<PAGE>
As filed with the Securities and Exchange Commission
on September 1, 2000
Securities Act File No. 333-43064
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. /2/
Post-Effective Amendment No. / /
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
(Exact Name of Registrant as Specified in Charter)
466 Lexington Avenue, 16th Floor, New York, New York 10017
(Address of Principal Executive Offices: Number,
Street, City, State, Zip Code)
(212) 875-3500
(Registrant's Area Code and Telephone Number)
-------------
Hal Liebes, Esq., Senior Vice President
The Emerging Markets Infrastructure Fund, Inc.
466 Lexington Avenue, 16th Floor
New York, New York 10017
(Name and Address of Agent for Service)
with copies to:
Daniel Schloendorn, Esq.
Rose F. DiMartino, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
<PAGE>
Approximate Date of Proposed Public Offering:
As soon as practicable after
this Registration Statement becomes effective
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
==================================================================================================================
TITLE OF PROPOSED PROPOSED
SECURITIES MAXIMUM MAXIMUM AMOUNT OF
BEING AMOUNT BEING OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(2)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ($0.001
par value) $9,730,047 $11.49 $111,860,512.33 $29,531.18
------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended,
based on the average of the high and low sales prices reported on the New
York Stock Exchange on July 28, 2000.
(2) Previously paid.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
Cover Sheet
Contents of Registration Statement
Form N-14 Cross Reference Sheet
Letter to Shareholders of The Emerging Markets Infrastructure Fund, Inc.
Letter to Shareholders of The Emerging Markets Telecommunications Fund, Inc.
Notice of Annual Meeting of Shareholders of The Emerging Markets Infrastructure
Fund, Inc.
Notice of Special Meeting of Shareholders of The Emerging Markets
Telecommunications Fund, Inc.
Part A - Proxy Statement/Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<S><C>
PART A ITEM NO. AND CAPTION PROXY STATEMENT/PROSPECTUS CAPTION
1. Beginning of Registration Statement and Outside Cover Page
Front Cover Page of Prospectus
2. Beginning and Outside Back Cover Page of Cover Page; Table of Contents
Prospectus Contents
3. Fee Table, Synopsis Information, and Risk Factors Synopsis; Risk Factors and Special Considerations;
Comparison of Investment Objectives and Policies
4. Information about the Transactions Synopsis - The Proposed Merger; Information about the
Merger; Additional Information about the Funds
5. Information about the Registrant Synopsis; Risk Factors and Special Considerations;
Comparison of Investment Objectives and Policies;
Additional Information about the Funds
6. Information about the Company Being Acquired Synopsis; Risk Factors and Special Considerations;
Comparison of Investment Objectives and Policies;
Additional Information about the Funds
7. Voting Information Notice of Meeting of Shareholders; General; Required Vote
8. Interest of Certain Persons and Experts Additional Information about the Funds
9. Additional Information Required for Reoffering by (Not Applicable)
Persons Deemed to be Underwriters
<CAPTION>
PART B ITEM NO. AND CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. Additional Information about the Registrant Comparison of Risk Factors and Special Considerations
(in Part A); Comparison of Investment Objectives and
Policies (in Part A); Additional Information about the
Funds (in Part A); Tax Considerations
13. Additional Information about the Company Being Comparison of Risk Factors and Special Considerations
Acquired (in Part A); Comparison of Investment Objectives and
Policies; Additional Information about the Funds (in
Part A); Tax Considerations
14. Financial Statements Financial Statements
PART C
15 - 17 Information required to be included in Part C is set
forth under the appropriate Item, so numbered, in Part C
of this Registration Statement.
</TABLE>
<PAGE>
PART A
INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
466 LEXINGTON AVENUE, 16TH FLOOR
NEW YORK, NEW YORK 10017
September 1, 2000
Dear Shareholder:
We are pleased to invite you to a special meeting of shareholders of The
Emerging Markets Infrastructure Fund, Inc., a Maryland corporation. The Emerging
Markets Infrastructure Fund, Inc. is sometimes referred to as "EMG" or the
"Fund."
The special meeting is scheduled to be held at 2:00 p.m., Eastern time, on
Tuesday, October 10, 2000, at the offices of Credit Suisse Asset Management,
LLC, 466 Lexington Avenue, 16th Floor, New York, New York 10017. Shareholders
who are unable to attend this meeting are strongly encouraged to vote by proxy,
which is customary in corporate meetings of this kind. A Proxy Statement/
Prospectus regarding the meeting, a proxy card(s) for your vote at the meeting
and an envelope--postage prepaid--in which to return your proxy card are
enclosed. At the special meeting, you will be asked to vote on three matters.
First, you will be asked to vote on a Merger Agreement and Plan of
Reorganization, or the Merger Agreement, whereby The Emerging Markets
Telecommunications Fund, Inc., sometimes referred to as "ETF," will merge with
and into EMG in accordance with the Maryland General Corporation Law. As a
result of the merger and related proposals:
- each share of common stock of ETF will convert into an equivalent dollar
amount (to the nearest one ten-thousandth of one cent) of full shares of
common stock of EMG, based on the net asset value per share of each fund,
and
- EMG, which technically will be the surviving corporation in the merger,
will change its name to "The Emerging Markets Telecommunications Fund,
Inc." and, as described in greater detail below, will adopt ETF's
investment policies.
EMG will not issue any fractional shares to ETF shareholders. EMG will
purchase all fractional shares at the current net asset value of the shares and
remit the cash proceeds to former shareholders of ETF. The currently issued and
outstanding shares of EMG will remain issued and outstanding.
Second, you will be asked to approve a change to EMG's fundamental
investment policy to conform to that of ETF. Both ETF and EMG are closed-end,
non-diversified management investment companies listed on the New York Stock
Exchange that seek long-term capital appreciation by investing primarily in
emerging countries' securities. However, currently, EMG, under normal
conditions, invests at least 70% of its total assets in equity securities of
infrastructure companies in emerging countries, whereas ETF invests at least 65%
of its total assets in equity securities of telecommunications companies in
emerging countries. This proposal is conditional upon consummation of the
merger, and the merger is likewise conditional upon approval of this proposal.
The Board of Directors of EMG believes that combining the two funds will
benefit Fund shareholders by providing the potential for:
- economies of scale,
- greater investment flexibility,
- a lower operating expense ratio,
- improved diversification of portfolio equity holdings enabling the Fund to
mitigate risks, and
- enhanced market liquidity of the Fund's shares.
<PAGE>
Combining the two funds also permits the implementation of the self-tender
program that was recently announced which, subject to consummation of the
merger, contemplates future self-tenders of at least 15% of the combined fund's
outstanding shares on an annual basis commencing in 2001. The Board of Directors
believes that, absent this combination, the asset level of the Fund would not be
sufficient to implement these self-tenders and, at the same time, remain a
viable investment vehicle. The Board also believes that the proposed merger and
these self-tenders achieve a balance between providing shareholders with a
degree of liquidity while preserving the benefits of the closed-end structure.
The proposed merger and investment policies of the funds are described in more
detail in the combined Proxy Statement/Prospectus.
Third, you will be asked to approve a new investment advisory agreement with
Credit Suisse Asset Management, LLC, or CSAM. The new investment advisory
agreement will be substantially the same as the current investment advisory
agreement except for the following changes:
- the investment advisory fee will be based upon a percentage of the lower
of the average weekly stock price (market value) of the Fund's outstanding
shares or its average weekly net assets, and
- the fee percentage will be reduced from an annual rate of 1.30% of the
Fund's average weekly net assets to an annual rate of 1.25% of the first
$100 million of the Fund's average weekly market value or net assets
(whichever is lower), 1.125% of the next $100 million and 1.00% of amounts
over $200 million.
By basing the fee on the lower of the average weekly stock price (market
value) or average weekly net assets, the Fund is expected to:
- reduce investment advisory fees, thereby lowering its overall expense
ratio, and
- more closely align the interests of CSAM with shareholder interests which
are aimed at enhancing the Fund's market value.
CSAM, through a voluntary fee waiver, has agreed to base its current
investment advisory fee upon the lower of the average weekly stock price (market
value) of the Fund's outstanding shares or its average weekly net assets,
effective July 1, 2000. The new investment advisory agreement with CSAM will
take effect only upon the consummation of the merger.
THE BOARD OF DIRECTORS OF YOUR FUND BELIEVES THAT THE PROPOSED MERGER, THE
CHANGE IN FUNDAMENTAL INVESTMENT POLICY AND THE NEW INVESTMENT ADVISORY
AGREEMENT ARE IN THE BEST INTERESTS OF THE SHAREHOLDERS AND RECOMMENDS THAT YOU
READ THE ENCLOSED MATERIALS CAREFULLY AND THEN VOTE "FOR" PROPOSALS 1, 2, AND 3.
Please note that EMG intends to make a tender offer, or Tender Offer, to
acquire up to 50% of its shares of common stock at a price per share equal to
95% of EMG's net asset value per share as of the end of the tender offer period,
and prior to the consummation of the merger. The Tender Offer will not occur
unless the shareholders of both funds approve the Merger Agreement and all other
conditions to the consummation of the merger are satisfied or waived. A separate
shareholder vote on the Tender Offer is not required and is not being solicited.
An Offer to Purchase and a related Letter of Transmittal will be mailed to EMG
shareholders in the near future. The Tender Offer will only be made by these
materials. Shareholders are urged to read carefully these materials when they
are received as they will contain important information regarding the Tender
Offer. The offer to purchase shares will not be made to, and tenders pursuant to
the Offer to Purchase will not be accepted from, or on behalf of, shareholders
in any jurisdiction in which making or accepting the offer to purchase would
violate that jurisdiction's laws.
<PAGE>
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your signed proxy card(s) after a reasonable amount of time, you may receive a
telephone call from our proxy solicitor, Shareholder Communications Corporation,
reminding you to vote your shares.
Respectfully,
William W. Priest, Jr.
Chairman of the Board of Directors
YOU ARE URGED TO SIGN THE PROXY CARD(S) AND RETURN THE CARD(S) IN THE
POSTAGE-PAID ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
466 LEXINGTON AVENUE, 16TH FLOOR
NEW YORK, NEW YORK 10017
September 1, 2000
Dear Shareholder:
We are pleased to invite you to the annual meeting of shareholders of The
Emerging Markets Telecommunications Fund, Inc., a Maryland corporation. The
Emerging Markets Telecommunications Fund, Inc. is sometimes referred to as "ETF"
or the "Fund."
The annual meeting is scheduled to be held at 3:00 p.m., Eastern time, on
Tuesday, October 10, 2000, at the offices of Credit Suisse Asset Management,
LLC, 466 Lexington Avenue, 16th Floor, New York, New York 10017. Shareholders
who are unable to attend this meeting are strongly encouraged to vote by proxy,
which is customary in corporate meetings of this kind. A Proxy Statement/
Prospectus regarding the meeting, a proxy card(s) for your vote at the meeting
and an envelope--postage prepaid--in which to return your proxy card are
enclosed. At the annual meeting, you will be asked to vote on four matters.
First, you will be asked to vote on a Merger Agreement and Plan of
Reorganization, or the Merger Agreement, whereby ETF will merge with and into
The Emerging Markets Infrastructure Fund, Inc., sometimes referred to as "EMG"
or the "Surviving Fund," in accordance with the Maryland General Corporation
Law. As a result of the merger and related proposals:
- each share of common stock of ETF will convert into an equivalent dollar
amount (to the nearest one ten-thousandth of one cent) of full shares of
common stock of EMG, based on the net asset value per share of each fund,
and
- EMG, which technically will be the surviving corporation in the merger,
will change its name to "The Emerging Markets Telecommunications Fund,
Inc." and, as described in greater detail below, will adopt ETF's
investment policies.
EMG will not issue any fractional shares to ETF shareholders. EMG will
purchase all fractional shares at the current net asset value of the shares and
remit the cash proceeds to former ETF shareholders.
The currently issued and outstanding shares of EMG will remain issued and
outstanding.
Like ETF, EMG is a closed-end, non-diversified management investment company
listed on the New York Stock Exchange. Both funds seek long-term capital
appreciation by investing primarily in emerging countries' securities. While EMG
currently seeks this objective by investing primarily in equity securities of
infrastructure companies in emerging countries, ETF, under normal conditions,
invests at least 65% of its total assets in equity securities of
telecommunications companies in emerging countries. Shareholders of EMG are also
being asked to approve a change in EMG's fundamental investment policy to
conform to that of ETF. In addition, EMG's Board of Directors has agreed to
modify EMG's current non-fundamental investment policies (that is, those not
requiring shareholder approval) to conform to the non-fundamental investment
policies of ETF. All of the foregoing changes are conditional upon the
consummation of the merger, and the merger is likewise conditional upon approval
of the proposed change to EMG's fundamental investment policy.
The Board of Directors of ETF believes that combining the two funds will
benefit Fund shareholders by providing the potential for:
- economies of scale,
- greater investment flexibility,
- a lower operating expense ratio,
<PAGE>
- improved diversification of portfolio equity holdings enabling the
Surviving Fund to mitigate risks, and
- enhanced market liquidity of the Surviving Fund's shares.
Combining the two funds also permits implementation of the self-tender
program that was recently announced which, subject to consummation of the
merger, contemplates future self-tenders of at least 15% of the combined fund's
outstanding shares on an annual basis commencing in 2001. The Board of Directors
believes that, absent this combination, the asset level of the Fund would not be
sufficient to implement these self-tenders and, at the same time, remain a
viable investment vehicle. The Board also believes that the proposed merger and
these self-tenders achieve a balance between providing shareholders with a
degree of liquidity while preserving the benefits of the closed-end structure.
The proposed merger and the investment policies of the funds are described in
more detail in the combined Proxy Statement/Prospectus.
Second, you will be asked to elect two (2) management nominees standing for
re-election to ETF's Board of Directors, James J. Cattano and William W. Priest,
Jr.
Third, you will be asked to ratify the selection of PricewaterhouseCoopers
LLP as ETF's independent public accountants for the fiscal year ending May 31,
2001.
Fourth, you will be asked to vote upon a shareholder proposal requesting
that, within 60 days after passage of this proposal, ETF's Board of Directors
present for shareholder approval and support a program to permit ETF
shareholders to realize net asset value for their shares.
Please note that EMG intends to make a tender offer to acquire up to 50% of
its shares of common stock at a price per share equal to 95% of EMG's net asset
value per share as of the end of the tender offer period, and prior to the
consummation of the merger. This tender offer will not occur unless the
shareholders of both funds approve the Merger Agreement and all other conditions
to the consummation of the merger are satisfied or waived.
EMG shareholders are also being asked to approve a new investment advisory
agreement with Credit Suisse Asset Management, LLC, or CSAM. The new agreement
will be substantially the same as the current agreement except for the following
changes:
- the fee schedule under the agreement will be equal to that currently paid
by ETF, and
- the investment advisory fee paid to CSAM will be based upon the lower of
the average weekly stock price (market value) of the Surviving Fund's
outstanding shares or its average weekly net assets.
By basing the fee on the lower of the average weekly stock price (market
value) or average weekly net assets, the Surviving Fund is expected to:
- reduce investment advisory fees, thereby lowering its overall expense
ratio, and
- more closely align the interests of CSAM with the interests of the
Surviving Fund shareholders which are aimed at enhancing the Surviving
Fund's market value.
The new investment advisory agreement with CSAM will take effect only upon
the consummation of the merger. Proposals 2 and 3 will become effective only if
the merger does not occur. If Proposal 4 is approved by the shareholders and the
merger is consummated, EMG's board will treat this proposal as applicable to the
Surviving Fund.
If the Merger Agreement is approved and concluded, as shareholders of the
Surviving Fund you will benefit from the advisory fee structure changes. You are
not being asked to vote separately on this matter.
<PAGE>
THE BOARD OF DIRECTORS OF YOUR FUND BELIEVES THAT THE PROPOSED MERGER, THE
RE-ELECTION OF THE TWO DIRECTORS AND THE RATIFICATION OF THE INDEPENDENT PUBLIC
ACCOUNTANTS ARE IN THE BEST INTERESTS OF THE SHAREHOLDERS AND RECOMMENDS THAT
YOU READ THE ENCLOSED MATERIALS CAREFULLY AND THEN VOTE "FOR" PROPOSALS 1, 2 AND
3. THE BOARD OF DIRECTORS BELIEVES THAT THE SHAREHOLDER PROPOSAL IS NOT IN THE
BEST INTERESTS OF THE SHAREHOLDERS AND RECOMMENDS THAT YOU VOTE "AGAINST"
PROPOSAL 4.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your signed proxy card(s) after a reasonable amount of time, you may receive a
telephone call from our proxy solicitor, Shareholder Communications Corporation,
reminding you to vote your shares.
Respectfully,
William W. Priest, Jr.
Chairman of the Board of Directors
YOU ARE URGED TO SIGN THE PROXY CARD(S) AND RETURN THE CARD(S) IN THE
POSTAGE-PAID ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of The Emerging Markets Infrastructure Fund, Inc.:
Please take notice that a special meeting of shareholders of The Emerging
Markets Infrastructure Fund, Inc. (sometimes referred to as "EMG"), a Maryland
corporation, will be held at the offices of Credit Suisse Asset Management, LLC,
466 Lexington Avenue, 16th Floor, New York, New York 10017, on Tuesday,
October 10, 2000, at 2:00 p.m., Eastern time, for the following purposes:
1. To consider and vote upon the approval of a Merger Agreement and Plan of
Reorganization dated as of July 31, 2000 whereby The Emerging Markets
Telecommunications Fund, Inc. (sometimes referred to as "ETF"), a Maryland
corporation, will merge with and into EMG in accordance with the Maryland
General Corporation Law;
2. To consider and vote upon the approval of a change in EMG's fundamental
investment policy from investing generally in equity securities of
infrastructure companies in emerging countries to investing, under normal
conditions, at least 65% of its total assets in equity securities of
telecommunications companies in emerging markets; and
3. To consider and vote upon the approval of a new investment advisory
agreement with Credit Suisse Asset Management, LLC.
The appointed proxies will vote in their discretion on any other business
that may properly come before the special meeting or any adjournments thereof.
Holders of record of shares of common stock of EMG at the close of business
on August 28, 2000 are entitled to vote at the special meeting and at any
postponements or adjournments thereof. ETF shareholders must approve the merger
as well.
The persons named as proxies may propose one or more adjournments of the
special meeting if the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the meeting. Any
such adjournment will require the affirmative vote of the holders of a majority
of EMG's shares present in person or by proxy at the special meeting. The
persons named as proxies will vote those proxies which they are entitled to vote
on any such proposal in accordance with their best judgment in the interest of
EMG.
The enclosed proxy is being solicited on behalf of the Board of Directors of
EMG.
By Order of the Board of Directors,
Michael A. Pignataro, Chief Financial Officer and Secretary
September 1, 2000
IMPORTANT--WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN
THE CARD(S) IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS
INTENDED FOR YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S)
MAY SAVE THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM
AT THE MEETING. IF YOU CAN ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES IN
PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of The Emerging Markets Telecommunications Fund, Inc.:
Please take notice that the annual meeting of shareholders of The Emerging
Markets Telecommunications Fund, Inc. (sometimes referred to as "ETF"), a
Maryland corporation, will be held at the offices of Credit Suisse Asset
Management, LLC, 466 Lexington Avenue, 16th Floor, New York, New York 10017, on
Tuesday, October 10, 2000, at 3:00 p.m., Eastern time, for the following
purposes:
1. To consider and vote upon the approval of a Merger Agreement and Plan of
Reorganization dated as of July 31, 2000 whereby ETF will merge with and
into The Emerging Markets Infrastructure Fund, Inc. (sometimes referred to
as "EMG"), a Maryland corporation, in accordance with the Maryland General
Corporation Law;
2. To consider and vote upon the election of two management nominees standing
for re-election to ETF's Board of Directors, James J. Cattano and
William W. Priest, Jr.;
3. To consider and vote upon the ratification of the selection of
PricewaterhouseCoopers LLP as ETF's independent public accountants; and
4. To consider and vote upon a shareholder proposal requesting that ETF's Board
of Directors present a program for shareholder approval to permit ETF
shareholders to realize net asset value for their shares.
The appointed proxies will vote in their discretion on any other business
that may properly come before the annual meeting or any adjournments thereof.
Holders of record of shares of common stock of ETF at the close of business
on August 28, 2000 are entitled to vote at the annual meeting and at any
postponements or adjournments thereof. EMG shareholders must approve the merger
as well.
The persons named as proxies may propose one or more adjournments of the
annual meeting if the necessary quorum to transact business or the vote required
to approve or reject any proposal is not obtained at the meeting. Any such
adjournment will require the affirmative vote of the holders of a majority of
ETF's shares present in person or by proxy at the annual meeting. The persons
named as proxies will vote those proxies which they are entitled to vote on any
such proposal in accordance with their best judgment in the interest of ETF.
The enclosed proxy is being solicited on behalf of the Board of Directors of
ETF.
By Order of the Board of Directors,
Michael A. Pignataro, Chief Financial Officer and Secretary
September 1, 2000
IMPORTANT--WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN
THE CARD(S) IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS
INTENDED FOR YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S)
MAY SAVE THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM
AT THE MEETING. IF YOU CAN ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES IN
PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE>
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
466 LEXINGTON AVENUE, 16TH FLOOR
NEW YORK, NEW YORK 10017
(212) 875-3500
TO BE MERGED WITH AND INTO
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
466 LEXINGTON AVENUE, 16TH FLOOR
NEW YORK, NEW YORK 10017
(212) 875-3500
PROXY STATEMENT
MEETINGS OF SHAREHOLDERS
TO BE HELD OCTOBER 10, 2000
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC. PROSPECTUS
This Proxy Statement/Prospectus is being furnished to shareholders of The
Emerging Markets Telecommunications Fund and The Emerging Markets Infrastructure
Fund for use at a special meeting of shareholders of The Emerging Markets
Infrastructure Fund and at the annual meeting of shareholders of The Emerging
Markets Telecommunications Fund to be held on Tuesday, October 10, 2000 at 2:00
p.m., Eastern time, with respect to The Emerging Markets Infrastructure Fund,
and at 3:00 p.m., Eastern time, with respect to The Emerging Markets
Telecommunications Fund, and at any and all postponements or adjournments
thereof. The meeting of shareholders of each Fund will be held at the offices of
Credit Suisse Asset Management, LLC, 466 Lexington Avenue, 16th Floor, New York,
New York 10017. The Emerging Markets Telecommunications Fund is sometimes
referred to in this Proxy Statement/Prospectus as "ETF," The Emerging Markets
Infrastructure Fund is sometimes referred to in this Proxy Statement/Prospectus
as "EMG" or, following consummation of the merger, as the "Surviving Fund," and
ETF and EMG are sometimes collectively referred to as the "Funds" and
individually, as the context may require, as the "Fund." The approximate mailing
date of this Proxy Statement/Prospectus is September 7, 2000.
PURPOSE OF THE MEETINGS. At each of the meetings, shareholders of the Funds
will be asked to approve a Merger Agreement and Plan of Reorganization dated as
of July 31, 2000, whereby ETF will merge with and into EMG, in accordance with
the Maryland General Corporation Law. The Merger Agreement and Plan of
Reorganization is referred to in this Proxy Statement/Prospectus as the "Plan."
In addition:
- EMG's shareholders are being asked to approve changes in EMG's fundamental
investment policy to conform to that of ETF and a new investment advisory
agreement with Credit Suisse Asset Management LLC, referred to in this
Proxy Statement/Prospectus as "CSAM", and
- ETF's shareholders are being asked to vote on the election of two
directors, the ratification of the selection of ETF's independent public
accountants and a shareholder proposal requesting that ETF's Board of
Directors present a program for shareholder approval to permit ETF
shareholders to realize net asset value for their shares.
While in order to achieve the desired tax treatment for the merger, EMG
technically will be the surviving legal entity, the proposals being presented to
EMG shareholders are designed so that, if approved, the Surviving Fund will
operate in all substantive respects as ETF currently operates.
SPECIFICS OF THE PROPOSED MERGER. As a result of the merger:
- each share of common stock of ETF will convert into an equivalent dollar
amount (to the nearest one ten-thousandth of one cent) of full shares of
common stock of the Surviving Fund, based on the net asset value per share
of each Fund, and
<PAGE>
- EMG, which technically will be the surviving corporation in the merger,
will change its name to "The Emerging Markets Telecommunications Fund,
Inc." and, as described in greater detail below, will adopt ETF's
investment policies.
Each ETF shareholder, in connection with the merger, will receive full
shares of the Surviving Fund having an aggregate net asset value (disregarding
fractional shares) equal to the aggregate net asset value of the shareholder's
ETF shares before the merger.
The Surviving Fund will not issue any fractional shares to ETF shareholders.
In lieu thereof, the Surviving Fund will purchase all fractional shares at the
current net asset value of the shares and remit the cash proceeds to former ETF
shareholders in proportion to their fractional shares. The currently issued and
outstanding shares of EMG will remain issued and outstanding. ETF shareholders
will recognize no gain or loss for federal income tax purposes as a result of
the merger, except with respect to any cash proceeds received from the purchase
of fractional shares of the Surviving Fund. These shareholders will be treated
for federal income tax purposes as if they received fractional share interests
and then sold such interests for cash.
CHANGE IN INVESTMENT POLICIES. EMG currently invests at least 70% of its
total assets in equity securities of infrastructure companies in emerging
countries. Shareholders of EMG are also being asked to approve a change in EMG's
fundamental investment policy to conform to ETF's current fundamental investment
policy, requiring EMG, under normal conditions, to invest at least 65% of its
total assets in equity securities of telecommunications companies in emerging
markets. In addition, EMG's Board of Directors has agreed to modify EMG's
current non-fundamental investment policies (that is, those not requiring
shareholder approval to modify) to conform to the non-fundamental investment
policies of ETF, all of which are more fully described in this Proxy
Statement/Prospectus. EMG's name will change to "The Emerging Markets
Telecommunications Fund, Inc." on the Effective Date (as defined below).
NEW INVESTMENT ADVISORY AGREEMENTS. Shareholders of EMG are also being
asked to approve a new investment advisory agreement with EMG's investment
adviser, CSAM. The new agreement will be substantially the same as the current
agreements except for the following changes:
- the fee schedule under the agreement will be equal to that currently paid
by ETF, and
- the investment advisory fee will be based upon the lower of the average
weekly stock price (market value) of the Surviving Fund's outstanding
shares or its average weekly net assets.
The new investment advisory agreement with CSAM, which is more fully
described in this Proxy Statement/Prospectus, will take effect only upon the
consummation of the merger.
EMG TENDER OFFER. The Board of Directors of EMG has determined that it is
in the best interests of that Fund to make a tender offer, which is referred to
in this Proxy Statement/Prospectus as the "Tender Offer," to acquire up to 50%
of its shares of common stock at a price per share equal to 95% of its net asset
value per share as of the end of the tender offer period. In reaching this
determination, the Board concluded that the Tender Offer would afford
shareholders seeking liquidity for their shares the opportunity to sell a
significant portion of their holdings at a price approximating net asset value,
while at the same time maintaining a sufficient asset level to preserve the
viability of the proposed merger with ETF. The Tender Offer will be conditioned
upon the approval of the Plan by the shareholders of both Funds and will not
occur unless these approvals are obtained and all other conditions to the
consummation of the merger are satisfied or waived. The Tender Offer will be
made pursuant to an Offer to Purchase that is being sent to the shareholders of
record of EMG on or about September 8, 2000. For more information about the
Tender Offer, see "Information About The Merger--History of The Emerging Markets
Infrastructure Fund's Discount."
2
<PAGE>
FUTURE TENDER OFFERS. The Board of Directors of EMG has approved the
overall terms of a self-tender program that the Surviving Fund intends to launch
in the calendar year 2001, which terms include the following: (i) the Surviving
Fund will make a tender offer to acquire at least 15% of its outstanding shares
during each calendar year of the program; and (ii) the per share purchase price
will be at least 95% of the Surviving Fund's net asset value per share. The
implementation of this program is conditioned on approval of the merger.
INFORMATION ABOUT THE FUNDS. Both ETF and EMG are closed-end,
non-diversified management investment companies listed on the New York Stock
Exchange. Both funds seek long-term capital appreciation by investing primarily
in securities of companies in emerging countries. While ETF generally invests in
equity securities of telecommunication companies in emerging countries, EMG
generally invests in equity securities of infrastructure companies in emerging
countries. In addition, ETF may invest in equity or debt securities of corporate
or government issuers in developed countries, and in certain short-term and
medium-term debt instruments. Upon consummation of the merger, the Surviving
Fund's fundamental investment policy will conform to that of ETF.
The terms and conditions of the merger and related transactions are more
fully described in this Proxy Statement/Prospectus and in the Plan, a copy of
which is attached as Exhibit A.
This Proxy Statement/Prospectus serves as a prospectus for shares of EMG
under the Securities Act of 1933, which is referred to in this Proxy
Statement/Prospectus as the "Securities Act," in connection with the issuance of
EMG common shares in the merger.
Assuming the shareholders of the Funds approve the merger and all other
conditions to the consummation of the merger have been satisfied or waived, the
Funds will jointly file articles of merger, or the Articles of Merger, with the
State Department of Assessments and Taxation of Maryland, or the Department. The
merger will become effective when the Department accepts for record the Articles
of Merger or at such later time, which may not exceed 30 days after the Articles
of Merger are accepted for record, as specified in the Articles of Merger. The
date when the Articles of Merger are accepted for record, or the later date, is
referred to in this Proxy Statement/Prospectus as the "Effective Date." ETF, as
soon as practicable after the Effective Date, will terminate its registration
under the Investment Company Act of 1940, which is referred to in this Proxy
Statement/Prospectus as the "Investment Company Act."
You should retain this Proxy Statement/Prospectus for future reference as it
sets forth concisely information about ETF and EMG that you should know before
voting on the proposals described below.
A Statement of Additional Information, which is referred to in this Proxy
Statement/Prospectus as the "SAI," dated September 1, 2000, which contains
additional information about the merger and the Funds has been filed with the
Securities and Exchange Commission, or SEC. The SAI, the financial statements of
ETF for the fiscal year ended May 31, 2000 and the financial statements of EMG
for the fiscal year ended November 30, 1999 and the unaudited financial
statements of EMG for the six months ended May 31, 2000, in each case included
in the respective annual and semi-annual reports to shareholders, are
incorporated by reference into this Proxy Statement/Prospectus. A copy of these
documents is available upon request, without charge by calling Shareholder
Communications Corporation, the Funds' proxy agent, at 1-(800) 403-7916. You
may also submit your request in writing to Shareholder Communications
Corporation, Attn: MF proxy, 17 State Street, New York, New York 10004. If you
should have any questions regarding the proxy material or how to execute your
vote, you can call Shareholder Communications Corporation at 1-(800) 403-7916.
ETF has provided the information included in this Proxy Statement/Prospectus
regarding that Fund. EMG has provided the information included in this Proxy
Statement/Prospectus regarding that Fund.
3
<PAGE>
ETF's shares of common stock currently are listed on the New York Stock
Exchange, or NYSE, under the symbol "ETF". EMG's shares of common stock
currently are listed on the NYSE under the symbol "EMG". After the Effective
Date, shares of common stock of the Surviving Fund will be listed on the NYSE
under the symbol "ETF". Reports, proxy materials and other information
concerning each Fund may be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
The SEC has not approved or disapproved these securities or determined if
this Proxy Statement/ Prospectus is truthful or complete. To state otherwise is
a crime.
The date of this Proxy Statement/Prospectus is September 1, 2000
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
GENERAL..................................................... 7
PROPOSAL 1 (BOTH FUNDS): APPROVAL OF THE MERGER AGREEMENT
AND PLAN OF REORGANIZATION PURSUANT TO WHICH THE EMERGING
MARKETS TELECOMMUNICATIONS FUND WILL MERGE WITH AND INTO THE
EMERGING MARKETS INFRASTRUCTURE FUND........................ 8
SYNOPSIS................................................ 10
EXPENSE TABLE........................................... 16
FINANCIAL HIGHLIGHTS.................................... 18
RISK FACTORS AND SPECIAL CONSIDERATIONS................. 21
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES........ 27
UNITED STATES FEDERAL INCOME TAXES...................... 34
INFORMATION ABOUT THE MERGER............................ 36
ADDITIONAL INFORMATION ABOUT THE FUNDS.................. 42
MANAGEMENT OF THE FUNDS................................. 49
EXPERTS................................................. 55
REQUIRED VOTE........................................... 55
LEGAL PROCEEDINGS....................................... 56
LEGAL OPINIONS.......................................... 56
PROPOSAL 2 (EMERGING MARKETS INFRASTRUCTURE FUND
SHAREHOLDERS ONLY): APPROVAL OF CHANGE IN FUNDAMENTAL
INVESTMENT POLICY........................................... 56
BACKGROUND.............................................. 56
BOARD CONSIDERATIONS; REASONS FOR CHANGE IN FUNDAMENTAL
INVESTMENT POLICY....................................... 57
REQUIRED SHAREHOLDER VOTE............................... 58
PROPOSAL 3 (EMERGING MARKETS INFRASTRUCTURE FUND
SHAREHOLDERS ONLY): APPROVAL OF NEW INVESTMENT ADVISORY
AGREEMENT................................................... 58
BACKGROUND.............................................. 58
BOARD RECOMMENDATION.................................... 58
BOARD CONSIDERATIONS; REASONS FOR THE NEW INVESTMENT
ADVISORY AGREEMENT...................................... 59
INFORMATION CONCERNING CREDIT SUISSE GROUP AND CSAM..... 59
DESCRIPTION OF CURRENT INVESTMENT ADVISORY AGREEMENT.... 59
THE NEW INVESTMENT ADVISORY AGREEMENT................... 60
DIFFERENCES BETWEEN THE CURRENT AND THE NEW INVESTMENT
ADVISORY AGREEMENT...................................... 61
REQUIRED SHAREHOLDER VOTE............................... 61
PROPOSAL 4 (EMERGING MARKETS TELECOMMUNICATIONS FUND
SHAREHOLDERS ONLY): RE-ELECTION OF DIRECTORS................ 61
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
BACKGROUND.............................................. 61
REQUIRED SHAREHOLDER VOTE............................... 63
PROPOSAL 5 (EMERGING MARKETS TELECOMMUNICATIONS FUND
SHAREHOLDERS ONLY): RATIFICATION OF SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS.......................................... 63
BACKGROUND.............................................. 63
REQUIRED SHAREHOLDER VOTE............................... 64
PROPOSAL 6 (EMERGING MARKETS TELECOMMUNICATIONS FUND
SHAREHOLDERS ONLY): SHAREHOLDER PROPOSAL REQUESTING THAT
ETF'S BOARD OF DIRECTORS PRESENT FOR SHAREHOLDER APPROVAL A
PROGRAM TO PERMIT ETF SHAREHOLDERS TO REALIZE NET ASSET
VALUE FOR THEIR SHARES...................................... 64
BACKGROUND.............................................. 64
SHAREHOLDER PROPOSAL.................................... 64
SUPPORTING STATEMENTS................................... 64
REQUIRED SHAREHOLDER VOTE............................... 65
OPPOSING STATEMENT OF THE BOARD OF DIRECTORS............ 65
ADDITIONAL INFORMATION...................................... 65
EXHIBIT A--FORM OF MERGER AGREEMENT AND PLAN OF
REORGANIZATION.............................................. A-1
EXHIBIT B--FORM OF NEW CSAM INVESTMENT ADVISORY AGREEMENT... B-1
</TABLE>
6
<PAGE>
GENERAL
This Proxy Statement/Prospectus is furnished to the shareholders of the
Funds in connection with the solicitation of proxies on behalf of the Boards of
Directors of ETF and EMG. The Board of Directors of each Fund is soliciting
proxies for use at the meetings. The mailing address for both Funds is 466
Lexington Avenue, 16th Floor, New York, New York 10017.
This Proxy Statement/Prospectus, the Notice of Meeting to Shareholders and
the proxy card(s) are first being mailed to shareholders on or about
September 7, 2000 or as soon as practicable thereafter. Any shareholder who
gives a proxy has the power to revoke the proxy either:
- by mail, addressed to the Secretary of the respective Fund, at the Fund's
mailing address, or
- in person at the special meeting
by executing a superseding proxy or by submitting a notice of revocation to the
respective Fund. All properly executed proxies received in time for the meetings
will be voted as specified in the proxy or, if no specification is made, in
favor of each proposal for that Fund referred to in the Proxy Statement/
Prospectus.
Shareholders of ETF and EMG will be asked to vote on the following
proposals:
<TABLE>
<CAPTION>
PROPOSAL TO BE VOTED UPON BY
-------- -------------------
<S> <C>
Proposal 1--Approval of the Plan....................... ETF and EMG Shareholders
Proposal 2--Approval of Change in EMG's Fundamental EMG Shareholders Only
Investment Policy....................................
Proposal 3--Approval of the New Investment Advisory EMG Shareholders Only
Agreement with CSAM..................................
Proposal 4--Re-Election of James J. Cattano and ETF Shareholders Only
William W. Priest, Jr. to ETF's Board of
Directors............................................
Proposal 5--Ratification of the Selection of ETF Shareholders Only
PricewaterhouseCoopers LLP as ETF's Independent
Public Accountants...................................
Proposal 6--Shareholder Proposal Requesting that ETF's ETF Shareholders Only
Board of Directors Present for Shareholder Approval a
Program to Permit ETF Shareholders to Realize Net
Asset Value for Their Shares.........................
</TABLE>
The presence, either in person or by proxy, of the holders of a majority of
the outstanding shares of common stock entitled to vote at a meeting of a Fund,
will constitute a quorum for the transaction of business by such Fund. For
purposes of determining the presence of a quorum for transacting business at a
meeting, abstentions and broker "non-votes" will be treated as shares that are
present. Broker non-votes are proxies received by a Fund from brokers or
nominees, indicating that the broker or nominee has neither received
instructions from the beneficial owner or other persons entitled to vote nor has
the discretionary power to vote on a particular matter. Shareholders are urged
to forward their voting instructions promptly.
Proposal 1 requires the affirmative vote of a majority of the outstanding
shares of common stock of each Fund.
Proposals 2 and 3 to be submitted at the special meeting of shareholders of
EMG requires the affirmative vote of a "majority of outstanding voting
securities" of EMG. A "majority of outstanding voting securities" is defined
under the Investment Company Act to mean the lesser of
7
<PAGE>
- 67% of the shares of a fund's common stock represented at a meeting at
which more than 50% of the outstanding shares of that fund's common stock
are represented, or
- more than 50% of the outstanding shares of common stock.
Proposal 4 to be submitted at the annual meeting of shareholders of ETF
requires the affirmative vote of a plurality of the votes cast at such meeting
in person or by proxy. Proposals 5 and 6 to be submitted at the annual meeting
of shareholders of ETF require the affirmative vote of a majority of the votes
cast at such meeting in person or by proxy.
Abstentions and broker non-votes will have the effect of a "no" vote for
each of Proposals 1, 2 and 3 and will have no effect on Proposals 4, 5 or 6.
Proxy solicitations will be made primarily by mail, but solicitations may
also be made by telephone, telegraph or personal interviews conducted by
officers or employees of the Funds, CSAM, the investment adviser to the Funds,
Bear Stearns Funds Management Inc., the U.S. administrator to the Funds, or
Shareholder Communications Corporation, a proxy solicitation firm retained by
each Fund and entitled to receive a fee of approximately $7,500 per Fund and
reimbursement for its reasonable expenses. The Funds will bear costs of
solicitation, including:
- printing and mailing of this Proxy Statement/Prospectus and accompanying
material,
- the reimbursement of brokerage firms and others for their expenses in
forwarding solicitation material to the beneficial owners of each Fund's
shares,
- payment to Shareholder Communications Corporation, for its services in
soliciting proxies, and
- supplementary solicitations to submit proxies.
Only shareholders of record of each Fund at the close of business on
August 28, 2000, the Record Date, are entitled to vote. An outstanding share of
each Fund is entitled to one vote on all matters voted upon at a meeting of the
shareholders of that Fund. As of August 28, 2000, there were 7,100,819 shares of
ETF outstanding, and 11,175,955 shares of EMG outstanding.
ETF and EMG provide periodic reports to all of their shareholders. These
reports highlight relevant information including investment results and a review
of portfolio changes for each Fund. You may receive a copy of the most recent
annual report for ETF or EMG and a copy of any more recent interim report,
without charge, by calling 1-(800) 403-7916 or writing to Shareholder
Communications Corporation, Attn: MF proxy, 17 State Street, New York, New York
10004.
The Boards of Directors of the Funds know of no business other than the
proposals described above which will be presented for consideration at the
meetings. If any other matter is properly presented, it is the intention of the
persons named in the enclosed proxy to vote on that matter in their discretion.
PROPOSAL 1 (BOTH FUNDS): APPROVAL OF THE MERGER AGREEMENT AND PLAN OF
REORGANIZATION PURSUANT TO WHICH THE EMERGING MARKETS TELECOMMUNICATIONS FUND
WILL MERGE WITH AND INTO THE EMERGING MARKETS INFRASTRUCTURE FUND
On July 24, 2000, the Boards of Directors of ETF and EMG, including a
majority of the directors of each Fund who are not "interested persons" of the
respective Fund, or the Non-interested Directors, unanimously:
- declared the merger of ETF with and into EMG advisable,
- approved entering into the Plan, and
8
<PAGE>
- recommended that the Plan be approved by the shareholders of each Fund.
For more information about the merger, see "Information About The Merger."
The Plan is subject to the approval of the shareholders of both Funds and
certain other conditions.
A copy of the Plan is attached to this Proxy Statement/Prospectus as Exhibit
A, and the description of the Plan included in this Prospectus/Proxy Statement
is qualified in its entirety by reference to Exhibit A.
The following provides a more detailed discussion about the Merger, each
Fund and additional information that you may find helpful in deciding how to
vote on the Plan.
9
<PAGE>
SYNOPSIS
This summary highlights important information included in this Proxy
Statement/Prospectus. This summary is qualified by reference to the more
complete information included elsewhere in this Proxy Statement/Prospectus and
the Plan. Shareholders of the Funds should read this entire Proxy Statement/
Prospectus carefully.
THE PROPOSED MERGER. The Boards of Directors of ETF and EMG, including the
Non-interested Directors of each Fund, have unanimously approved the Plan. The
Plan provides for the merger of ETF with and into EMG, referred to in this Proxy
Statement/Prospectus as the "Merger." If approved, the Merger is expected to be
consummated shortly after the completion of the Tender Offer. As a result of the
Merger:
- each share of common stock of ETF will convert into an equivalent dollar
amount (to the nearest one ten-thousandth of one cent) of full shares of
common stock of the Surviving Fund, based on the net asset value per share
of each Fund calculated at 4:00 pm on the Business Day (defined as any day
on which the NYSE is open for trading) preceding the Effective Date,
- each shareholder of ETF will become a shareholder of the Surviving Fund
and will receive, on the Effective Date, that number of full shares of
common stock of the Surviving Fund having an aggregate net asset value
equal to the aggregate net asset value of such shareholder's shares held
in ETF (disregarding fractional shares) as of the close of business on the
Business Day preceding the Effective Date,
- the Surviving Fund will not issue any fractional shares to ETF
shareholders. In lieu thereof, the Surviving Fund will purchase all
fractional shares at the current net asset value of the shares and remit
the cash proceeds to former shareholders of ETF in proportion to their
fractional shares, and
- EMG will change its name to "The Emerging Markets Telecommunications Fund,
Inc." and, as described in greater detail below, will adopt ETF's
investment policies.
The Board of Directors of EMG also has determined that it is in the best
interests of that Fund to make a Tender Offer to acquire up to 50% of its shares
of common stock at a price per share equal to 95% of its net asset value per
share as of the end of the Tender Offer period. The Tender Offer will be
conditioned upon the approval of the Plan by the shareholders of both Funds and
will not occur unless these approvals are obtained and all other conditions to
the consummation of the Merger are satisfied or waived. For more information
about the Tender Offer, see "Information About The Merger--History of the
Emerging Markets Infrastructure Fund's Discount."
In addition, the Board of Directors of EMG has approved a self-tender
program that the Fund intends to launch in the calendar year 2001. The basic
terms of the self-tender program include the following:
- the Surviving Fund will make a tender offer to acquire at least 15% of its
outstanding shares during each calendar year of the program, and
- the per share purchase price will be at least 95% of the Surviving Fund's
net asset value per share.
While the precise terms of any self-tender following the Merger have not
been fixed, the current expectation is that the self-tenders would not
substantially exceed 15% of the Surviving Fund's outstanding shares on an annual
basis. The implementation of this program is conditioned on the approval of the
Merger. For more information about this program, see "Additional Information
About The Funds--History of the Emerging Markets Infrastructure Fund's
Discount."
10
<PAGE>
For the reasons set forth below under "Information About The Merger--Reasons
for the Merger," the Boards of Directors of ETF and EMG, including the
Non-interested Directors of each Fund, have unanimously concluded that:
- the Merger is in the best interests of each respective Fund, and
- the interests of existing shareholders of each respective Fund will not be
diluted as a result of the transactions contemplated by the Plan.
Accordingly, the Board of Directors of each Fund recommends approval of the
Merger. If the Merger is not approved, each Fund will continue as a separate
investment company, and the Board of Directors of each Fund will consider such
other alternatives as it determines to be in the best interests of its
shareholders.
The Merger is subject to the receipt of regulatory approvals. These
approvals have been requested, although there can be no assurance when or if
they will be obtained.
FORM OF ORGANIZATION. Both Funds are closed-end, non-diversified management
investment companies registered under the Investment Company Act. ETF was
organized as a Maryland corporation in 1992 and EMG was organized as a Maryland
corporation in 1993. Each Fund's Board of Directors is responsible for the
management of the business and affairs of each Fund, including the supervision
of the duties performed by each Fund's investment manager.
INVESTMENT OBJECTIVES AND POLICIES. The following table highlights the
differences between the Funds' investment objectives and policies.
<TABLE>
<CAPTION>
INVESTMENT OBJECTIVES AND POLICIES ETF EMG
---------------------------------- --- ---
<S> <C> <C>
Fundamental Investment Objective(1) To seek long-term capital To seek long-term capital
appreciation by investing appreciation by investing
primarily in equity securities primarily in equity securities
of companies in emerging of companies in emerging
markets markets
Fundamental Investment Policy(1) Investment of at least 65% of Investment of at least 70% of
its total assets in equity its total assets in equity
securities of securities of infrastructure
telecommunications companies companies in emerging countries
in emerging countries
Investment in unlisted equity securities Up to 25% of its assets Up to 30% of its assets
including investments in new and early
stage companies(2)
Investment in corporate or government To the extent not invested as Not applicable
debt securities of emerging market indicated above
issuers(2)
</TABLE>
------------------
(1) The fundamental investment objectives and policies listed above can only
be changed with the approval of the holders of a majority of each Fund's
outstanding voting securities, as defined under the Investment Company Act.
(2) These investment policies are not fundamental and may be modified by the
Board of Directors of each Fund if, in the reasonable exercise of its
business judgment, the Board determines that modification is necessary or
appropriate to carry out the Fund's investment objective.
On July 24, 2000, EMG's Board of Directors approved the adoption of ETF's
investment policies, subject to the consummation of the Merger and approval by
EMG's shareholders of Proposal 2.
11
<PAGE>
The preceding summary of the Funds' investment objectives and certain
policies should be considered in conjunction with the discussion below under
"Risk Factors and Special Considerations" and "Comparison of Investment
Objectives and Policies." EMG, by investing in the securities of infrastructure
companies, is subject to certain risks unique to EMG, as is ETF by virtue of its
investments in telecommunications companies, in addition to the risks to which
both Funds are subject as a consequence of investing in emerging countries. For
more information, see "Risk Factors and Special Considerations."
FEES AND EXPENSES--THE EMERGING MARKETS TELECOMMUNICATIONS FUND.
OVERVIEW. The following table summarizes certain information with respect
to advisory, administrative and accounting fees payable by ETF:
<TABLE>
U.S. BRAZILIAN CHILEAN
CONTRACTUAL ADMINISTRATION FEE ADMINISTRATION FEE ADMINISTRATION FEE
ANNUAL ADVISORY FEE PAID TO BEAR STEARNS PAYABLE TO FLEET PAYABLE TO CELFIN
PAYABLE TO CSAM FUNDS MANAGEMENT (EXPRESSED AS A (EXPRESSED AS A REIMBURSEMENTS BY
(EXPRESSED AS A INC. (EXPRESSED AS A PERCENTAGE OF AVERAGE PERCENTAGE OF AVERAGE ETF TO CSAM FOR
PERCENTAGE OF AVERAGE PERCENTAGE OF AVERAGE MONTH-END BRAZILIAN WEEKLY NET ASSETS ADMINISTRATIVE
WEEKLY NET ASSETS) WEEKLY NET ASSETS) NET ASSETS) INVESTED IN CHILE) SERVICES
<S> <C> <C> <C> <C>
1.25% of the first 0.12% 0.10% 0.10% Up to $20,000 per
$100 million; year
1.125% of the next
$100 million; and
1.00% in excess of
$200 million
</TABLE>
ADVISER. CSAM, formerly known as BEA Associates, serves as ETF's investment
adviser. As compensation for its advisory services, CSAM is contractually
entitled to receive from ETF 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 of the Fund's average weekly net assets,
and
- 1.00% of the Fund's average weekly net assets in excess of $200 million.
