<PAGE>
The Emerging Markets
Telecommunications
Fund, Inc.
-----------------------------
Semi-Annual Report
November 30, 1997
[PHOTO]
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................................................................ 1
Portfolio Summary............................................................................. 6
Schedule of Investments....................................................................... 8
Statement of Assets and Liabilities........................................................... 12
Statement of Operations....................................................................... 13
Statement of Changes in Net Assets............................................................ 14
Financial Highlights.......................................................................... 15
Notes to Financial Statements................................................................. 16
Results of Annual Meeting of Shareholders..................................................... 21
Description of InvestLink-SM- Program......................................................... 22
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
LETTER TO SHAREHOLDERS
December 8, 1997
DEAR SHAREHOLDER:
I am writing to report on the activities of The Emerging Markets
Telecommunications Fund, Inc. (the "Fund") for the six months ended November 30,
1997.
At November 30, 1997, the Fund's net asset value ("NAV") was $19.81 per share,
as compared to $21.53 on May 31, 1997.
PERFORMANCE
For the period June 1, 1997 through November 30, 1997, the Fund's total return,
based on NAV, was down 8.0%. The Morgan Stanley Capital International Emerging
Markets Free Index (the "Index") declined 22.8% during the same period.
The Fund outperformed the Index mainly because of my decision to dramatically
underweight the Asia/Pacific nations. Specifically, the portfolio kept only
minimal positions in Malaysia, Indonesia and the Philippines, while no stocks
were held in the markets of South Korea and Thailand. Underweighting
Asia/Pacific additionally benefited the Fund by enabling it to avoid most
exposure to the region's battered currencies. Other notably positive returns
were generated by a combination of overweightings and favorable stock selection
both in Israel and Russia.
From the commencement of investment operations on June 25, 1992 through November
30, 1997, the Fund's total return, based on NAV and assuming the reinvestment of
dividends and distributions, was 97.6%. The Index gained 46.2% during the same
period.
INVESTMENT STRATEGY
For some time now, I have de-emphasized Asian telecoms in favor of those in
Latin America, Eastern Europe and other emerging nations. This is due to my
cautious view on most Asian countries as well as the fact that telecom stocks
elsewhere have typically offered lower, more attractive valuations.
The massive sell-off in Asian equities over the last few months, however, raises
the question of whether valuations in the Asian telecom sector have fallen to
levels that warrant a higher allocation. My conclusion: they have not.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
VALUATION COMPARISON: LATIN VS. ASIAN TELECOM STOCKS
(ALL FIGURES ARE ESTIMATES FOR 1997, AS OF 12/2/97)
ENTERPRISE P/E AS MULTIPLE
VALUE PER OF GROWTH RATE ENTERPRISE VALUE/
INSTALLED LINE '96-01 (EST.) PRICE/ EARNINGS EBITDA
--------------- ------------------- --------------- -------------------
<S> <C> <C> <C> <C>
Latin telecommunication companies.................. 2.4 0.9 12.7 5.0
Asian telecommunication companies.................. 19.6 1.4 23.2 9.1
U.S. telecommunication companies................... 20.6 3.0 21.3 7.5
---------------------
SOURCES: MORGAN STANLEY DEAN WITTER, BEA ASSOCIATES
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------
VALUATION COMPA
(ALL FIGURES AR
<S> <C>
Latin telecommunication companies..................
Asian telecommunication companies..................
U.S. telecommunication companies...................
---------------------
SOURCES: MORGAN STANLEY DEAN WITTER, BEA ASSOCIATES
- ------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
As illustrated in the table above, valuations of Latin telecommunication
companies ("telcos") still are cheaper than those of their Asian counterparts
and, for perspective, even more so compared to U.S. telcos. I suspect that the
growth expectations reflected in the table will be meaningfully revised downward
in the next few months in response to perceptions of a slower-growth
environment. This should be especially true for Asia, while prospects appear
materially stronger in Latin America.
At present, then, valuation levels suggest that Asian telecom stocks probably
will remain more expensive than those elsewhere in the world, indicating that a
continued de-emphasis on such stocks in the portfolio is appropriate. I
additionally sense that, with the outlook for emerging markets as a group likely
to be problematic in the near term, there is some merit in re-examining the case
for investing in developed-world telecom stocks. This is something I intend to
actively pursue.
FEATURED COMPANIES
As is my custom, I'd like to highlight a few specific companies held in the Fund
in order to provide some insight into how your money is invested. The following
are two that I view quite positively.
ECI TELECOMMUNICATIONS LTD.
Within the fast-moving telecommunications business, opportunities are plentiful
for agile companies that can exploit attractive niches. One of the Fund's
largest positions is in just such a company: ECI Telecommunications Ltd.
("ECI"). ECI makes digital equipment designed to improve the transmission
infrastructure of existing telecommunications networks. It also is the largest
overall Israeli producer of telecom equipment.
I believe that now is a particularly good time to be optimistic about ECI
shares. This is because the company is well-positioned to benefit from a number
of strong industry trends and, for the first time in several years, the outlook
is simultaneously positive for all of its main product sectors.
