<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
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July 14, 1995
Dear Shareholders:
We are pleased to report on the activities of The Emerging Markets
Infrastructure Fund, Inc. (the "Fund") for the six months ended May 31, 1995.
After deduction of underwriting commissions and offering costs, the Fund began
operations with a net asset value (NAV) of $13.89 per share. At May 31, 1995,
$191.2 million was invested in equity securities and convertible bonds, with the
balance of the Fund's investments, $10.3 million, invested in short-term
obligations. As of May 31, 1995, the Fund's NAV was $12.50 per share.
For the period December 1, 1994 through May 31, 1995, the Fund saw its total
return decline by 11.4%. The Morgan Stanley Capital International Emerging
Markets Index fell by 11.3% during this period. From the commencement of
investment operations on December 29, 1993 through May 31, 1995, the Fund saw
its total return decline by 9.7%. The Morgan Stanley Capital International
Emerging Markets Index fell by 10.2% during this period.
At May 31, 1995, the Fund had invested $162.5 million in infrastructure
companies in over 19 developing countries, and an additional $13.1 million in
companies that provide services or products ancillary to infrastructure
development in several of these same markets. The Fund has also made investments
totaling $12.0 million in infrastructure companies in the developed markets of
Denmark, Italy, the Netherlands, and Spain.
The past six months have been a turbulent time in the emerging markets. The
dominant factor in the performance of emerging equity markets worldwide so far
in 1995, of course, has been the collapse of the Mexican peso, which has had
wide-ranging repercussions throughout the developing world. The crisis began a
few days before last Christmas, as the government responded to Mexico's
expanding current account deficit and deteriorating currency reserves with a
devaluation of approximately 15% in the value of the peso. Within days, however,
severe selling pressure forced the Mexican government to float the currency, the
value of which immediately collapsed.
Although the government took a series of steps in the ensuing months to restore
the confidence of the market, both the peso and the Mexican equity market
declined substantially during the first quarter of 1995. In the first few weeks
of the year, it appeared that Mexico's market could stabilize in the wake of
President Clinton's $52 billion international credit package to save the Mexican
economy. The basic framework of this package was structured during the last few
days of January, as the value of the peso continued to plummet and the Mexican
government appeared to be on the verge of default. Much of the month of
February, however, was taken up with the details of the plan, and a final
agreement was reached between U.S. Treasury Secretary Robert Rubin and Mexican
Finance Minister Guillermo Ortiz only at the end of the month. In the end, the
Mexicans were compelled to hand over to the U.S. substantial control over the
future direction of their economy. Perhaps the most important provision, from an
economic point of view, was the requirement
1
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THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
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that the Mexicans maintain -- whatever the cost -- an extraordinarily tight
monetary policy in order to limit the inflationary effects of the peso crisis.
Mexican interest rates soared to nearly 100% in the aftermath of this agreement.
In the second half of March, however, the Mexican market began to display strong
signs of recovery, and in the second quarter Mexico was one of the
best-performing markets worldwide, taking back nearly all of its substantial
first quarter losses. The strong performance of the Mexican BOLSA was driven by
a growing consensus among both local and foreign investors that the economic
stabilization plan of the Zedillo government is actually working reasonably
well. We believe that this perception is largely a reasonable one. Interest
rates have come down from their highs of the spring, and, perhaps most
importantly, inflation is showing real signs of beginning to settle. While
inflation for the year 1995 is likely to come in somewhat above the market
consensus estimate of about 50%, the risk of a serious hyperinflation has
abated, and it seems that the inflation rate has already passed its peak.
There remain, of course, major challenges to the Mexican administration and
economy. The aftermath of the peso crisis has sharply reduced domestic demand,
leading to a drop in corporate earnings. In addition, corruption is still a
serious problem throughout the political system, and this issue has become
clearer to foreign investors in the wake of recent high-profile revelations. The
freakish political events we have witnessed in 1995 -- the pseudo-exile of
former President Salinas following the arrest of his brother in a political
assassination plot which was in turn allegedly covered up by the victim's own
brother, who was the government's chief investigator -- have, if anything,
redounded to the political benefit of President Zedillo. Zedillo has effectively
used this political crisis to solidify his image as a reformer seeking to
uncover and eliminate PRI corruption whatever the cost.
In a medium to long-term view, Mexico looks attractive to us. Unlike the early
1980s, Mexico today is full of competitive companies with proven management. The
population is young and growing, labor is inexpensive and increasingly well
trained, and the consumer marketplace is growing in both size and
sophistication. NAFTA and GATT have opened international markets to Mexican
goods and forced Mexican companies to become globally competitive. Perhaps most
importantly, Mexico has in the past decade experienced a dramatic transformation
from a state-dominated system to a truly market-oriented economy. Finally,
despite some serious initial missteps, the Zedillo administration is displaying
an unprecedented willingness to confront past mistakes, attack endemic
corruption, and face future challenges head on.
The impact of this crisis upon the rest of Latin America has been profound. The
extent to which markets declined in sympathy to Mexico's largely depended upon
two variables, which, as it turned out, often went hand in hand. The first was
the importance, within each market, of foreign investors, which depended upon
both the domestic savings rate and the restrictions imposed upon foreign
investment. As Mexico's troubles sucked liquidity out of the emerging markets,
the BOLSAS that were dominated by foreigners felt substantially more selling
pressure than those where domestic investors controlled the preponderance of
shares. The second factor was a country's similarity, in economic terms, to
Mexico. Of the major regional markets, the chief beneficiary of this calculus
was Chile, where the savings rate is high, foreign investment is strictly
2
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THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
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regulated, the currency is fairly valued, the current account balance is
healthy, and economic reform has been a sterling success. As a result, Chilean
equities saw relatively little diminution of value during the first quarter of
the year.
In contrast, Argentina and Brazil have problems, in varying degrees, with both
variables. Foreign investors account for a large portion of the trading in each
market, and both economies bear a certain similarity -- if only superficially --
to that of Mexico. Argentina suffered particularly from comparisons with Mexico,
and rumors of imminent default or devaluation periodically swirled through the
market during the first quarter. During the second quarter, the Argentine market
continued to struggle, as foreign investors remained concerned about the
stability of the peso, the banking system, and the government's fiscal health,
and local investors continued to sit on the sidelines. In Brazil, on the other
hand, the picture has been increasingly positive. While the REAL was devalued
during June, for the second time this year, this time the devaluation was
handled in a forthright and eminently successful manner. This contrasts with the
March devaluation, which necessitated massive intervention by the Brazilian
central bank at a cost of $6 billion in currency reserves. As a result, the
market's response this time was calm and generally positive. (The REAL still
trades at a premium to the U.S. dollar -- it should be remembered in this
context that the original goal of the REAL Plan was a one-to-one exchange rate.)
This change in the exchange rate band should lead to an improvement in Brazil's
trade balance over the next several months, as well as allowing interest rates
to gradually come down. President Cardoso has in recent months begun to confound
the pessimists by pushing important economic reforms through the national
legislature with unprecedented ease. Recent legislation has included significant
privatization and deregulation policies, eliminating, for example, the
government's long-time monopoly over the electricity sector. We are
significantly overweight in Brazil, and are quite sanguine on the prospects of
the Brazilian market for the remainder of the decade.