For the fiscal year ended May 31, 2000, CSAM earned $1,542,224 for advisory
services. CSAM also provides certain administrative services to the Fund and is
reimbursed by the Fund for costs incurred on behalf of the Fund (up to $20,000
per annum). For the fiscal year ended May 31, 2000, CSAM was reimbursed $14,040
for administrative services rendered to the Fund.
ETF's Board of Directors recently approved a proposal by CSAM to base the
investment advisory fees on the lower of the average weekly market value of the
Fund's outstanding shares or the Fund's average weekly net asset value. This new
fee structure became effective on July 1, 2000 through a voluntary fee waiver by
CSAM. If the Merger does not occur, ETF's Board of Directors intends to submit a
new investment advisory agreement, reflecting this change in fee calculation, at
the next shareholders' meeting. For information regarding submission of a new
investment advisory agreement containing a similar new fee structure applicable
to the Surviving Fund, see "Proposal 3 (Emerging Markets Infrastructure Fund
Shareholders Only): Approval of New Investment Advisory Agreement."
ADMINISTRATORS. Bear Stearns Funds Management Inc., or BSFM, serves as
ETF's U.S. administrator. The Fund pays BSFM a monthly fee for its services.
This fee is computed weekly at an annual rate of 0.12% of the Fund's average
weekly net assets. For the fiscal year ended May 31, 2000, BSFM earned $151,157
for administrative services.
12
<PAGE>
Fleet National Bank, or Fleet, and CELFIN Administradora de Fondos de
Inversion de Capital Extranjero S.A., or Celfin, serve as ETF's Brazilian and
Chilean administrators, respectively. For the fiscal year ended May 31, 2000,
Celfin earned $54,670 for administration services. Fleet was paid its fee out of
the custody fee payable to Brown Brothers Harriman & Co., ETF's accounting agent
and custodian.
For the fiscal year ended May 31, 2000, ETF's total expense ratio was 2.24%.
The Fund's total expense ratio is the ratio of total annual operating expenses
to average net assets, including taxes.
FEES AND EXPENSES--THE EMERGING MARKETS INFRASTRUCTURE FUND.
OVERVIEW. The following table summarizes certain information with respect
to advisory, administrative and accounting fees payable by EMG:
<TABLE>
U.S. BRAZILIAN CHILEAN
CONTRACTUAL ADMINISTRATION FEE ADMINISTRATION FEE ADMINISTRATION FEE
ANNUAL ADVISORY FEE PAID TO BEAR STEARNS PAYABLE TO FLEET PAYABLE TO CELFIN
PAYABLE TO CSAM FUNDS MANAGEMENT (EXPRESSED AS A (EXPRESSED AS A REIMBURSEMENTS BY
(EXPRESSED AS A INC. (EXPRESSED AS A PERCENTAGE OF AVERAGE PERCENTAGE OF AVERAGE EMG TO CSAM FOR
PERCENTAGE OF AVERAGE PERCENTAGE OF AVERAGE MONTH-END BRAZILIAN WEEKLY NET ASSETS ADMINISTRATIVE
WEEKLY NET ASSETS) WEEKLY NET ASSETS) NET ASSETS) INVESTED IN CHILE) SERVICES
<S> <C> <C> <C> <C>
1.30% 0.12% 0.10% 0.10% Up to $20,000 per
year
</TABLE>
ADVISER. CSAM also serves as EMG's investment adviser. As compensation for
its advisory services, CSAM is contractually entitled to receive 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 fiscal year ended November 30, 1999, CSAM earned $1,922,776 for
advisory services. CSAM also provides certain administrative services to the
Fund and is reimbursed by the Fund for costs incurred on behalf of the Fund (up
to $20,000 per annum). For the fiscal year ended November 30, 1999, the Fund
reimbursed CSAM $19,998 for administrative services rendered to the Fund.
On July 24, 2000, EMG's Board of Directors approved a new investment
advisory agreement with CSAM, subject to shareholder approval and consummation
of the Merger. The new investment advisory agreement with CSAM will be
substantially similar to the Fund's current investment advisory agreement except
for the following changes:
- the investment advisory fee will be based upon a percentage of the lower
of the average weekly stock price (market value) of the Fund's outstanding
shares or its average weekly net assets; and
- the fee percentage will be equal to an annual rate of 1.25% of the first
$100 million of the Fund's average weekly market value or net assets
(whichever is lower), 1.125% of the next $100 million and 1.00% of amounts
over $200 million.
CSAM, through a voluntary fee waiver, has agreed to base its current
investment advisory fee upon the lower of the average weekly stock price (market
value) of the Fund's outstanding shares or its average weekly net assets
effective July 1, 2000. If the Merger does not occur, EMG's Board of Directors
intends to submit a new investment advisory agreement, reflecting this new fee
calculation, at the next shareholders' meeting. For more information about the
new investment advisory agreement, see "Proposal 3 (Emerging Markets
Infrastructure Fund Shareholders Only): Approval of New Investment Advisory
Agreement."
ADMINISTRATORS. BSFM also serves as EMG'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 fiscal year ended November 30, 1999,
BSFM earned $177,488 for administrative services.
13
<PAGE>
Fleet and Celfin also serve as EMG's Brazilian and Chilean administrators,
respectively. For the fiscal year ended November 30, 1999, Celfin earned $64,999
for administrative services. Fleet was paid its fee out of the custody fee
payable to Brown Brothers Harriman & Co., EMG's accounting agent and custodian.
For the fiscal year ended November 30, 1999, EMG's total expense ratio was
2.33%, and is currently 2.45% based on the operating expenses for the first six
months of fiscal 2000. The Fund's total expense ratio is the ratio of total
annual operating expenses to the average net assets, including taxes.
The expense ratio of the Surviving Fund is projected to be approximately
1.71% after giving effect to the Merger and assuming that the new investment
advisory agreement is approved and the Tender Offer for up to 50% of EMG's
outstanding shares is fully subscribed. The actual expense ratios for the
Surviving Fund for the current and future fiscal years, if the Merger occurs,
may be higher or lower than this projection and depend upon the Surviving Fund's
performance, general stock market and economic conditions, net asset levels,
stock price and other factors.
See "Expense Table" below for the current expenses of each Fund and pro
forma expenses following the Merger.
UNREALIZED CAPITAL GAINS/LOSSES. As of May 31, 2000, ETF had approximately
$7,677,708 of unrealized capital gains, representing approximately 5.89% of its
net assets. As of that same date, EMG had approximately $380,968 of unrealized
capital losses, representing approximately 0.25% of its net assets. As of May
31, 2000, ETF had no capital loss carryforwards, while EMG had approximately
$48,668,543 of capital loss carryforwards as of November 30, 1999.
Both Funds will pay their shareholders a cash distribution of substantially
all undistributed 2000 net investment income prior to the Effective Date unless
such amounts are immaterial. It is expected that any undistributed realized net
capital gains, including any that EMG may realize as a result of disposing of
portfolio securities to raise funds to finance the Tender Offer, will be offset
through the utilization of capital loss carryforwards prior to the Effective
Date.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. As a condition to the
closing of the Merger, both Funds will receive an opinion of Willkie Farr &
Gallagher, counsel to the Funds and CSAM, stating that the Merger will
constitute a tax-free reorganization within the meaning of Section 368(a)(1) of
the Internal Revenue Code of 1986, or the Code. Accordingly, neither EMG, ETF
nor the shareholders of either Fund will recognize any gain or loss for federal
income tax purposes as a result of the Merger, except with respect to the
shareholders of ETF who receive cash proceeds from the purchase of fractional
share interests by the Surviving Fund. These shareholders will be treated for
federal income tax purposes as if they received such fractional share interests
and then sold such interests for cash. The holding period and the aggregate tax
basis of EMG shares (including fractional share interests purchased by the
Surviving Fund) received by an ETF shareholder will be the same as the holding
period and aggregate tax basis of the shares of ETF previously held by the
shareholder. The holding period and the aggregate tax basis of the assets
received by EMG in the Merger will be the same as the holding period and the tax
basis of such assets in the hands of ETF immediately before the Merger. For more
information about the tax consequences of the Merger, see "Information About The
Merger--Tax Considerations."
DISCOUNT FROM NET ASSET VALUE. Shares of closed-end funds frequently trade
at a market price that is less than the value of the fund's net assets. The
possibility that shares of the Surviving Fund will trade at a discount from its
net asset value is a risk separate and distinct from the risk that the Fund's
net asset value will decrease. Except for limited periods of time, EMG's shares
have traded in the market at a discount, and, as of May 15, 2000, the last
trading day immediately before the announcement of the Tender Offer, and
August 25, 2000, traded at a market price discount of 21.26%
14
<PAGE>
and 14.46%, respectively. Similarly, ETF shares have traded in the market at a
discount and, as of those same dates, traded at a market price discount of
22.17% and 20.77%, respectively.
RECENT DISPARITY IN ETF AND EMG DISCOUNT LEVELS. Recently, EMG's market
discount has narrowed substantially. Management believes that this narrowing is
largely attributable to market activity following the announcement of the 50%
Tender Offer and other initiatives described in this Proxy Statement/Prospectus.
In contrast, as of the date of this Proxy Statement/Prospectus, ETF's market
discount remains at or near higher historical levels. If this pattern continues,
the total market value of EMG shares issued to ETF shareholders on the Effective
Date will be more than the total market value of ETF shares outstanding
immediately prior to the Effective Date, although their total net asset values
will be the same (disregarding fractional shares). While the current disparity
of market discounts would cause ETF shareholders to receive shares in the Merger
with a higher aggregate market value, shareholders should consider that, over
time, there has not been a significant disparity between the two Funds' market
discount levels. Accordingly, the Boards' recommendations are based on long-term
average market discount levels. In other words, the initiatives described in
this Proxy Statement/Prospectus have led to a situation that the Boards believe
is a temporary aberration, but which could cause a ETF shareholder to receive
assets (EMG shares) that are more valuable, from a market value perspective
only, than the assets (ETF shares) owned immediately prior to the transaction,
if the disparity in discount levels persists at the time of the Merger. This may
cause EMG shareholders to experience a reduction in the market value of their
holdings. Although there can be no assurance, the Board of Directors of EMG
believes that the initiatives described in this Proxy Statement/Prospectus
should have a beneficial effect on the discount at which shares of the Surviving
Fund trade. The discount level of the Funds may be different at the time the
Merger occurs. For more information, see "Additional Information About The
Funds--Discount to Net Asset Value."
EXPENSES OF THE MERGER. In evaluating the proposed Merger, CSAM has
estimated the amount of expenses the Funds would incur, including NYSE listing
fees, SEC registration fees, financial adviser fees, legal and accounting fees
and proxy and distribution costs and expenses incurred in connection with the
Tender Offer. The estimated total expenses pertaining to the Merger and the
Tender Offer are $1,106,003. The aggregate amount of estimated expenses of the
Merger will be allocated equally between the Funds, including the SEC
registration fees and the fees for listing additional shares of EMG on the NYSE.
However, EMG will be responsible for the estimated expenses of the Tender Offer,
and each Fund will be responsible for its pro rata share of the financial
advisory fees. This pro rata share will be based on a fraction, the numerator of
which is the net assets of the respective Fund as of February 1, 2000 and the
denominator of which is the net assets, as of such date, of all the closed-end
funds advised by CSAM who have engaged PaineWebber Incorporated, or PaineWebber,
as the financial adviser.
The expenses of the Merger are expected to result in a reduction in ETF's
net asset value per share of approximately $0.07, and a reduction in EMG's net
asset value per share of approximately $0.03. The expenses related to the Tender
Offer, estimated at $220,000, will reduce the net asset value per share of EMG
by approximately $0.02.
15
<PAGE>
EXPENSE TABLE
<TABLE>
<CAPTION>
EMERGING EMERGING PRO FORMA
MARKETS MARKETS POST-MERGER
TELECOMMUNICATIONS INFRASTRUCTURE AND TENDER
FUND FUND OFFER(1)
------------------ -------------- -----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of offering price).... NONE NONE NONE
Dividend Reinvestment and Cash Purchase Plan
Fees............................................ $ 5(2) $ 5(2) $ 5(2)
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)(3)
Investment Management Fees........................ 1.23%(4) 1.30%(4) 0.93%(5)
Interest Payments on Borrowed Funds............... 0 0 0
Other Expenses(6)................................. 0.88% 0.90% 0.78%
Total Annual Expenses............................. 2.11% 2.20% 1.71%
</TABLE>
--------------
(1) Assumes that the Tender Offer is fully subscribed.
(2) For optional cash purchases. First time investors are subject to an initial
service charge of $10.
(3) The percentages in the above table expressing annual fund operating expenses
are based on The Emerging Markets Telecommunications Fund's operating
expenses for the fiscal year ended May 31, 2000 and The Emerging Markets
Infrastructure's Fund's operating expenses for the fiscal year ended
November 30, 1999. "Other Expenses" include fees for shareholder services,
custody, legal and accounting services, printing costs, the costs involved
in communication with shareholders and the costs of regulatory compliance,
maintaining corporate existence and the listing of the shares of common
stock on the NYSE. These figures do not reflect the expenses of the Merger
or the Tender Offer.
(4) CSAM is contractually entitled to receive 1.25% of the first $100 million of
ETF's average weekly net assets, 1.125% of the next $100 million and 1.00%
of amounts in excess of $200 million and 1.30% of EMG's average weekly net
assets. As of July 1, 2000, the investment advisory fees paid to CSAM by
both Funds are based on the Funds' market capitalization rather than net
assets whenever the stock price is less than net asset value. Had this fee
structure been in effect on November 30, 1999 and May 31, 2000,
respectively, the investment management fees for EMG (assuming approval of
Proposal 3) and ETF would have been 0.96% and 0.97%, respectively. This
calculation is based on an average discount of 20.71% and 21.00% for EMG and
ETF, respectively, during 1999. For more information about each Fund's
investment management fees, see "Synopsis--Fees and Expenses--The Emerging
Markets Telecommunications Fund" and "Synopsis--Fees and Expenses--The
Emerging Markets Infrastructure Fund."
(5) Assumes approval of Proposal 3 and is based on ETF's average discount of
21.00% for the fiscal year ended May 31, 2000. Based on no discount and the
highest discount of 26.71% experienced during the fiscal year ended May 31,
2000, the pro forma investment management fees would have been 1.18% and
0.87%, respectively.
(6) Includes Administration Fees.
16
<PAGE>
EXAMPLE. The purpose of the following example is to help you understand the
costs and expenses you may bear as an investor. This example is based on the
level of total annual operating expenses for each Fund listed in the table
above, the total expenses relating to a $10,000 investment, assuming a 5% annual
return and reinvestment of all dividends and distributions. Shareholders do not
pay these expenses directly; they are paid by the Funds before they distribute
net investment income to shareholders. This example should not be considered a
representation of future expenses, and actual expenses may be greater or less
than those shown. Federal regulations require the example to assume a 5% annual
return, but actual annual returns may vary.
<TABLE>
<CAPTION>
PRO FORMA
POST-MERGER
THE EMERGING MARKETS THE EMERGING MARKETS AND TENDER
TELECOMMUNICATIONS FUND INFRASTRUCTURE FUND OFFER
----------------------- -------------------- -----------
<S> <C> <C> <C>
1 Year............................... $ 214 $ 223 $ 174
3 Years.............................. $ 661 $ 688 $ 539
5 Years.............................. $1,134 $1,180 $ 928
10 Years............................. $2,441 $2,534 $2,019
</TABLE>
PERFORMANCE. The table below provides performance data for period ended May
31, 2000 for ETF and the period ended November 30, 1999 for EMG based on each
Fund's net asset value and market value. Past performance is not a guarantee of
future results, and it is not possible to predict whether or how investment
performance will be affected by the Merger. The seven-year comparison has been
included to illustrate the comparative performance of both Funds during a period
which closely approximates the period during which both Funds were in existence.
<TABLE>
<CAPTION>
THE EMERGING MARKETS THE EMERGING MARKETS
TELECOMMUNICATIONS FUND INFRASTRUCTURE FUND
--------------------------- ---------------------------
AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value One Year................... 51.40% 51.40% 34.40% 34.40%
Three Year................. 29.64% 9.03% 3.40% 1.12%
Five Year.................. 70.12% 11.20% (1.06)% (0.21)%
Seven Year................. 64.65% 8.08% N/A N/A
Since inception (1)........ 178.32% 13.76% 0.94% 0.16%
Market Value One Year................... 37.58% 37.58% 30.93% 30.93%
Three Year................. 18.18% 5.71% (9.73)% (3.35)%
Five Year.................. 35.38% 6.22% (17.28)% 3.72%
Seven Year................. (4.06)% (0.64)% N/A N/A
Since inception (1)........ 103.14% 9.33% (29.56)% (5.75)%
</TABLE>
--------------
(1) ETF commenced operations on June 25, 1992. EMG commenced operations on
December 29, 1993.
17
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand the financial
performance of ETF and EMG. This information is derived from financial and
accounting records of each Fund.
This information has been audited, except as noted, by
PricewaterhouseCoopers LLP, the Funds' independent public accountants, whose
reports, along with the Funds' financial statements, are incorporated herein by
reference and included in the Funds' Annual and Semi-Annual Reports to
Shareholders. The Annual and Semi-Annual Reports may be obtained without charge
by writing to Shareholder Communications Corporation, 17 State Street, New York,
New York 10004, or by calling 1-(800) 403-7916.
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes 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 FISCAL YEARS ENDED MAY 31,
---------------------------------------------------------------
2000 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period............................. $ 12.12 $ 16.36 $ 21.53 $ 20.94 $ 19.20 $ 20.90
-------- ------- -------- -------- -------- --------
Net investment income/(loss)......... (0.20)# (0.04)# (0.06) 0.10 0.27 0.11
Net realized and unrealized
gain/(loss) on investments and
foreign currency related
transactions....................... 6.14 (2.41) (1.40) 2.86 1.91 0.01
-------- ------- -------- -------- -------- --------
Net increase/(decrease) in net assets
resulting from operations.......... 5.94 (2.45) (1.46) 2.96 2.18 0.12
-------- ------- -------- -------- -------- --------
Dividends and distributions to
shareholders:
Net investment income.............. -- -- (0.09) (0.27) (0.04) (0.04)
Net realized gain on investments
and foreign currency related
transactions..................... -- (1.96) (3.62) (2.10) (0.40) (1.78)
-------- ------- -------- -------- -------- --------
Total dividends and distributions to
shareholders....................... -- (1.96) (3.71) (2.37) (0.44) (1.82)
-------- ------- -------- -------- -------- --------
Anti-dilutive impact due to shares of
beneficial interest repurchased.... 0.29 0.17 -- -- -- --
-------- ------- -------- -------- -------- --------
Net asset value, end of period....... $ 18.35 $ 12.12 $ 16.36 $ 21.53 $ 20.94 $ 19.20
======== ======= ======== ======== ======== ========
Market value, end of period.......... $ 13.50 $ 9.813 $ 13.000 $ 17.375 $ 17.375 $ 17.750
======== ======= ======== ======== ======== ========
Total investment return (a).......... 37.58% (9.99)% (4.57)% 14.31% 0.21% (13.94)%
======== ======= ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000
omitted)........................... $130,300 $94,026 $138,023 $181,627 $176,628 $161,925
Ratio of expenses to average net
assets (b)......................... 2.24% 2.09% 2.32% 1.90% 1.77% 1.89%
Ratio of expenses to average net
assets, excluding taxes............ 2.04% 2.01% 1.82% 1.82% -- --
Ratio of net investment income/(loss)
to average net assets.............. (1.15)% (0.33)% (0.29)% 0.52% 1.40% 0.53%
Portfolio turnover rate.............. 113.75% 179.66% 162.58% 42.14% 27.71% 14.29%
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 25, 1992*
FOR THE FISCAL YEAR THROUGH
ENDED MAY 31, 1994 MAY 31, 1993
------------------- --------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period........................ $ 14.95 $ 13.84**
-------- --------
Net investment income/(loss)................................ 0.13 0.16
Net realized and unrealized gain/(loss) on investments and
foreign currency-related transactions..................... 7.03+ 1.20
-------- --------
Net increase/(decrease) in net assets resulting from
operations................................................ 7.16 1.36
-------- --------
Dividends and distributions to shareholders:
Net investment income..................................... (0.15) (0.14)
Net realized gain on investments and foreign
currency-related transactions........................... (1.06) (0.11)
-------- --------
Total dividends and distributions to shareholders........... (1.21) (0.25)
-------- --------
Anti-dilutive impact due to shares of beneficial interest
repurchased............................................... -- --
-------- --------
Net asset value, end of period.............................. $ 20.90 $ 14.95
======== ========
Market value, end of period................................. $ 22.750 $ 14.500
======== ========
Total investment return (a)................................. 64.74% 5.85%
======== ========
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted)..................... $176,253 $125,338
Ratio of expenses to average net assets (b)................. 1.81% 1.99%(c)
Ratio of expenses to average net assets, excluding taxes.... -- --
Ratio of net investment income to average net assets........ 0.63% 2.02%(c)
Portfolio turnover rate..................................... 43.98% 22.55%
</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 anti-dilutive impact of shares issued pursuant to the
Fund's automatic Dividend Reinvestment Plan in January 1994.
# Based on average shares outstanding.
(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 Brazilian transaction and Chilean repatriation
taxes, if any.
(c) Annualized.
19
<PAGE>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes 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 DECEMBER 29,
ENDED 1993*
MAY 31, FOR THE FISCAL YEARS ENDED NOVEMBER 30, THROUGH
2000 -------------------------------------------------------- NOVEMBER 30,
(UNAUDITED) 1999 1998 1997 1996 1995 1994
----------- -------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period... $ 12.67 $ 9.60 $ 14.69 $ 13.39 $ 11.60 $ 14.17 $ 13.89**
-------- -------- -------- -------- -------- -------- --------
Net investment income/(loss)........... (0.04)+ (0.05)+ 0.08 0.07 0.12 0.07 (0.01)
Net realized and unrealized gain/(loss)
on investments and foreign currency
related transactions................. 0.79 2.97 (4.71) 1.32 1.76 (2.59) 0.29
-------- -------- -------- -------- -------- -------- --------
Net increase/(decrease) in net assets
resulting from operations............ 0.75 2.92 (4.63) 1.39 1.88 (2.52) 0.28
-------- -------- -------- -------- -------- -------- --------
Dividends and distributions to
shareholders:
Net investment income................ -- (0.16) (0.03) (0.09) (0.09) (0.03) --
Net realized gain on investments and
foreign currency related
transactions....................... -- -- (0.43) -- -- (0.02) --
-------- -------- -------- -------- -------- -------- --------
Total dividends and distributions to
shareholders......................... -- (0.16) (0.46) (0.09) (0.09) (0.05) --
-------- -------- -------- -------- -------- -------- --------
Anti-dilutive effect of Tender Offer... -- 0.14 -- -- -- -- --
Anti-dilutive effect of the Share
Repurchase Program................... 0.21 0.17 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total anti-dilutive effect of Tender
Offer and the Share Repurchase
Program.............................. 0.21 0.31 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period......... $ 13.63 $ 12.67 $ 9.60 $ 14.69 $ 13.39 $ 11.60 $ 14.17
======== ======== ======== ======== ======== ======== ========
Market value, end of period............ $ 11.00 $ 9.563 $ 7.440 $ 11.250 $ 10.750 $ 9.750 $ 11.88
======== ======== ======== ======== ======== ======== ========
Total investment return (a)............ 15.03% 30.93% (29.60)% 5.46% 11.11% (17.49)% (14.87)%
======== ======== ======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000
omitted)............................. $152,360 $150,362 $154,670 $236,536 $215,735 $186,921 $228,171
Ratio of expenses to average net assets
#.................................... 2.45%(b) 2.33% 2.07% 2.02% 1.81% 1.83% 2.02%(b)
Ratio of expenses to average net
assets, excluding taxes.............. 2.22%(b) 2.31% 1.91% 1.83% -- -- 1.96%(b)
Ratio of net investment income/(loss)
to average net assets................ (0.56)%(b) (0.40)% 0.72% 0.46% 0.90% 0.65% (0.13)%(b)
Portfolio turnover rate................ 68.82% 109.09% 169.85% 108.68% 23.89% 13.73% 24.63%
</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 $0.06 per share.
+ Based on average shares outstanding.
# Ratios shown are inclusive of Brazilian transaction and Chilean repatriation
taxes, if any.
(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) Annualized.
20
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
Both ETF and EMG invest in equity securities of companies in emerging
countries and, accordingly, are subject to many of the same investment risks.
ETF and EMG currently, however, are also subject to certain risks which are
specific to the telecommunications and infrastructure industry, respectively.
The current investment risks of each of the Funds are described below.
TELECOMMUNICATIONS COMPANIES
Telecommunications companies are undergoing significant change due to
varying and evolving levels of governmental regulation or deregulation and other
factors. As a result, competitive pressures are intense and the securities of
such companies may be subject to rapid price volatility. In addition, telephone
services are experiencing increasing competition from cellular telephone
services. All telecommunications companies are subject to the additional risk
that technological innovations will make their products and services obsolete.
While telephone companies may pay an above average dividend, ETF's investment
decisions are based upon capital appreciation potential rather than income
considerations.
In virtually every country, certain aspects of the telecommunications
industry are subject to some government regulation. The nature and scope of such
regulation generally is subject to political forces and market considerations,
the effect of which cannot be predicted. Such regulation can have significant
effects upon the operations of a telecommunications venture. It is difficult to
predict the directions, types or effects of future telecommunications-related
regulation.
Telecommunications regulation typically limits rates charged, returns
earned, providers of services, types of services, ownership, areas served and
terms for dealing with competitors and customers. Telecommunications regulation
generally has tended to be less stringent for newer services than for
traditional telephone service, although there can be no assurances that such
newer services will not be heavily regulated in the future. Regulation may also
limit the use of new technologies and hamper efficient depreciation of existing
assets. If regulation limits the use of new technologies by established carriers
or forces cross-subsidies, large private networks may emerge. Service providers
may also be subject to regulations regarding ownership and control, providers of
services, subscription rates and technical standards.
INFRASTRUCTURE COMPANIES
Infrastructure companies in emerging countries are undergoing significant
change due to varying and evolving levels of governmental regulation or
deregulation and other factors. Competitive pressures are intense and the
securities of such companies may be subject to increased share price volatility.
In addition, certain infrastructure companies are subject to the risk that
technological innovations will make their services obsolete. While certain
infrastructure companies in a number of emerging countries may pay an above
average dividend, EMG's investment decisions are based upon capital appreciation
potential rather than income considerations.
In virtually every country, certain industries providing infrastructure
services, including those engaged in the generation, transmission or
distribution of electricity or gas, telecommunications and transportation, are
subject to governmental regulation. The nature and scope of such regulation
generally is subject to political forces and market considerations, the effect
of which cannot be predicted. Certain governments have taken measures to foster
infrastructure companies because of the importance of these companies to the
development of their economies. However, government regulation of certain
infrastructure companies, such as telecommunications companies, typically limits
rates charged, returns earned, providers of services, types of services,
ownership, areas served and terms for dealing with competitors and customers.
Regulation may also limit the use of new technologies and hamper efficient
depreciation of existing assets. Government regulation can have significant
effects
21
<PAGE>
upon the operations of an infrastructure company. It is not possible to predict
the directions, type or effects of future regulation, any of which could have a
material adverse effect on EMG and its investments.
INVESTMENT CONTROLS
Foreign investment in the securities of emerging countries issuers is
restricted or controlled to varying degrees. These restrictions or controls at
times may limit or preclude foreign investment in certain emerging countries
issuers and increase the costs and expenses of the Funds. For example, certain
countries:
- require governmental approval prior to investment by foreign persons,
- limit the amount of investment by foreign persons in a particular company,
- limit investment by foreign persons to only a specific class of securities
of a company that may have less advantageous terms than the classes
available for purchase by domiciliaries of the countries, and/or
- impose additional taxes on foreign investors.
Certain emerging countries may also restrict investment opportunities in
issuers in industries deemed important to national interests. Some countries may
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.
Delays in, or a refusal to grant, any required governmental approval for
repatriation of capital, as well as restrictions on the Funds' investments could
adversely affect the Funds. Investing in local markets in emerging countries may
require the Funds to adopt special procedures, seek local governmental approvals
or take other actions, each of which may involve additional costs to the Funds.
If for any reason the Funds were unable to distribute substantially all of their
investment company taxable income (as defined for U.S. tax purposes) within
applicable time periods, the Funds would cease to qualify for the favorable tax
treatment afforded to regulated investment companies under the Code. For more
information, see "Taxation" in the SAI.
MARKET ILLIQUIDITY; VOLATILITY; SMALLER MARKET CAPITALIZATION
The securities markets of emerging countries are substantially smaller, less
liquid and more volatile than the major securities markets around the world. A
limited number of persons may hold a high proportion of the shares of many
emerging countries companies, which may limit the number of shares available for
investment by the Funds. A limited number of issuers in most, if not all,
emerging countries' securities markets may represent a disproportionately large
percentage of market capitalization and trading value. The limited liquidity of
emerging countries securities markets may also affect each Fund's ability to
acquire or dispose of securities at the price and time it wishes to do so. In
addition, certain emerging countries' securities markets are susceptible to the
influence of large investors trading significant blocks of securities or large
dispositions of securities resulting from the failure to meet margin calls when
due.
In addition to their smaller size, lesser liquidity and greater volatility,
emerging countries' securities markets are less developed than U.S. securities
markets. Disclosure and regulatory standards are in many respects less stringent
than U.S. standards. Furthermore, there is a low level of monitoring and
regulation of the markets and the activities of investors in such markets and
the enforcement of existing regulations has been extremely limited.
Consequently:
- other market participants' anticipation of a Fund's investing,
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- trading by persons with material, non-public information, and
- securities transactions by brokers in anticipation of transactions by a
Fund in particular securities
can affect the prices for investments acquired by a Fund. Commissions and other
transaction costs on most, if not all, emerging countries securities exchanges
are generally higher than in the United States.
CURRENCY DEVALUATIONS AND FLUCTUATIONS
The Funds normally invest principally in securities denominated in
currencies of emerging countries. CSAM generally does not seek to hedge against
declines in the value of the Funds' non-dollar denominated portfolio securities
resulting from currency devaluations or fluctuations. Accordingly, a change in
the value of currencies in which each Fund's investments are denominated against
the U.S. dollar will result in a corresponding change in the U.S. dollar value
of each Fund's assets. This change will also affect each Fund's income and net
asset value. The Funds compute income on the date of its receipt by the
respective Fund at the exchange rate in effect with respect to the relevant
currency on that date. Each Fund pays most expenses and makes distributions
necessary to maintain its status as a regulated investment company for U.S.
federal income tax purposes in U.S. dollars. In order to pay such expenses and
make such distributions each Fund may have to liquidate securities denominated
in one or more of the currencies of the emerging countries in which each Fund
invests. If the value of a currency in which the securities so liquidated are
denominated declines relative to the U.S. dollar between the time when the
income of a dollar-denominated expense item is accrued and date when the expense
is paid or the distribution is made, the Fund may have to liquidate more
investment securities than would otherwise have been the case. There can be no
assurance that the Funds will be able to liquidate securities for these
purposes, but the Funds are permitted to borrow money to pay expenses outside of
the emerging countries and to make distributions required to maintain their
status as regulated investment companies for U.S. tax purposes.
Many of the currencies of emerging countries have experienced steady
devaluations relative to the U.S. dollar, and major adjustments have at times
been made in certain of these currencies.
CURRENCY HEDGING
CSAM generally does not seek to hedge against a decline in the value of
either Fund's non-dollar-denominated portfolio securities resulting from
currency devaluations or fluctuations. The Funds will be subject to risk of
changes in the value of the emerging countries currencies in which their assets
are denominated in relation to the U.S. dollar unless they engage in currency
hedging transactions. If suitable hedging instruments are available on a timely
basis and on acceptable terms, CSAM may, in its discretion, hedge all or part of
the value of the Funds' non-dollar-denominated portfolio securities, although it
is not obligated to do so. The Funds may, from time to time, seek to protect,
during the period prior to the remittance, the value of the amount of interest,
dividends and net realized capital gains received or to be received in a local
currency that they intend to remit out of an emerging country. The Funds seek
this protection by investing in U.S. dollar-denominated debt securities of the
emerging country and/or participating in the forward currency market for the
purchase of U.S. dollars in that country. There can be no guarantee that efforts
to hedge against a currency devaluation or fluctuation will be effective or that
suitable U.S. dollar-denominated investments will be available at the time when
CSAM wishes to use them to hedge amounts to be remitted. Moreover, shareholders
should be aware that:
- dollar-denominated securities may not be available in some or all emerging
countries,
- the forward currency market for the purchase of U.S. dollars in most, if
not all, emerging countries is not highly developed, and
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<PAGE>
- in certain emerging countries no forward market for foreign currencies
currently exists or such market may be closed to investment by the Funds.
INFLATION
Many emerging countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain emerging countries.
In an attempt to control inflation, wage and price controls have been imposed at
times in certain countries.
ECONOMIC AND POLITICAL RISKS
The economies of individual emerging countries may differ favorably or
unfavorably from the U.S. economy in several respects, including:
- general development,
- wealth distribution,
- rate of inflation,
- volatility of the rate of growth of gross domestic product,
- capital reinvestment,
- resource self-sufficiency, and
- balance of payments position
Governments of many emerging countries have exercised and continue to
exercise substantial influence over many aspects of the private sector. In some
cases, the government owns or controls many companies, including some of the
largest in the country. As a result, government actions in the future could have
a significant effect on economic conditions in a emerging country, which, in
turn, may adversely affect companies in the private sector, general market
conditions and prices and yields of certain of the securities in each Fund's
portfolio. Expropriation, confiscatory taxation, nationalization, political,
economic or social instability or other developments, such as military coups,
have occurred in the past in certain emerging countries. These conditions or
events could adversely affect the assets of each Fund held in particular
emerging countries should they recur. Each Fund may also experience greater
difficulty in its ability to protect and enforce its rights against governmental
and private entities in certain emerging countries.
Since 1982, some emerging countries, including Argentina, Brazil, Chile and
Mexico, have experienced difficulty servicing their sovereign debt obligations.
As a result, some of these countries have entered into agreements to restructure
these debts, in particular commercial bank loans, typically by rescheduling
principal payments, reducing interest rates and principal amounts and extending
new credit to finance interest payments on existing debt. Some emerging
countries governmental issuers have not made payments of interest on or
principal of their debt obligations as such payments have come due. Obligations
arising from past restructuring agreements have affected, and those arising from
future restructuring agreements may affect, the economic performance and
political and social stability of certain emerging countries.
REPORTING STANDARDS
Companies in emerging countries are subject to accounting, auditing and
financial standards and requirements that differ, in some cases significantly,
from those applicable to U.S. companies. The assets and profits appearing on the
financial statements of a company in an emerging country may not
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<PAGE>
reflect its financial position or results of operations in the way they would be
reflected had such financial statements been prepared in accordance with U.S.
generally accepted accounting principles. In addition, for companies that keep
accounting records in local currency, inflation accounting rules in some
emerging countries require, for both tax and accounting purposes, that certain
assets and liabilities be restated on the company's balance sheet in order to
express items in terms of currency of constant purchasing power. This means that
certain balance sheet items may be adjusted up or down to take into account the
effects of inflation. Inflation accounting may indirectly generate losses or
profits. Consequently, data concerning securities of issuers in emerging
countries may be materially affected by restatements for inflation and may not
accurately reflect the real conditions of companies and securities markets.
There is often substantially less publicly available information about emerging
countries companies and the governments of emerging countries than there is
about U.S. companies and the U.S. Government. These risks are generally
magnified in the case of investments in non-publicly traded securities.
PRIVATIZATIONS
The Funds anticipate investment in telecommunications and infrastructure
companies, as applicable, that have been or will be transferred from government
to private ownership. Many of these telecommunications and infrastructure
companies have underdeveloped or obsolete technologies and equipment. It is
impossible to predict whether any further privatizations will take place or what
the terms or effects of such privatizations may be. There can be no assurance
that any privatizations will be undertaken or, if undertaken, that such plans
will be successfully completed or even completed at all. There also can be no
assurance that, if a privatization is undertaken on a private placement basis,
the Funds will have the opportunity to participate in the investing consortium.
Investors should also be aware that changes in governments or economic factors
could result in a change in an emerging country's policies on privatization.
TAXATION
Taxation of dividends, interest and capital gains received by non-residents
varies among emerging countries and, in some cases, is comparatively high. In
addition, emerging countries typically have less well-defined tax laws and
procedures and such laws may permit retroactive taxation so that the Funds could
in the future become subject to local tax liability that the Funds may not have
reasonably anticipated in conducting their investment activities or valuing
their assets.
LITIGATION
The Funds and their shareholders may encounter substantial difficulties in
obtaining and enforcing judgments against non-U.S. resident individuals and
companies.
FRAUDULENT SECURITIES
It is possible, particularly in emerging countries markets, that the Funds
may purchase securities that may subsequently be found to be fraudulent or
counterfeit and as a consequence could result in losses.
SETTLEMENT RISKS
Settlement systems in emerging countries markets are generally less well
organized than in developed markets. Supervisory authorities may also be unable
to apply standards which are comparable with those in developed markets. Thus
there may be risks that settlement may be delayed and that cash or securities
belonging to the Funds may be in jeopardy because of failures of or defects in
the systems. In particular, market practice may require that payment shall be
made before receipt of the security which is being purchased or that delivery of
a security must be made before payment is
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<PAGE>
received. In such cases, default by a broker or bank through whom the relevant
transaction is effected might result in losses for the Funds. The Funds will
seek, where possible, to use reputable financial institutions to reduce this
risk. However, there can be no certainty that the Funds will be able to use
banks or brokers with reputable financial status to reduce this risk. Moreover,
there can be no certainty that the Funds will be successful in eliminating this
risk, particularly as banks or brokers operating in emerging countries markets
frequently lack the substance or financial resources of those in more developed
countries. There may also be a danger that, because of uncertainties in the
operation of settlement systems in individual markets, competing claims may
arise in respect of securities held by or to be transferred to the Fund.
INVESTMENTS IN NON-PUBLICLY TRADED SECURITIES
Although the Funds invest primarily in equity securities of publicly traded
companies in emerging countries, they may, subject to local investment
limitations, invest in unlisted emerging countries equity securities, including
investments in new and early stage companies. Investments in unlisted equity
securities may involve a high degree of business and financial risk and may
result in substantial losses. ETF may invest up to 25% of its assets, and EMG
may invest up to 30% of its assets, in unlisted equity securities. Currently, no
liquid trading market exists for these investments, and, as such, the Funds may
take longer to liquidate these positions than 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 Funds. Further, companies whose securities are not publicly traded may not
be subject to the disclosure and other investor protection requirements
applicable to companies with publicly traded securities.
MARKET VALUE AND NET ASSET VALUE
Shares of closed-end investment companies frequently trade at a discount
from net asset value. Trading at a discount is a risk separate and distinct from
the risk that the net asset value of each Fund will decrease. The risk of
purchasing shares of a closed-end fund that might trade at a discount is more
pronounced for shareholders who wish to sell their shares in a relatively short
period of time because for those shareholders, realization of a gain or loss on
their investments is likely to be more dependent upon the existence of a premium
or discount than upon portfolio performance. Although each Fund's shares have at
times been traded in the market above net asset value, since the commencement of
its operations, each Fund's shares have generally traded in the market at a
discount to net asset value. Neither Fund's shares are subject to redemption.
Investors desiring liquidity may, subject to applicable securities laws, trade
their shares in a Fund on any exchange where such shares are then listed at the
then current market value, which may differ from the then current net asset
value.
NON-DIVERSIFIED STATUS
Both Funds are classified as non-diversified investment companies under the
Investment Company Act. Non-diversified investment companies are not limited by
the Investment Company Act in the proportion of assets that may be invested in
the securities of a single issuer. Both Funds, however, are subject to local
laws which limit investments in a single issuer and the diversification
requirements imposed by the Code for qualification as a regulated investment
company. As a non-diversified investment company, each Fund may invest a greater
proportion of its assets in the obligations of a smaller number of issuers and,
as a result, may be subject to greater risk with respect to its portfolio
securities.
CHARTER PROVISIONS
Certain provisions of each Fund's Articles of Incorporation and By-Laws may
inhibit that Fund's possible conversion to open-end status and limit the ability
of other persons to acquire control of that
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<PAGE>
Fund's Board of Directors. In certain circumstances, these provisions might also
inhibit the ability of shareholders to sell their shares at a premium over
prevailing market prices.
OPERATING EXPENSES
Each Fund's annual operating expenses are higher than those of many other
investment companies of comparable size. However, management of each Fund
believes these operating expenses are comparable to expenses of other closed-end
management investment companies that invest primarily in the securities of
emerging countries.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
ORGANIZATION. ETF and EMG are both closed-end, non-diversified management
investment companies registered under the Investment Company Act. Both Funds are
organized as corporations under the laws of the State of Maryland. Each Fund is
managed and advised by CSAM, formerly known as BEA Associates. The shares of
common stock of each Fund are listed and trade on the NYSE under the symbols
"ETF" and "EMG", respectively. Upon the Effective Date, EMG's name will change
to "The Emerging Markets Telecommunications Fund, Inc." and after the Merger,
the Surviving Fund's shares will trade on the NYSE under the symbol "ETF", while
ETF's shares will be delisted and ETF will cease to exist.
The shares of common stock of each Fund have equal non-cumulative voting
rights and equal rights with respect to dividends, assets and dissolution. Each
Fund's shares of common stock are fully paid and non-assessable and have no
preemptive, conversion or other subscription rights. Fluctuations in the market
price of the Fund's shares is the principal investment risk of an investment in
either Fund. Portfolio management, market conditions, investment policies and
other factors affect such fluctuations. Although currently the investment
objectives, policies and restrictions of the Funds are similar, there are
differences between them, as discussed below. There can be no assurance that
either Fund will achieve its stated objective.
PROPOSED CHANGE IN INVESTMENT POLICIES. Shareholders of EMG are being asked
to approve a change in EMG's fundamental investment policy to permit the
Surviving Fund, under normal conditions, (i) to invest at least 65% of its total
assets in equity securities of telecommunications companies in emerging markets,
and (ii) to invest a substantial portion of its remaining assets, under normal
market conditions (up to 25% of its total assets), in equity securities of
companies that provide other essential services in the development in an
emerging country's infrastructure and will benefit from macroeconomic growth in
an emerging country, but whose growth is not directly linked to favorable
changes in commodity prices. EMG currently invests, under normal conditions, at
least 70% of its total assets in equity securities of infrastructure companies
in emerging countries. In addition, EMG's Board of Directors has agreed to
modify EMG's current non-fundamental investment policies to conform to the
non-fundamental investment policies of ETF. See "Proposal 2 (Emerging Markets
Infrastructure Fund Shareholders Only): Approval of Change in Fundamental
Investment Policy."
CURRENT INVESTMENT OBJECTIVES. Long-term capital appreciation is the
principal investment objective of each Fund. ETF seeks to achieve this
investment objective by investing primarily in equity securities of emerging
countries telecommunications companies and companies that provide other
essential services in the development of an emerging country's infrastructure.
EMG seeks to achieve this investment objective by investing primarily in equity
securities of infrastructure companies in emerging countries and companies that
manufacture products on behalf of or service infrastructure companies in
emerging countries. The investment objective of each Fund is a fundamental
policy of each Fund and cannot be changed without the approval of the holders of
a "majority of each Fund's outstanding voting securities," as defined above
under "General."
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No assurance can be given that either Fund's investment objective will be
achieved.
COMPARISON OF CURRENT INVESTMENT POLICIES. While each Fund seeks long-term
capital appreciation as its principal objective, each Fund seeks to achieve this
objective in different ways. The following table highlights certain significant
differences between the Funds' investment policies:
<TABLE>
<CAPTION>
INVESTMENT POLICIES ETF EMG
------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
Fundamental Investment Policy Investment of at least 65% of its Investment of at least 70% of its
total assets in equity securities of total assets in equity securities of
telecommunications companies in infrastructure companies in emerging
emerging countries countries
% of Assets That May Be Invested in Up to 25% Up to 30%
Equity Securities of Companies
Related to an Emerging Country's
Infrastructure
% of Assets That May Be Invested in Up to 25% Up to 30%
Unlisted Equity Securities
(Including Investments in New and
Early Stage Companies)
% of Assets That May Be Invested in To the extent not invested as Not applicable
Corporate or Government Debt described above
Securities of Emerging Market
Issuers
</TABLE>
ETF's policy, under normal market conditions, is to invest at least 65% of
its total assets in equity securities of telecommunications companies in
emerging markets. ETF may also invest a substantial portion of its remaining
assets, up to 25% of its total assets under normal market conditions, in equity
securities of companies that provide other essential services in the development
of an emerging country's infrastructure and will benefit from macroeconomic
growth in an emerging country, but whose growth is not directly linked to
favorable changes in commodity prices.
EMG's policy, under normal market conditions, is to invest at least 70% of
its total assets in equity securities of infrastructure companies in emerging
countries. EMG may also invest up to 30% of its total assets in equity
securities of companies that manufacture products on behalf of or service
infrastructure companies in emerging countries.
The policies and the investment limitations enumerated above and those
described in the SAI under the caption "Investment Restrictions" are fundamental
and may not be changed without the approval of a majority of each Fund's
outstanding voting securities. All other policies and percentage limitations of
each Fund as described below may be modified by that Fund's Board of Directors
if, in the reasonable exercise of its business judgment, it determines that
modification is necessary or appropriate to carry out that Fund's investment
objective.
ETF may also seek to invest in equity securities of telecommunications
companies in developed countries when these securities, in the opinion of CSAM,
have investment characteristics similar to emerging country telecommunications
companies. In determining if the securities of a telecommunications company in a
developed country have investment characteristics similar to those of emerging
country telecommunications companies, CSAM will consider whether the potential
for growth in such company is similar to that of telecommunications companies in
emerging countries, based on analysis and comparison of such factors as earnings
potential, ratio of revenue per employee and
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revenue per telephone line, the density of telephone lines per household,
management performance and other pertinent measurements.
Both Funds define emerging countries as countries which are generally
considered to be emerging or developing by the International Bank for
Reconstruction and Development (more commonly referred to as the World Bank) and
the International Finance Corporation, as well as countries that are classified
by the United Nations or otherwise regarded by its authorities as emerging or
developing, at the time of the investment. The countries that are not considered
emerging countries include: Australia; Austria; Belgium; Canada; Denmark;
Finland; France; Germany; Ireland; Italy; Japan; Luxembourg; Netherlands, New
Zealand; Norway; Spain; Sweden; Switzerland; United Kingdom; and the United
States.
An emerging country equity security is defined as:
- common stock and preferred stock (including convertible preferred stock),
- bonds, notes and debentures convertible into common or preferred stock,
- stock purchase warrants and rights,
- equity interests in trusts and partnerships, and
- American, Global or other types of Depositary Receipts of companies: (i)
the principal securities trading market for which is an emerging country;
(ii) whose principal trading market is in any country, provided that,
alone or on a consolidated basis, they derive 50% or more of their annual
revenue from either goods produced, sales made or services performed in
emerging countries; or (iii) that are organized under the laws of, and
with a principal office in, an emerging country.
Determinations as to eligibility will be made by the Funds based on publicly
available information and inquiries made to the companies. (See "Risk Factors
and Special Considerations" for a discussion of the nature of information
publicly available for non-U.S. companies.)
In addition, ETF's definition of emerging country equity securities also
includes securities of companies that may have characteristics and business
relationships common to companies in a country or countries other than an
emerging country. As a result, the value of the securities of such companies may
reflect economic and market forces applicable to other countries, as well as to
an emerging country.
Many of the companies in which the Funds invest may be in the early stages
of their growth cycle and/or may have only recently been privatized.
Accordingly, the Funds anticipate that certain investments (up to 25% of its
total assets in the case of ETF and 30% of its total assets in the case of EMG,
at the time of purchase) will be in equity securities of closely-held companies
or private placements of public companies, where CSAM anticipates that a liquid
market will develop for these securities within a period of two to five years
from the date such securities are acquired by such Fund. Securities that are not
publicly traded in the United States but that can be sold to "qualified
institutional buyers" pursuant to Rule 144A under the Securities Act, will not
be subject to these percentage limitations if the Fund's Board of Directors
determines on an ongoing basis that an adequate trading market exists for these
securities. The Board of Directors of either Fund may adopt guidelines and
delegate to CSAM the function of determining and monitoring the liquidity of
Rule 144A securities, although the Board of Directors will retain ultimate
responsibility for any determination regarding an adequate market for Rule 144A
securities.
The governments of some emerging countries have been engaged in
"privatization" programs which involve the sale of part or all of their stakes
in government owned or controlled enterprises. CSAM believes that privatizations
may offer shareholders opportunities for significant capital
29
<PAGE>
appreciation and intends to invest assets of each Fund in privatizations in
appropriate circumstances. In certain emerging countries, the ability of foreign
entities, such as the Funds, to participate in privatizations may be limited by
local law. In addition, the terms on which the Funds may be permitted to
participate may be less advantageous than those for local investors. There can
be no assurance that the governments of emerging countries will continue to sell
companies currently owned or controlled by them or that privatization programs
will be successful.