Favorable trends for ECI include:
-Aggressive deregulation and/or privatization of most telecom markets
worldwide. Service providers are responding to market forces by seeking out
suppliers that offer a favorable price/performance profile. Many also no
longer are required by law to use domestic suppliers.
-Heavier demands on network capacity as a result of greater home usage
(E.G., for data transfer, faxing, internet access).
-Huge need for basic telecom infrastructure in developing nations, many of
which also view the expansion of telephone service as an important element
of economic stimulation. I note in this context that the growing Asian
economic crisis actually should benefit ECI, in that the crisis is likely
to steer affected nations toward products (and vendors) that can help them
save on infrastructure costs.
-Increasing technological complexity, which can create big opportunities for
smaller companies like ECI.
-Rapid build-out of wireless networks.
Current and longer-term prospects for ECI's core businesses are quite good.
Local network access (40% of 1996 sales), which is the enlargement of the
capacity of the lines connecting individual users to their local telephone
exchange, is
- --------------------------------------------------------------------------------
2
<PAGE>
LETTER TO SHAREHOLDERS
one of the fastest-growing areas in telecom equipment. In my view, it probably
will be a major growth engine for ECI over the next several years. ECI holds a
commanding 70% share in the market for digital circuit multiplication equipment
("DCME," 30%), which conserves precious bandwidth space in phone lines by
compressing voice and fax transmissions. The fairly mature DCME business
recently has been reinvigorated by the explosive growth in internet usage.
Wide area network equipment (14%) is the province of Telematics, ECI's U.S.
subsidiary. Telematics is poised for a dramatic turnaround after posting
disappointing results for several years. Finally, ECI is successfully focusing
on innovative niche products in synchronous digital hierarchy systems (13%), the
European standard for high-speed fiber-optic transmission.
Other positive factors for ECI include its longstanding relationships with most
of the world's major telecom providers; global geographic diversification;
minimal presence in the mature Israeli domestic market; lack of dependence on
any particular product or customer; record-high order backlog; and low debt
level.
A wildcard in the ECI picture is the recent announcement that Koor Industries
Ltd. ("Koor"), a sprawling conglomerate that is Israel's largest publicly traded
company, intends to acquire the 10.4% equity stake in ECI currently owned by
Claridge Israel, a private investment company. Koor will receive the ECI shares
from Claridge in exchange for about 13% of its own equity. Koor also has
declared its intention to purchase more ECI shares.
COMPANHIA RIOGRANDENSE DE TELECOMUNICACOES
Companhia Riograndense de Telecomunicacoes ("CRT") is the local telecom provider
in the southern Brazilian state of Rio Grande do Sul.
Among Brazilian telcos, CRT's ownership profile is somewhat unusual. Equity
control is in the hands of the state government (I.E., 56% of voting shares) and
other major stakes are held by a consortium led by the TISA International
("TISA") subsidiary of Telefonica de Espana (35%), as well as the federally
owned Telecomunicacoes Brasileiras S.A. ("Telebras") system (8%). It is the sole
Brazilian telco with a non-domestic operator (I.E., TISA) and one of only four
not controlled by Telebras.
CRT experienced quasi-privatization when Rio Grande do Sul sold the TISA
consortium its 35% stake in November 1996. As part of the transaction, TISA
entered into a five-year contract to manage CRT. This represents a major
positive for CRT, which gains from TISA's top-quality management skills;
expertise in efficiency/cost reduction; extensive experience in the Latin
telecom business (TISA is the largest non-domestic player in the region); wide
access to lower-cost capital; and purchasing efficiencies.
The major investment variable for CRT shareholders is how the company will fare
in the upcoming privatization of the Brazilian telecom sector. Although analysts
and other industry observers generally agree that CRT will become part of a
larger regional entity serving Brazil's southern and central states, they are
divided over the ultimate composition of the entity's ownership. More
specifically, the question is whether TISA will seek to maintain its prominent
equity and operational presence or be supplanted by some other company. My view
is that TISA will prevail. Should this occur, the considerable benefits of
TISA's involvement in CRT will accrue to the new entity.
- --------------------------------------------------------------------------------
3
<PAGE>
LETTER TO SHAREHOLDERS
In a sense, then, the Fund's holding in CRT shares is a means of enabling the
portfolio to participate in the bright future of a privatized Brazilian telecom
sector, in that I expect to hold on to the shares in the new entity that will be
created in the process. This is hardly the only reason to own the stock, though,
as there also are solid fundamentals underpinning the CRT story. Among them:
ATTRACTIVE SERVICE TERRITORY - Rio Grande do Sul offers numerous positives as a
service territory. For example, it accounts for 6% of the national population
and about 7% of Gross Domestic Product ("GDP"); it is one of the biggest
exporting and most industrialized states in Brazil, giving it access to a large
pool of lucrative commercial customers; its per capita GDP (which is highly
correlated with telephony usage) is about 25% higher than the national average;
and its important strategic location on the borders of Uruguay and Argentina
should allow it to benefit from the growth of the Mercosul trade zone.