The immediate effects of the peso's collapse hit markets far beyond Mexico's
Latin American neighbors. Last December and into January, virtually all emerging
markets declined sharply as liquidity evaporated from the marketplace in a
general flight to quality. During February, however, we began to see a
significant divergence of returns between markets in Latin America -- which
continued to suffer -- and the Asian markets, which recovered strongly. Most
Asian stock markets gained back much or all of their January losses before the
end of the first quarter.
In Southeast Asia, short-term market performance is to a great extent driven by
global economic factors, and particularly by the interest rate picture in the
U.S. This should not be a surprise, given that currencies in virtually all of
the major regional markets are linked in one way or another to the U.S. dollar.
The news on this front, of course, has recently been positive, in that the
interest rate environment has remained benign. An additional factor in the Asian
markets' favor has been the gradually rising tide of good news coming out of
Mexico and Latin America. This has led to a slow but steady return of cautious
foreign capital to the emerging markets in all regions -- we are now seeing
investors looking to buy in markets that they would not have touched two or
three months ago. Throughout the Asian region, these positive factors are
battling against a growing wave of negative speculation about a slowdown in
earnings momentum, perhaps beginning in 1996, as the economic growth cycle moves
into its next phase. The direction of Asian markets over the next 12 months will
largely be a product of the interplay of these forces -- will the buoyancy of a
positive interest
3
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THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
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rate environment delay the natural tendency for earnings growth to slow as the
cycle moves forward? In any case, the next two or three months are likely to be
relatively unexciting in the Southeast Asian markets, as trading volumes decline
in an annual bout of "summer blues" (paradoxical in a region where there is
relatively little distinction between summer and winter).
Markets throughout the region benefited during the quarter as the dark clouds of
a political succession in China seemed to have dissipated to some extent. While
the aged leader Deng Xiaoping apparently still hangs onto life, he has, from a
political standpoint, already passed from the scene, and the transition to the
next generation of leaders appears to be taking place peacefully. It will
undoubtedly take some time for the Chinese political structure to fully
stabilize -- Chinese politics are now dominated by political purges in the guise
of corruption prosecutions -- but it appears that the most negative scenarios
will not occur. This comes as good news particularly to the Hong Kong market, a
strong performer during the first half of 1995 and a market in which we have a
significantly overweight position. At current valuations, we believe that the
overall picture is an appealing one for the long-term investor: we believe that
it is and will remain in China's interest to maintain the viability of Hong Kong
as a gateway to its capital-starved economy.
Our view on this region is mostly positive: we anticipate that, in the absence
of rising U.S. rates, growth will continue for the rest of the year, and we are
looking for a resumption of strong performance in the fall. We are watching
Thailand, where an election at the beginning of July has resulted in a victory
for the conservative (and apparently more corrupt) opposition. While this is not
good news for the market from a political risk standpoint, it is our view that
this market will overcome near-term uncertainties and perform well on strong
economic fundamentals for the remainder of the year. We are focusing
particularly upon selected bank and property stocks in the Thai market, as well
as in Indonesia and the Philippines. These sectors performed well during the
first half of the year, driven mainly by foreign buyers, and we believe that
renewed buying by domestic retail investors will continue to drive up prices as
the year moves forward, particularly in the smaller and mid-sized companies that
are often overlooked by foreign investors.
In summary, despite the high levels of volatility in the emerging markets over
the past several months, we believe that these markets remain an extremely
attractive long-term investment. While the economic fundamentals have changed in
certain markets -- most notably in Mexico -- much of the selling pressure that
drove markets down bore little relationship to economic reality. We believe
that, over the medium to long term, the emerging equity markets will continue to
outperform the developed markets by a substantial margin throughout the 1990s.
This projection is based on both macroeconomic and capital markets factors. We
expect the growth rate of developing economies to continue to outpace that of
the developed countries, and believe that high economic growth has and will
continue to correlate with relatively high equity market returns.
In all, 8.2% of the Fund's portfolio, expressed as a percentage of net assets,
has been invested in unlisted securities. Among these have been private equity
investments in telecommunications and other infrastructure companies in
Argentina, Israel, Peru and Russia. We continue to seek private equity
investment opportunities that offer attractive valuations, access to unique
situations such as privatizations, a solid management structure, and the
potential for dramatic growth.
4
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THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
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We believe that governmental deregulation and privatization around the world
will continue to offer the Fund many new opportunities in the future. We plan to
continue pursuing these opportunities as government-owned companies involved in
telecommunications, electricity and gas distribution, ports and roads continue
to privatize. Our theme is simple: for developing economies to grow, basic
services must be provided. If basic services sufficient for growth are to be
provided, these sorts of companies must generate high internal rates of return.
Thus, as emerging market economies continue to grow rapidly, we expect
telecommunications and other infrastructure companies within those markets to
grow with equal rapidity.
We wish to remind shareholders whose shares are registered in their own name
that they automatically participate in the Fund's dividend reinvestment program.
The automatic Dividend Reinvestment plan can be of value to shareholders in
maintaining their proportional ownership interest in the Fund in an easy and
convenient way. A shareholder whose shares are held in the name of a
broker/dealer or nominee should contact that party for details about
participating in the Plan. The Fund also offers shareholders a voluntary Cash
Purchase Plan. The Plan and the Cash Purchase Program are described on pages 20
and 21 of this report.
We appreciate your interest in the Fund and would be pleased to respond to your
questions or comments.
Respectfully,
Emilio Bassini
President
Chief Investment Officer*
- ------------------------
*Emilio Bassini, who is a member of the Executive Committee of BEA Associates
and holds the offices of Chief Financial Officer and Executive Director of BEA
Associates, is primarily responsible for management of the Fund's assets. He
has served the Fund in such capacity since the commencement of the Fund's
operations. Mr. Bassini joined BEA Associates (formerly Basic Appraisals, Inc.
and BEA Associates Inc.) in 1984. Mr. Bassini is a Director, Chairman of the
Board, President and Chief Investment Officer of the Fund and is also a
Director, Chairman of the Board, President and Chief Investment Officer of The
Emerging Markets Telecommunications Fund, Inc., The Latin America Equity Fund,
Inc., The Latin America Investment Fund, Inc. and The Portugal Fund, Inc. He is
also the President, Chief Investment Officer and Secretary of The Indonesia
Fund, Inc., Director, Chairman of the Board, President and Chief Executive
Officer of The Brazilian Equity Fund, Inc. and Director, President and Chief
Investment Officer of The Chile Fund, Inc. and The First Israel Fund, Inc.
