EMERGING MARKETS TELECOMMUNICATIONS FUND INC, N-30D, 1997-07-25

EMERGING MARKETS TELECOMMUNICATIONS FUND INC
N-30D, 1997-07-25

Previous: EMERGING MARKETS TELECOMMUNICATIONS FUND INC, DEF 14A, 1997-07-25

Next: MUNIYIELD NEW JERSEY FUND INC, NSAR-A, 1997-07-25

<PAGE>

THE EMERGING MARKETS
TELECOMMUNICATIONS
FUND, INC.

ANNUAL REPORT
MAY 31, 1997

<PAGE>
CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders........................................................................ 1

Portfolio Summary............................................................................. 8

Schedule of Investments....................................................................... 10

Statement of Assets and Liabilities........................................................... 14

Statement of Operations....................................................................... 15

Statement of Changes in Net Assets............................................................ 16

Financial Highlights.......................................................................... 17

Notes to Financial Statements................................................................. 18

Report of Independent Accountants............................................................. 23

Results of Annual Meeting of Shareholders..................................................... 24

Tax Information............................................................................... 24

Description of InvestLink Program............................................................. 25
</TABLE>

- --------------------------------------------------------------------------------
<PAGE>
LETTER TO SHAREHOLDERS
June 16, 1997

DEAR SHAREHOLDERS:

We are writing to report on the activities of The Emerging Markets
Telecommunications Fund, Inc. (the "Fund") for the year ended May 31, 1997.

At May 31, 1997, the Fund's net asset value ("NAV") was $21.53 per share, as
compared to $20.94 on May 31, 1996.

PERFORMANCE

For the period June 1, 1996 through May 31, 1997, the Fund's total return, based
on NAV and assuming the reinvestment of dividends and distributions, was 17.5%.
In comparison, the Morgan Stanley Capital International Emerging Markets Free
Index (the "Index") returned 7.8% in the same period.

The Fund's outperformance relative to the Index was due principally to returns
generated in Brazil, Chile, Israel, Peru, Portugal, Russia and Venezuela. In
Brazil, moves to deregulate the telecommunications sector resulted in
significant price appreciation--by far, the highest in the portfolio.
Deregulation also figured as the key to the strong results achieved in Peru and
Venezuela, where the former state-owned telephone companies were privatized. In
Israel, the Fund's exposure to developers of telecom software and equipment
proved especially successful. In Portugal, the price of Portugal Telecom, S.A.
rose mainly as a function of its status as a highly visible blue-chip stock in a
market that experienced a significant re-rating. Finally, our performance in
Russia was boosted by our interest in a privately held Russian company.

From the commencement of investment operations on June 25, 1992 through May 31,
1997, the Fund's total return, based on NAV and assuming the reinvestment of
dividends and distributions, was 114.7%. The Index gained 89.3% during the same
period.

INVESTMENT PHILOSOPHY

We believe that deregulation and privatization around the world will continue to
offer the Fund many new opportunities in the future. We plan to pursue these
opportunities as governments privatize entities involved in telecommunications
and related businesses. Equities of numerous private-sector companies within
these and associated areas also are available for investment.

Our theme is simple: for developing economies to grow, basic services such as
telecommunications must be provided. Implementation of basic services on a level
sufficient for growth means that these sorts of companies are likely to generate
high internal rates of return. Thus, as emerging market economies sustain their
rapid growth, we expect telecommunications and other infrastructure companies
within those markets to grow at above-average rates, particularly in comparison
with similar companies in developed economies.

THE GLOBAL TELECOMMUNICATIONS ENVIRONMENT: CHANGE AS USUAL

Much has happened in the global telecommunications business since our last
report. We recognize three developments as being of greatest significance to
emerging markets.

- --------------------------------------------------------------------------------
1
<PAGE>
LETTER TO SHAREHOLDERS

First was the ratification of a landmark agreement by 68 nations under the
auspices of the World Trade Organization ("WTO") in February 1997. The agreement
legally obligates all signers to open their telecommunications markets to
competition (which is expected to occur by 2000). Most nations also agreed to
drop their prohibition against foreign ownership of a controlling interest in
their domestic telecom provider. Unlike many such multinational pacts,
furthermore, this one includes substantive provisions for enforcement.

The WTO agreement has strong ramifications for developing nations, where
retention of historical telecom monopolies is prevalent. The liberalization
process that had already begun in many developing nations likely will gain
considerable momentum. The industry consolidation via numerous mergers and
global alliances should quicken as well, allowing for the creation of seamless
"end-to-end" networks that make telephony cheaper and simpler for customers. In
each case, emerging markets telecom companies will take on increased strategic
value to others, and their stock prices should rise accordingly.

The second major industry development was the April 1997 addition of Telefonica
de Espana ("Telefonica") and Portugal Telecom, S.A. to the global Concert
alliance headed up by British Telecom and MCI Communications. Telefonica gives
the alliance unfettered access to the Spanish domestic market and, perhaps more
important, an immediate presence in Latin America, where it holds valuable
equity stakes in many leading telephone companies. Portugal Telecom, S.A.
contributes its own domestic market as well as its strong historical links with
Portuguese-speaking Brazil (Latin America's largest and, perhaps, most vital
market). All at once, then, Concert has gained an extraordinary capability to
realize the huge potential of the Latin American market for telecom services and
made substantial progress in the construction of its global end-to-end network.

Our final milestone was the Brazilian government's privatization of Companhia
Vale do Rio Doce ("CVRD"), the world's largest iron ore producer, in early May
1997. In our view, the sale of CVRD has positive implications for privatizations
in the telecom sector. The months-long failure to complete the CVRD deal earlier
had grinded to a halt the entire Brazilian privatization process, which was
slated to accelerate in 1997 with the first in a series of high-profile sales of
telcos and electric utilities. The process now is back on track, as exemplified
by the success thus far achieved in the ongoing sale of "Band B" cellular
telephony concessions. In moving CVRD into private hands, furthermore, the
Cardoso administration sent the world a signal that privatization can and will
go forward. Investors should reap the resulting benefits.

FEATURED COMPANIES

We'd now like to discuss a few of our specific holdings. In this report, we
focus on telecom providers that the Fund has added in recent months.

VIDESH SANCHAR NIGAM LTD.

Within the developing world, India is becoming increasingly attractive to
investors. Its government is displaying greater resolve to implement structural
economic reform, part of which includes the gradual opening of Indian financial
markets to foreign participation.

Of particular interest to telecommunications investors is Videsh Sanchar Nigam
Ltd. ("VSNL"), the government-controlled long-distance monopoly. VSNL is a
gateway provider, meaning that it earns revenues by routing incoming

- --------------------------------------------------------------------------------
2
<PAGE>
LETTER TO SHAREHOLDERS
and outgoing calls. In March 1997, the Indian government reduced its equity
stake in the company to 62% by selling 20% to the public in the form of global
depositary receipts. The deal's popularity was so great that, not only was it
oversubscribed by 10 times, but it also was the largest-ever such offering by an
Indian company.

We like VSNL for its multifaceted investment appeal. It is not only an emerging
market telecom company well-positioned for growth, but also an unusually pure
play on international long-distance telephony as well as an equity surrogate for
the rapidly expanding Indian economy as a whole.

Here are the factors that most contribute to our favorable view on VSNL:

OVER-CORRELATION WITH ECONOMIC GROWTH - Typically, a nation's volume of
international telephony grows at a rate higher than that of the underlying
economy. With India's GDP having risen at an annualized rate of 6-7% over the
last three years and projected to maintain a similar pace into the long-term,
VSNL is an excellent vehicle for investment in a high-growth economy.

HIGH DEGREE OF EARNINGS PREDICTABILITY - VSNL functions according to a
revenue-sharing agreement with the government's Department of Telecommunications
("DoT"). The agreement fixes the company's earnings per call-minute through
1999, meaning that its income and profits are relatively predictable.

