FOREIGN & COLONIAL EMERGING MIDDLE EAST FUND INC, DEF 14A, 2000-02-04

FOREIGN & COLONIAL EMERGING MIDDLE EAST FUND INC
DEF 14A, 2000-02-04

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Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

The Foreign & Colonial Emerging Middle East Fund, Inc.
(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it is determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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THE FOREIGN & COLONIAL EMERGING MIDDLE EAST FUND, INC.
1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

February 3, 2000

To the Stockholders:

The Annual Meeting of Stockholders of The Foreign & Colonial Emerging
Middle East Fund, Inc. (the "Fund") will be held at the offices of Simpson
Thacher & Bartlett, 425 Lexington Avenue, New York, New York on the 30th floor,
on March 6, 2000, at 11:00 a.m., for the purposes of considering and voting
upon:

1. The election of directors (Proposal 1).

2. The ratification of the selection of PricewaterhouseCoopers LLP as
the independent accountants of the Fund for the year ending October 31,
2000 (Proposal 2).

3. Proposal to amend the Fund's industry concentration policy to permit
the Fund to concentrate in banking stocks (Proposal 3).

4. Stockholder proposal to adopt a resolution to allow stockholders to
realize net asset value for their shares as soon as practicable
(Proposal 4).

5. Stockholder proposal to terminate the investment advisory agreement
between the Fund and Foreign & Colonial Emerging Markets Limited
(Proposal 5).

6. Stockholder proposal to recommend that the Board of Directors
consider the approval of a new investment advisory agreement between the
Fund and a new investment adviser (Proposal 6).

7. Stockholder proposal to change the name of the Fund (Proposal 7).

8. Stockholder proposal to recommend that the Board of Directors
request that the Fund's new investment adviser recommend measures intended
to enhance stockholder value to a new investment adviser (Proposal 8).

9. Any other business that may properly come before the meeting.

The close of business on December 21, 1999 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the meeting.

By Order of the Board of Directors,

Karen J. Clarke
Secretary
<PAGE>

IMPORTANT: TO AVOID UNNECESSARY EXPENSE OF FURTHER SOLICITATION, WE URGE
YOU TO COMPLETE THE ENCLOSED PROXY CARD, DATE AND SIGN IT AND RETURN IT
PROMPTLY IN THE ENVELOPE PROVIDED, REGARDLESS OF HOW LARGE OR HOW SMALL
YOUR HOLDINGS MAY BE. IF YOU HAVE ANY QUESTIONS OR REQUIRE ANY ASSISTANCE
IN VOTING YOUR SHARES, PLEASE CALL THE FIRM ASSISTING US IN SOLICITING
PROXIES, INNISFREE M & A INC., TOLLFREE AT 1-888-750-5834.

INSTRUCTIONS FOR SIGNING PROXY CARDS

The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense to the Fund involved in validating your vote
if you fail to sign your proxy card properly.

1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.

2. Joint Accounts: Either party may sign, but the name of the party signing
should conform exactly to a name shown in the registration.

3. All Other Accounts: The capacity of the individual signing the proxy card
should be indicated unless it is reflected in the form of registration. For
example:

REGISTRATION

CORPORATE ACCOUNTS VALID SIGNATURE
- ------------------ ---------------
(1) ABC Corp. ....................................... ABC Corp.
(2) ABC Corp. ....................................... John Doe, Treasurer
(3) ABC Corp. ....................................... John Doe
c/o John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan ................... John Doe, Trustee

TRUST ACCOUNTS
- --------------
(1) ABC Trust ....................................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee ............................ Jane B. Doe
u/t/d 12/28/78

CUSTODIAL OR ESTATE ACCOUNTS
- ----------------------------

(1) John B. Smith, Cust. ............................ John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith ................................... John B. Smith, Jr.,
Executor

2
<PAGE>
THE FOREIGN & COLONIAL EMERGING MIDDLE EAST FUND, INC.
1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019

----------------

PROXY STATEMENT

This Proxy Statement is furnished in connection with a solicitation by the
Board of Directors of The Foreign & Colonial Emerging Middle East Fund, Inc.
(the "Fund") of proxies to be used at the Annual Meeting of Stockholders of the
Fund (the "Annual Meeting") to be held at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York on the 30th floor, on March
6, 2000 at 11:00 a.m. (and at any adjournment or adjournments thereof) for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
This proxy statement and the accompanying form of proxy are first being mailed
to stockholders on or about February 3, 2000. ADDITIONAL COPIES OF THE FUND'S
ANNUAL REPORT CONTAINING FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED OCTOBER 31,
1999 MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING THE FUND'S TRANSFER AGENT,
BOSTON EQUISERVE, P.O. BOX 8200, BOSTON, MASSACHUSETTS 02266-8209, TOLL FREE
TELEPHONE NUMBER 800 426-5523. Stockholders who execute proxies retain the right
to revoke them in person at the Annual Meeting or by written notice received by
the Secretary of the Fund at any time before they are voted. Unrevoked proxies
will be voted in accordance with the specifications thereon and, unless
specified to the contrary, will be voted FOR the election of directors, FOR
Proposal 2, FOR Proposal 3, AGAINST Proposal 4, AGAINST Proposal 5, AGAINST
Proposal 6, AGAINST Proposal 7 and AGAINST Proposal 8. The close of business on
December 21, 1999 has been fixed as the record date for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting. Each
stockholder is entitled to one vote for each full share and an appropriate
fraction of a vote for each fractional share held. On the record date there were
2,807,169 shares of Common Stock outstanding.

In the event that a quorum is not present at the Annual Meeting, or in the
event that a quorum is present but sufficient votes to approve or reject any of
the proposals are not received, the persons named as proxies may propose one or
more adjournments of the Annual Meeting to a date not more than 120 days after
the original record date to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of those shares
represented at the Annual Meeting in person or by proxy. The persons named as
proxies will vote those proxies which they are entitled to vote FOR or AGAINST
any such proposal in their discretion. A stockholder vote may be taken on one or
more of the proposals in this proxy statement prior to any such adjournment if
sufficient votes have been received for approval or rejection. Under the By-Laws
of the Fund, a quorum is constituted by the presence in person or by proxy of
the holders of record of at least a majority of the outstanding shares of Common
Stock of the Fund entitled to vote at the Annual Meeting.

