UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File No. 811-08076
-----------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
466 Lexington Avenue, New York, New York 10017-3140
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
J. Kevin Gao, Esq.
The Emerging Markets Telecommunications Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3140
Registrant's telephone number, including area code:(212) 875-3500
Date of fiscal year end: October 31
Date of reporting period: November 1, 2004 to April 30, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
THE EMERGING MARKETS
TELECOMMUNICATIONS
FUND, INC.
SEMI-ANNUAL REPORT
APRIL 30, 2005
(UNAUDITED)
[ETF LISTED NYSE(R) LOGO]
ETF-SAR-0405
CONTENTS
Letter to Shareholders 1
Portfolio Summary 4
Schedule of Investments 6
Statement of Assets and Liabilities 10
Statement of Operations 11
Statement of Changes in Net Assets 12
Statement of Cash Flows 13
Financial Highlights 14
Notes to Financial Statements 16
Results of Annual Meeting of Shareholders 24
Privacy Policy Notice 25
Description of InvestLink(SM) Program 26
Advisory Agreement Approval Disclosure 29
Proxy Policy and Portfolio Holdings Information 33
LETTER TO SHAREHOLDERS
June 2, 2005
DEAR SHAREHOLDER:
For the six months ended April 30, 2005, The Emerging Markets Telecommunications
Fund, Inc. (the "Fund") had a return of 8.34%, based on net asset value, vs. a
same-period increase of 13.43% for the Morgan Stanley Capital International
Emerging Markets Index* (MSCI EM) and an increase of 13.85% for the
telecommunications services subsector of the MSCI EM.
THE MARKET: ROBUST START, LACKLUSTER FINISH
Emerging equity markets performed well in both absolute terms and compared with
developed stock markets, though the group struggled late in the period. Emerging
markets climbed steadily over the November through early March span, as investor
sentiment toward the asset class remained favorable based on generally strong
macro fundamentals combined with historically moderate valuations. However,
these stocks declined in the last six weeks of the period, hit by changing
expectations for U.S. interest rates as the U.S. Federal Reserve turned more
hawkish on inflation. This tended to spark profit taking within markets
globally, and in riskier asset classes in particular.
Emerging telecom stocks modestly outperformed the broader emerging markets
group, supported in part by visible merger and acquisition activity in the
industry, including the purchase of a Canadian-based wireless company with
exposure to Central and Eastern Europe by the UK's Vodaphone Group Plc. Emerging
markets telecoms outpaced developed market telecom stocks by a wide margin.
PERFORMANCE: STRENGTH IN LATIN AMERICA COUNTERED BY PRIVATE PLACEMENTS
The Fund participated in the rally in the types of stocks it targets, though it
trailed its benchmarks during this time period. We attribute this primarily to
the Fund's private placement holdings, which accounted for about 20% of the
portfolio in the period and which had only a modest gain. Other factors that
hindered the Fund's relative return included its underweighting in South Africa,
Poland, and the Czech Republic, markets that had strong gains. On the positive
side, the Fund's Latin American holdings had solid performance, reflecting good
stock selection in Mexico and Brazil, as well as our overweighting in Brazil.
PORTFOLIO ACTIVITY: MORE FAVORABLE OUTLOOK ON CHINA
In terms of noteworthy portfolio adjustments, we narrowed our underweighting in
Asia. This was largely due to our increased exposure to China, where we saw
attractive valuations combined with strong and growing demand for telecom
services, the possibility for a value-enhancing restructuring of the industry
and signs of more benign competition in the mobile area. We trimmed our exposure
to certain Asian holdings on the back of strong rallies, particularly within
Thailand and India.
Within Latin America, we pared our Mexico weighting, selling a fixed-line
company based on our view of limited positive catalysts for the company, and
taking profits in a mobile stock that had become more richly valued. In Brazil,
we lowered our exposure to the wireless area, based on our concerns over
intensifying competition and the prospects for profit growth going forward. We
added to our position in an integrated Brazilian telecom company that we viewed
as more attractive.
1
Elsewhere of note, we established a stake in Egypt, including a company we view
as a compelling growth story with multi-country exposure. The stock was a good
performer in the period, and it continues to offer longer-term value in our
view. We also purchased shares of a Polish integrated telecom company that we
deemed to be attractively valued. As a tactical strategy, we opportunistically
traded a few pure-play wireless stocks that were volatile in part due to
takeover speculation.
Going forward, we intend to maintain the two-tiered strategy we have been
employing, attempting to identify high-growth telecom companies in markets with
relatively low competition, while also seeking lower valuation stocks of
companies paying higher dividends and/or engaging in share buybacks. We think
the market for telecom stocks could remain fairly volatile, and we will continue
to look for opportunities to purchase shares we deem to be oversold.
PRIVATE PLACEMENTS UPDATE
As discussed in previous reports, most of the Fund's private placement holdings
are technology oriented venture-capital funds. Following a series of consecutive
write-downs related to the past difficult market environment for technology and
telecom providers, the most recent six month period saw more widespread
stability in valuations. Write-ups of these types of investments typically lag
recovery in the public markets, as these write-ups are generally the result of a
third-party financing round, IPO or sale of an investment, while write-downs
also reflect the manager's judgment with respect to any impairment of value.
Despite fluctuating markets during the period, which were particularly
challenging in the last few months, several of these funds also benefited from
appreciation of underlying investments, primarily in those companies that had
already reached a level of maturity that allowed them to go public.
Distributions in this period declined from the previous six months ($490,000 as
compared to $1.2 million); however, we believe that this reflects a traditional
lag of distributions to realizations as the improving technology sector, in
combination with the maturation of the underlying portfolio companies, is
beginning to drive a growing number of liquidity events (strategic sales or
sales in the public markets). We would hope to see this trend continue and
accelerate over the coming quarters. With this improved environment, the
investment pace of the funds remained strong, with approximately $1.3 million of
capital calls made by the fund investments during the semi-annual period (15.6%
of unfunded commitments at the beginning of the period).
Respectfully,
/s/ Neil Gregson
Neil Gregson
Chief Investment Officer**
2
INTERNATIONAL INVESTING ENTAILS SPECIAL RISK CONSIDERATIONS, INCLUDING CURRENCY
FLUCTUATIONS, LOWER LIQUIDITY, ECONOMIC AND POLITICAL RISKS, AND DIFFERENCES IN
ACCOUNTING METHODS; THESE RISKS ARE GENERALLY HEIGHTENED FOR EMERGING MARKET
INVESTMENTS. SINCE THE FUND FOCUSES ITS INVESTMENTS ON COMPANIES INVOLVED IN
TELECOMMUNICATIONS, AN INVESTMENT IN THE FUND MAY INVOLVE A GREATER DEGREE OF
RISK THAN AN INVESTMENT IN OTHER FUNDS THAT SEEK CAPITAL APPRECIATION BY
INVESTING IN A BROADER MIX OF ISSUERS.
IN ADDITION TO HISTORICAL INFORMATION, THIS REPORT CONTAINS FORWARD-LOOKING
STATEMENTS, WHICH MAY CONCERN, AMONG OTHER THINGS, DOMESTIC AND FOREIGN MARKET,
INDUSTRY AND ECONOMIC TRENDS AND DEVELOPMENTS AND GOVERNMENT REGULATION AND
THEIR POTENTIAL IMPACT ON THE FUND'S INVESTMENT PORTFOLIO. THESE STATEMENTS ARE
SUBJECT TO RISKS AND UNCERTAINTIES AND ACTUAL TRENDS, DEVELOPMENTS AND
REGULATIONS IN THE FUTURE AND THEIR IMPACT ON THE FUND COULD BE MATERIALLY
DIFFERENT FROM THOSE PROJECTED, ANTICIPATED OR IMPLIED. THE FUND HAS NO
OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS.
*The Morgan Stanley Capital International Emerging Markets Index is an unmanaged
index (with no defined investment objective) of emerging-market equities that
includes reinvestment of net dividends, and is the exclusive property of Morgan
Stanley Capital International Inc. Investors cannot invest directly in an index.
**Neil Gregson, who is a Managing Director of Credit Suisse Asset Management,
Limited ("CSAM"), is head of emerging market equities, based in London. Prior to
assuming this role in 2003, he was chief investment officer for equities in
Emerging Europe, the Middle East and Africa. Mr. Gregson joined CSAM in 1990
after working as an investment analyst in Johannesburg. Previously, he was a
mining engineer with Anglo American Corporation in South Africa. Mr. Gregson
holds a BSc. (Hons.) in mining engineering from Nottingham University. Mr.
Gregson is also the Chief Investment Officer of The First Israel Fund, Inc.
