15, 2009, while disclosures about purchases, sales, issuances, and settlements in the Level 3 rollforward of activity is effective for interim and annual reporting periods beginning after December 15, 2010. The Fund has adopted a policy of recognizing significant transfers between Level 1 and Level 2 at the reporting period end. A significant transfer is a transfer, in aggregate, whose value is

December 31, 2010

greater than 5% of the net assets of the Fund on the recognition date. As of December 31, 2010, there have been no significant transfers between Level 1, Level 2, or Level 3.

(g) Federal Income Taxes:

The Fund intends to continue to qualify as a “regulated investment company” by complying with the provisions available to certain investment companies, as defined in Subchapter M of the Internal Revenue Code, and to make distributions of net investment income and net realized capital gains sufficient to relieve the Fund from all, or substantially all, federal income taxes. Therefore, no federal income tax provision is required.

The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Since tax authorities can examine previously filed tax returns, the Fund’s U.S. federal tax returns for the prior four fiscal years are subject to review by the Internal Revenue Service.

Income received by the Fund from sources within Chile and other foreign countries may be subject to withholding and other taxes imposed by such countries. The Fund accrues foreign Chilean taxes on realized gains and repatriation taxes in an amount equal to what the Fund would owe if the securities were sold and the proceeds repatriated on the valuation date as a liability and reduction of realized/unrealized gains. Taxes on foreign income are recorded when the related income is recorded. For the year ended December 31, 2010, the Fund incurred $399,628 of such expense.

2. Agreements

Aberdeen Asset Management Investment Services Limited (“AAMISL”) serves as the Fund’s investment adviser with respect to all investments. The adviser is a direct wholly-owned subsidiary of Aberdeen Asset Management PLC. AAMISL 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 amounts from $50-100 million, 1.10% of amounts from $100-150 million, 1.05% of amounts from $150-200 million and 1.00% of amounts over $200 million. AAMISL has voluntarily agreed to waive a portion of its advisory fee, calculated weekly and paid quarterly, equal to 0.20% of the first $50 million of the Fund’s average weekly market value or net assets (whichever is lower), 0.15% of amounts from $50-100 million, 0.10% of amounts from $100-150 million, 0.05% of amounts from $150-$200 million. For the year ended December 31, 2010, AAMISL earned $1,922,135 for advisory services to the Fund, of which AAMISL waived $233,227.

Celfin Capital Servicios Financieros S.A. (“Celfin”) serves as the Fund’s investment sub-adviser. For its services, Celfin is paid a fee out of the advisory fee, calculated weekly and paid quarterly, at an annual rate after waiver of 0.17% of the Fund’s average weekly market value or net assets (whichever is lower). For the year ended December 31, 2010, sub-advisory fees for the Fund amounted to $287,115.

For the year ended December 31, 2010, Celfin earned approximately $212,472 in brokerage commissions from portfolio transactions executed on behalf of the Fund.

BBH & Co. is the U.S. Administrator for the Fund and certain other funds advised by AAMISL or its affiliates (collectively the “Funds”). The Funds pay BBH & Co. monthly for administrative and fund accounting services, at an annual rate of .06% of the Funds’ aggregate assets up to $500 million, .0525% for the next $500 million, and .0425% in excess of $1 billion. Each Fund pays its pro rata portion of the fee based on its level of assets. For the year ended December 31, 2010, BBH & Co. earned $100,992 from the Fund for administrative and fund accounting 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 AAMISL, 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, annual reimbursement of out-of-pocket expenses and an accounting fee from the Fund. For the year ended December 31, 2010, the administration fees, supplemental administration fees and accounting fees for the Fund amounted to $84,445, $106,204 and $8,567, respectively.

Effective February 1, 2010, the Board approved an Investor Relations Services Agreement. Under the terms of the Investor Relations Services Agreement, Aberdeen Asset Management Inc. (“AAMI”), an affiliate of AAMISL, provides investor relations services to the Fund and certain other U.S. registered closed end funds advised by AAMISL or its affiliates. The Fund incurred investor relations service fees of approximately $49,808 as of December 31, 2010. Investor relations fees and expenses in the Statement of Operations include certain out-of-pocket expenses.

Fifty percent (50%) of the annual retainer of the Independent Directors is invested in Fund shares and, at the option of each Independent Director, 100% of the annual retainer can be invested in shares of the Fund. During the fiscal year ended December 31, 2009, 1,045 shares were issued and an additional 997 shares were purchased pursuant to the Directors compensation plan. During the fiscal year ended December 31, 2010, there were 1,755 shares purchased pursuant to the Directors compensation plan. Directors as a group own less than 1% of the Fund’s outstanding shares.