Abstentions and Broker Non-Votes, as defined below, do not count as votes
cast with respect to any Proposal. With respect to a Proposal requiring the
affirmative vote of a majority of the Fund's outstanding shares of capital
stock, the effect of abstentions and Broker Non-Votes is the same as a vote
against such Proposal. Otherwise, abstentions and Broker Non-Votes have no
effect on the outcome of a Proposal. "Broker Non-Votes" refers to proxies
received by the Fund which are returned on behalf of shares held in the name of
a broker or nominee, but which are not voted with respect to a Proposal because
the broker or nominee has not received voting instructions from the beneficial
owners or persons entitled to vote and the broker or nominee does not have
discretionary voting power.

Foreign & Colonial Emerging Markets Limited ("FCEM"), whose principal
business address is Exchange House, Primrose Street, London, England EC2A 2NY,
is the Fund's investment adviser. Mitchell Hutchins Asset Management Inc.,
whose principal business address is 1285 Avenue of the Americas, New York, New
York 10019, is the Fund's administrator.

3
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PROPOSAL 1:
ELECTION OF DIRECTORS

In accordance with the Fund's charter, the Fund's Board of Directors is
divided into three classes: Class I, Class II and Class III. At the meeting,
stockholders will be asked to elect two Class III Directors to hold office until
the Annual Meeting of Stockholders held in the year 2003 or until their
respective successors are elected and qualified. The terms of office of the
Class II and Class I Directors expire at the Annual Meetings of Stockholders in
2002 and 2001, respectively, or in each case until their respective successors
are elected and qualified. The effect of these staggered terms is to limit the
ability of other entities or persons to acquire control of the Fund by delaying
the replacement of a majority of the Board of Directors.

The persons named in the accompanying form of proxy intend to vote at the
Annual Meeting (unless directed not to vote) FOR the election of the nominees
named below. Both of the nominees are currently members of the Board of
Directors of the Fund. Each nominee has indicated that he will serve if elected,
but if any nominee should be unable to serve, the proxy will be voted for any
other person determined by the persons named in the proxy in accordance with
their judgment.

The following table provides information concerning each nominee for
election as a director:

<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY OWNED,
NOMINEES AND PRINCIPAL OCCUPATIONS DIRECTOR DIRECTLY OR INDIRECTLY,
DURING THE PAST FIVE YEARS SINCE AGE ON OCTOBER 31, 1999**
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS III NOMINEES TO SERVE UNTIL THE 2003
ANNUAL MEETING OF STOCKHOLDERS
- ------------------------------------------------------------------------------------------------------------
Albert Francke, Chairman of Audit Committee; 1994 65 --
Of Counsel, Curtis Mallet-Prevost, Colt &
Mosle (law firm), (1997-present); partner and
chairman of the firm (1968-1997); Director,
Fidelity European Values plc; Director, The
New South Africa Fund, Inc.
- ------------------------------------------------------------------------------------------------------------
Walter M. Noel, Jr., Member of Audit 1994 69 10,000
Committee; Principal, Walter Noel Associates
(1983-present) (investment management
consultant); Principal, Fairfield Greenwich
Group (1987-present) (investment fund
manager); General Partner (1992-1996),
Limited Partner (1996-1997), Fred Kolber &
Company (broker/dealer)
- ------------------------------------------------------------------------------------------------------------
</TABLE>

4
<PAGE>

The following table provides information concerning the directors of the
Fund serving until the 2002 and 2001 Annual Meetings of Stockholders.

<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY OWNED,
DIRECTORS AND PRINCIPAL OCCUPATIONS DIRECTOR DIRECTLY OR INDIRECTLY,
DURING THE PAST FIVE YEARS SINCE AGE ON OCTOBER 31, 1999**
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS II DIRECTORS SERVING UNTIL THE 2002 ANNUAL
MEETING OF STOCKHOLDERS
- ------------------------------------------------------------------------------------------------------------
Bassam Aburdene, Member of Audit 1994 51 --
Committee; Principal, Capital Trust Ltd.
(investment manager and consultant)
(1985-present); Corporate Finance Director,
C.T. Capital Trust N.V. (investment manager
and consultant) (1985-present)
- ------------------------------------------------------------------------------------------------------------
Fred Arthur Rank Packard, Member of Audit 1994 50 6,300
Committee, Director, Gerrard PLC and
Chairman of the Jaguar Fund, Curacao
(1995-present); Chairman of the Board,
London Representative, Garantia Banking
Ltd. (1985-1998) and shareholder since 1974;
Chairman, Foreign & Colonial Emerging
Markets Limited (1993-1996).
- ------------------------------------------------------------------------------------------------------------
Abdulwahab Al-Mulla, Member of the Audit 1998 50 --
Committee; Independent Financing and
Project Consultant (1990-present); Director,
Kuwait Investment Office, London,
(1971-1990).
- ------------------------------------------------------------------------------------------------------------
</TABLE>

- ----------
* "Interested person" as defined in the Investment Company Act of 1940
("1940 Act") because of her affiliation with FCEM, the Fund's investment
adviser.

** The holdings of no director or nominee represented more than 1% of the
outstanding shares of the Fund. Each director and nominee has sole voting
and investment power with respect to the listed shares.

At October 31, 1999, directors and officers of the Fund as a group owned
beneficially less than 1% of the outstanding shares of the Fund.

5
<PAGE>

The following table sets forth the beneficial ownership of shares of the
Fund, at October 31, 1999 by each person known to the Fund to be deemed to be
the beneficial owner of more than 5% of the outstanding shares of the Fund.

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OWNERSHIP
------------------------ ------------------ -----------------
<S> <C> <C>
International Finance Corporation (1)
1818 H Street, N.W.
Washington, D.C. 20433 500,000 17.8%

Lazard Freres & Co., LLC (2)
30 Rockefeller Plaza
New York, New York 10020 256,300 9.13%

City of London Investment Group plc (3)
10 Eastcheap
London EC3M IAJ
England 322,752 11.85%

The State Teachers Retirement Board of Ohio (4)
275 East Broad Street
Columbus, Ohio 43215 533,527 19.01%
</TABLE>

- ----------
(1) Based solely upon information presented in Schedule 13D, dated November 14,
1994, filed by International Finance Corporation, which has sole voting and
dispositive power as to all such shares.

(2) Based solely upon information presented in Schedule 13G, dated January 28,
2000, filed by Lazard Freres & Co. LLC ("Lazard"). Lazard is the beneficial
owner of such shares as a result of acting as an investment adviser. Lazard
has sole voting and dispositive power as to all such shares.