LOW TELEDENSITY - The level of telephone service penetration in Rio Grande do
Sul is much lower than in comparable other areas, suggesting that substantial
increases in revenues and profits are available simply from filling existing
unmet demand.
BARRIERS TO LOCAL ENTRY - Potential challengers will find it tough to compete
with CRT on the basis of price, as local telephone rates already are quite low.
Rio Grande do Sul, furthermore, will be open to true competition in cellular and
domestic long distance service meaningfully later than the rest of Brazil.
BIG UPSIDE FROM COST REDUCTION - CRT's efficiency is much lower than that of
many other Brazilian telcos, with employee headcount and personnel expenses
particularly bloated. The presence of TISA managers is already having a positive
impact in this regard, though, and any future regional combination is likely to
generate even further cost savings.
OUTLOOK
My near-term outlook for emerging market telecoms is mixed. The Asian currency
crisis, clearly, has caused investors to reassess the asset class, especially at
a time when developed markets are performing relatively well. It is likely,
then, that the risk premium attached to the emerging markets as a group has
risen.
Nonetheless, I remain confident that those whose investment horizon lies further
out will be amply rewarded for their patience:
-The underlying thesis for buying and holding emerging market telecom stocks
(E.G., rapid growth in teledensity, expansion of usage, demand for
value-added services, widening universe of available stocks) has not
changed and should remain viable well into the future.
-Next year will see major positive developments, most prominently the
privatization of Telebras.
-The brisk pace of joint ventures among companies in the developed and
developing worlds should continue unabated.
-The current negative environment has generated precisely the type of
opportunity for funds such as this to exploit: valuations of companies with
excellent longer-term growth prospects have been reduced to compelling
levels.
The Fund already is well-positioned to benefit from each of these trends.
- --------------------------------------------------------------------------------
4
<PAGE>
LETTER TO SHAREHOLDERS
I 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 and
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
President, Chief Investment Officer and a Director of the Fund. He also is
President, Chief Investment Officer and a Director 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.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
PORTFOLIO SUMMARY - AS OF NOVEMBER 30, 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 30-Nov-97
Cellular Communications 11.26% 9.12%
Electric Distribution 9.33% 5.36%
Electric Generation 4.37% 4.67%
Gas & Oil 4.11% 4.13%
Local and/or Long Distance Telephone
Service 48.86% 24.20%
Telecommunications 11.85% 27.11%
Utilities 0.00% 4.35%
Other 4.21% 5.63%
Cash & Cash Equivalents 6.01% 15.43%
</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 30-Nov-97
Asia 11.06% 4.67%
Caribbean 1.60% 0.00%
Eastern Europe 7.63% 14.55%
Europe 5.59% 1.82%
Latin America 56.82% 53.10%
Middle East 8.51% 6.81%
Global 5.77% 5.67%
Cash & Cash Equivalents 3.02% 13.38%
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
PORTFOLIO SUMMARY - AS OF NOVEMBER 30, 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 November 30, 1997
Argentina 2.37% 5.03%
Brazil 13.07% 13.84%
Central Europe 0.00% 1.82%
Chile 19.67% 13.94%
Eastern Europe 7.63% 14.55%
India 3.05% 1.41%
Indonesia 3.26% 0.00%
Israel 8.51% 6.81%
Italy 2.23% 0.00%
Malaysia 1.50% 0.73%
Mexico 2.51% 6.46%
Peru 11.84% 4.76%
Philippines 2.34% 1.44%
Portugal 3.36% 0.00%
Venezuela 4.37% 7.02%
Global 5.77% 5.67%
Other 2.51% 1.09%
</TABLE>
TOP 10 HOLDINGS, BY ISSUER
<TABLE>
<CAPTION>
Percent of Net
Holding Sector Country/Region Assets
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
1. Telefonos de Mexico, S.A. de C.V. Telecommunications Mexico 5.5
- --------------------------------------------------------------------------------------------------------------------------------
2. Compania Anonima Nacional Telefonos de Venezuela Local and/or Long Distance
Telephone Service Venezuela 5.3
- --------------------------------------------------------------------------------------------------------------------------------
3. Compania de Telecomunicaciones de Chile S.A. Local and/or Long Distance
Telephone Service Chile 5.2
- --------------------------------------------------------------------------------------------------------------------------------
4. Companhia de Saneamento Basico do Estado de Sao Paulo Utilities Brazil 4.1
- --------------------------------------------------------------------------------------------------------------------------------