3
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
PORTFOLIO SUMMARY - AS OF APRIL 30, 2005 (UNAUDITED)
[CHART]
SECTOR ALLOCATION
AS A PERCENT OF NET ASSETS
APRIL 30, 2005 OCTOBER 31, 2004
Cellular Telecommunications 34.99% 35.49%
Electric Products - Miscellaneous 0.00% 1.06%
Internet Services/Software 0.96% 2.14%
Investment & Holding Company 0.10% 0.11%
Technology 1.02% 0.86%
Telecommunications 24.37% 18.94%
Telephone-Integrated 21.15% 24.50%
Television 1.07% 1.15%
Venture Capital 12.55% 12.80%
Cash & Other Assets 3.79% 2.95%
[CHART]
GEOGRAPHIC ASSET BREAKDOWN
AS A PERCENT OF NET ASSETS
APRIL 30, 2005 OCTOBER 31, 2004
Africa 6.77% 5.39%
Asia 35.10% 31.49%
Europe 4.86% 2.81%
Latin America 27.13% 41.05%
Middle East 14.26% 8.09%
North America 0.96% 0.94%
Global 7.13% 7.28%
Cash & Other Assets 3.79% 2.95%
4
[CHART]
SUMMARY OF SECURITIES BY COUNTRY/REGION
AS A PERCENT OF NET ASSETS
APRIL 30, 2005 OCTOBER 31, 2004
Asia 1.94% 2.64%
Brazil 10.12% 10.94%
Chile 0.00% 3.05%
China 14.02% 5.26%
Egypt 5.56% 0.00%
Indonesia 2.81% 4.83%
Israel 8.70% 8.09%
Malaysia 3.56% 3.28%
Mexico 14.08% 21.56%
Poland 3.28% 0.00%
Russia 3.35% 3.58%
South Africa 6.77% 5.39%
South Korea 6.87% 8.76%
Global 7.13% 7.28%
Other 8.02% 12.39%
TOP 10 HOLDINGS, BY ISSUER
COUNTRY/ PERCENT OF
HOLDING SECTOR REGION NET ASSETS
---------------------------------------------------------------------------------------------------------------
1. America Movil S.A. de C.V. Cellular Telecommunications Mexico 14.1
2. China Mobile (Hong Kong) Ltd. Cellular Telecommunications China 6.3
3. Emerging Markets Ventures I, L.P. Venture Capital Global 5.6
4. SK Telecom Co., Ltd. Cellular Telecommunications South Korea 5.1
5. Orascom Telecom Holding SAE Telecommunications Egypt 4.7
6. Tele Norte Leste Participacoes S.A. Telephone-Integrated Brazil 4.6
7. China Telecom Corp. Ltd. Telecommunications China 4.5
8. Telkom South Africa Ltd. Telephone-Integrated South Africa 3.5
9. Telekomunikacja Polska S.A. Telecommunications Poland 3.3
10. MTN Group Ltd. Cellular Telecommunications South Africa 3.3
5
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
SCHEDULE OF INVESTMENTS - APRIL 30, 2005 (UNAUDITED)
NO. OF
DESCRIPTION SHARES/UNITS VALUE
----------------------------------------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-96.21%
EQUITY OR EQUITY-LINKED SECURITIES OF
TELECOMMUNICATION COMPANIES IN EMERGING
COUNTRIES-95.15%
ARGENTINA-1.16%
TELEPHONE-INTEGRATED-1.16%
Nortel Inversora S.A., PNB,
ADR+ 74,400 $ 613,800
Telecom Argentina S.A.,
ADR+^ 41,000 469,450
--------------
TOTAL ARGENTINA (Cost $975,473) 1,083,250
--------------
ASIA-1.94%
TECHNOLOGY-0.01%
Nirvana Capital Ltd.+* 42,000 7,409
--------------
TELECOMMUNICATIONS-1.93%
TVG Asian Communications
Fund II, L.P.+@# 3,187,104 1,800,099
--------------
TOTAL ASIA (Cost $2,857,925) 1,807,508
--------------
BRAZIL-10.12%
TELEPHONE-INTEGRATED-10.12%
Brasil Telecom Participacoes
S.A 165,600,000 1,368,433
Tele Norte Leste Participacoes
S.A 136,900 2,660,643
Tele Norte Leste Participacoes
S.A., ADR^ 112,600 1,666,480
Tele Norte Leste Participacoes
S.A., PN+ 1,416 1,671
Telecomunicacoes de Sao Paulo
S.A., ADR 200 3,824
Telecomunicacoes de Sao Paulo
S.A., PN 98,600,000 1,861,578
Telemar Norte Leste S.A., PNA 85,700 1,871,284
--------------
TOTAL BRAZIL (Cost $7,383,898) 9,433,913
--------------
CHINA-14.02%
CELLULAR TELECOMMUNICATIONS-6.34%
China Mobile (Hong Kong)
Ltd. 276,000 $ 967,873
China Mobile (Hong Kong)
Ltd., ADR^ 277,700 4,943,060
--------------
5,910,933
--------------
TELECOMMUNICATIONS-4.54%
China Telecom Corp. Ltd. 9,541,000 3,247,523
China Telecom Corp. Ltd., ADR 28,800 984,384
--------------
4,231,907
--------------
TELEPHONE-INTEGRATED-3.14%
China Netcom Group Corp.,
ADR+^ 109,400 2,926,450
--------------
TOTAL CHINA (Cost $11,634,113) 13,069,290
--------------
EGYPT-5.56%
CELLULAR TELECOMMUNICATIONS-0.91%
Egyptian Company for Mobile
Services 25,800 844,586
--------------
TELECOMMUNICATIONS-4.65%
Orascom Telecom Holding
SAE+ 53,000 4,338,647
--------------
TOTAL EGYPT (Cost $4,327,277) 5,183,233
--------------
HUNGARY-1.58%
TELEPHONE-INTEGRATED-1.58%
Magyar Telekom
(Cost $1,320,280) 334,200 1,475,974
--------------
INDIA-0.94%
TELECOMMUNICATIONS-0.94%
Bharti Tele-Ventures Ltd.
(Cost $326,305)+ 185,600 881,932
--------------
See accompanying notes to financial statements.
6
NO. OF
DESCRIPTION SHARES/UNITS VALUE
----------------------------------------------------------------------------------------------------
INDONESIA-2.81%
TELECOMMUNICATIONS-2.81%
PT Indosat Tbk+ 2,406,500 $ 1,089,547
PT Telekomunikasi Indonesia 3,397,500 1,527,645
--------------
TOTAL INDONESIA (Cost $2,472,425) 2,617,192
--------------
ISRAEL-8.60%
TECHNOLOGY-1.01%
SVE Star Ventures Enterprises
GmbH & Co. No. IX KG+@# 1,500,000 941,505
--------------
TELECOMMUNICATIONS-1.37%
Lynx Photonic Networks* 375,394 781,378
Lynx Series E* 493,000 498,488
--------------
1,279,866
--------------
TELEPHONE-INTEGRATED-0.48%
Bezeq Israeli
Telecommunication
Corp. Ltd. 373,900 443,103
--------------
VENTURE CAPITAL-5.74%
BPW Israel Ventures LLC+@# 1,500,098 878,049
Concord Ventures II
Fund L.P.+@# 3,640,000 1,446,707
Formula Ventures L.P.+@ 1,499,989 216,448
Giza GE Venture
Fund III, L.P.+@# 2,255,000 1,213,912
K.T. Concord Venture
Fund L.P.+@ 2,000,000 892,260
Neurone Ventures II, L.P.+@# 483,684 220,947
Walden-Israel
Ventures III, L.P.+@# 664,813 487,201
--------------
5,355,524
--------------
TOTAL ISRAEL (Cost $11,560,847) 8,019,998
--------------
LATIN AMERICA-1.24%
VENTURE CAPITAL-1.24%
J.P. Morgan Latin America
Capital Partners
(Cayman), L.P.+@ 803,879 $ 669,326
J.P. Morgan Latin America
Capital Partners
(Delaware), L.P.+@# 1,277,217 487,412
--------------
TOTAL LATIN AMERICA (Cost $1,376,771) 1,156,738
--------------
MALAYSIA-3.56%
CELLULAR TELECOMMUNICATIONS-1.25%
Maxis Communications
Berhad 460,000 1,168,473
--------------
TELECOMMUNICATIONS-2.31%
Telekom Malaysia Berhad 847,000 2,152,361
--------------
TOTAL MALAYSIA (Cost $3,415,578) 3,320,834
--------------
MEXICO-14.08%
CELLULAR TELECOMMUNICATIONS-14.08%
America Movil S.A. de C.V.,
Series L, ADR^
(Cost $5,893,524) 264,400 13,127,460
--------------
POLAND-3.28%
TELECOMMUNICATIONS-3.28%
Telekomunikacja Polska S.A
(Cost $3,436,730) 550,100 3,055,163
--------------
RUSSIA-3.35%
CELLULAR TELECOMMUNICATIONS-2.28%
Mobile Telesystems, ADR 63,100 2,120,160
--------------
TELEVISION-1.07%
Independent Network Television
Holding Ltd, Series II+@ 1,000,000 1,000,000
--------------
TOTAL RUSSIA (Cost $2,602,372) 3,120,160
--------------
See accompanying notes to financial statements.
7
NO. OF
DESCRIPTION SHARES/UNITS VALUE
----------------------------------------------------------------------------------------------------
SOUTH AFRICA-6.77%
CELLULAR TELECOMMUNICATIONS-3.26%
MTN Group Ltd. 427,600 $ 3,042,843
--------------
TELEPHONE-INTEGRATED-3.51%
Telkom South Africa Ltd. 187,160 3,269,545
--------------
TOTAL SOUTH AFRICA (Cost $3,670,530) 6,312,388
--------------
SOUTH KOREA-6.87%
CELLULAR TELECOMMUNICATIONS-6.87%
KT Freetel Co., Ltd. 71,400 1,647,236
SK Telecom Co., Ltd. 4,400 728,606
SK Telecom Co., Ltd., ADR 206,900 4,026,274
--------------
TOTAL SOUTH KOREA (Cost $6,065,487) 6,402,116
--------------
TAIWAN-0.98%
TELECOMMUNICATIONS-0.98%
Chunghwa Telecom Co.,
Ltd., ADR (Cost $880,450) 45,000 912,150
--------------
THAILAND-0.63%
TELEPHONE-INTEGRATED-0.63%
True Corporation Public Co.
Ltd., Foreign Registered+ 3,323,100 589,501
True Corporation Public Co.
Ltd., Foreign Registered,
Warrants (expiring 04/03/08)+ 1,717,483 0
--------------
TOTAL THAILAND (Cost $735,079) 589,501
--------------
VENEZUELA-0.53%
TELEPHONE-INTEGRATED-0.53%
Compania Anonima Nacional
Telefonos de Venezuela, ADR
(Cost $465,032) 25,800 493,812
--------------
GLOBAL-7.13%
TELECOMMUNICATIONS-1.56%
International Wireless
Communications Holdings
Corp.+@ 15,092 $ 0
TeleSoft Partners L.P.+@ 1,250,000 0
TeleSoft Partners II QP, L.P.+@# 1,740,000 1,456,867
--------------
1,456,867
--------------
VENTURE CAPITAL-5.57%
Emerging Markets
Ventures I, L.P.+@# 7,181,061 5,190,614
--------------
TOTAL GLOBAL (Cost $7,404,666) 6,647,481
--------------
TOTAL EMERGING COUNTRIES
(Cost $78,804,762) 88,710,093
--------------
EQUITY SECURITIES OF TELECOMMUNICATION
COMPANIES IN DEVELOPED COUNTRIES-0.96%
UNITED STATES-0.96%
INTERNET SERVICES-0.96%
Technology Crossover
Ventures IV, L.P.+@#
(Cost $883,082) 1,643,600 898,482
--------------
EQUITY SECURITES OF COMPANIES PROVIDING OTHER
ESSENTIAL SERVICES IN THE DEVELOPMENT OF AN
EMERGING COUNTRY'S INFRASTRUCTURE-0.10%
ARGENTINA-0.00%
INVESTMENT & HOLDING COMPANY-0.00%
Exxel Capital Partners V, L.P.+@
(Cost $449,172) 1,897,761 0
--------------
ISRAEL-0.10%
INVESTMENT & HOLDING COMPANY-0.10%
The Renaissance Fund LDC+@
(Cost $484,061) 160 91,179
--------------
TOTAL OTHER ESSENTIAL SERVICES
(Cost $933,233) 91,179
--------------
TOTAL EQUITY OR EQUITY-LINKED
SECURITIES (Cost $80,621,077) 89,699,754
--------------
See accompanying notes to financial statements.