(3) Based solely upon information presented in Schedule 13F-HR dated October
22, 1999, filed by City of London Investment Management Co. Ltd., which has
sole voting and dispositive power as to all such shares.

(4) Based solely upon information presented in Schedule 13F-HR, dated November
12, 1999, filed by The State Teachers Retirement Board of Ohio, which has
sole voting and dispositive power as to all such shares.

In addition, at October 31, 1999 Cede & Co., a nominee for participants in
the Depository Trust Company, held of record 2,290,873 shares of the Fund, equal
to 81.6% of the outstanding shares of the Fund.

The Fund's Audit Committee, a standing committee of the Fund, is composed
of Messrs. Aburdene, Al-Mulla, Francke (Chairman), Noel, Packard and Patterson.
The principal functions of the Audit Committee are to recommend to the Board of
Directors the appointment of the Fund's independent accountants, to review with
the independent accountants the scope and anticipated cost of their audit and to
receive and consider a report from the independent accountants concerning their
conduct of the audit, including any comments or recommendations they might want
to make in that connection. This Committee met on January 21, 1999 and October
21, 1999. The Fund has no nominating or compensation committees.

During the fiscal year ended October 31, 1999, the Board of Directors met
six times. Each director attended at least 75% of the aggregate number of
meetings of the Board and the committees on which he or she serves.

Under the federal securities laws, the Fund is required to provide to
stockholders in connection with the annual meeting of stockholders information
regarding compensation paid to directors by the Fund as well as by any other
U.S. registered investment company advised by FCEM. The following table provides
information concerning the compensation earned by the directors of the Fund
during the fiscal year ended October 31, 1999. None of the directors serves as a
director of any other U.S. registered investment company advised by FCEM. Please
note that the Fund does not provide any pension or retirement benefits to
directors. In addition, no remuneration was paid during the fiscal year ended
October 31, 1999

6
<PAGE>

by the Fund to Ms. Clarke who, as an employee of FCEM, is an interested person
under the 1940 Act (although Ms. Clarke is, along with the other directors of
the Fund, reimbursed for travel and out-of-pocket expenses incurred in
connection with her attendance at meetings of the Fund's Board of Directors).

COMPENSATION
NAME OF DIRECTOR FROM FUND
---------------- ---------
Bassam Aburdene ............................................... $6,500
Albert Francke, III ........................................... $7,200
Walter M. Noel, Jr. ........................................... $7,900
Fred Arthur Rank Packard ...................................... $7,900
David C. Patterson ............................................ $7,900
Abdulwahab Al-Mulla ........................................... $7,900

The executive officers of the Fund are chosen each year at the first
meeting of the Board of Directors of the Fund following the annual meeting of
stockholders, to hold office until the meeting of the Board following the next
annual meeting of stockholders and until their successors are chosen and
qualified. In addition to Ms. Clarke, the present executive officers of the
Fund are:

<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
OWNED, DIRECTLY
NAME AND PRINCIPAL OR INDIRECTLY, ON
OCCUPATIONS DURING THE PAST OCTOBER 31,
FIVE YEARS OFFICE AGE 1999
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arnab Banerji, Chief Investment Officer and Executive Vice President 43 --
Chairman of the Board, Foreign & Colonial (since commencement of
Emerging Markets Limited (1993-present); investment operations)
Head of Emerging Markets, Citibank Global
Asset Management (1991-1993)
- -----------------------------------------------------------------------------------------------------
Jeffrey Chowdhry, Senior Fund Manager and Executive Vice President 39 --
Director, Foreign & Colonial Emerging (since September 10, 1996)
Markets Limited (1994-present); Fund
Manager and Director, BZW Investment
Management (1987-1994)
- -----------------------------------------------------------------------------------------------------
David McIlroy, Senior Fund Manager, Foreign Vice President (since 38 --
& Colonial Emerging Markets Limited April 21, 1999)
(1994-present)
- -----------------------------------------------------------------------------------------------------
</TABLE>

The holdings of no executive officer represented more than 1% of the
outstanding shares of the Fund. Each executive officer has sole voting and
investment power with respect to the listed shares.

Ms. Clarke, Dr. Banerji and Mr. Chowdhry are also directors of FCEM.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 and Section 30(f) of
the 1940 Act in combination require the Fund's directors and officers, persons
who beneficially own more than ten percent of the Fund's Common Stock, FCEM,
and affiliated persons of FCEM under the 1940 Act to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and the
New York Stock Exchange. The Fund believes that all relevant persons have
complied with applicable filing requirements during the fiscal period ended
October 31, 1999, except that a Form 4 -- Statement of Change of Beneficial
Ownership of Securities for Walter M. Noel Jr. was inadvertently not timely
filed.

REQUIRED VOTE

Directors are elected by a plurality of the votes cast by the holders of
shares of Common Stock of the Fund present in person or represented by proxy at
a meeting with a quorum present. For purposes of the election of directors,
abstentions and Broker Non-Votes will not be considered votes cast, and do not
affect the plurality vote required for directors.

7
<PAGE>

PROPOSAL 2:
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS

The Board of Directors of the Fund has selected PricewaterhouseCoopers LLP
as independent accountants to the Fund for the fiscal year ending October 31,
2000. The appointment of independent accountants is approved annually by the
Board of Directors and is subsequently submitted to the stockholders for
ratification. The Fund has been advised by PricewaterhouseCoopers LLP that at
October 21, 1999 neither the firm nor any of its partners had any direct or
material indirect financial interest in the Fund. A representative of
PricewaterhouseCoopers LLP will be present at the Annual Meeting to answer
questions concerning the audit of the Fund's financial statements and will have
an opportunity to make a statement if he or she chooses to do so.

THE DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS, UNANIMOUSLY
RECOMMEND THAT THE STOCKHOLDERS VOTE "FOR" RATIFICATION OF THE SELECTION OF
INDEPENDENT ACCOUNTANTS.

REQUIRED VOTE

Ratification of the selection of PricewaterhouseCoopers LLP as independent
accountants of the Fund requires the affirmative vote of the holders of a
majority of the votes cast by holders of shares of Common Stock of the Fund
present in person or represented by proxy at a meeting with a quorum present.
For purposes of this proposal, abstentions and Broker Non-Votes will not be
considered votes cast, and do not affect the vote required for ratification.