5. Millicom International Cellular S.A. Cellular Communications Global 4.1
- --------------------------------------------------------------------------------------------------------------------------------
6. Companhia Riograndense de Telecomunicacoes Telecommunications Brazil 3.9
- --------------------------------------------------------------------------------------------------------------------------------
7. SPT Telecom a.s. Telecommunications Eastern Europe 3.9
- --------------------------------------------------------------------------------------------------------------------------------
8. Telefonica del Peru S.A. Local and/or Long Distance
Telephone Service Peru 3.3
- --------------------------------------------------------------------------------------------------------------------------------
9. Telecomunicacoes Brasileiras S.A. Local and/or Long Distance
Telephone Service Brazil 2.8
- --------------------------------------------------------------------------------------------------------------------------------
10. Global Telesystems Group Cellular Communications Eastern Europe 2.7
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
SCHEDULE OF INVESTMENTS - NOVEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
<S> <C> <C>
- --------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-84.57%
EQUITY OR EQUITY-LINKED SECURITIES OF TELECOMMUNICATION COMPANIES
IN EMERGING COUNTRIES-61.40%
ARGENTINA-2.46%
CEI Citicorp Holdings S.A., Class B..... 597,483 $ 2,390,805
Telefonica de Argentina S.A. ADS#....... 52,000 1,719,250
-----------
TOTAL ARGENTINA (Cost $4,318,904)...................... 4,110,055
-----------
BRAZIL-8.88%
Companhia Riograndense de
Telecomunicacoes PN,
A Shares............................... 6,392,200 6,569,105
Telecomunicacoes Brasileiras S.A. ON.... 49,574,200 4,647,721
Telecomunicacoes de Sao Paulo S.A. PN... 13,683,890 3,614,333
-----------
TOTAL BRAZIL (Cost $17,404,586)........................ 14,831,159
-----------
CHILE-5.67%
Compania de Telecomunicaciones de Chile
S.A. ADR#.............................. 298,119 8,067,845
Compania de Telecomunicaciones de Chile
S.A., Class B.......................... 117,000 575,629
Empresa Nacional de Telecomunicaciones
S.A.................................... 169,018 831,553
-----------
TOTAL CHILE (Cost $6,939,967).......................... 9,475,027
-----------
EASTERN EUROPE-11.90%
Global Telesystems Group*+.............. 189,345 4,449,607
Magyar Tavkozlesi Rt. ADR+.............. 85,000 1,721,250
PLD Telekom, Inc.+...................... 641,125 4,207,383
SPT Telecom a.s.+....................... 62,054 6,539,585
Vimpel-Communications ADR#.............. 97,600 2,976,800
-----------
TOTAL EASTERN EUROPE
(Cost $18,090,997).................................... 19,894,625
-----------
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
HONG KONG-1.09%
Asia Satellite Telecommunications ADR... 38,000 $ 805,125
China Telecom (Hong Kong) Ltd. ADR+..... 30,200 1,019,250
-----------
TOTAL HONG KONG (Cost $1,738,005)...................... 1,824,375
-----------
INDIA-1.41%
Mahanagar Telephone Nigam+.............. 125,000 737,758
Videsh Sanchar Nigam Ltd. GDR++......... 122,605 1,624,516
-----------
TOTAL INDIA (Cost $3,383,540).......................... 2,362,274
-----------
ISRAEL-5.90%
ECI Telecommunications Ltd.............. 110,200 2,996,063
Geotek Communications, Inc., Convertible
Preferred Series M, 8.50%*............. 100 237,763
Gilat Satellite Networks Ltd.+#......... 71,693 2,330,023
M-Systems Flash Disk Pioneers Ltd.,
Warrants (expiring 06/30/98)+.......... 61,524 63,104
Nexus Telecommunications Systems Ltd.
(units)+(a)............................ 170,784 944,649
Tadiran Ltd. ADR........................ 67,100 2,621,094
Tadiran Telecommunications Ltd.#........ 32,100 662,063
-----------
TOTAL ISRAEL (Cost $9,167,497)......................... 9,854,759
-----------
MALAYSIA-0.73%
Telekom Malaysia Berhard (Cost
$1,246,015)............................ 546,800 1,216,758
-----------
MEXICO-6.46%
Grupo Iusacell, S.A. de C.V., Series L
ADR+................................... 6,300 131,513
Grupo Radio Centro
S.A. de C.V............................ 889,000 1,428,721
Telefonos de Mexico,
S.A. de C.V. ADR#...................... 186,726 9,242,937
-----------
TOTAL MEXICO (Cost $10,540,471)........................ 10,803,171
-----------
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
PERU-3.34%
Telefonica del Peru S.A. ADR............ 80,500 $ 1,690,500
Telefonica del Peru S.A., Class B....... 1,872,559 3,892,282
-----------
TOTAL PERU (Cost $3,153,916)........................... 5,582,782
-----------
PHILIPPINES-1.44%
Philippine Long Distance Telephone Co.