8
PRINCIPAL
DESCRIPTION AMOUNT (000'S) VALUE
----------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS-8.49%
BAHAMAS-3.71%
Citibank, N.A. overnight deposit,
2.11%, 05/02/05**
(Cost $3,457,000) $ 3,457 $ 3,457,000
--------------
UNITED STATES-4.78%
Bear, Stearns & Co. Inc.,
repurchase agreement,
(Agreement dated 04/29/05 to
be repurchased at $4,278,669),
3.00%, 05/02/05, collateralized
by U.S. Government and
Agencies*** 4,278 4,277,600
Bear, Stearns & Co. Inc.,
repurchase agreement,
(Agreement dated 04/29/05 to
be repurchased at $179,513),
1.50%, 05/02/05, collateralized
by Freddie Mac*** 179 179,491
--------------
TOTAL UNITED STATES
(Cost $4,457,091) 4,457,091
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $7,914,091) 7,914,091
--------------
TOTAL INVESTMENTS-104.70%
(Cost $88,535,168) (Notes A,D,F) 97,613,845
--------------
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS-(4.70)% (4,376,621)
--------------
NET ASSETS-100.00% $ 93,237,224
==============
----------
+ Non-income producing security.
@ Restricted security, not readily marketable; security is valued at fair
value as determined in good faith by, or under the direction of, the
Board of Directors under procedures established by the Board of
Directors. (See Notes A and G.)
^ Security or a portion thereof is out on loan.
# As of April 30, 2005, the aggregate amount of open commitments for the
Fund is $7,373,511. (See Note G.)
* Not readily marketable security; security is valued at fair value as
determined in good faith by, or under the direction of, the Board of
Directors under procedures established by the Board of Directors. (See
Note A.)
** Variable rate account. Rate resets on a daily basis; amounts are
available on the same business day.
*** Represents security purchased with cash collateral received for
securities on loan.
ADR American Depository Receipts.
PN Preferred Shares.
PNA Preferred Shares, Class A.
PNB Preferred Shares, Class B.
See accompanying notes to financial statements.
9
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - APRIL 30, 2005 (UNAUDITED)
ASSETS
Investments, at value, including collateral for securities on loan of $4,457,091 (1)
(Cost $88,535,168) (Notes A,D,F) $ 97,613,845
Cash (including $8,099 of foreign currencies with a cost of $6,030) 7,302
Dividends receivable 260,617
Prepaid expenses 17,959
--------------
Total Assets 97,899,723
--------------
LIABILITIES
Payables:
Upon return of securities loaned (Note A) 4,457,091
Investment advisory fee (Note B) 80,666
Directors' fees 15,152
Administration fees (Note B) 10,337
Other accrued fees 99,253
--------------
Total Liabilities 4,662,499
--------------
NET ASSETS (applicable to 8,650,121 shares of common stock outstanding) (Note C) $ 93,237,224
==============
NET ASSETS CONSIST OF
Capital stock, $0.001 par value; 8,650,121 shares issued and outstanding
(100,000,000 shares authorized) $ 8,650
Paid-in capital 166,210,392
Undistributed net investment income 52,337
Accumulated net realized loss on investments and foreign currency related transactions (82,115,526)
Net unrealized appreciation in value of investments and translation of other
assets and liabilities denominated in foreign currencies 9,081,371
--------------
Net assets applicable to shares outstanding $ 93,237,224
==============
NET ASSET VALUE PER SHARE ($93,237,224 DIVIDED BY 8,650,121) $ 10.78
==============
MARKET PRICE PER SHARE $ 9.39
==============
----------
(1) Includes securities out on loan to brokers with a market value of
$4,388,370.
See accompanying notes to financial statements.
10
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED APRIL 30, 2005 (UNAUDITED)
INVESTMENT INCOME
Income (Note A):
Dividends $ 1,063,451
Interest 19,642
Securities lending 16,304
Less: Foreign taxes withheld (115,064)
--------------
Total Investment Income 984,333
--------------
Expenses:
Investment advisory fees (Note B) 508,756
Legal fees 116,631
Printing (Note B) 75,527
Administration fees (Note B) 62,579
Custodian fees 55,689
Audit fees 32,773
Directors' fees 29,110
Accounting fees 15,444
NYSE listing fees 11,675
Transfer agent fees 10,581
Insurance 3,530
Miscellaneous 9,701
--------------
Total Expenses 931,996
--------------
Net Investment Income 52,337
--------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments 7,060,655
Foreign currency related transactions (95,706)
Net change in unrealized appreciation in value of investments and translation
of other assets and liabilities denominted in foreign currencies 138,634
--------------
Net realized and unrealized gain on investments and foreign currency related transactions 7,103,583
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 7,155,920
==============
See accompanying notes to financial statements.
11
STATEMENT OF CHANGES IN NET ASSETS
FOR THE
SIX MONTHS FOR THE
ENDED ELEVEN MONTHS
APRIL 30, 2005 ENDED
(UNAUDITED) OCTOBER 31, 2004
---------------- ----------------
INCREASE IN NET ASSETS
Operations:
Net investment income $ 52,337 $ 96,738
Net realized gain on investments and foreign currency
related transactions 6,964,949 7,725,125
Net change in unrealized appreciation in value of investments
and translation of other assets and liabilities denominated in
foreign currencies 138,634 7,465,722
---------------- ----------------
Net increase in net assets resulting from operations 7,155,920 15,287,585
---------------- ----------------
Capital share transactions (Note H):
Cost of 29,900 and 484,200 shares purchased under the share repurchase
program, respectively (269,750) (3,835,755)
---------------- ----------------
Total increase in net assets 6,886,170 11,451,830
---------------- ----------------
NET ASSETS
Beginning of period 86,351,054* 74,899,224
---------------- ----------------
End of period $ 93,237,224 $ 86,351,054
================ ================
----------
* Includes undistributed net investment income of $52,337.
See accompanying notes to financial statements.
12
STATEMENT OF CASH FLOWS - FOR THE SIX MONTHS ENDED APRIL 30, 2005 (UNAUDITED)
DECREASE IN CASH FROM
Operating Activities:
Investment income received $ 1,110,825
Operating expenses paid (1,016,148)
Purchases of long-term portfolio investments (38,026,409)
Proceeds from disposition of long-term portfolio investments 39,231,235
Net purchase of short-term portfolio investments (1,031,000)
Cost of shares repurchased (269,750)
----------------
Net decrease in cash from operating activities $ (1,247)
Cash at beginning of period 8,549
----------------
Cash at end of period $ 7,302
================
RECONCILIATION OF NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS TO NET DECREASE IN CASH
FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations $ 7,155,920
Adjustments:
Decrease in accrued expenses $ (72,992)
Decrease in receivables 128,766
Increase in prepaid expenses (13,434)
Net increase in cash from investment transactions 173,826
Cost of shares repurchased (269,750)
Net realized and unrealized gain on investments and foreign currency
related transactions (7,103,583)
----------------
Total adjustments (7,157,167)
----------------
NET DECREASE IN CASH FROM OPERATING ACTIVITIES $ (1,247)
================
See accompanying notes to financial statements.
13
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
FINANCIAL HIGHLIGHTS^
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
FOR THE FOR THE FOR THE FISCAL YEARS
SIX MONTHS ELEVEN MONTHS ENDED
ENDED ENDED NOVEMBER 30,
APRIL 30, 2005 OCTOBER 31, ----------------------------------------
(UNAUDITED) 2004 2003 2002 2001
-------------- ------------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 9.95 $ 8.17 $ 7.30 $ 8.42 $ 10.35
-------------- ------------- ---------- ---------- ----------
Net investment income/(loss) 0.01+ 0.01+ (0.10)+ (0.15)+++ (0.12)++
Net realized and unrealized gain/(loss)
on investments and foreign currency
related transactions 0.82 1.70 0.97 (1.03) (1.88)
-------------- ------------- ---------- ---------- ----------
Net increase/(decrease) in net assets
resulting from operations 0.83 1.71 0.87 (1.18) (2.00)
-------------- ------------- ---------- ---------- ----------
Dividends and distributions to shareholders:
Net investment income -- -- -- -- --
Net realized gain on investments and
foreign currency related transactions -- -- -- -- --
-------------- ------------- ---------- ---------- ----------
Total dividends and distributions
to shareholders -- -- -- -- --
-------------- ------------- ---------- ---------- ----------
Anti-dilutive impact due to capital shares
tendered or repurchased -- 0.07 -- 0.06 0.07
-------------- ------------- ---------- ---------- ----------
Net asset value, end of period $ 10.78 $ 9.95 $ 8.17 $ 7.30 $ 8.42
============== ============= ========== ========== ==========
Market value, end of period $ 9.39 $ 8.52 $ 6.85 $ 6.22 $ 6.88
============== ============= ========== ========== ==========
Total investment return (a) 10.21% 24.38% 10.13% (9.59)% (10.50)%
============== ============= ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 93,237 $ 86,351 $ 74,899 $ 66,937 $ 90,771
Ratio of expenses to average net assets (b) 1.99%(c) 1.81%(c) 1.77% 1.90% 1.76%
Ratio of expenses to average net assets,
excluding taxes 1.98%(c) 1.81%(c) 1.77% 1.77% 1.74%
Ratio of net investment income/(loss)
to average net assets 0.11%(c) 0.13%(c) (1.33)% (1.89)% (1.18)%
Portfolio turnover rate 41.17% 71.57% 120.31% 94.89% 82.16%
^ Per share amounts prior to November 3, 2000 have been restated to reflect a
conversion factor of 0.9994 for shares issued in connection with the merger
of The Emerging Markets Infrastructure Fund, Inc. and The Emerging Markets
Telecommunications Fund, Inc.
# 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.
++ Based on shares outstanding on November 21, 2001 (prior to the 2001 tender
offer) and November 30, 2001.
+++ Based on shares outstanding on November 6, 2002 (prior to the 2002 tender
offer) and November 30, 2002.
(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.
(b) Ratios shown are inclusive of Brazilian transaction and Chilean
repatriation taxes, if any.
(c) Annualized.
See accompanying notes to financial statements.