To the extent its assets are not invested as described above, ETF may invest
the remainder of its assets in:
- debt securities denominated in the currency of an emerging country or
issued or guaranteed by an emerging country company or the government of
an emerging country,
- equity or debt securities of corporate or governmental issuers located in
developed countries, and
- short-term and medium-term debt securities of the type described below
under "Temporary Investments."
ETF's assets may be invested in debt securities when CSAM believes that,
based upon factors such as relative interest rate levels and foreign exchange
rates, such debt securities offer opportunities for long-term capital
appreciation. The debt securities in which ETF may invest include:
- bonds,
- notes,
- bank deposits and bank obligations (including certificates of deposit,
time deposits and bankers' acceptances),
- commercial paper,
- repurchase agreements, and
- assignments of loans and loan participations.
In addition, for temporary defensive purposes, ETF and EMG may invest less
than 65% and 70%, respectively, of their total assets in equity securities of
telecommunications and infrastructure companies, respectively, in emerging
countries, in which case the Funds may invest in debt securities of the kind
described under "Temporary Investments" below. In addition, ETF may acquire
assignments of, and participations in, loans.
TEMPORARY INVESTMENTS. During periods in which CSAM believes changes in
economic, financial or political conditions make it advisable, the Funds may for
temporary defensive purposes reduce their holdings in equity and other
securities and invest in certain short-term (less than twelve months to
maturity) and medium-term (not greater than five years to maturity) debt
securities or hold cash.
Each Fund may invest in the following short-term instruments:
- obligations of the U.S. Government, its agencies or instrumentalities
(including repurchase agreements with respect to these securities),
- bank obligations (including certificates of deposit, time deposits and
bankers' acceptances) of U.S. banks and foreign banks denominated in any
currency,
- floating rate securities and other instruments denominated in any currency
issued by international development agencies, banks and other financial
institutions, governments and their agencies and instrumentalities, and
corporations located in countries that are members of the Organization for
Economic Cooperation and Development,
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<PAGE>
- obligations of U.S. corporations that are rated no lower than A-2 by
Standard & Poor's Rating Group or P-2 by Moody's Investor Services or the
equivalent by another rating service or, if unrated, deemed to be of
equivalent quality by CSAM, and
- shares of money market funds that are authorized to invest in short-term
instruments described above.
CURRENCY TRANSACTIONS. CSAM generally does not seek to hedge against
declines in the value of the Funds' non-dollar-denominated portfolio securities
resulting from currency devaluations or fluctuations. If suitable hedging
instruments are available on a timely basis and on acceptable terms, CSAM may,
in its discretion, hedge all or part of the value of the Funds'
non-dollar-denominated portfolio securities, although it is not obligated to do
so. Each Fund will be subject to the risk of changes in value of the currencies
of the emerging countries in which their assets are denominated, unless they
engage in hedging transactions. For a more detailed description of each Fund's
currency transactions, see "Comparison of Investment Objectives and
Policies--Currency Transactions" in the SAI.
CURRENCY CONVERTIBILITY. Neither Fund intends to invest in any security in
a country where the currency is not freely convertible to U.S. dollars, unless
that Fund has obtained the necessary governmental licensing to convert such
currency or other appropriately licensed or sanctioned contractual guarantee to
protect such investment against loss of that currency's external value, or that
Fund has a reasonable expectation at the time the investment is made that such
governmental licensing or other appropriately licensed or sanctioned guarantee
would be obtained or that the currency in which the security is quoted would be
freely convertible at the time of any proposed sale of the security by that
Fund.
DEPOSITARY RECEIPTS. Both Funds may invest indirectly in securities of
emerging country issuers through sponsored or unsponsored American Depositary
Receipts, or ADRs, Global Depositary Receipts, or GDRs, and other types of
Depositary Receipts (which, together with ADRs and GDRs, are referred to in this
Proxy Statement/Prospectus as "Depositary Receipts"). Depositary Receipts may
not necessarily be denominated in the same currency as the underlying securities
into which they may be converted. In addition, the issuers of the stock of
unsponsored Depositary Receipts are not obligated to disclose material
information in the United States and, therefore, there may not be a correlation
between such information and the market value of the Depositary Receipts. ADRs
are Depositary Receipts typically issued by a United States bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of Depositary Receipts are typically issued by
foreign banks or trust companies, although they also may be issued by U.S. banks
or trust companies, and evidence ownership of underlying securities issued by
either a foreign or a United States corporation. Generally, Depositary Receipts
in registered form are designed for use in the United States securities markets
and Depositary Receipts in bearer form are designed for use in securities
markets outside the United States. For purposes of the Funds' investment
policies, the Funds' investments in ADRs, GDRs and other types of Depositary
Receipts will be deemed to be investments in the underlying securities.
PORTFOLIO TURNOVER RATE. Neither Fund engages in the trading of securities
for the purpose of realizing short-term profits, but adjusts its portfolio as it
deems advisable in view of prevailing or anticipated market conditions to
accomplish its investment objective. It is not anticipated that the annual
portfolio turnover rate of the Surviving Fund following the Merger will exceed
85%. A high rate of portfolio turnover involves correspondingly greater
brokerage commission expenses than a lower rate, which expenses must be borne by
the Fund and its shareholders. High portfolio turnover may also result in the
realization of substantial net short-term capital gains and any distributions
resulting from such gains will be taxable at ordinary income rates for U.S.
federal income tax purposes. ETF's portfolio turnover rates for the fiscal years
ended May 31, 2000 and 1999 were 113.75% and 179.66%,
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<PAGE>
respectively. EMG's portfolio turnover rates for the fiscal years ended November
30, 1999 and 1998 were 109.09% and 169.85%, respectively. The higher EMG
portfolio turnover rate for the fiscal year ended November 30, 1998 is
attributable to the Fund's increased investment activity in Asia during that
year. The portfolio turnover rate is calculated by dividing the lesser of sales
or purchases of portfolio securities by the average monthly value of the Fund's
portfolio securities. For purposes of this calculation, portfolio securities
exclude purchases and sales of debt securities having a maturity at the date of
purchase of one year or less.
BORROWING. Borrowing increases exposure to capital risk, and borrowed funds
are subject to interest costs that may offset or exceed the return earned on
investment of the amounts borrowed. Nevertheless, both Funds are authorized to
borrow money from banks for the following reasons:
- for temporary or emergency purposes,
- for such short-term credits as may be necessary for the clearance or
settlement of transactions,
- to finance repurchases of its shares in amounts not exceeding 10% (taken
at the lower of cost or current value) of its total assets (not including
the amount borrowed),
- to pay any dividends required to be distributed to maintain the Fund's
qualification as a regulated investment company under the Code or
otherwise avoid taxation under the Code, or
- to pay Fund expenses outside of the emerging countries, and not for the
purpose of leveraging.
Additional investments will not be made when borrowings exceed 5% of the
Fund's total assets. The Fund may pledge its assets to secure such borrowings.
For the purpose of this investment restriction, collateral arrangements with
respect to the writing of options or the purchase or sale of future contracts or
related options or forward currency contracts are not deemed a pledge of assets
or the issuance of a senior security.
FUNDAMENTAL POLICIES. Each Fund has "fundamental" investment policies which
may not be changed without the prior approval of the holders of a majority of
each Fund's outstanding voting securities (as defined under the Investment
Company Act), and "non-fundamental" investment policies which may be modified by
each Fund's Board of Directors if, in the reasonable exercise of its business
judgment, the Board determines that modification is necessary or appropriate to
carry out that Fund's investment objective. Following is a description of the
Funds' current fundamental investment policies which are substantially similar:
1. Neither Fund may invest more than 25% of the total value of its
assets in a particular industry. This restriction does not apply to
investments in U.S. Government securities.
2. Neither Fund may issue senior securities, borrow money or pledge its
assets, except that either Fund may borrow from a lender for the reasons
specified above under "--Borrowing."
3. Neither Fund may lend money to other persons except through the
purchase of debt obligations, loans or participation interests in loans, and
the entering into of repurchase agreements or reverse repurchase agreements
consistent with applicable regulatory requirements, in each case consistent
with the Fund's investment objective and policies.
4. Neither Fund may make short sales of securities or maintain a short
position in any security.
5. Neither Fund may purchase securities on margin, except such
short-term credits as may be necessary or routine for the clearance or
settlement of transactions and the maintenance of margin with respect to
forward contracts or other hedging securities.
6. Neither Fund may underwrite securities of other issuers, except
insofar as either Fund may be deemed an underwriter under the Securities Act
in selling portfolio securities.
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<PAGE>
7. Neither Fund may purchase or sell commodities or real estate, except
that either Fund may invest in securities secured by real estate or
interests in real estate or in securities issued by companies, including
real estate investment trusts, that invest in real estate or interests in
real estate, and may purchase and sell forward contracts on foreign
currencies to the extent permitted under applicable law.
8. Neither Fund may make investments for the purpose of exercising
control over, or management of, the issuers of any securities.
In addition to the foregoing restrictions, each Fund is subject to
investment limitations, portfolio diversification requirements and other
restrictions imposed by certain emerging countries in which it invests.
Under the Investment Company Act, neither Fund may:
- invest more than 5% of its total assets in the securities of any one
investment company, nor
- acquire more than 3% of the outstanding voting securities of any such
company.
In addition, the Funds may not invest more than 10% of their total assets in
securities issued by all investment companies. As a shareholder in any
investment company, each Fund will bear its ratable share of that investment
company's expenses, and would remain subject to payment of the company's
advisory, sub-advisory and administrative fees with respect to assets so
invested.
33
<PAGE>
UNITED STATES FEDERAL INCOME TAXES
The following is a brief summary of certain United States federal income tax
issues that apply to each Fund. Shareholders should consult their own tax
advisers with regard to the federal tax consequences of the purchase, ownership
and disposition of each Fund's shares, as well as tax consequences arising under
the laws of any state, foreign country, or other taxing jurisdiction.
Each Fund has qualified, and intends to continue to qualify and elect to be
treated, as a regulated investment company, or RIC, for each taxable year under
Subchapter M of the Code. A RIC generally is not subject to federal income tax
on income and gains distributed in a timely manner to its shareholders.
Each Fund intends to distribute annually to its shareholders substantially
all of its investment company taxable income. The Board of Directors of each
Fund will determine annually whether to distribute any net realized long-term
capital gains in excess of net realized short-term capital losses, including any
capital loss carryovers. The Funds currently expect to distribute any such
excess annually to their shareholders. However, if either Fund retains for
investment an amount equal to its net long-term capital gains in excess of its
net short-term capital losses and capital loss carryovers, it will be subject to
a corporate tax, currently at a rate of 35%, on the amount retained. In that
event, that Fund expects to designate such retained amounts as undistributed
capital gains in a notice to its shareholders who:
- will be required to include in income for United States federal income tax
purposes, as long-term capital gains, their proportionate shares of the
undistributed amount,
- will be entitled to credit their proportionate shares of the 35% tax paid
by that Fund on the undistributed amount against their United States
federal income tax liabilities, if any, and to claim refunds to the extent
their credits exceed their liabilities, if any, and
- will be entitled to increase their tax basis, for United States federal
income tax purposes, in their shares by an amount equal to 65% of the
amount of undistributed capital gains included in the shareholder's
income.
Income received by the Funds from sources within countries other than the
United States may be subject to withholding and other taxes imposed by such
countries, which will reduce the amount available for distribution to
shareholders. If more than 50% of the value of either Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, that
Fund will be eligible and intends to elect to "pass-through" to shareholders the
amount of foreign income and similar taxes it has paid. Pursuant to this
election, shareholders of the electing Fund will be required to include in gross
income (in addition to the full amount of the taxable dividends actually
received) their pro rata share of the foreign taxes paid by that Fund. Each such
shareholder will also be entitled either to deduct (as an itemized deduction)
its pro rata share of foreign taxes in computing its taxable income or to claim
a foreign tax credit against its U.S. federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions, but such a shareholder may be eligible to claim the
foreign tax credit. The deduction for foreign taxes is not allowable in
computing alternative minimum taxable income. Each shareholder will be notified
within 60 days after the close of that Fund's taxable year whether the foreign
taxes paid by the Fund will "pass through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or her foreign
source taxable income. For this purpose, if the pass-through election is made,
the source of each Fund's income flows through to its shareholders. Any gains
from the sale of securities by either Fund will be treated as derived from U.S.
sources and certain currency fluctuation gains, including fluctuation gains from
foreign currency-denominated debt securities, receivables and payables, will be
treated as ordinary income derived from U.S. sources. The
34
<PAGE>
limitation on the foreign tax credit is applied separately to foreign source
passive income (as defined for purposes of the foreign tax credit), including
the foreign source passive income passed through by each Fund. Because of the
limitation, shareholders taxable in the United States may be unable to claim a
credit for the full amount of their proportionate share of the foreign taxes
paid by each Fund. The foreign tax credit also cannot be used to offset more
than 90% of the alternative minimum tax (as computed under the Code for purposes
of this limitation) imposed on corporations and individuals.
Shareholders will be notified annually by each Fund as to the United States
federal income tax status of the dividends, distributions and deemed
distributions made by the Fund to its shareholders. Furthermore, shareholders
will also receive, if appropriate, various written notices after the close of
each Fund's taxable year regarding the United States federal income tax status
of certain dividends, distributions and deemed distributions that were paid, or
that are treated as having been paid, by that Fund to its shareholders during
the preceding taxable year. For a more detailed discussion of tax matters
affecting each Fund and its shareholders, see "Taxation" in the SAI.
35
<PAGE>
INFORMATION ABOUT THE MERGER
GENERAL. Under the Plan, ETF will merge with and into EMG on the Effective
Date. As a result of the Merger and on the Effective Date:
- ETF will no longer exist,
- EMG will be the surviving corporation, and
- EMG will change its name to "The Emerging Markets Telecommunications Fund,
Inc." and will adopt ETF's investment policies.
ETF will then:
- deregister as an investment company under the Investment Company Act,
- cease its separate existence under Maryland law,
- remove its shares of common stock from listing on the NYSE, and
- withdraw from registration under the Securities Exchange Act of 1934, or
the Securities Exchange Act.
Each share of outstanding stock of ETF will convert into an equivalent
dollar amount of full shares of stock of the Surviving Fund, based on the net
asset value per share of each Fund calculated at 4:00 p.m. on the Business Day
preceding the Effective Date. The Surviving Fund will not issue any fractional
shares to ETF shareholders. In lieu thereof, the Surviving Fund will purchase
all fractional shares at the current net asset value of the shares and remit the
cash proceeds to former shareholders of ETF in proportion to their fractional
shares. No sales charge or fee of any kind will be charged to ETF shareholders
in connection with their receipt of common stock of the Surviving Fund in the
Merger.
If approved, the Merger is expected to occur shortly after the completion of
the Tender Offer. Under Maryland law, shareholders of a corporation whose shares
are traded publicly on a national securities exchange, such as the Funds'
shares, are not entitled to demand the fair value of their shares upon a merger;
therefore, the shareholders of the Funds will be bound by the terms of the
Merger. However, any shareholder of either Fund may sell his or her shares of
common stock at any time prior to the Merger on the NYSE.
The Plan may be terminated and the Merger abandoned, whether before or after
approval by the Funds' shareholders, at any time prior to the Effective Date:
- by the mutual written consent of the Board of Directors of each Fund, or
- by either Fund if the conditions to that Fund's obligations under the Plan
have not been satisfied or waived.
If the Merger has not been consummated by December 31, 2000, the Plan
automatically terminates on that date, unless a later date is mutually agreed
upon by the Board of Directors of each Fund.
REASONS FOR THE MERGER. The Board of Directors of each Fund considered and
unanimously approved the proposed Merger at separate meetings of each Board held
on July 24, 2000. All of the Directors of each Fund were present at the meeting
in person. For the reasons discussed below, the Board of Directors of each Fund,
including Non-interested Directors of each Fund, after consideration of the
potential benefits of the Merger to the shareholders of that Fund and the
expenses expected to be incurred by that Fund in connection with the Merger,
unanimously determined that:
- the interests of the existing shareholders of that Fund will not be
diluted as a result of the proposed Merger, and
- the proposed Merger is in the best interests of that Fund.
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<PAGE>
Each Board of Directors has, over the years, discussed the significance of
the existence of the discount to net asset value at which each Fund's shares
have traded on the NYSE and the impact on shareholders of the discount. Each
Board has discussed and considered various alternative strategies to address the
discount, including instituting share repurchases, combining with other funds,
converting to an open-end format, or liquidating. The Directors of each Fund,
however, have consistently concluded that it was in the best interests of each
Fund and its shareholders to maintain the current closed-end format, because, in
the view of the Boards and of CSAM, the closed-end format is the most
appropriate investment vehicle for participating in the equities markets of
emerging countries. In CSAM's view, many attractive equity investment
opportunities in emerging countries have been and continue to be found in the
small-capitalization and less liquid sectors of those markets. The Board of
Directors of each Fund believes that the long-term performance of each Fund
supports this view.
In the context of each Board's ongoing consideration of the impact of the
market price discount on each Fund and its shareholders, the Non-interested
Directors of each Fund retained PaineWebber, as financial adviser, to assist in
this process and requested that PaineWebber evaluate possible alternatives to
address these concerns and otherwise enhance shareholder value. The Boards
further requested that, in evaluating the possible alternatives, PaineWebber
take into consideration the interests of all shareholders.
The alternatives available to the Funds, including a full range of
alternatives that has been reviewed in the past discussions of the discount
issue, were considered at meetings of each Board of Directors held on February
8, 2000, April 6, 2000, May 8, 2000, June 27, 2000 and July 24, 2000. After
consideration of these alternatives, PaineWebber proposed, and the Board of
Directors of each Fund approved, the course of action described below. Morrison
& Foerster, counsel to the Non-interested Directors of the Funds, assisted the
Non-interested Directors in their consideration of these matters. Willkie Farr &
Gallagher, counsel for the Funds and CSAM, also assisted the Funds in their
consideration of these matters.
IN THE JUDGMENT OF THE BOARD OF DIRECTORS OF EACH FUND, THE MERGER SERVES
THE BEST INTERESTS OF EACH FUND AND ITS SHAREHOLDERS.
In deciding to approve the course of action described below, the
Non-interested Directors considered many factors, including but not limited to,
market information, analyses and advice provided to them by PaineWebber. In
addition, in considering the merits of the proposed Merger, the Boards also
considered the larger asset size of the combined Fund relative to each
constituent Fund standing alone, the newly revised fee structure and the
potential for economies of scale that may result from the larger asset size of
the combined Fund. Based on data presented by PaineWebber and CSAM, the Board of
Directors of each Fund believes that a combination of the Funds may result in a
total operating expense ratio that will be lower than the total operating
expense ratio of either Fund currently.
The Boards also considered whether a larger asset base would provide
benefits in portfolio management. After the Merger, the Surviving Fund may be
better able to diversify portfolio equity holdings and thereby mitigate risks,
while participating in more equity investment opportunities. In addition, a
larger asset size could result in a more liquid trading market for shares of the
Surviving Fund than either Fund currently enjoys separately, which might have a
positive impact on the discount at which each Fund's shares have tended to
trade. Further, the Merger itself should focus the attention of a wider circle
of securities analysts on the Surviving Fund and, after the Merger, may
facilitate securities analysts' following of this Fund because the Merger may
eliminate confusion in the marketplace that results from two funds with a
similar objective, similar policies and similar names managed by the same
adviser.
There can be no guarantee that any of these potential beneficial results
will be realized.
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<PAGE>
The Board of Directors of each Fund, in declaring advisable and recommending
the proposed Merger, also considered the following:
(1) the capabilities and resources of CSAM and its affiliates in the areas
of investment management and shareholder servicing;
(2) expense ratios and information regarding fees and expenses of the Funds,
both currently and on a pro forma basis;
(3) the terms and conditions of the Merger and whether it would result in
dilution of the interests of each Fund and its existing shareholders;
(4) the compatibility of each Fund's portfolio securities, investment
objective, policies and restrictions;
(5) the tax consequences to each Fund and its shareholders in connection
with the Merger; and
(6) the anticipated expenses of the Merger.
In reviewing issues relating to the structure of the Merger and the
selection of the surviving corporation in the Merger, each Board also considered
information provided to them by CSAM and PaineWebber concerning:
- the comparative performance records of the two Funds,
- public and market perception of the two Funds,
- the relative size of the two Funds,
- the investment policies, strategies and personnel CSAM intends to utilize
in managing the merged fund, and
- PaineWebber's recommendation that the investment policies of the Surviving
Fund be those of ETF.
In evaluating the comparative fee and expense structures of the two Funds,
the Boards noted that CSAM has agreed, effective July 1, 2000, to voluntarily
waive that portion of the investment advisory fee payable by EMG to the level
that would be obtained if the fee was based on the average weekly market value
of the Fund's outstanding shares rather than the average weekly net asset value,
whenever the Fund's shares are trading at a discount to net asset value. The
Board of Directors of EMG recommends that the shareholders of the Fund approve a
new investment advisory agreement which, among other changes, will formalize
this new fee calculation. For more information about the new investment advisory
agreement, see "Proposal 3 (Emerging Markets Infrastructure Fund Shareholders
Only): Approval of New Investment Advisory Agreement."
Finally, each Board considered the impact of the breakpoints in the
investment advisory fee in the context of the Surviving Fund's larger asset
base. Assuming the Tender Offer is fully subscribed and Proposal 3 is approved
and based on the market value of EMG and the net asset values of each Fund as of
June 30, 2000, the blended investment advisory fee using the breakpoints would
be 0.89% of the Surviving Fund's net assets.
Based on the factors discussed above, the Board of Directors of each Fund
concluded that the expenses of the Merger are outweighed by the benefits that
are anticipated to be derived from the Merger. In addition, the Boards of each
Fund, including the Non-interested Directors of each Fund, have unanimously
concluded that:
- the Merger is in the best interests of each respective Fund, and
- the interests of existing shareholders of each respective Fund will not be
diluted as a result of the transactions contemplated by the Plan.
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<PAGE>
TERMS OF THE MERGER AGREEMENT. The following is a summary of the
significant terms of the Plan. This summary is qualified in its entirety by
reference to the Plan, attached hereto as Exhibit A.
At the Effective Date, each share of common stock of ETF will convert into
an equivalent dollar amount (to the nearest one ten-thousandth of one cent) of
full shares of common stock of the Surviving Fund, based on the net asset value
per share of each Fund calculated at 4:00 p.m. on the Business Day preceding the
Effective Date. The Surviving Fund will not issue any fractional shares to ETF
shareholders. In lieu thereof, the Surviving Fund will purchase all fractional
shares at the current net asset value of the shares and remit the cash proceeds
to former shareholders of ETF in proportion to their fractional shares.
For purposes of valuing assets in connection with the Merger, the assets of
ETF will be valued pursuant to the principles and procedures consistently
utilized by EMG, which principles and procedures are also utilized by ETF in
valuing its own assets and determining its own liabilities. As a result, it is
not expected that EMG's valuation procedures as applied to ETF's portfolio
securities will result in any difference from the valuation that would have
resulted from the application of ETF's valuation procedures to such securities.
The net asset value per share of common stock of the Surviving Fund will be
determined in accordance with these principles and procedures, and the Surviving
Fund will certify the computations involved. The net asset value per share of
each Fund will not be adjusted to take into account differences in unrealized
gains and losses.
The Surviving Fund will issue separate certificates or share deposit
receipts for common stock of the Surviving Fund to shareholders of ETF. The
Surviving Fund will deliver these certificates or share deposit receipts
representing shares of common stock of the Surviving Fund to Fleet National Bank
c/o EquiServe, L.P., as the transfer agent and registrar for common stock of the
Surviving Fund. The Surviving Fund will not permit any ETF shareholder to
receive new certificates representing shares of common stock of the Surviving
Fund until this shareholder has surrendered his or her outstanding certificates
representing shares of the common stock of ETF or, in the event of lost
certificates, posted adequate bond. ETF will request its shareholders to
surrender their outstanding certificates representing shares of the common stock
of ETF or post adequate bond therefor. Dividends payable to holders of record of
shares of the Surviving Fund as of any date after the Effective Date and prior
to the exchange of certificates by any shareholder of ETF will be paid to such
shareholder, without interest; however, such dividends will not be paid unless
and until such shareholder surrenders his or her stock certificates of ETF for
exchange.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. UPON CONSUMMATION
OF THE MERGER, SHAREHOLDERS OF EACH FUND WILL BE FURNISHED WITH INSTRUCTIONS FOR
EXCHANGING THEIR STOCK CERTIFICATES FOR STOCK CERTIFICATES OF THE SURVIVING
FUND.
The net asset value of the shares of the Surviving Fund received by ETF
shareholders plus the cash amounts received upon the purchase of fractional
share interests by the Surviving Fund will equal the net asset value of the ETF
shares exchanged.
The Plan provides, among other things, that the Merger will not take place
without:
- the requisite approval of the shareholders of ETF and EMG, and
- the effectiveness of a Registration Statement on Form N-14.
The Plan may be terminated at any time prior to the Effective Date by mutual
agreement of each Fund's Board of Directors or by either Fund if the other has
violated a condition of the Plan. The Plan will automatically terminate after
December 31, 2000 if the Merger has not been consummated, unless such time is
extended by mutual agreement of the Board of Directors of each Fund.
The Plan may be amended, modified or supplemented by mutual agreement of EMG
and ETF. However, no amendments which would have the effect of changing the
provisions for determining the
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<PAGE>
number of shares issued to ETF shareholders will be permitted following the
special meeting unless those shareholders consent to the amendment.
EXPENSES OF THE MERGER. In evaluating the proposed Merger, CSAM has
estimated the amount of expenses the Funds would incur, including NYSE listing
fees, SEC registration fees, financial adviser fees, legal and accounting fees
and proxy and distribution costs and expenses incurred in connection with the
Tender Offer. The estimated total expenses pertaining to the Merger and the
Tender Offer are $1,106,003. For more information about the expenses of the
Merger, See "Synopsis--Expenses of the Merger."
The expenses of the Merger are expected to result in a reduction in ETF's
net asset value per share of approximately $0.07, and a reduction in EMG's net
asset value per share of approximately $0.03. The expenses related to the Tender
Offer, estimated at $220,000, will reduce the net asset value per share of EMG
by approximately $0.02.
TAX CONSIDERATIONS. The Plan and Merger are conditioned upon the receipt by
the Funds of an opinion from Willkie Farr & Gallagher, substantially to the
effect that, based upon the facts, assumptions and representations of the
parties, for federal income tax purposes:
- the Merger will constitute a tax-free "reorganization" within the meaning
of Section 368(a)(1) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of Section 368(b) of the Code,
- no gain or loss will be recognized by either Fund as a result of the
Merger,
- the basis of the assets of ETF in the hands of the Surviving Fund will be
the same as the basis of such assets to ETF immediately prior to the
Merger,
- the holding period of the assets of ETF in the hands of the Surviving Fund
will include the period during which such assets were held by ETF,
- no gain or loss will be recognized by the shareholders of ETF upon the
conversion of their ETF shares into common stock of the Surviving Fund
except with respect to cash received upon the purchase of fractional share
interests by the Surviving Fund,
- the basis of shares of the Surviving Fund received by the shareholders of
ETF and the basis of fractional share interests purchased by the Surviving
Fund will be the same as the basis of the shares of ETF exchanged
therefor,
- the holding period of shares of the Surviving Fund received by the
shareholders of ETF and the holding period of fractional share interests
purchased by the Surviving Fund will include the holding period during
which the shares of ETF exchanged therefor were held, provided that at the
time of the exchange the shares of ETF were held as capital assets in the
hands of the shareholders of ETF, and
- cash received for fractional share interests purchased by the Surviving
Fund will generate gain or loss to shareholders receiving such cash.
While ETF is not aware of any adverse state or local tax consequences of the
proposed Merger, it has not requested any ruling or opinion with respect to such
consequences and shareholders may wish to consult their own tax advisers with
respect to such matters.
HISTORY OF THE EMERGING MARKETS INFRASTRUCTURE FUND'S DISCOUNT. EMG's
shares have generally traded at a discount to their net asset value per share
since shortly after its commencement of operations. See "Additional Information
About The Funds--Discount to Net Asset Value." The Board of Directors of EMG has
considered a number of actions in response to this discount.
In October 1998, the Board of Directors of each Fund engaged in a share
repurchase program of up to 15% of that Fund's outstanding common stock. In
February 1999, EMG's Board authorized significant enhancements to this share
repurchase program, including repurchases of 10% of the Fund's
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<PAGE>
outstanding shares on a rolling 12-month basis (rather than an annual basis) and
permitting repurchases of the Fund's outstanding shares (subject to the 15%
annual limit) whenever the discount to net asset value is 15% or more. EMG's
Board authorized another share repurchase program for not less than 10% nor more
than 15% of the Fund's outstanding common stock in October 1999 after
repurchasing the full amount of shares authorized under the first share
repurchase program. Both share repurchase programs were intended to provide
additional liquidity to those shareholders who elected to sell their shares and
to enhance the net asset value of the shares held by shareholders who maintained
their investment.
In May 1999, EMG's Board of Directors approved a self tender. Pursuant to
this self tender, EMG acquired 3,011,714 shares of its common stock,
representing approximately 20% of its then outstanding shares for a cash
purchase price equal to 95% of EMG's net asset value per share on June 25, 1999,
the date of the closing of the tender offer.
In May 2000, the Board of Directors of EMG, in recognition of the fact that
the Fund's shares continue to trade at a discount to their net asset value and
after consulting PaineWebber, determined that it was in the best interests of
the Fund to initiate the Tender Offer to acquire up to 50% of its shares of
common stock at a price per share equal to 95% of the Fund's net asset value per
share as of the end of the Tender Offer period. This Tender Offer is conditioned
upon the approval of the Plan by the shareholders of both Funds and will not
occur if these approvals are not obtained.
The Board of Directors of EMG has approved the overall terms of a
self-tender program that the Fund intends to launch in the calendar year 2001,
which terms include the following: (i) the Surviving Fund will make a tender
offer to acquire at least 15% of its outstanding shares during each calendar
year of the program; and (ii) the per share purchase price will be at least 95%
of the Surviving Fund's net asset value per share. Implementation of the program
is conditioned on approval of the Merger.
The Directors have reserved the right to decide on the timing and the terms
of specific tenders, subject to adherence to the terms described above. The
Board of Directors intends to continue the self-tender program indefinitely,
subject to changes in economic or market conditions or other factors. For
example, a sustained reduction in the market discounts at which the Surviving
Fund's shares are trading, a risk of material adverse tax consequences or a risk
of the Surviving Fund becoming subject to delisting may lead its Board to
conclude in the future that it is appropriate to suspend the self-tender
program. In addition, the self-tender program is likely to reduce the Surviving
Fund's asset levels over time. Absent substantial appreciation in the Surviving
Fund's portfolio or opportunities to raise additional funds, this could lead to
higher expense ratios, the absence of reasonable diversification or investment
opportunities, or other factors that adversely affect the Surviving Fund and,
possibly, the continued viability of the Surviving Fund as a closed-end fund.
The Board will evaluate the program from time to time in light of its effects on
the Surviving Fund.
The Boards of Directors view this self-tender program as a further
enhancement to the actions previously announced by ETF and EMG to enhance
shareholder value, which, in addition to the Merger, includes the modification
of the CSAM investment advisory agreement pursuant to which the advisory fees
are based on the Fund's stock price (market value) rather than net asset value
whenever its shares are trading at a discount, and the payment of 50% of the
Directors' annual retainer in shares of the Fund.
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<PAGE>
ADDITIONAL INFORMATION ABOUT THE FUNDS
DESCRIPTION OF SECURITIES TO BE ISSUED. The authorized stock of ETF
consists of 100,000,000 shares of common stock, U.S.$0.001 par value. Shares of
ETF entitle its holders to one vote per share. Holders of ETF's common stock are
entitled to share equally in dividends authorized by the Fund's Board of
Directors payable to the holders of such common stock and in the net assets of
ETF available for distribution to holders of such common stock. Shares have
noncumulative voting rights and no conversion, preemptive or other subscription
rights, and are not redeemable. The outstanding shares of common stock of ETF
are fully paid and non-assessable. In the event of liquidation, each share of
common stock is entitled to its proportion of the Fund's assets after payment of
debts and expenses. ETF holds shareholder meetings annually.
The following table shows information about the common stock of each Fund as
of June 30, 2000.
<TABLE>
<CAPTION>
(3) (4)
AMOUNT HELD AMOUNT ISSUED
(2) BY FUND AND OUTSTANDING
(1) AMOUNT FOR ITS OWN EXCLUSIVE OF AMOUNT
TITLE OF CLASS AUTHORIZED ACCOUNT SHOWN UNDER (3)
---------------- ----------- ----------- -------------------
<S> <C> <C> <C> <C>
EMERGING MARKETS Common Stock, 100,000,000 None 7,100,819
TELECOMMUNICATIONS FUND $0.001 par value
EMERGING MARKETS Common Stock, 100,000,000 None 11,175,955
INFRASTRUCTURE FUND $0.001 par value
</TABLE>
The shares of common stock of ETF and EMG are listed and trade on the NYSE
under the symbols "ETF" and "EMG", respectively. As of August 25, 2000, the net
asset value of ETF common stock was $18.30, and the market price per share was
$14.50. As of that same date, the net asset value of EMG common stock was
$12.86, and the market price per share was $11.00.
DISCOUNT TO NET ASSET VALUE. Shares of closed-end investment companies,
such as the Funds, have frequently traded at a discount from net asset value.
This characteristic is a risk separate and distinct from the risk that the
Funds' net asset values may decrease, and this risk may be greater for
shareholders expecting to sell their shares in a relatively short period. THE
SHARES OF COMMON STOCK OF THE FUNDS SHOULD THUS BE VIEWED AS BEING DESIGNED
PRIMARILY FOR LONG-TERM INVESTORS AND SHOULD NOT BE CONSIDERED A VEHICLE FOR
TRADING PURPOSES.
During the period since the inception of the Funds, the common stock of both
Funds has generally traded at a discount to net asset value, and does so
currently. It is not possible to state whether shares of the Surviving Fund will
trade at a premium or discount to net asset value following the Merger, or the
extent of any such premium or discount. The Directors of both Funds have
regularly considered, and the Directors of the Surviving Fund will continue to
consider, the respective Fund's market price discount and the effect of the
discount on the Surviving Fund and its shareholders.
42
<PAGE>
PER SHARE DATA FOR THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
COMMON STOCK TRADED ON THE NYSE
<TABLE>
<CAPTION>
DISCOUNT
MARKET PRICE NET ASSET VALUE AS % OF NAV
------------------- ------------------- -------------------
PERIOD HIGH LOW HIGH LOW HIGH LOW
------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1998
First Quarter.......................... $ 15.000 $11.8750 $18.16 $14.91 20.36% 11.72%
Second Quarter......................... 15.000 12.0625 18.29 15.35 22.42 18.33
Third Quarter.......................... 13.750 7.6875 17.28 10.92 28.12 19.10
Fourth Quarter......................... 11.125 8.0625 13.41 10.36 22.95 16.96
1999
First Quarter.......................... 9.8750 8.8125 12.01 10.66 20.48 11.95
Second Quarter......................... 11.1250 9.3125 13.63 11.36 20.36 10.64
Third Quarter.......................... 11.3125 10.2500 14.16 12.91 23.20 16.45
Fourth Quarter......................... 16.1250 10.2500 20.89 13.14 25.10 17.64
2000
First Quarter.......................... 20.0625 15.1250 25.21 19.52 20.48 11.95
Second Quarter......................... 18.2500 12.7500 22.58 17.17 26.95 18.14
Third Quarter (through August 1,
2000)................................ 15.8125 13.8750 20.35 18.09 24.66 20.46
</TABLE>
PER SHARE DATA FOR THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
COMMON STOCK TRADED ON THE NYSE
<TABLE>
<CAPTION>
DISCOUNT
MARKET PRICE NET ASSET VALUE AS % OF NAV
------------------- ------------------- -------------------
PERIOD HIGH LOW HIGH LOW HIGH LOW
------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1998
First Quarter........................... $12.4375 $10.625 $15.28 $13.19 20.72% 14.50%
Second Quarter.......................... 12.2500 9.125 15.06 12.05 25.36 19.33
Third Quarter........................... 10.5625 5.500 13.44 8.23 30.48 20.60
Fourth Quarter.......................... 7.8750 5.750 9.97 8.00 27.97 20.60
1999
First Quarter........................... 8.1250 6.9375 9.97 9.03 24.56 15.63
Second Quarter.......................... 9.6250 8.0000 11.48 9.77 20.77 14.44
Third Quarter........................... 9.4375 8.4375 11.97 11.02 40.99 18.88
Fourth Quarter.......................... 11.2500 8.2500 15.07 10.85 26.36 21.73
2000
First Quarter........................... 13.5625 11.0625 17.31 14.63 25.50 19.48
Second Quarter.......................... 13.0000 10.8125 16.57 13.00 24.56 14.35
Third Quarter (through August 1,
2000)................................. 12.4380 11.1880 14.58 13.20 16.03 12.81
</TABLE>
43
<PAGE>
CAPITALIZATION. The following table shows on an unaudited basis the
capitalization of ETF and EMG as of May 31, 2000 and on a pro forma basis as of
that same date giving effect to the Tender Offer and the Merger(1):
<TABLE>
<CAPTION>
EMERGING
EMERGING MARKETS MARKETS PRO FORMA FOR
TELECOMMUNICATIONS INFRASTRUCTURE PRO FORMA TENDER OFFER
FUND FUND ADJUSTMENTS AND MERGER
------------------ -------------- ------------ -------------
<S> <C> <C> <C> <C>
Net assets......................... $130,300,455 $152,360,458 $(76,977,103) $205,683,810
Net asset value per share (2)...... $ 18.35 $ 13.63 $ 13.63(3)
Shares outstanding (4)............. 7,100,819 11,175,955 (3,186,252) 15,090,522
</TABLE>
--------------
(1) Assumes that the Tender Offer was fully subscribed and that the Tender Offer
and the Merger each had been consummated on May 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares
of EMG common stock shareholders of ETF will receive on the date the Merger
takes place, and the foregoing should not be relied upon to reflect the
number of shares of EMG common stock that actually will be received on or
after such date. Assumes distributions of ordinary income and accrual of
estimated Tender Offer and Merger expenses of $1,106,003.
(2) Net asset value per share after Tender Offer- and Merger-related expenses.
(3) Subsequent to the proposed merger, ETF, the accounting survivor, will
restate its historical financial highlights to reflect the adjustment to its
net asset value per share which will result from the exchange of its net
assets for shares of EMG.
(4) Assumes the issuance of 9,534,327 shares in exchange for the net assets of
ETF (assuming the Tender Offer is fully subscribed). The number of shares
issued was based on the net asset value of each Fund, net of estimated
Tender Offer and Merger expenses and distributions, on May 31, 2000.
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund intends to distribute
dividends from its net investment income and any net realized capital gains
after utilization of capital loss carryforwards annually to prevent application
of a federal excise tax. An additional distribution may be made if necessary.
Any dividends or capital gains distributions declared in October, November or
December with a record date in such a month and paid during the following
January will be treated by shareholders for federal income tax purposes as if
received on December 31 of the calendar year in which it is declared. Dividends
and distributions of each Fund are invested in shares of the Fund at market
value and credited to the shareholder's account on the settlement date which is
usually three Business Days from the purchase date or, at the shareholder's
election, paid in cash.
If the Merger is approved by each Fund's shareholders, then as soon as
practicable before the Effective Date, each Fund will pay its shareholders a
cash distribution of all undistributed 2000 net investment income unless such
amounts are immaterial. It is expected that any undistributed realized net
capital gains, including any that EMG may realize as a result of disposing of
portfolio securities to raise funds to finance the Tender Offer, will be offset
through the utilization of capital loss carryforwards prior to the Effective
Date.
PORTFOLIO VALUATION. Investments of each Fund are stated at value in each
Fund's financial statements. All securities for which market quotations are
readily available are valued at the last sales price or, lacking any sales, at
the closing price last quoted for the securities (but if bid and asked
quotations are available, at the mean between the 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 fair value as determined in good faith by each Fund's Board of
Directors. Short-term investments having a maturity of 60 days or less are
valued on
44
<PAGE>
the basis of amortized cost. The Board of Directors of each Fund has established
general guidelines for calculating fair value of securities that are not readily
marketable. At May 31, 2000, ETF held 11.03% of its net assets in securities
valued in good faith by the Board of Directors with an aggregate cost of
$15,396,542 and fair value of 14,373,701, and EMG held 6.97% of its net assets
in securities valued in good faith by its Board of Directors with an aggregate
cost of $12,551,543 and fair value of $10,625,469. The net asset value per share
of each Fund is calculated on each Business Day.
For purposes of valuing assets in connection with the Merger, the assets of
ETF will be valued pursuant to the principles and procedures consistently
utilized by EMG, which principles and procedures are also utilized by ETF in
valuing its own assets and determining its own liabilities. As a result, it is
not expected that EMG's valuation procedures as applied to ETF's portfolio
securities will result in any difference from the valuation that would have
resulted from the application of ETF's valuation procedures to such securities.
PORTFOLIO TRANSACTIONS. The Funds may utilize Celfin, CS First Boston
Corporation and other affiliates of Credit Suisse, in connection with the
purchase or sale of securities in accordance with rules or exemptive orders
promulgated by the SEC when CSAM believes that the charge for the transaction
does not exceed usual and customary levels. For a more detailed discussion of
each Fund's brokerage allocation practice, see "Portfolio Transactions" in the
SAI.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN. Each Fund operates a Dividend
Reinvestment and Cash Purchase Plan, the InvestLink-SM- Program, or the Program,
sponsored and administered by Fleet National Bank c/o EquiServe, L.P., pursuant
to which Fund dividends and distributions, net of any applicable U.S.
withholding tax, are reinvested in shares of the Fund. Fleet National Bank c/o
EquiServe, L.P., serves as the Program Administrator for the shareholders in
administering the Program.
An interested shareholder 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 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 Program. The receipt of
dividends and distributions in stock under the Program will not relieve
participants of any income tax (including withholding tax) that may be payable
on such dividends or distributions.
Certain distributions of cash attributable to (a) some of the dividends and
interest amounts paid to the Funds and (b) certain capital gains earned by the
Funds that are derived from securities of issuers from emerging countries are
subject to taxes payable by the Funds at the time amounts are remitted. Such
taxes will be borne by the Funds and allocated to all shareholders in proportion
to their interests in the Funds.
If the Board of Directors of a Fund declares an income dividend or a capital
gains distribution payable either in that Fund's common stock or in cash, as
shareholders may have elected, nonparticipants in the Program will receive cash
and participants in the Program will receive shares of common stock of the Fund
purchased on the open market by the Program Administrator. The number of shares
of common stock 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
45
<PAGE>
purchase price of the shares. Such purchases will be made by participating
brokers as agent for the participants using normal cash settlement practices.
All shares of common stock purchased through the Program will be allocated to
participants as of the settlement date, which is usually three Business Days
from the purchase date.
Participants in the Program also have the option of making additional cash
payments, or bank account deductions, to the Program Administrator for the
purchase of shares of common stock of the Fund, in any amount from $100 up to
$3,000 semi-annually.
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 these transaction charges,
participants will be assessed per share processing fees which include brokerage
commissions. Participants will not be charged any fee for reinvesting dividends.
All correspondence concerning the Program should be directed to the Program
Administrator at Fleet National Bank c/o EquiServe, L.P., InvestLink Program,
P.O. Box 8040, Boston, MA 02266-8040. For a more complete description of the
Plan, see "Dividend Reinvestment and Cash Purchase Plan" in the SAI.
CORPORATE GOVERNANCE PROVISIONS. Both Funds are Maryland corporations and
in many respects have similar charter and by-law provisions.
SPECIAL VOTING PROVISIONS AND REQUIREMENTS. The Articles of Incorporation
and By-laws of each Fund contain provisions that could have the effect of
limiting the ability of other entities or persons to acquire control of the
Fund, to cause it to engage in certain transactions or to modify its structure.
The Board of Directors of each Fund is divided into three classes each having a
term of three years. Each year, the term of one class expires and the successor
or successors elected to such class will serve for a three-year term. This
provision could delay for up to two years the replacement of a majority of the
Board of Directors.
In addition, conversion of either of the Funds from a closed-end to an
open-end investment company requires the affirmative vote of at least 75% of the
directors and of the holders of 75% of the shares of the respective Fund unless
approved by at least 75% of the Continuing Directors (as defined below). If the
conversion is approved by at least 75% of the Continuing Directors, the
affirmative vote of at least 75% of the directors and of the holders of a
majority of the outstanding shares of each Fund will be required to approve such
conversion. Converting to an open-end investment company could restrict the
ability of either Fund to redeem its shares otherwise than in kind due to the
limited depth of the markets for certain securities in which the Funds may
invest. As a result, there can be no assurance that the Funds could realize the
then market value of the portfolio securities the Funds would be required to
liquidate to meet redemption requests.
The affirmative vote of at least 75% of the directors and of the holders of
at least 75% of the shares of either of the Funds is required to authorize any
of the following transactions:
(i) merger, consolidation or share exchange of either of the Funds with or
into any other person;
(ii) issuance or transfer by either of the Funds (in one or a series of
transactions in any 12-month period) of any securities of either of the
Funds to any other person or entity for cash, securities or other
property (or combination thereof) having an aggregate fair market value
of $1,000,000 or more, excluding sales of securities of the Funds in
connection with a public offering, issuances of securities of either of
the Funds pursuant to a dividend reinvestment
46
<PAGE>
plan adopted by the Funds and issuances of securities of either of the
Funds upon the exercise of any stock subscription rights distributed by
either of the Funds;
(iii) sale, lease, exchange, mortgage, pledge, transfer or other disposition
by either of the Funds (in one or a series of transactions in any
12-month period) to or with any person of any assets of either of the
Funds having an aggregate fair market value of $1,000,000 or more,
except for portfolio transactions effected by either of the Funds in
the ordinary course of its business (transactions within clauses (i)
and (ii) and this clause (iii) each being known individually as a
"Business Combination");
(iv) any proposal as to the voluntary liquidation or dissolution of either
of the Funds or any amendment to either of the Funds' Articles of
Incorporation to terminate its existence; and
(v) any shareholder proposal as to specific investment decisions made or to
be made with respect to either Funds' assets.
However, in the case of a Business Combination or a voluntary liquidation
proposal as described in clause (iv) above, a 75% shareholder vote will not be
required if the transaction is approved by a vote of at least 75% of the
Continuing Directors or if certain conditions regarding the consideration paid
by the person entering into, or proposing to enter into, a Business Combination
with either Fund and various other requirements are satisfied. In that event, a
majority of the votes entitled to be cast by EMG's shareholders will be required
to approve such transaction if it is a transaction described in clauses (i) or
(iii) with respect to which a shareholder vote is required under Maryland law or
if it is a transaction described in clause (iv), and no shareholder vote will be
required otherwise. Similarly, in that event, a majority of the votes entitled
to be cast by ETF's shareholders will be required to approve such transaction if
it is a transaction described in clauses (i) or (iv), or if it is a transaction
described in clause (iii) involving a transfer of substantially all of ETF's
assets with respect to which shareholder approval is required under Maryland
law, and no shareholder action will be required otherwise.
Each Fund's By-laws contain provisions the effect of which is to prevent
matters, including nominations of directors, from being considered at
shareholders' meetings where the Fund has not received sufficient prior notice
of the matters.
The provisions described above could have the effect of depriving
shareholders of an opportunity to sell their shares at a premium over prevailing
market prices by discouraging a third party from seeking to obtain control of
either Fund in a tender offer or similar transaction. In the opinion of each
Fund's Board of Directors, however, these provisions offer several possible
advantages, including:
- they may require persons seeking control of either Fund to negotiate with
its management regarding the price to be paid for the shares required to
obtain such control,
- they promote continuity and stability, and
- they enhance each Fund's ability to pursue long-term strategies that are
consistent with its investment objectives.
The Board of Directors of each Fund has determined that the foregoing voting
requirements, which are generally greater than the minimum requirements under
Maryland law and the Investment Company Act, are in the best interests of
shareholders generally.
A "Continuing Director" is any member of the Board of Directors of either
Fund who:
- is not a person or affiliate of a person (other than an investment company
advised by the Fund's initial investment adviser or any of its affiliates)
who enters or proposes to enter into a Business Combination with either
Fund (such person or affiliate, an "Interested Party"), and
47
<PAGE>
- who has been a member of the Board of Directors of the respective Fund for
a period of at least 12 months, or is a successor of a Continuing Director
who is unaffiliated with an Interested Party and is recommended to succeed
a Continuing Director by a majority of the Continuing Directors then on
the Board of Directors of the respective Fund.
REMOVAL OF DIRECTORS. Directors of both Funds may be removed, with or
without cause, only by a vote of the holders of 75% of the shares of the
respective Fund entitled to be voted on that matter.
