<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
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July 14, 1995
Dear Shareholders:
We are pleased to report on the activities of The Emerging Markets
Telecommunications Fund, Inc. (the "Fund") for the fiscal year ended May 31,
1995.
After deduction of underwriting commissions and offering costs, the Fund began
operations with a net asset value (NAV) of $13.84 per share. At May 31, 1995,
$154.9 million was invested in equity securities, $5.5 million was invested in
convertible bonds, with the balance of the Fund's investments, $2.5 million,
invested in short-term obligations. As of May 31, 1995, the Fund's NAV was
$19.20 per share.
For the year ended May 31, 1995, the Fund's total return, based on net asset
value and assuming the reinvestment of dividends, was 1.33%. In comparison, the
Morgan Stanley Capital International Emerging Markets Index declined 3.06%
during the same time period. From inception to May 31, 1995, the Fund's total
return, based on net asset value and assuming the reinvestment of dividends, was
63.60%. In comparison, the Morgan Stanley Capital International Emerging Markets
Index gained 62.44% during the same time period.
At May 31, 1995, the Fund had invested $111.6 million in basic telephone or
cellular services of emerging economies in over 16 developing countries, and an
additional $39.3 million in electric/gas utilities in five developing countries.
The Fund has also invested $9.4 million in telecommunications companies in the
developed markets of Denmark, Italy and the Netherlands.
The past six months have been a turbulent time in the emerging markets. The
dominant factor in the performance of emerging equity markets worldwide so far
in 1995, of course, has been the collapse of the Mexican peso, which has had
wide-ranging repercussions throughout the developing world. The crisis began a
few days before Christmas, as the government responded to Mexico's expanding
current account deficit and deteriorating currency reserves with a devaluation
of approximately 15% in the value of the peso. Within days, however, severe
selling pressure forced the Mexican government to float the currency, the value
of which immediately collapsed.
Although the government took a series of steps in the ensuing months to restore
the confidence of the market, both the peso and the Mexican equity market
declined substantially during the first quarter of 1995. In the first few weeks
of the year, it appeared that Mexico's market could stabilize in the wake of
President Clinton's $52 billion international credit package to save the Mexican
economy. The basic framework of this package was structured during the last few
days of January, as the value of the peso continued to plummet and the Mexican
government appeared to be on the verge of default. Much of the month of
February, however, was taken up with the details of the plan, and a final
agreement was reached between U.S. Treasury Secretary Robert Rubin and Mexican
Finance Minister Guillermo Ortiz only at the end of the month. In the end, the
Mexicans were compelled to hand over to the U.S. substantial control over the
future direction of their economy. Perhaps the most important provision, from an
economic point of view, was the requirement
1
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
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that the Mexicans maintain -- whatever the cost -- an extraordinarily tight
monetary policy in order to limit the inflationary effects of the peso crisis.
Mexican interest rates soared to nearly 100% in the aftermath of this agreement.
In the second half of March, however, the Mexican market began to display strong
signs of recovery, and in the second quarter Mexico was one of the
best-performing markets worldwide, taking back nearly all of its substantial
first quarter losses. The strong performance of the Mexican BOLSA was driven by
a growing consensus among both local and foreign investors that the economic
stabilization plan of the Zedillo government is actually working reasonably
well. We believe that this perception is largely a reasonable one. Interest
rates have come down from their highs of the spring, and, perhaps most
importantly, inflation is showing real signs of beginning to settle. While
inflation for the year 1995 is likely to come in somewhat above the market
consensus estimate of about 50%, the risk of a serious hyperinflation has
abated, and it seems that the inflation rate has already passed its peak.
There remain, of course, major challenges to the Mexican administration and
economy. The aftermath of the peso crisis has sharply reduced domestic demand,
leading to a drop in corporate earnings. In addition, corruption is still a
serious problem throughout the political system, and this issue has become
clearer to foreign investors in the wake of recent high-profile revelations. The
freakish political events we have witnessed in 1995 -- the pseudo-exile of
former President Salinas following the arrest of his brother in a political
assassination plot which was in turn allegedly covered up by the victim's own
brother, who was the government's chief investigator -- have, if anything,
redounded to the political benefit of President Zedillo. Zedillo has effectively
used this political crisis to solidify his image as a reformer seeking to
uncover and eliminate PRI corruption whatever the cost.
In a medium to long-term view, Mexico looks attractive to us. Unlike the early
1980s, Mexico today is full of competitive companies with proven management. The
population is young and growing, labor is inexpensive and increasingly well
trained, and the consumer marketplace is growing in both size and
sophistication. NAFTA and GATT have opened international markets to Mexican
goods and forced Mexican companies to become globally competitive. Perhaps most
importantly, Mexico has in the past decade experienced a dramatic transformation
from a state-dominated system to a truly market-oriented economy. Finally,
despite some serious initial missteps, the Zedillo administration is displaying
an unprecedented willingness to confront past mistakes, attack endemic
corruption, and face future challenges head on.
The impact of this crisis upon the rest of Latin America has been profound. The
extent to which markets declined in sympathy to Mexico's largely depended upon
two variables, which, as it turned out, often went hand in hand. The first was
the importance, within each market, of foreign investors, which depended upon
both the domestic savings rate and the restrictions imposed upon foreign
investment. As Mexico's troubles drained liquidity out of the emerging markets,
the BOLSAS that were dominated by foreigners felt substantially more selling
pressure than those where domestic investors controlled the preponderance of
shares. The second factor was a country's similarity, in economic terms, to
Mexico. Of the major regional markets, the chief beneficiary of this calculus
was Chile, where the savings rate is high, foreign investment is strictly
2
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THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
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regulated, the currency is fairly valued, the current account balance is
healthy, and economic reform has been a sterling success. As a result, Chilean
equities saw relatively little diminution of value during the first quarter of
the year.
In contrast, Argentina and Brazil have problems, in varying degrees, with both
variables. Foreign investors account for a large portion of the trading in each
market, and both economies bear a certain similarity -- if only superficially --
to that of Mexico. Argentina suffered particularly from comparisons with Mexico,
and rumors of imminent default or devaluation periodically swirled through the
market during the first quarter. During the second quarter, the Argentine market
continued to struggle, as foreign investors remained concerned about the
stability of the peso, the banking system, and the government's fiscal health,
and local investors continued to sit on the sidelines. In Brazil, on the other
hand, the picture has been increasingly positive. While the REAL was devalued
during June, for the second time this year, this time the devaluation was
handled in a forthright and eminently successful manner. This contrasts with the
March devaluation, which necessitated massive intervention by the Brazilian
central bank at a cost of $6 billion in currency reserves. As a result, the
market's response this time was calm and generally positive. (The REAL still
trades at a premium to the U.S. dollar -- it should be remembered in this
context that the original goal of the REAL Plan was a one-to-one exchange rate.)
This change in the exchange rate band should lead to an improvement in Brazil's
trade balance over the next several months, as well as allowing interest rates
to gradually come down. President Cardoso has in recent months begun to confound
the pessimists by pushing important economic reforms through the national
legislature with unprecedented ease. Recent legislation has included significant
privatization and deregulation policies, eliminating, for example, the
government's long-time monopoly over the electricity sector. We are
significantly overweight in Brazil, and are quite sanguine on the prospects of
the Brazilian market for the remainder of the decade.