14
FOR THE
SIX MONTHS
ENDED FOR THE FISCAL YEARS ENDED MAY 31,
NOVEMBER 30, ------------------------------------------------------------------
2000 2000 1999 1998 1997 1996
------------ ---------- ---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 18.36 $ 12.13 $ 16.37 $ 21.54 $ 20.95 $ 19.21
------------ ---------- ---------- ---------- ---------- ----------
Net investment income/(loss) (0.14)+ (0.20)+ (0.04)+ (0.06) 0.10 0.27
Net realized and unrealized gain/(loss)
on investments and foreign currency
related transactions (4.78) 6.14 (2.41) (1.40) 2.86 1.91
------------ ---------- ---------- ---------- ---------- ----------
Net increase/(decrease) in net assets
resulting from operations (4.92) 5.94 (2.45) (1.46) 2.96 2.18
------------ ---------- ---------- ---------- ---------- ----------
Dividends and distributions to shareholders:
Net investment income -- -- -- (0.09) (0.27) (0.04)
Net realized gain on investments and
foreign currency related transactions (3.09) -- (1.96) (3.62) (2.10) (0.40)
------------ ---------- ---------- ---------- ---------- ----------
Total dividends and distributions
to shareholders (3.09) -- (1.96) (3.71) (2.37) (0.44)
------------ ---------- ---------- ---------- ---------- ----------
Anti-dilutive impact due to capital shares
tendered or repurchased -- 0.29 0.17 -- -- --
------------ ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 10.35 $ 18.36 $ 12.13 $ 16.37 $ 21.54 $ 20.95
============ ========== ========== ========== ========== ==========
Market value, end of period $ 7.688 $ 13.508 $ 9.819 $ 13.008 $ 17.385 $ 17.385
============ ========== ========== ========== ========== ==========
Total investment return (a) (28.46)% 37.58% (9.99)% (4.57)% 14.31% 0.21%
============ ========== ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 131,325 $ 130,300 $ 94,026 $ 138,023 $ 181,627 $ 176,628
Ratio of expenses to average net assets (b) 1.91%(c) 2.24% 2.09% 2.32% 1.90% 1.77%
Ratio of expenses to average net assets,
excluding taxes 1.91%(c) 2.04% 2.01% 1.82% 1.82% --
Ratio of net investment income/(loss)
to average net assets (1.50)%(c) (1.15)% (0.33)% (0.29)% 0.52% 1.40%
Portfolio turnover rate 51.72% 113.75% 179.66% 162.58% 42.14% 27.71%
15
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE A. SIGNIFICANT ACCOUNTING POLICIES
The Emerging Markets Telecommunications Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940, as amended, as a closed-end,
non-diversified management investment company. On August 9, 2004, the Fund's
Board of Directors approved a change in the Fund's fiscal year from a
twelve-month period ending November 30 to a twelve-month period ending October
31. The statements of changes in net assets and financial highlights for 2004
represent the eleven-month period beginning on December 1, 2003 and ended
October 31, 2004.
USE OF ESTIMATES: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
SECURITY VALUATION: The net asset value of the Fund is determined daily as of
the close of regular trading on the New York Stock Exchange, Inc. (the
"Exchange") on each day the Exchange is open for business. The Fund's equity
investments are valued at market value, which is generally determined using the
closing price on the exchange or market on which the security is primarily
traded at the time of valuation (the "Valuation Time"). If no sales are
reported, equity investments are generally valued at the most recent bid
quotation as of the Valuation Time or at the lowest ask quotation in the case of
a short sale of securities. Debt securities with a remaining maturity greater
than 60 days are valued in accordance with the price supplied by a pricing
service, which may use a matrix, formula or other objective method that takes
into consideration market indices, yield curves and other specific adjustments.
Debt obligations that will mature in 60 days or less are valued on the basis of
amortized cost, which approximates market value, unless it is determined that
this method would not represent fair value.
Securities and other assets for which market quotations are not readily
available, or whose values have been materially affected by events occurring
before the Fund's Valuation Time, but after the close of the securities' primary
market, are valued at fair value as determined in good faith by, or under the
direction of, the Board of Directors under procedures established by the Board
of Directors. The Fund may utilize a service provided by an independent third
party which has been approved by the Board of Directors to fair value certain
securities. At April 30, 2005, the Fund held 20.57% of its net assets in
securities valued at fair value as determined in good faith under procedures
established by the Board of Directors with an aggregate cost of $25,548,320 and
fair value of $19,178,283. The Fund's estimate of fair value assumes a willing
buyer and a willing seller neither acting under the compulsion to buy or sell.
Although these securities may be resold in privately negotiated transactions,
the prices realized on such sales could differ from the prices originally paid
by the Fund or the current carrying values, and the difference could be
material.
SHORT-TERM INVESTMENT: The Fund sweeps available cash into a short-term time
deposit available through Brown Brothers Harriman & Co., the Fund's custodian.
The short-term time deposit is a variable rate account classified as a
short-term investment.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on a trade date basis. The cost of investments sold is determined
by use of the specific identification method for both financial reporting and
U.S. income tax purposes. Interest income is accrued as earned; dividend income
is recorded on the ex-dividend date.
16
TAXES: No provision is made for U.S. income or excise taxes as it is the Fund's
intention to continue to qualify as a regulated investment company and to make
the requisite distributions to its shareholders sufficient to relieve it from
all or substantially all U.S. income and excise taxes.
Income received by the Fund from sources within emerging countries and other
foreign countries may be subject to withholding and other taxes imposed by such
countries.
Under certain circumstances the Fund may be subject to a maximum of 36% Israeli
capital gains tax on gains derived from the sale of certain Israeli investments.
For the six months ended April 30, 2005, the Fund did not incur such expense.
The Fund accrues foreign taxes on realized gains as a liability and reduction of
realized/unrealized gains in an amount equal to what the Fund owed when the
securities were sold. Taxes on foreign income are recorded when the related
income is recorded.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(I) market value of investment securities, assets and liabilities at the
valuation date rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The Fund does not isolate that portion of gains and losses on 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.
The Fund reports certain foreign currency related transactions and foreign taxes
withheld on security transactions as components of realized gains for financial
reporting purposes, whereas such foreign currency related transactions are
treated as ordinary income for U.S. income tax purposes.
Net unrealized 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.
Net realized foreign exchange gains or losses represent foreign exchange gains
and losses from 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 the Fund's books and the U.S. dollar
equivalent of the amounts actually received.
SECURITIES LENDING: The market value of securities out on loan to brokers at
April 30, 2005, was $4,388,370, for which the Fund has received cash as
collateral of $4,457,091. Such cash collateral was reinvested into an overnight
repurchase agreement with Bear, Stearns & Co. Inc. ("Bear Stearns"), which was
in turn collateralized by U.S. Government securities with a value of $4,592,436.
Security loans are required at all times to have collateral at least equal to
102% of the market value of the securities on loan; however, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings. During
17
the six months ended April 30, 2005, total earnings from the investment of cash
collateral received by the Fund in a securities lending arrangement with Bear
Stearns as the sole borrower was $17,835, of which $1,531 was rebated to Bear
Stearns.
DISTRIBUTIONS OF INCOME AND GAINS: The Fund distributes at least annually to
shareholders substantially all of its net investment income and net realized
short-term capital gains, if any. The Fund determines annually whether to
distribute any net realized long-term capital gains in excess of net realized
short-term capital losses, including capital loss carryovers, if any. An
additional distribution may be made to the extent necessary to avoid the payment
of a 4% U.S. federal excise tax. Dividends and distributions to shareholders are
recorded by the Fund on the ex-dividend date.
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.
income tax purposes due to U.S. generally accepted accounting principles/tax
differences in the character of income and expense recognition.
PARTNERSHIP ACCOUNTING POLICY: The Fund records its pro-rata share of the
income/(loss) and capital gains/(losses) allocated from the underlying
partnerships and adjusts the cost of the underlying partnerships accordingly.
These amounts are included in the Fund's Statement of Operations.
OTHER: Some countries require governmental approval for the repatriation of
investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if there is a deterioration in a country's balance of
payments or for other reasons, a country may impose temporary restrictions on
foreign capital remittances abroad. Amounts repatriated prior to the end of
specified periods may be subject to taxes as imposed by a foreign country.
The emerging countries' securities markets are substantially smaller, less
liquid and more volatile than the major securities markets in the United States.
A high proportion of the securities of many companies in emerging countries may
be held by a limited number of persons, which may limit the number of securities
available for investment by the Fund. The limited liquidity of emerging country
securities markets may also affect the Fund's ability to acquire or dispose of
securities at the price and time it wishes to do so.
The Fund is sector concentrated and therefore invests a high percentage of its
assets in the telecommunications sector. As a result, the financial, economic,
business and political developments in a particular sector of the market,
positive or negative, have a greater impact on the Fund's net asset value and
will cause its shares to fluctuate more than if the Fund did not concentrate its
investments in a particular sector. Under normal market conditions, it will
invest not less than 80% of its net assets in a group of related industries
within the telecommunications sector of the market.
The Fund, subject to local investment limitations, may invest up to 25% of its
assets (at the time of commitment) in illiquid equity securities, including
securities of private equity funds (whether in corporate or partnership form)
that invest primarily in the emerging markets. When investing through another
investment fund, the Fund will bear its proportionate share of the expenses
incurred by that fund, including management fees. Such securities are expected
to be illiquid, which may involve a high degree of business and financial risk
and may result in substantial losses. Because of the current absence of any
liquid trading market for these investments, the Fund may take longer to
liquidate these positions than would be the case for publicly traded securities.
Although these securities may be resold in privately negotiated transactions,
the prices realized on such sales could be substantially less than those
originally paid by the Fund or the current carrying values and
18
these differences could be material. Further, companies whose securities are not
publicly traded may not be subject to the disclosures and other investor
protection requirements applicable to companies whose securities are publicly
traded.
The Fund may enter into repurchase agreements ("repos") on U.S. Government
securities with primary government securities dealers recognized by the Federal
Reserve Bank of New York and member banks of the Federal Reserve System and on
securities issued by the governments of foreign countries, their
instrumentalities and with creditworthy parties in accordance with established
procedures. Repos are contracts under which the buyer of a security
simultaneously buys and commits to resell the security to the seller at an
agreed upon price and date. Repos are deposited with the Fund's custodian and,
pursuant to the terms of the repurchase agreement, the collateral must have an
aggregate market value greater than or equal to the repurchase price plus
accrued interest at all times. If the value of the underlying securities fall
below the value of the repurchase price plus accrued interest, the Fund will
require the seller to deposit additional collateral by the next business day. If
the request for additional collateral is not met, or the seller defaults on its
repurchase obligation, the Fund maintains the right to sell the underlying
securities at market value and may claim any resulting loss against the seller;
collectibility of such claims may be limited. At April 30, 2005, the Fund had no
such agreements, other than the cash collateral received that was reinvested in
a repo under the Fund's securities lending program.