MONOPOLY PROTECTION - DoT guarantees VSNL's status as India's exclusive
international long-distance carrier through 2004.

STRONG EXPOSURE TO GROWTH OF INDIAN TELEPHONY - There are three powerful forces
driving the growth of the Indian domestic phone network. First, penetration of
fixed phone lines within the population is about 1.3%, among the lowest rate in
Asia and globally. Second, pent-up demand for phone service is huge. Third, the
domestic network is needed to complete both incoming and outgoing international
long-distance calls. Since VSNL's revenues are constrained by the size of the
domestic network, then, its revenues should surge as the network expands.

GROWTH IN CALL VOLUME - The volume of international calls both to and from India
is growing due to the nation's increased integration into the global economy,
rising disposable income and the large number of Indians living abroad. Pressure
from other countries, however, likely will result in a reduction in VSNL's
earnings per call-minute following the 1999 expiration of its agreement with
DoT. We believe that any such potential shortfall will be more than made up for
by the growth in call volume.

FAVORABLE NATIONAL POLICY - India's National Telecom Policy, established in
1994, sets out targets for vigorous growth in domestic fixed lines, as well as
the need both for a world-class telephony capability and the attraction of
substantial foreign direct investment.

VETERAN MANAGEMENT - All of VSNL's top executives have at least 10 years'
experience in the Indian telecom business, either in the private sector or as
government regulators. They are seasoned and well-connected.

PORTUGAL TELECOM, S.A.

More than almost any other developing-nation telephony provider, Portugal
Telecom, S.A. ("PT") possesses substantial strategic value to the telecom
world's global giants. This is most clearly illustrated by its inclusion in the
British Telecom ("BT") - MCI Concert alliance we discussed earlier.

- --------------------------------------------------------------------------------
3
<PAGE>
LETTER TO SHAREHOLDERS

As shareholders in PT, however, our primary concern is how the company can
benefit from its membership in Concert. Our view is that this is the key to PT's
long-term investment appeal.

Although the Concert connection undoubtedly will increase the quantity and
quality of overseas opportunities for PT, its greatest value lies in how it can
help PT at home in Portugal. This is critical because 1) Portugal already has
one of the highest teledensity levels among emerging markets, meaning that its
growth potential is relatively low; 2) the Portuguese tariff (I.E., rate)
structure is in dire need of overhaul; and 3) PT will be vulnerable to
competition in 2000, when its official monopoly status expires.

Membership in Concert will improve PT's position in its domestic market in
several important ways:

-BT, one of the strongest potential entrants into the Portuguese market, has
been neutralized as a competitive threat.

-As the only European telecom provider to have fully rebalanced its tariff
structure, BT can provide unmatched expertise to PT in its own rebalancing
efforts.

-Access to Concert products will enable PT to offer state-of-the-art
telephony to multinational corporations with facilities in Portugal, as
soon as late 1997. PT's ability to deliver the same level of performance to
small-and medium-size companies, which form Portugal's largest business
customer sector, will set an extremely high standard for potential
competitors to meet.

-BT's status as a world leader in the development of telecom transmission
systems will give PT access to leading-edge research and technology.

-PT will be able to take advantage of the significant economies of scale in
procurement costs created by the merger of BT and MCI.

In addition to PT's membership in Concert, we note these other positive factors:

-Portugal's government recently announced its intention to spend $2.1
billion on building up the nation's telecom infrastructure by the start of
competition in 2000.

-Digitalization of PT's network, which will allow the delivery of
high-margin/value-added services such as call waiting and teleconferencing,
reached 79% at year-end 1996 and should be complete by 1999.

-PT is a prodigious generator of excess cash flow, with which it can create
shareholder value via debt reduction, stock repurchases, dividend increases
and high-return investments.

-PT's earnings will continue to be enhanced by a highly successful
cost-reduction program.

-PT controls half of Portugal's cellular telephony market, whose dynamic
growth should extend into the next several years.

COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA

Compania Anonima Nacional Telefonos de Venezuela ("CANTV") is the monopoly
provider of full-service telephony in Venezuela. It was wholly owned by the
Venezuelan government until 1991, when 40% of its equity was sold to a foreign
operating consortium controlled by GTE. The government sold off most of its
remaining stake to the public in

- --------------------------------------------------------------------------------
4
<PAGE>
LETTER TO SHAREHOLDERS
a November 1996 initial public offering. Following this offering, CANTV's
ownership is distributed among four primary shareholder groups. The consortium
owns 40%, the public 35%, company employees 20% and the government 5%.

Our investment thesis for CANTV is somewhat different from the typical rationale
for a developing-nation telephony provider. Most such stocks tend to be bought
based on prospects for substantial growth via expansion of lines in service and
increased market penetration. CANTV certainly will grow in these respects, but
not as dramatically as some others.

Instead, CANTV's performance should benefit from a wider and particularly benign
set of circumstances, all of which should drive rising profitability:

-Following a five-year period of heavy spending and infrastructure
development, CANTV is poised to exploit the considerable operating leverage
it has built.

-Venezuelan phone tariffs, whose structure frequently has worked against
CANTV, have been rebalanced in a way that should be much more beneficial.

-Significant gains in efficiency and cost reduction should continue.

-CANTV is successfully shifting its emphasis to marketing and a much more
customer-friendly orientation.

-The company's wireless subsidiary will be a major participant in the
enormous growth projected for cellular telephony in Venezuela.

-CANTV ranks behind most other Latin telephony providers in many financial
and operating performance categories, suggesting fairly little downside and
substantial upside potential.

CANTV has additional appeal as a surrogate equity play on the overall resurgence
of the Venezuelan economy. After years of economic deterioration, there are
strengthening indications that a gradual economic turnaround may be in progress.
The latter are most prominently reflected in the government's efforts to tame
hyperinflation, reform onerous labor laws, restructure the pension/social
security system, quicken the pace of privatization and refinance the nation's
Brady debt.

Investors likely will greet substantive progress on any of these fronts with
enthusiasm. As one of Venezuela's most liquid stocks and largest private
employer, CANTV will benefit not only from specific improvements but also from
the general sense of positive momentum that such changes would bring about.

OUTLOOK

We remain decidedly optimistic about the future of the emerging markets
telecommunications sector. In general, our optimism rests on 1) the rapid growth
that providers are experiencing as their domestic markets become increasingly
integrated into the global economy; and 2) the large universe of companies with
attractive fundamentals and valuations.

We also believe that the sector will be viewed increasingly favorably by
investors, due to the growing recognition of the strategic value of emerging
markets within the global telecom business. Each of the three major developments
we discussed earlier (I.E., the WTO agreement, the addition of PT and Telefonica
to the Concert global alliance and Brazil's privatization of CVRD) indicates
that industry participants themselves hold a similar view.

- --------------------------------------------------------------------------------
5
<PAGE>
LETTER TO SHAREHOLDERS

With this in mind, we show in the table below a comparison of the teledensity
(I.E., level of penetration of telephone service) of emerging nations to that of
their established counterparts. Note that, in most cases, teledensity in the
emerging nations is substantially lower than in the established nations. This
should provide you with a clear, simple quantification of the immense growth
potential for telephony in many emerging nations which, in turn, should help to
drive favorable performance by related equities.