December 31, 2010

3. Investment Transactions

For the year ended December 31, 2010, Fund purchases and sales of securities, other than short-term investments, were $72,214,868 and $137,411,256, respectively.

4. Tax Information

Income and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from GAAP.

For the year ended December 31, 2010 the Fund paid $74,745 in distributions classified as ordinary income and $27,346,856 in distributions classified as long-term capital gains. For the year ended December 31, 2009 the Fund paid $3,391,348 in distributions classified as ordinary income and $7,488,148 in distributions classified as long-term capital gains.

The tax basis of components of distributable earnings differ from the amounts reflected in the Statement of Assets and Liabilities by temporary book/tax differences. These differences are primarily due to timing differences due to losses deferred on wash sales. At December 31, 2010, the components of distributable earnings on a tax basis for the Fund were as follows:

At December 31, 2010, the identified cost for U.S. federal income tax purposes, the gross unrealized appreciation from investments for those securities having an excess of value over cost, the gross unrealized depreciation from investments for those securities having an excess of cost over value and the net unrealized appreciation from investments were $64,605,024, $113,090,937, $(566,477) and $112,524,460, respectively.

GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, during the year ended December 31, 2010, $493,910 had been reclassified from accumulated net realized gain on investments and foreign currency related transactions to accumulated net investment loss as a result of permanent differences primarily attributable to foreign currency transactions. These reclassifications had no effect on net assets or net asset values per share.

5. Capital

The authorized capital stock of the Fund is 100,000,000 shares of common stock, $0.001 par value. As of December 31, 2010 there were 7,626,079 shares issued and outstanding.

On April 21, 2010, the Fund’s Board approved a tender offer for shares of the Fund’s common stock. The tender offer authorized the Fund to purchase up to 25% of its

issued and outstanding shares at a price equal to 99% of the Fund’s net asset value per share at the close of business on the NYSE Amex on June 1, 2010, the first business day following the expiration of the offer. The tender offer commenced on April 30, 2010 and expired on May 28, 2010.

In connection with the tender offer, the Fund purchased 2,542,026 shares of capital stock at a price equal to $17.82. The tender offer was oversubscribed and all tenders of shares were subject to pro ration (at a ratio of approximately 0.413880429) in accordance with the terms of the tender offer.

On December 7, 2010 the Board of Directors declared the payment of an elective cash distribution to be paid in the amount of $1.6591 per share of common stock, on January 28, 2011, to shareholders of record at the close of business on December 16, 2010. As announced, the distribution was payable in the Fund’s common stock. However, shareholders had the option to request that their distributions be paid in cash in lieu of common stock. The aggregate amount of cash distributions to all stockholders was limited to 10% of the aggregate dollar amount of the total distribution. Because cash distribution requests exceeded this limit, the Fund pro rated the cash distribution among all stockholders who made such requests. Shareholders who requested cash distributions received $0.28396 per share or 17.11% of the distribution in cash and received the balance in the Fund’s common stock. For purposes of computing the stock portion of the dividend, the common stock distributed was valued at $20.61 per share, which equaled the average closing price of the Fund’s common shares on the NYSE Amex on January 19, 2011 and the two preceding trading days. Following the closing of the elective cash distribution, the Fund’s number of outstanding shares was 8,178,159.

6. Credit Facility

On November 12, 2010, the Fund entered into a joint credit facility along with certain other Funds. The Funds agreed to a $10 million committed revolving credit facility with BBH & Co. for temporary or emergency purposes. Under the terms of the joint credit facility, the Funds pay an aggregate commitment fee on the average unused amount of the credit facility. In addition, the Funds will pay interest on borrowings at the Overnight LIBOR rate plus a spread. For the year ended December 31, 2010, the Fund had no borrowings under the joint credit facility.

7. 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.

December 31, 2010

8. Portfolio Investment Risks

(a) Risks Associated with Foreign Securities and Currencies:

Investments in securities of foreign issuers carry certain risks not ordinarily associated with investments in securities of U.S. issuers. Such risks include, among others, currency risks, information risk and political risk. Currency risk results from securities denominated in currencies other than U.S. dollars that are subject to changes in value due to fluctuations in exchange rates. Information risk arises with respect to foreign securities when key information about foreign issuers may be inaccurate or unavailable. Political risk includes future political and economic developments, and the possible imposition of exchange controls or other foreign governmental laws and restrictions. In addition, with respect to certain countries, there is the possibility of expropriation of assets, confiscatory taxation, political or social instability or diplomatic developments, which could adversely affect investments in those countries. Other risks of investing in foreign securities include liquidity and valuation risks.