BY-LAWS. Each Fund's By-laws provide, among other things, that:
- a majority of the outstanding capital stock of such Fund is required to
request a special meeting of shareholders,
- certain advance notice requirements must be met in order for shareholders
to submit proposals at annual meetings and for nominations by stockholders
for election to the Board of Directors, and
- the power to amend the By-laws is reserved to the Board of Directors,
except as otherwise required by the Investment Company Act.
The full text of EMG's Articles of Incorporation and By-laws are on file
with the SEC and these documents, as may be amended from time to time, will
govern the Surviving Fund after the Merger.
INTEREST OF CERTAIN PERSONS. CSAM may be considered to have a financial
interest in the Merger, arising from the fact that the amount of its management
fee under the advisory agreement between CSAM and EMG will increase as the
amount of EMG's assets increases, and the amount of those assets will increase
by virtue of the Merger. However, the combined assets of both Funds, after
giving effect to the Tender Offer (assuming it is fully subscribed), will be
reduced by approximately 48% based on the Funds' net asset values as of June 30,
2000, and CSAM has agreed to voluntarily waive a portion of its advisory fee
payable by EMG as described above under "Information About The Merger-Reasons
for the Merger." In addition, assuming the Tender Offer is fully subscribed and
Proposal 3 is approved and based on the market value of EMG and the net asset
values of the Funds, the blended investment advisory fee, using the breakpoint,
would be 1.71% of the Surviving Fund's net assets after giving effect to the
Merger and would reduce the fee payable by EMG. Accordingly, CSAM's aggregate
advisory fees will be reduced as a result of the Merger. For more information
about the reduction in CSAM's aggregate advisory fees, see "Proposal 3 (Emerging
Markets Infrastructure Fund Shareholders Only): Approval of New Investment
Advisory Agreement."
48
<PAGE>
MANAGEMENT OF THE FUNDS
DIRECTORS AND PRINCIPAL OFFICERS. The business and affairs of each Fund are
managed under the direction of that Fund's Board of Directors, and the day to
day operations are conducted through or under the direction of the officers of
that Fund. Although both Funds are Maryland corporations, Martin M. Torino, a
director of each Fund, is a resident of Argentina, and a substantial portion of
his assets is located outside of the United States. Consequently, it may be
difficult for shareholders to enforce, in United States courts, judgments
against him obtained in such courts predicated on the civil liability provisions
of the United States securities laws. In addition, there is doubt as to the
enforceability in Argentine courts of liabilities predicated solely upon the
United States securities laws, whether or not such liabilities are based upon
judgments of courts in the United States.
Directors and Executive Officers of EMG and ETF are as follows:
<TABLE>
<CAPTION>
SHARES OF ETF BENEFICIALLY
NAME AND ADDRESS OWNED ON AUGUST 28, 2000 POSITION WITH THE FUND
------------------------------------ -------------------------- -------------------------------------
<S> <C> <C>
Dr. Enrique R. Arzac (1)(2) 1,000 Director
Columbia University Graduate
School of Business
New York, New York 10027
James J. Cattano (1)(2) 100 Director
55 Old Field Point Road
Greenwich, Connecticut 06830
George W. Landau (1)(2) 2,000 Director
Two Grove Isle Drive
Coconut Grove, Florida 33133
Martin M. Torino (1)(2) -- Director
TAU S.A.
25 de Mayo 252,
14th Floor
Buenos Aires, Argentina 1002
William W. Priest, Jr. (1) 1,000 Chairman of the Board
466 Lexington Avenue,
16th Floor
New York, New York 10017
Richard W. Watt (1) 1,790 President, Chief Investment Officer
466 Lexington Avenue, and Director
16th Floor
New York, New York 10017
Emily Alejos (1) -- Investment Officer
466 Lexington Avenue,
16th Floor
New York, New York 10017
Yarek Aranowicz (1) -- Investment Officer
466 Lexington Avenue,
16th Floor
New York, New York 10017
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
SHARES OF ETF BENEFICIALLY
NAME AND ADDRESS OWNED ON AUGUST 28, 2000 POSITION WITH THE FUND
------------------------------------ -------------------------- -------------------------------------
<S> <C> <C>
Robert B. Hrabchak (1) -- Investment Officer
466 Lexington Avenue,
16th Floor
New York, New York 10017
Hal Liebes (1) -- Senior Vice President
466 Lexington Avenue,
16th Floor
New York, New York 10017
Michael A. Pignataro (1) -- Chief Financial Officer
466 Lexington Avenue, and Secretary
16th Floor
New York, New York 10017
</TABLE>
------------------
(1) Also serves in the same capacity for ETF.
(2) Indicates Non-interested Directors of EMG and members of its audit
committee. These directors are also Non-interested Directors of ETF and
members of its audit committee.
All the directors and executive officers, as a group, of each of EMG and
ETF, as of August 28, 2000 owned less than 1% of the outstanding shares of EMG
and ETF, respectively.
Dr. Enrique R. Arzac, 58, is a Professor of Finance and Economics at the
Graduate School of Business, Columbia University (1971-present). Dr. Arzac is
also a Director of nine other CSAM-advised investment companies, and he is a
Director of The Adams Express Company and Petroleum and Resources Corporation.
James J. Cattano, 56, is President of Primary Resource Inc. (an
international trading and chemical processing company specializing in the sale
of agricultural and industrial commodities throughout Latin American markets)
(10/96-present). He was President of Atlantic Fertilizer & Chemical Company (an
international trading company specializing in the sale of agricultural
commodities in Latin American markets) (10/91-10/96) and President of Diamond
Fertilizer & Chemical Corporation, a subsidiary of Norsk Hydro A.S. (a Norwegian
agriculture, oil and gas, light metals and petro-chemical company) (1/84-10/91).
Mr. Cattano is also a Director of four other CSAM-advised investment companies.
George W. Landau, 80, is Senior Advisor, Latin America Group, The Coca Cola
Company (since 1988). Ambassador Landau was President of the Americas Society
and Council of the Americas (7/85-10/93). He was the United States Ambassador to
Venezuela (1982-1985), United States Ambassador to Chile (1977-1982) and United
States Ambassador to Paraguay (1972-1977). Ambassador Landau is also a Director
of five other CSAM-advised investment companies, and he is a Director of
Emigrant Savings Bank and GAM Funds, Inc.
Martin M. Torino, 50, is Chairman of the Board of Ingenio y Refineria San
Martin Del Tabacal S.A. since August 1996 and the Executive Director of TAU S.A.
(a commodities trading firm) since November 1990. Mr. Torino was President of
DYAT S.A. (10/93-present) and an Executive Vice President of Louis Dreyfus Sugar
Company, Inc. (a commodities trading firm) from 1984 to 1990. Mr. Torino is also
a Director of four other CSAM-advised investment companies.
William W. Priest, Jr., 58, has been Chairman and Managing Director of CSAM
since May 2000. Prior to May 2000, Mr. Priest was Chairman, Chief Executive
Officer and Executive Director of CSAM and Chairman--Management Committee of
CSAM. He is a Director of fifty-five other CSAM-advised investment companies.
50
<PAGE>
Richard W. Watt, 41, has been a Managing Director of CSAM since July 1996.
He was a Senior Vice President of CSAM (8/95-7/96), the Head of Emerging Markets
Investments and Research at Gartmore Investment Limited (11/92-6/95) and a
Director of Kleinwort Benson International Investment (5/87-10/92). He is a
Director of six other CSAM-advised investment companies.
Emily Alejos, 36, has been a Director of CSAM since January 1999. She was
Vice President of CSAM (4/97-1/99) and Vice President of Bankers Trust Co.
(8/93-3/97). Ms. Alejos is also Chief Investment Officer of The Brazilian Equity
Fund, Inc., The Latin America Equity Fund, Inc. and The Latin America Investment
Fund, Inc. and the Investment Officer of The Chile Fund, Inc. and ETF.
Yarek Aranowicz, 36, has been a Vice President of CSAM since March 1998. He
was a Director of Research for Europe and the Middle East, TransNational
Research Corporation (12/95-2/98) and an Analyst at John Hancock Financial
Services (5/92-6/95). Mr. Aranowicz is also an Investment Officer of The Latin
America Equity Fund, Inc., The Latin America Investment Fund, Inc., The Chile
Fund, Inc., The Brazilian Equity Fund, Inc. and ETF.
Robert B. Hrabchak, 36, is currently a Director of CSAM. Mr. Hrabchak was a
Vice President of CSAM (6/97-1/99) and Senior Portfolio Manager, Merrill Lynch
Asset Management, Hong-Kong (1/95-5/97). Mr. Hrabchak was also an Associate at
Salomon Brothers Inc. (4/93-1/95). Mr. Hrabchak is also the Chief Investment
Officer of The Indonesia Fund, Inc.
Hal Liebes, 36, has been a Managing Director and General Counsel of CSAM
since December 1999. He was Director and General Counsel of CSAM (3/97-12/99).
Mr. Liebes was Vice President and Counsel for Lehman Brothers, Inc. (6/96-3/97),
Vice President and Legal Counsel for CSAM (6/95-6/96) and Chief Compliance
Officer for CS First Boston Investment Management (3/94-6/95). He is also an
executive officer of other CSAM-advised investment companies.
Michael A. Pignataro, 40, has been a Vice President of CSAM since December
1995. He was an Assistant Vice President and the Chief Administrative Officer
for Investment Companies of CSAM (9/89-12/95). Mr. Pignataro is also an
executive officer of other CSAM-advised investment companies.
Mr. Torino is a resident of Argentina and a substantial portion of his
assets is located in Argentina. Mr. Torino has not appointed an agent for
service of process in the United States.
All the Directors and Officers of EMG are also Directors and Officers of
ETF.
Each Fund pays each of its directors who is not a director, officer,
partner, co-partner or employee of CSAM or any affiliate thereof an annual fee
of $5,000 plus $500 for each Board of Directors meeting attended. In addition,
each Fund will reimburse those directors for travel and out-of-pocket expenses
incurred in connection with Board of Directors meetings. The aggregate
remuneration paid to directors by ETF during the fiscal year ended May 31, 1999
was $41,000, and the aggregate remuneration paid to directors by EMG during the
fiscal year ended November 30, 1999 was $49,500.
On May 8, 2000, the Board of Directors of each of ETF and EMG unanimously
approved a proposal by the Non-interested Directors to partially compensate
Non-interested Directors in shares of the respective Funds. Under this new
policy, the Non-Interested Directors will receive 50% of their annual retainer
in the form of shares purchased by the respective Fund in the open market.
Paying directors' annual retainers in shares is intended to align the interests
of the Non-interested Directors with those of each Fund's shareholders.
The Articles of Incorporation and By-laws of each Fund provide that the Fund
will indemnify directors and officers and may indemnify employees or agents of
the Fund against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their positions with the Fund to the
fullest extent permitted by law. In addition, each Fund's Articles of
Incorporation provide that the Fund's directors and officers will not be liable
to shareholders for money damages, except in limited instances.
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<PAGE>
Each of the Non-interested Directors of the Funds is also party to an
Indemnification Agreement with the Fund or Funds as to which he serves as a
director providing for contractual rights of indemnity and advancement of
expenses. However, nothing in the Articles of Incorporation, the By-laws or the
Indemnification Agreements of either Fund protects or indemnifies a director,
officer, employee or agent against any liability to which such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
person's office. Insurance obtained by either Fund shall not protect or purport
to protect officers or directors or the investment adviser of that Fund against
any liability to the Fund or its shareholders to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of their obligations and duties.
INVESTMENT MANAGERS. CSAM, located at 466 Lexington Avenue, 16th Floor, New
York, New York 10017, is the investment manager to both ETF and EMG pursuant to
investment advisory agreements with each.
CSAM is an indirect wholly-owned U.S. subsidiary of Credit Suisse Group.
Credit Suisse Group is a global financial services company which provides a
comprehensive range of banking and insurance products. As of December 31, 1999,
Credit Suisse Group, through its institutional asset management and mutual fund
division, had approximately $203 billion of global assets under management. The
principal business address of Credit Suisse Group is Paradeplatz 8, CH 8070,
Zurich, Switzerland.
CSAM is a diversified asset manager, handling global equity, balanced, fixed
income and derivative securities accounts for private individuals, as well as
corporate pension and profit-sharing plans, state pension funds, union funds,
endowments and other charitable institutions. As of December 31, 1999,
CSAM-Americas managed approximately $72.0 billion in assets. CSAM is registered
as an investment adviser under the Investment Advisers Act of 1940, or the
Advisers Act. For information regarding a proposed new investment advisory
agreement with CSAM, see "Proposal 3 (Emerging Markets Infrastructure Fund
Shareholders Only): Approval of New Investment Advisory Agreement."
CSAM has sole investment discretion for each Fund's assets under the
supervision of each Fund's Board of Directors and in accordance with each Fund's
stated policies. CSAM will select investments for each Fund and will place
purchase and sale orders on behalf of the Funds. For information about each
Fund's investment advisory fees, including amounts paid for the 1999 fiscal
year, see "Synopsis--Fees and Expenses--The Emerging Markets Telecommunications
Fund" and "Synopsis--Fees and Expenses--The Emerging Markets Infrastructure
Fund."
CSAM's executive officers and directors are as follows: William W. Priest,
Jr., Richard W. Watt, Hal Liebes (all of whom are also executive officers or
directors of the Funds), James P. McCaughan, Laurence R. Smith, Elizabeth B.
Dater, Eugene L. Podsiadlo, Sheila N. Scott, Timothy T. Taussig, Robert D.
Birnbaum, Susan Black, Steven D. Bleiberg, Jo Ann Corkran, Alain G. De Coster,
Gregg M. Diliberto, Paul N. Edwards, Harold W. Ehrlich, Kyle F. Frey,
Jeffrey A. Geller, Robert S. Janis, Kevin K. Keady, Scott T. Lewis, Richard J.
Lindquist, Brady T. Lipp, Stephen J. Lurito, Lynn S. Martin, Jack Morgenstern,
Maryanne S. Mullarkey, Terry S. Newman, Sharon B. Parente, Roger Reinlieb,
Eric N. Remole, Donald C. Schultheis, Harold E. Sharon, Eugene J. Siembieda,
Mark K. Silverstein, Barbara A. Tarmy and Donna M. Vandenbulcke.
In addition, Emily Alejos, the Funds' Investment Officer, Yarek Aranowicz,
the Funds' Investment Officer, Robert B. Hrabchak, the Funds' Investment
Officer, Michael A. Pignataro, the Funds' Chief Financial Officer and Secretary,
Rocco A. Del Guercio, a Vice President of each Fund, and Robert M. Rizza, the
Funds' Treasurer, are also employees of CSAM.
PORTFOLIO MANAGEMENT. Richard W. Watt, who is a Managing Director of CSAM
and who held the office of Senior Vice President of CSAM from August 1995 to
July 1996, is primarily responsible for management of each Fund's assets.
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<PAGE>
ADMINISTRATOR. Bear Stearns Funds Management Inc. serves as each Fund's
U.S. administrator pursuant to an administrative agreement with each Fund. BSFM
is located at 575 Lexington Avenue, New York, New York 10022. For information
about fees paid to BSFM, see "Synopsis--Fees and Expenses--The Emerging Markets
Telecommunications Fund" and "Synopsis--Fees and Expenses--The Emerging Markets
Infrastructure Fund."
BSFM provides office facilities and personnel adequate to perform the
following services for each Fund:
- oversight of the determination and publication of each Fund's net asset
value in accordance with the respective Fund's policy as adopted from time
to time by the respective Board of Directors,
- oversight of the maintenance by Brown Brothers Harriman & Co. of the books
and records of each Fund as required under the Investment Company Act,
- assist in the preparation of each Fund's U.S. federal, state and local
income tax returns,
- preparation for the review and approval by officers of each Fund of
financial information for each Fund's proxy statements and semiannual and
annual reports to shareholders, and
- preparation of certain of each Fund's reports to the SEC.
As of May 31, 2000, BSFM provided accounting and/or administrative services
for 29 investment companies and investment partnerships, with combined total
assets of approximately $4.2 billion.
Each Fund has retained CSAM to provide certain administrative and
shareholder services to the respective Fund that are not provided by BSFM,
subject to the supervision and direction of the respective Board of Directors of
the respective Fund pursuant to an administrative services agreement with CSAM.
These services include:
- furnishing certain internal executive and administrative services,
responding to shareholder inquiries,
- acting as liaison between the respective Fund and its various service
providers,
- furnishing corporate secretarial services, which include assisting in the
preparation of materials for meetings of the Board of Directors,
- coordinating the preparation of proxy statements, reports to shareholders
and filings with state blue sky authorities,
- assisting in the preparation of tax returns, and
- generally assisting in monitoring and developing compliance procedures for
each Fund.
CSAM is reimbursed by each Fund for costs incurred on behalf of the Fund (up
to $20,000 per annum). Costs incurred on behalf of two or more funds for which
CSAM provides administrative and shareholder services are apportioned among such
funds according to their respective net asset values. Each Fund also reimburses
CSAM for any out-of-pocket expenses in providing these services to each Fund,
including postage, telephone and other telecommunications charges and
duplicating costs. For information regarding fees paid to CSAM for
administrative services for ETF's fiscal year ended May 31, 2000 and EMG's
fiscal year ended November 30, 1999, see "Synopsis--Fees and Expenses--The
Emerging Markets Telecommunications Fund" and "Synopsis--Fees and Expenses--The
Emerging Markets Infrastructure Fund."
CHILEAN ADMINISTRATOR. Under Chilean law, each Fund is required to have an
administrator in Chile. Celfin serves as each Fund's Chilean administrator
pursuant to an administrative agreement with
53
<PAGE>
each Fund. The Chilean administrator, a Chilean corporation located at Apoquindo
3721, Piso 19, Santiago, Chile, a subsidiary of CSAM, performs various services
for each Fund, including:
- maintaining the general ledger and preparing financial statements required
for each Fund pursuant to Chilean law and regulations,
- making applications to the Central Bank of Chile for remittances of
dividends, interest, net realized capital gains and capital outside Chile,
- withholding Chilean taxes due on amounts remitted abroad on account of
dividends, interest and net realized capital gains or otherwise,
- acting as each Fund's representative in Chile, and
- providing clerical assistance in connection with Chilean investments.
For information regarding fees paid to Celfin, see "Synopsis--Fees and
Expenses--The Emerging Markets Telecommunications Fund" and "Synopsis--Fees and
Expenses--The Emerging Markets Infrastructure Fund."
ESTIMATED EXPENSES. Except as otherwise provided in the administrative
services agreements, the Brazilian administration agreement and the Chilean
administration agreements, CSAM, Fleet, Celfin and BSFM are each obligated to
pay expenses associated with providing the services contemplated by the
agreements to which they are parties, including compensation of and office space
for their respective officers and employees connected with investment and
economic research, trading and investment management and administration of each
Fund, as well as the fees of all directors of each Fund who are affiliated with
those companies or any of their affiliates. Each Fund pays all other expenses
incurred in the operation of that Fund including, among other things:
- expenses for legal and independent accountants' services,
- costs of printing proxies, stock certificates and shareholder reports,
- charges of the custodians, any sub-custodians and the transfer and
dividend-paying agent's expenses in connection with the Funds' Dividend
Reinvestment and Cash Purchase Plan,
- U.S. SEC fees and fees of regulatory bodies of the emerging countries,
- fees and expenses of unaffiliated directors,
- accounting and pricing costs,
- membership fees in trade associations,
- fidelity bond coverage for the Funds' officers and employees,
- directors' and officers' errors and omissions insurance coverage,
- interest,
- brokerage costs and stock exchange fees,
- taxes,
- stock exchange listing fees and expenses,
- expenses of qualifying the Funds' shares for sale in various states and
foreign jurisdictions,
- litigation, and
- other extraordinary or non-recurring expenses and other expenses properly
payable by the Funds.
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<PAGE>
PORTFOLIO MANAGERS. If the Merger is consummated, it is anticipated that
Richard W. Watt will continue as the Chief Investment Officer of the Surviving
Fund. For more information regarding Mr. Watt, see "--Directors and Principal
Officers."
CUSTODIAN. Brown Brothers Harriman & Co., 40 Water Street, Boston, MA
02109, is the custodian for both Funds' U.S. and foreign assets and also serves
as the accounting agent of each Fund.
TRANSFER AGENT AND REGISTRAR. Fleet National Bank c/o EquiServe, L.P., P.O.
Box 1865, Mail Stop 45-02-62, Boston, MA 02105 acts as the transfer agent and
registrar of each Fund.
PROXY SOLICITOR. Each Fund has retained Shareholder Communications
Corporation, or SCC, a proxy solicitation firm, to assist the Funds in
soliciting proxies from shareholders. SCC will contact individual shareholders
of record, beneficial owners and banks, brokers and other nominee shareholders.
In return for its services, SCC is entitled to receive $7,500 per Fund and
reimbursements for its reasonable expenses.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. The following table
shows certain information based on filings made with the SEC concerning persons
who may be deemed beneficial owners of 5% or more of the shares of common stock
of either Fund because they possessed or shared voting or investment power with
respect to the shares of that Fund:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
FUND NAME AND ADDRESS BENEFICIALLY OWNED SHARES
---- ----------------------------------------- ------------------ ----------
<S> <C> <C> <C>
ETF FMR Corp. 398,000 5.13%(1)
82 Devonshire Street
Boston, Massachusetts 02109
EMG Lazard Freres & Co. LLC 1,789,693 11.11%(2)
30 Rockefeller Plaza
New York, New York 10022
President and Fellows of Harvard College 1,116,058 9.40%(3)
c/o Harvard Management Company, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
</TABLE>
--------------
(1) Based on a Schedule 13-G filed with the SEC on February 12, 2000.
(2) Based on a Schedule 13-G filed with the SEC on March 10, 2000.
(3) Based on a Schedule 13-G filed with the SEC on January 28, 2000.
It is not possible to calculate the ownership of the outstanding shares of
common stock of the Surviving Fund by any of the persons listed above after
consummation of the Tender Offer and the Merger because the Fund is unable to
determine:
- the amount of such person's participation in the Tender Offer;
- the affect of the pro rata allocation on the amount of shares tendered by
such persons, assuming the Tender Offer is fully subscribed; and
- the net asset value of each Fund on the Effective Date.
All the directors and executive officers, as a group, of ETF, as of
August 28, 2000, owned less than 1% of the outstanding shares of ETF, and all
the directors and executive officers, as a group, of EMG, as of the same date,
owned less than 1% of the outstanding shares of EMG.
EXPERTS
Each Fund has selected PricewaterhouseCoopers LLP, Two Commerce Square,
Suite 1700, 2001 Market Street, Philadelphia, PA 19103, as its independent
public accountants who will audit its financial statements.
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<PAGE>
REQUIRED VOTE
The Merger has been approved by 75% of the Continuing Directors of each
Fund. Accordingly, under the Articles of Incorporation of each Fund, approval of
the Merger requires the affirmative vote of the holders of a majority of the
outstanding shares of common stock of each Fund. Subject to such approval, the
Merger is currently scheduled to be consummated shortly after the completion of
the Tender Offer. The Board of Directors of each Fund recommends that the
shareholders of each Fund vote in favor of this Proposal 1.
LEGAL PROCEEDINGS
There are currently no material legal proceedings to which the Funds are a
party.
LEGAL OPINIONS
Certain legal matters in connection with the Merger will be passed upon for
the Funds by Willkie Farr & Gallagher. Willkie Farr & Gallagher will rely as to
certain matters of Maryland law on the opinion of Venable, Baetjer and Howard,
LLP.
PROPOSAL 2 (EMERGING MARKETS INFRASTRUCTURE FUND SHAREHOLDERS ONLY):
APPROVAL OF CHANGE IN FUNDAMENTAL INVESTMENT POLICY
BACKGROUND
EMG's investment objective is long-term capital appreciation. EMG seeks to
achieve this investment objective by investing primarily in equity securities of
infrastructure companies in emerging countries and companies that manufacture
products on behalf of or service infrastructure companies in emerging countries.
"Infrastructure companies" may engage in any of the following activities:
(a) the generation, transmission or distribution of electricity; (b) the
distribution of gas; (c) the construction or operation of roads or other public
works, including water treatment facilities; (d) the construction or operation
of transportation systems; (e) the operation of, development or manufacture and
sale of equipment relating to long distance and local telephone services,
cellular radio telephone services and other radio common carrier communications
services, including paging and specialized mobile radio systems; (f) the
production and operation of telegraph, satellite, microwave and private
communications networks, electronic mail and other emerging telecommunications
technologies; and (g) other public service activities which, in the opinion of
CSAM, relate to the development of a country's basic structure on which its
economic activity relies.
It is EMG's policy, under normal conditions, to invest at least 70% of its
total assets in equity securities of infrastructure companies in emerging
countries. EMG may also invest up to 30% of its total assets in equity
securities of companies that manufacture products on behalf of or service
infrastructure companies in emerging countries.
ETF's investment objective is long-term capital appreciation. ETF seeks to
achieve this investment objective by investing primarily in equity securities of
emerging countries telecommunications companies and companies that provide other
essential services in the development of an emerging country's infrastructure.
Telecommunications companies may engage in any of the following activities:
(a) operation of, development, financing or manufacture and sale of equipment
relating to long distance and local telephone services, cellular radio telephone
services and other radio common carrier communications services, including
paging and specialized mobile radio systems; and (b) production, financing and
operation of telegraph, satellite, microwave and private communications
networks, electronic mail and other emerging telecommunications technologies.
It is ETF's policy, under normal conditions, to invest at least 65% of its
total assets in equity securities of telecommunications companies in emerging
markets. ETF may also invest a substantial portion of its remaining assets, up
to 25% of its total assets under normal market conditions, in equity
56
<PAGE>
securities of companies that provide other essential services in the development
of an emerging country's infrastructure and will benefit from macroeconomic
growth in an emerging country, but whose growth is not directly linked to
favorable changes in commodity prices.
On July 24, 2000, EMG's Board of Directors resolved to conform EMG's
fundamental investment policy to be consistent with that of ETF as described
above, subject to shareholder approval.
In addition, EMG's Board of Directors agreed to modify EMG's current
non-fundamental investment policies, effective upon consummation of the Merger,
to conform to the investment policies of ETF as described under "Proposal 1
(Both Funds): Approval of the Merger Agreement and Plan of Reorganization
Pursuant to which The Emerging Markets Telecommunications Fund Will Merge with
and into The Emerging Markets Infrastructure Fund--Synopsis--Investment
Objectives and Policies." The principal differences between those policies and
EMG's current policies are that:
1. The Surviving Fund may seek to invest in equity securities of
telecommunications companies in developed countries when these securities,
in the opinion of CSAM, have investment characteristics similar to emerging
country telecommunications companies.
2. The Surviving Fund's definition of emerging country equity
securities also includes securities of companies that may have
characteristics and business relationships common to companies in a country
or countries other than an emerging country.
3. Up to 25% of ETF's total assets may be invested in equity securities
of closely-held companies or private placements of public companies, where
CSAM anticipates that a liquid market will develop for these securities
within a period of two to five years from the date such securities are
acquired, whereas EMG permits up to 30% of its total assets to be so
invested.
4. The Surviving Fund may invest the remainder of its assets in
(i) debt securities denominated in the currency of an emerging country or
issued or guaranteed by an emerging country company or the government of an
emerging country, (ii) equity or debt securities of corporate or
governmental issuers located in developed countries, and (iii) short-term
(less than 12 months to maturity) and medium-term (not greater than 5 years
to maturity) debt securities. The Surviving Fund's assets may be invested in
debt securities when CSAM believes that, based upon factors such as relative
interest rate levels and foreign exchange rates, such debt securities offer
opportunities for long-term capital appreciation. The debt securities in
which the Surviving Fund may invest include bonds, notes, bank deposits and
bank obligations (including certificates of deposit, time deposits and
bankers' acceptances), commercial paper, repurchase agreements, assignments
of loans and loan participations.
Shareholder approval is neither required nor requested for these changes.
BOARD CONSIDERATIONS; REASONS FOR CHANGE IN
FUNDAMENTAL INVESTMENT POLICY
The proposed changes in EMG's investment policy would shift the Surviving
Fund's investment focus away from investing 70% of its assets in equity
securities of infrastructure companies to requiring the Fund to normally invest
at least 65% of its assets in equity securities of telecommunications companies.
In approving this change, the Board considered a number of factors, including
the performance of ETF's and EMG's holding over time in both relative and
absolute terms and the greater range of attractive investment opportunities
available in the telecommunications sector as compared to the infrastructure
sector. The Board also considered the views of both CSAM and PaineWebber on the
matter. CSAM advised the Board that, in its view, future opportunities for
capital appreciation would likely be greater for equity securities of
telecommunications companies, rather than for equity securities of
infrastructure companies, although this may not be true under particular market
conditions. PaineWebber also recommended that the investment policies of the
Surviving Fund be those of ETF, noting particularly the lack of general
awareness in the marketplace about the meaning of the
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<PAGE>
term "infrastructure companies." The Board also took note of the positive
performance of many telecommunications companies and the funds that invest in
them.
The proposed changes in EMG's fundamental investment policy are conditioned
upon approval of the Merger.
REQUIRED SHAREHOLDER VOTE
Approval of the proposed change to EMG's fundamental investment policy
requires the affirmative vote of a "majority of the outstanding voting
securities" of the Fund as defined under "General."
IN THE JUDGMENT OF THE BOARD OF DIRECTORS OF THE FUND, THE CHANGE IN
FUNDAMENTAL INVESTMENT POLICY SERVES THE BEST INTERESTS OF THE SURVIVING FUND
AND ITS SHAREHOLDERS, AND THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 2.
PROPOSAL 3 (EMERGING MARKETS INFRASTRUCTURE FUND SHAREHOLDERS ONLY):
APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENT
BACKGROUND
CSAM currently acts as EMG's investment adviser pursuant to an investment
advisory agreement between CSAM and the Fund dated December 21, 1993, which was
approved by EMG's initial shareholder on November 24, 1993. See "proposal 1
(Both Funds): Approval of the Merger Agreement and Plan of Reorganization
Pursuant to which The Emerging Markets Telecommunications Fund Will Merge with
and into The Emerging Markets Infrastructure Fund--Synopsis--Fees and Expenses
of The Emerging Markets Infrastructure Fund."
On July 24, 2000, EMG's Board of Directors approved a new investment
advisory agreement, or the New Investment Advisory Agreement, to become
effective upon the consummation of the Merger. The New Investment Advisory
Agreement will be substantially similar to the current investment advisory
agreement except that:
- the investment advisory fee will be based upon a percentage of the lower
of the average weekly stock price (market value) of the Fund's outstanding
shares or its average weekly net assets; and
- the fee percentage will be reduced from an annual rate of 1.30% to an
annual rate of 1.25% of the first $100 million of the Fund's average
weekly market value or net assets (whichever is lower), 1.125% of the next
$100 million and 1.00% of amounts over $200 million.
CSAM, through a voluntary fee waiver, has agreed to the new fee calculation
described above (that is, based on the lower of stock price or net assets)
effective July 1, 2000 and continuing through the date of the Merger, at which
time this concept will be incorporated in the new investment advisory agreement.
If the New Investment Advisory Agreement is not approved, the Merger will not be
consummated and the current investment advisory agreement will remain in effect.
In that event, EMG's Board of Directors intends to submit a new investment
advisory agreement, reflecting this concept, at the next shareholders' meeting.
For the fiscal year ended November 30, 1999, EMG paid brokerage commissions
of $7,918 to affiliated brokers, which amount is equal to 1.02% of total
commissions paid by EMG. See "Portfolio Transactions" in the SAI for more
information.
A description of the proposed New Investment Advisory Agreement is provided
below under "--The New Investment Advisory Agreement." This description is only
a summary and is qualified by reference to the form of investment advisory
agreement attached hereto as Exhibit B, which is marked to show changes from the
current investment advisory agreement for EMG.
58
<PAGE>
BOARD RECOMMENDATION
On July 24, 2000, at an in-person meeting of the Board specifically called
for this purpose, the Board of Directors of the Fund, including the
Non-interested Directors, unanimously approved the New Investment Advisory
Agreement and recommended its approval to shareholders of the Fund.
BOARD CONSIDERATIONS; REASONS FOR
THE NEW INVESTMENT ADVISORY AGREEMENT
As discussed in "Proposal 1 (Both Funds): Approval of the Merger Agreement
and Plan of Reorganization pursuant to which The Emerging Markets
Telecommunications Fund Will Merge with and into The Emerging Markets
Infrastructure Fund--Information About the Merger," the Board of Directors of
the Fund has been concerned with the size of the discount to net asset value at
which the Fund's shares have traded on the NYSE. The Board has discussed and
considered various alternative strategies to address the discount at meetings
held on February 8, 2000, April 6, 2000, May 8, 2000, June 27, 2000 and July 24,
2000. For a description of these strategies, see "Proposal 1 (Both Funds):
Approval of the Merger Agreement and Plan of Reorganization pursuant to which
The Emerging Markets Telecommunications Fund Will Merge with and into The
Emerging Markets Infrastructure Fund--Information About the Merger--Reasons for
the Merger."
At the May 8, 2000 board meeting, CSAM proposed changing the basis upon
which the fee is calculated. Changing the methodology by which the current
investment advisory fees are calculated as described above (that is, based on
the lower of stock price or net assets) would:
- reduce the investment advisory fee, thereby lowering the Fund's overall
expense ratio, and
- have an on-going accretive impact on net asset value.
In addition, the Board of Directors believes that calculating the investment
advisory fee with reference to the stock price (market value) when the Fund's
shares are trading at a discount, will more closely align the interests of CSAM
with the interests of the Fund's shareholders in enhancing the Fund's market
value and narrowing the market discount, recognizing that CSAM does not and
cannot control the discount at which Fund shares trade.
The Board of Directors also considered and evaluated the proposed New
Investment Advisory Agreement and determined that, except for modification of
the fee calculation and the new fee structure, the New Investment Advisory
Agreement is not materially different from the current investment advisory
agreement. CSAM has confirmed that the level and quality of the services
provided to the Fund will not change if the New Investment Advisory Agreement is
approved by the Fund's shareholders.
INFORMATION CONCERNING CREDIT SUISSE GROUP AND CSAM
For information about the Fund's investment adviser, see "Proposal 1 (Both
Funds): Approval of the Merger Agreement and Plan of Reorganization pursuant to
which The Emerging Markets Telecommunications Fund Will Merge with and into The
Emerging Markets Infrastructure Fund--Management of the Funds."
DESCRIPTION OF CURRENT INVESTMENT ADVISORY AGREEMENT
Under the current investment advisory agreement, CSAM provides the Fund with
ongoing investment advisory services. CSAM:
- manages the Fund's assets in accordance with the Fund's investment
objective and policies,
- selects investments for the Fund,
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<PAGE>
- places purchase and sale orders on behalf of the Fund, and
- together with the Board of Directors of the Fund, monitors the performance
of Celfin.
CSAM also provides investment research and supervision of the Fund's
investments and conducts a continual program of investment, evaluation and if
appropriate, sale and reinvestment of the Fund's assets. Furthermore, CSAM also
provides administrative services to the Fund pursuant to a separate
administrative agreement. For more information about the administrative services
CSAM provides to the Fund pursuant to this agreement, see "Proposal 1 (Both
Funds): Approval of the Merger Agreement and Plan of Reorganization pursuant to
which The Emerging Markets Telecommunications Fund Will Merge with and into The
Emerging Markets Infrastructure Fund--Management of the Funds--Administrator."
CSAM is responsible for all expenses incurred in connection with the
performance of its services under the current investment advisory agreement,
including fees payable to any sub-advisers. The Fund is responsible for all
other expenses, including those described under "Proposal 1 (Both Funds):
Approval of the Merger Agreement and Plan of Reorganization pursuant to which
The Emerging Markets Telecommunications Fund Will Merge with and into The
Emerging Markets Infrastructure Fund--Management of the Funds--Estimated
Expenses."
For a description of investment advisory fees paid by EMG, see "Proposal 1
(Both Funds): Approval of the Merger Agreement and Plan of Reorganization
Pursuant to which The Emerging Markets Telecommunications Fund Will Merge with
and into The Emerging Markets Infrastructure Fund--Synopsis--Fees and
Expenses--The Emerging Markets Infrastructure Fund." For the fiscal year ended
November 30, 1999, CSAM earned $1,922,776 for advisory services. In addition,
CSAM was reimbursed $19,998 for administrative services rendered to the Fund for
the fiscal year ended November 30, 1999.
The current investment advisory agreement provides that CSAM shall not be
liable, and shall be indemnified, for error of judgment or mistake of law or for
any loss suffered by the Fund in connection with matters to which such agreement
relates, except liability resulting from willful misfeasance, bad faith or gross
negligence on the part of CSAM in the performance of its duties or reckless
disregard of its obligations and duties under the current investment advisory
agreement. CSAM is entitled to receive advances from the Fund for payment of the
reasonable expenses it incurs in connection with any matter as to which it seeks
indemnification in the manner and to the fullest extent permissible under the
Maryland General Corporate Law.
The current investment advisory agreement may be terminated without penalty
upon 60 days' written notice by the Board of Directors or by CSAM or the vote of
the holders of a majority of the Fund's shares. This agreement terminates
automatically in the event of its assignment.
THE NEW INVESTMENT ADVISORY AGREEMENT
Shareholders are being asked to approve or disapprove the New Investment
Advisory Agreement. The New Investment Advisory Agreement is substantially
similar to the current investment advisory agreement except for modification of
the basis upon which the fee is calculated (that is, the lower of stock price or
net assets) and the new fee structure.
The New Investment Advisory Agreement will be dated as of the date
shareholder approval is granted. The agreement will be in effect for an initial
two-year term, ending on the second anniversary of the date on which shareholder
approval is granted. The agreement may continue thereafter from year to year
only if specifically approved at least annually by either (i) the Board of
Directors of the Fund or (ii) the "vote of a majority of the outstanding voting
securities" of the Fund, and in either case, the vote of a majority of the
Non-Interested Directors, cast in person at a meeting called for such purpose.
60
<PAGE>
The implementation of the New Investment Advisory Agreement is conditional
upon approval of the Merger.
DIFFERENCES BETWEEN THE CURRENT AND
THE NEW INVESTMENT ADVISORY AGREEMENT
Under the current investment advisory agreements, CSAM is entitled to
quarterly investment advisory fees computed at an annual rate of 1.30% of the
Fund's average weekly net assets. Under the New Investment Advisory Agreement,
CSAM will be entitled to receive quarterly investment advisory fees computed at
an annual rate of 1.25% of the first $100 million of the Fund's average weekly
market value or net assets (whichever is lower), 1.125% of the next $100 million
and 1.00% of amounts over $200 million.
The following table sets forth the investment advisory fee paid for the
fiscal year ended November 30, 1999 under the current investment advisory
agreement and the amount that would have been paid had the New Investment
Advisory Agreement been in effect for the fiscal year ended November 30, 1999
taking into consideration the new advisory fee percentages and the new fee
structure. Also shown is the difference between the two amounts in dollars and
as a percentage of the fee paid under the existing agreement.
<TABLE>
<CAPTION>
FEE PAYABLE TO CSAM
UNDER CURRENT FEE PAYABLE UNDER
AGREEMENT NEW AGREEMENT REDUCTION IN FEE
--------------------- ----------------- -----------------------
<S> <C> <C> <C>
$1,922,776 $1,354,699 $568,077 29.54%
</TABLE>
REQUIRED SHAREHOLDER VOTE
Approval of the New Investment Advisory Agreement requires the affirmative
vote of a "majority of the outstanding voting securities" of the Fund as defined
under "General".
IN THE JUDGMENT OF THE BOARD OF DIRECTORS OF THE FUND, THE NEW INVESTMENT
ADVISORY AGREEMENT SERVES THE BEST INTERESTS OF THE SURVIVING FUND AND ITS
SHAREHOLDERS, AND THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
PROPOSAL 3.
PROPOSAL 4 (EMERGING MARKETS TELECOMMUNICATIONS FUND SHAREHOLDERS ONLY):
RE-ELECTION OF DIRECTORS
BACKGROUND
The Fund's Board of Directors is divided into three classes, each class
having a term of no more than three years. Each year the term of office of one
class expires and the successor or successors elected to such class will serve
for a three-year term.
Each of James J. Cattano and William W. Priest, Jr., directors whose current
terms expire on October 10, 2000, the date of the annual meeting, has been
nominated for a three-year term to expire at the 2002 Annual Meeting of
Shareholders. Messrs. Cattano and Priest currently serve as directors of the
Fund. Mr. Cattano has been a member of the Board of Directors since 1994, and
Mr. Priest has served as a director since 1997.
Each nominee has indicated an intention to continue to serve if elected and
has consented to being named in this Proxy Statement/Prospectus. Each director
named below who is deemed an "interested person" of the Fund, as defined in the
1940 Act, is indicated by an asterisk. Messrs. Priest and Watt are interested
persons of the Fund by virtue of their positions as directors and/or officers of
CSAM.
61
<PAGE>
For information regarding the nominees for election to ETF's Board,
directors whose terms of office continue beyond the 2000 annual meeting, and the
officers and directors of ETF as a group, see "Proposal 1 (Both Funds): Approval
of the Merger Agreement and Plan of Reorganization pursuant to which The
Emerging Markets Telecommunications Fund Will Merge with and into The Emerging
Markets Infrastructure Fund--Management of the Funds."
During the fiscal year ended May 31, 2000, each director who is not a
director, officer, partner, co-partner or employee of CSAM, the Administrator,
or any affiliate thereof, received an annual fee of $5,000 and $500 for each
meeting of the Board attended by him and was reimbursed for expenses incurred in
connection with his attendance at the Board meetings. The total remuneration
paid or accrued by the Fund during the fiscal year ended May 31, 2000 to all
such unaffiliated directors was $41,000. During the fiscal year ended May 31,
2000, the Board convened nine times. Each director attended at least
seventy-five percent of the aggregate number of meetings of the Board and any
committee on which he served held during the period for which he was a Director.
Messrs. Arzac, Cattano, Landau and Torino constitute the Fund's Audit
Committee, which is composed of directors who are not interested persons of the
Fund. The Audit Committee met twice during the fiscal year ended May 31, 2000.
The Audit Committee advises the full Board with respect to accounting, auditing
and financial matters affecting the Fund. The Board performs the functions of a
nominating committee. The Board will consider nominees recommended by
shareholders in the event any vacancies arise. Recommendations should be
submitted to the Board care of the Secretary of the Fund. The Fund does not have
a compensation committee.
Section 16(a) of the Securities Exchange Act of 1934 and Section 30(f) of
the 1940 Act require the Fund's officers and directors, officers and directors
of the investment adviser, affiliated persons of the investment adviser, and
persons who beneficially own more than ten percent of the Fund's shares, to file
reports of ownership with the Securities and Exchange Commission, the New York
Stock Exchange and the Fund. Based solely upon its review of the copies of such
forms received by it and written representations from such persons, the Fund
believes that, for the fiscal year ended May 31, 2000, all filing requirements
applicable to such persons were complied with.
For information about executive officers of the Fund, see "Proposal 1 (Both
Funds): Approval of the Merger Agreement and Plan of Reorganization pursuant to
which The Emerging Markets Telecommunications Fund Will Merge with and into The
Emerging Markets Infrastructure Fund--Management of the Funds."
The following table shows certain compensation information for the directors
of ETF and EMG for the fiscal year ended May 31, 2000 and November 30, 1999,
respectively. None of the Fund's
62
<PAGE>
executive officers or directors who are also officers or directors of CSAM
received any compensation from the Fund for such period. The Fund has no bonus,
profit sharing, pension or retirement plans.
<TABLE>
<CAPTION>
PENSION OR TOTAL TOTAL NUMBER
RETIREMENT ESTIMATED COMPENSATION OF BOARDS OF
BENEFITS ANNUAL FROM FUNDS AND CSAM-ADVISED
AGGREGATE ACCRUED AS BENEFITS FUND COMPLEX INVESTMENT
COMPENSATION PART OF FUND UPON PAID TO COMPANIES
NAME OF DIRECTOR FROM FUNDS EXPENSES RETIREMENT DIRECTORS (1) SERVED (2)
---------------- -------------- ------------ ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Enrique R. Arzac........ ETF: $ 9,500 0 0 $94,500 11
EMG: $11,500
James J. Cattano............ ETF: $ 9,500 0 0 $57,500 6
EMG: $10,000
Peter A. Gordon*............ ETF: $ 4,000 0 0 $44,500 6
EMG: $ 7,500
George W. Landau............ ETF: $ 9,500 0 0 $59,000 7
EMG: $11,000
Martin M. Torino............ ETF: $ 8,500 0 0 $50,000 6
EMG: $10,500
William W. Priest Jr........ ETF: $ 0 0 0 0 57
EMG $ 0
Richard W. Watt............. ETF: $ 0 0 0 0 8
EMG: $ 0
</TABLE>
--------------
* Mr. Gordon resigned from the Funds' Boards of Directors effective
December 20, 1999.
(1) As of November 30, 1999
(2) Includes ETF and EMG
REQUIRED SHAREHOLDER VOTE
Approval of the election of James J. Cattano and William W. Priest, Jr. as
Directors of the Fund requires the affirmative vote of a plurality of the votes
cast on the matter at the annual meeting of the Fund in person or by proxy. If
the Merger is consummated, the Directors of the Surviving Fund will be the
Directors of EMG, who currently are the same as the Directors of ETF.
THE BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS, RECOMMENDS
THAT THE SHAREHOLDERS VOTE "FOR" THE RE-ELECTION OF JAMES J. CATTANO AND
WILLIAM W. PRIEST, JR. AS DIRECTORS OF THE FUND.
PROPOSAL 5 (EMERGING MARKETS TELECOMMUNICATIONS FUND SHAREHOLDERS ONLY):
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
BACKGROUND
The fifth proposal to be submitted will be the ratification or rejection of
the selection by the Board of Directors of PricewaterhouseCoopers LLP as
independent public accountants of the Fund for the fiscal year ending May 31,
2001. At a meeting held on May 8, 2000, the Board of Directors, including those
directors who are not "interested persons" of the Fund, approved the selection
of PricewaterhouseCoopers LLP for the fiscal year ending May 31, 2001.
PricewaterhouseCoopers LLP has been the Fund's independent public accountants
since the Fund commenced operations in 1992, and has informed the Fund that it
has no material direct or indirect financial interest in the Fund. A
63
<PAGE>
representative of PricewaterhouseCoopers LLP will be available by telephone at
the annual meeting of the Fund and will have the opportunity to make a statement
if the representative so desires and will be available to respond to appropriate
questions.
REQUIRED SHAREHOLDER VOTE
Ratification of the selection of PricewaterhouseCoopers LLP as the Fund's
independent public accountants requires the affirmative vote of a majority of
the votes cast on the matter at the annual meeting of the Fund in person or by
proxy and is conditioned upon the non-occurrence of the Merger.
THE BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS, RECOMMENDS
THAT THE SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF PRICEWATERHOUSECOOPERS LLP
AS THE FUND'S INDEPENDENT PUBLIC ACCOUNTANTS.
PROPOSAL 6 (EMERGING MARKETS TELECOMMUNICATIONS FUND SHAREHOLDERS ONLY):
SHAREHOLDER PROPOSAL REQUESTING THAT ETF'S BOARD OF DIRECTORS PRESENT FOR
SHAREHOLDER APPROVAL A PROGRAM TO PERMIT ETF SHAREHOLDERS TO REALIZE NET ASSET
VALUE FOR THEIR SHARES
BACKGROUND
ON MAY 1, 2000, ETF RECEIVED THE FOLLOWING PROPOSAL AND SUPPORTING STATEMENT
FROM WALTER S. BAER, WHO ADVISED ETF THAT, AT THE TIME HE SUBMITTED HIS PROPOSAL
TO ETF, HE OWNED SHARES OF THAT FUND WITH A MARKET VALUE OF AT LEAST $2,000
CONTINUOUSLY FOR THE PRECEDING YEAR. ETF WILL PROVIDE THE ADDRESS OF MR. BAER TO
ANY PERSON WHO SO REQUESTS SUCH INFORMATION ORALLY OR IN WRITING, PROMPTLY UPON
THE RECEIPT OF ANY ORAL OR WRITTEN REQUEST THEREFOR, TO CSAM AT 466 LEXINGTON
AVENUE, 16TH FLOOR, NEW YORK, NEW YORK 10017. ETF ACCEPTS NO RESPONSIBILITY FOR
THE ACCURACY OF EITHER THE PROPOSAL OR MR. BAER'S SUPPORTING STATEMENT. THE
BOARD OF DIRECTORS OF ETF RECOMMENDS A VOTE AGAINST THIS SHAREHOLDER PROPOSAL.
SHAREHOLDER PROPOSAL
The text of the shareholder proposal for ETF is as follows:
"RESOLVED: The shareholders request that, within sixty days, the Fund's
Board of Directors present for shareholder approval a program that will permit
shareholders to realize Net Asset Value for their shares."
SUPPORTING STATEMENTS
The text of the supporting statement for the shareholder proposal of ETF is
as follows:
"Shareholders have suffered long enough from the Fund's large discount from
Net Asset Value (NAV). The Fund should permit shareholders who want to redeem
shares to do so at NAV. Recommended programs to accomplish this include 1) an
unlimited, one-time self-tender offer at NAV; 2) converting the Fund to an
open-end fund; 3) merging the Fund with an open-end fund; or 4) liquidating the
Fund.