COMPARATIVE GLOBAL TELEDENSITY
(MAIN LINES PER HOUSEHOLD, 1995)

<TABLE>
<CAPTION>
ESTABLISHED NATIONS EMERGING NATIONS
- ----------------------- --------------------------
<S> <C> <C> <C>
Sweden 68.8 Greece 47.7
U.S. 63.3 Israel 43.2
Denmark 61.9 South Korea 41.8
Switzerland 60.6 Taiwan 40.0
Canada 59.2 Portugal 36.8
Norway 56.3 Czech Republic 23.3
Finland 55.1 Turkey 20.1
France 54.7 Hungary 18.4
Hong Kong 52.8 Argentina 18.0
Netherlands 52.8 Malaysia 16.6
Australia 51.6 Chile 13.2
Germany 50.1 Poland 13.1
Singapore 49.7 Venezuela 10.9
U.K. 48.8 Colombia 9.7
Japan 48.0 Mexico 9.6
Austria 47.4 South Africa 9.5
New Zealand 47.0 Brazil 8.5
Belgium 45.9 Thailand 7.5
Italy 43.5 Jordan 7.2
Spain 38.2 Peru 4.7
Ireland 37.0 Russia 4.5
China 2.3
Philippines 1.8
Indonesia 1.7
India 1.1
</TABLE>

- ------------------
SOURCE: ING BARINGS

The table relates only to traditional fixed-wire telephony. We should add here
that the scope for value-added services like cellular, wireless transmission of
data, paging and related services such as cable television is equally immense.
Such an environment suggests huge opportunities for profit growth among
providers, equipment manufacturers, software developers and the broad universe
of ancillary businesses. Our goal is to find these opportunities and, in so
doing, give investors a unique vehicle for participation in one of the
fastest-growing industry sectors in emerging markets.

- --------------------------------------------------------------------------------
6
<PAGE>
LETTER TO SHAREHOLDERS

We appreciate your continued confidence in the Fund and would be pleased to
respond to your questions and comments.

Sincerely yours,

[SIGNATURE]
Richard W. Watt
President
Chief Investment Officer*

- --------------------------------------------------------------------------------
* Richard W. Watt, who is a Managing Director of BEA Associates, is primarily
responsible for management of the Fund's assets. Mr. Watt has served the Fund in
such capacity since January 1, 1997. He joined BEA Associates on August 2, 1995.
Mr. Watt formerly was associated with Gartmore Investment Limited in London,
where he was head of emerging markets investments and research. In this
capacity, he led a team of four portfolio managers and was manager of a
closed-end fund focusing on smaller Latin American companies. Before joining
Gartmore Investment Limited in 1992, Mr. Watt was a Director of Kleinwort Benson
International Investments in London, where he was responsible for research,
analysis and trading of equities in Latin America and other regions. Mr. Watt is
a Director, President and Chief Investment Officer of the Fund. He also is
Director, President and Chief Investment Officer of The Brazilian Equity Fund,
Inc., The Chile Fund, Inc., The Emerging Markets Infrastructure Fund, Inc., The
First Israel Fund, Inc., The Latin America Equity Fund, Inc., The Latin America
Investment Fund, Inc. and The Portugal Fund, Inc.

- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------

THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.

PORTFOLIO SUMMARY - AS OF MAY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
AS A PERCENT OF NET ASSETS
<S> <C> <C>
May 31,1997 May 31,1996
Cellular Communications 11.26% 18.5%
Electric Distribution 9.33% 11.0%
Electric Generation 4.37% 4.9%
Gas & Oil 4.11% 3.4%
Local and/or Long Distance Telephone
Service 48.86% 50.3%
Telecommunications 11.85% 4.6%
Other 4.21% 2.9%
Cash & Cash Equivalents 6.01% 4.4%
</TABLE>

GEOGRAPHIC ASSET BREAKDOWN

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
AS A PERCENT OF NET ASSETS
<S> <C> <C>
May 31,1997 May 31,1996
Asia 11.06% 14.08%
Caribbean 1.60% 3.17%
Eastern Europe 7.63% 2.08%
Europe 5.59% 8.68%
Latin America 56.82% 54.49%
Middle East 8.51% 7.78%
Global 5.77% 6.22%
Cash & Cash Equivalents 3.02% 3.50%
</TABLE>

- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.

PORTFOLIO SUMMARY - AS OF MAY 31, 1997 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
SUMMARY OF EQUITY OR EQUITY-LINKED SECURITIES BY COUNTRY/REGION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
AS A PERCENT OF NET ASSETS
<S> <C> <C>
May 31,1997 May 31,1996
Argentina 2.37% 3.83%
Brazil 13.07% 19.20%
Chile 19.67% 17.50%
Denmark 0.00% 2.59%
Eastern Europe 7.63% 2.08%
Hong Kong 0.91% 2.55%
India 3.05% 0.00%
Indonesia 3.26% 2.16%
Israel 8.51% 7.78%
Italy 2.23% 3.38%
Malaysia 1.50% 2.06%
Mexico 2.51% 7.43%
Peru 11.84% 5.07%
Philippines 2.34% 5.01%
Portugal 3.36% 2.18%
Puerto Rico 1.60% 3.17%
Thailand 0.00% 2.30%
Venezuela 4.37% 0.59%
Global 5.77% 6.22%
Other 0.00% 0.53%
</TABLE>

TOP 10 HOLDINGS, BY ISSUER

<TABLE>
<CAPTION>
Percent of Net
Holding Sector Country/Region Assets
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
1. Telefonica del Peru S.A. Local and/or Long Distance
Telephone Service Peru 10.6
- --------------------------------------------------------------------------------------------------------------------------------
2. Compania de Telecomunicaciones de Chile S.A. Local and/or Long Distance
Telephone Service Chile 9.8
- --------------------------------------------------------------------------------------------------------------------------------
3. Telecomunicacoes Brasileiras S.A. Local and/or Long Distance
Telephone Service Brazil 6.0
- --------------------------------------------------------------------------------------------------------------------------------
4. Millicom International Cellular S.A. Cellular Communications Global 4.6
- --------------------------------------------------------------------------------------------------------------------------------
5. Telecomunicacoes de Sao Paulo S.A. Local and/or Long Distance
Telephone Service Brazil 3.4
- --------------------------------------------------------------------------------------------------------------------------------
6. Portugal Telecom, S.A. Local and/or Long Distance
Telephone Service Portugal 3.4
- --------------------------------------------------------------------------------------------------------------------------------
7. Compania Anonima Nacional Telefonos de Venezuela Local and/or Long Distance
Telephone Service Venezuela 3.3
- --------------------------------------------------------------------------------------------------------------------------------
8. Videsh Sanchar Nigam Ltd. Telecommunications India 3.1
- --------------------------------------------------------------------------------------------------------------------------------
9. ECI Telecommunications Ltd. Telecommunications Israel 2.6
- --------------------------------------------------------------------------------------------------------------------------------
10. Cementos Mexicanos, S.A. de C.V. Other Infrastructure Mexico 2.5
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.

SCHEDULE OF INVESTMENTS - MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
<S> <C> <C>
- -----------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-93.99%
EQUITY OR EQUITY-LINKED SECURITIES OF
TELECOMMUNICATION COMPANIES IN EMERGING
COUNTRIES-70.54%
ARGENTINA-0.00%
Argentine Cellular
Communications Holdings
Ltd.*+ (Cost
$3,093,745)............. 304,094 $ 0
-----------
BRAZIL-9.49%
Telecomunicacoes
Brasileiras S.A. ON..... 84,288,200 10,983,056
Telecomunicacoes de Sao
Paulo S.A. PN........... 18,153,755 6,223,660
Telecomunicacoes de Sao
Paulo S.A. PN, Rights
(expiring 06/20/97)+.... 791,100 26,604
-----------
TOTAL BRAZIL (Cost $3,575,074).......... 17,233,320
-----------
CHILE-10.82%
Compania de
Telecomunicaciones de
Chile S.A. ADR#......... 498,950 17,089,037
Compania de
Telecomunicaciones de
Chile S.A., Class B..... 117,000 770,968
Compania Nacional de
Telefonos S.A........... 184,719 119,074
Empresa Nacional de
Telecomunicaciones
S.A..................... 221,018 1,678,017
-----------
TOTAL CHILE (Cost $9,356,047)........... 19,657,096
-----------
EASTERN EUROPE-4.98%
Global Telesystems
Group*+................. 189,345 3,786,900
Northern Elektrik
Telekomunikasyon
A.S.+................... 6,916,000 2,326,805
PLD Telekom, Inc.+....... 263,000 1,479,375
Vimpel-Communications
ADR+.................... 48,600 1,451,925
-----------
TOTAL EASTERN EUROPE (Cost
$6,345,105)............................ 9,045,005
-----------