5
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
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PORTFOLIO SUMMARY
AS OF MAY 31, 1995 (unaudited)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Local and/or long distance telephone
Latin America 55.40% service 24.30
<S> <C> <C> <C> <C>
Caribbean 0.80% Cement Companies 6.30
Middle East 4.90% Cellular Communications 10.70
Asia 23.40% Investment Companies 1.80
Eastern Europe 1.90% Infrastructure and Construction 7.50
Europe 7.20% Cash and cash Equivalents 4.90
Cash and cash equivalents 3.80% Telecommunications Equipment 3.00
Global 2.60% Gas & Oil 7.90
100.00% Other 0.2
Electric Distribution 18.6
Electric Generation 14.8
100.00
</TABLE>
<TABLE>
<S> <C>
THIS CHART REPRESENTS THE GEOGRAPHIC ASSET THIS CHART REPRESENTS THE SECTOR ALLOCATION
ALLOCATION OF TOTAL NET ASSETS OF THE FUND. OF TOTAL NET ASSETS OF THE FUND.
</TABLE>
TOP 10 EQUITY HOLDINGS, BY ISSUER, AS OF MAY 31, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
OF
HOLDING SECTOR COUNTRY/REGION NET ASSETS
<C> <S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
1. Philippine Long Distance
Telephone Co. ADR Local and/or Long Distance
Telephone Service
- -----------------------------------------------------------------------------------------------------------
2. Chilectra S.A. ADS
Electric Distribution
- -----------------------------------------------------------------------------------------------------------
3. Centrais Eletricas Brasileiras S.A.
Electric Generation
- -----------------------------------------------------------------------------------------------------------
4. Technology Resources Industries
Cellular Communications
- -----------------------------------------------------------------------------------------------------------
5. Companhia Energetica de
Minas Gerais PN
Electric Distribution
- -----------------------------------------------------------------------------------------------------------
6. Siam Cement Co. Foreign Registered
Cement Companies
- -----------------------------------------------------------------------------------------------------------
7. Consolidated Electric Power
Asia Ltd.
Electric Generation
- -----------------------------------------------------------------------------------------------------------
8. Compania de Telefonos de
Chile S.A. ADS Local and/or Long Distance Telephone
Service
- -----------------------------------------------------------------------------------------------------------
9. Telecom Argentina S.A. Cl. B
Local and/or Long Distance
Telephone Service
- -----------------------------------------------------------------------------------------------------------
10. Millicom International
Cellular S.A. Cellular Communications
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------
1.
Philippines 3.86 %
- ---------
2.
Chile 3.80
- ---------
3.
Brazil 3.05
- ---------
4.
Malaysia 2.87
- ---------
5.
Brazil 2.84
- ---------
6.
Thailand 2.78
- ---------
7.
Hong Kong 2.55
- ---------
8.
Chile 2.11
- ---------
9.
Argentina 1.99
- ---------
10.
Global 1.87
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</TABLE>
6
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THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
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SCHEDULE OF INVESTMENTS
MAY 31, 1995
(unaudited)
<TABLE>
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
EQUITY SECURITIES-94.91%
EQUITY OR EQUITY-LINKED SECURITIES OF INFRASTRUCTURE COMPANIES IN EMERGING COUNTRIES-80.70%
ARGENTINA-10.52%
173,789 Argentine Cellular Communications (Holdings) Ltd.*+........................... $ 2,519,941
1,729,347 Camuzzi Argentina S.A.*....................................................... 3,289,382
100,700 Capex S.A. Ord. +............................................................. 765,358
33,000 Central Costanera S.A. Cl. B ADR+, ++......................................... 924,000
48,000 Central Puerto S.A. ADR+, ++.................................................. 1,008,000
192,400 Citicorp Equity Investments
S.A. Cl. B................................................................... 673,434
104,630 Compania Naviera Perez Companc Cl. B.......................................... 448,885
135,638 Minetti (Juan) S.A............................................................ 467,975
308,626 Polledo +..................................................................... 268,518
695,400 Sociedad Comercial del
Plata S.A.................................................................... 1,689,906
6,800 Sociedad Comercial del Plata S.A. ADR++....................................... 163,200
806,600 Telecom Argentina S.A. Cl. B.................................................. 4,009,002
49,732 Telefonica de Argentina S.A. ADS.............................................. 1,330,331
179,000 YPF Sociedad Anonima ADS...................................................... 3,624,750
------------
TOTAL ARGENTINA (Cost $26,505,097).............................................. 21,182,682
------------
BOLIVIA-1.03%
79,200 Compania Boliviana de Energia Electrica S.A. (Cost $1,854,055)................ 2,069,100
------------
BRAZIL-15.13%
136,676,664 Acesita CIA Espec Itab PN(a).................................................. 1,096,127
4,386 Bardella Industrias Mecanicas S.A............................................. 740,274
12,259,179 Centrais Eletricas Brasileiras S.A. ON+....................................... 3,407,957
9,871,414 Centrais Eletricas Brasileiras S.A. PN+....................................... 2,733,287
1,279,000 Centrais Eletricas de Santa Catarin Cl. B PN+................................. 1,058,191
248,258,400 Companhia Energetica de Minas Gerais PN....................................... 5,723,773
77,380 Companhia Energetica de Sao Paulo ADR+........................................ 899,543
64,837,500 Companhia Paulista de Forca e Luz ON.......................................... 3,647,780
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
BRAZIL (CONTINUED)
30,100,000 Companhia Siderurgica Nacional ON............................................. $ 687,336
918,000 Confab Industrial PN.......................................................... 658,246
21,248,266 Petroleo Brasileiro S.A. PN................................................... 1,992,391
74,664,182 Telecomunicacoes Brasileiras S.A. PN(b)....................................... 2,602,745
11,820,291 Telecomunicacoes de Sao Paulo S.A. PN(c)...................................... 1,483,893
994,000 Telecomunicacoes do Parana
S.A. PN(d)................................................................... 285,097
4,371,000 Telecomunicacoes do Rio de Janeiro S.A. PN+(e)................................ 212,161
509,800 Trafo Equipamentos Electricos S.A. PN+........................................ 506,145
142,400 Usinas Siderurgicas de Minas Gerais S.A. ADR++................................ 1,566,400
1,054,700,000 Usinas Siderurgicas de Minas Gerais S.A. PN................................... 1,163,486
------------
TOTAL BRAZIL (Cost $31,430,646)................................................. 30,464,832
------------
CHILE-18.13%
145,600 Chilectra S.A. ADS++.......................................................... 7,644,000
243,803 Chilgener S.A................................................................. 1,877,890
226,522 Chilquinta S.A................................................................ 1,385,034
48,000 Compania de Telefonos de Chile S.A. ADS##..................................... 4,248,000
2,320,540 Compania Eletrica del Rio Maipo S.A........................................... 1,596,984
70,000 Conatel S.A................................................................... 100,053
605,459 Elecda Empresa Eletrica de Antofagasta S.A.................................... 416,674
978,133 Eliqsa Empresa Eletrica de Iquique S.A........................................ 642,078
1,321,792 Emelari Empresa Eletrica de Arica S.A......................................... 575,529
81,328 Empresa Electric de Melipilla S.A............................................. 2,045,040
1,044,341 Empresa Eletrica Pehuenche S.A................................................ 3,358,587
3,092,853 Empresa Nacional de Electricidad S.A.......................................... 2,570,555
195,234 Empresa Nacional de Telecomunicaciones S.A.................................... 1,772,415
116,000 Enersis S.A. ADR ##........................................................... 3,349,500
605,258 Gen Elec Industril S.A........................................................ 3,524,530
61,355 Sociedad Austral de Electricidad S.A.......................................... 1,412,886
------------
TOTAL CHILE (Cost $27,404,337).................................................. 36,519,755
------------
</TABLE>
7
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THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
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SCHEDULE OF INVESTMENTS (unaudited) (continued)
<TABLE>
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
CHINA-0.20%
<C> <S> <C>
49,200 AES China Generating Co. Ltd. Cl. A+ (Cost $814,875).......................... $ 393,600
------------
EASTERN EUROPE-1.91%
189,345 Global Telesystems Group*+.................................................... 2,031,158
322,600 Petersburg Long Distance Inc.+................................................ 1,814,625
------------
TOTAL EASTERN EUROPE (Cost $4,612,183).......................................... 3,845,783
------------
HONG KONG-7.41%
588,000 China Light & Power Co. Ltd................................................... 3,215,441
2,194,800 Consolidated Electric Power Asia Ltd.......................................... 5,135,661
1,320,480 Hong Kong & China Gas Co...................................................... 2,142,389
642,000 Hong Kong Electric Holdings Ltd............................................... 2,282,394
100,900 Hong Kong Telecommunications Ltd. ADR......................................... 2,156,738
------------
TOTAL HONG KONG (Cost $13,779,678).............................................. 14,932,623
------------
INDIA-0.01%
700 HINDALCO Industries GDR++ (Cost $18,900)...................................... 20,125
------------
ISRAEL-4.10%
701,680 Bezeq Israeli Telecommunication Corp., Ltd.................................... 1,554,796
117,500 ECI Telecom Ltd............................................................... 1,982,813
163,000 Geotek Communications, Inc.+,##............................................... 1,283,625