The immediate effects of the peso's collapse hit markets far beyond Mexico's
Latin American neighbors. Last December and into January, virtually all emerging
markets declined sharply as liquidity evaporated from the marketplace in a
general flight to quality. During February, however, we began to see a
significant divergence of returns between markets in Latin America -- which
continued to suffer -- and the Asian markets, which recovered strongly. Most
Asian stock markets gained back much or all of their January losses before the
end of the first quarter.
In Southeast Asia, short-term market performance is to a great extent driven by
global economic factors, and particularly by the interest rate picture in the
U.S. This should not be a surprise, given that currencies in virtually all of
the major regional markets are linked in one way or another to the U.S. dollar.
The news on this front, of course, has recently been positive, in that the
interest rate environment has remained benign. An additional factor in the Asian
markets' favor has been the gradually rising tide of good news coming out of
Mexico and Latin America. This has led to a slow but steady return of cautious
foreign capital to the emerging markets in all regions -- we are now seeing
investors looking to buy in markets that they would not have touched two or
three months ago. Throughout the Asian region, these positive factors are
battling against a growing wave of negative speculation about a slowdown in
earning momentum, perhaps beginning in 1996, as the economic growth cycle moves
into its next phase. The direction of Asian markets over the next 12 months will
largely be a product of the interplay of these forces -- will the buoyancy of a
positive interest
3
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THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
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rate environment delay the natural tendency for earnings growth to slow as the
cycle moves forward? In any case, the next two or three months are likely to be
relatively unexciting in the Southeast Asian markets, as trading volumes decline
in an annual bout of "summer blues" (paradoxical in a region where there is
relatively little distinction between summer and winter).
Markets throughout the region benefited during the quarter as the dark clouds of
a political succession in China seemed to have dissipated to some extent. While
the aged leader Deng Xiaoping apparently still hangs onto life, he has, from a
political standpoint, already passed from the scene, and the transition to the
next generation of leaders appears to be taking place peacefully. It will
undoubtedly take some time for the Chinese political structure to fully
stabilize -- Chinese politics are now dominated by political purges in the guise
of corruption prosecutions -- but it appears that the most negative scenarios
will not occur. This comes as good news particularly to the Hong Kong market, a
strong performer during the first half of 1995 and a market in which we have a
significantly overweight position. At current valuations, we believe that the
overall picture is an appealing one for the long-term investor: we believe that
it is and will remain in China's interest to maintain the viability of Hong Kong
as a gateway to its capital-starved economy.
Our view on this region is mostly positive: we anticipate that, in the absence
of rising U.S. rates, growth will continue for the rest of the year, and we are
looking for a resumption of strong performance in the fall. We are watching
Thailand, where an election at the beginning of July has resulted in a victory
for the conservative (and apparently more corrupt) opposition. While this is not
good news for the market from a political risk standpoint, it is our view that
this market will overcome near-term uncertainties and perform well on strong
economic fundamentals for the remainder of the year. We are focusing
particularly upon selected bank and property stocks in the Thai market, as well
as in Indonesia and the Philippines. These sectors performed well during the
first half of the year, driven mainly by foreign buyers, and we believe that
renewed buying by domestic retail investors will continue to drive up prices as
the year moves forward, particularly in the smaller and mid-sized companies that
are often overlooked by foreign investors.
In summary, despite the high levels of volatility in the emerging markets over
the past several months, we believe that these markets remain an extremely
attractive long-term investment. While the economic fundamentals have changed in
certain markets -- most notably in Mexico -- much of the selling pressure that
drove markets down bore little relationship to economic reality. We believe
that, over the medium to long term, the emerging equity markets will continue to
outperform the developed markets by a substantial margin throughout the 1990s.
This projection is based on both macroeconomic and capital markets factors. We
expect the growth rate of developing economies to continue to outpace that of
the developed countries, and believe that high economic growth has and will
continue to correlate with relatively high equity market returns.
In all, 10.4% of the Fund's portfolio, expressed as a percentage of net assets,
has been invested in unlisted securities. Among these have been private equity
investments in telecommunications and other infrastructure companies in
Argentina, Israel, Peru, Russia and Venezuela. We continue to seek private
equity investment opportunities that offer attractive valuations, access to
unique situations such as privatizations, a solid management structure, and the
potential for dramatic growth.
4
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
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We believe that governmental deregulation and privatization around the world
will continue to offer the Fund many new opportunities in the future. We plan to
continue pursuing these opportunities as government-owned companies involved in
telecommunications, electricity and gas distribution, ports and roads continue
to privatize. Our theme is simple: for developing economies to grow, basic
services must be provided. If basic services sufficient for growth are to be
provided, these sorts of companies must generate high internal rates of return.
Thus, as emerging market economies continue to grow rapidly, we expect
telecommunications and other infrastructure companies within those markets to
grow with equal rapidity.
We wish to remind shareholders whose shares are registered in their own name
that they automatically participate in the Fund's dividend reinvestment program.
The automatic Dividend Reinvestment plan can be of value to shareholders in
maintaining their proportional ownership interest in the Fund in an easy and
convenient way. A shareholder whose shares are held in the name of a
broker/dealer or nominee should contact that party for details about
participating in the Plan. The Fund also offers shareholders a voluntary Cash
Purchase Plan. The Plan and the Cash Purchase Program are described on pages 26
and 27 of this report.
We appreciate your interest in the Fund and would be pleased to respond to your
questions or comments.
Respectfully,
Emilio Bassini
President
Chief Investment Officer*
*Emilio Bassini, who is a member of the Executive Committee of BEA Associates
and holds the offices of Chief Financial Officer and Executive Director of BEA
Associates, is primarily responsible for management of the Fund's assets. He has
served the Fund in such capacity since the commencement of the Fund's
operations. Mr. Bassini joined BEA Associates (formerly Basic Appraisals, Inc.
and BEA Associates Inc.) in 1984. Mr. Bassini is a Director, Chairman of the
Board, President and Chief Investment Officer of the Fund and is also a
Director, Chairman of the Board, President and Chief Investment Officer of The
Emerging Markets Infrastructure Fund, Inc., The Latin America Equity Fund, Inc.,
The Latin America Investment Fund, Inc. and The Portugal Fund, Inc. He is also
the President, Chief Investment Officer and Secretary of The Indonesia Fund,
Inc., Director, Chairman of the Board, President and Chief Executive Officer of
The Brazilian Equity Fund, Inc. and Director, President and Chief Investment
Officer of The Chile Fund, Inc. and The First Israel Fund, Inc.
5
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
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PORTFOLIO SUMMARY
AS OF MAY 31, 1995
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Local and/or long distance telephone
Latin America 57.10% service 58.80
<S> <C> <C> <C> <C>
Global 3.00% Telephone cable 1.20
Caribbean 3.50% Cellular communications 8.30
Middle East 6.80% Infrastructure and Construction 0.20
Asia 20.50% Cash and cash equivalents 0.70
Eastern Europe 1.70% Telecommunications equipment 6.70
Europe 7.20% Electric/Gas & Oil Utilities 24.10
Cash and cash equivalents 0.20% 100.00
100.00%
</TABLE>
<TABLE>
<S> <C>
THIS CHART REPRESENTS THE GEOGRAPHIC ASSET THIS CHART REPRESENTS THE SECTOR ALLOCATION
ALLOCATION OF TOTAL NET ASSETS OF THE FUND. OF TOTAL NET ASSETS OF THE FUND.