ADR (Cost $2,401,948).................. 97,300 2,408,175
-----------
VENEZUELA-6.45%
Compania Anonima Nacional Telefonos de
Venezuela ADR.......................... 222,531 8,789,975
Venworld Telecommunications+=/ =........ 125,947 1,987,696
-----------
TOTAL VENEZUELA (Cost $10,513,980)..................... 10,777,671
-----------
GLOBAL-5.67%
International Wireless Communications,
Inc.*+................................. 338,758 338,758
International Wireless Communications,
Inc., Series D*+....................... 220,120 2,063,625
International Wireless Communications,
Inc., Series F*+....................... 15,440 144,750
International Wireless Communications,
Inc., Warrants (expiring 12/31/98)*+... 1,240 580
Millicom International Cellular S.A.+... 182,454 6,796,411
Telesoft Partners Ltd................... 125,000 125,000
-----------
TOTAL GLOBAL (Cost $5,216,461)......................... 9,469,124
-----------
TOTAL EMERGING COUNTRIES
(Cost $94,116,287).................................... 102,609,955
-----------
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES OF TELECOMMUNICATION COMPANIES IN DEVELOPED
COUNTRIES-1.82%
CENTRAL EUROPE-1.82%
Central European Media Enterprises Ltd.+
(Cost $3,230,554)...................... 119,300 $ 3,042,150
-----------
EQUITY OR EQUITY-LINKED SECURITIES OF INFRASTRUCTURE COMPANIES IN
EMERGING COUNTRIES-5.83%
BRAZIL-4.09%
Companhia de Saneamento Basico do Estado
de Sao Paulo ON+(b) (Cost
$8,234,074)............................ 29,380,000 6,833,174
-----------
CHILE-0.26%
Compania de Consumidores de Gas de
Santiago S.A. (Cost $561,859).......... 138,770 438,221
-----------
EASTERN EUROPE-1.48%
AO Tatneft ADR.......................... 12,750 1,708,500
Lukoil Oil Holding Co. ADR#............. 9,600 768,000
-----------
TOTAL EASTERN EUROPE
(Cost $2,172,076)..................................... 2,476,500
-----------
TOTAL EMERGING COUNTRIES
(Cost $10,968,009).................................... 9,747,895
-----------
EQUITY SECURITES OF COMPANIES PROVIDING OTHER ESSENTIAL SERVICES IN
THE DEVELOPMENT OF AN EMERGING COUNTRY'S INFRASTRUCTURE-15.52%
ARGENTINA-2.57%
Camuzzi Argentina S.A.*+................ 1,383,478 2,631,375
Sodigas del Sur S.A.*................... 421,485 783,962
Sodigas Pampeana S.A.*.................. 583,264 886,561
-----------
TOTAL ARGENTINA (Cost $3,032,673)...................... 4,301,898
-----------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Description (000) (Note A)
<S> <C> <C>
- --------------------------------------------------------------------
BRAZIL-0.87%
Enersul, Convertible Bond, 16.00%,
09/01/98 (Cost $1,094,375)............. BRL 1,000 $ 1,452,808
-----------
CHILE-8.01%
<CAPTION>
No. of
Shares
-------------
<S> <C> <C>
Chilgener S.A........................... 5,998,444 2,168,774
Compania Electrica del Rio Maipo S.A.... 2,129,567 1,286,512
Compania General de Electricidad S.A.... 268,519 983,136
Cristalerias de Chile S.A............... 290,888 1,397,860
Empresa Electrica Pehuenche S.A......... 1,394,156 1,649,379
Empresa Nacional de Electricidad S.A.... 2,637,691 1,581,407
Empresas Emel S.A....................... 148,394 2,866,008
Sociedad Austral de Electricidad S.A.... 57,500 1,447,368
-----------
TOTAL CHILE (Cost $8,565,880).......................... 13,380,444
-----------
EASTERN EUROPE-1.17%
Elektrim Spolka Akcyjna S.A............. 189,947 1,825,897
Surgutneftegaz ADR...................... 16,030 130,244
-----------
TOTAL EASTERN EUROPE
(Cost $1,910,378)..................................... 1,956,141
-----------
ISRAEL-0.91%
PEC Israel Economic Corp.+ (Cost
$1,859,112)............................ 74,620 1,525,046
-----------
PERU-1.42%
Ontario-Quinta A.V.V.* (Cost
$1,835,372)............................ 1,787,000 2,368,942
-----------
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
VENEZUELA-0.57%
C.A. La Electricidad de Caracas,
SAICA-SACA (Cost $991,699)............. 797,834 $ 947,338
-----------
TOTAL OTHER ESSENTIAL SERVICES (Cost $19,289,489)......
25,932,617
-----------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES (Cost
$127,604,339)......................................... 141,332,617
-----------
SHORT-TERM INVESTMENTS-2.05%
CHILEAN INFLATION-ADJUSTED TIME DEPOSIT-0.15%
<CAPTION>
Units (000)
-------------
<S> <C> <C>
Banco Security, 6.25%**, 12/15/97 (Cost
$258,142).............................. CLP 8 244,851
-----------
CHILEAN MUTUAL FUNDS-1.13%
<CAPTION>
No. of
Shares
-------------
<S> <C> <C>
Fondo Mutuo Corp Selecto................ 199,516 491,185
Fondo Mutuo Operacional BanChile........ 41,693 486,591
Fondo Mutuo Security Check.............. 210,081 915,518
-----------
TOTAL CHILEAN MUTUAL FUNDS
(Cost $1,941,087)..................................... 1,893,294
-----------
CHILEAN REPURCHASE AGREEMENTS-0.77%
<CAPTION>
Par (000)
-------------
<S> <C> <C>
Citibank, N.A. (Agreement dated
11/20/97, to be repurchased at
$1,252,356), 16.80%, 12/15/97* (Note
G)..................................... CLP 539,000 1,236,863
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Description (000) (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
CHILEAN REPURCHASE AGREEMENTS (CONTINUED)
Citibank, N.A. (Agreement dated
11/24/97, to be repurchased at
$43,977), 15.60%, 12/15/97* (Note G)... CLP 19,000 $ 43,478
-----------
TOTAL CHILEAN REPURCHASE AGREEMENTS (Cost
$1,307,673)........................................... 1,280,341
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost $3,506,902).........