100 Geotek Communications, Inc.
Convertible Preferred Series M*+............................................. 926,940
13,118 Koor Industries Ltd........................................................... 1,038,552
192 PAZ Oil Co.*+................................................................. 960,002
65,700 Teledata Communication Ltd.+.................................................. 509,175
------------
TOTAL ISRAEL (Cost $11,460,904)................................................. 8,255,903
------------
MALAYSIA-3.94%
1,770,000 Technology Resources
Industries+.................................................................. 5,781,497
281,000 Telekom Malaysia Berhad....................................................... 2,154,960
------------
TOTAL MALAYSIA (Cost $9,032,235)................................................ 7,936,457
------------
MEXICO-2.14%
39,600 Grupo Simec, S.A. de C.V. ADS+................................................ 381,150
600,000 Grupo Simec, S.A. de C.V. Cl. B+.............................................. 282,927
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
MEXICO (CONTINUED)
31,200 Grupo Tribasa, S.A. de C.V. ADS+,##........................................... $ 210,600
122,300 Telefonos de Mexico, S.A. de C.V. ADR......................................... 3,439,688
------------
TOTAL MEXICO (Cost $11,825,502)................................................. 4,314,365
------------
PAKISTAN-0.32%
5,900 Pakistan Telecom Co. GDR+,++ (Cost $1,144,600)................................ 649,000
------------
PERU-2.58%
1,157,354 Compania Peruana de Telefonos S.A. Cl. B+..................................... 1,985,214
2,085,000 Ontario Quinta A.V.V.*+....................................................... 2,176,740
<CAPTION>
PAR
(000)
- -------------
<C> <S> <C>
US$ 1,260 Tele 2000 S.A. Convertible Note, 9.75%, due 04/14/97++........................ 1,033,200
------------
TOTAL PERU (Cost $4,704,467).................................................... 5,195,154
------------
<CAPTION>
NO. OF SHARES
- -------------
<C> <S> <C>
PHILIPPINES-3.86%
108,200 Philippine Long Distance Telephone Co. ADR## (Cost $8,549,750)................ 7,776,875
------------
PORTUGAL-1.29%
62,400 Companhia Portuguesa Radio Marconi, S.A. (Cost $1,911,299).................... 2,597,095
------------
PUERTO RICO-0.83%
54,600 Cellular Communications of Puerto Rico, Inc.+,## (Cost $1,231,325)............ 1,672,125
------------
SINGAPORE-2.39%
330,000 Keppel Corp................................................................... 3,008,614
262,000 Sembawang Shipyard Ltd........................................................ 1,805,599
------------
TOTAL SINGAPORE (Cost $4,760,238)............................................... 4,814,213
------------
THAILAND-1.47%
70,500 Advanced Information Services Public Co. Ltd. Foreign Registered.............. 1,091,207
206,700 Telecom Asia Corporation Public Company Limited Local Registered+............. 783,081
</TABLE>
8
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THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
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SCHEDULE OF INVESTMENTS (unaudited) (continued)
<TABLE>
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
THAILAND (CONTINUED)
<C> <S> <C>
288,500 Telecom Asia Corporation Public Company Limited Foreign Registered+........... $ 1,092,980
------------
TOTAL THAILAND (Cost $3,286,168)................................................ 2,967,268
------------
VENEZUELA-1.07%
2,048,778 C.A. la Electricidad de Caracas, SAICA-SACA (Cost $3,004,499)................. 2,159,974
------------
GLOBAL-2.37%
3,817 International Wireless Communications, Inc.*+................................. 1,003,836
151,041 Millicom International Cellular S.A.+......................................... 3,757,145
------------
TOTAL GLOBAL (Cost $4,369,047).................................................. 4,760,981
------------
TOTAL EMERGING COUNTRIES (Cost $171,699,805).................................... 162,527,910
------------
EQUITY SECURITIES OF INFRASTRUCTURE COMPANIES IN DEVELOPED COUNTRIES-5.94%
DENMARK-1.42%
100,000 Tele Danmark A/S Cl. B ADS## (Cost $2,352,600)................................ 2,850,000
------------
ITALY-2.22%
813,600 Italiana Telecom SPA.......................................................... 2,127,794
1,155,000 Societa Italiana per l'Esercizio delle Telecomunicazioni p.a.................. 2,353,298
------------
TOTAL ITALY (Cost $4,278,077)................................................... 4,481,092
------------
NETHERLANDS-0.70%
38,900 Koninklijke PTT Nederland N.V. (Cost $1,063,513).............................. 1,405,662
------------
SPAIN-1.60%
182,100 Iberdrola S.A................................................................. 1,275,255
59,600 Repsol S.A. ADR+.............................................................. 1,944,450
------------
(Cost $3,375,421)............................................................... 3,219,705
------------
TOTAL DEVELOPED COUNTRIES (Cost $11,069,611).................................... 11,956,459
------------
EQUITY SECURITIES OF COMPANIES PROVIDING OTHER ESSENTIAL SERVICES IN THE DEVELOPMENT OF AN
EMERGING COUNTRY'S INFRASTRUCTURE-6.50%
ARGENTINA-0.29%
120,108 Corp. Cementera Argentina S.A.+ (Cost $870,260)............................... 576,547
------------
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
BRAZIL-0.15%
304,000 Moinho Santista Industrias Gerais PN+ (Cost $1,060,580)....................... $ 301,820
------------
ECUADOR-0.85%
7,481 Cemento Nacional Ecuador GDR++ (Cost $1,490,362).............................. 1,720,630
------------
MEXICO-2.43%
325,000 Cementos Apasco, S.A. de C.V.................................................. 1,125,610
253,125 Cementos Mexicanos S.A. de C.V. Cl. B......................................... 819,055
405,500 Cementos Mexicanos S.A. de C.V. C.P........................................... 1,240,896
450,000 Grupo Sidek, S.A. de C.V. Ser B+.............................................. 351,220
11,188 Grupo Sidek, S.A. de C.V. Ser L+.............................................. 11,861
362,000 Tolmex, S.A. de C.V........................................................... 1,353,821
------------
TOTAL MEXICO (Cost $12,343,200)................................................. 4,902,463
------------
THAILAND-2.78%
87,200 Siam Cement Co. Foreign Registered (Cost $3,317,976).......................... 5,589,562
------------
TOTAL OTHER ESSENTIAL SERVICES (Cost $19,082,378)............................... 13,091,022
------------
INVESTMENT COMPANIES IN EMERGING COUNTRIES-1.77%
INDIA-0.99%
2,000,000 India Special Situations Fund Ltd.*+ (Cost $2,000,000)........................ 2,000,000
------------
ISRAEL-0.78%
106 The Renaissance Fund*+# (Cost $1,064,447)..................................... 1,567,494
------------
TOTAL INVESTMENT COMPANIES (Cost $3,064,447).................................... 3,567,494
------------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES (Cost $204,916,241).................... 191,142,885
------------
SHORT-TERM INVESTMENTS-5.13%
CHILEAN MUTUAL FUNDS-0.18%
5,356 Fondo Mutuo Bonosorno Global.................................................. 19,852
25,070 Fondo Mutuo Operacional BanChile.............................................. 261,404
17,136 Fondo Mutuo Security Premium.................................................. 89,465
------------
TOTAL CHILEAN MUTUAL FUNDS
(Cost $340,120)................................................................ 370,721
------------
</TABLE>
9