</TABLE>
TOP 10 EQUITY HOLDINGS, BY ISSUER, AS OF MAY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
OF
HOLDING SECTOR COUNTRY/REGION NET ASSETS
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
1. Philippine Long Distance Local and/or Long Distance
Telephone Co. ADR Telephone Service
- ---------------------------------------------------------------------------------------------------------------
2. Compania de Local and/or Long Distance
Telefonos de Chile S.A. Telephone Service
- ---------------------------------------------------------------------------------------------------------------
3. Telecomunicacoes Brasileiras S.A. Local and/or Long Distance Telephone
Service
- ---------------------------------------------------------------------------------------------------------------
4. Telecom Argentina S.A. Class B Local and/or Long Distance
Telephone Service
- ---------------------------------------------------------------------------------------------------------------
5. Telefonos de Mexico, S.A. de C.V. Local and/or Long Distance
Telephone Service
- ---------------------------------------------------------------------------------------------------------------
6. Cellular Communications
of Puerto Rico, Inc. Cellular Communications
- ---------------------------------------------------------------------------------------------------------------
7. Tele Danmark A/S Class B ADS Local and/or Long Distance
Telephone Service
- ---------------------------------------------------------------------------------------------------------------
8. Hong Kong Telecommunications Ltd. Local and/or Long Distance
Telephone Service
- ---------------------------------------------------------------------------------------------------------------
9. Telekom Malaysia Berhad Local and/or Long Distance
Telephone Service
- ---------------------------------------------------------------------------------------------------------------
10. Compania Peruana de Telefonos S.A. Local and/or Long Distance
Telephone Service
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------
1.
Philippines 7.27 %
- ---------
2.
Chile 6.18
- ---------
3.
Brazil 4.98
- ---------
4.
Argentina 4.37
- ---------
5.
Mexico 4.30
- ---------
6.
Puerto Rico 3.45
- ---------
7.
Denmark 3.19
- ---------
8.
Hong Kong 3.18
- ---------
9.
Malaysia 2.95
- ---------
10.
Peru 2.82
- ---------
</TABLE>
6
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
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SCHEDULE OF INVESTMENTS
MAY 31, 1995
<TABLE>
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- ------------- ----------------------------------------------------------------------------------- --------------
<C> <S> <C>
EQUITY SECURITIES-99.05%
EQUITY OR EQUITY-LINKED SECURITIES OF
TELECOMMUNICATION COMPANIES IN EMERGING
COUNTRIES-68.94%
ARGENTINA-9.05%
$ 2,204,682
152,047 Argentine Cellular Communications (Holdings) Ltd.*#
725,290
206,977 Citicorp Equity Investments S.A. Class B#
7,071,920
1,421,214 Telecom Argentina S.A. Class B
1,580,000
32,000 Telecom Argentina Stet -- France Telecom S.A. Class B ADS##
3,065,015
114,580 Telefonica de Argentina S.A. ADS
--------------
14,646,907
TOTAL ARGENTINA (Cost $12,030,342)
--------------
BRAZIL-7.41%
1,747,925
50,300 Telecomunicacoes Brasileiras S.A. ADR#
1,741,741
56,188,200 Telecomunicacoes Brasileiras S.A. ON(a)
4,579,642
131,374,846 Telecomunicacoes Brasileiras S.A. PN
3,549,927
28,277,755 Telecomunicacoes de Sao Paulo S.A. PN#(b)
383,453
7,900,000 Telecomunicacoes do Rio de Janeiro S.A. PN#(c)
--------------
12,002,688
TOTAL BRAZIL (Cost $7,805,621)
--------------
CHILE-7.59%
9,442,950
106,700 Compania de Telefonos de Chile S.A. ADS##
570,656
117,000 Compania de Telefonos de Chile S.A. Series B
264,409
184,719 Conatel S.A.
2,009,521
221,018 Empresa Nacional de Telecomunicaciones S.A.
--------------
12,287,536
TOTAL CHILE (Cost $7,944,799)
--------------
EASTERN EUROPE-1.88%
2,031,157
189,345 Global Telesystems Group*#
1,012,500
200,000 Petersburg Long Distance Inc.#(d)
--------------
3,043,657
TOTAL EASTERN EUROPE (Cost $3,031,163)
--------------
</TABLE>
7
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
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SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- ------------- ----------------------------------------------------------------------------------- --------------
GREECE-0.19%
<C> <S> <C>
$ 314,994
39,600 Alkatel Cable Hellas S.A. (Cost $586,831)
--------------
HONG KONG-3.18%
4,116,776
1,947,600 Hong Kong Telecommunications Ltd.
1,026,000
48,000 Hong Kong Telecommunications Ltd. ADR#
--------------
5,142,776
TOTAL HONG KONG (Cost $3,192,261)
--------------
ISRAEL-6.80%
2,685,478
1,181,530 Bezeq Israeli Telecommunication Corp. Ltd.
1,900,849
114,509 DSP Group, Inc. Preferred Series F*#
1,721,250
102,000 ECI Telecom Ltd.
1,047,375
133,000 Geotek Communications, Inc.#
975,728
100 Geotek Communications, Inc. Convertible Preferred Series M*#
755,242
9,300 Koor Industries Ltd.
387,601
123,048 M - Systems Flash Disk Pioneers Ltd.*#
86,384
61,524 M - Systems Flash Disk Pioneers Ltd., Warrants, due 06/03/98*#
1,108,688
1,282 Scorpio Communications*#(e)
336,350
43,400 Teledata Communication Ltd.#
--------------
11,004,945
TOTAL ISRAEL (Cost $9,964,281)
--------------
MALAYSIA-5.71%
4,482,023
1,372,000 Technology Resources Industries#
4,770,635
622,000 Telekom Malaysia Berhad
--------------
9,252,658
TOTAL MALAYSIA (Cost $7,842,274)
--------------
MEXICO-4.30%
2,022,187
71,900 Telefonos de Mexico, S.A. de C.V. ADR
2,444,844
1,732,000 Telefonos de Mexico, S.A. de C.V. Series A
2,495,843
1,760,000 Telefonos de Mexico, S.A. de C.V. Series L
--------------
6,962,874
TOTAL MEXICO (Cost $11,353,749)
--------------
PAKISTAN-0.34%
551,250
4,900 Pakistan Telecom Co. GDR#+ (Cost $950,600)
--------------
</TABLE>
8
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
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SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- ------------- ----------------------------------------------------------------------------------- --------------
PERU-3.39%
<C> <S> <C>
$ 4,563,565
2,661,092 Compania Peruana de Telefonos S.A.