Certain countries also may impose substantial restrictions on investments in their capital markets by foreign entities, including restrictions on investments in issuers of industries deemed sensitive to relevant national interests. These factors may limit the investment opportunities available and result in a lack of liquidity and a high price volatility with respect to securities of issuers from developing countries.

Some countries require governmental approval for the repatriation of investment income, capital or the

proceeds of sales of securities by foreign investors. In addition, if there is a deterioration in a country’s balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad. Amounts repatriated prior to the end of specified periods may be subject to taxes as imposed by a foreign country.

(b) Risks Associated with Chilean Markets:

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 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.

9. Subsequent Events

Management has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no adjustments were required to the Financial Statements as of December 31, 2010.

Considerations in Approving Renewal of Management Agreement, Investment Advisory Agreement and Sub-Advisory Agreement

The Investment Company Act of 1940 (the “Investment Company Act”) and the terms of the investment advisory agreement (the “Advisory Agreement”) between the Aberdeen Chile Fund, Inc. (the “Fund”) and Aberdeen Asset Management Investment Services Limited (the “Adviser”) and the investment sub-advisory agreement (the “Sub-Advisory Agreement”) between the Fund and Celfin Capital Servicios Financieros S.A. (the “Sub-Adviser”) require that, following their initial two-year approval period, the agreements be approved annually at an in-person meeting by a majority of the Board of Directors (the “Board”), including a majority of the

Directors who have no direct or indirect interest in the investment advisory agreements and are not “interested persons” of the Fund, as defined in the Investment Company Act (the “Independent Directors”).

At its meeting on December 7, 2010, the Board voted unanimously to renew the Advisory Agreement between the Fund and the Adviser and the Sub-Advisory Agreement between the Fund and the Sub-Adviser. The Adviser and the Sub-Adviser are referred to collectively at the Advisers. The Advisory Agreement and the Sub-Advisory Agreement are collectively referred to as the Advisory Agreements. In connection

with its evaluation of the Advisory Agreements, the Board reviewed a broad range of information requested for this purpose and considered a variety of factors, including the following:

(i)    The nature, extent and quality of the services provided by the Advisers;

(ii)   The performance of the Fund;

(iii)  The management fee rate and the net total expense ratio of the Fund, both on an absolute basis and as compared both to a relevant peer group of funds and to fees charged by the Adviser to others;

(iv)   The extent to which economies of scale could be realized by the Adviser and shared with the shareholders;

(v)    The costs of services provided and profits realized by the Adviser;

(vi)   Other benefits realized by the Advisers from their relationship with the Fund; and

(vii)  Any other factors that the Board deemed relevant to its consideration.

In its review of information presented to the Board during the contract renewal process and throughout the year, the Board also considered knowledge gained from discussions with management leading up to and since the initial approval of the Advisory Agreements. The Independent Directors were represented by independent counsel throughout the review process and convened executive sessions without management present. In its deliberations, the Board did not identify any single factor that was all-important or controlling and each Director may have attributed different weights to the various factors.

Certain of the Board considerations outlined above are discussed in more detail below.

Nature, Extent and Quality of Services. The Board received and considered various data and information regarding the nature, extent and quality of services provided under the Advisory Agreements. The Board considered, among other things, information about the background and experience of senior management and investment personnel who were responsible for managing the Fund. The Board also received presentations from and participated in information sessions with senior investment personnel of the Adviser. The Board considered the information provided regarding the portfolio managers and other resources dedicated to the Fund and the investment philosophy and process followed by those individuals responsible for managing the Fund.

The Board also evaluated the ability of the Advisers, based on their resources, reputation and other attributes,

to attract and retain qualified investment professionals. In this regard, the Board considered information regarding the general nature of the compensation structure applicable to portfolio managers and other key personnel.

In addition, the Board considered and evaluated materials and information received regarding the Adviser’s investment and legal compliance program and record with respect to the U.S. registered closed-end funds managed by the Adviser. The Board met in-person with and received quarterly reports from the Fund’s Chief Compliance Officer.

The Board considered the Sub-Advisor’s history and experience with the Fund. The Board further considered the Sub-Adviser’s resources dedicated to compliance. The Board also considered the Adviser’s execution of its oversight responsibilities.

Furthermore, the Board received and considered information about the financial viability of the Advisers to satisfy itself that the Advisers had adequate resources to perform the services required under the Advisory Agreements.