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
- -------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (unaudited) (continued)
<TABLE>
<CAPTION>
PAR VALUE
(000) DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
CHILEAN INFLATION ADJUSTED TIME DEPOSITS-0.89%
<C> <S> <C>
CLP 7,298 Banco de Edwards, 5.91%, 7/24/95**............................................ $ 223,663
3,134 Banco Bice, 5.90%, 8/23/95**.................................................. 96,612
732 Banco Bice, 5.90%, 8/08/95**.................................................. 22,499
17,285 Banco de O'Higgins, 6.10%, 7/19/95**.......................................... 529,381
21,587 Banco Santander, 6.03%, 7/25/95**............................................. 661,726
479 Banco Security, 5.80%, 6/05/95**.............................................. 14,558
7,491 Banco Security, 5.50%, 8/29/95**.............................................. 231,339
------------
TOTAL CHILEAN INFLATION ADJUSTED TIME DEPOSITS (Cost $1,754,423)................ 1,779,778
------------
<CAPTION>
PAR VALUE
(000) DESCRIPTION (NOTE A)
- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
GRAND CAYMAN-4.06%
US$ 8,182 Brown Brothers Harriman & Co.
Call Account, 5.00%+++ (Cost $8,182,000)..................................... $ 8,182,000
------------
TOTAL SHORT-TERM INVESTMENTS (Cost $10,276,543)................................. 10,332,499
------------
TOTAL INVESTMENTS (Notes A, D) (Cost $215,192,784).......................100.04% 201,475,384
LIABILITIES IN EXCESS OF
OTHER ASSETS............................................................(0.04%) (78,773)
------------
NET ASSETS...............................................................100.00% $201,396,611
------------
------------
</TABLE>
- ------------------------------
* Not readily marketable security.
** Effective yield on the date of purchase.
+ Security is non-income producing.
++ SEC Rule 144A security. Such securities have limited primary and
secondary markets in that they are traded only among "qualified
institutional buyers".
+++ Variable rate account. Rates reset on a monthly basis; amounts available
generally on the same business day requested.
# As of May 31, 1995, the Fund committed to investing additional capital of
$540,000 in the Renaissance Fund.
## Security is out on loan.
(a) With an additional 17,767,966 rights attached, expiring 6/30/95, with no
market value.
(b) With an additional 2,601,385 rights attached, expiring 6/26/95, with no
market value.
(c) With an additional 267,320 rights attached, expiring 6/23/95, with no
market value.
(d) With an additional 7,850 rights attached, expiring 6/20/95, with no
market value.
(e) With an additional 203,748 rights attached, expiring 6/20/95, with no
market value.
ADR American Depositary Receipts.
ADS American Depositary Shares.
C.P. Certificate of Participation.
CLP Chilean pesos.
GDR Global Depositary Receipts.
ON Ordinary Shares.
PN Preferred Shares.
US$ United States dollars.
See accompanying notes to financial statements.
10
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
- -------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUMMARY OF EQUITY SECURITIES BY COUNTRY/REGION
(unaudited)
<TABLE>
<CAPTION>
PERCENT OF
COUNTRY/REGION NET ASSETS VALUE
- ----------------------------------------------------------------------------------- --------------- --------------
<S> <C> <C>
ARGENTINA.......................................................................... 10.81% $ 21,759,229
BOLIVIA............................................................................ 1.03 2,069,100
BRAZIL............................................................................. 15.28 30,766,652
CHILE.............................................................................. 18.13 36,519,755
CHINA.............................................................................. 0.20 393,600
DENMARK............................................................................ 1.42 2,850,000
EASTERN EUROPE..................................................................... 1.91 3,845,783
ECUADOR............................................................................ 0.85 1,720,630
HONG KONG.......................................................................... 7.41 14,932,623
INDIA.............................................................................. 1.00 2,020,125
ISRAEL............................................................................. 4.88 9,823,397
ITALY.............................................................................. 2.22 4,481,092
MALAYSIA........................................................................... 3.94 7,936,457
MEXICO............................................................................. 4.57 9,216,828
NETHERLANDS........................................................................ 0.70 1,405,662
PAKISTAN........................................................................... 0.32 649,000
PERU............................................................................... 2.58 5,195,154
PHILIPPINES........................................................................ 3.86 7,776,875
PORTUGAL........................................................................... 1.29 2,597,095
PUERTO RICO........................................................................ 0.83 1,672,125
SINGAPORE.......................................................................... 2.39 4,814,213
SPAIN.............................................................................. 1.60 3,219,705
THAILAND........................................................................... 4.25 8,556,830
VENEZUELA.......................................................................... 1.07 2,159,974
GLOBAL............................................................................. 2.37 4,760,981
----- --------------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES....................................... 94.91% $ 191,142,885
----- --------------
----- --------------
</TABLE>
11
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
- -------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
(unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $215,192,784) (Note A) $201,475,384
Receivables:
Investments sold 1,035,694
Note 500,000
Dividends 436,069
Interest 95,511
Other assets 97,156
-----------
Total Assets 203,639,814
-----------
LIABILITIES:
Payables:
Due to custodian 582,238
Investments purchased 856,339
Due to adviser (Note B) 412,571
Due to administrators (Note B) 70,199
Other accrued expenses 321,856
-----------
Total Liabilities 2,243,203
-----------
NET ASSETS (applicable to 16,107,169 shares of common stock outstanding) (Note
C) $201,396,611
-----------
-----------
NET ASSET VALUE PER SHARE ($201,396,611 DIVIDED BY 16,107,169) $12.50
-----------
-----------
Net assets consist of:
Capital stock, $0.001 par value; 16,107,169 shares issued and outstanding
(100,000,000 shares authorized) $ 16,107
Paid-in capital 223,751,241
Undistributed net investment income 248,884
Accumulated realized losses on investments and foreign currency related
transactions (8,930,625)
Net unrealized depreciation on investments and other assets and liabilities
denominated in foreign currency (13,688,996)
-----------
Net assets applicable to shares outstanding $201,396,611
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
- -------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1995
(unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income (Note A):
Dividends $ 2,445,668
Interest 410,539
Less: Foreign taxes withheld (203,358)
-----------
Total Investment Income 2,652,849