<CAPTION>
PAR
(000)
- -------------
<C> <S> <C>
918,400
US$ 1,120 Tele 2000 S.A. Convertible Note, 9.75%, due 04/14/97
--------------
5,481,965
TOTAL PERU (Cost $3,205,678)
--------------
<CAPTION>
NO. OF
SHARES
- -------------
<C> <S> <C>
PHILIPPINES-8.26%
11,765,937
163,700 Philippine Long Distance Telephone Co. ADR
1,611,842
1,700,000 Pilipino Telephone Corporation#
--------------
13,377,779
TOTAL PHILIPPINES (Cost $7,786,705)
--------------
PORTUGAL-1.23%
1,999,194
48,000 Companhia Portuguesa Radio Marconi, S.A. (Cost $1,371,656)
--------------
PUERTO RICO-3.45%
2,383,391
77,825 Cellular Communications of Puerto Rico, Inc.#
<CAPTION>
PAR
(000)
- -------------
<C> <S> <C>
3,195,000
US$ 1,500 Cellular Communications of Puerto Rico, Inc., Convertible Bond, 8.25%, due
08/01/00
--------------
5,578,391
TOTAL PUERTO RICO (Cost $2,825,253)
--------------
<CAPTION>
NO. OF
SHARES
- -------------
<C> <S> <C>
THAILAND-2.80%
2,293,869
147,300 Advance Information Services Public Co. Ltd. Foreign Registered
2,237,444
587,000 Telecom Asia Corporation Public Company Limited Local Registered#
--------------
4,531,313
TOTAL THAILAND (Cost $4,379,169)
--------------
VENEZUELA-0.65%
1,049,139
125,947 Venworld Telecommunications*# (Cost $2,531,383)
--------------
</TABLE>
9
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
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- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- ------------- ----------------------------------------------------------------------------------- --------------
GLOBAL-2.71%
<C> <S> <C>
$ 1,003,836
3,817 International Wireless Communications, Inc.*#
3,394,293
136,454 Millicom International Cellular S.A.#
--------------
4,398,129
TOTAL GLOBAL (Cost $2,645,275)
--------------
111,626,195
TOTAL EMERGING COUNTRIES (Cost $89,447,040)
--------------
EQUITY SECURITIES OF TELECOMMUNICATION COMPANIES IN
DEVELOPED COUNTRIES-5.81%
DENMARK-3.19%
5,164,200
181,200 Tele Danmark A/S Class B ADS## (Cost $4,416,828)
--------------
ITALY-1.70%
1,845,967
902,100 Societa Italiana per l'Esercizio delle Telecomunicazioni p.a.
911,642
346,840 Societa Italiana per l'Esercizio delle Telecomunicazioni p.a.,
Non-Convertible Savings Shares
--------------
2,757,609
TOTAL ITALY (Cost $1,998,951)
--------------
NETHERLANDS-0.92%
1,485,025
41,200 Koninklijke PTT Nederland N.V. (Cost $1,176,270)
--------------
9,406,834
TOTAL DEVELOPED COUNTRIES (Cost $7,592,049)
--------------
EQUITY SECURITIES OF COMPANIES PROVIDING OTHER ESSENTIAL
SERVICES IN THE DEVELOPMENT OF AN EMERGING COUNTRY'S
INFRASTRUCTURE-24.30%
ARGENTINA-2.87%
2,631,998
1,383,478 Camuzzi Argentina S.A.*
886,937
58 Sodigas Pampeana S.A.*
782,591
58 Sodigas del Sur S.A.*
353,362
17,450 YPF Sociedad Anonima ADS
--------------
4,654,888
TOTAL ARGENTINA (Cost $3,519,957)
--------------
</TABLE>
10
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
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- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- ------------- ----------------------------------------------------------------------------------- --------------
BRAZIL-3.49%
<C> <S> <C>
$ 1,413,924
5,086,198 Centrais Eletricas Brasileiras S.A. ON#
457,823
1,653,452 Centrais Eletricas Brasileiras S.A. Class B PN#
594,457
718,500 Centrais Eletricas de Santa Catarin Class B PN#
888,031
38,516,774 Companhia Energetica de Minas Gerais PN
879,287
15,628,900 Companhia Paulista de Forca e Luz ON#
<CAPTION>
PAR
(000)
- -------------
<C> <S> <C>
1,413,392
BR 1,000 Enersul, Convertible Bond 16.00%, due 09/01/98
--------------
5,646,914
TOTAL BRAZIL (Cost $4,319,514)
--------------
<CAPTION>
NO. OF
SHARES
- -------------
<C> <S> <C>
CHILE-16.01%
363,975
8,212 Chilectra S.A. ADS+
2,872,064
372,332 Chilgener S.A.
1,654,456
270,192 Chilquinta S.A.
1,727,728
2,459,567 Compania Eletrica del Rio Maipo S.A.
3,419,958
586,445 Compania General de Electricidad Industrial S.A.
376,416
546,165 Elecda Empresa Eletrica de Antofagasta S.A.
995,407
1,514,182 Eliqsa Empresa Eletrica de Iquique S.A.
768,138
1,761,580 Emelari Empresa Eletrica de Arica S.A.
3,736,893
148,394 Emelsa
4,434,691
1,394,156 Empresa Eletrica Pehuenche S.A.
2,195,454
2,637,691 Empresa Nacional de Electricidad S.A.
2,119,936
3,676,992 Enersis S.A.
1,257,455
57,500 Saesa
--------------
25,922,571
TOTAL CHILE (Cost $9,945,931)
--------------
</TABLE>
11
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- ------------- ----------------------------------------------------------------------------------- --------------
PERU-1.15%
<C> <S> <C>
$ 1,866,521
1,787,000 Ontario--Quinta A.V.V.*# (Cost $1,835,372)
--------------
VENEZUELA-0.78%
1,258,290
1,195,024 C.A. la Electricidad de Caracas SAICA-SACA (Cost $1,487,074)
--------------
39,349,184
TOTAL OTHER ESSENTIAL SERVICES (Cost $21,107,848)
--------------
160,382,213
TOTAL EQUITY OR EQUITY-LINKED SECURITIES (Cost $118,146,937)
--------------
SHORT-TERM INVESTMENTS-1.56%
CHILEAN MUTUAL FUNDS-0.16%
30,872
8,212 Fondo Mutuo Bonosorno Global
141,277
13,665 Fondo Mutuo Operacional BanChile
97,612
27,017 Fondo Mutuo Renta Mas
--------------
269,761
TOTAL CHILEAN MUTUAL FUNDS (Cost $264,937)
--------------
<CAPTION>
PAR
(000)
- -------------
<C> <S> <C>
CHILEAN INFLATION ADJUSTED TIME DEPOSITS-0.25%
38,168
CLP 1,236 Banco Bice, 5.90%, 08/23/95
31,170
998 Banco de Santiago, 5.50%, 08/29/95
338,541
10,950 Republic National Bank of New York, 5.90%, 07/31/95
--------------
407,879
TOTAL CHILEAN INFLATION ADJUSTED
TIME DEPOSITS (Cost $390,768)
--------------
</TABLE>
12
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
PAR VALUE
(000) DESCRIPTION (NOTE A)
- ------------- ----------------------------------------------------------------------------------- --------------
GRAND CAYMAN-1.15%
<C> <S> <C>
$ 1,859,000
US$ 1,859 Brown Brothers Harriman & Co.-
Call Account, 5.00%++ (Cost $1,859,000)
--------------
2,536,640
TOTAL SHORT-TERM INVESTMENTS (Cost $2,514,705)
--------------
</TABLE>
<TABLE>
<C> <S> <C>
TOTAL INVESTMENTS (Cost $120,661,642) (Notes A, D)-100.61% 162,918,853
(994,218)
LIABILITIES IN EXCESS OF OTHER ASSETS-(0.61)%
-----------
$161,924,635
NET ASSETS-100%
-----------
-----------
</TABLE>
- ------------------------
<TABLE>
<C> <S>
* Not readily marketable securities.