Based on the foregoing and other relevant information reviewed, the Board concluded that, overall, the nature, extent and quality of the services provided to the Fund supported renewal of the Advisory Agreements.

Investment Performance. In addition to reports received at its regular quarterly meetings, the Board received and considered information on the performance history of the Fund, including comparisons to a Morningstar Category average and benchmark index returns over various time periods. The Board was provided with reports, independently prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), which included a comprehensive analysis of the Fund’s performance.

The Fund’s performance was higher than or in-line with the performance of its benchmark index, the MSCI Chile Index, for the periods under review. Except for the 2004-2007 time periods, the Fund’s performance was higher than the performance of the Morningstar Latin America Stock Category average. The Adviser discussed factors that contributed to the Fund’s performance results. The Board took into account that the Adviser had only been managing the Fund since July 2009 and that the Adviser plans to gradually reposition the portfolio as part of the transition to the Adviser’s investment approach. The Board concluded that it was generally satisfied with the Fund’s performance and that the Adviser was taking appropriate actions to improve the Fund’s performance.

Fees and Economies of Scale. The Board considered the management fee rate charged by the Adviser to the Fund. The Board received an analysis from Strategic Insight that compared the Fund’s management

fee rate to the management fee rate of a peer group of funds on a gross basis and on a net basis after taking into consideration any waivers or reimbursements. The Board noted that the gross management fee rate for the Fund was equal to the average and median gross management fee rates for its peer group. The Board also noted that the net management fee rate for the Fund was lower than the average net management fee rate and equal to the median net management fee rate of its peer group. Furthermore, the Board concluded that the contractual breakpoints utilized by the Fund adequately took into account potential economies of scale.

The Board also reviewed information prepared by Strategic Insight that showed that the Fund’s net total expense ratio was higher than the average and median ratios of its peer group. The Board considered the differences between the Fund and the funds in the peer group and noted that the Fund was the only fund in the peer group that invested primarily in Chilean equity and debt securities. The Board noted that the most significant factor contributing to the Fund’s expense results was the Fund’s “Other Expenses.” The Board concluded that the Fund’s expense results were primarily attributable to expenses for Chilean taxes for the repatriation process between Chile to the US for each quarterly distribution.

Costs of Services Provided and Profitability. The Board considered, among other things, the Adviser’s estimates of its costs in providing advisory services to the Fund, and the Adviser’s resulting profitability. Based on its review of the expense and profit information provided by the Adviser, the Board concluded that the profits earned by the Adviser from the Advisory Agreement were not excessive in light of the nature, extent and quality of services provided to the Fund.

The Board also received and considered a profit statement related to the Fund from the Sub-Adviser. The Board observed the costs of providing services to the Fund. The Board also noted that the sub-advisory fees are paid to the Sub-Adviser by the Adviser and not directly by the Fund. The Board noted that the fees paid to the Sub-Adviser had been negotiated at arm’s length. Based on these factors, the Board concluded that the profits and other ancillary benefits that the Sub-Adviser received with regard to providing these services to the Fund were not excessive.

Information about Services to Other Clients. The Board considered information about the nature and extent of services and fee rates offered by the Adviser to other clients, including other registered investment companies and separate accounts. The Board considered that the Adviser was subject to a broader and more extensive regulatory regime in connection with management of the Fund compared to the Adviser’s management of unregistered or institutional accounts. The Board concluded that the fee rate under the Advisory Agreement was not excessive relative to these other fee rates, given its understanding of similarities and differences in the nature and extent of services offered and other factors.

Fall-Out Benefits and Other Factors. The Board also considered information regarding potential “fall-out” or ancillary benefits that could be realized by the Advisers as a result of their relationship with the Fund. In this regard, the Board concluded that the Adviser and its affiliates may derive reputational benefits from their association with the Fund. The Board also noted, however, that such benefits were difficult to quantify with certainty.

Additionally, the Board considered that the Adviser does not use “soft dollars.” The Board noted that the Adviser may enter into commission sharing arrangements with certain brokers for the receipt of goods or services that relate to the execution of trades or the provision of research. The Board considered the Adviser’s representations that it evaluates its commission sharing arrangements for compliance with US regulations, particularly, with respect to the safe harbor contained in Section 28(e) of the Securities Exchange Act of 1934 and for compliance with its best execution obligations.

* * * * *

After an evaluation of the above-described factors and based on its deliberations and analysis of the information provided and alternatives considered, the Board, including all of the Independent Directors, concluded that approval of the Advisory Agreements are in the best interest of the Fund and its shareholders. Accordingly, the Board unanimously approved the Advisory Agreements.