<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
HONG KONG-0.91%
Asia Satellite
Telecommunications
Holdings Limited ADR
(Cost $1,549,920)....... 60,000 $ 1,657,500
-----------
INDIA-3.05%
Videsh Sanchar Nigam Ltd.
GDR+.................... 32,000 659,200
Videsh Sanchar Nigam Ltd.
GDR+,++................. 237,105 4,884,363
-----------
TOTAL INDIA (Cost $5,101,506)........... 5,543,563
-----------
INDONESIA-3.26%
PT Indonesia Satellite... 580,000 1,728,674
PT Telekomunikasi
Indonesia............... 1,500,000 2,528,263
PT Telekomunikasi
Indonesia ADR........... 50,000 1,662,500
-----------
TOTAL INDONESIA (Cost $4,499,079)....... 5,919,437
-----------
ISRAEL-8.51%
DSP Group Inc.+.......... 114,509 1,603,126
ECI Telecommunications
Ltd..................... 204,700 4,733,687
Geotek Communications,
Inc.+#.................. 133,000 594,344
Geotek Communications,
Inc., Convertible
Preferred Series M,
8.50%*.................. 100 515,882
Gilat Satellite Networks
Ltd.+................... 71,693 2,258,330
Koor Industries Ltd...... 9,300 824,154
M-Systems Flash Disk
Pioneers Ltd.+.......... 75,948 417,714
M-Systems Flash Disk
Pioneers Ltd., Warrants
(expiring 06/30/98)+.... 61,524 104,900
Nexus Telecommunications
Systems Ltd.
(units)+(a)............. 170,784 694,664
Tadiran Ltd. ADR......... 67,100 1,811,700
Tadiran
Telecommunications
Ltd.#................... 32,100 581,813
Teledata Communication
Ltd.+#.................. 43,400 1,323,700
-----------
TOTAL ISRAEL (Cost $14,230,575)......... 15,464,014
-----------
</TABLE>

- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.

SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
MALAYSIA-1.50%
Telekom Malaysia (Cost
$3,233,031)............. 368,000 $ 2,724,082
-----------
PERU-10.58%
Telefonica del Peru S.A.
ADR..................... 489,000 12,408,375
Telefonica del Peru S.A.,
Class B................. 2,661,092 6,808,722
-----------
TOTAL PERU (Cost $12,258,948)........... 19,217,097
-----------
PHILIPPINES-2.34%
Philippine Long Distance
Telephone Co. ADR#...... 57,200 3,310,450
Pilipino Telephone
Corporation+,++......... 2,402,500 933,673
-----------
TOTAL PHILIPPINES (Cost $4,961,100)..... 4,244,123
-----------
PORTUGAL-3.36%
Portugal Telecom, S.A.
(Cost $3,094,635)....... 158,928 6,093,618
-----------
PUERTO RICO-1.60%
CoreComm Inc.+ (Cost
$2,825,253)............. 181,991 2,911,856
-----------
VENEZUELA-4.37%
Compania Anonima Nacional
Telefonos de Venezuela
ADR+.................... 163,309 6,062,847
Venworld
Telecommunications+=/
=....................... 125,947 1,868,172
-----------
TOTAL VENEZUELA (Cost $7,695,370)....... 7,931,019
-----------
GLOBAL-5.77%
International Wireless
Communications, Inc.,
Series D*+.............. 5,503 2,063,625
International Wireless
Communications, Inc.,
Series F*+.............. 386 144,750
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
GLOBAL (CONTINUED)
International Wireless
Communications, Inc.,
Warrants (expiring
12/31/98)*+............. 31 $ 581
Millicom International
Cellular S.A.+#......... 182,454 8,278,850
-----------
TOTAL GLOBAL (Cost $4,756,091).......... 10,487,806
-----------
TOTAL EMERGING COUNTRIES (Cost
$86,575,479)........................... 128,129,536
-----------
EQUITY SECURITIES OF TELECOMMUNICATION COMPANIES IN
DEVELOPED COUNTRIES-1.43%
ITALY-1.43%
Telecom Italia Mobile
S.p.A................... 346,840 1,017,198
Telecom Italia Mobile
S.p.A., Non Convertible
Savings Shares.......... 902,100 1,575,674
-----------
TOTAL DEVELOPED COUNTRIES (Cost
$856,379).............................. 2,592,872
-----------
EQUITY OR EQUITY-LINKED SECURITES OF COMPANIES
PROVIDING OTHER ESSENTIAL SERVICES IN THE
DEVELOPMENT OF AN EMERGING COUNTRY'S
INFRASTRUCTURE-21.22%
ARGENTINA-2.37%
Camuzzi Argentina
S.A.*+.................. 1,383,478 2,631,998
Sodigas del Sur S.A.*.... 421,485 782,592
Sodigas Pampeana S.A.*... 583,264 886,935
-----------
TOTAL ARGENTINA (Cost $3,032,673)....... 4,301,525
-----------
BRAZIL-3.58%
Companhia Energetica de
Minas Gerais PN......... 14,743,651 674,861
Companhia Paulista de
Forca e Luz ON.......... 29,729,900 4,349,091
<CAPTION>
Par (000)
-------------
<S> <C> <C>
Enersul, Convertible
Bond, 16.00%,
09/01/98................ BRL 1,000 1,484,820
-----------
TOTAL BRAZIL (Cost $4,124,140).......... 6,508,772
-----------
</TABLE>

- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.

<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES OF INFRASTRUCTURE COMPANIES IN
DEVELOPED COUNTRIES-0.80%
ITALY-0.80%
Edison S.p.A. (Cost
$1,506,074)............. 305,000 $ 1,445,225
-----------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES
(Cost $114,202,111).................... 170,708,045
-----------

SHORT-TERM INVESTMENTS-2.99%
CHILEAN CERTIFICATES OF DEPOSIT-0.28%
<CAPTION>
Units (000)
-------------
<S> <C> <C>
Banco del Pacifaco,
6.70%, 06/23/97......... CLP 8 255,070
Banco Santiago, 6.70%,
06/23/97................ 8 262,656
-----------
TOTAL CHILEAN CERTIFICATES OF DEPOSIT
(Cost $521,523)........................ 517,726
-----------
CHILEAN INFLATION-ADJUSTED TIME DEPOSITS-0.60%
Banco Security, 6.70%,
06/09/97**.............. CLP 6 177,182
Banco Santiago, 6.70%,
06/16/97**.............. 29 912,021
-----------
TOTAL CHILEAN INFLATION-ADJUSTED TIME
DEPOSITS (Cost $1,103,649)............. 1,089,203
-----------
CHILEAN MUTUAL FUNDS-1.01%
<CAPTION>
No. of
Shares
-------------
<S> <C> <C>
Fondo Mutuo Operacional
BanChile................ 62,662 727,141
Fondo Mutuo Security
Check................... 256,953 1,104,472
-----------
TOTAL CHILEAN MUTUAL FUNDS (Cost
$1,819,641)............................ 1,831,613
-----------
</TABLE>

- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.

SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Description (000) (Note A)
- -----------------------------------------------------
<S> <C> <C>
CHILEAN REPURCHASE AGREEMENTS-1.10%
Citibank, N.A. (Agreement
dated 05/26/97, to be
repurchased at
$1,453,814), 10.08%,
06/02/97 (Note G)....... CLP 608,000 $ 1,452,127
Molina, Swett y Valdes
S.A. (Agreement dated
05/26/97, to be
repurchased at
$547,381), 10.20%,
06/02/97 (Note G)....... 228,915 547,461
-----------
TOTAL CHILEAN REPURCHASE AGREEMENTS
(Cost $1,996,729)...................... 1,999,588
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $5,441,542)...................... 5,438,130
-----------

TOTAL INVESTMENTS-96.98%
(Cost $119,643,653) (Notes A,D)........ 176,146,175
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES-3.02%...................... 5,481,224
-----------
NET ASSETS-100.00%...................... $181,627,399
-----------
-----------
- ---------------------------------------------------------
* Not readily marketable security.
** Effective yield on the date of purchase.
+ Security is non-income producing.
++ SEC Rule 144A security. Such securities are traded
only among "qualified institutional buyers".
++ Restricted security (See Note F).
# Security or a portion thereof is out on loan.
(a) Includes 170,784 warrants, expiring 11/28/97, with a
market value of $11,528.
ADR American Depositary Receipts.
BRL Brazilian Real.
CLP Chilean Pesos.
CPO Ordinary Participation Certificates.
GDR Global Depositary Receipts.
ON Ordinary Shares.
PN Preferred Shares.
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
13
<PAGE>
- --------------------------------------------------------------------------------

THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES - MAY 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost
$119,643,653) (Note A)................. $176,146,175
Cash (including $2,141 of foreign
currencies with a cost of $2,141) (Note
A)..................................... 4,720,354
Receivables:
Escrow on sale of security, due
September 1997....................... 631,775
Dividends............................. 564,373
Interest.............................. 65,062
Prepaid expenses and other assets....... 41,226
------------
Total Assets............................ 182,168,965
------------

LIABILITIES
Payables:
Advisory fee (Note B)................. 342,237
Administration fees (Note B).......... 34,249
Other accrued expenses................ 165,080
------------
Total Liabilities....................... 541,566
------------
NET ASSETS (applicable to 8,434,919
shares of common stock outstanding)
(Note C)............................... $181,627,399
------------
------------

NET ASSET VALUE PER SHARE ($181,627,399
DIVIDED BY 8,434,919)................. $21.53
------------
------------

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
Undistributed net investment income..... 789,507
Accumulated net realized gain on
investments and foreign currency
related transactions................... 7,040,163
Net unrealized appreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currencies..................... 56,499,143
------------
Net assets applicable to shares
outstanding............................ $181,627,399
------------
------------
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.

STATEMENT OF OPERATIONS - FOR THE FISCAL YEAR ENDED MAY 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends............................. $ 3,410,626
Interest.............................. 1,002,244
Less: Foreign taxes withheld.......... (247,959)
-----------
Total Investment Income............... 4,164,911
-----------
Expenses:
Investment advisory fees (Note B)..... 2,059,688
Administration fees (Note B).......... 293,699
Custodian fees........................ 288,368
Accounting fees....................... 133,299
Printing.............................. 118,782
Audit and legal fees.................. 92,997
Directors' fees....................... 43,799
Transfer agent fees................... 25,801
Insurance............................. 24,921
NYSE listing fees..................... 16,487
Amortization of organizational
costs................................ 8,001
Other................................. 20,732
Chilean repatriation taxes (Note A)... 133,513
Brazilian taxes (Note A).............. 12,864
-----------
Total Expenses........................ 3,272,951
-----------
Net Investment Income................. 891,960
-----------

NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments (net of Israeli capital
gains taxes of $2,100,460) (Note
A)................................... 23,781,880
Foreign currency related
transactions......................... (102,452)
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities
denominated in foreign currencies...... 419,091
-----------
Net realized and unrealized gain on
investments and foreign currency
related transactions................... 24,098,519
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $24,990,479
-----------
-----------
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the Fiscal Years Ended
May 31,
-----------------------------
1997 1996
<S> <C> <C>
-----------------------------

INCREASE IN NET ASSETS
Operations:
Net investment income................. $ 891,960 $ 2,257,954
Net realized gain on investments and
foreign currency related
transactions......................... 23,679,428 2,352,444
Net change in unrealized appreciation
in value of investments and
translation of other assets and
liabilities denominated in foreign
currencies........................... 419,091 13,804,009
------------ ------------
Net increase in net assets resulting
from operations.................... 24,990,479 18,414,407
------------ ------------
Dividends and distributions to
shareholders:
Net investment income................. (2,247,555) (321,938)
Net realized gain on investments and
foreign currency related
transactions......................... (17,743,203) (3,389,426)
------------ ------------
Total dividends and distributions to
shareholders....................... (19,990,758) (3,711,364)
------------ ------------
Total increase in net assets........ 4,999,721 14,703,043
------------ ------------

NET ASSETS
Beginning of year....................... 176,627,678 161,924,635
------------ ------------
End of year (including undistributed net
investment income of $789,507 and
$1,431,647, respectively).............. $181,627,399 $176,627,678
------------ ------------
------------ ------------
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
16
<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
June 25,
For the Fiscal Years Ended 1992*
May 31, through
----------------------------------------------- May 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.......... $20.94 $19.20 $20.90 $14.95 $13.84**
----------- --------- --------- --------- ---------
Net investment income......................... 0.10 0.27 0.11 0.13 0.16
Net realized and unrealized gain on
investments and foreign currency related
transactions................................. 2.86 1.91 0.01 7.03+ 1.20
----------- --------- --------- --------- ---------
Net increase in net assets resulting from
operations................................... 2.96 2.18 0.12 7.16 1.36
----------- --------- --------- --------- ---------
Dividends and distributions to shareholders:
Net investment income....................... (0.27) (0.04) (0.04) (0.15) (0.14)
Net realized gain on investments and foreign
currency related transactions.............. (2.10) (0.40) (1.78) (1.06) (0.11)
----------- --------- --------- --------- ---------
Total dividends and distributions to
shareholders................................. (2.37) (0.44) (1.82) (1.21) (0.25)
----------- --------- --------- --------- ---------
Net asset value, end of period................ $21.53 $20.94 $19.20 $20.90 $14.95
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Market value, end of period................... $17.375 $17.375 $17.75 $22.75 $14.50
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Total investment return(a).................... 14.31% 0.21% (13.94)% 64.74% 5.85%
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted)....... $181,627 $176,628 $161,925 $176,253 $125,338
Ratio of expenses to average net assets....... 1.90%(b) 1.77% 1.89% 1.81% 1.99%(c)
Ratio of net investment income to average net
assets....................................... 0.52% 1.40% 0.53% 0.63% 2.02%(c)
Portfolio turnover rate....................... 42.14% 27.71% 14.29% 43.98% 22.55%
Average commission rate per share(d).......... $0.0012 -- -- -- --
</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.
+ Includes 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.
(a) Total investment return at market value is based on the changes in
market price of a share during the period and assumes reinvestment of
dividends and distributions, if any, at actual prices pursuant to the
Fund's Dividend Reinvestment Plan. Total investment return does not
reflect brokerage commissions or initial underwriting discounts and
has not been annualized.
(b) Ratios shown are inclusive of taxes. If such taxes had not been
imposed, the ratio of expenses to average net assets would have been
1.82% for the fiscal year ended May 31, 1997.
(c) Annualized.
(d) Disclosure is required for fiscal years beginning on or after
September 1, 1995. Represents average commission rate per share
charged to the Fund on purchases and sales of investments subject to
such commissions during the period.

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
17
<PAGE>
- --------------------------------------------------------------------------------

THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE A. SIGNIFICANT ACCOUNTING POLICIES
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:

MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make certain
estimates and assumptions that may affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.

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 closing price quoted for the securities prior to the
time of determination (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. Short-term
investments 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, 1997, the
Fund held 8.25% of its net assets in securities valued in good faith by the
Board of Directors with an aggregate cost of $15,117,318 and fair value of
$14,978,221. The net asset value per share of the Fund is calculated weekly, at
the end of each month and at any other times determined by the Board of
Directors.

CASH: Deposits held at Brown Brothers Harriman & Co., the Fund's custodian, in a
variable rate account are classified as cash. At May 31, 1997, the interest rate
was 5.00%, which resets on a daily basis. Amounts on deposit are generally
available on the same business day.

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 U.S.
federal 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 U.S. 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.