PROPOSAL 3:
AMENDMENT OF THE FUND'S INDUSTRY CONCENTRATION POLICY

The 1940 Act requires a registered investment company to state in its
prospectus a fundamental policy regarding its intention to concentrate
portfolio investments in one industry. Investments of more than 25% of the
value of an investment company's assets in any one industry represent a
"concentration" in that particular industry. If an investment company does not
intend to concentrate its investments, that policy must also be stated in the
prospectus.

The Fund currently has a fundamental investment policy prohibiting it from
concentrating its investments in a single industry. The Fund's current
concentration policy states that:

"[T]he Fund may not . . . purchase any securities which would cause more
than 25% of the value of its total assets at the time of such purchase to be
invested in securities of one or more issuers conducting their principal
business activities in the same industry, provided that there is no limitation
with respect to investments in U.S. Government Securities or repurchase
agreements collateralized by any of such obligations. . ."

Upon approval by the Fund's stockholders, the fundamental policy governing
concentration will allow the fund to concentrate its investments in the banking
industry. If approved, the Fund's new policy will provide:

"The Fund will purchase securities which will cause, at the time of
purchase, at least 25%, but not more than 40%, of the value of its total assets
to be invested in obligations of issuers in the banking industry or in
obligations, such as repurchase agreements, secured by such obligations."

The primary purpose of the proposal is to enable the Fund to concentrate
its investments in the banking industry by removing the current restriction on
the ability of the Fund to concentrate its investments in any one industry.
Over the course of the life of the Fund, and particularly within recent years,
the Fund's investment manager has encountered an increasing number of
attractive investment opportunities in the equities of the Middle East banking
industry. The appeal of banking stocks in the Middle East equity markets is due
in part to the relatively smaller overall number of other types of equity
investments in which the Fund can invest, as well as the intrinsic quality of
the banking stocks as investments in the Middle East. It is the view of the
Fund's investment adviser that the banking industry currently represents the
most significant investment opportunity in the Middle East markets, and that it

8
<PAGE>

is unlikely any other sector would rally without a corresponding rally in
banking stocks. Moreover, the relative appeal of banking industry stocks
vis-a-vis the other equity investment opportunities currently available in the
Middle East markets has increased in recent years. The above proposal is,
therefore, intended to enable the Fund's investment manager to exploit these
investment opportunities to an extent currently not permitted by the Fund's
fundamental investment policy.

Concentration in the stocks of any one industry does, however, increase
the risk to which the Fund is exposed. Because the Fund would concentrate in
stocks of the banking industry, a downturn in that one industry would impact
the Fund more significantly than would be so if the Fund were diversified
across a broad range of industries. If the Fund's concentration proposal were
adopted, the Fund would face greater specific risk, i.e. exposure to a downturn
in the banking industry, in addition to its exposure to general market risk.
This is because diversification of a portfolio reduces the risk associated with
a downturn in any one investment or industry. Also, interest rate changes would
have a greater impact on a Fund that concentrates in the banking sector.
However, it is the view of the investment manager that a downturn in the stocks
of the banking industry of one Middle East country would not necessarily be
mirrored by a corresponding downturn in the banking stocks of the other Middle
East countries in which the Fund invests. The absence of this parallelism may
mitigate some of the unique risk to which the Fund would be exposed as a result
of concentrating in the banking industry.

THE DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS, UNANIMOUSLY
RECOMMEND THAT THE STOCKHOLDERS VOTE "FOR" THE AMENDMENT TO THE FUND'S INDUSTRY
CONCENTRATION POLICY.

REQUIRED VOTE

Approval of the amendment of the Fund's fundamental policy regarding
industry concentration requires the affirmative vote of the lesser of: (1) 67%
or more of the shares of the Fund present at the meeting, if more than 50% of
the then outstanding shares are present or represented by proxy at the Meeting;
and (2) more than 50% of the then outstanding shares of the Fund. For this
purpose, abstentions and Broker Non-Votes will have the same effect as votes
cast against the amendment.

THE FOLLOWING IS A STOCKHOLDER PROPOSAL, NOT A PROPOSAL BY MANAGEMENT.
YOUR BOARD OF DIRECTORS STRONGLY URGES YOU TO VOTE AGAINST THE FOLLOWING
STOCKHOLDER PROPOSAL.

PROPOSAL 4:
STOCKHOLDER PROPOSAL TO ADOPT A RESOLUTION TO ALLOW STOCKHOLDERS
OF THE FUND TO REALIZE NET ASSET VALUE FOR THEIR SHARES
AS SOON AS PRACTICABLE

A stockholder of the Fund (the "proponent") has submitted the following
proposal for inclusion in this Proxy Statement. The Fund will provide the
proponent's name, address and the number of shares owned by the proponent to
any stockholder who asks for it orally or in writing, promptly upon receipt of
such request. Please direct any request to The Foreign & Colonial Emerging
Middle East Fund, Inc., c/o Mitchell Hutchins Asset Management, 1285 Avenue of
the Americas, New York, New York 10019, Attention: Paul Schubert, or call
Innisfree M&A, Inc. , the Fund's proxy solicitor at (888) 750-5834. The Board
of Directors and the Fund accept no responsibility for the accuracy of either
the stockholder proposal or the proponent's supporting statement.

The text of the stockholder proposal and supporting statement is as
follows:

"RESOLVED: The shareholders of the Fund request that they be afforded the
opportunity to realize net asset value (NAV) for their investment in the Fund
as soon as practicable."

SUPPORTING STATEMENT

"In December 1998, the Fund's Board of Directors resolved that `if the
average weekly discount of the Fund's shares for the fiscal year ending October
31, 2000 is equal to or greater than 15%, it is the Board's current expectation
that it would submit to shareholders a proposal to liquidate the Fund at the
following annual meeting of shareholders.... '

9
<PAGE>

"Our Board is to be commended for its concern for enhancing shareholder
value. However, I believe it should not be necessary to wait until sometime in
2001 to address the discount problem. Both before and since the Board's
announcement, the Fund's discount has remained stubbornly high.

"Passing this resolution will tell the Board that shareholders want to be
able to realize net asset value sooner rather than later. The Board can then
implement our request by 1) tendering at NAV for as many shares as shareholders
want redeemed, 2) open-ending the Fund or 3) liquidating the Fund."