This proposal has been submitted prior to any statement from the Fund about
actions it plans to take as a result of the recently completed PaineWebber
study. If by the time this proxy is filed, actions have been taken or proposed
that permit shareholders to realize NAV, I will withdraw this proposal. If not,
however, Fund management probably will oppose this proposal and make numerous
arguments why the current structure should be retained. In my opinion, the
dollars-and-cents benefits to
64
<PAGE>
shareholders of eliminating the discount far outweigh whatever advantages the
closed-end structure may offer for this Fund."
REQUIRED SHAREHOLDER VOTE
The shareholder request that ETF's Board of Directors present a program for
shareholder approval that will permit shareholders to realize the net asset
value for their shares requires the affirmative vote of a majority of the votes
cast on the matter at the annual meeting in person or by proxy.
OPPOSING STATEMENT OF THE BOARD OF DIRECTORS
The Board of Directors of ETF has, over the years, taken a range of actions
intended to address the discount to net asset value at which its shares have
traded on the NYSE and the impact on shareholders of the discount. After
numerous discussions and the consideration of various alternative strategies,
the Board of Directors of ETF has concluded that it is in the best interests of
ETF and its shareholders to maintain the closed-end format. Among the benefits
of this structure are the ability to manage the Fund's portfolio without the
need to maintain cash balances to fund redemption requests, the flexibility to
adopt investment policies that would permit the investment of a greater
percentage of the Fund's assets in illiquid securities and the possible lower
operating expenses associated with managing a closed-end fund and avoiding the
need to finance the distribution of the Fund's shares in a continuous offering.
For more information about the factors considered by ETF's Board of Directors
see "Proposal 1 (Both Funds): Approval of the Merger Agreement and Plan of
Reorganization pursuant to which The Emerging Markets Telecommunications Fund
Will Merge with and into The Emerging Markets Infrastructure Fund--Information
About the Merger--Reasons for the Merger." However, in recognition of the desire
of certain shareholders to be able to realize an amount approximating net asset
value for their shares, the Board of Directors of EMG has approved, subject to
the consummation of the Merger, a program whereby the Surviving Fund intends to
effectuate a self-tender for not less than 15% of its outstanding shares on an
annual basis, as described above under "Proposal 1 (Both Funds): Approval of the
Merger Agreement and Plan of Reorganization pursuant to which The Emerging
Markets Telecommunications Fund Will Merge with and into The Emerging Markets
Infrastructure Fund--Information About The Merger--History of the Emerging
Markets Infrastructure Fund's Discount." The Board of Directors of ETF believes
that the combination of the Funds pursuant to the Merger proposal and the
implementation of this self-tender program achieves a proper balance between the
ability of the Surviving Fund to pursue its investment objective and the desire
of certain shareholders to sell their shares at a price approximating net asset
value. Accordingly,
THE BOARD OF DIRECTORS OF ETF, INCLUDING THE NON-INTERESTED DIRECTORS,
RECOMMENDS THAT THE SHAREHOLDERS OF ETF VOTE "AGAINST" PROPOSAL 6.
In the event that Proposal 6 is approved and the Merger is consummated, the
Surviving Fund's Board of Directors will treat the proposal as applicable to the
Surviving Fund.
ADDITIONAL INFORMATION
The Proxy Statement/Prospectus does not contain all of the information set
forth in the registration statements and the exhibits relating thereto which the
Funds have filed with the Commission, under the Securities Act and the
Investment Company Act, to which reference is hereby made.
The Funds are subject to the informational requirements of the Securities
Exchange Act and in accordance therewith, file reports and other information
with the SEC. Reports, proxy statements, registration statements and other
information filed by the Funds can be inspected and copied at the
65
<PAGE>
public reference facilities of the SEC in Washington, D.C. and at the New York
Regional Office of the SEC at Seven World Trade Center, New York, New York
10048. Copies of such materials also can be obtained by mail from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates.
PROPOSALS OF ETF SHAREHOLDERS. Notice is hereby given that for a
shareholder proposal to be considered for inclusion in ETF's proxy material
relating to its 2001 annual meeting of shareholders, the shareholder proposal
must be received by the Fund no later than May 10, 2001. The shareholder
proposal, including any accompanying supporting statement, may not exceed 500
words. A shareholder desiring to submit a proposal must be a record or
beneficial owner of shares with a market value of $2,000 and must have held such
shares for at least one year. Further, the shareholder must continue to hold
such shares through the date on which the meeting is held. Documentary support
regarding the foregoing must be provided along with the proposal. There are
additional requirements regarding proposals of shareholders, and a shareholder
contemplating submission of a proposal is referred to Rule 14a-8 promulgated
under the Securities Exchange Act. The timely submission of a proposal does not
guarantee its inclusion in ETF's proxy materials.
Pursuant to the By-laws of ETF, at any annual meeting of the shareholders,
only such business will be conducted as has been properly brought before the
annual meeting. To be properly brought before the annual meeting, the business
must be (i) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board, (ii) otherwise properly brought before the
meeting by or at the direction of the Board, or (iii) otherwise properly brought
before the meeting by a shareholder.
For business to be properly brought before the annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of ETF. To be timely, any such notice must be delivered to or
mailed and received by The Emerging Markets Telecommunications Fund, Inc. c/o
Credit Suisse Asset Management, LLC, 466 Lexington Avenue, 16th Floor, New York,
NY 10017 not later than May 10, 2001; provided, however, that in the event that
the date of the 2001 annual meeting is advanced or delayed by more than 30 days
from October 10, 2001, the first anniversary of the 2000 annual meeting, notice
by such shareholder to be timely must be so received not later than the close of
business on the 10th day following the day on which notice or public
announcement of the date of the 2001 meeting is given or made.
Any notice by a shareholder to the respective Fund must set forth as to each
matter the shareholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on ETF's books, of the shareholder proposing such
business, (iii) the class and number of shares of the capital stock of ETF which
are beneficially owned by the shareholder, (iv) a representation that the
shareholder is a holder of record of shares of ETF entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to present
such business, (v) whether the shareholder intends or is part of a group which
intends to solicit proxies from other shareholders in support of such business,
and (vi) any material interest of the shareholder in such business.
The Fund may exercise discretionary voting authority with respect to any
shareholder proposals that are not submitted in accordance with Rule 14a-8 under
the Securities Exchange Act and which are submitted after the advance notice
deadline for submission of proposals pursuant to ETF's By-laws indicated above.
Even if timely notice is received, ETF may exercise discretionary voting
authority in certain other circumstances as described under Rule 14a-4(c) under
the Securities Exchange Act which governs ETF's use of discretionary proxy
voting authority. Discretionary voting authority is the ability to vote proxies
that shareholders have executed and returned to ETF on matters not specifically
reflected on the form of proxy.
66
<PAGE>
PROPOSALS OF EMG SHAREHOLDERS. Notice is hereby given that for a
shareholder proposal to be considered for inclusion in EMG's proxy material
relating to its 2001 annual meeting of shareholders, the shareholder proposal
must be received by the Fund no later than November 6, 2000. A shareholder
desiring to submit a proposal for inclusion in EMG's proxy material for a
shareholder meeting subsequent to the special meeting, if any, must be a record
or beneficial owner of at least 1% of the outstanding shares of common stock of
the Fund or shares of the Fund with a market value of $2,000 entitled to be
voted at the meeting and must have held such shares for at least one year.
Further, the shareholder must continue to hold such shares through the date on
which the meeting is held. Documentary support regarding the foregoing must be
provided along with the proposal. There are additional requirements regarding
proposals of the shareholders, and a shareholder contemplating submission of a
proposal is referred to Rule 14a-8 promulgated under the Securities Exchange
Act. Shareholders who meet the above conditions and desire to submit a written
proposal, should send their written proposals to the Fund c/o Credit Suisse
Asset Management, LLC, 466 Lexington Avenue, 16th Floor, New York, New York
10017, within a reasonable time before the solicitation of proxies for the
meeting of shareholders. The timely submission of a proposal does not guarantee
its inclusion in EMG's proxy materials.
OTHER MATTERS TO COME BEFORE THE MEETING. The Board of Directors of each
Fund is not aware of any matters that will be presented for action at the
Meeting other than the matters set forth herein. Should any other matters
requiring a vote of shareholders arise, the proxy in the accompanying form will
confer upon the person or persons entitled to vote the shares represented by
such proxy the discretionary authority to vote the shares as to any such other
matters in their discretion in the interest of the respective Fund. PLEASE
COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Boards of Directors of The Emerging Markets Telecommunications
Fund, Inc. and The Emerging Markets Infrastructure Fund, Inc.
Michael A. Pignataro
Chief Financial Officer and Secretary, The Emerging Markets Infrastructure Fund,
Inc.
Michael A. Pignataro
Chief Financial Officer and Secretary, The Emerging Markets Telecommunications
Fund, Inc.
67
<PAGE>
EXHIBIT A
FORM OF
MERGER AGREEMENT AND PLAN OR REORGANIZATION
A-1
<PAGE>
MERGER AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
AND
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
DATED AS OF JULY 31, 2000
A-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
1. DEFINITIONS........................................................ A-6
2. BASIC TRANSACTION.................................................. A-6
2.1. The Merger.................................................. A-6
2.2. Actions at Closing.......................................... A-6
2.3. Effect of Merger............................................ A-7
2.4. Name Change................................................. A-7
3. REPRESENTATIONS AND WARRANTIES OF THE EMERGING MARKETS
TELECOMMUNICATIONS FUND, INC. ................................... A-7
3.1. Organization................................................ A-7
3.2. Registrations and Qualifications............................ A-7
3.3. Regulatory Consents and Approvals........................... A-7
3.4. Noncontravention............................................ A-7
3.5. Financial Statements........................................ A-8
3.6. Annual Report............................................... A-8
3.7. Qualification, Corporate Power, Authorization of
Transaction................................................. A-8
3.8. Legal Compliance............................................ A-8
3.9. Material Contracts.......................................... A-8
3.10. Undisclosed Liabilities..................................... A-8
3.11. Tax Filings................................................. A-9
3.12. Qualification under Subchapter M............................ A-9
3.13. Form N-14................................................... A-9
3.14. Capitalization.............................................. A-9
3.15. Books and Records........................................... A-9
4. REPRESENTATIONS AND WARRANTIES OF THE EMERGING MARKETS
INFRASTRUCTURE FUND, INC. ....................................... A-10
4.1. Organization................................................ A-10
4.2. Registrations and Qualifications............................ A-10
4.3. Regulatory Consents and Approvals........................... A-10
4.4. Noncontravention............................................ A-10
4.5. Financial Statements........................................ A-10
4.6. Annual Report............................................... A-11
4.7. Qualification, Corporate Power, Authorization of
Transaction................................................. A-11
4.8. Legal Compliance............................................ A-11
4.9. Material Contracts.......................................... A-11
4.10. Undisclosed Liabilities..................................... A-11
4.11. Tax Filings................................................. A-11
4.12. Qualification under Subchapter M............................ A-12
4.13. Form N-14................................................... A-12
4.14. Capitalization.............................................. A-12
4.15. Issuance of Stock........................................... A-12
4.16. Books and Records........................................... A-12
</TABLE>
A-3
<PAGE>
<TABLE>
<S> <C> <C> <C>
5. CONVERSION TO EMERGING MARKETS INFRASTRUCTURE FUND, INC. COMMON
STOCK............................................................ A-13
5.1. Conversion.................................................. A-13
5.2. Computation of Net Asset Value.............................. A-13
5.3. Issuance of Emerging Markets Infrastructure Fund, Inc.
Common Stock................................................ A-13
5.4. Surrender of Emerging Markets Telecommunications Fund, Inc.
Stock Certificates.......................................... A-13
6. COVENANTS OF THE PARTIES........................................... A-14
6.1. Shareholders' Meetings...................................... A-14
6.2. Operations in the Normal Course............................. A-14
6.3. Articles of Merger.......................................... A-14
6.4. Regulatory Filings.......................................... A-14
6.5. Preservation of Assets...................................... A-14
6.6. Tax Matters................................................. A-15
6.7. Shareholder List............................................ A-15
6.8. Delisting, Termination of Registration as an Investment
Company..................................................... A-15
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE EMERGING MARKETS
INFRASTRUCTURE FUND, INC. ....................................... A-15
7.1. Approval of Merger.......................................... A-15
7.2. Certificates and Statements by the Emerging Markets
Telecommunications Fund, Inc. .............................. A-16
7.3. Absence of Litigation....................................... A-16
7.4. Legal Opinions.............................................. A-16
7.5. Auditor's Consent and Certification......................... A-18
7.6. Liabilities................................................. A-18
7.7. Effectiveness of N-14 Registration Statement................ A-18
7.8. Regulatory Filings.......................................... A-18
7.9. Administrative Rulings, Proceedings......................... A-19
7.10. Satisfaction of the Emerging Markets Infrastructure Fund,
Inc......................................................... A-19
7.11. Dividends................................................... A-19
7.12. Custodian's Certificate..................................... A-19
7.13. Books and Records........................................... A-19
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE EMERGING MARKETS
TELECOMMUNICATIONS FUND, INC. ................................... A-19
8.1. Approval of Merger.......................................... A-19
8.2. Certificates and Statements by the Emerging Markets
Infrastructure Fund, Inc. .................................. A-19
8.3. Absence of Litigation....................................... A-20
8.4. Legal Opinions.............................................. A-20
8.5. Auditor's Consent and Certification......................... A-22
8.6. Effectiveness of N-14 Registration Statement................ A-22
8.7. Regulatory Filings.......................................... A-22
8.8. Satisfaction of the Emerging Markets Telecommunications
Fund, Inc. ................................................. A-22
8.9. Dividends................................................... A-22
</TABLE>
A-4
<PAGE>
<TABLE>
<S> <C> <C> <C>
9. PAYMENT OF EXPENSES................................................ A-23
9.1. Allocation.................................................. A-23
10. COOPERATION FOLLOWING EFFECTIVE DATE............................... A-23
11. INDEMNIFICATION.................................................... A-23
11.1. The Emerging Markets Telecommunications Fund, Inc........... A-23
11.2. The Emerging Markets Infrastructure Fund, Inc............... A-23
12. TERMINATION, POSTPONEMENT AND WAIVERS.............................. A-23
12.1. Termination................................................. A-23
12.2. Waiver...................................................... A-24
12.3. Expiration of Representations and Warranties................ A-24
13. MISCELLANEOUS...................................................... A-24
13.1. Transfer Restriction........................................ A-24
13.2. Material Provisions......................................... A-25
13.3. Notices..................................................... A-25
13.4. Amendments.................................................. A-26
13.5. Headings.................................................... A-26
13.6. Counterparts................................................ A-26
13.7. Enforceability.............................................. A-26
13.8. Successors and Assigns...................................... A-26
13.9. Governing Law............................................... A-26
</TABLE>
A-5
<PAGE>
THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of this 31st day of July, 2000, between The Emerging Markets
Telecommunications Fund, Inc. (the "Target Fund" or the "Emerging Markets
Telecommunications Fund"), a Maryland corporation and a registered investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and The Emerging Markets Infrastructure Fund, Inc. (the "Acquiring Fund" or the
"Emerging Markets Infrastructure Fund"), a Maryland corporation and a registered
investment company under the 1940 Act.
This agreement contemplates a tax-free merger transaction which qualifies
for federal income tax purposes as a reorganization within the meaning of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").
NOW, THEREFORE, in consideration of the covenants and agreements hereinafter
set forth, the Parties hereto agree as follows:
1. DEFINITIONS
Certain capitalized terms used in this Agreement are specifically defined
herein.
2. BASIC TRANSACTION
2.1. THE MERGER. On and subject to the terms and conditions of this
Agreement, the Target Fund will merge with and into the Acquiring Fund (the
"Merger") at the Effective Date (as defined in Section 2.3 below) in accordance
with the Maryland General Corporation Law ("MGCL"). The Emerging Markets
Infrastructure Fund shall be the surviving investment company. The Emerging
Markets Telecommunications Fund shall cease to exist as a separate investment
company.
Each share of the Emerging Markets Telecommunications Fund will be converted
into an equivalent dollar amount (to the nearest one ten-thousandth of one cent)
of full shares of Common Stock of the Emerging Markets Infrastructure Fund, with
a par value of $0.001 per share, based on the net asset value per share of each
of the Parties at 4:00 p.m. Eastern Time on the Business Day prior to the
Effective Date (the "Valuation Time"). No fractional shares of the Emerging
Markets Infrastructure Fund will be issued to Emerging Markets
Telecommunications Fund shareholders. In lieu thereof, the Emerging Markets
Infrastructure Fund will purchase all fractional shares of the Emerging Markets
Infrastructure Fund at the current net asset value of shares of the Emerging
Markets Infrastructure Fund for the account of all holders of fractional
interests, and each such holder will receive such holder's pro rata share of the
proceeds of such purchase. The Effective Date and the Business Day prior to it
must each be a day on which the New York Stock Exchange (the "NYSE") is open for
trading (a "Business Day").
From and after the Effective Date, the Acquiring Company shall possess all
of the properties, assets, rights, privileges, powers and shall be subject to
all of the restrictions, liabilities, obligations, disabilities and duties of
the Emerging Markets Telecommunications Fund, all as provided under Maryland
law.
2.2. ACTIONS AT CLOSING. At the closing of the transactions contemplated
by this Agreement (the "Closing") on the date thereof (the "Closing Date"),
(i) the Emerging Markets Telecommunications Fund will deliver to the Emerging
Markets Infrastructure Fund the various certificates and documents referred to
in Article 7 below, (ii) the Emerging Markets Infrastructure Fund will deliver
to the Emerging Markets Telecommunications Fund the various certificates and
documents referred to in Article 8 below, and (iii) the Emerging Markets
Telecommunications Fund and the Emerging Markets Infrastructure Fund will file
jointly with the State Department of Assessments and Taxation of Maryland (the
"Department") articles of merger (the "Articles of Merger") and make all other
filings or recordings required by Maryland law in connection with the Merger.
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2.3. EFFECT OF MERGER. Subject to the requisite approvals of the
shareholders of the Parties, and to the other terms and conditions described
herein, the Merger shall become effective at such time as the Articles of Merger
are accepted for record by the Department or at such later time as is specified
in the Articles of Merger (the "Effective Date") and the separate corporate
existence of the Emerging Markets Telecommunications Fund shall cease. As
promptly as practicable after the Merger, the Emerging Markets
Telecommunications Fund shall delist its shares from the NYSE and its
registration under the 1940 Act shall be terminated. Any reporting
responsibility of the Emerging Markets Telecommunications Fund is, and shall
remain, the responsibility of the Emerging Markets Telecommunications Fund up to
and including the Effective Date.
2.4. NAME CHANGE. Upon the Effective Date, the name of the Acquiring Fund
shall be changed to "The Emerging Markets Telecommunications Fund, Inc."
3. REPRESENTATIONS AND WARRANTIES OF THE EMERGING MARKETS TELECOMMUNICATIONS
FUND, INC.
The Emerging Markets Telecommunications Fund represents and warrants to the
Emerging Markets Infrastructure Fund that the statements contained in this
Article 3 are correct and complete in all material respects as of the execution
of this Agreement on the date hereof. The Emerging Markets Telecommunications
Fund represents and warrants to, and agrees with, the Emerging Markets
Infrastructure Fund that:
3.1. ORGANIZATION. The Emerging Markets Telecommunications Fund is a
corporation duly organized, validly existing under the laws of the State of
Maryland and is in good standing with the Department, and has the power to own
all of its assets and to carry on its business as it is now being conducted and
to carry out this Agreement.
3.2. REGISTRATIONS AND QUALIFICATIONS. The Emerging Markets
Telecommunications Fund is duly registered under the 1940 Act as a closed-end,
non-diversified management investment company (File No. 811-06562), and such
registration has not been revoked or rescinded and is in full force and effect.
The Emerging Markets Telecommunications Fund has elected and qualified for the
special tax treatment afforded regulated investment companies ("RICs") under
Sections 851-855 of the Code at all times since its inception. The Emerging
Markets Telecommunications Fund is qualified as a foreign corporation in every
jurisdiction where required, except to the extent that failure to so qualify
would not have a material adverse effect on the Emerging Markets
Telecommunications Fund.
3.3. REGULATORY CONSENTS AND APPROVALS. No consent, approval,
authorization, or order of any court or governmental authority is required for
the consummation by the Emerging Markets Telecommunications Fund of the
transactions contemplated herein, except (i) such as have been obtained or
applied for under the Securities Act of 1933, as amended (the "1933 Act"), the
Securities Exchange Act of 1934 (the "1934 Act"), the 1940 Act and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"); (ii) such
as may be required by state securities laws and (iii) such as may be required
under Maryland law for the acceptance for record of the Articles of Merger by
the Department.
3.4. NONCONTRAVENTION. The Emerging Markets Telecommunications Fund is
not, and the execution, delivery and performance of this Agreement by the
Emerging Markets Telecommunications Fund will not result in, a violation of the
laws of the State of Maryland or of the Articles of Incorporation or the By-laws
of the Emerging Markets Telecommunications Fund, or of any material agreement,
indenture, instrument, contract, lease or other undertaking to which the
Emerging Markets Telecommunications Fund is a party or by which it is bound, and
the execution, delivery and performance of this Agreement by the Emerging
Markets Telecommunications Fund will not result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement, indenture,
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instrument, contract, lease, judgment or decree to which the Emerging Markets
Telecommunications Fund is a party or by which it is bound.
3.5. FINANCIAL STATEMENTS. The Emerging Markets Infrastructure Fund has
been furnished with a statement of assets, liabilities and capital and a
schedule of investments of the Emerging Markets Telecommunications Fund, each as
of May 31, 2000, said financial statements having been examined by
PricewaterhouseCoopers LLP, independent public accountants. These financial
statements are in accordance with generally accepted accounting principles
applied on a consistent basis ("GAAP") and present fairly, in all material
respects, the financial position of the Emerging Markets Telecommunications Fund
as of such date in accordance with GAAP, and there are no known contingent
liabilities of the Emerging Markets Telecommunications Fund required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein.
3.6. ANNUAL REPORT. The Emerging Markets Infrastructure Fund has been
furnished with the Emerging Markets Telecommunications Fund's Annual Report to
Shareholders for the fiscal year ended May 31, 2000.
3.7. QUALIFICATION, CORPORATE POWER, AUTHORIZATION OF TRANSACTION. The
Emerging Markets Telecommunications Fund has full power and authority to enter
into and perform its obligations under this Agreement. The execution, delivery
and performance of this Agreement has been duly authorized by all necessary
action of its Board of Directors, and, subject to shareholder approval, this
Agreement constitutes a valid and binding contract enforceable in accordance
with its terms, subject to the effects of bankruptcy, insolvency, moratorium,
fraudulent conveyance and similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto.
3.8. LEGAL COMPLIANCE. No material litigation or administrative proceeding
or investigation of or before any court or governmental body is presently
pending (in which service of process has been received) or to its knowledge
threatened against the Emerging Markets Telecommunications Fund or any
properties or assets held by it. The Emerging Markets Telecommunications Fund
knows of no facts which might form the basis for the institution of such
proceedings which would materially and adversely affect its business and is not
a party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its business
or its ability to consummate the transactions herein contemplated.
3.9. MATERIAL CONTRACTS. There are no material contracts outstanding to
which the Emerging Markets Telecommunications Fund is a party that have not been
disclosed in the N-14 Registration Statement (as defined in Section 3.13 below)
or will not be otherwise disclosed to the Emerging Markets Infrastructure Fund
prior to the Effective Date.
3.10. UNDISCLOSED LIABILITIES. Since May 31, 2000, there has not been any
material adverse change in the Emerging Markets Telecommunications Fund's
financial condition, assets, liabilities or business and the Emerging Markets
Telecommunications Fund has no known liabilities of a material amount,
contingent or otherwise, required to be disclosed in a balance sheet in
accordance with GAAP other than those shown on the Emerging Markets
Telecommunications Fund's statements of assets, liabilities and capital referred
to above, those incurred in the ordinary course of its business as an investment
company since June 1, 2000, and those incurred in connection with the Merger.
Prior to the Effective Date, the Emerging Markets Telecommunications Fund will
advise the Emerging Markets Infrastructure Fund in writing of all known
liabilities, contingent or otherwise, whether or not incurred in the ordinary
course of business, existing or accrued. For purposes of this Section 3.10, a
decline in net asset value per share of the Emerging Markets Telecommunications
Fund due to declines in market values of securities in the Emerging Markets
Telecommunications Fund's portfolio or the discharge of Emerging Markets
Telecommunications Fund liabilities will not constitute a material adverse
change.
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<PAGE>
3.11. TAX FILINGS. All federal and other tax returns and information
reports of the Emerging Markets Telecommunications Fund required by law to have
been filed shall have been filed and are or will be correct in all material
respects, and all federal and other taxes shown as due or required to be shown
as due on said returns and reports shall have been paid or provision shall have
been made for the payment thereof, and, to the best of the Emerging Markets
Telecommunications Fund's knowledge, no such return is currently under audit and
no assessment has been asserted with respect to such returns. All tax
liabilities of the Emerging Markets Telecommunications Fund have been adequately
provided for on its books, and no tax deficiency or liability of the Emerging
Markets Telecommunications Fund has been asserted and no question with respect
thereto has been raised by the Internal Revenue Service or by any state or local
tax authority for taxes in excess of those already paid, up to and including the
taxable year in which the Effective Date occurs.
3.12. QUALIFICATION UNDER SUBCHAPTER M. For each taxable year of its
operation (including the taxable year ending on the Effective Date), the
Emerging Markets Telecommunications Fund has met the requirements of Subchapter
M of the Code for qualification as a RIC and has elected to be treated as such,
has been eligible to and has computed its federal income tax under Section 852
of the Code, and will have distributed substantially all of its investment
company taxable income and net realized capital gain (as defined in the Code)
that has accrued through the Effective Date.
3.13. FORM N-14. The registration statement to be filed by the Emerging
Markets Infrastructure Fund on Form N-14 relating to the Emerging Markets
Infrastructure Fund Common Stock to be issued pursuant to this Agreement, and
any supplement or amendment thereto or to the documents therein (as amended, the
"N-14 Registration Statement"), on the effective date of the N-14 Registration
Statement, at the time of the shareholders' meetings referred to in Article 6 of
this Agreement and at the Effective Date, insofar as it relates to the Emerging
Markets Telecommunications Fund (i) shall have complied or will comply in all
material respects with the provisions of the 1933 Act, the 1934 Act and the 1940
Act and the rules and regulations thereunder and (ii) did not or will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; and the prospectus included therein did not or will not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; PROVIDED, HOWEVER, that the
representations and warranties in this Section 3.13 shall only apply to
statements in, or omissions from, the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by the Emerging
Markets Infrastructure Fund for use in the N-14 Registration Statement.
3.14. CAPITALIZATION.
(a) All issued and outstanding shares of the Emerging Markets
Telecommunications Fund (i) have been offered and sold in compliance in all
material respects with applicable registration requirements of the 1933 Act and
state securities laws, (ii) are, and on the Effective Date will be, duly and
validly issued and outstanding, fully paid and non-assessable, and (iii) will be
held at the time of the Closing by the persons and in the amounts set forth in
the records of the transfer agent as provided in Section 6.7. The Emerging
Markets Telecommunications Fund does not have outstanding any options, warrants
or other rights to subscribe for or purchase any of the Emerging Markets
Telecommunications Fund shares, nor is there outstanding any security
convertible into, or exchangeable for, any of the Emerging Markets
Telecommunications Fund shares.
(b) The Emerging Markets Telecommunications Fund is authorized to issue
100,000,000 shares of stock, par value $0.001 per share, all of which shares are
classified as Common Stock and each outstanding share of which is fully paid,
non-assessable and has full voting rights.
3.15. BOOKS AND RECORDS. The books and records of the Emerging Markets
Telecommunications Fund made available to the Emerging Markets Infrastructure
Fund are substantially true and correct
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<PAGE>
and contain no material misstatements or omissions with respect to the
operations of the Emerging Markets Telecommunications Fund.
4. REPRESENTATIONS AND WARRANTIES OF THE EMERGING MARKETS INFRASTRUCTURE FUND,
INC.
The Emerging Markets Infrastructure Fund represents and warrants to the
Emerging Markets Telecommunications Fund that the statements contained in this
Article 4 are correct and complete in all material respects as of the execution
of this Agreement on the date hereof. The Emerging Markets Infrastructure Fund
represents and warrants to, and agrees with, the Emerging Markets
Telecommunications Fund that:
4.1. ORGANIZATION. The Emerging Markets Infrastructure Fund is a
corporation duly organized, validly existing under the laws of the State of
Maryland and is in good standing with the Department, and has the power to own
all of its assets and to carry on its business as it is now being conducted and
to carry out this Agreement.
4.2. REGISTRATIONS AND QUALIFICATIONS. The Emerging Markets Infrastructure
Fund is duly registered under the 1940 Act as a closed-end, non-diversified
management investment company (File No. 811-08076) and such registration has not
been revoked or rescinded and is in full force and effect. The Emerging Markets
Infrastructure Fund has elected and qualified for the special tax treatment
afforded RICs under Sections 851-855 of the Code at all times since its
inception. The Emerging Markets Infrastructure Fund is qualified as a foreign
corporation in every jurisdiction where required, except to the extent that
failure to so qualify would not have a material adverse effect on the Emerging
Markets Infrastructure Fund.
4.3. REGULATORY CONSENTS AND APPROVALS. No consent, approval,
authorization, or order of any court or governmental authority is required for
the consummation by the Emerging Markets Infrastructure Fund of the transactions
contemplated herein, except (i) such as have been obtained or applied for under
the 1933 Act, the 1934 Act, the 1940 Act and the HSR Act, (ii) such as may be
required by state securities laws and (iii) such as may be required under
Maryland law for the acceptance for record of the Articles of Merger by the
Department.
4.4. NONCONTRAVENTION. The Emerging Markets Infrastructure Fund is not,
and the execution, delivery and performance of this Agreement by the Emerging
Markets Infrastructure Fund will not result, in violation of the laws of the
State of Maryland or of the Articles of Incorporation or the By-laws of the
Emerging Markets Infrastructure Fund, or of any material agreement, indenture,
instrument, contract, lease or other undertaking to which the Emerging Markets
Infrastructure Fund is a party or by which it is bound, and the execution,
delivery and performance of this Agreement by the Emerging Markets
Infrastructure Fund will not result in the acceleration of any obligation, or
the imposition of any penalty, under any agreement, indenture, instrument,
contract, lease, judgment or decree to which the Emerging Markets Infrastructure
Fund is a party or by which it is bound.
4.5. FINANCIAL STATEMENTS. The Emerging Markets Telecommunications Fund
has been furnished with a statement of assets, liabilities and capital and a
schedule of investments of the Emerging Markets Infrastructure Fund, each as of
November 30, 1999, said financial statements having been examined by
PricewaterhouseCoopers LLP, independent public accountants. These financial
statements are in accordance with GAAP and present fairly, in all material
respects, the financial position of the Emerging Markets Infrastructure Fund as
of such date in accordance with GAAP, and there are no known contingent
liabilities of the Emerging Markets Infrastructure Fund required to be reflected
on a balance sheet (including the notes thereto) in accordance with GAAP as of
such date not disclosed therein.
The Emerging Markets Telecommunications Fund has been furnished with an
unaudited statement of assets, liabilities and capital and a schedule of
investments of the Emerging Markets Infrastructure
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<PAGE>
Fund, each as of May 31, 2000. This financial statement and schedule of
investments are in accordance with GAAP and present fairly, in all material
respects the financial position of the Emerging Markets Infrastructure Fund as
of such date in accordance with GAAP, and there are no known contingent
liabilities of the Emerging Markets Infrastructure Fund required to be reflected
on a balance sheet (including the notes thereto) in accordance with GAAP as of
such date not disclosed therein.
4.6. ANNUAL REPORT. The Emerging Markets Telecommunications Fund has been
furnished with the Emerging Markets Infrastructure Fund's Annual Report to
Shareholders for the fiscal year ended November 30, 1999.
4.7. QUALIFICATION, CORPORATE POWER, AUTHORIZATION OF TRANSACTION. The
Emerging Markets Infrastructure Fund has full power and authority to enter into
and perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary action
of its Board of Directors, and, subject to shareholder approval, this Agreement
constitutes a valid and binding contract enforceable in accordance with its
terms, subject to the effects of bankruptcy, insolvency, moratorium, fraudulent
conveyance and similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto.
4.8. LEGAL COMPLIANCE. No material litigation or administrative proceeding
or investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Emerging Markets
Infrastructure Fund or any properties or assets held by it. The Emerging Markets
Infrastructure Fund knows of no facts which might form the basis for the
institution of such proceedings which would materially and adversely affect its
business and is not a party to or subject to the provisions of any order, decree
or judgment of any court or governmental body which materially and adversely
affects its business or its ability to consummate the transactions herein
contemplated.
4.9. MATERIAL CONTRACTS. There are no material contracts outstanding to
which the Emerging Markets Infrastructure Fund is a party that have not been
disclosed in the N-14 Registration Statement or will not be otherwise disclosed
to the Emerging Markets Telecommunications Fund prior to the Effective Date.
4.10. UNDISCLOSED LIABILITIES. Since November 30, 1999, there has not been
any material adverse change in the Emerging Markets Infrastructure Fund's
financial condition, assets, liabilities, or business and the Emerging Markets
Infrastructure Fund has no known liabilities of a material amount, contingent or
otherwise, required to be disclosed in a balance sheet with GAAP other than
those shown on the Emerging Markets Infrastructure Fund's statements of assets,
liabilities and capital referred to above, those incurred in the ordinary course
of its business as an investment company since December 1, 1999, and those
incurred in connection with the Merger. Prior to the Effective Date, the
Emerging Markets Infrastructure Fund will advise the Emerging Markets
Telecommunications Fund in writing of all known liabilities, contingent or
otherwise, whether or not incurred in the ordinary course of business, existing
or accrued. For purposes of this Section 4.10, a decline in net asset value per
share of the Emerging Markets Infrastructure Fund due to declines in market
values of securities in the Emerging Markets Infrastructure Fund's portfolio or
the discharge of the Emerging Markets Infrastructure Fund liabilities will not
constitute a material adverse change.
4.11. TAX FILINGS. All federal and other tax returns and information
reports of the Emerging Markets Infrastructure Fund required by law to have been
filed shall have been filed and are or will be correct in all material respects,
and all federal and other taxes shown as due or required to be shown as due on
said returns and reports shall have been paid or provision shall have been made
for the payment thereof, and, to the best of the Emerging Markets Infrastructure
Fund's knowledge, no such return is currently under audit and no assessment has
been asserted with respect to such returns. All tax liabilities of the Emerging
Markets Infrastructure Fund have been adequately provided for on its books, and
no tax deficiency or liability of the Emerging Markets Infrastructure Fund has
been asserted and no question with respect thereto has been raised by the
Internal Revenue Service or by any state
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or local tax authority for taxes in excess of those already paid, up to and
including the taxable year in which the Effective Date occurs.
4.12. QUALIFICATION UNDER SUBCHAPTER M. For each taxable year of its
operation, the Emerging Markets Infrastructure Fund has met the requirements of
Subchapter M of the Code for qualification as a RIC and has elected to be
treated as such, has been eligible to and has computed its federal income tax
under Section 852 of the Code, and will have distributed substantially all of
its investment company taxable income and net realized capital gain (as defined
in the Code) that has accrued through the Effective Date.
4.13. FORM N-14. The N-14 Registration Statement, on the effective date of
the N-14 Registration Statement, at the time of the shareholders' meetings
referred to in Section 6 of this Agreement and at the Effective Date, insofar as
it relates to the Emerging Markets Infrastructure Fund (i) shall have complied
or will comply in all material respects with the provisions of the 1933 Act, the
1934 Act and the 1940 Act and the rules and regulations thereunder and (ii) did
not or will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; and the prospectus included therein did not
or will not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that the representations and warranties in this Section 4.13 shall not apply to
statements in, or omissions from, the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by the Emerging
Markets Telecommunications Fund for use in the N-14 Registration Statement.
4.14. CAPITALIZATION.
(a) All issued and outstanding shares of the Emerging Markets Infrastructure
Fund (i) have been offered and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities laws,
(ii) are, and on the Effective Date will be, duly and validly issued and
outstanding, fully paid and non-assessable, and (iii) will be held at the time
of the Closing by the persons and in the amounts set forth in the records of the
transfer agent. The Emerging Markets Infrastructure Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Emerging Markets Infrastructure Fund shares, nor is there outstanding
any security convertible into, or exchangeable for, any of the Emerging Markets
Infrastructure Fund shares.
(b) The Emerging Markets Infrastructure Fund is authorized to issue
100,000,000 shares of stock, par value $0.001 per share, all of which shares are
classified as Common Stock and each outstanding share of which is fully paid,
non-assessable and has full voting rights.
4.15. ISSUANCE OF STOCK.
(a) The offer and sale of the shares to be issued pursuant to this Agreement
will be in compliance with all applicable federal and state securities laws.
(b) At or prior to the Effective Date, the Emerging Markets Infrastructure
Fund will have obtained any and all regulatory, director and shareholder
approvals necessary to issue the Emerging Markets Infrastructure Fund Common
Stock.
4.16. BOOKS AND RECORDS. The books and records of the Emerging Markets
Infrastructure Fund made available to the Emerging Markets Telecommunications
Fund are substantially true and correct and contain no material misstatements or
omissions with respect to the operations of the Emerging Markets Infrastructure
Fund.
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5. CONVERSION TO EMERGING MARKETS INFRASTRUCTURE FUND, INC. COMMON STOCK
5.1. CONVERSION.
(a) Subject to the requisite approval of the shareholders of the Parties,
and the other terms and conditions contained herein, at the Effective Date, each
share of Common Stock of the Emerging Markets Telecommunications Fund will be
converted into an equivalent dollar amount (to the nearest one ten-thousandth of
one cent) of full shares of Emerging Markets Infrastructure Fund Common Stock,
computed based on the net asset value per share of each of the Parties at the
Valuation Time.
(b) No fractional shares of the Emerging Markets Infrastructure Fund will be
issued to Emerging Markets Telecommunications Fund shareholders. In lieu
thereof, the Emerging Markets Infrastructure Fund will purchase all fractional
shares of the Emerging Markets Infrastructure Fund at the current net asset
value of shares of the Emerging Markets Infrastructure Fund for the account of
all holders of fractional interests, and each such holder will receive such
holder's pro rata share of the proceeds of such purchase.
5.2. COMPUTATION OF NET ASSET VALUE. The net asset value per share of the
Parties shall be determined as of the Valuation Time, and no formula will be
used to adjust the net asset value so determined of either of the Parties to
take into account differences in realized and unrealized gains and losses. The
value of the assets of the Emerging Markets Telecommunications Fund to be
transferred to the Emerging Markets Infrastructure Fund shall be determined by
the Emerging Markets Infrastructure Fund pursuant to the principles and
procedures consistently utilized by the Emerging Markets Infrastructure Fund in
valuing its own assets and determining its own liabilities for purposes of the
Merger, which principles and procedures are substantially similar to those
employed by the Emerging Markets Telecommunications Fund when valuing its own
assets and determining its own liabilities. Such valuation and determination
shall be made by the Emerging Markets Infrastructure Fund in cooperation with
the Emerging Markets Telecommunications Fund and shall be confirmed in writing
by the Emerging Markets Infrastructure Fund to the Emerging Markets
Telecommunications Fund. The net asset value per share of Emerging Markets
Infrastructure Fund Common Stock shall be determined in accordance with such
procedures, and the Emerging Markets Infrastructure Fund shall certify the
computations involved.
5.3. ISSUANCE OF EMERGING MARKETS INFRASTRUCTURE FUND, INC. COMMON
STOCK. The Emerging Markets Infrastructure Fund shall issue to the shareholders
of the Emerging Markets Telecommunications Fund separate certificates or share
deposit receipts for the Emerging Markets Infrastructure Fund Common Stock by
delivering the certificates or share deposit receipts evidencing ownership of
the Emerging Markets Infrastructure Fund Common Stock to Fleet National Bank c/o
EquiServe, L.P., as the transfer agent and registrar for the Emerging Markets
Infrastructure Fund Common Stock.
5.4. SURRENDER OF EMERGING MARKETS TELECOMMUNICATIONS FUND, INC. STOCK
CERTIFICATES. With respect to any Emerging Markets Telecommunications Fund
shareholder holding certificates representing shares of the Common Stock of the
Emerging Markets Telecommunications Fund as of the Effective Date, and subject
to the Emerging Markets Infrastructure Fund being informed thereof in writing by
the Emerging Markets Telecommunications Fund, the Emerging Markets
Infrastructure Fund will not permit such shareholder to receive new certificates
evidencing ownership of the Emerging Markets Infrastructure Fund Common Stock
until such shareholder has surrendered his or her outstanding certificates
evidencing ownership of the Common Stock of the Emerging Markets
Telecommunications Fund or, in the event of lost certificates, posted adequate
bond. The Emerging Markets Telecommunications Fund will request its shareholders
to surrender their outstanding certificates representing certificates of the
Common Stock of the Emerging Markets Telecommunications Fund or post adequate
bond therefor. Dividends payable to holders of record of shares of the Emerging
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Markets Infrastructure Fund as of any date after the Effective Date and prior to
the exchange of certificates by any shareholder of the Emerging Markets
Telecommunications Fund shall be paid to such shareholder, without interest;
however, such dividends shall not be paid unless and until such shareholder
surrenders his or her stock certificates of the Emerging Markets
Telecommunications Fund for exchange.
6. COVENANTS OF THE PARTIES
6.1. SHAREHOLDERS' MEETINGS.
(a) Each of the Parties shall hold a meeting of its respective shareholders
for the purpose of considering the Merger as described herein, which meeting has
been called by each Party for October 10, 2000, and any adjournments thereof.
(b) Each of the Parties agrees to mail to each of its respective
shareholders of record entitled to vote at the meeting of shareholders at which
action is to be considered regarding the Merger, in sufficient time to comply
with requirements as to notice thereof, a combined Proxy Statement and
Prospectus which complies in all material respects with the applicable
provisions of Section 14(a) of the 1934 Act and Section 20(a) of the 1940 Act,
and the rules and regulations, respectively, thereunder.
6.2. OPERATIONS IN THE NORMAL COURSE. Each Party covenants to operate its
business in the ordinary course between the date hereof and the Effective Date,
it being understood that such ordinary course of business will include (i) the
declaration and payment of customary dividends and other distributions and
(ii) in the case of the Emerging Markets Telecommunications Fund, preparing for
its deregistration, except that the distribution of dividends pursuant to
Sections 7.11 and 8.9 of this Agreement shall not be deemed to constitute a
breach of the provisions of this Section 6.2.
6.3. ARTICLES OF MERGER. The Parties agree that, as soon as practicable
after satisfaction of all conditions to the Merger, they will jointly file
executed Articles of Merger with the Department and make all other filings or
recordings required by Maryland law in connection with the Merger.
6.4. REGULATORY FILINGS.
(a) The Emerging Markets Telecommunications Fund undertakes that, if the
Merger is consummated, it will file, or cause its agents to file, an application
pursuant to Section 8(f) of the 1940 Act for an order declaring that the
Emerging Markets Telecommunications Fund has ceased to a registered investment
company.
(b) The Emerging Markets Infrastructure Fund will file the N-14 Registration
Statement with the Securities and Exchange Commission ("SEC") and will use its
best efforts to ensure that the N-14 Registration Statement becomes effective as
promptly as practicable. The Emerging Markets Telecommunications Fund agrees to
cooperate fully with the Emerging Markets Infrastructure Fund, and will furnish
to the Emerging Markets Infrastructure Fund the information relating to itself
to be set forth in the N-14 Registration Statement as required by the 1933 Act,
the 1934 Act, the 1940 Act, and the rules and regulations thereunder and the
state securities or blue sky laws.
(c) The Parties each agree to proceed as promptly as possible to cause to be
made the necessary filings under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Filing") if applicable, with respect to the transactions
contemplated by this Agreement and to ensure that the related waiting period
expires or is otherwise terminated at the earliest possible time.
6.5. PRESERVATION OF ASSETS. The Emerging Markets Infrastructure Fund
agrees that it has no plan or intention to sell or otherwise dispose of the
assets of the Emerging Markets Telecommunications Fund to be acquired in the
Merger, except for dispositions made in the ordinary course of business.
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6.6. TAX MATTERS. Each of the Parties agrees that by the Effective Date
all of its federal and other tax returns and reports required to be filed on or
before such date shall have been filed and all taxes shown as due on said
returns either have been paid or adequate liability reserves have been provided
for the payment of such taxes. In connection with this covenant, the Parties
agree to cooperate with each other in filing any tax return, amended return or
claim for refund, determining a liability for taxes or a right to a refund of
taxes or participating in or conducting any audit or other proceeding in respect
of taxes. The Emerging Markets Infrastructure Fund agrees to retain for a period
of ten (10) years following the Effective Date all returns, schedules and work
papers and all material records or other documents relating to tax matters of
the Emerging Markets Telecommunications Fund for its final taxable year and for
all prior taxable periods. Any information obtained under this Section 6.6 shall
be kept confidential except as otherwise may be necessary in connection with the
filing of returns or claims for refund or in conducting an audit or other
proceeding. After the Effective Date, the Emerging Markets Infrastructure Fund
shall prepare, or cause its agents to prepare, any federal, state or local tax
returns, including any Forms 1099, required to be filed and provided to required
persons by the Emerging Markets Telecommunications Fund with respect to its
final taxable years ending with the Effective Date and for any prior periods or
taxable years for which the due date for such return has not passed as of the
Effective Date and further shall cause such tax returns and Forms 1099 to be
duly filed with the appropriate taxing authorities and provided to required
persons. Notwithstanding the aforementioned provisions of this Section 6.6, any
expenses incurred by the Emerging Markets Infrastructure Fund (other than for
payment of taxes) in excess of any accrual for such expenses by the Emerging
Markets Telecommunications Fund in connection with the preparation and filing of
said tax returns and Forms 1099 after the Effective Date shall be borne by the
Emerging Markets Infrastructure Fund.
6.7. SHAREHOLDER LIST. Prior to the Effective Date, the Emerging Markets
Telecommunications Fund shall have made arrangements with its transfer agent to
deliver to the Emerging Markets Infrastructure Fund, a list of the names and
addresses of all of the shareholders of record of the Emerging Markets
Telecommunications Fund on the Effective Date and the number of shares of Common
Stock of the Emerging Markets Telecommunications Fund owned by each such
shareholder, certified by the Emerging Markets Telecommunications Fund's
transfer agent or President to the best of their knowledge and belief.
6.8. DELISTING, TERMINATION OF REGISTRATION AS AN INVESTMENT COMPANY. The
Emerging Markets Telecommunications Fund agrees that the (i) delisting of the
shares of the Emerging Markets Telecommunications Fund with the NYSE and
(ii) termination of its registration as a RIC will be effected in accordance
with applicable law as soon as practicable following the Effective Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE EMERGING MARKETS INFRASTRUCTURE
FUND, INC.
The obligations of the Emerging Markets Infrastructure Fund hereunder shall
be subject to the following conditions:
7.1. APPROVAL OF MERGER. This Agreement shall have been approved by the
affirmative vote of the holders of a majority of the shares of Common Stock of
the Emerging Markets Infrastructure Fund issued and outstanding and entitled to
vote thereon and the affirmative vote of the holders of a majority of the shares
of Common Stock of the Emerging Markets Telecommunications Fund issued and
outstanding and entitled to vote thereon; and the Emerging Markets
Telecommunications Fund shall have delivered to the Emerging Markets
Infrastructure Fund a copy of the resolutions approving this Agreement adopted
by its Board of Directors and shareholders, certified by its secretary.
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<PAGE>
7.2. CERTIFICATES AND STATEMENTS BY THE EMERGING MARKETS TELECOMMUNICATIONS
FUND, INC.
(a) The Emerging Markets Telecommunications Fund shall have furnished a
statement of assets, liabilities and capital, together with a schedule of
investments with their respective dates of acquisition and tax costs, certified
on its behalf by its President (or any Vice President) and its Treasurer, and a
certificate executed by both such officers, dated the Effective Date, certifying
that there has been no material adverse change in its financial position since
July 31, 2000, other than changes in its portfolio securities since that date or
changes in the market value of its portfolio securities.
(b) The Emerging Markets Telecommunications Fund shall have furnished to the
Emerging Markets Infrastructure Fund a certificate signed by its President (or
any Vice President), dated the Effective Date, certifying that as of the
Effective Dates, all representations and warranties made in this Agreement are
true and correct in all material respects as if made at and as of such date and
each has complied with all of the agreements and satisfied all of the conditions
on its part to be performed or satisfied at or prior to such dates.