Under certain circumstances the Fund may be subject to a maximum of 36% Israeli
capital gains tax on gains derived from the sale of certain Israeli investments.

The Fund is subject to a 10% Chilean repatriation tax with respect to all
remittances from Chile in excess of original invested capital. For the fiscal
year ended May 31, 1997, the Fund incurred $133,513 of such expense.

Effective January 23, 1997, Brazil imposes a 0.20% CONTRIBUCAO SOBRE
MOVIMENTACAO FINANCIERA("CPMF") tax that applies to most debit transactions
carried out by financial institutions. Stock exchange transactions are not
affected by this tax. For the fiscal year ended May 31, 1997, the Fund incurred
$12,864 of such expense.

- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

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 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. However, the Fund does isolate the
effect of fluctuations in foreign exchange rates when determining the gain or
loss upon the sale or maturity of foreign currency denominated debt obligations
pursuant to U.S. federal income tax regulations, with such amount categorized as
foreign exchange gain or loss for both financial reporting and U.S. federal
income tax reporting purposes.

Net currency gains 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 losses represent foreign exchange gains and losses
from sales and maturities of debt securities, transactions in foreign currencies
and forward foreign currency contracts, exchange gains or losses realized
between the trade date and settlement dates on security transactions, and the
difference between the amounts of interest and dividends recorded on the Fund's
books and the U.S. dollar equivalent of the amounts actually received.
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, 1997, was $23,433,364, for which the Fund has received cash as collateral of
$24,037,200. Such cash collateral was reinvested into a repurchase agreement
which is in turn collateralized by U.S. Government agency securities. Security
loans are required at all times to have 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 fiscal year ended May 31, 1997, the Fund earned $46,426 in securities
lending income which is included in interest income in the Statement of
Operations.

DISTRIBUTIONS OF INCOME AND GAINS: The Fund distributes at least annually to
shareholders substantially all of its net investment income and net realized
short-term capital gains, if any. The Fund determines annually whether to
distribute any net realized long-term capital gains in excess of net realized
short-term capital losses, including capital loss carryovers, if any. An
additional distribution may be made to the extent necessary to avoid the payment
of a

- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4% U.S. federal excise tax. Dividends and distributions to shareholders are
recorded by the Fund on the ex-dividend date.

The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.

At May 31, 1997, the Fund reclassified $815,907 of permanent book/tax
differences relating to realized gains on passive foreign investment company
holdings from accumulated net realized gain on investments and foreign currency
related transactions to undistributed net investment income. In addition, the
Fund reclassified $102,452 of net realized losses from foreign currency related
transactions to undistributed net investment income.

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 proceeds 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.

The Fund may enter into repurchase agreements on U.S. Government securities with
primary government securities dealers recognized by the Federal Reserve Bank of
New York and member banks of the Federal Reserve System and on securities issued
by the governments of foreign countries, their instrumentalities and with
creditworthy parties in accordance with established procedures. Repurchase
agreements are contracts under which the buyer of a security simultaneously buys
and commits to resell the security to the seller at an agreed upon price and
date. Repurchase agreements are deposited with the Fund's custodian and,
pursuant to the terms of the repurchase agreement, the collateral must have an
aggregate market value greater than or equal to the repurchase price plus
accrued interest at all times. If the value of the underlying securities fall
below the value of the repurchase price plus accrued interest, the Fund will
require the seller to deposit additional collateral by the next business day. If
the request for additional collateral is not met, or the seller defaults on its
repurchase obligation, the Fund maintains the right to sell the underlying
securities at market value and may claim any resulting loss against the seller;
collectibility of such claims may be limited (see Note G).

- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

NOTE B. AGREEMENTS
BEA Associates ("BEA") serves as the Fund's investment adviser with respect to
all investments. As compensation for its advisory services, BEA 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, 1.125% of the
next $100 million and 1.00% of amounts in excess of $200 million. For the fiscal
year ended May 31, 1997, BEA earned $2,059,688 for advisory services. BEA also
provides certain administrative services to the Fund and is reimbursed by the
Fund for costs incurred on behalf of the Fund (up to $20,000 per annum). For the
fiscal year ended May 31, 1997, BEA was reimbursed $18,001 for administrative
services rendered to the Fund.

Bear Stearns Funds Management Inc. ("BSFM") serves as the Fund's U.S.
administrator. The Fund pays BSFM a fee for its services rendered that is
computed weekly at an annual rate of 0.12% of the Fund's average weekly net
assets. For the fiscal year ended May 31, 1997, BSFM earned $205,899 for
administrative services.

The First National Bank of Boston, Sao Paulo ("Banco de Boston") and CELFIN
Administradora de Fondos de Inversion de Capital Extranjero S.A. ("Chilean
administrator") serve as the Fund's administrators with respect to Brazilian and
Chilean investments, respectively. Banco de Boston is paid for its services a
quarterly fee based on an annual rate of 0.10% of average month end Brazilian
net assets of the Fund. In return for services rendered, the Chilean
administrator receives a fee computed monthly and paid quarterly at an annual
rate of 0.10% of the Fund's average weekly net assets in Chile, subject to
certain minimum annual fees and reimbursements for a predefined limit of their
expenses.

NOTE C. CAPITAL STOCK

The authorized capital stock of the Fund is 100,000,000 shares of common stock,
$0.001 par value. Of the 8,434,919 shares outstanding at May 31, 1997, BEA owned
7,169 shares.
NOTE D. INVESTMENT IN SECURITIES

For U.S. federal income tax purposes, the cost of securities owned at May 31,
1997 was $119,643,653. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currencies) of
$56,502,522, was composed of gross appreciation of $60,451,431 for those
investments having an excess of value over cost and gross depreciation of
$3,948,909 for those investments having an excess of cost over value.

For the fiscal year ended May 31, 1997, total purchases and sales of securities,
other than short-term investments, were $68,631,493 and $93,376,526,
respectively.
NOTE E. CREDIT AGREEMENT

The Fund, along with 18 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 of the fund.
However, at no time shall the aggregate outstanding principal amount of all
loans to any of the 19 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
amount outstanding under the credit agreement for the Fund averaged $73,699 with
an average interest rate of 8.25% during the fiscal year ended May 31, 1997. At
May 31, 1997, the Fund had no amounts outstanding under the credit agreement.

- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

NOTE F. RESTRICTED SECURITIES
Certain of the Fund's investments are restricted as to resale and are valued at
the direction of the Fund's Board of Directors in good faith, at fair value,
after taking into consideration available indications of value. The table below
shows the number of shares held, the acquisition date, aggregate cost, fair
value as of May 31, 1997, share value of such securities and percent of net
assets which the security comprises.

<TABLE>
<CAPTION>
PERCENT
NUMBER FAIR VALUE VALUE OF
OF ACQUISITION AT MAY 31, PER NET
SECURITY SHARES DATE COST 1997 SHARE ASSETS
- --------------------------------------- -------- --------------- --------- -------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Venworld Telecommunications............ 125,947 05/18/95 $2,531,383 $ 1,868,172 $ 14.83 1.03
</TABLE>

NOTE G. COLLATERAL FOR REPURCHASE AGREEMENTS
Listed below is the collateral associated with the repurchase agreement with
Citibank, N.A. outstanding at May 31, 1997:

<TABLE>
<CAPTION>
INTEREST MATURITY CLP MARKET ACCRUED TOTAL
SECURITY SERIES RATE DATE PAR VALUE INTEREST VALUE
- --------------------------------------- ----- ------- ------- ----------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Pagares Capitolo Diez y Nueve.......... QA 7.74% 11/08/99 209,624,474 $ 500,261 $2,474 $ 502,735
Pagares Descontables Banco Central de
Chile................................. -- 9.84 06/06/97 2,891,312 6,900 332 7,232
Pagares Reajustable Banco Central de
Chile................................. 1B 6.72 08/05/97 335,207,008 799,959 17,172 817,132
Pagares Reajustable Banco Central de
Chile................................. 1D 6.47 06/01/99 15,627,423 37,294 1,213 38,507
Pagares Reajustable Banco Central de
Chile................................. 1D 6.47 06/01/99 44,649,783 106,555 3,466 110,021
--------- ------ ---------
Total $1,450,969 $24,657 $1,475,627
--------- ------ ---------
--------- ------ ---------
</TABLE>