THE BOARD OF DIRECTORS' OPPOSING STATEMENT

YOUR BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
STRONGLY AND UNANIMOUSLY OPPOSES THE STOCKHOLDER PROPOSAL DESCRIBED ABOVE AND
URGES ALL STOCKHOLDERS TO VOTE "AGAINST" THE PROPOSAL BECAUSE, AMONG OTHER
REASONS:

o THIS PROPOSAL IS NOT IN THE BEST INTEREST OF STOCKHOLDERS, BECAUSE OF
THE TIMING IT PROPOSES. CURRENT DEPRESSED SHARE-PRICES AND A POSSIBLE
FUTURE RESURGENCE IN THE MIDDLE EAST CAPITAL MARKETS PRESENT COMPELLING
REASONS WHY A LIQUIDATION OF THE FUND EARLIER THAN CONTEMPLATED BY THE
BOARD'S OCTOBER 20, 1998 RESOLUTION WOULD NOT BE IN THE BEST INTERESTS
OF THE FUND'S STOCKHOLDERS.

o THE BOARD HAS ALREADY ENACTED WHAT IT BELIEVES IS THE BEST PROGRAM FOR
ADDRESSING THE ISSUE OF THE FUND'S DISCOUNT.

As the Fund was designed as a long-term investment, the Board of Directors
strongly believes that the proposal that the Board allow stockholders to
realize the net asset value (NAV) of their shares "as soon as practicable" is
not in the best interest of stockholders. The Board of Directors has already
taken measures to address the issue of the discount to NAV and has approved a
clear-cut time-frame for implementing these measures. The Fund has already
addressed the issue of the discount in the manner it considers to be in the
best interest of stockholders.

The Board conducted a thorough examination of issues related to the Fund's
discount and the ability of its stockholders to realize NAV of their shares.
Following its study, the Board at its December 8, 1998 meeting, unanimously
adopted a resolution that if the average weekly discount of the Fund's shares
for the fiscal year ending October 31, 2000 is equal to or greater than 15%, it
is the Board's current expectation that it would submit to stockholders a
proposal to liquidate the Fund at the following annual meeting of stockholders,
absent unusual market or other conditions that exist at that time.

The Board believed at that time -- and continues to believe now -- that
the end of the Fund's fiscal year 2000 is the most appropriate and practical
time to take this action. The decision was made after considering a) the
present illiquidity in certain emerging markets in which the Fund invests; b)
the concern of investors on the effect of Y2K on emerging markets; and c) the
present state of the peace process in the Middle East, which in the investment
adviser's view is more encouraging than at any time since the launch of the
Fund.

At the time the Board made this decision, it considered the full range of
alternatives available for dealing with the discount -- including share
repurchase programs, tender offers and open-ending the Fund. The Board
determined that it would face substantial difficulties were it to try to
open-end the Fund because of the Fund's size and the relative illiquidity of
the markets in which the Fund invests. Because an open-end fund must redeem
shares upon demand, such a fund may be forced to execute sales of its portfolio
securities to meet redemption needs even if the illiquidity of the markets in
which those securities trade would render such sales disadvantageous to the
fund's other stockholders. Thus the Board continues to believe that the
closed-end structure is the most effective vehicle for investing in highly
volatile and illiquid emerging markets. This view has been endorsed by a
leading Wall Street analyst in a "Country Funds Weekly" report dated April 30,
1999 issued by Merrill Lynch & Co. which emphasized the need for a closed-end
structure in the extremely illiquid markets of the Middle East region. The Fund
is the only New York Stock Exchange listed investment vehicle to give exposure
to the entire Middle East region.

The Board further concluded that a share repurchase program or tender
offer would have little effect in light of the tendency of these strategies to
alleviate the discount for only a short period of time, as well

10
<PAGE>

as a potentially negative effect on the Fund's expense ratio. A share
repurchase program or tender offer, for example, would reduce the asset size of
the Fund. The Fund incurs certain fixed expenses, such as accounting and legal
costs that do not vary with the size of the Fund. Therefore, these programs
could have the effect of increasing the Fund's expense ratio. Accordingly, the
Board's resolution also reflects its desire to minimize the expenses incurred
by the Fund.

Despite the fact that the discount remains higher than either the Board or
management would like, the performance of the Fund on both a long term and
short term basis has been positive. The investment manager reports that (a)
from the Fund's inception in October 1994 through the end of December 1999 the
Fund's net asset value total return is 83% in US$ terms, and (b) recent
performance has been impressive and the share price of the Fund has appreciated
significantly over the past three months due to the outperformance of the
Fund's largest two markets, Egypt and Turkey.

The directors, including all the independent directors, unanimously agree
that this proposal is not in the best interest of the stockholders of the Fund.
The persons named in the enclosed proxy retain discretion to vote in their best
judgment on this proposal for all proxies submitted to the Fund. It is the
current intention of these persons to exercise that discretion and vote against
Proposal 4.

REQUIRED VOTE

Approval of the proposal to adopt a resolution to allow stockholders of
the Fund to realize net asset value for their shares as soon as practicable
requires the affirmative vote of the holders of a majority of the votes cast by
holders of shares of Common Stock of the Fund present in person or represented
by proxy at a meeting with a quorum present. For purposes of this proposal,
abstentions and Broker Non-Votes will not be considered votes cast, and do not
affect the vote required for ratification.

THE FOLLOWING IS A STOCKHOLDER PROPOSAL, NOT A PROPOSAL BY MANAGEMENT. YOUR
BOARD OF DIRECTORS STRONGLY URGES YOU TO VOTE AGAINST THE FOLLOWING STOCKHOLDER
PROPOSAL.

PROPOSAL 5:
STOCKHOLDER PROPOSAL TO TERMINATE THE INVESTMENT ADVISORY
AGREEMENT BETWEEN THE FUND AND FCEM

A stockholder of the Fund ("the proponent") has indicated that he plans to
raise Proposal 5 for consideration at the Fund's Annual Meeting of
stockholders.

The text of the stockholder proposal is as follows:

"The investment advisory agreement between the Fund and Foreign & Colonial
Emerging Markets ("FCEM") shall be terminated forthwith and the requisite
notice given immediately to FCEM."