(c) The Emerging Markets Telecommunications Fund shall have delivered to the
Emerging Markets Infrastructure Fund a letter from PricewaterhouseCoopers LLP,
dated the Effective Date, stating that such firm has performed a limited review
of the federal, state and local income tax returns for the period ended
December 31, 1999, and that based on such limited review, nothing came to their
attention which caused them to believe that such returns did not properly
reflect, in all material respects, the federal, state and local income taxes of
the Emerging Markets Telecommunications Fund for the period covered thereby; and
that for the period from December 31, 1999 to and including the Effective Date
and for any taxable year ending upon the effective Date, such firm has performed
a limited review to ascertain the amount of such applicable federal, state and
local taxes, and has determined that either such amount has been paid or
reserves have been established for payment of such taxes, this review to be
based on unaudited financial data; and that based on such limited review,
nothing has come to their attention which caused them to believe that the taxes
paid or reserves set aside for payment of such taxes were not adequate in all
material respects for the satisfaction of federal, state and local taxes for the
period from December 31, 1999, to and including the Effective Date and for any
taxable year ending upon the Effective Date or that the Emerging Markets
Telecommunications Fund would not continue to qualify as a RIC for federal
income tax purposes.
7.3. ABSENCE OF LITIGATION. There shall be no material litigation pending
with respect to the matters contemplated by this Agreement.
7.4. LEGAL OPINIONS.
(a) The Emerging Markets Infrastructure Fund shall have received an opinion
of Willkie Farr & Gallagher, as counsel to the Emerging Markets
Telecommunications Fund, in form and substance reasonably satisfactory to the
Emerging Markets Infrastructure Fund and dated the Effective Date, to the effect
that (i) the Emerging Markets Telecommunications Fund is a corporation duly
organized, validly existing under the laws of the State of Maryland and in good
standing with the Department; (ii) the Agreement has been duly authorized,
executed and delivered by the Emerging Markets Telecommunications Fund, and,
assuming that the N-14 Registration Statement complies with the 1933 Act, the
1934 Act and the 1940 Act, constitutes a valid and legally binding obligation of
the Emerging Markets Telecommunications Fund, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws pertaining to the enforcement of creditors'
rights generally and by equitable principles; (iii) to the best of such
counsel's knowledge, no consent, approval, authorization or order of any United
States federal or Maryland state court or governmental authority is required for
the consummation by the Emerging Markets Telecommunications Fund of the Merger,
except such as may be required under the 1933 Act, the 1934 Act, the 1940 Act,
the HSR Act, the published rules and regulations of the SEC thereunder and under
Maryland law and such as may be required by state securities or blue sky laws;
(iv) such counsel does
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<PAGE>
not know of any contracts or other documents with respect to the Emerging
Markets Telecommunications Fund related to the Merger of a character required to
be described in the N-14 Registration Statement which are not described therein
or, if required to be filed, filed as required; (v) the execution and delivery
of this Agreement does not, and the consummation of the Merger will not, violate
any material provision of the Articles of Incorporation, as amended, the
by-laws, as amended, or any agreement (known to such counsel) to which the
Emerging Markets Telecommunications Fund is a party or by which the Emerging
Markets Telecommunications Fund is bound, except insofar as the parties have
agreed to amend such provision as a condition precedent to the Merger; (vi) to
the best of such counsel's knowledge, no material suit, action or legal or
administrative proceeding is pending or threatened against the Emerging Markets
Telecommunications Fund; and (vii) all corporate actions required to be taken by
the Emerging Markets Telecommunications Fund to authorize this Agreement and to
effect the Merger have been duly authorized by all necessary corporate actions
on behalf of the Emerging Markets Telecommunications Fund. Such opinion shall
also state that (A) while such counsel cannot make any representation as to the
accuracy or completeness of statements of fact in the N-14 Registration
Statement or any amendment or supplement thereto with respect to the Emerging
Markets Telecommunications Fund, nothing has come to their attention that would
lead them to believe that, on the respective effective dates of the N-14
Registration Statement and any amendment or supplement thereto with respect to
the Emerging Markets Telecommunications Fund, (1) the N-14 Registration
Statement or any amendment or supplement thereto contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading with respect
to the Emerging Markets Telecommunications Fund, and (2) the prospectus included
in the N-14 Registration Statement contained any untrue statement of a material
fact or omitted to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading with respect to the Emerging Markets Telecommunications Fund;
PROVIDED that such counsel need not express any opinion or belief as to the
financial statements, other financial data, statistical data or information
relating to the Emerging Markets Telecommunications Fund contained or
incorporated by reference in the N-14 Registration Statement. In giving the
opinion set forth above, Willkie Farr & Gallagher may state that it is relying
on certificates of officers of the Emerging Markets Telecommunications Fund with
regard to matters of fact and certain certificates and written statements of
governmental officials with respect to the good standing of the Emerging Markets
Telecommunications Fund and on the opinion of Venable, Baetjer and Howard, LLP,
as to matters of Maryland law.
(b) The Emerging Markets Infrastructure Fund shall have received an opinion
from Willkie Farr & Gallagher, as counsel to the Emerging Markets
Telecommunications Fund, dated the Effective Date, to the effect that for
federal income tax purposes (i) the Merger as provided in this Agreement will
constitute a reorganization within the meaning of Section 368(a)(1)(A) of the
Code and that the Emerging Markets Infrastructure Fund and the Emerging Markets
Telecommunications Fund will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code; (ii) no gain or loss will be recognized
by the Emerging Markets Telecommunications Fund as a result of the Merger or
upon the conversion of Emerging Markets Telecommunications Fund shares to
Emerging Markets Infrastructure Fund Common Stock; (iii) no gain or loss will be
recognized by the Emerging Markets Infrastructure Fund as a result of the
Merger; (iv) no gain or loss will be recognized by the shareholders of the
Emerging Markets Telecommunications Fund upon the conversion of their shares
into Emerging Markets Infrastructure Fund Common Stock except to the extent such
shareholders are paid cash in lieu of fractional shares of Emerging Markets
Infrastructure Fund in the Merger; (v) the tax basis of the Emerging Markets
Telecommunications Fund assets in the hands of the Emerging Markets
Infrastructure Fund will be the same as the tax basis of such assets in the
hands of the Emerging Markets Telecommunications Fund immediately prior to the
consummation of the Merger; (vi) immediately after the Merger, the tax basis of
the Emerging Markets Infrastructure Fund Common
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<PAGE>
Stock received by the shareholders of the Emerging Markets Telecommunications
Fund in the Merger (including that of fractional share interests purchased by
the Surviving Fund) will be equal, in the aggregate, to the tax basis of the
shares of the Emerging Markets Telecommunications Fund converted pursuant to the
Merger; (vii) a shareholder's holding period for the Emerging Markets
Infrastructure Fund Common Stock (including that of fractional share interests
purchased by the Surviving Fund) will be determined by including the period for
which he or she held the Common Stock of the Emerging Markets Telecommunications
Fund converted pursuant to the Merger, PROVIDED, that such Emerging Markets
Telecommunications Fund shares were held as a capital asset; (viii) the Emerging
Markets Infrastructure Fund's holding period with respect to the Emerging
Markets Telecommunications Fund assets transferred will include the period for
which such assets were held by the Emerging Markets Telecommunications Fund; and
(ix) the payment of cash to an Emerging Markets Telecommunications Fund
shareholder in lieu of fractional shares of the Emerging Markets Infrastructure
Fund will be treated as though the fractional shares were distributed as part of
the Merger and then redeemed by the Emerging Markets Infrastructure Fund with
the result that the Emerging Markets Telecommunications Fund shareholder will
have a capital gain or loss to the extent the cash distribution differs from
such shareholder's basis allocable to the fractional shares, provided that the
converted Emerging Markets Telecommunications Fund shares were held as capital
assets immediately prior to the conversion and that the shareholder's
proportionate interest in the Emerging Markets Infrastructure Fund will be
reduced as a result of such cash distribution.
7.5. AUDITOR'S CONSENT AND CERTIFICATION. The Emerging Markets
Infrastructure Fund shall have received from PricewaterhouseCoopers LLP a letter
dated as of the effective date of the N-14 Registration Statement and a similar
letter dated within five days prior to the Effective Date, in form and substance
satisfactory to the Emerging Markets Infrastructure Fund, to the effect that
(i) they are independent public auditors with respect to the Emerging Markets
Telecommunications Fund within the meaning of the 1933 Act and the applicable
published rules and regulations thereunder; and (ii) in their opinion, the
financial statements and supplementary information of the Emerging Markets
Telecommunications Fund included or incorporated by reference in the N-14
Registration Statement and reported on by them comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act and the
published rules and regulations thereunder.
7.6. LIABILITIES. The assets or liabilities of the Emerging Markets
Telecommunications Fund to be transferred to the Emerging Markets Infrastructure
Fund shall not include any assets or liabilities which the Emerging Markets
Infrastructure Fund, by reason of limitations in its investment objective and
policies as in effect upon the consummation of the Merger or Articles of
Incorporation, may not properly acquire or assume. The Emerging Markets
Infrastructure Fund does not anticipate that there will be any such assets or
liabilities but the Emerging Markets Infrastructure Fund will notify the
Emerging Markets Telecommunications Fund if any do exist and will reimburse the
Emerging Markets Telecommunications Fund for any reasonable transaction costs
incurred by the Emerging Markets Telecommunications Fund for the liquidation of
such assets and liabilities.
7.7. EFFECTIVENESS OF N-14 REGISTRATION STATEMENT. The N-14 Registration
Statement shall have become effective under the 1933 Act and no stop order
suspending such effectiveness shall have been instituted or, to the knowledge of
the Emerging Markets Infrastructure Fund, contemplated by the SEC.
7.8. REGULATORY FILINGS.
(a) The Emerging Markets Infrastructure Fund shall have received from the
SEC such orders or interpretations as Willkie Farr & Gallagher, as counsel to
the Emerging Markets Infrastructure Fund, deems reasonably necessary or
desirable under the 1933 Act and the 1940 Act in connection with the Merger,
PROVIDED, that such counsel shall have requested such orders as promptly as
practicable, and all such orders shall be in full force and effect.
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<PAGE>
(b) Any applicable waiting period under the HSR Act relating to the
transactions contemplated hereby shall have expired or been terminated.
7.9. ADMINISTRATIVE RULINGS, PROCEEDINGS. The SEC shall not have issued an
unfavorable advisory report under Section 25(b) of the 1940 Act, nor instituted
or threatened to institute any proceeding seeking to enjoin consummation of the
Merger under Section 25(c) of the 1940 Act; no other legal, administrative or
other proceeding shall be instituted or threatened which would materially affect
the financial condition of the Emerging Markets Telecommunications Fund or would
prohibit the Merger.
7.10. SATISFACTION OF THE EMERGING MARKETS INFRASTRUCTURE FUND, INC. All
proceedings taken by the Emerging Markets Telecommunications Fund and its
counsel in connection with the Merger and all documents incidental thereto shall
be satisfactory in form and substance to the Emerging Markets Infrastructure
Fund.
7.11. DIVIDENDS. Prior to the Effective Date, the Emerging Markets
Telecommunications Fund shall have declared and paid a dividend or dividends
which, together with all such previous dividends, shall have the effect of
distributing to its shareholders substantially all of its net investment company
taxable income that has accrued through the Effective Date, if any (computed
without regard to any deduction of dividends paid) (unless such amounts are
immaterial), and substantially all of its net capital gain, if any, realized
through the Effective Date.
7.12. CUSTODIAN'S CERTIFICATE. The Emerging Markets Telecommunications
Fund's custodian shall have delivered to the Emerging Markets Infrastructure
Fund a certificate identifying all of the assets of the Emerging Markets
Telecommunications Fund held or maintained by such custodian as of the Valuation
Time.
7.13. BOOKS AND RECORDS. The Emerging Markets Telecommunications Fund's
transfer agent shall have provided to the Emerging Markets Infrastructure Fund
(i) the originals or true copies of all of the records of the Emerging Markets
Telecommunications Fund in the possession of such transfer agent as of the
Exchange Date, (ii) a certificate setting forth the number of shares of the
Emerging Markets Telecommunications Fund outstanding as of the Valuation Time,
and (iii) the name and address of each holder of record of any shares and the
number of shares held of record by each such shareholder.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE EMERGING MARKETS
TELECOMMUNICATIONS FUND, INC.
The obligations of the Emerging Markets Telecommunications Fund hereunder
shall be subject to the following conditions:
8.1. APPROVAL OF MERGER. This Agreement shall have been approved by the
affirmative vote of the holders of a majority of the shares of Common Stock of
the Emerging Markets Telecommunications Fund issued and outstanding and entitled
to vote thereon and the affirmative vote of the holders of a majority of the
shares of Common Stock of the Emerging Markets Infrastructure Fund issued and
outstanding and entitled to vote thereon; and that the Emerging Markets
Infrastructure Fund shall have delivered to the Emerging Markets
Telecommunications Fund a copy of the resolutions approving this Agreement
adopted by its Board of Directors and shareholders, certified by its secretary.
8.2. CERTIFICATES AND STATEMENTS BY THE EMERGING MARKETS INFRASTRUCTURE
FUND, INC.
(a) The Emerging Markets Infrastructure Fund shall have furnished a
statement of assets, liabilities and capital, together with a schedule of
investments with their respective dates of acquisition and tax costs, certified
on its behalf by its President (or any Vice President) and its Treasurer, and a
certificate executed by both such officers, dated the Effective Date, certifying
that there has been no material adverse change in its financial position since
July 31, 2000, other than changes in its portfolio securities since that date or
changes in the market value of its portfolio securities.
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<PAGE>
(b) The Emerging Markets Infrastructure Fund shall have furnished to the
Emerging Markets Telecommunications Fund a certificate signed by its President
(or any Vice President), dated the Effective Date, certifying that as of the
Effective Date, all representations and warranties made in this Agreement are
true and correct in all material respects as if made at and as of such date and
each has complied with all of the agreements and satisfied all of the conditions
on its part to be performed or satisfied at or prior to such dates.
(c) The Emerging Markets Infrastructure Fund shall have delivered to the
Emerging Markets Telecommunications Fund a letter from PricewaterhouseCoopers
LLP, dated the Effective Date, stating that such firm has performed a limited
review of the federal, state and local income tax returns for the period ended
December 31, 1999, and that based on such limited review, nothing came to their
attention which caused them to believe that such returns did not properly
reflect, in all material respects, the federal, state and local income taxes of
the Emerging Markets Infrastructure Fund for the period covered thereby; and
that for the period from December 31, 1999 to and including the Effective Date,
such firm has performed a limited review to ascertain the amount of such
applicable federal, state and local taxes, and has determined that either such
amount has been paid or reserves established for payment of such taxes, this
review to be based on unaudited financial data; and that based on such limited
review, nothing has come to their attention which caused them to believe that
the taxes paid or reserves set aside for payment of such taxes were not adequate
in all material respects for the satisfaction of federal, state and local taxes
for the period from December 31, 1999, to and including the Effective Date or
that the Emerging Markets Infrastructure Fund would not continue to qualify as a
RIC for federal income tax purposes.
8.3. ABSENCE OF LITIGATION. There shall be no material litigation pending
with respect to the matters contemplated by this Agreement.
8.4. LEGAL OPINIONS.
(a) The Emerging Markets Telecommunications Fund shall have received an
opinion of Willkie Farr & Gallagher, as counsel to the Emerging Markets
Infrastructure Fund, in form and substance reasonably satisfactory to the
Emerging Markets Telecommunications Fund and dated the Effective Date, to the
effect that (i) the Emerging Markets Infrastructure Fund is a corporation duly
organized, validly existing under the laws of the State of Maryland and in good
standing with the Department; (ii) the Agreement has been duly authorized,
executed and delivered by the Emerging Markets Infrastructure Fund, and,
assuming that the N-14 Registration Statement complies with the 1933 Act, the
1934 Act and the 1940 Act, constitutes a valid and legally binding obligation of
the Emerging Markets Infrastructure Fund, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws pertaining to the enforcement of creditors'
rights generally and by equitable principles; (iii) to the best of such
counsel's knowledge, no consent, approval, authorization or order of any United
States federal or Maryland state court or governmental authority is required for
the consummation by the Emerging Markets Infrastructure Fund of the Merger,
except such as may be required under the 1933 Act, the 1934 Act, the 1940 Act,
the HSR Act and the published rules and regulations of the SEC thereunder and
under Maryland law and such as may be required under state securities or blue
sky laws; (iv) the N-14 Registration Statement has become effective under the
1933 Act, no stop order suspending the effectiveness of the N-14 Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the 1933 Act, and, with respect
to the Emerging Markets Infrastructure Fund, the N-14 Registration Statement,
and each amendment or supplement thereto, as of their respective effective
dates, appear on their face to be appropriately responsive in all material
respects to the requirements of the 1933 Act, the 1934 Act and the 1940 Act and
the published rules and regulations of the SEC thereunder; (v) such counsel does
not know of any statutes, legal or governmental proceedings or contracts with
respect to the Emerging Markets Infrastructure Fund or other documents related
to the Merger of a character required to be described in the N-14 Registration
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<PAGE>
Statement which are not described therein or, if required to be filed, filed as
required; (vi) the execution and delivery of this Agreement does not, and the
consummation of the Merger will not, violate any material provision of the
Articles of Incorporation, as amended, the by-laws, as amended, or any agreement
(known to such counsel) to which the Emerging Markets Infrastructure Fund is a
party or by which the Emerging Markets Infrastructure Fund is bound, except
insofar as the parties have agreed to amend such provision as a condition
precedent to the Merger; (vii) to the best of such counsel's knowledge, no
material suit, action or legal or administrative proceeding is pending or
threatened against the Emerging Markets Infrastructure Fund; and (viii) all
corporate actions required to be taken by the Emerging Markets Infrastructure
Fund to authorize this Agreement and to effect the Merger have been duly
authorized by all necessary corporate actions on behalf of the Emerging Markets
Infrastructure Fund. Such opinion shall also state that (A) while such counsel
cannot make any representation as to the accuracy or completeness of statements
of fact in the N-14 Registration Statement or any amendment or supplement
thereto with respect to the Emerging Markets Infrastructure Fund, nothing has
come to their attention that would lead them to believe that, on the respective
effective dates of the N-14 Registration Statement and any amendment or
supplement thereto, (1) the N-14 Registration Statement or any amendment or
supplement thereto contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading with respect to the Emerging Markets
Infrastructure Fund; and (2) the prospectus included in the N-14 Registration
Statement contained any untrue statement of a material fact or omitted to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading with respect to the
Emerging Markets Infrastructure Fund; PROVIDED that such counsel need not
express any opinion or belief as to the financial statements, other financial
data, statistical data or information relating to the Emerging Markets
Infrastructure Fund contained or incorporated by reference in the N-14
Registration Statement. In giving the opinion set forth above, Willkie Farr &
Gallagher may state that it is relying on certificates of officers of the
Emerging Markets Infrastructure Fund with regard to matters of fact and certain
certificates and written statements of governmental officials with respect to
the good standing of the Emerging Markets Infrastructure Fund and on the opinion
of Venable, Baetjer and Howard, LLP as to matters of Maryland law.
(b) The Emerging Markets Telecommunications Fund shall have received an
opinion from Willkie Farr & Gallagher and dated the Effective Date, to the
effect that for federal income tax purposes (i) the Merger as provided in this
Agreement will constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Code and that the Emerging Markets Infrastructure
Fund and the Emerging Markets Telecommunications Fund will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code; (ii) no gain
or loss will be recognized by the Emerging Markets Telecommunications Fund as a
result of the Merger or upon the conversion of Emerging Markets
Telecommunications shares to Emerging Markets Infrastructure Fund Common Stock;
(iii) no gain or loss will be recognized by the Emerging Markets Infrastructure
Fund as a result of the Merger; (iv) no gain or loss will be recognized by the
shareholders of the Emerging Markets Telecommunications Fund upon the conversion
of their shares into Emerging Markets Infrastructure Fund Common Stock except to
the extent such shareholders are paid cash in lieu of fractional shares of
Emerging Markets Infrastructure Fund in the Merger; (v) the tax basis of the
Emerging Markets Telecommunications Fund assets in the hands of the Emerging
Markets Infrastructure Fund will be the same as the tax basis of such assets in
the hands of the Emerging Markets Telecommunications Fund immediately prior to
the consummation of the Merger; (vi) immediately after the Merger, the tax basis
of the Emerging Markets Infrastructure Fund Common Stock received by the
shareholders of the Emerging Markets Telecommunications Fund in the Merger
(including that of fractional share interests purchased by the Surviving Fund)
will be equal, in the aggregate, to the tax basis of the shares of the Emerging
Markets Telecommunications Fund converted pursuant to the Merger; (vii) a
shareholder's holding period for the Emerging Markets Infrastructure Fund Common
Stock (including that of fractional share interests
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<PAGE>
purchased by the Surviving Fund) will be determined by including the period for
which he or she held the Common Stock of the Emerging Markets Telecommunications
Fund converted pursuant to the Merger, PROVIDED, that such Emerging Markets
Telecommunications Fund shares were held as a capital asset; (viii) the Emerging
Markets Infrastructure Fund's holding period with respect to the Emerging
Markets Telecommunications Fund assets transferred will include the period for
which such assets were held by the Emerging Markets Telecommunications Fund; and
(ix) the payment of cash to an Emerging Markets Telecommunications Fund
shareholder in lieu of fractional shares of the Emerging Markets Infrastructure
Fund will be treated as though the fractional shares were distributed as part of
the Merger and then redeemed by the Emerging Markets Infrastructure Fund with
the result that the Emerging Markets Telecommunications Fund shareholder will
have a capital gain or loss to the extent the cash distribution differs from
such shareholder's basis allocable to the fractional shares provided that the
converted Emerging Markets Telecommunications Fund shares were held as capital
assets immediately prior to the conversion and that the shareholder's
proportionate interest in the Emerging Markets Infrastructure Fund will be
reduced as a result of such cash distribution.
8.5. AUDITOR'S CONSENT AND CERTIFICATION. The Emerging Markets
Telecommunications Fund shall have received from PricewaterhouseCoopers LLP a
letter dated as of the effective date of the N-14 Registration Statement and a
similar letter dated within five days prior to the Effective Date, in form and
substance satisfactory to the Emerging Markets Telecommunications Fund, to the
effect that (i) they are independent public auditors with respect to the
Emerging Markets Infrastructure Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder; and (ii) in their
opinion, the financial statements and supplementary information of the Emerging
Markets Infrastructure Fund incorporated by reference in the N-14 Registration
Statement and reported on by them comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and the published
rules and regulations thereunder.
8.6. EFFECTIVENESS OF N-14 REGISTRATION STATEMENT. The N-14 Registration
Statement shall have become effective under the 1933 Act and no stop order
suspending such effectiveness shall have been instituted or, to the knowledge of
the Emerging Markets Telecommunications Fund, contemplated by the SEC.
8.7. REGULATORY FILINGS.
(a) The Emerging Markets Telecommunications Fund shall have received from
the SEC such orders or interpretations as Willkie Farr & Gallagher, as counsel
to the Emerging Markets Telecommunications Fund, deems reasonably necessary or
desirable under the 1933 Act and the 1940 Act in connection with the Merger,
provided, that such counsel or counsel to the Emerging Markets Infrastructure
Fund shall have requested such orders as promptly as practicable, and all such
orders shall be in full force and effect. Any applicable waiting period under
the HSR Act relating to the transactions contemplated hereby shall have expired
or been terminated.
(b) The SEC shall not have issued an unfavorable advisory report under
Section 25(b) of the 1940 Act, nor instituted or threatened to institute any
proceeding seeking to enjoin consummation of the Merger under Section 25(c) of
the 1940 Act; no other legal, administrative or other proceeding shall be
instituted or threatened which would materially affect the financial condition
of the Emerging Markets Telecommunications Fund or would prohibit the Merger.
(c) The Emerging Markets Infrastructure Fund shall have received from any
relevant state securities administrator such order or orders as are reasonably
necessary or desirable under the 1933 Act, the 1934 Act, the 1940 Act, and any
applicable state securities or blue sky laws in connection with the transactions
contemplated hereby, and that all such orders shall be in full force and effect.
8.8. SATISFACTION OF THE EMERGING MARKETS TELECOMMUNICATIONS FUND,
INC. All proceedings taken by the Emerging Markets Infrastructure Fund and its
counsel in connection with the Merger and all
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<PAGE>
documents incidental thereto shall be satisfactory in form and substance to the
Emerging Markets Telecommunications Fund.
8.9. DIVIDENDS. Prior to the Effective Date, the Emerging Markets
Infrastructure Fund shall have declared and paid a dividend or dividends which,
together with all such previous dividends, shall have the effect of distributing
to its shareholders substantially all of its net investment company taxable
income that has accrued through the Effective Date, if any (computed without
regard to any deduction of dividends paid) (unless such amounts are immaterial),
and substantially all of its net capital gain, if any, realized through the
Effective Date.
9. PAYMENT OF EXPENSES
9.1. ALLOCATION. All expenses incurred in connection with the Merger shall
be allocated equally between the Emerging Markets Infrastructure Fund and the
Emerging Markets Telecommunications Fund in the event the Merger is consummated.
Such expenses shall include, but not be limited to, all costs related to the
preparation and distribution of the N-14 Registration Statement, the HSR Filing
for the Parties, proxy solicitation expenses, legal and acounting fees, SEC
registration fees, and NYSE listing fees. Neither of the Parties owes any
broker's or finder's fees in connection with the transactions provided for
herein.
10. COOPERATION FOLLOWING EFFECTIVE DATE
In case at any time after the Effective Date any further action is necessary
to carry out the purposes of this Agreement, each of the Parties will take such
further action (including the execution and delivery of such further instruments
and documents) as any other Party may reasonably request, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled to
indemnification as described below). The Emerging Markets Telecommunications
Fund acknowledges and agrees that from and after the Effective Date, the
Emerging Markets Infrastructure Fund shall be entitled to possession of all
documents, books, records, agreements and financial data of any sort pertaining
to the Emerging Markets Telecommunications Fund.
11. INDEMNIFICATION
11.1. THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC. The Emerging
Markets Infrastructure Fund agrees to indemnify and hold harmless the Emerging
Markets Telecommunications Fund and each of the Emerging Markets
Telecommunications Fund's directors and officers from and against any and all
losses, claims, damages, liabilities or expenses (including, without limitation,
the payment of reasonable legal fees and reasonable costs of investigation) to
which jointly and severally, the Emerging Markets Telecommunications Fund or any
of its directors or officers may become subject, insofar as any such loss,
claim, damage, liability or expense (or actions with respect thereto) arises out
of or is based on any breach by the Emerging Markets Infrastructure Fund of any
of its representations, warranties, covenants or agreements set forth in this
Agreement.
11.2. THE EMERGING MARKETS INFRASTRUCTURE FUND, INC. The Emerging Markets
Telecommunications Fund agrees to indemnify and hold harmless the Emerging
Markets Infrastructure Fund and each of the Emerging Markets Infrastructure
Fund's directors and officers from and against any and all losses, claims,
liabilities or expenses (including, without limitation, the payment of
reasonable legal fees and reasonable costs of investigation) to which jointly
and severally, the Emerging Markets Infrastructure Fund or any of its directors
or officers may become subject, insofar as any such loss, claim, damage,
liability or expense (or actions with respect thereto) arises out of or is based
on any breach by the Emerging Markets Telecommunications Fund of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
12. TERMINATION, POSTPONEMENT AND WAIVERS
12.1. TERMINATION.
A-23
<PAGE>
(a) Notwithstanding anything to the contrary in this Agreement, this
Agreement may be terminated and the Merger abandoned at any time (whether before
or after adoption by the shareholders of each of the Parties) prior to the
Effective Date, or the Effective Date may be postponed, (i) by mutual agreement
of the Parties' Board of Directors; (ii) by the Board of Directors of the
Emerging Markets Infrastructure Fund if any of the obligations of the Emerging
Markets Telecommunications Fund set forth in this Agreement has not been
fulfilled or waived by such Board or if the Emerging Markets Telecommunications
Fund has made a material and intentional misrepresentation herein or in
connection herewith; or (iii) by the Board of Directors of the Emerging Markets
Telecommunications Fund if any of the obligations of the Emerging Markets
Infrastructure Fund set forth in this Agreement has not been fulfilled or waived
by such Board or if the Emerging Markets Infrastructure Fund has made a material
and intentional misrepresentation herein or in connection herewith.
(b) If the transaction contemplated by this Agreement shall not have been
consummated by December 31, 2000, this Agreement automatically shall terminate
on that date, unless a later date is mutually agreed to by the Boards of
Directors of the Parties.
(c) In the event of termination of this Agreement pursuant to the provisions
hereof, the Agreement shall become void and have no further effect, and there
shall not be any liability hereunder on the part of either of the Parties or
their respective directors or officers, except for any such material breach or
intentional misrepresentation, as to each of which all remedies at law or in
equity of the party adversely affected shall survive.
12.2. WAIVER. At any time prior to the Effective Date, any of the terms or
conditions of this Agreement may be waived by the Board of Directors of either
the Emerging Markets Telecommunications Fund or the Emerging Markets
Infrastructure Fund (whichever is entitled to the benefit thereof), if, in the
judgment of such Board after consultation with its counsel, such action or
waiver will not have a material adverse effect on the benefits intended in this
Agreement to the shareholders of their respective fund, on behalf of which such
action is taken.
12.3. EXPIRATION OF REPRESENTATIONS AND WARRANTIES.
(a) The respective representations and warranties contained in Articles 3
and 4 of this Agreement shall expire with, and be terminated by, the
consummation of the Merger, and neither of the Parties nor any of their
officers, directors, agents or shareholders shall have any liability with
respect to such representations or warranties after the Effective Date. This
provision shall not protect any officer, director, agent or shareholder of the
Parties against any liability to the entity for which that officer, director,
agent or shareholder so acts or to its shareholders to which that officer,
director, agent or shareholder would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties in
the conduct of such office.
(b) If any order or orders of the SEC with respect to this Agreement shall
be issued prior to the Effective Date and shall impose any terms or conditions
which are determined by action of the Boards of Directors of the Parties to be
acceptable, such terms and conditions shall be binding as if a part of this
Agreement without further vote or approval of the shareholders of the Parties,
unless such terms and conditions shall result in a change in the method of
computing the number of shares of Emerging Markets Infrastructure Fund Common
Stock to be issued pursuant to this Agreement, in which event, unless such terms
and conditions shall have been included in the proxy solicitation materials
furnished to the shareholders of the Parties prior to the meetings at which the
Merger shall have been approved, this Agreement shall not be consummated and
shall terminate unless the Parties call special meetings of shareholders at
which such conditions so imposed shall be submitted for approval.
A-24
<PAGE>
13. MISCELLANEOUS
13.1. TRANSFER RESTRICTION. Pursuant to Rule 145 under the 1933 Act, and
in connection with the issuance of any shares to any person who at the time of
the Merger is, to its knowledge, an affiliate of a party to the Merger pursuant
to Rule 145(c), the Emerging Markets Infrastructure Fund will cause to be
affixed upon the certificate(s) issued to such person (if any) a legend as
follows:
THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT TO THE EMERGING MARKETS INFRASTRUCTURE FUND,
INC. (OR ITS STATUTORY SUCCESSOR) UNLESS (I) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT OF 1933 OR (II) IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE FUND, SUCH REGISTRATION IS NOT REQUIRED.
and, further, that stop transfer instructions will be issued to the Emerging
Markets Infrastructure Fund's transfer agent with respect to such shares. The
Emerging Markets Telecommunications Fund will provide the Emerging Markets
Infrastructure Fund on the Effective Date with the name of any Emerging Markets
Telecommunications Fund Shareholder who is to the knowledge of the Emerging
Markets Telecommunications Fund an affiliate of it on such date.
13.2. MATERIAL PROVISIONS. All covenants, agreements, representations and
warranties made under this Agreement and any certificates delivered pursuant to
this Agreement shall be deemed to have been material and relied upon by each of
the parties, notwithstanding any investigation made by them or on their behalf.
13.3. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Emerging Markets Telecommunications Fund:
Hal Liebes, Esq.
Senior Vice President
The Emerging Markets Telecommunications Fund, Inc.
466 Lexington Avenue
New York, New York 10017
With copies to:
Daniel Schloendorn, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Marco E. Adelfio, Esq.
Morrison & Foerster
2000 Pennsylvania Avenue, N.W.
Suite 5500
Washington, D.C. 20006
A-25
<PAGE>
If to the Emerging Markets Infrastructure Fund:
Hal Liebes, Esq.
Senior Vice President
The Emerging Markets Infrastructure Fund
466 Lexington Avenue
New York, New York 10017
With copies to:
Daniel Schloendorn, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Marco E. Adelfio, Esq.
Morrison & Foerster
2000 Pennsylvania Avenue, N.W.
Suite 5500
Washington, D.C. 20006
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
13.4. AMENDMENTS. This Agreement may be amended, modified or supplemented
in such manner as may be mutually agreed upon in writing by the authorized
officers of the Emerging Markets Telecommunications Fund and the Emerging
Markets Infrastructure Fund; provided, however, that following the meeting of
the Emerging Markets Telecommunications Fund and Emerging Markets Infrastructure
Fund shareholders to approve the Merger, no such amendment may have the effect
of changing the provisions for determining the number of the Emerging Markets
Infrastructure Fund shares to be issued to the Emerging Markets
Telecommunications Fund shareholders under this Agreement to the detriment of
such shareholders without their further approval.
13.5. HEADINGS. The Article headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.6. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
13.7. ENFORCEABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
13.8. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns, but
no assignment or transfer hereof or of any rights or obligations hereunder shall
be made by any party without the written consent of the other party. Nothing
herein expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and the
shareholders of the Parties and their respective successors and assigns, any
rights or remedies under or by reason of this Agreement.
13.9. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with the laws of the State of Maryland, without
regard to its principles of conflicts of law.
A-26
<PAGE>
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to
be executed by its President or Vice President and its seal to be affixed
thereto and attested by its Secretary or Assistant Secretary.
<TABLE>
<S> <C> <C> <C>
THE EMERGING MARKETS INFRASTRUCTURE FUND, INC.
By:
--------------------------------------------
Name:
--------------------------------------------
Attest:
--------------------------------------------
Title:
--------------------------------------------
THE EMERGING MARKETS
TELECOMMUNICATIONS FUND, INC.
By:
--------------------------------------------
Name:
--------------------------------------------
Attest:
--------------------------------------------
Title:
--------------------------------------------
</TABLE>
A-27
<PAGE>
EXHIBIT B
FORM OF
NEW CSAM INVESTMENT ADVISORY AGREEMENT
B-1
<PAGE>
INVESTMENT ADVISORY AGREEMENT
THE EMERGING MARKETS <#>INFRASTRUCTURE</#><*>TELECOMMUNICATIONS</*> FUND, INC.
<#>December 21, 1993</#>
<#>BEA Associates
One Citicorp Center
153 East 53rd Street
New York, New York 10022</#>
<*> , 2000</*>
<*>Credit Suisse Asset Management, LLC
466 Lexington Avenue
New York, New York 10017</*>
Dear Sirs:
<*>The Emerging Markets Telecommunications Fund, Inc. (formerly known as</*>
The Emerging Markets Infrastructure Fund, Inc.) (the "Company"), a corporation
organized under the laws of the State of Maryland, herewith confirms its
agreement with <#>BEA Associates</#><*>Credit Suisse Asset Management, LLC</*>
(the "Adviser"), a <#>general partnership</#><*>limited liability company</*>
organized under the laws of the State of <#>New York</#><*>Delaware</*>, as
follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Company desires to employ its capital by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in its
Articles of Incorporation, as may be amended from time to time, and in its
Registration Statement as from time to time in effect <*>(including its
Registration Statement on Form N-14 as declared effective by the Securities and
Exchange Commission on September 1, 2000)</*>, and in such manner and to such
extent as may from time to time be approved by the Board of Directors of the
Company. Copies of the Company's Registration Statement and Articles of
Incorporation have been or will be submitted to the Adviser. The Company agrees
to provide copies of all amendments to the Company's Registration Statement and
Articles of Incorporation to the Adviser on an ongoing basis. The Company
desires to employ and hereby appoints the Adviser to act as investment adviser
to the Company. The Adviser accepts the appointment and agrees to furnish the
services described herein for the compensation set forth below.
2. SERVICES AS INVESTMENT ADVISER
Subject to the supervision and direction of the Board of Directors of the
Company, the Adviser will (a) act in accordance with the Company's Articles of
Incorporation, the Investment Company Act of 1940 and the Investment Advisers
Act of 1940, as the same may from time to time be amended, (b) manage the
Company's assets in accordance with its investment objective and policies as
stated in the Company's Registration Statement as from time to time in effect,
(c) make investment decisions and exercise voting rights in respect of portfolio
securities for the Company, (d) place purchase and sale orders on behalf of the
Company for all investments and (e) borrow money on behalf of and in the name of
the Company within the limits established in the Company's Articles of
Incorporation and the Registration Statement as from time to time in effect. In
providing these services, the Adviser will provide investment research and
supervision of the Company's investments and conduct a continual program of
investment, evaluation and, if appropriate, sale and reinvestment of the
Company's assets. In addition, the Adviser will furnish the Company with
whatever statistical information the Company may reasonably request with respect
to the securities that the Company may hold or contemplate purchasing.
B-2
<PAGE>
3. BROKERAGE
In executing transactions for the Company and selecting brokers or dealers,
the Adviser will use its best efforts to seek the best overall terms available.
In assessing the best overall terms available for any Company transaction, the
Adviser will consider all factors it deems relevant including, but not limited
to, breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer and the
reasonableness of any commission for the specific transaction and on a
continuing basis. In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, the Adviser may
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to the Company
and/or other accounts over which the Adviser or an affiliate exercises
investment discretion.
4. INFORMATION PROVIDED TO THE COMPANY
The Adviser will keep the Company informed of developments materially
affecting the Company, and will, on its own initiative, furnish the Company from
time to time with whatever information the Adviser believes is appropriate for
this purpose.
5. STANDARD OF CARE
The Adviser shall exercise its best judgment in rendering the services
described in paragraphs 2 and 3 above. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Company in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect the Adviser
against any liability to the Company or its shareholders to which the Adviser
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement ("disabling
conduct"). The Company will indemnify the Adviser against, and hold it harmless
from, any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) not resulting from disabling conduct by
the Adviser. Indemnification shall be made only following: (i) a final decision
on the merits by a court or other body before whom the proceeding was brought
that the Adviser was not liable by reason of disabling conduct or (ii) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the Adviser was not liable by reason of disabling conduct by (a)
the vote of a majority of a quorum of directors of the Company who are neither
"interested persons" of the Company nor parties to the proceeding
("disinterested non-party directors") or (b) an independent legal counsel in a
written opinion. The Adviser shall be entitled to advances from the Company for
payment of the reasonable expenses incurred by it in connection with the matter
as to which it is seeking indemnification in the manner and to the fullest
extent permissible under the Maryland General Corporation Law. The Adviser shall
provide to the Company a written affirmation of its good faith belief that the
standard of conduct necessary for indemnification by the Company has been met
and a written undertaking to repay any such advance if it should ultimately be
determined that the standard of conduct has not been met. In addition, at least
one of the following additional conditions shall be met: (a) the Adviser shall
provide security in form and amount acceptable to the Company for its
undertaking; (b) the Company is insured against losses arising by reason of the
advance; or (c) a majority of a quorum of the full Board of Directors of the
Company, the members of which majority are disinterested non-party directors, or
independent legal counsel, in a written opinion, shall have determined, based on
a review of facts readily available to the Company at the time the advance is
proposed to be made, that there is reason to believe that the Adviser will
ultimately be found to be entitled to indemnification.
B-3
<PAGE>
6. COMPENSATION
6.1 In consideration of the services rendered pursuant to this Agreement,
the Company will pay the Adviser within five business days after the end of
<#>the calendar quarter during which the date of the closing of the offering
contemplated by the Company's initial registration statement occurs (the
"Closing Date") and within five business days after the end of</#>each calendar
quarter<#> thereafter</#>, a fee for the previous quarter computed at an annual
rate of <#>1.30</#><*>1.25%</*> of the <#>Fund</#><*>first US$ 100 million of
the Company's</*> <#>average weekly net assets</#><*>"Average Weekly Base
Amount" (as defined below), 1.125% of the next US$ 100 million and 1.00% of
amounts above US$ 200 million</*>.
<*>6.2(a)</*><*> "Average Weekly Base Amount" for any quarter is the
average of the lesser of (A) "Market Value" of the Company's outstanding shares,
and (B) the Company's net assets, in each case determined as of the last trading
day for each week during that quarter.</*>
<*> (b)</*><*> "Market Value" of the Company's outstanding shares will be
determined as follows:</*>
<*>(i)</*> <*>if the Company's shares are listed or traded on any
national securities exchange or on the Nasdaq National Market, the
shares shall be valued at the last sale price on the exchange or
market on which they are principally traded, on the valuation date;
if there is no sale on the valuation date, the shares shall be valued
at the mean between the closing bid and asked price;</*>
<*>(ii)</*> <*>if the Company's shares are traded
over-the-counter but are not listed or traded on any national
securities exchange or on the Nasdaq National Market, the shares
shall be valued at the last sale price on the valuation date or, if
no sale occurs on that date, at the last bid price; or</*>
<*>(iii)</*> <*>if the Company's shares are not listed or traded
on any recognized securities market or over-the-counter, the shares
shall be deemed to have the same value as the underlying net assets
of the Company as of the valuation date.</*>
The Adviser may retain the services of consultants in appropriate
circumstances and any costs associated with such consulting arrangements shall
be borne solely by the Adviser
<*>6.3</*> Upon any termination of this Agreement before the end of a
quarter, the fee for such part of that quarter shall be prorated according to
the proportion that such period bears to the full quarterly period and shall be
payable upon the date of termination of this Agreement. For the purpose of
determining fees payable to the Adviser, the value of the Company's net assets
shall be computed at the times and in the manner specified in the Company's
Registration Statement as from time to time in effect.
7. EXPENSES
The Adviser will bear all expenses in connection with the performance of its
services under this Agreement. The Company will bear certain other expenses to
be incurred in its operation, including: organizational expenses, expenses for
legal and independent accountants' services; insurance premiums; outside
auditing, accounting and pricing costs; costs of maintenance of the Company's
existence; costs attributable to investor services, including, without
limitation, telephone and personal expenses; costs of printing stock
certificates; costs of printing proxies; costs of shareholders' reports and
meetings of the shareholders of the Company and of the officers or Board of
Directors of the Company; charges of the custodians, any sub-custodians and the
transfer and dividend-paying agent; expenses in connection with the Dividend
Reinvestment and Cash Purchase Plan; Securities and Exchange Commission fees and
fees of emerging country regulatory bodies; fees and expenses of unaffiliated
directors; accounting and pricing costs; membership fees in trade associations;
fidelity bond coverage for the Fund's officers and employees directors' and
officers' errors and omissions insurance coverage; interest; brokerage costs and
stock exchange fees; taxes; stock exchange listing fees and expenses; expenses
of qualifying the
B-4
<PAGE>
Fund's shares for sale in various states and foreign jurisdictions; litigation
and other extraordinary or non-recurring expenses and other expenses properly
payable by the Fund.
8. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Company understands that the Adviser now acts, will continue to act or
may act in the future as investment adviser to fiduciary and other managed
accounts or as investment adviser to one or more other investment companies (the
"<#>BEA</#><*>CSAM</*> Accounts"), and the Company has no objection to the
Adviser so acting, provided that whenever the Company and one or more other
accounts or investment companies advised by the Adviser have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with procedures believed to be equitable to each entity. Similarly,
opportunities to sell securities will be allocated in an equitable manner. The
Company recognizes that in some cases this procedure may adversely affect the
size of the position that may be acquired or disposed of for the Company and the
Adviser agrees to report to the Board of Directors of the Company on a quarterly
basis whenever the Company and a <#>BEA</#><*>CSAM</*> Account are allocated
portions of the same investment opportunity and will review with the Board of
Directors of the Company the basis for each such allocation. In addition, the
Company understands that the persons employed by the Adviser to assist in the
performance of the Adviser's duties hereunder will not devote their full time to
such service and nothing contained herein shall be deemed to limit or restrict
the right of the Adviser or any affiliate of the Adviser to engage in and devote
time and attention to other businesses or to render services of whatever kind or
nature.
9. TERM OF AGREEMENT
This Agreement shall become effective as of the date <#>the Company's
registration statement is declared effective by the Securities and Exchange
Commission</#><*>hereof</*> and shall continue for an initial two-year term and
shall continue from year to year thereafter so long as such continuance is
specifically approved at least annually by (i) the Board of Directors of the
Company or (ii) a vote of a "majority" (as defined in the Investment Company Act
of 1940) of the Company's outstanding voting securities, provided that in either
event the continuance is also approved by a majority of the Board of Directors
who are not "interested persons" (as defined in said Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This Agreement is terminable, without penalty, on 60 days'
written notice, by the Board of Directors of the Company or by the Adviser or by
vote of holders of a majority of the Company's shares. This Agreement will also
terminate automatically in the event of its assignment (as defined in said Act).
10. INDEPENDENT CONTRACTOR STATUS
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided herein or authorized
by the Board of Directors of the Company from time to time, have no authority to
act for or represent the Company in any way or otherwise to be deemed an agent
of the Company.
11. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto.
12. CHANGES IN <#>PARTNERSHIP</#><*>MEMBERSHIP</*>
The Adviser shall notify the Company of any change in the membership of the
Adviser within a reasonable time after such change.
13. GOVERNING LAW
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the state of New York without giving effect to the conflicts of
laws principles thereof.
B-5
<PAGE>
14. COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same original.
If the foregoing accurately sets forth our agreement, kindly indicate your
acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
THE EMERGING MARKETS
<#>INFRASTRUCTURE</#><*>TELECOMMUNICATIONS</*>
FUND, INC.
By: <#>/s/ Paul P. Stamler</#>
--------------------------------------
Name: <#>Paul P. Stamler</#>
Title: <#>Senior Vice President</#>
Accepted:
<#>BEA ASSOCIATES</#>
<*>CREDIT SUISSE ASSET
MANAGEMENT, LLC</*>
By:<#> /s/ Emilio Bassini</#>
------------------------------------------
Name: <#>Emilio Bassini</#>
Title:<#> Chief Financial Officer and
Managing Director</#>
B-6
<PAGE>
PROXY CARD FOR
THE EMERGING MARKETS
INFRASTRUCTURE FUND, INC.
<PAGE>
THE EMERGING MARKETS
INFRASTRUCTURE FUND, INC.
PROXY
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Messrs. Hal Liebes and Michael A. Pignataro as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated on the reverse side and in
accordance with their judgment on such other matters as may properly come before
the meeting or any adjournments thereof, all shares of The Emerging Markets
Infrastructure Fund, Inc. (the "Fund") that the undersigned is entitled to vote
at the special meeting of shareholders to be held on Tuesday, October 10, 2000,
and at any adjournments thereof.
--------------- ---------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
--------------- ---------------
<PAGE>
/X/ PLEASE
MARK VOTES
AS IN THIS
EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1, "FOR" PROPOSAL 2
AND "FOR" PROPOSAL 3.
<TABLE>
<S> <C> <C> <C>
1. To approve the Merger Agreement and Plan of FOR AGAINST ABSTAIN
Reorganization whereby The Emerging Markets / / / / / /
Telecommunications Fund, Inc. will merge with
and into the Fund.
2. To approve a change in the Fund's fundamental FOR AGAINST ABSTAIN
investment policy from investing generally in equity / / / / / /
securities of infrastructure companies in emerging
countries to investing, under normal conditions, at
least 65% of its total assets in equity securities of
telecommunications companies in emerging markets.
3. To approve a new investment advisory agreement with FOR AGAINST ABSTAIN
Credit Suisse Asset Management, LLC. / / / / / /
</TABLE>
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder.
If no direction is made, this proxy will be voted for Proposals 1, 2 and 3.
Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Signature: Date:
------------------------------ ----------------
<PAGE>
PROXY CARD FOR
THE EMERGING MARKETS
TELECOMMUNICATIONS FUND, INC.
<PAGE>
THE EMERGING MARKETS
TELECOMMUNICATIONS FUND, INC.
PROXY
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Messrs. Hal Liebes and Michael A. Pignataro as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated on the reverse side and in
accordance with their judgment on such other matters as may properly come before
the meeting or any adjournments thereof, all shares of The Emerging Markets
Telecommunications Fund, Inc. (the "Fund") that the undersigned is entitled to
vote at the annual meeting of shareholders to be held on Tuesday,
October 10, 2000, and at any adjournments thereof.
--------------- ---------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
--------------- ---------------
<PAGE>
/X/ PLEASE MARK
VOTES AS IN THIS
EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1, "FOR" THE
NOMINEES IN PROPOSAL 2, "FOR" PROPOSAL 3 AND "AGAINST" PROPOSAL 4.
<TABLE>
<S> <C> <C> <C>
1. To approve the Merger Agreement and Plan of FOR AGAINST ABSTAIN
Reorganization whereby the Fund will merge with and / / / / / /
into The Emerging Markets Infrastructure Fund, Inc.