** Effective yield on the date of purchase.
# Security is non-income producing.
## Security is out on loan.
SEC Rule 144A security. Such securities are traded only among "qualified
institutional buyers".
+
Variable rate account. Rates reset on a monthly basis; amounts available generally on
the same business day requested.
++
(a) With an additional 595,030 rights attached, expiring 6/26/95, with no market value.
(b) With an additional 639,512 rights attached, expiring 6/23/95, with no market value.
(c) With an additional 368,248 rights attached, expiring 6/20/95, with no market value.
(d) With an additional 40,000 warrants attached, expiring 12/31/96, with no market value.
(e) With an additional 156 warrants attached, expiring 6/4/97, with a market value of $2.
ADR American Depositary Receipts.
ADS American Depositary Shares.
BR Brazilian Real.
CLP Chilean Pesos.
GDR Global Depositary Receipts.
ON Ordinary Shares.
PN Preferred Shares.
US$ United States dollars.
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUMMARY OF EQUITY SECURITIES BY COUNTRY/REGION
<TABLE>
<CAPTION>
PERCENT OF
COUNTRY/REGION NET ASSETS VALUE
- -------------------------------------------------------------------------------------- ----------- --------------
<S> <C> <C>
ARGENTINA............................................................................. 11.92% $ 19,301,795
BRAZIL................................................................................ 10.90 17,649,602
CHILE................................................................................. 23.60 38,210,107
DENMARK............................................................................... 3.19 5,164,200
EASTERN EUROPE........................................................................ 1.88 3,043,657
GREECE................................................................................ 0.19 314,994
HONG KONG............................................................................. 3.18 5,142,776
ISRAEL................................................................................ 6.80 11,004,945
ITALY................................................................................. 1.70 2,757,609
MALAYSIA.............................................................................. 5.71 9,252,658
MEXICO................................................................................ 4.30 6,962,874
NETHERLANDS........................................................................... 0.92 1,485,025
PAKISTAN.............................................................................. 0.34 551,250
PERU.................................................................................. 4.54 7,348,486
PHILIPPINES........................................................................... 8.26 13,377,779
PORTUGAL.............................................................................. 1.23 1,999,194
PUERTO RICO........................................................................... 3.45 5,578,391
THAILAND.............................................................................. 2.80 4,531,313
VENEZUELA............................................................................. 1.43 2,307,429
GLOBAL................................................................................ 2.71 4,398,129
----- --------------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES.......................................... 99.05% $ 160,382,213
----- --------------
----- --------------
</TABLE>
14
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $120,661,642) (Note A) $162,918,853
Receivables:
Securities sold 972,638
Note 500,000
Dividends 171,420
Interest 100,363
Other assets 61,280
-----------
Total Assets 164,724,554
-----------
LIABILITIES:
Payables:
Due to custodian 609,123
Investments purchased 1,589,383
Due to adviser (Note B) 303,603
Due to administrators (Note B) 28,352
Other accrued expenses 269,458
-----------
Total Liabilities 2,799,919
-----------
NET ASSETS (applicable to 8,434,919 shares of common stock outstanding) $161,924,635
-----------
-----------
NET ASSET VALUE PER SHARE ($161,924,635 DIVIDED BY 8,434,919) $19.20
-----------
-----------
Net assets consist of:
Capital stock, $0.001 par value; 8,434,919 shares issued and outstanding
(100,000,000 shares authorized) $ 8,435
Paid-in capital 117,290,151
Accumulated net investment income 557,665
Accumulated realized gains on investments and foreign currency related
transactions 1,792,341
Net unrealized appreciation on investments and other assets and liabilities
denominated in foreign currency 42,276,043
-----------
Net assets applicable to shares outstanding $161,924,635
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income (Note A):
Dividends $3,439,259
Interest 750,140
Less: Foreign taxes withheld (98,831)
----------
Total Investment Income 4,090,568
----------
Expenses:
Investment advisory fees (Note B) 2,031,180
Custodian fees (Note B) 327,309
Administration fees (Note B) 219,138
Chile repatriation tax 155,556
Accounting fees 108,503
Printing fees 65,665
Insurance 59,382
Audit fees 56,508
Transfer agent fees 47,527
Directors' fees (Note B) 33,002
Legal fees 27,930
Interest 23,097
Other 40,710
----------
Total Expenses 3,195,507
----------
Net Investment Income 895,061
----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS:
Net realized gain/(loss) from:
Investments 6,262,533
Foreign currency related transactions (156,614)
Net change in unrealized appreciation in value of investments and
translation
of other assets and liabilities denominated in foreign currency (5,978,276)
----------
Net realized and unrealized gain on investments and foreign currency related
transactions 127,643
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,022,704
----------
----------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 895,061 $ 1,040,204
Net realized gain on investments and foreign currency related transactions 6,105,919 18,941,773
Net change in unrealized appreciation in value of investments and translation
of other assets and liabilities denominated in foreign currency (5,978,276) 39,818,287
-------------- --------------
Net increase in net assets resulting from operations 1,022,704 59,800,264
-------------- --------------
Dividends and distributions to shareholders from:
Net investment income ($0.040 and $0.145 per share, respectively) (337,396) (1,217,353)
Net realized gain on investments and foreign currency related transactions
($1.780 and $1.065 per share, respectively) (15,014,156) (8,926,038)
-------------- --------------
(15,351,552) (10,143,391)
-------------- --------------
Capital share transactions (Note C):
Proceeds from 51,951 shares issued in reinvestment of dividends -- 1,258,522
-------------- --------------
Net increase in net assets resulting from capital share transactions -- 1,258,522
-------------- --------------
Total increase/(decrease) in net assets (14,328,848) 50,915,395
NET ASSETS:
Beginning of year 176,253,483 125,338,088
-------------- --------------
End of year (including undistributed net investment income of $557,665 and $0,
respectively) $ 161,924,635 $ 176,253,483
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MAY 31, 1995
<TABLE>
<S> <C> <C>
INCREASE/(DECREASE) IN CASH FROM OPERATING ACTIVITIES:
Investment income received $4,157,659
Operating expenses paid (3,291,480)
----------
Net increase in cash from operating activities 866,179
INVESTING ACTIVITIES:
Purchases of long-term investments (22,212,579)
Purchases of short-term investments, net (890,621)
Proceeds from disposition of long-term portfolio investments 37,467,915
----------
Net increase in cash from investing activities 14,364,715
FINANCING ACTIVITIES:
Cash dividends paid (15,351,552)
Proceeds of loan 3,500,000
Loan repaid (3,500,000)
Notes receivable (500,000)
----------
Net cash repaid by financing activities (15,851,552)
----------
Net decrease in cash (620,658)
Net cash at beginning of year 11,535
----------
Due to custodian at end of year ($ 609,123)
----------
----------
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM OPERATIONS TO NET
DECREASE IN CASH FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $1,022,704
ADJUSTMENTS:
Decrease in dividend and interest receivable $ 67,091
Decrease in accrued expenses (111,316)
Decrease in prepaid expenses 15,343
Net realized and unrealized gain on investments and foreign
currency related transactions (127,643)
----------
TOTAL ADJUSTMENTS (156,525)
----------
NET INCREASE IN CASH FROM OPERATING ACTIVITIES: $ 866,179
----------
----------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED MAY 31, JUNE 25, 1992*
---------------------------- THROUGH
1995 1994 MAY 31, 1993
------------- ------------- ---------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 20.90 $ 14.95 $ 13.84**
------ ------ ------
Net investment income 0.11 0.13 0.16
Net realized and unrealized gain on investments and foreign
currency related transactions 0.01 7.03 + 1.20
------ ------ ------
Net increase in net assets from operations 0.12 7.16 1.36
Dividends and distributions to shareholders from:
Net investment income (0.04 ) (0.15 ) (0.14)
Net realized gain on investments and foreign currency
transactions (1.78 ) (1.06 ) (0.11)
------ ------ ------
Total distributions to shareholders (1.82 ) (1.21 ) (0.25)
------ ------ ------
Net asset value, end of period $ 19.20 $ 20.90 $ 14.95
------ ------ ------
------ ------ ------
Market value, end of period $ 17.75 $ 22.75 $ 14.50
------ ------ ------
------ ------ ------
Total investment return++ (13.94)% 64.74 % 5.85 %
------ ------ ------
------ ------ ------
RATIO/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $161,925 $176,253 $125,338
Ratio of expenses to average net assets 1.89 % 1.81 % 1.99 %(a)
Ratio of net investment income to average net assets 0.53 % 0.63 % 2.02 %(a)
Portfolio turnover 14.29 % 43.98 % 22.55 %(b)
</TABLE>
- ------------------------
* Commencement of investment operations.