NOTE B. AGREEMENTS
Credit Suisse Asset Management, LLC ("CSAM") serves as the Fund's investment
adviser with respect to all investments. CSAM receives as compensation for its
advisory services from the Fund, an annual fee, calculated weekly and paid
quarterly, equal to 1.25% of the first $100 million of the Fund's average weekly
market value or net assets (whichever is lower), 1.125% of the next $100 million
and 1.00% of amounts in excess of $200 million. For the six months ended April
30, 2005, CSAM earned $508,756 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 six months
ended April 30, 2005, CSAM was reimbursed $6,653 for administrative services
rendered to the Fund.
Credit Suisse Asset Management Limited (CSAM U.K.) ("CSAM Ltd. U.K.") and Credit
Suisse Asset Management Limited (CSAM Australia) ("CSAM Ltd. Australia"),
affiliates of CSAM, are sub-investment advisers to the Fund. CSAM Ltd. U.K. and
CSAM Ltd. Australia's sub-investment advisory fees are paid by CSAM out of
CSAM's net investment advisory fee and are not paid by the Fund.
Bear Stearns Funds Management Inc. ("BSFM") serves as the Fund's U.S.
administrator. The Fund pays BSFM a monthly fee that is calculated weekly based
on the Fund's average weekly net assets. For the six months ended April 30,
2005, BSFM earned $55,926 for administrative services.
BankBoston, N.A., Sao Paulo ("BBNA") serves as the Fund's administrator with
respect to Brazilian investments. BBNA is paid for its services out of the
custody fee payable to Brown Brothers Harriman & Co., the Fund's accounting
agent and custodian, a quarterly fee based on the average month end Brazilian
net assets of the Fund.
Merrill Corporation ("Merrill"), an affiliate of CSAM, has been engaged by the
Fund to provide certain financial printing services. For the six months ended
April 30, 2005, Merrill was paid $34,310 for its services to the Fund.
19
The Independent Directors receive fifty percent (50%) of their annual retainer
in the form of shares purchased by the Fund's transfer agent in the open market.
Directors as a group own less than 1% of the Fund's outstanding shares.
NOTE C. CAPITAL STOCK
The authorized capital stock of the Fund is 100,000,000 shares of common stock,
$0.001 par value. Of the 8,650,121 shares outstanding at April 30, 2005, CSAM
owned 14,333 shares.
NOTE D. INVESTMENT IN SECURITIES
For the six months ended April 30, 2005, purchases and sales of securities,
other than short-term investments, were $38,026,409 and $38,872,321,
respectively.
NOTE E. CREDIT FACILITY
The Fund, together with other funds/portfolios advised by CSAM (collectively,
the "Participating Funds"), participates in a $75 million committed, unsecured,
line of credit facility ("Credit Facility") with Deutsche Bank, A.G. as
administrative agent and syndication agent and State Street Bank and Trust
Company as operations agent for temporary or emergency purposes. Under the terms
of the Credit Facility, the Participating Funds pay an aggregate commitment fee
at a rate of 0.10% per annum on the average unused amount of the Credit
Facility, which is allocated among the Participating Funds in such manner as is
determined by the governing Boards of the Participating Funds. In addition, the
Participating Funds pay interest on borrowings at the Federal Funds rate plus
0.50%. During the six months ended April 30, 2005, the Fund had no borrowings
under the Credit Facility.
NOTE F. FEDERAL INCOME TAXES
Income and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments of foreign currency transactions, losses
deferred due to wash sales, and excise tax regulations.
At October 31, 2004, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $88,722,816 of which $13,111,409 expires in 2006. This
amount is subject to Internal Revenue Code limitations. Capital loss
carryforwards of $5,308,276, $47,300,891, $17,356,479 and $5,645,761 expire in
2007, 2009, 2010 and 2011, respectively. It is uncertain whether the Fund will
be able to realize the benefits before they expire. During the eleven month
period ended October 30, 2004, the Fund utilized capital loss carryforwards of
$7,860,895.
At April 30, 2005, the identified cost for federal income tax purposes, as well
as the gross unrealized appreciation from investments for those securities
having an excess of value over cost, gross unrealized depreciation from
investments for those securities having an excess of cost over value and the net
unrealized depreciation from investments were $88,845,239, $16,679,651,
$(7,911,045) and $8,768,606, respectively.
20
NOTE G. RESTRICTED SECURITIES
Certain of the Fund's investments are restricted as to resale and are valued at
fair value as determined in good faith by, or under the direction of, the Board
of Directors under procedures established by the Board of Directors in the
absence of readily ascertainable market values.
NUMBER FAIR
OF ACQUISITION VALUE AT
SECURITY UNITS/SHARES DATE(s) COST 04/30/05
-------- ------------------- ------------------- ------------------- -------------------
BPW Israel Ventures
LLC 1,482,848 10/05/00 - 07/01/04 $ 1,179,179 $ 867,952
17,250 01/03/05 17,250 10,097
------------------- ------------------- -------------------
1,500,098 1,196,429 878,049
------------------- ------------------- -------------------
Concord Ventures II
Fund L.P. 3,520,000 03/29/00 - 08/19/04 2,756,161 1,399,013
120,000 03/04/05 120,000 47,694
------------------- ------------------- -------------------
3,640,000 2,876,161 1,446,707
------------------- ------------------- -------------------
Emerging Markets
Ventures I, L.P. 7,145,806 01/22/98 - 07/06/04 5,003,631 5,165,131
35,255 01/10/05 35,255 25,483
------------------- ------------------- -------------------
7,181,061 5,038,886 5,190,614
------------------- ------------------- -------------------
Exxel Capital
Partners V, L.P. 1,897,761 05/11/98 - 12/03/98 449,172 0
------------------- ------------------- -------------------
Formula Ventures L.P. 1,499,989 08/06/99 - 06/14/04 624,402 216,448
------------------- ------------------- -------------------
Giza GE Venture
Fund III, L.P. 2,117,500 01/31/00 - 10/11/04 1,583,935 1,139,893
137,500 02/14/05 137,500 74,019
------------------- ------------------- -------------------
2,255,000 1,721,435 1,213,912
------------------- ------------------- -------------------
Independent Network
Television Holding
Ltd., Series II 1,000,000 07/06/98 1,000,000 1,000,000
------------------- ------------------- -------------------
International Wireless
Communications
Holdings Corp. 15,092 12/08/97 414,568 0
------------------- ------------------- -------------------
J.P. Morgan Latin
America Capital
Partners
(Cayman), L.P. 803,879 04/10/00 - 05/28/03 780,246 669,326
------------------- ------------------- -------------------
J.P. Morgan Latin
America Capital
Partners
(Delaware), L.P. 1,277,217 04/10/00 - 03/26/04 596,525 487,412
------------------- ------------------- -------------------
PERCENT
VALUE PER OF NET DISTRIBUTIONS OPEN
SECURITY UNIT/SHARE ASSETS RECEIVED COMMITMENTS
-------- ------------------- ------------------- ------------------- -------------------
BPW Israel Ventures
LLC $ 0.59 0.93
0.59 0.01
-------------- ------------------- -------------------
0.94 -- $ 799,902
-------------- ------------------- -------------------
Concord Ventures II
Fund L.P. 0.40 1.50
0.40 0.05
-------------- ------------------- -------------------
1.55 -- 360,000
-------------- ------------------- -------------------
Emerging Markets
Ventures I, L.P. 0.72 5.54
0.72 0.03
-------------- ------------------- -------------------
5.57 $ 1,169,680 918,940
-------------- ------------------- -------------------
Exxel Capital
Partners V, L.P. 0.00 0.00 205,185 --
-------------- ------------------- -------------------
Formula Ventures L.P. 0.14 0.23 347,414 --
-------------- ------------------- -------------------
Giza GE Venture
Fund III, L.P. 0.54 1.22
0.54 0.08
-------------- ------------------- -------------------
1.30 92,554 495,000
-------------- ------------------- -------------------
Independent Network
Television Holding
Ltd., Series II 1.00 1.07 -- --
-------------- ------------------- -------------------
International Wireless
Communications
Holdings Corp. 0.00 0.00 10,564 --
-------------- ------------------- -------------------
J.P. Morgan Latin
America Capital
Partners
(Cayman), L.P. 0.83 0.72 28 --
-------------- ------------------- -------------------
J.P. Morgan Latin
America Capital
Partners
(Delaware), L.P. 0.38 0.52 594,742 1,482,685
-------------- ------------------- -------------------
21
NUMBER FAIR
OF ACQUISITION VALUE AT
SECURITY UNITS/SHARES DATE(s) COST 04/30/05
-------- ------------------- ------------------- ------------------- -------------------
K.T. Concord Venture
Fund L.P. 2,000,000 12/08/97 - 09/29/00 $ 1,692,236 $ 892,260
------------------- ------------------- -------------------
Neurone Ventures II,
L.P. 438,684 11/24/00 - 09/24/04 272,580 200,391
45,000 03/24/05 45,000 20,556
------------------- ------------------- -------------------
483,684 317,580 220,947
------------------- ------------------- -------------------
SVE Star Ventures
Enterprises
GmbH & Co.
No. IX KG 1,250,000 12/21/00 - 08/09/04 1,005,006 784,588
250,000 250,000 156,917
------------------- ------------------- -------------------
1,500,000 1,255,006 941,505
------------------- ------------------- -------------------
Technology
Crossover
Ventures IV, L.P. 1,563,800 03/08/00 - 06/30/04 803,282 854,859
79,800 01/13/05 79,800 43,623
------------------- ------------------- -------------------
1,643,600 883,082 898,482
------------------- ------------------- -------------------
Telesoft Partners L.P. 1,250,000 07/22/97 - 06/07/01 692,962 0
------------------- ------------------- -------------------
Telesoft Partners II QP,
L.P 1,500,000 07/14/00 - 06/03/04 1,018,250 1,255,920
240,000 12/09/04 240,000 200,947
------------------- ------------------- -------------------
1,740,000 1,258,250 1,456,867
------------------- ------------------- -------------------
The Renaissance
Fund LDC 160 03/30/94 - 03/21/97 484,061 91,179
------------------- ------------------- -------------------
TVG Asian
Communications
Fund II, L.P. 3,008,374 06/07/00 - 12/31/03 2,275,911 1,699,151
178,730 12/23/04 162,014 100,948
------------------- ------------------- -------------------
3,187,104 2,437,925 1,800,099
------------------- ------------------- -------------------
Walden-Israel
Ventures III, L.P. 492,938 02/23/01 - 05/27/04 377,372 361,244
75,625 11/10/04 75,625 55,421
96,250 03/02/05 96,250 70,536
------------------- ------------------- -------------------
664,813 549,247 487,201
------------------- ------------------- -------------------
Total $ 24,268,173 $ 17,891,008
=================== ===================
PERCENT
VALUE PER OF NET DISTRIBUTIONS OPEN
SECURITY UNIT/SHARE ASSETS RECEIVED COMMITMENTS
-------- ------------------- ------------------- ------------------- -------------------
K.T. Concord Venture
Fund L.P. $ 0.45 0.96 $ 659,477 --
-------------- ------------------- -------------------
Neurone Ventures II,
L.P. 0.46 0.22
0.46 0.02
-------------- ------------------- -------------------
0.24 30,083 $ 277,500
-------------- ------------------- -------------------
SVE Star Ventures
Enterprises
GmbH & Co.