-----------
Expenses:
Investment advisory fees (Note B) 1,257,695
Administration fees (Note B) 184,303
Custodian fees (Note B) 139,452
Accounting fees 53,872
Insurance 33,294
Printing fees 25,098
Audit fees 24,206
Directors' fees (Note B) 15,106
Transfer agent fees 14,924
Legal fees 9,865
Other 31,824
-----------
Total Expenses 1,789,639
-----------
Net Investment Income 863,210
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCY RELATED
TRANSACTIONS:
Net realized loss from:
Investments (5,439,820)
Foreign currency related transactions (9,622)
Net change in unrealized appreciation in value of investments and
translation
of other assets and liabilities denominated in foreign currency (21,543,825)
-----------
Net realized and unrealized loss on investments and foreign currency
related transactions (26,993,267)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(26,130,057)
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
- -------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED DECEMBER 29, 1993*
MAY 31, 1995 THROUGH
(UNAUDITED) NOVEMBER 30, 1994
-------------- ------------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income/(loss) $ 863,210 $ (262,589)
Net realized loss on investments and foreign currency related
transactions (5,449,442) (3,188,633)
Net change in unrealized appreciation in value of investments and
translation of other assets and liabilities denominated in foreign
currency (21,543,825) 7,854,829
-------------- ------------------
Net increase/(decrease) in net assets resulting from operations (26,130,057) 4,403,607
-------------- ------------------
Dividends and distributions to shareholders from:
Net investment income ($0.02 and $0.00 per share, respectively) (351,737) --
Net realized gain on foreign currency related transactions ($0.02 and
$0.00 per share, respectively) (292,550) --
-------------- ------------------
(644,287) --
-------------- ------------------
Capital share transactions (Note C):
Proceeds from the sale of 16,100,000 shares -- 224,595,000
Offering costs charged to capital -- (927,660)
-------------- ------------------
Net increase in net assets resulting from capital share transactions -- 223,667,340
-------------- ------------------
Total increase/(decrease) in net assets (26,774,344) 228,070,947
NET ASSETS:
Beginning of period 228,170,955 100,008
-------------- ------------------
End of period (including undistributed net investment income of $248,884
and net investment loss of $262,589, respectively) $ 201,396,611 $ 228,170,955
-------------- ------------------
-------------- ------------------
</TABLE>
- ------------------------
* Commencement of investment operations.
See accompanying notes to financial statements.
14
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE 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 SIX MONTHS FOR THE PERIOD
ENDED DECEMBER 29, 1993*
MAY 31, 1995 THROUGH
(UNAUDITED) NOVEMBER 30, 1994
------------------ ------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $14.17 $13.89**
Net investment income/(loss) 0.05 (0.01)
Net realized and unrealized gain/(loss) on investments and foreign currency
related transactions (1.68) 0.29
Net increase/(decrease) in net assets from operations (1.63) 0.28
Distributions to shareholders from:
Net investment income (0.02) --
Net realized gain on foreign currency related transactions (0.02) --
Total distributions to shareholders (0.04) --
Net asset value, end of period $12.50 $14.17
Market value, end of period $10.75 $11.88
Total investment return (a) (9.12)% (14.87)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $201,397 $228,171
Ratio of expenses before taxes to average net assets (c) 1.85% 1.96%
Ratio of expenses after taxes to average net assets (c) 1.85% 2.02%
Ratio of net investment income/(loss) to average net assets (c) 0.89% (0.13)%
Portfolio turnover (b) 8.43% 24.63%
</TABLE>
- ------------------------
* Commencement of investment operations.
** Initial public offering price $15.00 per share less underwriting discount of
$1.05 per share and offering expenses of $0.06 per share.
(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 distributions
at actual prices pursuant to the Fund's dividend reinvestment plan. Total
investment return does not reflect brokerage commissions or initial
underwriting discounts and has not been annualized.
(b) Not annualized.
(c) Annualized.
See accompanying notes to financial statements.
15
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
- -------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
NOTE A. The Emerging Markets Infrastructure Fund, Inc. (the "Fund") was
incorporated in Maryland on October 12, 1993 and commenced investment operations
on December 29, 1993. The Fund is registered under the Investment Company Act of
1940, as amended, as a closed-end, non-diversified management investment
company. Significant accounting policies are as follows:
PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All securities for which market quotations are readily
available are valued at the 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. Investments in
short-term debt instruments having a maturity of 60 days or less are valued on
the basis of amortized cost. The Board of Directors has established general
guidelines for calculating fair value of non-publicly traded securities. At May
31, 1995, the Fund held 8.2% of its net assets in securities valued in good
faith by the Board of Directors with an aggregate cost of $15,927,359 and market
value of $16,475,493. The net asset value per share of the Fund is calculated
weekly and at the end of each month and at any other times determined by the
Board of Directors.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.
TAXES: No provision is made for U.S. federal income or excise taxes as it is the
Fund's intention to qualify as a regulated investment company and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from all or substantially all federal income and excise taxes.
At November 30, 1994, the Fund had capital loss carryforwards of approximately
$1,079,000 available as a reduction, to the extent provided in regulations, of
any future net capital gains realized before the end of fiscal 2002. To the
extent that the loss is used to offset future capital gains, it is probable that
the gains so offset will not be distributed to shareholders. In accordance with
U.S. federal tax regulations, the Fund has elected to defer approximately
$2,399,000 of realized losses arising after October 31, 1994. Such losses are
treated for tax purposes as arising on December 1, 1994.
Income received by the Fund from sources within emerging countries and other
foreign countries may be subject to withholding and other taxes imposed by such
countries.
The Fund will be subject to and will accrue a 10% Chilean repatriation tax with
respect to all known and estimated remittances from Chile. For the six months
ended May 31, 1995, the Fund incurred no such expenses.
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
16
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
- -------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(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 of $9,622 represent foreign exchange gains
and losses from sales and maturities of debt securities, holdings of foreign
currencies, transactions in 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, 1995, was $17,308,674, for which the Fund has received cash as collateral of
$17,826,308. Such cash collateral was reinvested into a repurchase agreement
which is in turn collateralized by U.S. Treasury Strips (interest-only).