** Initial public offering price of $15.00 per share less underwriting discount
of $1.05 per share and offering expenses of $0.11 per share.
+ Reflects a $0.03 per share increase to the Fund's net asset value per share
resulting from the antidilutive impact of shares issued pursuant to the
Fund's automatic dividend reinvestment plan in January 1994.
++ Total investment return at market value is based on the changes in market
price of a share during the period and assumes reinvestment of distributions
at actual prices pursuant to the Fund's dividend reinvestment plan. Total
investment return does not reflect brokerage commissions or initial
underwriting discounts and has not been annualized.
(a) Annualized.
(b) Not annualized.
See accompanying notes to financial statements.
19
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE A. The Emerging Markets Telecommunications Fund, Inc. (the "Fund") was
incorporated in Maryland on February 11, 1992 and commenced investment
operations on June 25, 1992. The Fund is registered under the Investment Company
Act of 1940, as amended, as a closed-end, non-diversified management investment
company. Significant accounting policies are as follows:
PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All securities for which market quotations are readily
available are valued at the last sales price or lacking any sales, at the
closing price quoted for the securities (but if bid and asked quotations are
available, at the mean between the last current bid and asked prices).
Securities that are traded over-the-counter are valued at the mean between the
current bid and the asked prices, if available. All other securities and assets
are valued at the fair value as determined in good faith by the Board of
Directors. Investments in short-term debt instruments having a maturity of 60
days or less are valued on the basis of amortized cost. The Board of Directors
has established general guidelines for calculating fair value of non-publicly
traded securities. At May 31, 1995, the Fund held 10.4% of its net assets in
securities valued in good faith by the Board of Directors with an aggregate cost
of $16,970,262 and market value of $16,916,111. The net asset value per share of
the Fund is calculated weekly and at the end of each month and at any other
times determined by the Board of Directors.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. 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 recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.
TAXES: No provision is made for U.S. federal 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 federal income and excise taxes.
Income received by the Fund from sources within emerging countries and other
foreign countries may be subject to withholding and other taxes imposed by such
countries.
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.
federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.
The Fund is subject to and accrues a 10% Chilean repatriation tax with respect
to all known and estimated remittances from Chile. For the year ended May 31,
1995, the Fund incurred $155,556 in such taxes.
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
current 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 in investments in
equity securities which is due to changes in the foreign exchange rates from
that which is due to change in market prices of equity securities.
20
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
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 components are treated as ordinary income for
U.S. federal income tax purposes.
SECURITIES LENDING: The market value of securities out on loan to brokers at May
31, 1995, was $10,942,619, for which the Fund has received cash as collateral of
$11,221,249. Such cash collateral was reinvested into a repurchase agreement
which is in turn collateralized by U.S. Treasury Strips (interest-only).
Security loans are required at all times to be secured by collateral at least
equal to 102% of the market value of the securities on loan; however, in the
event of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral may be subject to legal proceedings. During
the period, the Fund earned $16,259 in securities lending income which is
included in interest income on the Statement of Operations.
DISTRIBUTION OF INCOME AND GAINS: The Fund intends to distribute annually to
shareholders substantially all of its net investment income and net realized
short-term capital gains. 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, although it currently
expects to distribute such gains. 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-date.
OTHER: Some countries require governmental approval for the repatriation of
investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if there is a deterioration in a country's balance of
payments or for other reasons, a country may impose temporary restrictions on
foreign capital remittances abroad. Amounts repatriated prior to the end of
specified periods may be subject to taxes as imposed by a foreign country.
The emerging countries' securities markets are substantially smaller, less
liquid and more volatile than the major securities markets in the United States.
A high proportion of the securities of many companies in emerging countries may
be held by a limited number of persons, which may limit the number of securities
available for investment by the Fund. The limited liquidity of emerging country
securities markets may also affect the Fund's ability to acquire or dispose of
securities at the price and time it wishes to do so.
The Fund, subject to local investment limitations, may invest up to 25% of its
assets in non-publicly traded equity securities which may involve a high degree
of business and financial risk and may result in substantial losses. Because of
the current absence of any liquid trading market for these investments, the Fund
may take longer to liquidate these positions than would be the case for publicly
traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized on such sales could be less than
those originally paid by the Fund. 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. BEA Associates serves as the Fund's investment adviser with respect to
all investments. As compensation for its advisory services, BEA Associates
receives from the Fund an annual fee, calculated weekly and paid quarterly,
equal to 1.25% of the first $100 million of the Fund's average weekly net
assets,
21
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
1.125% of the next $100 million and 1.00% of amounts in excess of $200 million.
For the year ended May 31, 1995, BEA Associates earned $2,031,180 for advisory
services. BEA Associates also provides certain administrative services to the
Fund and is reimbursed by the Fund for costs they incur on behalf of the Fund
(up to $20,000 per annum). For the year ended May 31, 1995, BEA Associates was
reimbursed $6,570 for administrative services rendered to the Fund.
Bear Stearns Funds Management Inc. ("BSFM") acts as the Fund's U.S.
administrator. The Fund pays BSFM a quarterly fee for its services rendered that
is computed weekly at an annual rate of 0.10% of the Fund's average weekly net
assets. For the year ended May 31, 1995, BSFM earned $169,439 for administrative
services.