THE BOARD OF DIRECTORS' OPPOSING STATEMENT

YOUR BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
STRONGLY AND UNANIMOUSLY BELIEVES THAT THIS PROPOSAL IS NOT IN THE BEST
INTEREST OF STOCKHOLDERS. ACCORDINGLY, THE BOARD URGES ALL STOCKHOLDERS TO VOTE
"AGAINST" THE PROPOSAL BECAUSE, AMONG OTHER REASONS:

o FOREIGN & COLONIAL EMERGING MARKETS LIMITED, WHOM THE PROPONENT SEEKS
TO REPLACE, HAS BEEN THE FUND'S ONLY INVESTMENT ADVISER AND HAS
SUCCESSFULLY PERFORMED THIS JOB FOR THE LAST FIVE YEARS.

o THE FUND'S PERFORMANCE HAS BEEN POSITIVE, ESPECIALLY IN LIGHT OF THE
HIGH DEGREE OF ILLIQUIDITY OF THE MIDDLE EAST CAPITAL MARKETS. SINCE
ITS INCEPTION, THE NAV OF THE FUND HAS INCREASED 83% THROUGH DECEMBER
1999 ACCORDING TO THE INVESTMENT ADVISER.

o TERMINATING THE FUND'S INVESTMENT ADVISORY AGREEMENT WOULD CAUSE
UNCERTAINTY REGARDING THE FUND'S ABILITY TO IDENTIFY AN INVESTMENT
ADVISER WHO COULD PROVIDE COMPARABLE SERVICES AND CAUSE THE FUND TO
INCUR THE COSTS ASSOCIATED WITH IDENTIFYING A NEW INVESTMENT ADVISER.

11
<PAGE>

On October 28, 1994, the Fund entered into a management agreement with
FCEM. This agreement has been reviewed by the Board of Directors' Audit
Committee, which is comprised entirely of independent directors, and has been
recommended to and approved by the full Board of Directors each year. The
review, the most recent of which was in October 1999, is to ensure that the
Fund is receiving high quality investment advising service at a fair price.
Each of the years this contract has been reviewed, the Board has consistently
found it to be favorable to the Fund and has approved its renewal. The
proponent now seeks to terminate the management agreement between the Fund and
FCEM.

During each annual review of the contract between the Fund and FCEM, the
Board has carefully considered a number of factors, including (i) the nature,
quality and scope of the operations and services FCEM would render to the Fund;
(ii) comparisons of similar arrangements by other investment companies,
particularly with regard to the level of fees and anticipated benefits to FCEM
due to its relationship with the Fund, and; (iii) the Fund's performance. After
carefully considering these and other factors, your Board, including the
Board's independent directors, unanimously concluded that the proposed
arrangements with FCEM were in the best interests of the Fund and you, the
stockholders.

The Fund was established only five years ago and was designed as a
long-term investment vehicle. The Fund has experienced positive NAV
performance, and in that regard the Fund's investment adviser reports that (a)
from the Fund's inception in October 1994 through the end of December 1999 the
Fund's net asset value total return is 83% in US$ terms, and (b) recent
performance has been impressive and the share price of the Fund has appreciated
significantly over the past four months due to the outperformance of the Fund's
largest two markets, Egypt and Turkey, relative to the ING Barings Greater
Middle East Index, which is the Fund's benchmark index.

At the same time, the fees and expenses of the Fund are comparable to
those paid by similarly situated funds, regardless of the identity of their
service providers. Indeed, the fees paid to FCEM are based upon the Fund's net
asset value, creating an incentive for FCEM to enhance net asset value and
stockholder value through strong performance.

Identifying an alternative investment adviser with equivalent experience
in the specialized investment markets in which the Fund invests would be
difficult, as the directors consider the existing investment adviser the most
qualified for the job. Thus the Fund would be exposed to the uncertainty that
the Fund might not be able to identify and enter into an advisory agreement
with an investment adviser with a comparable or better record to that of FCEM.
The Fund would also incur the expenses of identifying potentially suitable
investment advisers, conducting a due diligence review of potential candidates,
negotiating a contact with the new investment adviser, and obtaining
stockholder approval of the new advisory contract.

YOUR BOARD OF DIRECTORS, INCLUDING THE BOARD'S INDEPENDENT DIRECTORS,
UNANIMOUSLY AND STRONGLY RECOMMENDS THAT YOU VOTE "AGAINST" THE STOCKHOLDER
PROPOSAL.

REQUIRED VOTE

Approval of the stockholder proposal requires the affirmative vote of a
"majority" of the Fund's outstanding voting securities. The term "majority"
means the vote of the lesser of: (1) 67% or more of the shares of the Fund
present at the meeting, if more than 50% of the then outstanding shares are
present or represented by proxy at the Meeting; and (2) more than 50% of the
then outstanding shares of the Fund. For this purpose, abstentions and broker
non-votes will be counted as shares present at the Meeting for quorum purposes
but not for voting and will have the same effect as votes cast against the
amendment.

THE FOLLOWING IS A STOCKHOLDER PROPOSAL, NOT A PROPOSAL BY MANAGEMENT. YOUR
BOARD OF DIRECTORS STRONGLY URGES YOU TO VOTE AGAINST THE FOLLOWING STOCKHOLDER
PROPOSAL.

PROPOSAL 6:
STOCKHOLDER PROPOSAL TO RECOMEND THAT THE BOARD OF
DIRECTORS CONSIDER THE APPROVAL OF A NEW INVESTMENT ADVISORY
AGREEMENT BETWEEN THE FUND AND A NEW INVESTMENT ADVISER

A stockholder of the Fund ("the proponent") has indicated that he plans to
raise Proposal 6 for consideration at the Fund's Annual Meeting of
stockholders.

12
<PAGE>

The text of the stockholder proposal is as follows:

"It is recommended that the Board of Directors of the Fund, pursuant to
the procedures set forth in Section 15 of the Investment Company Act of 1940,
as amended, and applicable state law, promptly consider approval of a new
investment advisory agreement between the Fund and a new investment adviser, in
a form that is identical to that of the existing advisory agreement between the
Fund and FCEM except for the identities of the parties and the dates of
execution and termination ("the New Advisory Agreement")."

THE BOARD OF DIRECTORS' OPPOSING STATEMENT

YOUR BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
STRONGLY AND UNANIMOUSLY BELIEVES THAT THIS PROPOSAL IS NOT IN THE BEST
INTERESTS OF STOCKHOLDERS. ACCORDINGLY, THE BOARD URGES ALL STOCKHOLDERS TO
VOTE "AGAINST" THE PROPOSAL BECAUSE, AMONG OTHER REASONS:

o THE BOARD BELIEVES THAT THERE ARE NUMEROUS REASONS WHY IT IS IN THE
BEST INTERESTS OF STOCKHOLDERS TO MAINTAIN THE INVESTMENT ADVISORY
CONTRACT BETWEEN THE FUND AND FCEM. THUS, THE BOARD BELIEVES THAT THE
APPROVAL OF A NEW INVESTMENT ADVISORY CONTRACT WOULD NOT BE IN BEST
INTEREST OF SHAREHOLDERS AND IS UNNECESSARY.

o FORCING THE FUND TO APPROVE A NEW INVESTMENT ADVISORY CONTRACT WOULD
EXPOSE THE FUND TO UNNECESSARY UNCERTAINTY AND EXPENSE, BECAUSE IT
WOULD INVOLVE FINDING A NEW INVESTMENT ADVISER WITH A COMPARABLE OR
BETTER RECORD THAN THAT OF FCEM.