2. To elect the following nominees as Directors:
Nominees: James J. Cattano (three-year term)
William W. Priest, Jr. (three-year term)
</TABLE>
FOR / / / / WITHHOLD
ALL ALL
NOMINEES NOMINEES
/ / MARK HERE / /
------------------------------------------ FOR ADDRESS
For all nominees except as noted above CHANGE AND
NOTE BELOW
Signature: Date:
------------------------------ ----------------
<TABLE>
<S> <C> <C> <C>
3. To ratify the selection of PricewaterhouseCoopers LLP FOR AGAINST ABSTAIN
as independent public accountants of the Fund for the / / / / / /
fiscal year ending May 31, 2001.
4. To approve or disapprove the shareholder proposal FOR AGAINST ABSTAIN
requesting that, within sixty days, the Board present a / / / / / /
program for shareholder approval that will permit
shareholders to realize net asset value for their
shares.
</TABLE>
This proxy when properly executed will be voted in the
manner directed herein by the undersigned shareholder.
If no direction is made, this proxy will be voted for Proposals 1, 2 and 3, and
against Proposal 4.
Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Signature: Date:
------------------------------ ----------------
<PAGE>
PART B
THE EMERGING MARKETS INFRASTRUCTURE
FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
MERGER OF
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
466 LEXINGTON AVENUE, 16th FLOOR
NEW YORK, NEW YORK 10017
(212) 875-3500
WITH AND INTO
THE EMERGING MARKETS INFRASTRUCTURE
FUND, INC.
466 LEXINGTON AVENUE, 16th FLOOR
NEW YORK, NEW YORK 10017
(212) 875-3500
This Statement of Additional Information, or SAI, relates specifically
to the proposed merger (the "Merger") of The Emerging Markets Telecommunications
Fund, Inc. (the "Emerging Markets Telecommunications Fund") with and into The
Emerging Markets Infrastructure Fund, Inc. (the "Emerging Markets Infrastructure
Fund") in accordance with the General Corporation Law of the State of Maryland.
This Statement of Additional Information consists of this cover page, the
information contained herein, and the following documents, each of which has
been filed electronically and is incorporated by reference herein:
The audited financial statements, notes to the audited financial statements
and report of the independent public accountants for The Emerging Markets
Telecommunications Fund for the fiscal year ended May 31, 2000; and
The audited financial statements, notes to the audited financial statements
and report of the independent public accountants for The Emerging Markets
Infrastructure Fund for the fiscal year ended November 30, 1999 and the
unaudited financial statements for The Emerging Markets Infrastructure Fund
for the six months ended May 31, 2000.
This Statement of Additional Information is not a prospectus and
should be read only in conjunction with the Proxy Statement/Prospectus dated
September 1, 2000, relating to the Merger. A copy of the Proxy Statement/
Prospectus may be obtained without charge by writing to either Fund at
466 Lexington Avenue, 16th Floor, New York, New York 10017 or by calling
1
<PAGE>
Shareholders Communications Corporation at 1-(800) 403-7916.
This Statement of Additional Information is dated September 1, 2000
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES 4
INVESTMENT RESTRICTIONS 10
MANAGEMENT OF THE FUNDS 11
PORTFOLIO TRANSACTIONS 15
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 16
TAXATION 20
FINANCIAL STATEMENTS 27
PRO FORMA FINANCIAL STATEMENTS 27
</TABLE>
3
<PAGE>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
ORGANIZATION. Both The Emerging Markets Telecommunications Fund and The
Emerging Markets Infrastructure Fund are closed-end, non-diversified management
investment companies registered under the Investment Company Act of 1940, or the
Investment Company Act. The Emerging Markets Infrastructure Fund is sometimes
referred to in this SAI as "EMG," or following the consummation of the Merger,
the "Surviving Fund," the Emerging Markets Telecommunications Fund is sometimes
referred to in this SAI as "ETF," and EMG and ETF are sometimes collectively
referred to in this SAI as the "Funds" and individually, as the context may
require, as the "Fund." Both Funds are organized as corporations under the laws
of the State of Maryland. Each Fund is managed and advised by Credit Suisse
Asset Management, LLC, or CSAM, formerly known as BEA Associates. The shares of
common stock of each Fund are listed and trade on the New York Stock Exchange,
or NYSE, under the symbols "ETF" and "EMG", respectively. Upon consummation of
the Merger, EMG will change its name to "The Emerging Markets Telecommunications
Fund, Inc." After the Effective Date, shares of common stock of the Surviving
Fund will trade on the NYSE under the symbol "ETF", while ETF's shares will be
delisted and that Fund will cease to exist.
The shares of common stock of each Fund have equal non-cumulative voting
rights and equal rights with respect to dividends, assets and dissolution. Each
Fund's shares of common stock are fully paid and non-assessable and have no
preemptive, conversion or other subscription rights. Fluctuations in the market
price of the Fund's shares is the principal investment risk of an investment in
either Fund. Portfolio management, market conditions, investment policies and
other factors affect such fluctuations. Although currently the investment
objectives, policies and restrictions of the Funds are similar, there are
differences between them, as discussed below. There can be no assurance that
either Fund will achieve its stated objective.
PROPOSED CHANGE IN INVESTMENT POLICIES. EMG shareholders are being asked to
approve a change in EMG's fundamental investment policy to conform to ETF's
current fundamental investment policy. In addition, EMG's Board of Directors
has agreed to modify EMG's current non-fundamental investment policies to
conform to the investment policies of ETF. For more information about changing
EMG's investment policies, see "Proposal 2 (Emerging Markets Infrastructure Fund
Shareholders Only): Approval of Change in Fundamental Investment Policy" in the
Proxy Statement/Prospectus.
INVESTMENT OBJECTIVES. Long-term capital appreciation is the principal
investment objective of each Fund. ETF seeks to achieve this objective by
investing primarily in equity securities of telecommunications companies in
emerging countries and companies that provide other essential services in the
development of an emerging country's infrastructure, while EMG seeks to achieve
this objective by investing primarily in equity securities of infrastructure
companies in emerging countries and companies that manufacture products on
behalf of or service infrastructure companies in emerging countries. The
investment objective of each Fund is a fundamental policy of such Fund and
cannot be changed without the approval of the holders of a "majority of that
Fund's outstanding voting securities," as defined in the Proxy
4
<PAGE>
Statement/Prospectus under "General."
No assurance can be given that either Fund's investment objective will be
achieved.
CURRENT INVESTMENT POLICIES. ETF's policy, under normal market conditions,
is to invest at least 65% of its total assets in equity securities of
telecommunications companies in emerging markets. EMG's policy, under normal
market conditions, is to invest at least 70% of its total assets in equity
securities of infrastructure companies in emerging countries. These policies
and the investment limitations are fundamental and may not be changed without
the approval of a majority of each Fund's outstanding voting securities. All
other policies and percentage limitations of each Fund as described below may
be modified by that Fund's Board of Directors if, in the reasonable exercise
of its business judgment, it determines that modification is necessary or
appropriate to carry out that Fund's investment objective. ETF may also
invest a substantial portion of its remaining assets, up to 25% of its total
assets under normal market conditions, in equity securities of companies that
provide other essential services in the development of an emerging country's
infrastructure and will benefit from macroeconomic growth in an emerging
country, but whose growth is not directly linked to favorable changes in
commodity prices. EMG may also invest up to 30% of its total assets in
equity securities of companies that manufacture products on behalf of or
service infrastructure companies in emerging countries.
ETF may also seek to invest in equity securities of telecommunications
companies in developed countries when these securities, in the opinion of CSAM,
have investment characteristics similar to emerging country telecommunications
companies. In determining if the securities of a telecommunications company in a
developed country have investment characteristics similar to those of emerging
country telecommunications companies, CSAM will consider whether the potential
for growth in such company is similar to that of telecommunications companies in
emerging countries, based on analysis and comparison of such factors as earnings
potential, ratio of revenue per employee and revenue per telephone line, the
density of telephone lines per household, management performance and other
pertinent measurements.
Both Funds define emerging countries as countries which are generally
considered to be emerging or developing by the International Bank for
Reconstruction and Development (more commonly referred to as the World Bank) and
the International Finance Corporation, as well as countries that are classified
by the United Nations or otherwise regarded by its authorities as emerging or
developing, at the time of the Funds' investments. The countries that are not
considered emerging countries include: Australia; Austria; Belgium; Canada;
Denmark; Finland; France; Germany; Ireland; Italy; Japan; Luxembourg;
Netherlands, New Zealand; Norway; Spain; Sweden; Switzerland; United Kingdom;
and the United States.
An emerging country equity security is defined as common stock and
preferred stock (including convertible preferred stock); bonds, notes and
debentures convertible into common or preferred stock; stock purchase warrants
and rights; equity interests in trusts and partnerships; and American, Global or
other types of Depositary Receipts of companies: (i) the principal
5
<PAGE>
securities trading market for which is an emerging country; (ii) whose principal
trading market is in any country, provided that, alone or on a consolidated
basis, they derive 50% or more of their annual revenue from either goods
produced, sales made or services performed in emerging countries; or (iii) that
are organized under the laws of, and with a principal office in, an emerging
country. Determinations as to eligibility will be made by the Funds based on
publicly available information and inquiries made to the companies.
In addition, ETF's definition of emerging country equity securities also
includes securities of companies that may have characteristics and business
relationships common to companies in a country or countries other than an
emerging country. As a result, the value of the securities of these companies
may reflect economic and market forces applicable to other countries, as well as
to an emerging country.
Many of the companies in which the Funds invest may be in the early stages
of their growth cycle and/or may have only recently been privatized;
accordingly, the Funds anticipate that certain investments (up to 25% of its
total assets in the case of ETF and up to 30% of its total assets in the case of
EMG, in both cases at the time of purchase) will be in equity securities of
closely-held companies or private placements of public companies, where CSAM
anticipates that a liquid market will develop for these securities within a
period of two to five years from the date such securities are acquired by that
Fund. Securities that are not publicly traded in the United States but that can
be sold to "qualified institutional buyers" pursuant to Rule 144A ("Rule 144A
securities") under the Securities Act of 1933, as amended (the "Securities
Act"), will not be subject to these percentage limitations if the Fund's Board
of Directors determines on an ongoing basis that an adequate trading market
exists for these securities. The Board of Directors of either Fund may adopt
guidelines and delegate to CSAM the function of determining and monitoring the
liquidity of Rule 144A securities, although the Board of Directors will retain
ultimate responsibility for any determination regarding an adequate market for
Rule 144A securities.
The governments of some emerging countries have been engaged in
"privatization" programs which involve the sale of part or all of their stakes
in government owned or controlled enterprises. CSAM believes that privatizations
may offer shareholders opportunities for significant capital appreciation and
intends to invest assets of each Fund in privatizations in appropriate
circumstances. In certain emerging countries, the ability of foreign entities,
such as the Funds, to participate in privatizations may be limited by local law.
In addition, the terms on which the Funds may be permitted to participate may be
less advantageous than those for local investors. There can be no assurance that
the governments of emerging countries will continue to sell companies currently
owned or controlled by them or that privatization programs will be successful.
To the extent its assets are not invested as described above, ETF may
invest the remainder of its assets in (i) debt securities denominated in the
currency of an emerging country or issued or guaranteed by an emerging country
company or the government of an emerging country, (ii) equity or debt securities
of corporate or governmental issuers located in developed countries, and (iii)
short-term and medium-term debt securities of the type described below under
"Temporary Investments." ETF's assets may be invested in debt securities when
CSAM believes
6
<PAGE>
that, based upon factors such as relative interest rate levels and foreign
exchange rates, such debt securities offer opportunities for long-term capital
appreciation. The debt securities in which ETF may invest include bonds, notes,
bank deposits and bank obligations (including certificates of deposit, time
deposits and bankers' acceptances), commercial paper, repurchase agreements,
assignments of loans and loan participations.
To the extent that its assets are not invested as described above, the
remainder of EMG's assets may be invested as follows: (i) up to 10% of its total
assets in equity securities of emerging country corporate issuers, (ii) up to
30% of its total assets in equity securities of infrastructure companies in
developed countries when CSAM believes that these securities have investment
characteristics similar to securities of emerging country infrastructure
companies and (iii) up to 5% of its total assets in debt securities of
infrastructure companies in emerging countries.
In addition, for temporary defensive purposes, ETF and EMG may each invest
less than 65% and 70%, respectively, of its total respective assets in equity
securities of telecommunications and infrastructure companies, respectively, in
emerging countries, in which case each Fund may invest in debt securities of the
kind described under "Temporary Investments" below. In addition, ETF may acquire
assignments of, and participations in, loans.
TEMPORARY INVESTMENTS. During periods in which CSAM believes changes in
economic, financial or political conditions make it advisable, the Funds may for
temporary defensive purposes reduce their holdings in equity and other
securities and invest in certain short-term (less than twelve months to
maturity) and medium-term (not greater than five years to maturity) debt
securities or hold cash.
Each Fund may invest in the following short-term instruments:
obligations of the U.S. Government, its agencies or instrumentalities
(including repurchase agreements with respect to these securities),
bank obligations (including certificates of deposit, time deposits and
bankers' acceptances) of U.S. banks and foreign banks denominated in
any currency,
floating rate securities and other instruments denominated in any currency
issued by international development agencies, banks and other
financial institutions, governments and their agencies and
instrumentalities, and corporations located in countries that are
members of the Organization for Economic Cooperation and Development,
obligations of U.S. corporations that are rated no lower than A-2 by
Standard & Poor's Rating Group or P-2 by Moody's Investor Services or
the equivalent by another rating service or, if unrated, deemed to be
of equivalent quality by CSAM, and
shares of money market funds that are authorized to invest in short-term
instruments described above.
7
<PAGE>
CURRENCY TRANSACTIONS. CSAM generally does not seek to hedge against
declines in the value of the Funds' non-dollar-denominated portfolio securities
resulting from currency devaluations or fluctuations. If suitable hedging
instruments are available on a timely basis and on acceptable terms, CSAM may,
in its discretion, hedge all or part of the value of the Funds'
non-dollar-denominated portfolio securities, although it is not obligated to do
so. Each Fund will be subject to the risk of changes in value of the currencies
of the emerging countries in which their assets are denominated, unless they
engage in hedging transactions.
Both Funds will conduct any currency exchange transactions either on a
spot, i.e., cash, basis at the rate prevailing in the currency exchange market,
or through entering into forward contracts to purchase or sell currency. A
forward currency contract typically involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. If either Fund enters into a forward contract, that Fund's U.S.
or non-U.S. custodian will place cash or readily marketable securities in a
segregated account of that Fund in an amount equal to the value of that Fund's
total assets committed to the consummation of the forward contract. If the value
of the securities placed in the segregated account declines, additional cash or
securities will be placed in the account so that the value of the account will
equal the amount of the Fund's commitment with respect to the contract.
At or before the maturity of a forward contract, either Fund may either
sell a portfolio security and make delivery of the currency or retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on the same
maturity date, the same amount of the currency which it is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund, at the time of execution of the offsetting transaction,
will incur a gain or a loss to the extent that movement has occurred in forward
contract prices. Should forward prices decline during the period between the
Fund's entering into a forward contract for the sale of a currency and the date
it enters into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.
The cost to the Funds of engaging in currency transactions will vary with
respect to factors such as the length of the contract period and the market
conditions then prevailing. Because forward currency exchange transactions are
usually conducted on a principal basis, no fees or commissions are involved,
although the price charged in the transaction includes a dealer's markup. The
use of forward currency contracts does not eliminate fluctuations in the
underlying prices of the securities, but it does establish a rate of exchange
that can be achieved in the future. In addition, although forward currency
contracts limit the risk of loss due to a decline in the value of the hedged
currency, at the same time they limit any potential gain that might result
should the value of the currency increase.
If a devaluation is generally anticipated, either Fund may not be able to
contract to sell
8
<PAGE>
the currency at a price above the devaluation level it anticipates.
There is a risk that the U.S. dollar value of each Fund's dividends,
interest and net realized capital gains in local currency will decline, to the
extent of any devaluation of the currency, during the interval between the time
that the Fund becomes entitled to receive or receives dividends and interest and
realizes gains and the time such amounts are converted into U.S. dollars for
remittance.
CURRENCY CONVERTIBILITY. Neither Fund intends to invest in any security in
a country where the currency is not freely convertible to U.S. dollars, unless
that Fund has obtained the necessary governmental licensing to convert such
currency or other appropriately licensed or sanctioned contractual guarantee to
protect such investment against loss of that currency's external value, or that
Fund has a reasonable expectation at the time the investment is made that such
governmental licensing or other appropriately licensed or sanctioned guarantee
would be obtained or that the currency in which the security is quoted would be
freely convertible at the time of any proposed sale of the security by that
Fund.
DEPOSITARY RECEIPTS. Both Funds may invest indirectly in securities of
emerging country issuers through sponsored or unsponsored American Depositary
Receipts, or ADRs, Global Depositary Receipts, or GDRs, and other types of
Depositary Receipts (which, together with ADRs and GDRs, are referred to in this
SAI as "Depositary Receipts"). Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. In addition, the issuers of the stock of unsponsored
Depositary Receipts are not obligated to disclose material information in the
United States and, therefore, there may not be a correlation between such
information and the market value of the Depositary Receipts. ADRs are Depositary
Receipts typically issued by a United States bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
GDRs and other types of Depositary Receipts are typically issued by foreign
banks or trust companies, although they also may be issued by U.S. banks or
trust companies, and evidence ownership of underlying securities issued by
either a foreign or a United States corporation. Generally, Depositary Receipts
in registered form are designed for use in the United States securities markets
and Depositary Receipts in bearer form are designed for use in securities
markets outside the United States. For purposes of the Funds' investment
policies, the Funds' investments in ADRs, GDRs and other types of Depositary
Receipts will be deemed to be investments in the underlying securities.
PORTFOLIO TURNOVER RATE. Neither Fund engages in the trading of securities
for the purpose of realizing short-term profits, but adjusts its portfolio as it
deems advisable in view of prevailing or anticipated market conditions to
accomplish its investment objective. It is not anticipated that the annual
portfolio turnover rate of ETF following the Merger will exceed 85%. A high rate
of portfolio turnover involves correspondingly greater brokerage commission
expenses than a lower rate, which expenses must be borne by the Funds and their
shareholders. High portfolio turnover may also result in the realization of
substantial net short-term capital gains and any distributions resulting from
such gains will be taxable at ordinary income rates for U.S. federal income tax
purposes. ETF's portfolio turnover rates for the fiscal years ended May
9
<PAGE>
31, 2000 and 1999 were 113.75% and 179.66%, respectively. EMG's portfolio
turnover rates for the fiscal years ended November 30, 1999 and 1998 were
109.09% and 169.85%, respectively. The higher EMG portfolio turnover rate for
the fiscal year ended November 30, 1998 is attributable to the Fund's increased
investment activity in Asia during that year. The portfolio turnover rate is
calculated by dividing the lesser of sales or purchases of portfolio securities
by the average monthly value of a Fund's portfolio securities. For purposes of
this calculation, portfolio securities exclude purchases and sales of debt
securities having a maturity at the date of purchase of one year or less.
BORROWING. For information on the Funds' ability to borrow money see
"Proposal 1 (Both Funds): Approval of the Merger Agreement and Plan of
Reorganization pursuant to which the Emerging Markets Telecommunications Fund
Will Merge with and into the Emerging Markets Infrastructure Fund -- Comparison
of Investment Objectives and Policies" in the Proxy Statement/Prospectus.
INVESTMENT RESTRICTIONS
For information on the Funds' fundamental investment policies and
restrictions see "Proposal 1 (Both Funds): Approval of the Merger Agreement and
Plan of Reorganization pursuant to which the Emerging Markets Telecommunications
Fund Will Merge with and into the Emerging Markets Infrastructure Fund --
Comparison of Investment Objectives and Policies" in the Proxy
Statement/Prospectus.
10
<PAGE>
MANAGEMENT OF THE FUNDS
DIRECTORS AND PRINCIPAL OFFICERS
The names, addresses and principal occupations of the directors and
principal officers of each Fund are described under "Proposal 1 (Both Funds):
Approval of the Merger Agreement and Plan of Reorganization pursuant to which
the Emerging Markets Telecommunications Fund Will Merge with and into the
Emerging Markets Infrastructure Fund -- Management of the Funds -- Directors and
Principal Officers" in the Proxy Statement/Prospectus.
COMPENSATION OF DIRECTORS AND PRINCIPAL OFFICERS
For information about the compensation of the directors of ETF and EMG for
the fiscal years ended May 31, 1999 and November 30, 1999, respectively, see
"Proposal 1 (Both Funds): Approval of the Merger Agreement and Plan of
Reorganization pursuant to which The Emerging Markets Telecommunications Fund
Will Merge with and into The Emerging Markets Infrastructure Fund --- Management
of the Funds" and "Proposal 3 (Emerging Markets Telecommunications Fund
Shareholders Only): Election of Directors --- Background" in the Proxy
Statement/Prospectus.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
For information concerning persons who may be deemed beneficial owners of
5% or more of the shares of common stock of either Fund see "Proposal 1 (Both
Funds): Approval of the Merger Agreement and Plan of Reorganization pursuant to
which the Emerging Markets Telecommunications Fund Will Merge with and into the
Emerging Markets Infrastructure Fund --- Management of the Funds" in the Proxy
Statement/Prospectus.
ADVISORY ARRANGEMENTS
CSAM serves as the investment adviser to both Funds pursuant to advisory
agreements with each Fund (the "Advisory Agreements"). Each Advisory Agreement
provides that the Adviser shall not be liable, and shall be indemnified, for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which the Advisory Agreement relates, except
liability resulting from willful misfeasance, bad faith or gross negligence on
the part of the Adviser in the performance of its duties or from reckless
disregard of its obligations and duties under the Advisory Agreement. In
addition, CSAM is entitled to receive advances from each Fund for payment of the
reasonable expenses it incurs in connection with any matter as to which it seeks
indemnification in the manner and to the fullest extent permissible under the
Maryland General Corporation Law.
For more information about each Adviser and the Advisory Agreements, see
"Proposal 1 (Both Funds): Approval of the Merger Agreement and Plan of
Reorganization pursuant to which the Emerging Markets Telecommunications Fund
Will Merge with and into the Emerging Markets Infrastructure Fund - Synopsis
Fees and Expenses - The Emerging Markets Telecommunications Fund," "Proposal 1
(Both Funds): Approval of the Merger Agreement and Plan of Reorganization
pursuant to which the Emerging Markets Telecommunications Fund Will Merge with
and into the Emerging Markets Infrastructure Fund - Synopsis - Fees and Expenses
11
<PAGE>
of the Emerging Markets Infrastructure Fund" and "Proposal 1 (Both Funds):
Approval of the Merger Agreement and Plan of Reorganization pursuant to which
the Emerging Markets Telecommunications Fund Will Merge with and into the
Emerging Markets Infrastructure Fund - Management" in the Proxy
Statement/Prospectus. Shareholders of the Emerging Markets Infrastructure Fund
have been requested to consider and approve a new investment advisory agreement
with CSAM. For information regarding the terms of the new investment advisory
agreement, see "Proposal 2 (Emerging Markets Infrastructure Fund Shareholders
Only): Approval of New Investment Advisory Agreement" in the Proxy
Statement/Prospectus.
The table below sets forth the investment advisory fees earned by CSAM for
each Fund for the last three fiscal years.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Fund Fiscal Year Ended Advisory Fee
-------------------------------------------------------------------------
<S> <C> <C>
Emerging Markets May 31, 1998 $1,985,605
Telecommunications Fund
--------------------------------------------
May 31, 1999 $1,303,309
--------------------------------------------
May 31, 2000 $1,542,224
-------------------------------------------------------------------------
Emerging Markets November 30, 1997 $3,242,573
Infrastructure Fund
--------------------------------------------
November 30, 1998 $2,615,834
--------------------------------------------
November 30, 1999 $1,922,776
-------------------------------------------------------------------------
</TABLE>
For information about the Funds' custodian, transfer agent and registrar,
see "Proposal 1 (Both Funds): Approval of the Merger Agreement and Plan of
Reorganization pursuant to which the Emerging Markets Telecommunications Fund
Will Merge with and into the Emerging Markets Infrastructure Fund Management of
the Funds" in the Proxy Statement/Prospectus. For information about the Funds'
independent accountants, see "Proposal 1 (Both Funds): Approval of the Merger
Agreement and Plan of Reorganization pursuant to which the Emerging Markets
Telecommunications Fund Will Merge with and into the Emerging Markets
Infrastructure Fund - Experts" in the Proxy Statement/Prospectus.
DURATION AND TERMINATION; NON-EXCLUSIVE SERVICES
Unless earlier terminated as described below, the Advisory Agreements
remain in effect if approved annually by either (i) the Board of Directors of
the Fund or (ii) the "vote of a majority of the outstanding voting securities"
of the Fund, and in either case, the vote of a majority of the Non-interested
Directors (as defined in the Investment Company Act), cast in person at a
meeting called for such purpose. Each of the Advisory Agreements terminates
automatically on its assignment by any party and may be terminated without
penalty on 60 days' written notice by the Board of Directors or the vote of the
holders of a majority of the Fund's outstanding shares. CSAM may terminate
either agreement, without penalty, upon 60 days'
12
<PAGE>
written notice.
ADMINISTRATION ARRANGEMENTS
The U.S. Administration Agreements between Bear Stearns Funds Management
Inc. ("BSFM" or the "U.S. Administrator") and the Funds are terminable on 60
days' notice by either party. Unless terminated by the Funds' Board of Directors
upon 60 days' prior written notice or by the relevant service provider upon 90
days' prior written notice, the Chilean Administration Agreements between the
Funds and Celfin Administradora de Fondos de Inversion de Capitel Extranjero
S.A. ("Celfin" or the "Chilean Administrator") and the Brazilian Administration
Agreements between the Funds and Fleet National Bank ("Fleet" or the "Brazilian
Administrator") will continue automatically from year to year. The Chilean
Administrator and the Brazilian Administrator may be replaced only by an entity
authorized to act as an administrator of a foreign capital investment fund under
Chilean and Brazilian law, respectively.
The following table sets forth the amounts BSFM and Celfin earned as
administrative fees and the amounts CSAM was reimbursed for administrative fees
for the last three fiscal years. Fleet is paid for its services out of the
custody fee payable to Brown Brothers Harriman & Co., the Funds' accounting
agent and custodian.
13
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Fund Fiscal Year Ended BSFM CSAM CELFIN
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Emerging Markets May 31, 1998 $211,894 $14,078 $59,999
Telecommunications ---------------------------------------------------------
Fund May 31, 1999 $112,812 $14,001 $60,002
---------------------------------------------------------
May 31, 2000 $151,157 $14,040 $54,670
-----------------------------------------------------------------------------
Emerging Markets November 30, 1997 $299,319 $19,752 $65,369
Infrastructure ---------------------------------------------------------
Fund November 30, 1998 $241,462 $19,986 $71,999
---------------------------------------------------------
November 30, 1999 $177,488 $19,998 $64,999
-----------------------------------------------------------------------------
</TABLE>
The services of CSAM, the Chilean Administrator, the Brazilian
Administrator and the U.S. Administrator are not deemed to be exclusive, and
nothing in the relevant service agreements will prevent any of them or their
affiliates from providing similar services to other investment companies and
other clients (whether or not such clients' investment objectives and policies
are similar to those of the Fund) or from engaging in other activities.
CODE OF ETHICS
Each Fund and CSAM have adopted a written Code of Ethics, which permits
personnel covered by the Code of Ethics ("Covered Persons") to invest in
securities, including securities that may be purchased or held by the respective
Fund. The Code of Ethics also contains provisions designed to address the
conflicts of interest that could arise from personal trading by advisory
personnel, including: (1) all Covered Persons must report their personal
securities transactions at the end of each quarter; (2) with certain limited
exceptions, all Covered Persons must obtain preclearance before executing any
personal securities transactions; (3) Covered Persons may not execute personal
trades in a security if there are any pending orders in that security by the
respective Fund; and (4) Covered Persons may not invest in initial public
offerings.
The Board of Directors of each Fund reviews the administration of the Code
of Ethics at least annually and may impose sanctions for violations of the Code
of Ethics.
14
<PAGE>
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for each Fund are made by CSAM subject
to the overall review of that Fund's Board of Directors. Portfolio securities
transactions for each Fund are placed on behalf of the Fund by persons
authorized by CSAM. CSAM manages other investment companies and accounts that
invest in securities of emerging countries. Although investment decisions for
the Funds are made independently from those of the other accounts, investments
of the type the Funds may make may also be made on behalf of those other
accounts. When the Funds and one or more of those other accounts is prepared to
invest in, or desires to dispose of, the same security, available investments or
opportunities for each will be allocated in a manner believed by CSAM to be
equitable. In some cases, this procedure may adversely affect the price paid or
received by the Funds or the size of the position obtained or disposed of by the
Funds. The Funds may utilize Celfin, CS First Boston Corporation or other
affiliates of CSAM in connection with a purchase or sale of securities in
accordance with rules or exemptive orders adopted by the SEC when CSAM believes
that the charge for the transaction does not exceed usual and customary levels.
In addition, the Funds may purchase securities in the placement for which
Celfin, CS First Boston Corporation or other affiliates of CSAM has acted as
agent to or for issuers, consistent with applicable rules adopted by the SEC or
regulatory authorization, if necessary. The Funds will not purchase securities
from or sell securities to any Adviser or its affiliates acting as principal.
Transactions on U.S. and some foreign stock exchanges involve the payment
of negotiated brokerage commissions, which may vary among different brokers. The
cost of securities purchased from underwriters includes an underwriter's
commission or concession, and the prices at which securities are purchased from
and sold to dealers in the over-the-counter markets include an undisclosed
dealer's mark-up or mark-down. Fixed income securities are generally traded on a
"net" basis with dealers acting as principal for their own accounts without a
stated commission, although the price of the security will likely include a
profit to the dealer.
In selecting brokers or dealers to execute portfolio transactions on behalf
of each Fund, CSAM will seek the best overall terms available. Each Advisory
Agreement provides that, in assessing the best overall terms available for any
transaction, the Adviser will consider the factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on a
continuing basis. In addition, each Advisory Agreement authorizes the Adviser,
in selecting brokers or dealers to execute a particular transaction and in
evaluating the best overall terms available, to consider the brokerage and
research services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) provided to the Funds and/or other accounts over which the
Adviser exercises investment discretion. The fees payable under the Advisory
Agreements are not reduced as a result of the Adviser's receiving such brokerage
and research services.
The Board of Directors of each Fund will review periodically the
commissions paid by
15
<PAGE>
that Fund to determine if the commissions paid over representative periods of
time were reasonable in relation to the benefits inuring to such Fund.
The aggregate amounts paid by ETF in brokerage commissions for the fiscal
years ended May 31, 1998, 1999 and 2000 were $1,149,119, $672,107 and $600,684,
respectively, and the aggregate amounts paid by EMG for the fiscal years ended
November 30, 1997, 1998 and 1999 were $1,408,426, $1,490,525 and $778,666,
respectively. The higher commissions paid by ETF in the fiscal year
ended May 31, 1998 and the higher commissions paid by EMG in the fiscal years
ended November 30, 1997 and November 30, 1998 are attributable to the Funds'
increased investment activity in Asia during those periods. ETF paid $5,097 and
EMG paid $6,244 to brokers and dealers who provided research services for the
fiscal year ended May 31, 2000 and November 30, 1999, respectively.
The table below sets forth, for the last three fiscal years, (i) the
total dollar amount of brokerage commissions paid by each Fund to affiliated
brokers, (ii) the percentage of each Fund's aggregate brokerage commissions
paid to affiliated brokers, and (iii) the percentage of each Fund's aggregate
dollar amount of transactions involving the payment of commissions effected
through affiliated brokers.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
PERCENTAGE OF
PERCENTAGE OF AGGREGATE DOLLAR
TOTAL AMOUNT OF AGGREGATE AMOUNT OF
BROKERAGE BROKERAGE TRANSACTIONS
COMMISSIONS PAID COMMISSIONS EFFECTED THROUGH
FUND YEAR ENDED TO AFFILIATES PAID TO AFFILIATES AFFILIATES
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EMG November 30, 1997 $ 1,557 0.11 % 0.25 %
------------------------------------------------------------------------------
November 30, 1998 $ 12,248 0.82 % 1.76 %
------------------------------------------------------------------------------
November 30, 1999 $ 7,918 1.02 % 2.20 %
------------------------------------------------------------------------------------------
ETF May 31, 1998 $ 20,922 4.18 % 9.49 %
------------------------------------------------------------------------------
May 31, 1999 $ 2,132 0.32 % 0.32 %
------------------------------------------------------------------------------
May 31, 2000 $ 4,440 0.74 % 1.40 %
------------------------------------------------------------------------------------------
</TABLE>
Each Fund has the benefit of an exemptive order of the SEC issued under the
Investment Company Act authorizing the Funds and other investment companies
advised by CSAM to co-invest in securities issued in privately-negotiated
transactions, subject to the terms and conditions of the order.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Each Fund operates a Dividend Reinvestment and Cash Purchase Plan, the
InvestLink-SM- Program, or the Program, sponsored and administered by Fleet
National Bank c/o EquiServe, L.P. ("Fleet"), pursuant to which Fund dividends
and distributions, net of any applicable U.S. withholding tax, are reinvested in
additional shares of that Fund. Fleet National Bank c/o EquiServe, L.P. serves
as the Program Administrator for the shareholders in administering 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 that 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 Fleet
receives the participant's enrollment form. Once in the Program, a person will
remain a participant until he or she terminates his or her participation or
sells all Shares held in his or her Program account, or his or her account is
terminated by Fleet. A participant may change his or her investment options at
any time by requesting a new enrollment form and returning it to Fleet.
A participant will be assessed certain charges in connection with his or
her 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,
16
<PAGE>
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 or her dividends, cash payments or bank account or payroll
deductions, less applicable fees and commissions, and the purchase price of the
Shares. Fleet uses dividends and funds of participants to purchase Shares of the
relevant Fund's 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 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 Fleet 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 Fleet 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 or her account with his or her funds or dividends received by Fleet during
such time period. The average price of all Shares sold by Fleet 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 or her account
pursuant to his or her sell orders received by Fleet during such time period.
Fleet administers the Program for participants, keeps records, sends
statements of account to participants and performs other duties relating to the
Program. Each participant in the Program will receive a statement of his or her
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 respective Fund's annual and semi-annual reports to
shareholders, proxy statements and, if applicable, dividend income information
for tax reporting purposes.
If the respective 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 or her
account, and for all other Shares of the Fund registered in his or her name.
Fleet 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. Fleet will hold the Shares in book-entry form until a Program
participant chooses to withdraw his or her Shares or terminates
17
<PAGE>
his or her participation in the Program. The number of Shares purchased for a
participant's account under the Program will be shown on his or her 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 or her
Program account by notifying Fleet. After receipt of a participant's request,
Fleet 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
or her and send him or her the proceeds, less applicable brokerage commissions,
fees, and transfer taxes, if any. If a participant withdraws all full and
fractional Shares in his or her Program account, his or her participation in the
Program will be terminated by Fleet. In no case will certificates for fractional
Shares be issued. Fleet will convert any fractional Shares held by a participant
at the time of his or her 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 or
her 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 or her
Shares in person at the Shareholders' meeting.
A participant will receive tax information annually for his or her personal
records and to help him or her prepare his or her U.S. federal income tax
return. The automatic reinvestment of dividends does not relieve him or her 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.
Fleet in administering the Program will not be liable for any act done in
good faith or for any good faith omission to act. However, Fleet will be liable
for loss or damage due to error caused by its negligence, bad faith or willful
misconduct. Shares held in custody by Fleet are not subject to protection under
the Securities Investors Protection Act of 1970.
The participant should recognize that neither the Fund nor Fleet 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 or
her Program account is no different than his or her 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 or her Shares.
Neither the Fund nor Fleet 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
18
<PAGE>
independent investment decision based on his or her own judgment and research.
While Fleet hopes to continue the Program indefinitely, Fleet 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. Fleet 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
Fleet 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 $3,000.00
semi-annually. An interested investor may join the Program by reading the
Program description, completing and signing the enrollment form and returning it
to Fleet. The enrollment form and information relating to the Program (including
the terms and conditions) may be obtained by calling Fleet at one of the
following telephone numbers: First Time Investors--(800) 338-1176; Current
Shareholders--(800) 730-6001. All correspondence regarding the Program should be
directed to: Fleet National Bank c/o EquiServe, L.P., InvestLink-SM- Program,
P.O. Box 8040, Boston, MA 02266-8040.
19
<PAGE>
TAXATION
The following is a summary of certain material United States federal income
tax considerations regarding the purchase, ownership and disposition of shares
in either Fund. Each prospective shareholder is urged to consult his or her own
tax adviser with respect to the specific federal, state, local and foreign tax
consequences of investing in either Fund. The summary is based on the laws in
effect on the date of this SAI, which are subject to change.
UNITED STATES FEDERAL INCOME TAXES
THE FUNDS AND THEIR INVESTMENTS
Each Fund has qualified, and intends to continue to qualify and elect to be
treated, as a regulated investment company for each taxable year under the Code.
To so qualify, each Fund must, among other things: (a) derive at least 90% of
its gross income in each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
stock or securities or foreign currencies, or other income (including, but not
limited to, gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock, securities or currencies;
and (b) diversify its holdings so that, at the end of each quarter of that
Fund's taxable year, (i) at least 50% of the market value of that Fund's assets
is represented by cash, securities of other regulated investment companies,
United States government securities and other securities, with such other
securities limited, in respect of any one issuer, to an amount not greater than
5% of that Fund's assets and not greater than 10% of the outstanding voting
securities of such issuer and (ii) not more than 25% of the value of its assets
is invested in the securities (other than United States government securities or
securities of other regulated investment companies) of any one issuer or any two
or more issuers that such Fund controls and are determined to be engaged in the
same or similar trades or businesses or related trades or businesses. Each Fund
expects that all of its foreign currency gains will be directly related to its
principal business of investing in stocks and securities.
As a regulated investment company, neither Fund will be subject to United
States federal income tax on its net investment income (i.e., income other than
its net realized long- and short-term capital gains) and its net realized long-
and short-term capital gains, if any, that it distributes to its shareholders,
provided that an amount equal to at least 90% of its investment company taxable
income (i.e., 90% of its taxable income minus the excess, if any, of its net
realized long-term capital gains over its net realized short-term capital losses
(including any capital loss carryovers), plus or minus certain other adjustments
as specified in section 852 of the Code) for the taxable year is distributed,
but will be subject to tax at regular corporate rates on any income or gains
that it does not distribute. Furthermore, each Fund will be subject to a United
States corporate income tax with respect to such distributed amounts in any year
that it fails to qualify as a regulated investment company or fails to meet this
distribution requirement. Any dividend declared by either Fund in October,
November or December of any calendar year and payable to shareholders of record
on a specified date in such a month shall be deemed to have been received
20
<PAGE>
by each shareholder on December 31 of such calendar year and to have been paid
by that Fund not later than such December 31, provided that such dividend is
actually paid by that Fund during January of the following calendar year.
Each Fund intends to distribute annually to its shareholders substantially
all of its investment company taxable income. The Board of Directors of each
Fund will determine annually whether to distribute any such net realized
long-term capital gains in excess of net realized short-term capital losses
(including any capital loss carryovers). Each Fund currently expects to
distribute any excess annually to its shareholders. However, if either Fund
retains for investment an amount equal to its net long-term capital gains in
excess of its net short-term capital losses and capital loss carryovers, it will
be subject to a corporate tax (currently at a rate of 35%) on the amount
retained. In that event, each Fund expects to designate such retained amounts as
undistributed capital gains in a notice to its shareholders who (a) will be
required to include in income for United States federal income tax purposes, as
long-term capital gains, their proportionate shares of the undistributed amount,
(b) will be entitled to credit their proportionate shares of the 35% tax paid by
that Fund on the undistributed amount against their United States federal income
tax liabilities, if any, and to claim refunds to the extent their credits exceed
their liabilities, if any, and (c) will be entitled to increase their tax basis,
for United States federal income tax purposes, in their shares by an amount
equal to 65% of the amount of undistributed capital gains included in the
shareholder's income.
The Code imposes a 4% nondeductible excise tax on each Fund to the extent
such Fund does not distribute by the end of any calendar year at least 98% of
its net investment income for that year and 98% of the net amount of its capital
gains (both long- and short-term) for the one-year period ending, as a general
rule, on October 31 of that year. For this purpose, however, any income or gain
retained by such Fund that is subject to corporate income tax will be considered
to have been distributed by year-end. In addition, the minimum amounts that must
be distributed in any year to avoid the excise tax will be increased or
decreased to reflect any underdistribution or overdistribution, as the case may
be, from the previous year. Each Fund anticipates that it will pay such
dividends and will make such distributions as are necessary in order to avoid
the application of this tax.
Exchange control regulations may restrict repatriations of investment
income and capital or the proceeds of securities sales by foreign investors such
as the Funds and may limit the Funds' abilities to pay sufficient dividends and
to make sufficient distributions to satisfy the 90% and excise tax distribution
requirements.
Each Fund will maintain accounts and calculate income in U.S. dollars. In
general, gains and losses on the disposition, or receipt of principal, of debt
securities denominated in a foreign currency that are attributable to
fluctuation in exchange rates between the date the debt security is acquired and
the date of disposition, or receipt of principal, gains and losses attributable
to fluctuations in exchange rates that occur between the time such Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the
21
<PAGE>
time such Fund actually collects such receivables or pays such liabilities, and
gains and losses from the disposition of foreign currencies and foreign currency
forward contracts will be treated as ordinary income or loss. If either Fund
acquires a debt security denominated in a Latin American currency, such security
may bear interest at a high nominal rate that takes into account expected
decreases in the value of the principal amount of the security due to
anticipated devaluations of the currency. In the case of such debt securities,
each Fund would be required to include the stated interest in income as it
accrues, but would generally realize an ordinary loss attributable to
devaluations of the currency with respect to principal only when the security is
disposed of or the principal amount is received.
Each Fund's transactions in foreign currencies, forward contracts, options
and futures contracts (including options and futures contracts on foreign
currencies) will be subject to special provisions of the Code that, among other
things, may affect the character of gains and losses realized by such Fund
(i.e., may affect whether gains or losses are ordinary or capital), accelerate
recognition of income to such Fund and defer the Fund's losses. These rules
could therefore affect the character, amount and timing of distributions to
shareholders. These provisions also (a) will require each Fund to mark-to-market
certain types of the positions in its portfolio (i.e., treat them as if they
were closed out) and (b) may cause each Fund to recognize income without
receiving cash with which to pay dividends or make distributions in amounts
necessary to satisfy the distribution requirements for avoiding income and
excise taxes. Each Fund will monitor its transactions, will make the appropriate
tax elections and will make the appropriate entries in its books and records
when it acquires any foreign currency, forward contract, option, futures
contract or hedged investment in order to mitigate the effect of these rules and
prevent disqualification of such Fund as a regulated investment company.
PASSIVE FOREIGN INVESTMENT COMPANIES
If either Fund purchases shares in certain foreign investment entities,
called "passive foreign investment companies" (a "PFIC"), that Fund may be
subject to United States federal income tax on a portion of any "excess
distribution" or gain from the disposition of such shares even if such income is
distributed as a taxable dividend by the Fund to its shareholders. Additional
charges in the nature of interest may be imposed on that Fund in respect of
deferred taxes arising from such distributions or gains. If such Fund were to
invest in a PFIC and elected to treat the PFIC as a "qualified electing fund" (a
"QEF Election") under the Code, in lieu of the foregoing requirements, such Fund
might be required to include in income each year a portion of the ordinary
earnings and net capital gains of the qualified electing fund, even if not
distributed to the Fund, and such amounts would be subject to the 90% and
calendar year distribution requirements described above.
Alternatively, the Fund may make a mark-to-market election that will result
in the Fund being treated as if it had sold and repurchased all of the PFIC
stock at the end of each year. In such case, the Fund would report any such
gains as ordinary income and would deduct any such losses as ordinary losses to
the extent of previously recognized gains. The election, once made,
22
<PAGE>
would be effective for all subsequent taxable years of the Fund, unless revoked
with the consent of the IRS. By making the election, the Fund could potentially
ameliorate the adverse tax consequences with respect to its ownership of shares
in a PFIC, but in any particular year may be required to recognize income in
excess of the distributions it receives from PFICs and its proceeds from
dispositions of PFIC stock. The Fund may have to distribute this "phantom"
income and gain to satisfy the 90% distribution requirement and to avoid
imposition of the 4% excise tax. The Fund will make the appropriate tax
elections if possible, and take any additional steps that are necessary to
mitigate the effect of these rules.
DIVIDENDS AND DISTRIBUTIONS
Dividends of net investment income and distributions of net realized
short-term capital gains are taxable to a United States shareholder as ordinary
income, whether paid in cash or in shares. Distributions of net long-term
capital gains, if any, that either Fund designates as capital gains dividends
are taxable as long-term capital gains, whether paid in cash or in shares and
regardless of how long a shareholder has held shares of the Fund. Dividends and
distributions paid by each Fund (except for the portion thereof, if any,
attributable to dividends on stock of U.S. corporations received by the Fund)
will not qualify for the deduction for dividends received by corporations.
Distributions in excess of such Fund's current and accumulated earnings and
profits will, as to each shareholder, be treated as a tax-free return of
capital, to the extent of a shareholder's basis in his shares of the Fund, and
as a capital gain thereafter (if the shareholder held his shares of the Fund as
capital assets).
Shareholders reinvesting dividends or distributions in shares pursuant to
the Program will be treated for United States federal income tax purposes as
receiving a distribution in the amount equal to the amount of money that the
shareholders receiving cash dividends or distributions will receive, and will
have a cost basis in the shares received equal to such amount.
Investors considering buying shares just prior to a dividend or capital
gain distribution should be aware that, although the price of shares just
purchased at that time may reflect the amount of the forthcoming distribution,
those who purchase just prior to a distribution will receive a distribution
which nevertheless will be taxable to them.
If either Fund is the holder of record of any stock on the record date for
any dividends payable with respect to such stock, such dividends are included in
the Fund's gross income not as of the date received but as of the later of (a)
the date such stock became ex-dividend with respect to such dividends (i.e., the
date on which a buyer of the stock would not be entitled to receive the
declared, but unpaid, dividends) or (b) the date the Fund acquired such stock.
Accordingly, in order to satisfy its income distribution requirements, the Fund
may be required to pay dividends based on anticipated earnings, and shareholders
may receive dividends in an earlier year than would otherwise be the case.
SALES OF SHARES
23
<PAGE>
Upon the sale or exchange of his shares, a shareholder will realize a
taxable gain or loss equal to the difference between the amount realized and his
basis in his shares. Such gain or loss will be treated as capital gain or loss,
if the shares are capital assets in the shareholder's hands, and will be
long-term capital gain or loss if the shares are held for more than one year and
short-term capital gain or loss if the shares are held for one year or less. Any
loss realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced, including replacement through the reinvesting of
dividends and capital gains distributions in the Fund under the Program, within
a period (of 61 days) beginning 30 days before and ending 30 days after the
disposition of the shares. In such a case, the basis of the shares acquired will
be increased to reflect the disallowed loss. Any loss realized by a shareholder
on the sale of a Fund share held by the shareholder for six months or less will
be treated for United States income tax purposes as a long-term capital loss to
the extent of any distributions or deemed distributions of long-term capital
gains received by the shareholder with respect to such share.
FOREIGN TAXES
Income received by the Funds from sources within countries other than the
United States may be subject to withholding and other taxes imposed by such
countries, which will reduce the amount available for distribution to
shareholders. If more than 50% of the value of either Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, that
Fund will be eligible and intends to elect to "pass-through" to shareholders the
amount of foreign income and similar taxes it has paid. Pursuant to this
election, shareholders of the Fund will be required to include in gross income
(in addition to the full amount of the taxable dividends actually received)
their pro rata share of the foreign taxes paid by that Fund. Each such
shareholder will also be entitled either to deduct (as an itemized deduction)
its pro rata share of foreign taxes in computing its taxable income or to claim
a foreign tax credit against its U.S. federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions, but such a shareholder may be eligible to claim the
foreign tax credit. The deduction for foreign taxes is not allowable in
computing alternative minimum taxable income. Each shareholder will be notified
within 60 days after the close of that Fund's taxable year whether the foreign
taxes paid by the Fund will "pass through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or her foreign
source taxable income. For this purpose, if the pass-through election is made,
the source of each Fund's income flows through to its shareholders. Any gains
from the sale of securities by either Fund will be treated as derived from U.S.
sources and certain currency fluctuation gains, including fluctuation gains from
foreign currency-denominated debt securities, receivables and payables, will be
treated as ordinary income derived from U.S. sources. The limitation on the
foreign tax credit is applied separately to foreign source passive income (as
defined for purposes of the foreign tax credit), including the foreign source
passive income passed through by each Fund. Because of the limitation,
shareholders taxable in the United States may be unable to claim a credit for
the full amount of
24
<PAGE>
their proportionate share of the foreign taxes paid by each Fund. The foreign
tax credit also cannot be used to offset more than 90% of the alternative
minimum tax (as computed under the Code for purposes of this limitation) imposed
on corporations and individuals.