No. IX KG 0.63 0.84
0.63 0.17
-------------- ------------------- -------------------
1.01 -- 500,000
-------------- ------------------- -------------------
Technology
Crossover
Ventures IV, L.P. 0.55 0.92
0.55 0.05
-------------- ------------------- -------------------
0.97 718,360 356,400
-------------- ------------------- -------------------
Telesoft Partners L.P. 0.00 -- 7,203,101 --
-------------- ------------------- -------------------
Telesoft Partners II QP,
L.P 0.84 1.35
0.84 0.21
-------------- ------------------- -------------------
1.56 113,986 660,000
-------------- ------------------- -------------------
The Renaissance
Fund LDC 569.87 0.10 1,497,612 --
-------------- ------------------- -------------------
TVG Asian
Communications
Fund II, L.P. 0.56 1.82
0.56 0.11
-------------- ------------------- -------------------
1.93 837,379 812,896
-------------- ------------------- -------------------
Walden-Israel
Ventures III, L.P. 0.73 0.39
0.73 0.06
0.07
-------------- ------------------- -------------------
0.52 -- 710,188
-------------- ------------------- -------------------
Total 19.19 $ 13,480,165 $ 7,373,511
============== =================== ===================
The Fund may incur certain costs in connection with the disposition of the above
securities.
22
NOTE H. SHARE REPURCHASE PROGRAM/SELF-TENDER POLICY
SHARE REPURCHASE PROGRAM: The Board of Directors of the Fund, at a meeting held
on November 21, 2003, authorized management to make open market purchases from
time to time in an amount up to 10% of the Fund's outstanding shares whenever
the Fund's shares are trading at a discount to net asset value of 15% or more.
Open market purchases may also be made within the discretion of management if
the discount is less than 15%. The Board has instructed management to report
repurchase activity to it regularly, and to post the number of shares
repurchased on the Fund's website on a monthly basis. For the six months ended
April 30, 2005, the Fund repurchased 29,900 of its shares for a total cost of
$269,750 at a weighted discount of 14.35% from its net asset value. For the
eleven months ended October 30, 2004, the Fund repurchased 484,200 of its shares
for a total cost of $3,835,755 at a weighted discount of 14.39% from its net
asset value. The Board at the same time determined to suspend the Fund's annual
self-tender program that had been announced in June of 2000.
SELF-TENDER POLICY: In January 2005, the Fund adopted a policy to make annual
self-tenders for its shares of common stock. Each annual self-tender will be in
the amount equal to the net proceeds realized by the Fund during the year from
its illiquid private equity investments less any capital commitments that are
funded during that year, commencing with a self-tender in an amount equal to
such net proceeds as are realized by the Fund during 2005. A self-tender will be
made in any year only if the shares to be purchased under this formula would
equal 5% or more of the Fund's then outstanding shares; otherwise, the amounts
that would have been applied will be carried over in calculating the amount to
be applied in the next year. The price per share in the self-tenders will be
fixed at 95% of the net asset value of the Fund's shares at the conclusion of
the tender offer period, which is expected to occur near the end of each
calendar year.
23
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
After the failure to achieve a quorum of shareholders on the original meeting
date of February 4, 2005 and reconvened meetings held on February 25, 2005 and
March 1, 2005, the Board of Directors concluded that a quorum of shareholders
was not likely to be achieved at its 2005 Annual Meeting of Shareholders (the
"Meeting") and therefore the Meeting was not reconvened. At the rescheduled
Meeting held on March 1, 2005, holders of less than 36% of the Fund's shares
were represented in person or by proxy, while a quorum consists of a majority of
the Fund's outstanding shares of common stock.
As a consequence of the lack of a quorum, Martin M. Torino, a nominee for
election at the Meeting, pursuant to Maryland law, will remain as a Class I
director of the Fund until the 2006 annual meeting of shareholders and until his
successor is elected and qualifies. William W. Priest, Jr., the Fund's other
nominee for election at the Meeting, resigned from the Board. The Board also
voted to increase the size of the Board from five to six directors and, upon the
recommendation of its Nominating Committee, approved the election of Messrs.
Walter Eberstadt and Phillip Goldstein (who had nominated himself for election
as a director at the Meeting) to each serve as a director of the Fund until the
2006 annual meeting of shareholders and until his successor is elected and
qualifies. Mr. Eberstadt has been elected as a Class I director and Mr.
Goldstein has been elected as a Class II director. Mr. Eberstadt is a Limited
Managing Partner in Lazard Freres & Co. and has been associated with Lazard
Freres & Co. since 1969. Mr. Goldstein is the investment adviser to Opportunity
Partners L.P., an activist-orientated private investment fund, and other clients
since 1992. Mr. Goldstein has also been a director of Brantley Capital
Corporation since 2002 and of The Mexico Equity and Income Fund since 1999.
24
IMPORTANT PRIVACY CHOICES FOR CONSUMERS (UNAUDITED)
We are committed to maintaining the privacy of every current and prospective
customer. We recognize that you entrust important personal information to us,
and we wish to assure you that we take seriously our responsibilities in
protecting and safeguarding this information.
In connection with making available investment products and services to current
and potential customers, we may obtain nonpublic personal information about you.
This information may include your name, address, e-mail address, social security
number, account number, assets, income, financial situation, transaction history
and other personal information.
We may collect nonpublic information about you from the following sources:
- Information we receive on applications, forms, questionnaires, web sites,
agreements or in the course of establishing or maintaining a customer
relationship; and
- Information about your transactions with us, our affiliates, or others.
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except with your consent or as otherwise permitted
by law.
RESTRICT INFORMATION SHARING WITH AFFILIATES: In cases where we believe that
additional products and services may be of interest to you, we may share the
information described above with our affiliates unless you say "No."
/ / No, please do not share personal and financial information with your
affiliated companies. [If you check this box, you must send this notice
back to us with your name, address and account number to The Emerging
Markets Telecommunications Fund, Inc., c/o Credit Suisse Asset Management,
LLC, 466 Lexington Avenue, New York, New York 10017.]
We may also disclose this information to firms that perform services on our
behalf. These agents and service providers are required to treat the information
confidentially and use it only for the purpose for which it is provided.
We restrict access to nonpublic personal information about you to those
employees, agents or other parties who need to know that information to provide
products or services to you or in connection with your investments with or
through us. We maintain physical, electronic and procedural safeguards that
comply with federal standards to guard your nonpublic personal information.
NOTE: THIS NOTICE IS PROVIDED TO CLIENTS AND PROSPECTIVE CLIENTS OF CREDIT
SUISSE ASSET MANAGEMENT, LLC ("CSAM"), AND CREDIT SUISSE ASSET MANAGEMENT
SECURITIES, INC., AND SHAREHOLDERS AND PROSPECTIVE SHAREHOLDERS IN CSAM
SPONSORED AND ADVISED INVESTMENT COMPANIES, INCLUDING CREDIT SUISSE FUNDS, AND
OTHER CONSUMERS AND CUSTOMERS, AS APPLICABLE. THIS NOTICE IS NOT INTENDED TO BE
INCORPORATED IN ANY OFFERING MATERIALS BUT IS MERELY A STATEMENT OF OUR CURRENT
PRIVACY POLICY, AND MAY BE AMENDED FROM TIME TO TIME UPON NOTICE TO YOU. THIS
NOTICE IS DATED AS OF MAY 18, 2005.
25
DESCRIPTION OF INVESTLINK(SM) PROGRAM (UNAUDITED)
The InvestLink(SM) Program is sponsored and administered by EquiServe, L.P., not
by The Emerging Markets Telecommunications Fund, Inc. (the "Fund"). EquiServe,
L.P., will act as program administrator (the "Program Administrator") of the
InvestLink(SM) Program (the "Program"). The purpose of the Program is to provide
existing shareholders with a simple and convenient way to invest additional
funds and reinvest dividends in shares of the Fund's common stock ("Shares") at
prevailing prices, with reduced brokerage commissions and fees.
In order to participate in the Program, you must be a registered holder of at
least one Share of stock of the Fund. 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. All cash payments must be drawn on a U.S. bank
and payable in U.S. dollars. Checks must be made payable to EquiServe. If a
participant selects the dividend reinvestment option, automatic investment of
dividends generally will begin with the next dividend payable after the Program
Administrator receives his enrollment form. Once in the Program, a person will
remain a participant until he terminates his participation or sells all Shares
held in his Program account, or his account is terminated by the Program
Administrator. A participant may change his investment options at any time by
requesting a new enrollment form and returning it to the Program Administrator.
A participant will be assessed certain charges in connection with his
participation in the Program. All optional cash deposit investments will be
subject to a service charge. Sales processed through the Program will have a
service fee deducted from the net proceeds, after brokerage commissions. In
addition to the transaction charges outlined above, participants will be
assessed per share processing fees (which include brokerage commissions.)
Participants will not be charged any fee for reinvesting dividends.
The number of Shares to be purchased for a participant depends on the amount of
his dividends, cash payments or bank account or payroll deductions, less
applicable fees and commissions, and the purchase price of the Shares. The
investment date for cash payments is the 25th day of each month (or the next
trading day if the 25th is not a trading day). The investment date for dividend
reinvestment is the dividend payment date. The Program Administrator uses
dividends and funds of participants to purchase Shares of the Fund 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 the Program
Administrator is unable to purchase Shares within 30 days of the receipt of
funds, such funds will be returned to the participants.
The average price of all Shares purchased by the Program Administrator with all
funds received during the time period from two business days preceding any
investment date up to the second business day preceding the next investment date
shall be the price per share allocable to a participant in connection with the
Shares purchased for his account with his funds or dividends received by the
Program Administrator during such time period. The average price of all Shares
sold by the Program Administrator pursuant to sell orders received during such
time period shall be the price per share allocable to a participant in
connection with the Shares sold for his account pursuant to his sell orders
received by the Program Administrator during such time period. All sale requests
having an
26
anticipated market value of $100,000.00 or more are expected to be submitted in
written form. In addition, all sale requests received by the Program
Administrator within thirty (30) days of an address change are expected to be
submitted in written form.