3,418,486
-----------
TOTAL INVESTMENTS-86.62%
(Cost $131,111,241) (Notes A,D)....................... 144,751,103
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES-13.38%.................................... 22,366,883
-----------
NET ASSETS-100.00%..................................... $167,117,986
-----------
-----------
- ---------------------------------------------------------
* 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) With an additional 3,709 rights attached, expiring
12/31/25, with no market value.
(b) Includes 170,784 warrants, expiring 11/28/00, with a
market value of $5,337.
ADR American Depositary Receipts.
ADS American Depositary Shares.
BRL Brazilian Real.
CLP Chilean Pesos.
GDR Global Depositary Receipts.
ON Ordinary Shares.
PN Preferred Shares.
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
11
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - NOVEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost
$131,111,241) (Note A)................. $144,751,103
Cash (Note A)........................... 22,788,583
Collateral received for securities
loaned (Note A)........................ 17,573,051
Receivables:
Investments sold...................... 1,307,498
Dividends............................. 143,257
Interest.............................. 44,680
Prepaid expenses and other assets....... 25,273
------------
Total Assets............................ 186,633,445
------------
LIABILITIES
Payables:
Payable upon return of securities
loaned............................... 17,573,051
Investments purchased................. 1,247,835
Advisory fee (Note B)................. 344,653
Administration fees (Note B).......... 68,740
Other accrued expenses................ 281,180
------------
Total Liabilities....................... 19,515,459
------------
NET ASSETS (applicable to 8,434,919
shares of common stock outstanding)
(Note C)............................... $167,117,986
------------
------------
NET ASSET VALUE PER SHARE ($167,117,986
DIVIDED BY 8,434,919)................. $19.81
------------
------------
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..... 505,551
Accumulated net realized gain on
investments and foreign currency
related transactions................... 35,687,598
Net unrealized appreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currencies..................... 13,626,251
------------
Net assets applicable to shares
outstanding............................ $167,117,986
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends............................. $ 1,105,908
Interest.............................. 567,968
Less: Foreign taxes withheld.......... (51,177)
------------
Total Investment Income............... 1,622,699
------------
Expenses:
Investment advisory fees (Note B)..... 1,092,485
Administration fees (Note B).......... 159,239
Custodian fees........................ 122,624
Accounting fees....................... 68,186
Printing.............................. 64,611
Audit and legal fees.................. 48,067
Transfer agent fees................... 22,928
Directors' fees....................... 15,542
Insurance............................. 9,399
NYSE listing fees..................... 8,266
Other................................. 17,282
Brazilian taxes (Note A).............. 117,950
Chilean repatriation taxes (Note A)... 160,076
------------
Total Expenses........................ 1,906,655
------------
Net Investment Loss................... (283,956)
------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments........................... 29,079,521
Foreign currency related
transactions......................... (432,086)
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities
denominated in foreign currencies...... (42,872,892)
------------
Net realized and unrealized loss on
investments and foreign currency
related transactions................... (14,225,457)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $(14,509,413)
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
13
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Six Months For the
Ended Fiscal Year
November 30, 1997 Ended
(unaudited) May 31, 1997
<S> <C> <C>
----------------------------------------------------
INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income/(loss).......... $ (283,956) $ 891,960
Net realized gain on investments and
foreign currency related
transactions......................... 28,647,435 23,679,428
Net change in unrealized appreciation
in value of investments and
translation of other assets and
liabilities denominated in foreign
currencies........................... (42,872,892) 419,091
--------------- ------------
Net increase/(decrease) in net
assets resulting from operations... (14,509,413) 24,990,479
--------------- ------------
Dividends and distributions to
shareholders:
Net investment income................. -- (2,247,555 )
Net realized gain on investments and
foreign currency related
transactions......................... -- (17,743,203 )
--------------- ------------
Total dividends and distributions to
shareholders....................... -- (19,990,758 )
--------------- ------------
Total increase/(decrease) in net
assets............................. (14,509,413) 4,999,721
--------------- ------------
NET ASSETS
Beginning of period..................... 181,627,399 176,627,678
--------------- ------------
End of period (including undistributed
net investment income of $505,551 and
$789,507, respectively)................ $167,117,986 $181,627,399
--------------- ------------
--------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
14
<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
For the Period
Six Months June 25,
Ended For the Fiscal Years Ended 1992*
November May 31, through
30, 1997 ---------------------------------------- May 31,
(unaudited) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.... $21.53 $20.94 $19.20 $20.90 $14.95 $13.84**
----------- ---- --------- --------- --------- ---------
Net investment income/(loss)............ (0.03) 0.10 0.27 0.11 0.13 0.16
Net realized and unrealized gain/(loss)
on investments and foreign currency
related transactions................... (1.69) 2.86 1.91 0.01 7.03+ 1.20
----------- ---- --------- --------- --------- ---------
Net increase/(decrease) in net assets
resulting from operations.............. (1.72) 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.......... $19.81 $21.53 $20.94 $19.20 $20.90 $14.95
----------- ---- --------- --------- --------- ---------
----------- ---- --------- --------- --------- ---------
Market value, end of period............. $15.75 $17.375 $17.375 $17.75 $22.75 $14.50
----------- ---- --------- --------- --------- ---------
----------- ---- --------- --------- --------- ---------
Total investment return(a).............. (9.35)% 14.31% 0.21% (13.94)% 64.74% 5.85%
----------- ---- --------- --------- --------- ---------
----------- ---- --------- --------- --------- ---------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted)............................... $167,118 $181,627 $176,628 $161,925 $176,253 $125,338
Ratio of expenses to average net
assets................................. 2.06%(b)(c) 1.90%(b) 1.77% 1.89% 1.81% 1.99%(c)
Ratio of net investment income to
average net assets..................... (0.31)%(c) 0.52% 1.40% 0.53% 0.63% 2.02%(c)
Portfolio turnover rate................. 84.90% 42.14% 27.71% 14.29% 43.98% 22.55%
Average commission rate per share(d).... $0.0018 $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 program. 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
1.76% for the six months ended November 30, 1997 and 1.82% for the
fiscal year ended May 31, 1997.