Security loans are required at all times to 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 period, the Fund earned $19,537 in securities lending income which is
included in interest income in the Statement of Operations.
DISTRIBUTION 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, although it
currently expects to distribute such gains. An additional distribution may be
made to the extent necessary to avoid the payment of a 4% U.S. federal excise
tax. Dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date.
OTHER: Some countries require governmental approval for the repatriation of
investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if there is a deterioration in a country's
17
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
- -------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
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 30% of its
assets in non-publicly traded equity securities which may involve a high degree
of business and financial risk and may result in substantial losses. Because of
the current absence of any liquid trading market for these investments, the Fund
may take longer to liquidate these positions than would be the case for publicly
traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized on such sales could be less than
those originally paid by the Fund. Further, companies whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements applicable to companies whose securities are publicly
traded.
NOTE B. BEA Associates serves as the Fund's investment adviser with respect to
all investments. As compensation for its advisory services, BEA Associates
receives from the Fund an annual fee, calculated weekly and paid quarterly,
equal to 1.30% of the Fund's average weekly net assets. For the six months ended
May 31, 1995, BEA Associates earned $1,257,695 for advisory services. BEA
Associates 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 May 31, 1995, BEA Associates was reimbursed
$6,916 for administrative services rendered to the Fund.
Bear Stearns Funds Management Inc. ("BSFM") acts as the Fund's U.S.
administrator. The Fund pays BSFM a quarterly fee for its services rendered that
is computed weekly at an annual rate of 0.15% of the Fund's average weekly net
assets. For the six months ended May 31, 1995, BSFM earned $145,120 for
administrative services.
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's fee is 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 reimbursement for a predefined limit of their expenses.
The Fund pays each of its Directors, who is not a director, officer or employee
of BEA Associates, Banco de Boston, BSFM or the Chilean administrator, or any
affiliate thereof an annual fee of $5,000 plus $500 for each Board of Directors
meeting attended. In addition, the Fund reimburses these directors for travel
and out-of-pocket expenses incurred in connection with Board of Directors
meetings.
Brown Brothers Harriman & Co. acts as the custodian for the Fund's U.S. and
foreign assets.
18
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
- -------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
NOTE C. The authorized capital stock of the Fund is 100,000,000 shares of common
stock, $0.001 par value. Of the 16,107,169 shares outstanding at May 31, 1995,
BEA Associates owned 7,169 shares. In addition to the issuance of common stock
to BEA Associates, a public offering of the Fund's shares by a group of
underwriters resulted in the issuance of 16,100,000 shares of the Fund's common
stock. Offering expenses of $927,660 incurred in connection with the offering of
the Fund's shares have been charged to paid-in capital.
NOTE D. For U.S. federal income tax purposes, the cost of securities owned at
May 31, 1995 was $215,192,784. Accordingly, the net unrealized depreciation of
investments (including investments denominated in foreign currencies) of
$13,717,400, was composed of gross appreciation of $22,683,183 for those
investments having an excess of value over cost and gross depreciation of
$36,400,583 for those investments having an excess of cost over value.
For the period ended May 31, 1995, total purchases and sales of securities,
other than short-term investments, aggregated $16,770,468 and $15,704,258,
respectively.
NOTE E. The Fund, along with 15 other U.S. regulated investment companies for
which BEA serves as investment adviser, has a credit agreement with The First
National Bank of Boston. The agreement provides that each fund is permitted to
borrow an amount equal to the lesser of $50,000,000 or 25% of the net assets of
the fund. However, at no time shall the aggregate outstanding principal amount
of all loans to any of the 16 funds exceed $50,000,000. The line of credit will
bear interest at (i) the greater of the bank's prime rate or the Federal Funds
Effective Rate plus 0.50% or (ii) the Adjusted Eurodollar Rate plus 1.50%. The
Fund had no amounts outstanding under the line of credit agreement at May 31,
1995.
NOTE F. Quarterly Results of Operations:
<TABLE>
<CAPTION>
NET GAIN/(LOSS)
ON INVESTMENT NET
AND FOREIGN INCREASE/(DECREASE)
NET CURRENCY IN NET
INVESTMENT INVESTMENT DENOMINATED ASSETS RESULTING MARKET
INCOME INCOME/(LOSS) TRANSACTIONS FROM OPERATIONS PRICE
--------------------- -------------------- -------------------- ---------------------- ON NYSE
TOTAL TOTAL TOTAL TOTAL ---------
QUARTER ENDED (000) PER SHARE (000) PER SHARE (000) PER SHARE (000) PER SHARE HIGH
- ------------------------- --------- ---------- --------- --------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
February 28, 1995........ $ 731 $ 0.04 $ (225) $ (0.01) $ (46,457) $ (2.89) $ (46,682) $ (2.90) $ 12.000
May 31, 1995............. 1,922 0.12 1,088 0.06 19,464 1.21 20,552 1.27 11.250
--------- ----- --------- --------- --------- --------- --------- -----------
Totals................... $ 2,653 $ 0.16 $ 863 $ 0.05 $ (26,993) $ (1.68) $ (26,130) $ (1.63)
--------- ----- --------- --------- --------- --------- --------- -----------
--------- ----- --------- --------- --------- --------- --------- -----------
February 28, 1994*....... $ 564 $ 0.04 $ (220) $ (0.01) $ (134) $ (0.01) $ (354) $ (0.02) $ 16.125
May 31, 1994............. 1,140 0.07 128 0.01 (17,740) (1.10) (17,612) (1.09) 14.625
August 31, 1994.......... 1,259 0.08 132 0.01 29,716 1.84 29,848 1.85 14.000
November 30, 1994........ 750 0.04 (302) (0.02) (7,176) (0.44) (7,478) (0.46) 13.750
--------- ----- --------- --------- --------- --------- --------- -----------
Totals................... $ 3,713 $ 0.23 $ (262) $ (0.01) $ 4,666 $ 0.29 $ 4,404 $ 0.28
--------- ----- --------- --------- --------- --------- --------- -----------
--------- ----- --------- --------- --------- --------- --------- -----------
<CAPTION>
QUARTER ENDED LOW
- ------------------------- ---------
<S> <C>
February 28, 1995........ $ 9.250
May 31, 1995............. 7.500
Totals...................
February 28, 1994*....... $ 14.625
May 31, 1994............. 11.000
August 31, 1994.......... 11.000
November 30, 1994........ 11.125
Totals...................
</TABLE>
- --------------------------
* For the period December 29, 1993 (commencement of investment operations)
through February 28, 1994.