CELFIN Administradora de Fondos de Inversion de Capital Extranjero S.A.
("Chilean administrator") and Correval, S.A. ("Correval") serve as the Fund's
administrators with respect to Chilean and Colombian investments, respectively.
In return for services rendered, the Chilean administrator and Correval each
receive a fee computed monthly and paid quarterly at an annual rate of 0.10% of
the Fund's average weekly net assets in their respective countries, subject to
certain minimum annual fees and reimbursement for a predefined limit of their
expenses.
The Fund pays each of its Directors, who is not a director, officer or employee
of BEA Associates, BSFM, Correval or the Chilean administrator, or any affiliate
thereof an annual fee of $5,000 plus $500 for each Board of Directors meeting
attended. In addition, the Fund reimburses these directors for travel and
out-of-pocket expenses incurred in connection with Board of Directors meetings.
Through June 14, 1995, Brown Brothers Harriman & Co. served as the custodian for
the Fund's U.S. and foreign assets (other than Mexican equities), and S.D.
Indeval, S.A. de C.V. served as custodian for the Fund's Mexican equity
investments.
Effective June 15, 1995, Brown Brothers Harriman & Co. serves as custodian for
all of the Fund's U.S. and foreign assets.
NOTE C. The authorized capital stock of the Fund is 100,000,000 shares of common
stock, $0.001 par value. Of the 8,434,919 shares outstanding at May 31, 1995,
BEA Associates owned 7,169 shares.
NOTE D. For U.S. federal income tax purposes, the cost of securities owned at
May 31, 1995 was $122,012,600. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currencies) of
$40,906,253, was composed of gross appreciation of $51,096,522 for those
investments having an excess of value over cost and gross depreciation of
$10,190,269 for those investments having an excess of cost over value.
For the period ended May 31, 1995, total purchases and sales of securities,
other than short-term obligations, aggregated $23,724,274 and $38,411,210,
respectively.
NOTE E. The Fund, along with 15 other U.S. regulated investment companies for
which BEA serves as investment adviser, has a credit agreement with The First
National Bank of Boston. The agreement provides that each fund is permitted to
borrow an amount equal to the lesser of $50,000,000 or 25% of the net assets
22
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
of the fund. However, at no time shall the aggregate outstanding principal
amount of all loans to any of the 16 funds exceed $50,000,000. The line of
credit will bear interest at (i) the greater of the bank's prime rate or the
Federal Funds Effective Rate plus 0.50% or (ii) the Adjusted Eurodollar Rate
plus 1.50%. The Fund had no amounts outstanding under the letter of credit
agreement at May 31, 1995.
NOTE F. Quarterly Results of Operations (unaudited):
<TABLE>
<CAPTION>
NET GAIN/(LOSS)
ON INVESTMENT NET
AND FOREIGN INCREASE/(DECREASE)
NET CURRENCY IN NET
INVESTMENT INVESTMENT DENOMINATED ASSETS RESULTING MARKET
INCOME INCOME/(LOSS) TRANSACTIONS FROM OPERATIONS PRICE
--------------------- -------------------- -------------------- -------------------- ON NYSE
TOTAL TOTAL TOTAL TOTAL ---------
QUARTER ENDED (000) PER SHARE (000) PER SHARE (000) PER SHARE (000) PER SHARE HIGH
- -------------------------- --------- ---------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
August 31, 1994........... $ 1,269 $ 0.15 $ 501 $ 0.06 $ 22,258 $ 2.64 $ 22,759 $ 2.70 $ 25.250
November 30, 1994......... 883 0.11 61 0.01 (13,432) (1.60) (13,371) (1.59) 24.750
February 28, 1995......... 1,085 0.13 375 0.04 (31,771) (3.76) (31,396) (3.72) 21.500
May 31, 1995.............. 853 0.10 (42) 0.00 23,073 2.73 23,031 2.73 18.375
--------- ----- --------- --------- --------- --------- --------- ---------
Totals................ $ 4,090 $ 0.49 $ 895 $ 0.11 $ 128 $ 0.01 $ 1,023 $ 0.12
--------- ----- --------- --------- --------- --------- --------- ---------
--------- ----- --------- --------- --------- --------- --------- ---------
August 31, 1993........... $ 1,070 $ 0.13 $ 430 $ 0.05 $ 22,999 $ 2.74 $ 23,429 $ 2.79 $ 20.000
November 30, 1993......... 1,289 0.15 561 0.07 18,518 2.21 19,079 2.28 26.000
February 28, 1994......... 532 0.06 (238) (0.03) 36,151 4.32* 35,913 4.29 28.125
May 31, 1994.............. 1,128 0.14 287 0.04 (18,908) (2.24) (18,621) (2.20) 26.375
--------- ----- --------- --------- --------- --------- --------- ---------
Totals................ $ 4,019 $ 0.48 $ 1,040 $ 0.13 $ 58,760 $ 7.03 $ 59,800 $ 7.16
--------- ----- --------- --------- --------- --------- --------- ---------
--------- ----- --------- --------- --------- --------- --------- ---------
<CAPTION>
QUARTER ENDED LOW
- -------------------------- ---------
<S> <C>
August 31, 1994........... $ 19.250
November 30, 1994......... 20.250
February 28, 1995......... 15.000
May 31, 1995.............. 11.750
Totals................
August 31, 1993........... $ 14.125
November 30, 1993......... 18.875
February 28, 1994......... 23.500
May 31, 1994.............. 20.375
Totals................
</TABLE>
- ------------------------
* Reflects a $0.03 per share increase to the Fund's net asset value per share
resulting from the antidilutive impact of shares issued pursuant to the
Fund's automatic dividend reinvestment plan.
23
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
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- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of The Emerging Markets Telecommunications Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of The
Emerging Markets Telecommunications Fund, Inc., including the schedule of
investments, as of May 31, 1995, and the related statement of operations and
cash flows for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments held by the
custodians and brokers as of May 31, 1995. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Emerging Markets Telecommunications Fund, Inc., as of May 31, 1995, the results
of its operations and cash flows for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and its financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
July 12, 1995
24
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX INFORMATION
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 fiscal year end
(May 31, 1995) as to the U.S. federal tax status of distributions received by
the Fund's shareholders in respect of such fiscal year. Of the $1.82 per share
dividend paid in respect of such fiscal year, $0.04 was derived from net
investment income, $0.74 was derived from net realized short-term capital gains
and $1.04 per share was from long-term capital gains. There were no dividends
which would qualify 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 Form 1099-DIV to determine the amount
includable on their respective tax returns for 1995.
Because the Fund's fiscal year is not the calendar year, notification will be
sent in respect to calendar year 1995. The notification, which will reflect the
amount to be used by calendar year taxpayers on their U.S. federal income tax
returns, will be made in conjunction with Form 1099-DIV and will be mailed in
January 1996.
Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of their dividend. They will generally not be entitled to a foreign tax
credit or deduction for the withholding taxes paid by the Fund.
In general, dividends 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.