Listed below is the collateral associated with the repurchase agreement with
Molina, Swett y Valdes S.A. outstanding at May 31, 1997:

<TABLE>
<CAPTION>
INTEREST MATURITY CLP MARKET ACCRUED TOTAL
SECURITY RATE DATE PAR VALUE INTEREST VALUE
- --------------------------------------- ------- ------- ----------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Banco Bice Deposeto Placo
Reajustable........................... 6.97% 03/01/08 229,368,861 $547,381 $9,644 $557,025
</TABLE>

- --------------------------------------------------------------------------------
22
<PAGE>
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, 1997 and the related statement of operations for the
year then ended, the statements 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 issuers as of May 31, 1997. 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, 1997, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
July 11, 1997

- --------------------------------------------------------------------------------
23
<PAGE>
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)

On September 24, 1996, the annual meeting of shareholders of The Emerging
Markets Telecommunications Fund, Inc. (the "Fund") was held and the following
matters were voted upon:

(1) To re-elect four directors to the Board of Directors of the Fund.

<TABLE>
<CAPTION>
NAME OF DIRECTOR FOR WITHHELD NON-VOTES
- ----------------------------------------------------------------------------------- ---------- --------- ----------
<S> <C> <C> <C>
Dr. Enrique R. Arzac* 6,820,673 113,636 1,500,610
Emilio Bassini** 6,829,640 104,669 1,500,610
George W. Landau 6,824,983 109,326 1,500,610
Richard W. Watt 6,794,166 140,143 1,500,610
</TABLE>

- --------------
* On February 13, 1996, the Board of Directors increased the size of the Fund's
Board of Directors to eight and Dr. Enrique R. Arzac was elected to fill the
newly created vacancy. The election of Dr. Arzac was submitted to the Fund's
shareholders for their ratification at the annual meeting of shareholders.
** Resigned effective January 1, 1997.
In addition to the directors re-elected at the meeting, James J. Cattano,
Peter A. Gordon and Martin M. Torino continue to serve as directors of the
Fund. Daniel Sigg resigned as a director of the Fund effective February 11,
1997.

(2) To ratify the selection of Coopers & Lybrand L.L.P. as independent public
accountants for the fiscal year ending May 31, 1997.

<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
6,745,118 143,405 45,786 1,500,610
</TABLE>

TAX INFORMATION (UNAUDITED)

The Fund is required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise its shareholders within 60 days of the Fund's fiscal year end
(May 31, 1997) as to the U.S. federal tax status of distributions received by
the Fund's shareholders in respect of such fiscal year. Of the $2.37 per share
dividend and distribution paid in respect of such fiscal year, $0.27 per share
was derived from net investment income, $0.08 per share was from net realized
short-term capital gains and $2.02 per share was from net realized 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 1997.

- --------------------------------------------------------------------------------
24
<PAGE>
TAX INFORMATION (UNAUDITED)

Because the Fund's fiscal year is not the calendar year, notification will be
sent in respect of calendar year 1997. The second notification, which will
reflect the amount to be used by calendar year taxpayers on their 1997 U.S.
federal income tax returns, will be made in conjunction with Form 1099-DIV and
will be mailed in January, 1998.

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 of 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.
DESCRIPTION OF INVESTLINK* PROGRAM

The InvestLink Program is sponsored and administered by The First National Bank
of Boston, not by The Emerging Markets Telecommunications Fund, Inc. (the
"Fund"). The First National Bank of Boston will act as program administrator
(the "Program Administrator") of the InvestLink Program (the "Program"). The
purpose of the Program is to provide interested investors with a simple and
convenient way to invest funds and reinvest dividends in Shares of the Fund's
common stock ("Shares") at prevailing prices, with reduced brokerage commissions
and fees.

An interested investor may join the Program at any time. Purchases of Shares
with funds from a participant's cash payment or automatic account deduction will
begin on the next day on which funds are invested. If a participant selects the
dividend reinvestment option, automatic investment of dividends generally will
begin with the next dividend payable after the Program Administrator receives
his enrollment form. Once in the Program, a person will remain a participant
until he terminates his participation or sells all Shares held in his Program
account, or his account is terminated by the Program Administrator. A
participant may change his investment options at any time by requesting a new
enrollment form and returning it to the Program Administrator.

A participant will be assessed certain charges in connection with his
participation in the Program. First-time investors will be subject to an initial
service charge which will be deducted from their initial cash deposit. All
optional cash deposit investments will be subject to a service charge. Sales
processed through the Program will have a service fee deducted from the net
proceeds, after brokerage commissions. In addition to the transaction charges
outlined above, participants will be assessed per share processing fees (which
include brokerage commissions.) Participants will not be charged any fee for
reinvesting dividends.

The number of Shares to be purchased for a participant depends on the amount of
his dividends, cash payments or bank account or payroll deductions, less
applicable fees and commissions, and the purchase price of the Shares. The
Program Administrator uses dividends and funds of participants to purchase
Shares of Company Common Stock in the open market. Such purchases will be made
by participating brokers as agent for the participants using normal cash
settlement practices. All Shares purchased through the Program will be allocated
to participants as of the settlement date, which is usually three business days
from the the purchase date. In all cases, transaction processing will occur
within 30 days of the receipt of funds, except where temporary

- --------------------------------------------------------------------------------
25
<PAGE>
DESCRIPTION OF INVESTLINK* PROGRAM (CONTINUED)
curtailment or suspension of purchases is necessary to comply with applicable
provisions of the Federal Securities laws, or when unusual market conditions
make prudent investment impracticable. In the event the Program Administrator is
unable to purchase Shares within 30 days of the receipt of funds, such funds
will be returned to the participants.

The average price of all Shares purchased by the Program Administrator with all
funds received during the time period from two business days preceding any
investment date up to the second business day preceding the next investment date
shall be the price per share allocable to a participant in connection with the
Shares purchased for his account with his funds or dividends received by the
Program Administrator during such time period. The average price of all Shares
sold by the Program Administrator pursuant to sell orders received during such
time period shall be the price per share allocable to a participant in
connection with the Shares sold for his account pursuant to his sell orders
received by the Program Administrator during such time period.

The First National Bank of Boston, as Program Administrator, administers the
Program for participants, keeps records, sends statements of account to
participants and performs other duties relating to the Program. Each participant
in the Program will receive a statement of his account following each purchase
of Shares. The statements will also show the amount of dividends credited to
such participant's account (if applicable), as well as the fees paid by the
participant. In addition, each participant will receive copies of the Fund's
Annual Report to shareholders, proxy statements and, if applicable, dividend
income information for tax reporting purposes.

If the Fund is paying dividends on the Shares, a participant will receive
dividends through the Program for all Shares held on the dividend record date on
the basis of full and fractional Shares held in his account, and for all other
Shares of the Fund registered in his name. The Program Administrator will send
checks to the participants for the amounts of their dividends that are not to be
automatically reinvested at no cost to the participants.

Shares of the Fund purchased under the Program will be registered in the name of
the accounts of the respective participants. Unless requested, the Fund will not
issue to participants certificates for Shares of the Fund purchased under the
Program. The Program Administrator will hold the Shares in book-entry form until
a Program participant chooses to withdraw his Shares or terminate his
participation in the Program. The number of Shares purchased for a participant's
account under the Program will be shown on his statement of account. This
feature protects against loss, theft or destruction of stock certificates.