19
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
- -------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUND'S DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN
Pursuant to The Emerging Markets Infrastructure Fund, Inc. (the "Fund") Dividend
Reinvestment and Cash Purchase Plan (the "Plan"), each shareholder will be
deemed to have elected, unless the Fund's transfer agent, as the Plan Agent (the
"Plan Agent"), is otherwise instructed by the shareholder in writing, to have
all distributions, net of any applicable U.S. withholding tax, automatically
reinvested in additional shares of the Fund. Shareholders who do not participate
in the Plan will receive all dividends and distributions in cash, net of any
applicable U.S. withholding tax, paid in dollars by check mailed directly to the
shareholder by the Plan Agent, as dividend-paying agent. Shareholders who do not
wish to have dividends and distributions automatically reinvested should notify
the Plan Agent for the Fund at the address set forth below. Dividends and
distributions with respect to shares registered in the name of a broker-dealer
or other nominee (i.e. in "street name") will be reinvested under the Plan
unless such service is not provided by the broker or nominee or the shareholder
elects to receive dividends and distributions in cash. A shareholder whose
shares are held by a broker or nominee that does not provide a dividend
reinvestment program may be required to have his shares registered in his own
name to participate in the Plan. Investors who own shares of the Fund's common
stock registered in street name should contact the broker or nominee for details
concerning participation in the Plan.
Certain distributions of cash attributable to (a) some of the dividends and
interest amounts paid to the Fund and (b) certain capital gains earned by the
Fund that are derived from securities of certain emerging country issuers are
subject to taxes payable by the Fund at the time amounts are remitted. Such
taxes, if any, will be borne by the Fund and allocated to all shareholders in
proportion to their interests in the Fund.
The Plan Agent serves as agent for the shareholders in administering the Plan.
If the Board of Directors of the Fund declares an income dividend or a capital
gains distribution payable either in the Fund's common stock or in cash, as
shareholders may have elected, nonparticipants in the Plan will receive cash and
participants in the Plan will receive common stock to be issued by the Fund. If
the market price per share on the valuation date equals or exceeds net asset
value per share on that date, the Fund will issue new shares to participants
valued at net asset value or, if the net asset value is less than 95% of the
market price on the valuation date, then valued at 95% of the market price. If
net asset value per share on the valuation date exceeds the market price per
share on that date the Plan Agent, as agent for the participants, will purchase
shares of common stock on the open market, on the New York Stock Exchange or
elsewhere, for the participants' accounts. If, before the Plan Agent has
completed its purchases, the market price exceeds the net asset value per share,
the average per share purchase price paid by the Plan Agent may exceed the net
asset value per share, resulting in the acquisition of fewer shares than if the
dividend or distribution had been paid in shares issued by the Fund at net asset
value. If the market price exceeds the net asset value per share before the Plan
Agent has completed its purchases, the Plan Agent is permitted to cease
purchasing shares and the Fund may issue the remaining shares at a price equal
to the greater of (a) net asset value or (b) 95% of the then current market
price. In a case where the Plan Agent has terminated open market purchases and
the Fund has issued the remaining shares, the number of shares received by the
participant in respect of the cash dividend or distribution will be based on the
weighted average of prices paid for shares purchased in the open market and the
price at which the Fund issues remaining shares. The valuation date is the
dividend or distribution payment date or, if that date is not a New York Stock
Exchange trading day, the next preceding trading day. If the Fund should declare
an income dividend or capital gains distribution payable only in cash, the Plan
Agent will, as agent for the participants, buy Fund shares in the open market,
on the New York Stock Exchange or elsewhere, for the participants' accounts on,
or shortly after, the payment date.
Participants in the Plan have the option of making additional cash payments to
the Plan Agent, semiannually, in any amount from $100 to $3,000, for investment
in the Fund's common stock. The Plan Agent will use all funds received from
participants to purchase Fund shares in the open market on or about February 15
and August 15 of
20
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
- -------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUND'S DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN (CONTINUED)
each year. Any voluntary cash payments received more than 30 days prior to these
dates will be returned by the Plan Agent and interest will not be paid on any
uninvested cash payments. To avoid unnecessary cash accumulations, and also to
allow ample time for receipt and processing by the Plan Agent, it is suggested
that participants send in voluntary cash payments to be received by the Plan
Agent approximately 10 days before February 15 or August 15, as the case may be.
A participant may withdraw a voluntary cash payment by written notice, if the
notice is received by the Plan Agent not less than 48 hours before the payment
is to be invested. A participant's tax basis in his shares acquired through this
optional investment right will equal his cash payments to the Plan, including
any cash payments used to pay brokerage commissions allocable to his acquired
shares.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of the
participant and each shareholder's proxy will include those shares purchased
pursuant to the Plan.
In the case of a shareholder, such as a bank, broker or nominee, that holds
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are to participate in the
Plan.
There is no charge to participants for reinvesting dividends or capital gains
distributions payable in either shares or cash. The Plan Agent's fees for the
handling of reinvestment of such dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage charges with respect to shares
issued directly by the Fund as a result of dividends or capital gains
distributions payable either in stock or in cash. However, each participant will
be charged by the Plan Agent a pro rata share of brokerage commissions incurred
with respect to the Plan Agent's open market purchases in connection with
voluntary cash payments made by the participant or the reinvestment of dividends
or capital gains distributions payable only in cash. Brokerage charges for
purchasing small amounts of stock for individual accounts through the Plan are
expected to be less than the usual brokerage charges for such transactions
because the Plan Agent will be purchasing stock for all participants in blocks
and prorating the lower commission thus obtainable. Brokerage commissions will
vary based on, among other things, the broker selected to effect a particular
purchase and the number of participants on whose behalf such purchase is being
made. The Fund cannot predict, therefore, whether the cost to a participant who
makes a voluntary cash payment will be less than if a participant were to make
an open market purchase of the Fund's common stock on his own behalf.
The receipt of dividends and distributions in the stock under the Plan will not
relieve participants of any income tax (including withholding tax) that may be
payable on such dividends or distributions.
Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to notice of the termination sent to the members of the Plan at
least 30 days before the semiannual contribution date, in the case of voluntary
cash payments, or the record date for dividends or
distributions. The Plan also may be amended by the Fund or the Plan Agent, but
(except when necessary or appropriate to comply with applicable law, rules or
policies of a regulatory authority) only by at least 30 days' written notice to
members of the Plan. All correspondence concerning the Plan should be directed
as follows: Inquiries before September 5, 1995 should be directed to PNC Bank,
National Association, c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware
19809 or by telephone at 1-800-852-4750. Inquiries on or after September 5,
1995, should be directed to Bank of Boston, Investor Relations Department, P.O.
Box 644, Mail Stop 45-02-09, Boston, Massachusetts 02102-0644 or by telephone at
1-800-730-6001.
21
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
THE EMERGING MARKETS
BEA Associates
----------------------------
New York, New York
INFRASTRUCTURE
-------------------
FUND, INC.
U.S. ADMINISTRATOR
-----------
Bear Stearns Funds Management Inc.
New York, New York
TRANSFER AGENT AND REGISTRAR
PNC Bank, N.A.
Philadelphia, Pennsylvania
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
THE EMERGING MARKETS
This report, including the financial statements herein, is sent to the
INFRASTRUCTURE FUND, INC.
shareholders of the Fund for their information. The financial information
included herein is taken from the records of the Fund without SEMI-ANNUAL REPORT
examination by independent accountants who do not express an opinion MAY 31,
1995
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 (UNAUDITED)
mentioned in this report.