BACKUP WITHHOLDING
Each Fund may be required to withhold, for United States federal income tax
purposes, 31% of the dividends and distributions payable to shareholders who
fail to provide such Fund with their correct taxpayer identification number or
to make required certifications, or who have been notified by the Internal
Revenue Service that they are subject to backup withholding. Corporate
shareholders and certain other shareholders are or may be exempt from backup
withholding. Backup withholding is not an additional tax and any amount withheld
may be credited against a shareholder's United States federal income tax
liabilities. Additional tax withholding requirements which apply with respect to
foreign investors are discussed below.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a foreign
investor (such as a nonresident alien individual, a foreign trust or estate, a
foreign corporation or a foreign partnership) depends, in part, on whether the
shareholder's income from either Fund is "effectively connected" with a United
States trade or business carried on by the shareholder.
If the foreign investor is not a resident alien and the income from such
Fund is not effectively connected with a United States trade or business carried
on by the foreign investor, distributions of net investment income and net
realized short-term capital gains will be subject to a 30% (or lower treaty
rate) United States withholding tax. Furthermore, foreign investors may be
subject to an increased United States tax on their income resulting from that
Fund's election (described above) to "pass-through" amounts of foreign taxes
paid by such Fund, but may not be able to claim a credit or deduction with
respect to the foreign taxes treated as having been paid by them. Distributions
to a non-resident alien of net realized long-term capital gains, amounts
retained by that Fund which are designated as undistributed capital gains, and
gains realized upon the sale of shares of such Fund generally will not be
subject to United States tax unless the foreign investor who is a nonresident
alien individual is physically present in the United States for more than 182
days during the taxable year. However, a determination by such Fund not to
distribute long-term capital gains will cause that Fund to incur a U.S. federal
tax liability with respect to retained long-term capital gains, thereby reducing
the amount of cash held by the Fund that is available for investment, and the
foreign investor may not be able to claim a credit or deduction with respect to
such taxes.
In general, if a foreign investor is a resident alien or if dividends or
distributions from either Fund are effectively connected with a United States
trade or business carried on by the foreign investor, then dividends of net
investment income, distributions of net short-term and long-term capital gains,
amounts retained by such Fund that are designated as undistributed capital gains
and any gains realized upon the sale of shares of the Fund will be subject to
United
25
<PAGE>
States income tax at the rates applicable to United States citizens or domestic
corporations. If the income from the Fund is effectively connected with a United
States trade or business carried on by a foreign investor that is a corporation,
then such foreign investor may also be subject to the 30% (or lower treaty rate)
branch profits tax.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. Shareholders may be required to provide appropriate documentation
to establish their entitlement to the benefits of such a treaty. Foreign
investors are advised to consult their own tax advisers with respect to (a)
whether their income from either Fund is or is not effectively connected with a
United States trade or business carried on by them, (b) whether they may claim
the benefits of an applicable tax treaty, and (c) any other tax consequences to
them of an investment in either Fund.
NOTICES
Shareholders will be notified annually by each Fund as to the United States
federal income tax status of the dividends, distributions and deemed
distributions made by the Fund to its shareholders. Furthermore, shareholders
will also receive, if appropriate, various written notices after the close of
each Fund's taxable year regarding the United States federal income tax status
of certain dividends, distributions and deemed distributions that were paid (or
that are treated as having been paid) by the Fund to its shareholders during the
preceding taxable year.
OTHER TAXATION
Distributions also may be subject to additional state, local and foreign
taxes depending on each shareholder's particular situation.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES
AFFECTING THE FUNDS AND THEIR SHAREHOLDERS. SHAREHOLDERS ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISERS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM
OF AN INVESTMENT IN EITHER FUND.
26
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements, notes to the financial statements and
report of the independent public accountants of ETF for the fiscal year ended
May 31, 2000 included in ETF's Annual Reports to Shareholders are
incorporated by reference herein. The audited financial statements, notes to
the financial statements and report of the independent auditors of EMG for
the fiscal year ended November 30, 1999 included in EMG's Annual Reports to
Shareholders and the unaudited financial statements of EMG for the six-month
period ended May 31, 2000 are incorporated by reference herein. The Annual
Reports may be obtained without charge, by writing to Shareholder
Communications Corporation, 17 State Street, New York, New York 10004, or by
calling 1-(800) 403-7916.
PRO FORMA FINANCIAL STATEMENTS
The following tables set forth the unaudited pro forma condensed statement
of assets and liabilities and unaudited pro forma condensed statement of
operations for each Fund as of and for the year ended May 31, 2000 and as
adjusted to give effect to the Emerging Markets Infrastructure Fund's tender
offer to acquire up to 50% of its shares of common stock at a price per share
equal to 95% of its net asset value per share (the "Tender Offer") and the
Merger.
27
<PAGE>
PRO FORMA CONDENSED STATEMENT
OF ASSETS AND LIABILITIES
AT MAY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
THE EMERGING THE EMERGING
MARKETS MARKETS COMBINED
TELECOMMUNICATIONS INFRASTRUCTURE PRO FORMA FUND (AS
FUND FUND ADJUSTMENTS ADJUSTED)
---- ---- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value $119,286,078 $135,475,195 $(76,180,229)(a) $178,581,044
Cash 16,683,132 19,441,502 36,124,634
Collateral received from
securities loaned 11,639,279 6,232,895 17,872,174
Receivables:
Investments sold 294,290 -- 294,290
Dividends 326,223 408,184 734,407
Interest 0 2,121 2,121
Prepaid expenses and other
assets 9,920 15,601 (15,601) (c) 9,920
----- ------ -------- -----
Total Assets 148,238,922 161,575,498 (76,195,830) 233,618,590
----------- ----------- ------------ -----------
LIABILITIES
Payables:
Payable upon return of
securities loaned 11,639,279 6,232,895 17,872,174
Investments purchased 5,849,601 2,340,924 8,190,525
Merger and Tender Offer Payable -- -- 781,273 (b) 781,273
Investment advisory fee 285,213 358,611 643,824
Administration fees 29,516 36,362 65,878
Other accrued expenses 134,858 246,248 381,106
------- ------- -------
Total Liabilities 17,938,467 9,215,040 781,273 27,934,780
---------- --------- ------- ----------
Net Assets 130,300,455 152,360,458 (76,977,103) 205,683,810
----------- ----------- ------------ -----------
Net Assets Consist Of:
Capital stock, $0.001 par 7,101 11,176 (5,588) (a) 12,689
value, shares issued and
outstanding
Paid-in-capital 101,403,838 173,332,794 (76,174,641) (a) 198,561,991
Undistributed net investment ---- 930,254 (796,874) (b)(c) 133,380
income
Accumulated net realized gain/
(loss) on investments and
foreign currency related
transactions 21,211,808 (21,532,798) (d) (320,990)
Net unrealized appreciation in
value of investments and
translation of other assets
and liabilities denominated
in foreign currencies 7,677,708 (380,968) (d) 7,296,740
------------ --------- ------------- ---------
$130,300,455 $152,360,458 $(76,977,103) (d) $205,683,810
----------- ----------- ------------- ------------
Shares Outstanding 7,100,819 11,175,955 (3,186,252) 15,090,522
See Accompanying Notes to the Pro Forma Financial Statements.
28
<PAGE>
Net asset value per share $18.35 $13.63 $13.63
</TABLE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
THE THE
EMERGING EMERGING
MARKETS MARKETS
TELECOMMUN- INFRA- COMBINED
ICATIONS STRUCTURE PRO FORMA FUND (AS
FUND FUND ADJUSTMENTS ADJUSTED)
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $1,208,286 $1,828,360 $(914,180) (i) $2,122,466
Interest 275,305 837,099 (418,550) (i) 693,854
Less: Foreign taxes withheld (115,163) (175,182) 87,591 (i) (202,754)
------- ------- ------ -------
Total Investment Income 1,368,428 2,490,277 (1,245,139) 2,613,566
--------- --------- --------- ---------
Expenses:
Investment advisory fees 1,542,224 2,076,131 (1,698,221) (e) 1,920,134
Audit fees 54,777 54,652 (49,429) (h) 60,000
Legal fees 102,774 161,674 (159,448) (h) 105,000
Administration fees 219,867 276,872 (250,073) (f) 246,666
Custodian fees 157,305 237,116 (114,421) (g) 280,000
Printing 96,223 273,036 (269,259) (h) 100,000
Accounting fees 101,073 124,322 (60,951) (h) 164,444
Directors' fees 38,548 57,035 (57,035) (h) 38,548
Transfer agent fees 43,940 42,449 (41,389) (h) 45,000
NYSE listing fees 16,532 24,328 (16,600) (h) 24,260
Insurance 9,384 11,613 (5,807) (h) 15,190
Consulting Fees/Tender Offer/
Miscellaneous fees 162,675 349,836 (512,511) (j) 0
Other 19,859 24,823 (14,682) (h) 30,000
Chilean repatriation taxes 228,767 162,897 - 391,664(k)
Brazilian taxes 24,336 65,578 - 89,914
------ ------ --------- ------
Total Expenses 2,818,284 3,942,362 (3,249,826) 3,510,820
--------- --------- --------- ---------
Net Investment Income (1,449,856) (1,452,085) 2,004,687 (897,254)
--------- --------- --------- --------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY RELATED TRANSACTION
Net realized gain/loss from:
Investments 38,908,462 45,531,239 (d) 84,439,701
Foreign currency related
transactions (345,547) (810,818) (1,156,365)
Net change in unrealized
depreciation in value of
investments and translation of
other assets and liabilities
denominated in foreign
currencies 7,411,859 (4,565,562) (d) 2,846,297
--------- ----------- ---------
29
<PAGE>
Net realized and unrealized gain on
investments and foreign currency
related transaction 45,974,774 40,154,859 86,129,633
---------- ---------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS $44,524,918 $38,702,774 $2,004,687 $85,232,379
---------- ---------- --------- ----------
</TABLE>
30
<PAGE>
The Emerging Markets Telecommunications Fund, Inc.
The Emerging Markets Infrastructure Fund, Inc.
Notes to Pro Forma Financial Statements (unaudited)
1. Basis of Combination
The unaudited Pro Forma Condensed Portfolio of Investments, Pro Forma
Condensed Statement of Assets and Liabilities and Pro Forma Condensed
Statement of Operations give effect to the proposed merger of The Emerging
Markets Telecommunications Fund, Inc. ("ETF") into The Emerging Markets
Infrastructure Fund, Inc. ("EMG"). The proposed merger will be accounted for
by the method of accounting for tax-free mergers of investment companies
(sometimes referred to as the pooling-of-interest basis). Prior to
consummation of the Merger, EMG intends to make a Tender Offer to acquire up
to 50% of its shares of common stock at 95% of its net asset value. The
Tender Offer will not occur unless the shareholders of both Funds approve the
Merger. The Merger provides for the conversion of each share of common stock
of ETF into an equivalent dollar amount of full shares of common stock of EMG
based on the net asset value per share of each Fund. The accounting survivor
in the proposed merger will be EMF. This is because although ETG has
substantially similar investment objectives as EMF, the surviving Fund will
invest in a style that is similar to the way in which ETF is currently
operated.
The pro forma combined statements should be read in conjunction with the
historical financial statements of the constituent Fund and the notes thereto
incorporated by reference in the Registration Statement filed on Form N-14.
ETF and EMG are both closed-end, non-diversified management investment
companies registered under the Investment Company Act of 1940, as amended.
Pro Forma Adjustments:
The Pro Forma adjustments below reflect the impact of the merger between
ETF and EMG.
(a) To remove 50% of net assets from EMG as a result of Tender Offer,
investments will be sold off.
(b) To reflect expenses to be incurred in connection with the Tender Offer
and Merger.
(c) To remove certain prepaid expenses associated with ETF, in the
statement of assets and liabilities, which will not be assumed by
EMG; and to reduce the corresponding amortization on the statement of
operations.
31
<PAGE>
(d) In connection with EMG's intention to make a Tender Offer to acquire
up to 50% of its assets, EMG will be selling a certain percentage of
its securities. As a result, actual realized and unrealized gains and
losses will be impacted. The effects of these sales are not reasonably
estimable at this time.
(e) Adjustment based on contractual agreements with the Adviser and
reduction in net assets associated with Tender Offer.
(f) Adjustment based on the contractual agreement with the Administrator
for the combined Fund.
(g) Adjustment based on the contractual agreement with the custodian for
the combined Fund.
(h) Assumes elimination of duplicate charges in combination and reflects
management's estimates of combined pro forma operations.
(i) Adjustment for sale of securities in connection with Tender Offer.
(j) Assumes prior elimination of charges on prior tender offers.
(k) In connection with EMG's intention to make a Tender Offer to
acquire up to 50% of its assets, EMG intends to sell a certain
percentage of their holdings in Chile. As of the pro forma date,
there is no accrual for the Chile repatriation tax as all Chilean
holdings are in a unrealized loss position.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies, which
are consistently followed by each of ETF and EMG in the preparation of its
financial statements.
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 equity securities for which market
quotations are readily available are valued at the last sales price prior to the
time of determination, or, if no sales price is available at that time, at the
closing price quoted for the securities (but if bid and asked quotations are
available, at the mean between the 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 not readily marketable securities. The
net asset value per share of each Fund is calculated on each business day, with
the exception of those days on which the New York Stock Exchange is closed .
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions
are
32
<PAGE>
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 each 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 each Fund from sources within Latin America may be
subject to withholding and other taxes imposed by such countries. Also, certain
Latin American countries impose taxes on funds remitted or repatriated from such
countries.
Each fund will be subject to and accrues a 10% Chilean repatriation
tax with respect to all known and estimated remittances from Chile. Each Fund
does not accrue repatriation tax with respect to all unrealized gains on
Chilean securities, as each Fund does not intend to realize and remit such
unrealized gains in the foreseeable future.
From January 23, 1997 through January 22, 1999, Brazil imposed a 0.20%
CONTRIBUCAO PROVISORIA SOBRE MOVIMENTACAOES FINANCIERAS ("CPMF") tax that
applied to most debit transactions carried out by financial institutions.
Effective January 23, 1999 the CPMF tax expired and was reinstated on June 17,
1999 for a period of three years. The tax is assessed at a rate of 0.38% for the
initial year and will drop to 0.30% for the remaining two years.
FOREIGN CURRENCY TRANSLATIONS: The books and records of each Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
market value of investment securities, assets and liabilities at the
current rate of exchange; and purchases and sales of investment securities,
income and expenses at the relevant rates of exchange prevailing on the
respective dates of such transactions.
Each Fund does not isolate that portion of gains and losses in
investments in equity securities which is due to changes in the foreign exchange
rates from that which is due to changes in market prices of equity securities.
Accordingly, realized and unrealized foreign currency gains and losses with
respect to such securities are included in the reported net realized and
unrealized gains and losses on investment transactions balances. However, each
Fund does isolate the effect of fluctuations in foreign exchange rates when
determining the gain or loss upon the sale or maturity of foreign currency
denominated debt obligations pursuant to U.S. federal income tax regulations,
with such amount categorized as foreign exchange gain or loss for both financial
reporting and U.S. federal income tax reporting purposes.
Net currency gains or losses from valuing foreign currency denominated
assets and liabilities at period end exchange rates are reflected as a component
of net unrealized appreciation/depreciation in value of investments and
translation of other assets and liabilities denominated in foreign currencies.
33
<PAGE>
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 date on security transactions,
and the difference between the amounts of interest and dividends recorded on
each Fund's books and the U.S. dollar equivalent of the amounts actually
received.
DISTRIBUTIONS OF INCOME AND GAINS: Each Fund distributes at least
annually to shareholders, substantially all of its net investment income and net
realized short-term capital gains, if any. Each Fund determines annually whether
to distribute any net realized long-term capital gains in excess of net
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 each Fund on the ex-dividend date. .
The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for U.S. federal income tax purposes due to U.S. generally
accepted accounting principles/tax differences in the character of income and
expense recognition.
OTHER: Securities denominated in currencies other than U.S. dollars
are subject to changes in value due to fluctuations in exchange rates.
34
<PAGE>
SCHEDULE OF INVESTMENTS OF THE EMERGING
MARKETS TELECOMMUNICATIONS FUND, INC.
AT MAY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
NO. OF VALUE
SHARES/UNITS -----
-------------
<S> <C> <C>
EQUITY OR EQUITY-LINKED
SECURITIES - (91.55%)
Equity or Equity-Linked Securities of Telecommunications Companies in
Emerging Countries - (74.57%)
ARGENTINA - (2.67%):
CEI Citicorp Holdings S.A., Class B+ 949,309 $3,484,417
----------
TOTAL ARGENTINA (COST $3,738,676)
ASIA - (0.92%):
INVESCO AsiaNET Fund plc*+ 97,560 902,430
Nirvana Capital Limited*+# 30,000 300,000
-------
TOTAL ASIA (COST $1,299,990) 1,202,430
---------
BRAZIL - (8.44%):
Brasil Telecom Participacoes S.A. ADR## 12,900 774,000
Celular CRT Participacoes S.A. PNA+ 1,664,000 496,784
Companhia Riograndense de Telecomunicacoes PNA+ 1,087,758 333,686
Embratel Participacoes S.A. ADR## 135,700 2,841,219
Tele Nordeste Celular Participacoes S.A. ADR## 7,400 392,200
Tele Norte Leste Participacoes S.A. ADR## 132,702 2,604,277
Telemig Celular Participacoes S.A. ADR## 23,500 1,364,469
Telesp Celular Participacoes S.A. ADR 57,800 2,189,175
---------
TOTAL BRAZIL (COST $11,299,278) 10,995,810
----------
CHILE - (2.35%):
Compania de Telecomunicaciones de Chile S.A. ADR## 147,800 2,919,050
Telefonos de Coyhaique S.A. 6,500 148,827
-------
TOTAL CHILE (COST $3,464,897) 3,067,877
---------
GLOBAL - (2.44%):
International Wireless Communications Holdings Corp.* 7,546 0
TeleSoft Co-Investments, L.P. Sub Fund A-3*+ 375,394 375,394
TeleSoft Partners Ltd.++# 1,187,500 2,812,563
---------
TOTAL GLOBAL (COST $1,607,219) 3,187,957
---------
See Accompanying Notes to the Pro Forma Financial Statements.
35
<PAGE>
GREECE - (0.75%):
STET Hellas Telecommunications S.A.+ 46,400 $974,400
--------
TOTAL GREECE (COST $993,943)
HONG KONG - (8.57%):
China Telecom (Hong Kong) Ltd., Class H+ 1,309,415 9,788,370
Cable and Wireless HKT Ltd. 410,800 938,399
Pacific Century CyberWorks Ltd.+ 224,000 438,384
-------
TOTAL HONG KONG (COST $4,396,456) 11,165,153
----------
INDIA - (5.86%):
Mahanagar Telephone Nigam Ltd. GDR++ 233,500 2,410,887
The India Media, Internet and Communications
Fund Ltd++# 50,000 250,000
Videsh Sanchar Nigam Ltd. GDR++ 318,500 4,976,562
---------
TOTAL INDIA (COST $6,974,360) 7,637,449
---------
INDONESIA - (1.38%):
PT Indosat (Persero) TbK ADR 85,660 915,491
PT Telekomunikasi Indonesia 2,683,800 879,042
-------
TOTAL INDONESIA (COST $2,562,724) 1,794,533
---------
ISRAEL - (5.38%):
Aptel Warrants (expiring 01/06/03)*+ 16,800 189,000
Bezeq Israeli Telecommunication
Corporation Ltd. 121,527 684,815
Check Point Software Technologies Ltd.+ 16,000 3,006,000
Geotek Communications, Inc., Convertible Preferred Series M, 8.50%*+ 100 0
Gilat Satellite Networks Ltd.+## 23,200 1,869,050
Global Wireless Holdings Inc. C.V. PNB*+ 48,122 6,978
Nexus Telocation Systems Ltd.+ 170,784 384,264
Nexus Telocation Systems Ltd.*+ 481,600 866,880
-------
TOTAL ISRAEL (COST $8,089,672) 7,006,987
---------
LATIN AMERICA - (0.23%):
J.P. Morgan Latin America Capital Partners, L.P.+*# 297,445 297,445
-------
TOTAL LATIN AMERICA (COST $321,085)
MALAYSIA - (1.31%):
Digi.com Berhad+ 842,000 1,706,180
---------
TOTAL MALAYSIA (COST $1,503,250)
See Accompanying Notes to the Pro Forma Financial Statements.
36
<PAGE>
MEXICO - (6.37%):
Carso Global Telecom, Class A-1+ 848,000 $1,921,396
Grupo Iusacell S.A. de C.V., V shares ADR+ 85,288 1,130,066
Grupo Televisa S.A. GDR+ 50,400 2,806,650
Telefonos de Mexico, S.A. de CV ADR, Class L 50,200 2,444,113
---------
TOTAL MEXICO (COST $7,004,785) 8,302,225
---------
MIDDLE EAST/AFRICA - (0.78%):
EFG-Hermes Telecom Fund*+ 100,000 1,012,500
---------
TOTAL MIDDLE EAST/AFRICA (COST $1,020,000)
PERU - (0.01%):
Tecsur S.A.+ 102,450 6,727
-----
TOTAL PERU (COST $20,757)
PHILIPPINES - (0.55%):
Philippine Long Distance Telephone Co. ADR## 41,000 722,625
-------
TOTAL PHILIPPINES (COST $1,008,284)
RUSSIA - (3.51%):
Golden Telecom, Inc.+ 30,000 896,250
Independent Network Television, Series II*+ 1,000,000 500,000
Rostelecom ADR 127,800 1,940,963
Vimpel--Communications ADR+ 47,500 1,232,031
---------
TOTAL RUSSIA (COST $6,470,187) 4,569,244
---------
SINGAPORE - (1.06%):
Venture Manufacturing (Singapore) Ltd. 156,000 1,377,146
---------
TOTAL SINGAPORE (COST $543,812)
SOUTH KOREA - (12.52%):
Hanaro Telecom Inc.+ 52,000 342,523
Korea Telecom Corp. ADR 53,100 1,964,700
Samsung Electronics Co., Ltd. 30,004 8,181,702
SK Telecom Co., LTD. 7,840 2,672,333
SK Telecom Co., Ltd. ADR## 78,800 3,156,925
---------
TOTAL SOUTH KOREA (COST $11,120,574) 16,318,183
----------
TAIWAN - (2.89%):
See Accompanying Notes to the Pro Forma Financial Statements.
37
<PAGE>
Siliconware Precision Industries Co.+ 173,000 359,364
Siliconware Precision Industries Co. GDR+ 63,200 654,120
Taiwan Semiconductor Manufacturing Co., Ltd. ADR+## 77,850 2,749,078
---------
TOTAL TAIWAN (COST $2,489,527) 3,762,562
---------
THAILAND - (1.88%):
TelecomAsia Corporation Public Co., Ltd., Foreign Registered+(a) 2,460,300 2,447,435
---------
TOTAL THAILAND (COST $3,895,748)
TURKEY - (3.60%):
Dogan Yayin Holding A.S.+ 126,903,046 2,318,946
Vestel Elektronik Sanayi ve Ticaret A.S.+ 7,575,000 2,368,533
---------
TOTAL TURKEY (COST $5,505,242) 4,687,479
---------
VENEZUELA - (1.10%):
Venworld Telecommunications++ 125,947 1,430,971
---------
TOTAL VENEZUELA (COST $2,531,383)
TOTAL EMERGING COUNTRIES
(COST $87,861,849) 97,157,735
----------
EQUITY SECURITIES OF TELECOMMUNICATIONS COMPANIES
IN DEVELOPED COUNTRIES - (2.39%):
CENTRAL EUROPE - (0.17%):
Central European Media Enterprises Ltd.+ 22,875 217,313
-------
TOTAL CENTRAL EUROPE (COST $4,578,326)
SPAIN - (1.84%):
Telefonica S.A. ADR+ 39,500 2,404,563
---------
TOTAL SPAIN (COST $2,711,829)
UNITED STATES - (0.38%)
Technology Crossover Ventures IV, L.P. ++# 520,000 491,491
---------
TOTAL UNITED STATES (COST $520,000)
TOTAL DEVELOPED COUNTRIES
(COST $7,810,155) 3,113,367
---------
See Accompanying Notes to the Pro Forma Financial Statements.
38
<PAGE>
EQUITY SECURITIES OF COMPANIES PROVIDING OTHER
ESSENTIAL SERVICES IN THE DEVELOPMENT OF AN EMERGING
COUNTRY'S INFRASTRUCTURE - (14.59%):
GLOBAL - (2.22%):
Emerging Markets Ventures I, L.P.+++# 2,602,830 $2,888,699
---------
TOTAL GLOBAL (COST $2,702,244)
HONG KONG - (2.39%):
Hutchison Whampoa Ltd. 258,860 2,981,512
Li & Fung Ltd. 30,000 128,589
-------
TOTAL HONG KONG (COST $2,394,334) 3,110,101
---------
INDIA - (0.07%):
SSI Ltd. GDR+++ 12,900 90,300
------
TOTAL INDIA (COST $185,760)
ISRAEL - (1.57%):
Concord Ventures Fund II, L.P.+++# 240,000 240,000
Formula Ventures L.P.+++# 423,738 402,474
Giza GE Venture Fund III, L.P.+++# 250,000 240,970
K.T. Concord Venture Fund L.P.+++# 850,000 1,165,906
---------
TOTAL ISRAEL (COST $1,732,121) 2,049,350
---------
SINGAPORE - (0.24%):
St Assembly Test Services Ltd.+ 107,000 317,947
-------
TOTAL SINGAPORE (COST $222,510)
SOUTH KOREA - (1.21%)
Korea Electric Power (KEP) Corporation 58,900 1,580,053
---------
TOTAL SOUTH KOREA (COST $1,626,367)
TAIWAN - (5.65%)
D-Link Corp. 312,000 1,032,911
Hon Hai Precision Industry Co., Ltd. GDR+++ 74,300 1,690,325
Macronix International Co., Ltd.+ 366,000 1,134,469
Nan Ya Plastic Corp. 370,000 810,613
Via Technologies Inc.+ 76,000 1,312,301
Winbond Electronics Corp.+ 457,320 1,380,421
---------
See Accompanying Notes to the Pro Forma Financial Statements.
39
<PAGE>
TOTAL TAIWAN (COST $6,054,519) $7,361,040
----------
THAILAND - (1.24%):
Advanced Info Service Public Co., Ltd., Foreign Registered+ 140,919 1,617,486
---------
TOTAL THAILAND (COST $1,015,849)
TOTAL OTHER ESSENTIAL SERVICES
(COST $15,933,704) 19,014,976
----------
TOTAL INVESTMENTS - (91.55%)
(COST $111,605,708) 119,286,078
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES - (8.45%) 11,014,377
NET ASSETS - (100.00%) $130,300,455
============
</TABLE>
** As of May 31, 2000 ETF invested 11.07% of its total net assets in not
readily marketable securities.
* Not readily marketable security.
+ Security is non-income producing.
++ SEC Rule 144A security. Such securities are traded only among "qualified
institutional buyers."
++ Restricted security, not readily marketable.
# As of May 31, 2000, the Fund committed to investing an additional
$1,364,949, $150,000, $326,262, $62,500, $1,000,000, $2,478,915,
$1,760,000, $1,480,000, $700,000 and $250,000 of capital in Emerging
Markets Ventures I, L.P., K.T. Concord Venture Fund L.P., Formula
Ventures L.P., Telesoft Partners L.P., Giza GE Venture Fund III, L.P.,
J.P. Morgan Latin America Capital Partners, L.P., Concord Ventures
Fund II, L.P., Technology Crossover Venures IV, L.P., Nirvana Capital
Limited and The India Media, Internet and Communications Fund, Ltd.,
respectively.
## Security or a portion thereof is out on loan.
(a) With an additional 776,936 warrants attached, expiring 12/31/49, with no
market value.
ADR American Depositary Receipts.
GDR Global Depositary Receipts.
PNA Preferred Shares, Class A.
PNB Preferred Shares, Class B.
See Accompanying Notes to the Pro Forma Financial Statements.
40
<PAGE>
SCHEDULE OF INVESTMENTS OF THE EMERGING
MARKETS INFRASTRUCTURE FUND, INC.
AT MAY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
No. of Shares/Units Value
------------------- -----
<S> <C> <C>
EQUITY OR EQUITY LINKED
SECURITIES - (88.89%):
Equity or Equity Linked Securities of Infrastructure
Companies in Emerging Countries - (74.27%)
ARGENTINA - (2.84%):
CEI Citicorp Holdings S.A., Class B+ 627,952 $2,304,883
Exxel Capital Partners+++ 2,000,001 2,021,537
---------
TOTAL ARGENTINA (COST $4,582,278) 4,326,420
---------
BRAZIL - (7.03%):
Brasil Telecom Participacoes S.A. ADR## 24,700 1,482,000
Companhia Riograndense de Telecomunicacoes PNA+
1,330,242 408,072
Companhia Vale de Rio Doce ADR
31,700 790,103
Electropaulo Metropolitana - Electricidade de
Sao Paulo S.A. PN+ 25,403,416 1,426,376
Embratel Participacoes S.A. ADR 80,100 1,677,094
Petroleo Brasileiro S.A. 95,400 2,253,597
Tele Nordeste Celular Participacoes S.A. ADR 9,200 487,600
Tele Norte Leste Participacoes S.A. ADR 89,642 1,759,224
Tele Celular Sul Participacoes S.A. ADR## 12,600 426,825
-------
TOTAL BRAZIL (COST $10,718,729) 10,710,891
----------
CHILE - (6.91%):
Besalco S.A. 250,882 703,676
Chilectra S.A. 80,566 345,876
Compania de Consumidores de Gas de Santiago S.A. 40,000 148,827
Compania de Petroleos de Chile S.A. 221,895 965,313
Compania de Telecomunicacoes de Chile S.A.,
Class A+ 101,591 503,981
Compania de Telecomunicacoes de Chile S.A.,
ADR## 82,000 1,619,500
Empresa Nacional de Electricidad S.A.+ 1,434,282 563,067
Empresa Nacional de Telecomunicaciones S.A. 57,814 521,771
Enersis S.A.+ 1,431,330 611,750
Gener S.A. ADR+## 278,727 3,832,496
Puerto Ventenas S.A. 288,453 385,264
Sociedad Austral de Electricidad S.A. 20,600 326,236
-------
TOTAL CHILE (COST $12,324,231) 10,527,757
----------
See Accompanying Notes to the Pro Forma Financial Statements.
41
<PAGE>
CHINA - (0.25%):
Beijing Datang Power Generation Co., Ltd. 2,496,438 $381,246
--------
TOTAL CHINA (COST $719,084)
EUROPE - (0.67%):
Global TeleSystems Group, Inc.+ 91,876 1,022,120
---------
TOTAL EUROPE (COST $2,090,162)
HONG KONG - (9.18%):
China Telecom (Hong Kong) Limited ADR+## 55,200 8,114,400
City Telecom (HK) Ltd. 1,204,000 248,765
Hutchison Whampoa Ltd. 409,200 4,713,106
Li & Fung Ltd. 32,000 137,162
Pacific Century CyberWorks Ltd.+ 395,000 773,044
-------
TOTAL HONG KONG (COST $9,615,444) 13,986,477
----------
INDIA - (5.75%):
Bharat Heavy Electricals Ltd. 210,355 571,637
BSES Ltd.++ 158,800 3,025,140
Hindustan Corp. 100,600 302,364
Larsen & Toubro Ltd. GDR++ 77,000 704,550
Videsh Sanchar Nigam Ltd. GDR++ 266,300 4,160,938
---------
TOTAL INDIA (COST $11,123,126) 8,764,629
---------
INDONESIA - (0.70%):
PT Telekomunikasi Indonesia ADR 158,000 1,066,500
---------
TOTAL INDONESIA (COST $1,785,609)
ISRAEL - (2.60%):
Concord Ventures Fund II, L.P.+++# 240,000 240,000
Geotek Communications, Inc.+ 49,501 772
Geotek Communications, Inc., Convertible Preferred Series
M, 8.50%*+ 100 0
Geotek Communications, Inc., Convertible Preferred Series
N*+(a) 1,584 0
Gilat Satellite Networks Ltd.+## 15,800 1,272,888
Giza GE Venture Fund III, L.P.+++# 300,000 289,164
K.T. Concord Venture Fund LP+++# 850,000 1,165,906
Nexus Telocation Systems Ltd. +## 210,283 473,137
The Renaissance Fund LDC+++ 160 527,834
-------
TOTAL ISRAEL (COST $7,492,945) 3,969,701
---------
See Accompanying Notes to the Pro Forma Financial Statements.
42
<PAGE>
JAMAICA - (1.69%):
Jamaican Assets I L.P.+++ 1,156,324 $2,573,226
----------
TOTAL JAMAICA (COST $1,249,729)
LATIN AMERICA - (0.24%):
J.P. Morgan Latin America Capital Partners L.P.+##* 371,803 371,803
-------
TOTAL LATIN AMERICA (COST $401,354)
MALAYSIA - (4.63%):
Digi.com Berhad+ 997,000 2,020,263
Telecom Malaysia Berhad 243,800 891,806
Tenaga Nasional Berhad 1,133,000 4,144,449
---------
TOTAL MALAYSIA (COST $6,536,108) 7,056,518
---------
MEXICO - (3.86%):
Cemex S.A. de CV ADR+(b) 102,200 2,165,363
Grupo Televisa S.A. GDR+ 27,300 1,520,269
Telefonos de Mexico S.A. de CV ADR Class L 45,000 2,190,938
---------
TOTAL MEXICO (COST $6,182,670) 5,876,570
---------
PAKISTAN - (0.21%):
The Hub Power Company Ltd.+ 957,600 316,410
-------
TOTAL PAKISTAN (COST $1,209,434)
PERU - (0.01%):
Tecsur S.A.+ 119,535 7,848
-----
TOTAL PERU (COST $24,216)
RUSSIA - (1.58%):
RAO Unified Energy Systems 97,500 1,335,750
Rostelecom ADR+ 71,000 1,078,313
---------
TOTAL RUSSIA (COST $3,587,453) 2,414,063
---------
SINGAPORE - (1.74%):
Datacraft Asia Ltd. 98,000 681,100
NatSteel Electronics Ltd.+ 538,000 1,583,129
ST Assembly Test Services Ltd.+ 128,000 380,348
-------
TOTAL SINGAPORE (COST $2,259,273) 2,644,577
---------
See Accompanying Notes to the Pro Forma Financial Statements.
43
<PAGE>
SOUTH AFRICA - (0.58%):
Imperial Holdings Ltd.+ 119,173 $880,199
--------
TOTAL SOUTH AFRICA (COST $1,372,166)
SOUTH KOREA - (9.45%):
Dacom Corp.+ 8,710 1,160,562
Hanaro Telecom Inc.+ 38,469 253,395
Korea Telecom Corp. ADR 146,100 5,405,700
Samsung Electronics Co., Ltd. 27,787 7,577,154
---------
TOTAL SOUTH KOREA (COST $10,882,979) 14,396,811
----------
SPAIN- (1.87%):
Telefonica S.A. ADR+ 46,700 2,842,863
---------
TOTAL SPAIN (COST $3,206,137)
TAIWAN - (1.70%):
Hon Hai Precision Industry Co., Ltd., GDR+++ 30,000 682,500
Winbond Electronics Corp.+ 357,420 1,078,872
Yageo Corp.++ 95,400 834,750
-------
TOTAL TAIWAN (COST $1,944,209) 2,596,122
---------
THAILAND - (2.53%):
Advanced Information Service Public Co., Ltd.+ 77,900 894,146
TelecomAsia Corp. Public Co., Ltd.+(c) 2,978,400 2,962,826
---------
TOTAL THAILAND (COST $5,366,687) 3,856,972
---------
TURKEY - (6.35%):
Cimsa Cimento Sanayi ve Ticaret A.S. 87,089,000 1,768,233
Eregli Demir ve Celik Fabrikalari TAS+ 74,707,000 3,458,377
Netas Northern Electric Telekomunikasyon A.S. 32,591,000 4,446,754
---------
TOTAL TURKEY (COST $6,266,929) 9,673,364
---------
GLOBAL - (1.90%):
Emerging Markets Ventures I, L.P.+++# 2,602,830 2,888,699
International Wireless Communications Holdings Corp.* 7,546 0
---------
2,888,699
TOTAL GLOBAL (COST $2,908,065)
TOTAL EMERGING COUNTRIES
(COST $113,849,017) 113,151,786
-----------
See Accompanying Notes to the Pro Forma Financial Statements.
44
<PAGE>
EQUITY OR EQUITY-LINKED SECURITIES OF
NON-INFRASTRUCTURE COMPANIES - (12.52%)
CANADA - (0.10%): Par
(000)
-----
Officeland Inc., Senior Unsecured Convertible Notes, 571 80,672
12%, 12/31/25* Units
(000)
-----
Officeland Inc., Class C* 134 64,154
------
TOTAL CANADA (COST $638,256) USD 144,826
-------
HONG KONG - (2.50%):
Legend Holdings Ltd. 3,760,000 3,811,993
---------
TOTAL HONG KONG (COST $3,751,613)
INDIA - (3.12%):
Reliance Industries Ltd. GDR 190,000 4,650,250
SSI Ltd. GDR+++ 14,300 100,100
-------
TOTAL INDIA (COST $3,744,045) 4,750,350
---------
ISRAEL - (0.27%):
Formula Ventures L.P.+++# 423,738 402,474
-------
TOTAL ISRAEL (COST $433,923)
MALAYSIA - (1.03%):
Resorts World Berhad 502,200 1,572,700
---------
TOTAL MALAYSIA (COST $1,859,580)
TAIWAN - (2.81%):
D-Link Corp. 295,000 976,631
Nan Ya Plastic Corp. 785,000 1,719,815
Via Technologies Inc.+ 92,000 1,588,575
---------
TOTAL TAIWAN (COST $3,834,326) 4,285,021
---------
TURKEY - (2.69%):
Dogan Yayin Holding A.S.+ 70,044,702 1,279,953
Vestel Elektronik Sanayi ve Ticaret A.S.+ 9,033,000 2,824,417
---------
TOTAL TURKEY (COST $4,364,167) 4,104,370
---------
TOTAL SECURITIES OF
NON-INFRASTRUCTURE COMPANIES
(COST $18,625,910) 19,071,734
----------
See Accompanying Notes to the Pro Forma Financial Statements.
45
<PAGE>
EQUITY SECURTIES OF COMPANIES
PROVIDING OTHER ESSENTIAL SERVICES IN
THE DEVELOPMENT OF AN EMERGING
COUNTRY'S INFRASTRUCTURE - (2.10%)
COLOMBIA - (0.01%):
Cementos Paz del Rio S.A. ADR++ 2,135 $12,370
------
TOTAL COLOMBIA (COST $29,089)
EGYPT - (0.79%):
Nile Growth Company+ 200,000 1,200,000
---------
TOTAL EGYPT (COST $2,020,000)
TAIWAN - (1.30%):
Taiwan Semiconductor Manufacturing Co., Ltd.+ 390,400 1,989,380
---------
TOTAL TAIWAN (COST $1,282,116)
TOTAL OTHER ESSENTIAL SERVICES
(COST $3,331,205) 3,201,750
---------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES (COST
$135,806,132) 135,425,270
-----------
SHORT-TERM INVESTMENT - (0.03%)
Chilean Mutual Fund - (0.03%)
Fondo Mutuo Security Check 10,513 49,925
------
TOTAL CHILEAN MUTUAL FUND
(COST $50,199)
TOTAL INVESTMENTS (88.92%)
(COST $135,856,331) 135,475,195
See Accompanying Notes to the Pro Forma Financial Statements.
46
<PAGE>
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES - (11.08%)
16,885,263
NET ASSETS - 100.00% $152,360,458
------------
</TABLE>
** As May 31, 2000 EMG invested 6.97% of its total net assets in not
readily marketable securities.
* Not readily marketable security.
+ Security is non-income producing.
++ SEC Rule 144A security. Such securities are traded only among "qualified
institutional buyers."
++ Restricted security, not readily marketable.
# As of May 31, 2000, the Fund committed to investing an additional
$1,760,000, $1,200,000, $150,000, $3,098,646, $1,364,949 and $326,262 of
capital in Concord Ventures Fund II, L.P., Giza GE Venture Fund III L.P.,
K.T. Concord Venture Fund LP, J.P. Morgan Latin America Capital
Partners L.P., Emerging Markets Ventures I, L.P. and Formula
Ventures L.P., respectively.
## Security or a portion thereof is out on loan.
(a) With an additional 1,584 warrants attached, expiring 06/20/01, with no
market value
(b) With an additional 12,740 rights attached, expiring 12/25/49, with no
market value.
(c) With an additional 940,547 warrants attached, expiring 12/31/49, with no
market value.
ADR American Depositary Receipts.
GDR Global Depositary Receipts.
PN Preferred Shares.
PNA Preferred Shares, Class A.
USD United States Dollars.
See Accompanying Notes to the Pro Forma Financial Statements.
47
<PAGE>
PART C
OTHER INFORMATION
Item 15. Indemnification
A policy of insurance covering Credit Suisse Asset Management, LLC, its
affiliates, and all of the registered investment companies advised by Credit
Suisse Asset Management, LLC insures the Registrant's directors and officers and
others against liability arising by reason of an alleged breach of duty caused
by any negligent act, error or accidental omission in the scope of their duties.
Article Eight of the Registrant's Articles of Incorporation states as follows:
ARTICLE VIII
LIMITATION ON LIABILITY; INDEMNIFICATION
(1) To the fullest extent that limitations on the liability of directors
and officers are permitted by the Maryland General Corporation Law, no director
or officer of the Corporation shall have any liability to the Corporation or its
stockholders for damages. This limitation on liability applies to events
occurring at the time a person serves as a director or officer of the
Corporation whether or not such person is a director or officer at the time of
any proceeding in which liability is asserted.
(2) Any person who was or is a party or is threatened to be made a party in
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is a current or former director or officer of the Corporation, or is or
was serving while a director or officer of the Corporation at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, enterprise
or employee benefit plan, shall be indemnified by the Corporation against
judgments, penalties, fines, excise taxes, settlements and reasonable expenses
(including attorneys' fees) actually incurred by such person in connection with
such action, suit or proceeding to the fullest extent permissible under the
Maryland General Corporation Law, the Securities Act of 1933 and the Investment
Company Act of 1940, as such statutes are now or hereafter in force. In
addition, the Corporation shall also advance expenses to its currently acting
and its former directors and officers to the fullest extent that indemnification
of directors is permitted by the Maryland General Corporation Law, the
Securities Act of 1933 and the Investment Company Act of 1940. The Board of
Directors may by Bylaw, resolution or agreement make further provision for
indemnification of directors, officers, employees and agents to the fullest
extent permitted by the Maryland General Corporation Law.
(3) No provision of this Article shall be effective to protect or purport
to protect any director or officer of the Corporation against any liability to
the Corporation or its security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross
<PAGE>
negligence or reckless disregard of the duties involved in the conduct of his
office.
(4) References to the Maryland General Corporation Law in this Article are
to that law as from time to time amended. No amendment to the charter of the
Corporation shall affect any right of any person under this Article based on any
event, omission or proceeding prior to the amendment.
Articles 5.2 and 5.3 of Registrant's By-Laws state as follows:
INDEMNIFICATION AND INSURANCE
ARTICLE 5.2. INDEMNITY.
(a) The Company shall indemnify its directors to the fullest extent
that indemnification of directors is permitted by the Maryland General
Corporation Law. The Company shall indemnify its officers to the same extent as
its directors and to such further extent as is consistent with law. The Company
shall indemnify its directors and officers who, while serving as directors or
officers, also serve at the request of the Company as a director, officer,
partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan to
the fullest extent consistent with law. The indemnification and other rights
provided by this Article shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. This Article shall not protect any such person
against any liability to the Company or any Stockholder thereof to which such
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office ("disabling conduct").
(b) Any current or former director or officer of the Company seeking
indemnification within the scope of this Article shall be entitled to advances
from the Company for payment of the reasonable expenses incurred by him in
connection with the matter as to which he is seeking indemnification in the
manner and to the fullest extent permissible under the Maryland General
Corporation Law. The person seeking indemnification shall provide to the Company
a written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Company has been met and a written
undertaking to repay any such advance if it should ultimately be determined that
the standard of conduct has not been met. In addition, at least one of the
following conditions shall be met: (i) the person seeking indemnification shall
provide security in form and amount acceptable to the Company for his
undertaking; (ii) the Company is insured against losses arising by reason of the
advance; or (iii) a majority of a quorum of directors of the Company who are
neither "interested persons" as defined in Section 2(a)(19) of the Investment
Company Act of 1940, as amended, nor parties to the proceeding ("disinterested
non-party directors"), or independent legal counsel, in a written opinion, shall
have determined, based on a review of facts readily available to the Company at
the time the advance is proposed to be made, that there is reason to believe
that the person seeking indemnification will ultimately be found to be entitled
to indemnification.
(c) At the request of any person claiming indemnification under this
Article, the
<PAGE>
Board of Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, whether the standards
required by this Article have been met. Indemnification shall be made only
following: (i) a final decision on the merits by a court or other body before
whom the proceeding was brought that the person to be indemnified was not liable
by reason of disabling conduct or (ii) in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the person to
be indemnified was not liable by reason of disabling conduct by (a) the vote of
a majority of a quorum of disinterested non-party directors or (b) an
independent legal counsel in a written opinion.
(d) Employees and agents who are not officers or directors of the
Company may be indemnified, and reasonable expenses may be advanced to such
employees or agents, as may be provided by action of the Board of Directors or
by contract, subject to any limitations imposed by the Investment Company Act of
1940.
(e) The Board of Directors may make further provision consistent with
law for indemnification and advance of expenses to directors, officers,
employees and agents by resolution, agreement or otherwise. The indemnification
provided by this Article shall not be deemed exclusive of any other right, with
respect to indemnification or otherwise, to which those seeking indemnification
may be entitled under any insurance or other agreement or resolution of
stockholders or disinterested directors or otherwise.
(f) References in this Article are to the Maryland General Corporation
Law and to the Investment Company Act of 1940, as from time to time amended. No
amendment of these Bylaws shall affect any right of any person under this
Article based on any event, omission or proceeding prior to the amendment.
ARTICLE 5.3. INSURANCE. The Company may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Company or who, while a director, officer, employee or agent of the
Company, is or was serving at the request of the Company as a director, officer,
partner, trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan,
against any liability asserted against and incurred by such person in any such
capacity or arising out of such person's position; PROVIDED that no insurance
may be purchased by the Company on behalf of any person against any liability to
the Company or to its Stockholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
<PAGE>
Item 16. Exhibits
1. Articles of Incorporation of the Registrant, dated
October 12, 1993.*
2. Amended and Restated By-laws of the Registrant
dated November 9, 1999.*
3. Not Applicable.
4. Form of Merger Agreement and Plan of
Reorganization.**
5. Not Applicable.
6. Investment Advisory Agreement between the
Registrant and BEA Associates dated December 21,
1993, as amended.*
7. Not Applicable.
8. Not Applicable.
9. Custodian Agreement between the Registrant and
Brown Brothers Harriman & Co., dated June 14,
1995, as amended.*
10. Not Applicable.
11.(a) Opinion and Consent of Willkie Farr &
Gallagher.*
(b) Opinion and Consent of Venable, Baetjer and
Howard, LLP.*
12. Opinion and Consent of Willkie Farr & Gallagher
with respect to tax matters.*
13.(a) Registrar, Transfer Agency and Service Agreement
between the Registrant and the First National Bank
of Boston, dated September 1, 1995.*
------------------
* Incorporated by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-14 filed on August 25, 2000.
** Included as Exhibit A to the Prospectus forming part of the Registration
Statement.
*** Filed herewith.
<PAGE>
(b) Administrative Agreement between the Registrant
and Bear Stearns Funds Management Inc. dated
August 1, 1995.*
(c) Chilean Administration Agreement between the
Registrant, BEA Associates and CELFIN
Administradora de Fondos de Inversion de Capital
Extranjero S.A. dated November 4, 1997.*
(d) Credit Agreement between the Registrant, other
CSAM-advised Funds, Deutsche Bank AG, as
administrative agent, State Street Bank and Trust
Company, as operations agent, Bank of Nova Scotia,
as syndication agent, and other lenders (the
"Credit Agreement") dated June 23, 1999.*
(e) First Amendment to Credit Agreement dated June
21, 2000.*
14. Consent of PricewaterhouseCoopers LLP.***
15. Not Applicable.
16. Powers of Attorney.*
17. Code of Ethics.*
-------------
* Incorporated by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-14 filed on August 25, 2000.
** Included as Exhibit A to the Prospectus forming part of the Registration
Statement.
*** Filed herewith.
<PAGE>
Item 17. Undertakings
(1) The Registrant agrees that prior to any public reoffering of the securities
registered through the use of a prospectus which is a part of this registration
statement by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, the reoffering prospectus will
contain the information called for by the applicable registration form for
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The Registrant agrees that every prospectus that is filed under paragraph
(1) above will be filed as a part of an amendment to the registration statement
and will not be used until the amendment is effective, and that, in determining
any liability under the 1933 Act, each post-effective amendment shall be deemed
to be a new registration statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial bona
fide offering of them.
<PAGE>
Exhibit No. Exhibit
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14 Consent of PricewaterhouseCoopers LLP