The Board strongly believes that it is in the best interests of
stockholders to maintain the Fund's investment advisory contract with FCEM, as
the Board believes FCEM is the best investment adviser the Fund could have for
its existing portfolio. The investment adviser has informed the Board that it
possesses the largest team of emerging markets fund managers in Europe and has
more than US$4 billion under management. The Board believes that terminating
the current agreement between the Fund and FCEM would be unwise. FCEM has been
the Fund's only investment adviser and has successfully performed this job for
the last five years. The Fund's performance has been positive, especially in
light of the high degree of illiquidity of the Middle East capital markets.
Since its inception, the NAV of the Fund has increased 83% through December
1999, according to FCEM. Accordingly, the Board of course also strongly
believes that it is imprudent and not in the best interests of shareholders to
approve a new investment advisory agreement between the Fund and a new and
unknown investment adviser.

Your Board further urges you to vote against the stockholder proposal
because it would create considerable uncertainties for and impose additional
costs on the Fund. If the stockholder proposal is adopted, the Board will have
to solicit proposals for new investment management and advisory arrangements,
conduct a due diligence review of potential service providers and negotiate and
enter into the new arrangements. Any new investment management or advisory
agreements would then have to be approved by the Fund's stockholders.

Moreover, your Board believes that the difficulty and expense of finding a
new investment manager with comparable experience and performance investing in
Middle Eastern issuers, negotiating acceptable management and advisory
arrangements with a new investment manager, and soliciting proxies for
stockholder approval of the new arrangements could disrupt the Fund's
investment process considerably. Given the current lack of liquidity and
volatility of the Middle Eastern markets, this could pose great risks for the
Fund.

YOUR BOARD OF DIRECTORS, INCLUDING THE BOARD'S INDEPENDENT DIRECTORS,
UNANIMOUSLY AND STRONGLY RECOMMENDS THAT YOU VOTE "AGAINST" THE STOCKHOLDER
PROPOSAL.

REQUIRED VOTE

Approval of the proposal to recommend that the Board of Directors consider
the approval of a new investment advisory agreement requires the affirmative
vote of a majority of votes cast.

13
<PAGE>

THE FOLLOWING IS A STOCKHOLDER PROPOSAL, NOT A PROPOSAL BY MANAGEMENT. YOUR
BOARD OF DIRECTORS STRONGLY URGES YOU TO VOTE AGAINST THE FOLLOWING STOCKHOLDER
PROPOSAL.

PROPOSAL 7:
STOCKHOLDER PROPOSAL TO CHANGE THE NAME OF THE FUND

A stockholder of the Fund ("the proponent") has indicated that he plans to
raise Proposal 7 for consideration at the Fund's Annual Meeting of
shareholders.

The text of the stockholder proposal is as follows:

"It is recommended that the Fund's name be changed to 'The Emerging Middle
East Fund, Inc."'

BOARD OF DIRECTORS' OPPOSING STATEMENT

The proponent's proposal seeks to remove the name "Foreign & Colonial"
from the name of the Fund. The words "Foreign & Colonial" are, of course,
associated with the Fund's investment adviser. This proposal, therefore,
follows from proponent's Proposal 5, in which the proponent seeks the
termination of the investment advisory agreement between the Fund and FCEM. If
the investment advisory agreement is terminated and FCEM no longer serves as
investment adviser, a natural consequence would be to remove references to
"Foreign & Colonial" from the name of the Fund. The Board, however, strongly
believes that it is in the best interests of stockholders to maintain the
Fund's investment advisory contract with FCEM. FCEM has been the Fund's only
investment adviser and has successfully performed this job for the last five
years. The Fund's performance has been positive, especially in light of the
high degree of illiquidity of the Middle East capital markets. Since its
inception, the NAV of the Fund has increased 83% through December 1999,
according to FCEM. Moreover, terminating the Fund's investment advisory
agreement would cause uncertainty regarding the Fund's ability to identify an
equivalent investment adviser and cause the Fund to incur the search costs
associated with identifying a new investment adviser. Accordingly, the Board of
course also strongly believes that, since the Fund's investment adviser should
continue to be FCEM, the Fund's name should stay the same.

YOUR BOARD OF DIRECTORS, INCLUDING THE BOARD'S INDEPENDENT DIRECTORS,
UNANIMOUSLY AND STRONGLY RECOMMENDS THAT YOU VOTE "AGAINST" THE STOCKHOLDER
PROPOSAL.

REQUIRED VOTE

Approval of the proposal to change the name of the Fund requires the
affirmative vote of a majority of votes cast.

THE FOLLOWING IS A STOCKHOLDER PROPOSAL, NOT A PROPOSAL BY MANAGEMENT. YOUR
BOARD OF DIRECTORS STRONGLY URGES YOU TO VOTE AGAINST THE FOLLOWING STOCKHOLDER
PROPOSAL.

PROPOSAL 8:
STOCKHOLDER PROPOSAL TO RECOMMEND THAT THE BOARD OF DIRECTORS
REQUEST THAT THE FUND'S NEW INVESTMENT ADVISER RECOMMEND MEASURES
INTENDED TO ENHANCE STOCKHOLDER VALUE

A stockholder of the Fund ("the proponent") has indicated that he plans to
raise Proposal 8 for consideration at the Fund's Annual Meeting of shareholders.

The text of the stockholder proposal is as follows:

"It is recommended that the Board of Directors of the Fund request that the
Fund's new investment adviser recommend measures intended to enhance the value
of the Fund's shares."

14
<PAGE>

THE BOARD OF DIRECTORS' OPPOSING STATEMENT

YOUR BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
STRONGLY AND UNANIMOUSLY BELIEVES THAT THIS PROPOSAL IS UNNECESSARY AND MOOT.
ACCORDINGLY, THE BOARD URGES ALL STOCKHOLDERS TO VOTE "AGAINST" THE PROPOSAL
BECAUSE, AMONG OTHER REASONS:

As stated in its text, this proposal contemplates that the Fund would have
a new investment adviser. This would occur, however, only if proponent's
Proposals 5 and 6, which seek to terminate the Fund's current investment
adviser and approve a new adviser, are approved. The board, however, strongly
believes that it is in the best interests of stockholders to maintain the
Fund's investment advisory contract with FCEM. The Board believes that
terminating the current agreement between the Fund and FCEM would be unwise at
this time.