25
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUND'S DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN
Pursuant to The Emerging Markets Telecommunications Fund, Inc. (the "Fund")
Dividend Reinvestment and Cash Purchase Plan (the "Plan"), each shareholder will
be deemed to have elected, unless the Fund's transfer agent, as the Plan Agent
(the "Plan Agent"), is otherwise instructed by the shareholder in writing, to
have all distributions, net of any applicable U.S. withholding tax,
automatically reinvested in additional shares of the Fund. Shareholders who do
not participate in the Plan will receive all dividends and distributions in
cash, net of any applicable U.S. withholding tax, paid in dollars by check
mailed directly to the shareholder by the Plan Agent, as dividend-paying agent.
Shareholders who do not wish to have dividends and distributions automatically
reinvested should notify the Plan Agent for the Fund, at the address set forth
below. Dividends and distributions with respect to shares registered in the name
of a broker-dealer or other nominee (i.e. in "street name") will be reinvested
under the Plan unless such service is not provided by the broker or nominee or
the shareholder elects to receive dividends and distributions in cash. A
shareholder whose shares are held by a broker or nominee that does not provide a
dividend reinvestment program may be required to have his shares registered in
his own name to participate in the Plan. Investors who own shares of the Fund's
common stock registered in street name should contact the broker or nominee for
details concerning participation in the Plan.
Certain distributions of cash attributable to (a) some of the dividends and
interest amounts paid to the Fund and (b) certain capital gains earned by the
Fund that are derived from securities of certain foreign issuers are subject to
taxes payable by the Fund at the time amounts are remitted. Such taxes, if any,
will be borne by the Fund and allocated to all shareholders in proportion to
their interests in the Fund.
The Plan Agent serves as agent for the shareholders in administering the Plan.
If the Board of Directors of the Fund declares an income dividend or a capital
gains distribution payable either in the Fund's common stock or in cash, as
shareholders may have elected, nonparticipants in the Plan will receive cash and
participants in the Plan will receive common stock to be issued by the Fund. If
the market price per share on the valuation date equals or exceeds net asset
value per share on that date, the Fund will issue new shares to participants
valued at net asset value or, if the net asset value is less than 95% of the
market price on the valuation date, then valued at 95% of the market price. If
net asset value per share on the valuation date exceeds the market price per
share on that date the Plan Agent, as agent for the participants, will purchase
shares of common stock on the open market, on the New York Stock Exchange or
elsewhere, for the participants' accounts. If, before the Plan Agent has
completed its purchases, the market price exceeds the net asset value per share,
the average per share purchase price paid by the Plan Agent may exceed the net
asset value per share, resulting in the acquisition of fewer shares than if the
dividend or distribution had been paid in shares issued by the Fund at net asset
value. If the market price exceeds the net asset value per share before the Plan
Agent has completed its purchases, the Plan Agent is permitted to cease
purchasing shares and the Fund may issue the remaining shares at a price equal
to the greater of (a) net asset value or (b) 95% of the then current market
price. In a case where the Plan Agent has terminated open market purchases and
the Fund has issued the remaining shares, the number of shares received by the
participant in respect of the cash dividend or distribution will be based on the
weighted average of prices paid for shares purchased in the open market and the
price at which the Fund issues remaining shares. The valuation date is the
dividend or distribution payment date or, if that date is not a New York Stock
Exchange trading day, the next preceding trading day. If the Fund should declare
an income dividend or capital gains distribution payable only in cash, the Plan
Agent will, as agent for the participants, buy Fund shares in the open market,
on the New York Stock Exchange or elsewhere, for the participants' accounts on,
or shortly after, the payment date.
Participants in the Plan have the option of making additional cash payments to
the Plan Agent, semiannually, in any amount from $100 to $3,000, for investment
in the Fund's common stock. The Plan Agent will use all funds received from
participants to purchase Fund shares in the open market on or about February 15
and August 15 of
26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUND'S DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN (CONTINUED)
each year. Any voluntary cash payments received more than 30 days prior to these
dates will be returned by the Plan Agent and interest will not be paid on any
uninvested cash payments. To avoid unnecessary cash accumulations, and also to
allow ample time for receipt and processing by the Plan Agent, it is suggested
that participants send in voluntary cash payments to be received by the Plan
Agent approximately 10 days before February 15 or August 15, as the case may be.
A participant may withdraw a voluntary cash payment by written notice, if the
notice is received by the Plan Agent not less than 48 hours before the payment
is to be invested. A participant's tax basis in his shares acquired through this
optional investment right will equal his cash payments to the Plan, including
any cash payments used to pay brokerage commissions allocable to his acquired
shares.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of the
participant and each shareholder's proxy will include those shares purchased
pursuant to the Plan.
In the case of a shareholder, such as a bank, broker or nominee, that holds
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are to participate in the
Plan.
There is no charge to participants for reinvesting dividends or capital gains
distributions payable in either stock or cash. The Plan Agent's fees for the
handling of reinvestment of such dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage charges with respect to shares
issued directly by the Fund as a result of dividends or capital gains
distributions payable either in stock or in cash. However, each participant will
be charged by the Plan Agent a pro rata share of brokerage commissions incurred
with respect to the Plan Agent's open market purchases in connection with
voluntary cash payments made by the participant or the reinvestment of dividends
or capital gains distributions payable only in cash. Brokerage charges for
purchasing small amounts of stock for individual accounts through the Plan are
expected to be less than the usual brokerage charges for such transactions
because the Plan Agent will be purchasing stock for all participants in blocks
and prorating the lower commission thus obtainable. Brokerage commissions will
vary based on, among other things, the broker selected to effect a particular
purchase and the number of participants on whose behalf such purchase is being
made. The Fund cannot predict, therefore, whether the cost to a participant who
makes a voluntary cash payment will be less than if a participant were to make
an open market purchase of the Fund's common stock on his own behalf.
The receipt of dividends and distributions in the stock under the Plan will not
relieve participants of any income tax (including withholding tax) that may be
payable on such dividends or distributions.
The Fund and the Plan Agent reserve the right to terminate the Plan as applied
to any voluntary cash payments made and any dividend or distribution paid
subsequent to notice of the termination sent to the members of the Plan at least
30 days before the semiannual contribution date, in the case of voluntary cash
payments, or the record date for dividends or distributions. The Plan also may
be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by at least 30 days' written notice to members of the Plan. All
correspondence concerning the Plan should be directed as follows: Inquiries
before September 5, 1995 should be directed to PNC Bank, National Association,
c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809 or by telephone
at 1-800-852-4750. Inquiries on or after September 5, 1995, should be directed
to Bank of Boston, Investor Relations Department, P.O. Box 644, Mail Stop
45-02-09, Boston, Massachusetts 02102-0644 or by telephone at 1-800-730-6001.
27
<PAGE>
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- --------------------------------------------------------------------------------
INVESTMENT ADVISER
THE EMERGING MARKETS
BEA Associates
----------------------------
New York, New York
TELECOMMUNICATIONS
--------------------------
FUND, INC.
U.S. ADMINISTRATOR
-----------
Bear Stearns Funds Management Inc.
New York, New York
TRANSFER AGENT AND REGISTRAR
PNC Bank, N.A.
Philadelphia, Pennsylvania
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. The financial information
included herein is taken
THE EMERGING MARKETS
from the records of the Fund. 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 TELECOMMUNICATIONS FUND, INC.
mentioned in this report.
ANNUAL REPORT
MAY 31, 1995