EquiServe L.P., as Program Administrator, administers the Program for
participants, keeps records, sends statements of account to participants and
performs other duties relating to the Program. Each participant in the Program
will receive a statement of his account following each purchase of Shares. The
statements will also show the amount of dividends credited to such participant's
account (if applicable), as well as the fees paid by the participant. In
addition, each participant will receive copies of the Fund's annual and
semi-annual reports to shareholders, proxy statements and, if applicable,
dividend income information for tax reporting purposes.
If the Fund is paying dividends on the Shares, a participant will receive
dividends through the Program for all Shares held on the dividend record date on
the basis of full and fractional Shares held in his account, and for all other
Shares of the Fund registered in his name. The Program Administrator will send
checks to the participants for the amounts of their dividends that are not to be
automatically reinvested at no cost to the participants.
Shares of the Fund purchased under the Program will be registered in the name of
the accounts of the respective participants. Unless requested, the Fund will not
issue to participants certificates for Shares of the Fund purchased under the
Program. The Program Administrator will hold the Shares in book-entry form until
a Program participant chooses to withdraw his Shares or terminate his
participation in the Program. The number of Shares purchased for a participant's
account under the Program will be shown on his statement of account. This
feature protects against loss, theft or destruction of stock certificates.
A participant may withdraw all or a portion of the Shares from his Program
account by notifying the Program Administrator. After receipt of a participant's
request, the Program Administrator will issue to such participant certificates
for the whole Shares of the Fund so withdrawn or, if requested by the
participant, sell the Shares for him and send him the proceeds, less applicable
brokerage commissions, fees, and transfer taxes, if any. If a participant
withdraws all full and fractional Shares in his Program account, his
participation in the Program will be terminated by the Program Administrator. In
no case will certificates for fractional Shares be issued. The Program
Administrator will convert any fractional Shares held by a participant at the
time of his withdrawal to cash.
Participation in any rights offering, dividend distribution or stock split will
be based upon both the Shares of the Fund registered in participants' names and
the Shares (including fractional Shares) credited to participants' Program
accounts. Any stock dividend or Shares resulting from stock splits with respect
to Shares of the Fund, both full and fractional, which participants hold in
their Program accounts and with respect to all Shares registered in their names
will be automatically credited to their accounts.
All Shares of the Fund (including any fractional share) credited to his account
under the Program will be voted as the participant directs. The participants
will be sent the proxy materials for the annual meetings of shareholders. When a
participant returns an executed proxy, all of such Shares will be voted as
indicated. A participant may also elect to vote his Shares in person at the
Shareholders' meeting.
27
A participant will receive tax information annually for his personal records and
to help him prepare his U.S. federal income tax return. The automatic
reinvestment of dividends does not relieve him of any income tax which may be
payable on dividends. For further information as to tax consequences of
participation in the Program, participants should consult with their own tax
advisors.
The Program Administrator in administering the Program will not be liable for
any act done in good faith or for any good faith omission to act. However, the
Program Administrator will be liable for loss or damage due to error caused by
its negligence, bad faith or willful misconduct. Shares held in custody by the
Program Administrator are not subject to protection under the Securities
Investors Protection Act of 1970.
The participant should recognize that neither the Fund nor the Program
Administrator can provide any assurance of a profit or protection against loss
on any Shares purchased under the Program. A participant's investment in Shares
held in his Program account is no different than his investment in directly held
Shares in this regard. The participant bears the risk of loss and the benefits
of gain from market price changes with respect to all of his Shares. Neither the
Fund nor the Program Administrator can guarantee that Shares purchased under the
Program will, at any particular time, be worth more or less than their purchase
price. Each participant must make an independent investment decision based on
his own judgment and research.
While the Program Administrator hopes to continue the Program indefinitely, the
Program Administrator reserves the right to suspend or terminate the Program at
any time. It also reserves the right to make modifications to the Program.
Participants will be notified of any such suspension, termination or
modification in accordance with the terms and conditions of the Program. The
Program Administrator also reserves the right to terminate any participant's
participation in the Program at any time. Any question of interpretation arising
under the Program will be determined in good faith by the Program Administrator
and any such good faith determination will be final.
Any interested shareholder may participate in the Program. All other cash
payments or bank account deductions must be at least $100.00, up to a maximum of
$100,000.00 annually. An interested shareholder may join the Program by reading
the Program description, completing and signing the enrollment form and
returning it to the Program Administrator. The enrollment form and information
relating to the Program (including the terms and conditions) may be obtained by
calling the Program Administrator at one of the following telephone numbers:
(800) 730-6001 (U.S. and Canada) or (781) 575-3100 (outside U.S. and Canada).
All correspondence regarding the Program should be directed to: EquiServe Trust
Company N.A., InvestLink(SM) Program, P.O. Box 43010, Providence, RI 02940-3010.
InvestLink is a service mark of EquiServe, L.P.
28
ADVISORY AGREEMENT APPROVAL DISCLOSURE (UNAUDITED)
BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY
AGREEMENTS
Section 15(c) of the Investment Company Act of 1940 (the "1940 Act")
contemplates that the Board of Directors (the "Board") of The Emerging Markets
Telecommunications Fund, Inc. (the "Fund"), including a majority of the
Directors who have no direct or indirect interest in the investment advisory and
sub-advisory agreements and are not "interested persons" of the Fund, as defined
in the 1940 Act (the "Independent Directors"), will annually review and
re-approve the terms of the Fund's existing investment advisory and sub-advisory
agreements. In this regard, the Board reviewed and re-approved, during the most
recent six months covered by this report: (i) an investment advisory agreement
with Credit Suisse Asset Management, LLC ("CSAM") for the Fund, and (ii) a
sub-advisory agreement with Credit Suisse Asset Management (Australia) Limited
("CSAM A.U." or the "Sub-Adviser") for the Fund. The investment advisory
agreement with CSAM and the investment sub-advisory agreement with CSAM A.U. are
collectively referred to as the "Advisory Agreements."
More specifically, at a meeting held on December 2, 2004, the Board, including
the Independent Directors advised by their independent legal counsel, considered
the factors and reached the conclusions described below relating to the
selection of CSAM and the Sub-Adviser and the re-approval of the Advisory
Agreements.
NATURE, EXTENT AND QUALITY OF SERVICES
The Board received and considered various data and information regarding the
nature, extent and quality of services provided to the Fund by CSAM and the
Sub-Adviser under the Advisory Agreements. The most recent investment adviser
registration forms ("Forms ADV") for CSAM and the Sub-Adviser were provided to
the Board, as were responses of CSAM and the Sub-Adviser to requests submitted
by the Independent Directors' independent legal counsel on behalf of such
Directors. The Board reviewed and analyzed these materials, which included,
among other things, information about the background and experience of the
senior management and the expertise of, and amount of attention devoted to the
Fund by investment personnel of CSAM and the Sub-Adviser. In this regard, the
Board specifically reviewed the qualifications, backgrounds and responsibilities
of the chief investment officer who is primarily responsible for day-to-day
portfolio management services for the Fund.
In addition, the Board received and reviewed information on Securities and
Exchange Commission ("SEC") and other regulatory inquiries and examinations
relating to the Fund and CSAM. The Board considered the investment and legal
compliance programs of each of these entities, including their implementation of
enhanced compliance policies and procedures in response to SEC rule changes and
other regulatory initiatives. The Board also considered the Fund's Chief
Compliance Officer's report and recommendations.
The Board evaluated the ability of CSAM and the Sub-Adviser, based on their
respective resources, reputations and other attributes, to attract and retain
highly qualified investment professionals, including research, advisory, and
supervisory personnel. In this connection, the Board considered information
regarding CSAM's and the Sub-Adviser's compensation arrangements for its
personnel involved in the management of the Fund.
Based on the above factors, together with those referenced below, the Board
concluded that it was generally satisfied with the nature, extent and quality of
the investment advisory services provided to the Fund by CSAM and the
Sub-Adviser.
29
FUND PERFORMANCE AND EXPENSES
The Board considered the performance results of the Fund for each of the
previous seven years as well as for the most recent quarter-end and year-to-date
and since the inception of the Fund. It also considered these results in
comparison to the Fund's benchmark index, the MSCI Emerging Markets Index. The
Board noted that the Fund performed lower than its benchmark index for the year
ended 2003. The Board observed, however, that the Fund had outperformed its
benchmark index for the year-to-date period ended September 30, 2004.
The Board received and considered statistical information regarding the Fund's
total expense ratio and its various components, including management fees,
non-management fees, fee waivers/caps and/or expense reimbursements and actual
total expenses of the Fund (including and excluding investment-related expenses
and taxes). It also considered comparisons of these fees to the expense
information for the group of funds that was determined to be the most similar to
the Fund (the "Peer Group") and a broader universe of relevant funds (the
"Universe"). Lipper Inc. ("Lipper"), an independent provider of investment
company data, determined the Peer Group and Universe for the Fund and provided
the comparative data. The Board was provided with a description of the
methodology used by Lipper to select the closed-end mutual funds in the Fund's
Peer Group and Universe. The Board noted that the overall expense ratio of the
Fund was lower than the Peer Group's median overall ratio, both including and
excluding investment-related expenses and taxes.
Management also discussed the Lipper data and rankings, and other relevant
information, for the Fund. Based on the above-referenced considerations and
other factors, the Board concluded that the overall performance and expense
results supported the re-approval of the Advisory Agreements for the Fund.
INVESTMENT ADVISORY AND SUB-ADVISORY FEE RATES
The Board reviewed and considered the proposed contractual investment advisory
fee rate (the "Advisory Agreement Rate") payable by the Fund to CSAM for
investment advisory services. The Board also reviewed and considered the
proposed contractual investment sub-advisory fee rate (the "Sub-Advisory
Agreement Rate") payable by CSAM to the Sub-Adviser for investment sub-advisory
services. In addition, the Board reviewed and considered the proposed fee
waiver/cap arrangements applicable to the Advisory Agreement Rate and considered
the Advisory Agreement Rate after taking the waivers into account (the "Net
Advisory Rate"). The Board noted that CSAM had voluntary fee waivers in effect
to base its current investment advisory fee upon the lower of the average weekly
stock price or its average weekly net assets.
Additionally, the Board received and considered information comparing the Net
Advisory Rate (both on a stand-alone basis and on a combined basis with the
Fund's administration fee rate) with that of the other funds in its Peer Group.
The Board concluded that the Net Advisory Rate for the Fund was within a
reasonable range of the median rate of the Fund's Peer Group. The Board noted
that the Fund's administrator is not affiliated with CSAM and that the Fund's
administration agreement and corresponding fees were negotiated at arm's-length.