A participant may withdraw all or a portion of the Shares from his Program
account by notifying the Program Administrator. After receipt of a participant's
request, the Program Administrator will issue to such participant certificates
for the whole Shares of the Fund so withdrawn or, if requested by the
participant, sell the Shares for him and send him the proceeds, less applicable
brokerage commissions, fees, and transfer taxes, if any. If a participant
withdraws all full and fractional Shares in his Program account, his
participation in the Program will be terminated by the Program Administrator. In
no case will certificates for fractional Shares be issued. The Program
Administrator will convert any fractional Shares held by a participant at the
time of his withdrawal to cash.

Participation in any rights offering, dividend distribution or stock split will
be based upon both the Shares of the Fund registered in participants' names and
the Shares (including fractional Shares) credited to participants' Program
accounts. Any stock dividend or Shares resulting from stock splits with respect
to Shares of the Fund, both full and fractional, which participants hold

- --------------------------------------------------------------------------------
26
<PAGE>
DESCRIPTION OF INVESTLINK* PROGRAM (CONTINUED)
in their Program accounts and with respect to all Shares registered in their
names will be automatically credited to their accounts.

All Shares of the Fund (including any fractional share) credited to his account
under the Program will be voted as the participant directs. The participants
will be sent the proxy materials for the annual meetings of shareholders. When a
participant returns an executed proxy, all of such Shares will be voted as
indicated. A participant may also elect to vote his Shares in person at the
Shareholders' meeting.

A participant will receive tax information annually for his personal records and
to help him prepare his U.S. federal income tax return. The automatic
reinvestment of dividends does not relieve him of any income tax which may be
payable on dividends. For further information as to tax consequences of
participation in the Program, participants should consult with their own tax
advisors.

The Program Administrator in administering the Program will not be liable for
any act done in good faith or for any good faith omission to act. However, the
Program Administrator will be liable for loss or damage due to error caused by
its negligence, bad faith or willful misconduct. Shares held in custody by the
Program Administrator are not subject to protection under the Securities
Investors Protection Act of 1970.

The participant should recognize that neither the Fund nor the Program
Administrator can provide any assurance of a profit or protection against loss
on any Shares purchased under the Program. A participant's investment in Shares
held in his Program account is no different than his investment in directly held
Shares in this regard. The participant bears the risk of loss and the benefits
of gain from market price changes with respect to all of his Shares. Neither the
Fund nor the Program Administrator can guarantee that Shares purchased under the
Program will, at any particular time, be worth more or less than their purchase
price. Each participant must make an independent investment decision based on
his own judgment and research.

While the Program Administrator hopes to continue the Program indefinitely, the
Program Administrator reserves the right to suspend or terminate the Program at
any time. It also reserves the right to make modifications to the Program.
Participants will be notified of any such suspension, termination or
modification in accordance with the terms and conditions of the Program. The
Program Administrator also reserves the right to terminate any participant's
participation in the Program at any time. Any question of interpretation arising
under the Program will be determined in good faith by the Program Administrator
and any such good faith determination will be final.

Any interested investor may participate in the Program. To participate in the
Program, an investor who is not already a registered owner of the Shares must
make an initial investment of at least $250.00. All other cash payments or bank
account deductions must be at least $100.00, up to a maximum of $100,000.00
annually. An interested investor may join the Program by reading the Program
description, completing and signing the enrollment form and returning it to the
Program Administrator. The enrollment form and information relating to the
Program (including the terms and conditions) may be obtained by calling the
Program Administrator at one of the following telephone numbers: First Time
Investors--(800) 969-3294; Current Shareholders--(800) 730-6001. All
correspondence regarding the Program should be directed to: The First National
Bank of Boston, InvestLink Program, P.O. Box 1681, Boston, MA 02105-1681.
- --------------
*InvestLink-SM- is a service mark of Boston EquiServe Limited Partnership.

- --------------------------------------------------------------------------------
27
<PAGE>
SUMMARY OF GENERAL INFORMATION

The Fund--The Emerging Markets Telecommunications Fund, Inc.--is a closed-end,
non-diversified management investment company whose shares trade on the New York
Stock Exchange. Its investment objective is long-term capital appreciation
through investments primarily in equity securities of telecommunications
companies in emerging countries. The Fund is managed and advised by BEA
Associates ("BEA"). BEA is a diversified asset manager, handling equity,
balanced, fixed income, international and derivative based accounts. Portfolios
include international and emerging market investments, common stocks, taxable
and non-taxable bonds, options, futures and venture capital. BEA manages money
for corporate pension and profit-sharing funds, public pension funds, union
funds, endowments and other charitable institutions and private individuals. As
of March 31, 1997, BEA managed approximately $28.6 billion in assets.
SHAREHOLDER INFORMATION

The market price is published in: THE NEW YORK TIMES (daily) under the
designation "EMTel" and THE WALL STREET JOURNAL (daily), and BARRON'S (each
Monday) under the designation "EmergMktTele". The Fund's New York Stock Exchange
trading symbol is ETF. Weekly comparative net asset value (NAV) and market price
information about The Emerging Markets Telecommunications Fund, Inc.'s shares
are published each Sunday in THE NEW YORK TIMES and each Monday in THE WALL
STREET JOURNAL and BARRON's, as well as other newspapers, in a table called
"Closed End Funds."
THE BEA GROUP OF FUNDS

LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds or a prospectus on any of the open-end mutual funds listed
below. The prospectus contains more complete information, including fees,
charges and expenses, and should be read carefully before investing or sending
money.

<TABLE>
<S> <C>
CLOSED-END FUNDS BEA ADVISOR FUNDS
SINGLE COUNTRY OPEN-END MUTUAL FUNDS
The Brazilian Equity Fund, Inc. (BZL) BEA Emerging Markets Equity Fund
The Chile Fund, Inc. (CH) BEA Global Telecommunications Fund
The First Israel Fund, Inc. (ISL) BEA High Yield Fund
The Indonesia Fund, Inc. (IF) BEA International Equity Fund
The Portugal Fund, Inc. (PGF)
MULTIPLE COUNTRY
The Emerging Markets Infrastructure
Fund, Inc. (EMG)
The Latin America Equity Fund, Inc.
(LAQ)
The Latin America Investment Fund, Inc.
(LAM)
FIXED INCOME For shareholder information or a copy
BEA Income Fund, Inc. (FBF) of a prospectus for any of the open-end
BEA Strategic Income Fund, Inc. (FBI) mutual funds please call,
1-800-401-2230.
For closed-end fund information please Visit our website on the Internet:
call, 1-800-293-1232. http://www.beafunds.com
</TABLE>

- --------------------------------------------------------------------------------
<PAGE>
DIRECTORS AND CORPORATE OFFICERS

William W. Priest, Chairman of the Board of Directors
Jr.

Richard W. Watt President, Chief Investment Officer
and Director
Dr. Enrique R. Arzac Director

James J. Cattano Director

Peter A. Gordon Director
George W. Landau Director
Martin M. Torino Director

Stephen M. Swift Senior Vice President and
Investment Officer

Paul P. Stamler Senior Vice President
Michael A. Pignataro Chief Financial Officer and
Secretary

Rachel D. Manney Vice President and Treasurer

Wendy S. Setnicka Assistant Treasurer

INVESTMENT ADVISER

BEA Associates
One Citicorp Center
153 East 53rd Street
New York, NY 10022

ADMINISTRATOR

Bear Stearns Funds Management Inc.
245 Park Avenue
New York, NY 10167

CUSTODIAN

Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109

SHAREHOLDER SERVICING AGENT

The First National Bank of Boston
P.O. Box 1865
Mail Stop 45-02-62
Boston, MA 02105-1865

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103

LEGAL COUNSEL

Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street

New York, NY 10022

<TABLE>
<S> <C>
This report, including the financial statements herein, is
sent to the shareholders of the Fund for their information.
It is not a prospectus, circular or representation intended
for use in the purchase or sale of shares of the Fund or of
any securities mentioned in this report. [LOGO]
</TABLE>

- --------------------------------------------------------------------------------
3916-AR-97