(c) Annualized.
(d) Computed by dividing the total amount of brokerage commissions paid by
the total shares of investment securities purchased and sold during
the respective periods for which commissions were charged, as required
by the SEC for fiscal years beginning on or after September 1, 1995.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 November 30, 1997,
the Fund held 9.59% of its net assets in securities valued in good faith by the
Board of Directors with an aggregate cost of $12,483,943 and fair value of
$16,018,619. 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.
At the time of the Fund's organization, the Board of Directors of the Fund
adopted the following non-fundamental policies: (i) up to 30% of the Fund's
total assets may be invested in private placements of equity securities where
the Fund's investment adviser anticipates that a liquid market will develop for
these securities within a period of two to five years from the date of
acquisition; and (ii) up to 10% of the Fund's total assets may be invested in
equity securities of emerging market corporate issuers that are not
infrastructure companies. As disclosed in the Fund's prospectus at that time,
these policies and percentage limitations are subject to modification by the
Board of Directors if, in the reasonable exercise of the Board's business
judgment, modification is determined to be necessary or appropriate to carry out
the Fund's investment objective of long-term capital appreciation.
At a meeting of the Board of Directors held on December 8, 1997, the Board of
Directors unanimously approved modifications to the foregoing policies to
increase the limit on non-infrastructure companies from 10% to 20% and to permit
within that 20% limit investments in private equity funds, (whether in corporate
or partnership form) that invest primarily in emerging markets without regard to
whether a liquid market is expected to develop for such investment. Any such
investment would continue to count against the overall 30% limit on private
placements. The Board approved these changes on the basis that the long-term
value added approach of an emerging markets private equity strategy is well
suited to the long-term capital appreciation objective of the Fund. When
investing through another investment fund, the Fund will bear its proportionate
share of the expenses incurred by that fund, including management fees.
CASH: Deposits held at Brown Brothers Harriman & Co., the Fund's custodian, in a
variable rate account are classified as cash. At November 30, 1997, the
account's interest rate was 5.50%, 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
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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 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 six
months ended November 30, 1997, the Fund incurred $160,076 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 six months ended November 30, 1997, the Fund
incurred $117,950 of such expense.
FOREIGN CURRENCY TRANSACTIONS: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(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. 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 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 on investments, foreign currency holdings,
and 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
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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
November 30, 1997, was $17,045,603, for which the Fund has received cash as
collateral of $17,573,051. Such cash collateral was reinvested into an overnight
repurchase agreement with Bear, Stearns & Co. Inc., which is in turn
collateralized by U.S. Government agency securities with a value of $17,924,986.
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 six months ended November 30, 1997, the Fund earned $26,463 in
securities lending income which is included under the caption INTEREST 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 4% U.S. federal excise tax. Dividends and distributions to shareholders are
recorded by the Fund on the ex-dividend date.
On December 10, 1997 a distribution in the aggregate amount of $31,293,550,
equal to $3.71 per share was declared. The distribution was comprised of $0.01
per share from net investment income, $0.45 per share from net realized
short-term capital gains and $3.25 per share from net realized long-term capital
gains. The distribution is payable on January 16, 1998 to shareholders of record
as of December 31, 1997.
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.
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.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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).
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 six
months ended November 30, 1997, BEA earned $1,092,485 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 six months ended November 30, 1997, BEA was reimbursed $7,020 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 monthly fee that is computed weekly at an
annual rate of 0.12% of the Fund's average weekly net assets. For the six months
ended November 30, 1997, BSFM earned $109,920 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 November 30, 1997, BEA
owned 7,169 shares.