In any event, the Fund's current investment adviser, FCEM, and the Board
have already taken and continue to take appropriate measures intended to
enhance the value of the Fund's shares, both through the enhancement of NAV and
through other steps to lower the discount. The Board recently completed a
thorough examination of issues related to the ability of the Fund's
stockholders to realize the net asset value of their shares. The Board
discussed various ways to narrow the discount from net asset value, including
share repurchase programs, tender offers, and open-ending the Fund. The Board
also carefully studied the question of the most expedient and practical
time-frame for effecting changes to the Fund in response to concerns about the
discount. Following its study of the ways the Fund could address the discount
from net asset value, the Board of Directors, at its December 8, 1998 meeting,
unanimously adopted a resolution that if the average weekly discount of the
Fund's shares for the fiscal year ending October 31, 2000 is equal to or
greater than 15%, it is the Board's current expectation that it would submit to
stockholders a proposal to liquidate the Fund at the following annual meeting
of stockholders, absent unusual market or other conditions that exist at that
time. The recent resurgence of the Middle East capital markets presents a
compelling reason why a liquidation of the Fund earlier than contemplated by
the Board's October 20, 1998 resolution would not be in the best interests of
the Fund's stockholders.

Thus, the Board has already taken numerous steps to enhance the value of
the shares of all of the Fund's stockholders. Other measures taken in addition
to or in contravention of those measures currently in place to enhance the
value of the Fund's shares could in the Board's view have negative
consequences. For example, the Board concluded at its meeting in December of
1998 that a share repurchase program or tender offer would have little effect
in light of the tendency of these strategies to alleviate the discount for only
a short period of time, as well as a potentially negative effect on the Fund's
expense ratio. The Fund incurs certain fixed expenses, such as accounting and
legal costs, that do not vary with the size of the Fund. Therefore, these
programs could have the effect of increasing the Fund's expense ratio.

YOUR BOARD OF DIRECTORS, INCLUDING THE BOARD'S INDEPENDENT DIRECTORS, THUS
UNANIMOUSLY AND STRONGLY RECOMMENDS THAT YOU VOTE "AGAINST" THE STOCKHOLDER
PROPOSAL.

REQUIRED VOTE

Approval of the proposal to recommend that the Board of Directors request
that the Fund's new investment adviser recommend measures to enhance
stockholder value requires the affirmative vote of a majority of votes cast.

OTHER BUSINESS

The Board of Directors of the Fund does not know of any other matter which
may come before the Annual Meeting. If other matters properly come before the
Annual Meeting, it is the intention of the persons named in the proxy to vote
the proxies in accordance with their judgment on that matter.

PROPOSALS TO BE SUBMITTED BY STOCKHOLDERS

All proposals by stockholders of the Fund which are intended to be
presented at the Fund's next annual meeting of stockholders, to be held in 2001
must be received by the Fund for inclusion in the

15
<PAGE>

Fund's proxy statement and proxy relating to that meeting no later than October
7, 2000. Pursuant to the Fund's By-Laws any proposal to be presented at the
Fund's 2001 Annual Meeting of Stockholders must be delivered in writing to the
Secretary of the Fund during the period from December 7, 2000 to January 6,
2001.

EXPENSES OF PROXY SOLICITATION

The expenses of the Annual Meeting will be borne by the Fund. Proxies may
also be solicited personally by officers of the Fund and by regular employees
of FCEM or its respective affiliates, or other representatives of the Fund or
by telephone or telegraph, in addition to the use of mails. Brokerage houses,
banks and other fiduciaries may be requested to forward proxy solicitation
material to their principals to obtain authorization for the execution of
proxies, and they will be reimbursed by the Fund for out-of-pocket expenses
incurred in this connection. Innisfree M&A Inc. has been retained to assist in
the solicitation of proxies at a fee to be paid by the Fund and estimated at
$25,000, plus disbursements.

The material features of the contract between the Fund and Innisfree M&A
Inc. are the following. In return for its fee, Innisfree will 1) assist the
Fund in all aspects of contacting stockholders of the Fund; 2) assist in
facilitating stockholder voting, and; 3) assist in explaining the position of
the Fund's management with regard to the stockholder proposals to stockholders
of the Fund.

February 3, 2000

<PAGE>

THE FOREIGN & COLONIAL EMERGING MIDDLE EAST FUND, INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, N.Y. 10019

ANNUAL MEETING OF STOCKHOLDERS -- MARCH 6, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Fred Arthur Rank Packard, Karen J. Clarke
and Jeffrey Chowdhry, and each of them, attorneys and proxies for the
undersigned, with full power of substitution and revocation to represent the
undersigned at the Annual Meeting of Stockholders of The Foreign & Colonial
Emerging Middle East Fund, Inc. to be held at 425 Lexington Avenue, New York,
New York on March 6, 2000, at 11:00 a.m., and at any adjournments thereof, upon
the matters set forth in the Notice of Meeting and Proxy Statement dated
February 3, 2000 and upon all other matters properly coming before said meeting.

Please mark, sign, date and return this proxy promptly using the enclosed
envelope.

Please indicate your vote by an "X" in the appropriate box on the reverse
side. This proxy, if properly executed, will be voted in the manner directed by
the stockholder. If no direction is made, this proxy will be voted FOR Proposals
1 (including both nominees for Director), 2 and 3, and AGAINST proposals 4, 5,
6, 7, and 8. Please refer to the Proxy Statement for a discussion of the
Proposals.

(Continued and to be signed and dated, on the reverse side)

17
<PAGE>

[X] Please mark votes as in this example.

Your Board of Directors recommends a vote FOR proposals 1
(including BOTH nominees for Director), 2 and 3.

1. Election of Directors.
Class III to serve until the 2003 Annual Meeting

Albert Francke
Walter M. Noel, Jr.

FOR BOTH NOMINEES [ ] FOR BOTH EXCEPT [ ]
WITHHOLD [ ]

INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the
"For Both Except" box and strike a line through that nominee's name.

2. Ratification of the selection of Pricewaterhouse Coopers LLP as
independent accountants for the fiscal year ending October 31, 2000.