NOTE D. INVESTMENT IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at November
30, 1997 was $131,577,764. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currencies) of
$13,173,339, was composed of gross appreciation of $22,448,076 for those
investments having an excess of value over cost and gross depreciation of
$9,274,737 for those investments having an excess of cost over value.
For the six months ended November 30, 1997, total purchases and sales of
securities, other than short-term investments, were $136,708,646 and
$155,383,205, respectively.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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
maximum amount outstanding under the credit agreement for the Fund was
$5,500,000 with an average of $30,055 with an average interest rate of 8.50%
during the six months ended November 30, 1997. At November 30, 1997, the Fund
had no amounts outstanding under the credit agreement.
NOTE F. RESTRICTED SECURITY
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 November 30, 1997, share value of such security and percent of net
assets which the security comprises.
<TABLE>
<CAPTION>
PERCENT
NUMBER VALUE OF
OF ACQUISITION FAIR VALUE PER NET
SECURITY SHARES DATE COST AT NOVEMBER 30, 1997 SHARE ASSETS
- --------------------------------------- -------- ---------- ---- --------------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Venworld Telecommunications............ 125,947 05/18/95 $2,531,38 1,987,$696 $ 15.78 1.19
</TABLE>
The Fund may incur certain costs in connection with the disposition of the above
security.
NOTE G. COLLATERAL FOR REPURCHASE AGREEMENTS
Listed below is the collateral associated with the repurchase agreement with
Citibank, N.A., 16.80%, due 12/15/97, outstanding at November 30, 1997:
<TABLE>
<CAPTION>
INTEREST MATURITY CLP MARKET ACCRUED TOTAL
TYPE OF SECURITY SERIES RATE DATE PAR VALUE INTEREST VALUE
- --------------------------------------- ----- ------- ---- --------------------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Pagares Capitolo Diez y Nueve.......... E 7.13% 01/05/04 531,009,739 $1,215,125 $35,618 $1,250,743
Pagares Descontables Banco Central de
Chile................................. -- 11.88 12/24/97 7,990,261 18,284 730 19,014
--------- ------ ---------
Total.................................. $1,233,409 $36,348 $1,269,757
--------- ------ ---------
--------- ------ ---------
</TABLE>
Listed below is the collateral associated with the repurchase agreement with
Citibank, N.A., 15.60%, due 12/15/97, outstanding at November 30, 1997:
<TABLE>
<CAPTION>
INTEREST MATURITY CLP MARKET ACCRUED TOTAL
TYPE OF SECURITY SERIES RATE DATE PAR VALUE INTEREST VALUE
- --------------------------------------- ----- ------- ---- --------------------- -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Pagares Descontables Banco Central de
Chile................................. -- 19.32% 12/24/97 847,700 $ 1,940 $ 166 $ 2,106
Pagares Reajustable Banco Central de
Chile................................. 1A 6.86 02/01/00 18,152,300 41,538 958 42,496
-------- ------ ---------
Total.................................. $ 43,478 $1,124 $ 44,602
-------- ------ ---------
-------- ------ ---------
</TABLE>
- --------------------------------------------------------------------------------
20
<PAGE>
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On September 24, 1997, 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 two directors to the Board of Directors of the Fund.
<TABLE>
<CAPTION>
NAME OF DIRECTOR FOR WITHHELD NON-VOTES
- ----------------------------------------------------------------------------------- ---------- --------- ----------
<S> <C> <C> <C>
James J. Cattano 7,157,528 121,066 1,156,325
William W. Priest, Jr. 7,152,585 126,009 1,156,325
</TABLE>
In addition to the directors re-elected at the meeting, Dr. Enrique R. Arzac,
Peter A. Gordon, George W. Landau, Martin M. Torino and Richard W. Watt continue
to serve as directors of the Fund.
(2) To ratify the selection of Coopers & Lybrand L.L.P. as independent public
accountants for the fiscal year ending May 31, 1998.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
6,397,039 34,387 847,168 1,156,325
</TABLE>
- --------------------------------------------------------------------------------
21
<PAGE>
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 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
- --------------------------------------------------------------------------------
22
<PAGE>
DESCRIPTION OF INVESTLINK* PROGRAM (CONTINUED)
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 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
- --------------------------------------------------------------------------------
23
<PAGE>
DESCRIPTION OF INVESTLINK* PROGRAM (CONTINUED)
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) 969-3364; 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.
- --------------------------------------------------------------------------------
24
<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 September 30, 1997, BEA managed approximately $34.6 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 Global Income Fund, Inc. mutual funds please call,
(FBI) 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, Jr. Chairman of the Board of Directors
Richard W. Watt Chief Investment Officer, President
and Director
Robert B. Hrabchak Investment Officer
Dr. Enrique R. Arzac Director
James J. Cattano Director
Peter A. Gordon Director
George W. Landau Director
Martin M. Torino Director
Paul P. Stamler Senior Vice President
Hal Liebes Senior Vice President
Michael A. Pignataro Chief Financial Officer and
Secretary
Rocco A. Del Guercio Vice President
Wendy S. Setnicka 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.
The financial information included herein is taken from the
records of the Fund without examination by independent
accountants who do not express an opinion thereon. 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-SAR-97