The Board also noted that the combined investment advisory/administration fee
rate for the Fund was lower than the median rate of its Peer Group. The Board
concluded that these factors supported the Advisory Agreement Rate and the Net
Advisory Rate.
The Board also reviewed the Sub-Advisory Agreement Rate charged by the
Sub-Adviser. The Board concluded that the Sub-Advisory Agreement Rate was fair
and equitable, based on its consideration of the factors described above.
30
PROFITABILITY
The Board received and considered a detailed estimated profitability analysis of
CSAM based on the Advisory Agreement Rate and the Net Advisory Rate, as well as
on other relationships between the Fund and CSAM and its affiliates, including
CSAM A.U. The Board concluded that, in light of the costs of providing
investment management and other services to the Fund, the profits and other
ancillary benefits that CSAM and its affiliates received with regard to
providing these services to the Fund were not unreasonable.
The Board received and considered a detailed estimated profitability analysis of
CSAM A.U. based on the Sub-Advisory Agreement Rate, as well as on other
relationships between the Fund and CSAM A.U. and its affiliates. The Board noted
the costs of providing portfolio management and other services to the Fund. The
Board also noted that the sub-advisory fees are paid to the Sub-Adviser by CSAM
and not directly by the Fund, and that the Board separately determined that the
Advisory Agreement Rate for the Fund was fair and equitable. Based on these
factors, the Board concluded that the profits and other ancillary benefits that
the Sub-Adviser and its affiliates received with regard to providing these
services to the Fund were not unreasonable.
ECONOMIES OF SCALE
The Board received and considered information regarding whether there have been
economies of scale with respect to the management of the Fund, whether the Fund
has appropriately benefited from any economies of scale, and whether there is
potential for realization of any further economies of scale. The Board concluded
that any actual or potential economies of scale are, or will be, shared fairly
with Fund shareholders, including most particularly through Advisory Agreement
Rate breakpoints.
INFORMATION ABOUT SERVICES TO OTHER CLIENTS
The Board also received and considered information about the nature, extent and
quality of services and fee rates offered by CSAM and CSAM A.U. to their other
clients, including other registered investment companies, separate accounts and
institutional investors and investment companies to which CSAM serves as an
unaffiliated sub-adviser. The Board concluded that the Advisory Agreement Rate
and Sub-Advisory Agreement Rate were within a reasonable range of the fee rates
offered to their other clients. Where CSAM's rates offered to its other clients
were appreciably lower, the Board considered that CSAM's voluntary fee waivers
would potentially decrease the Advisory Agreement Rate. The Board concluded,
based on information provided by CSAM, that the costs associated with managing
and operating a registered, closed-end, emerging market country fund, compared
with an open-end domestic equity or fixed income fund or a fund to which CSAM
serves as sub-adviser, provided a justification for the higher fee rates charged
to the Fund.
OTHER BENEFITS TO CSAM AND THE SUB-ADVISER
The Board received and considered information regarding potential "fall-out" or
ancillary benefits received by CSAM and its affiliates, including CSAM A.U., and
the Sub-Adviser as a result of their relationship with the Fund. Such benefits
could include, among others, benefits directly attributable to the relationship
of CSAM and the Sub-Adviser with the Fund (such as soft-dollar credits) and
benefits potentially derived from an increase in the business of CSAM
31
and the Sub-Advisers as a result of their relationship with the Fund (such as
the ability to market to shareholders other financial products offered by CSAM
and its affiliates or the Sub-Advisers and its affiliates).
The Board also considered the effectiveness of practices of CSAM and CSAM A.U.
in achieving the best execution of portfolio transactions, whether and to what
extent soft dollar credits are sought and how any such credits are utilized, any
benefits that may be realized by using an affiliated broker, the extent to which
efforts are made to recapture transaction costs, and the controls applicable to
brokerage allocation procedures. The Board also reviewed the policies of CSAM
A.U. regarding the allocation of portfolio investment opportunities among the
Fund and its other clients.
OTHER FACTORS AND BROADER REVIEW
As discussed above, the Board reviews detailed materials received from CSAM and
the Sub-Adviser annually as part of the re-approval process under Section 15(c)
of the 1940 Act. The Board also regularly reviews and assesses the quality of
the services that the Fund receives throughout the year. In this regard, the
Board reviews reports of CSAM and the Sub-Adviser at least in each of its
quarterly meetings, which include, among other things, a detailed portfolio
review and detailed fund performance reports, and confers with the chief
investment officer of the Fund at least quarterly with respect to the portfolio
management of the Fund.
The Board noted that Credit Suisse Asset Management Limited (United Kingdom) was
approved by the Board as a sub-adviser to the Fund in November 2003, and
therefore, pursuant to Section 15(a) of the 1940 Act and the terms of the
related investment sub-advisory agreement, the investment sub-advisory agreement
is not yet subject to an annual re-approval requirement.
After considering the above-described factors and based on its deliberations and
its evaluation of the information provided to it, the Board concluded that
re-approval of the Advisory Agreements for the Fund was in the best interest of
the Fund and its shareholders. Accordingly, the Board unanimously re-approved
the Advisory Agreements.
32
PROXY VOTING AND PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
Information regarding how The Emerging Markets Telecommunications Fund, Inc.
(the "Fund") voted proxies related to its portfolio securities during the
12-month period ended June 30, 2004 as well as the policies and procedures that
the Fund uses to determine how to vote proxies relating to its portfolio
securities are available:
- By calling 1-800-293-1232;
- On the Fund's website, www.csam.com/us
- On the website of the Securities and Exchange Commission,
http://www.sec.gov.
The Fund files a complete schedule of its portfolio holdings for the first and
third quarters of its fiscal year with the SEC on Form N-Q. The Fund's Forms N-Q
are available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the SEC's Public Reference Room may be obtained by calling
1-800-SEC-0330.
33
OTHER FUNDS MANAGED BY CREDIT SUISSE ASSET MANAGEMENT, LLC
Credit Suisse Capital Appreciation Fund
Credit Suisse Cash Reserve Fund
Credit Suisse Commodity Return Strategy Fund
Credit Suisse Emerging Markets Fund
Credit Suisse Fixed Income Fund
Credit Suisse Global Fixed Income Fund
Credit Suisse Global Small Cap Fund
Credit Suisse High Income Fund
Credit Suisse International Focus Fund
Credit Suisse Japan Equity Fund
Credit Suisse Large Cap Value Fund
Credit Suisse Mid-Cap Growth Fund
Credit Suisse New York Municipal Fund
Credit Suisse Select Equity Fund
Credit Suisse Short Duration Bond Fund
Credit Suisse Small Cap Growth Fund
Credit Suisse Small Cap Value Fund
Fund shares are not deposits or other obligations of Credit Suisse Asset
Management, LLC or any affiliate, are not FDIC-insured and are not guaranteed by
Credit Suisse Asset Management, LLC or any affiliate. Fund investments are
subject to investment risks, including loss of your investment. There are
special risk considerations associated with international, global,
emerging-market, small-company, private equity, high-yield debt,
single-industry, single-country and other special, aggressive or concentrated
investment strategies. Past performance cannot guarantee future results.
More complete information about a fund, including charges and expenses, is
provided in the Prospectus, which should be read carefully before investing. You
may obtain copies by calling Credit Suisse Funds at 800-927-2874. For up-to-date
performance, please look in the mutual fund section of your newspaper under
Credit Suisse.
Credit Suisse Asset Management Securities, Inc., Distributor.
34
SUMMARY OF GENERAL INFORMATION (UNAUDITED)
The Fund--The Emerging Markets Telecommunications Fund, Inc.--is a closed-end,
non-diversified management investment company whose shares trade on the New York
Stock Exchange, Inc. Its investment objective is long-term capital appreciation
through investments primarily in equity securities of telecommunications
companies in emerging countries. Credit Suisse Asset Management, LLC (New York),
the Fund's investment adviser, is part of Credit Suisse Asset Management
("CSAM"), the institutional and mutual-fund asset-management arm of Credit
Suisse First Boston. As of March 31, 2005, CSAM managed over $25 billion in the
U.S. and, together with its global affiliates, managed assets of over $335
billion in 16 countries.
SHAREHOLDER INFORMATION
The market price is published in: THE NEW YORK TIMES (daily) under the
designation "EmMktTel" and THE WALL STREET JOURNAL (daily), and BARRON'S (each
Monday) under the designation "EmergMktTele". The Fund's New York Stock
Exchange, Inc. trading symbol is ETF. Weekly comparative net asset value (NAV)
and market price information about The Emerging Markets Telecommunications Fund,
Inc.'s shares are published each Sunday in THE NEW YORK TIMES and each Monday in
THE WALL STREET JOURNAL and BARRON'S, as well as other newspapers, in a table
called "Closed-End Funds."
THE CSAM GROUP OF FUNDS
LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds listed below at 1-800-293-1232 or visit our website on the
Internet: http://www.csam.com/us.
CLOSED-END FUNDS
SINGLE COUNTRY
The Chile Fund, Inc. (CH)
The First Israel Fund, Inc. (ISL)
The Indonesia Fund, Inc. (IF)
MULTIPLE COUNTRY
The Latin America Equity Fund, Inc. (LAQ)
FIXED INCOME
Credit Suisse Asset Management Income Fund, Inc. (CIK)
Credit Suisse High Yield Bond Fund (DHY)
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that The Emerging Markets Telecommunications
Fund, Inc. may from time to time purchase shares of its capital stock in the
open market.
DIRECTORS AND CORPORATE OFFICERS
Enrique R. Arzac Lead Director
James J. Cattano Director
Walter Eberstadt Director
Phillip Goldstein Director
George W. Landau Director
Martin M. Torino Director
Michael E. Kenneally Chairman of the Fund,
Chief Executive Officer
and President
Neil Gregson Chief Investment Officer
Jonathan S. Ong Investment Officer
J. Kevin Gao Senior Vice President
Ajay Mehra Chief Legal Officer
Emidio Morizio Chief Compliance Officer
Michael A. Pignataro Chief Financial Officer and
Secretary
Robert M. Rizza Treasurer
INVESTMENT ADVISER
Credit Suisse Asset Management, LLC
466 Lexington Avenue
New York, NY 10017
INVESTMENT SUB-ADVISERS
Credit Suisse Asset Management (Australia) Limited
Level 32, Gateway Building
1 Macquarie Place
Sydney NSW 2000
Credit Suisse Asset Management Limited
Beaufort House
15 St. Botolph Street
London EC3A 7JJ, England
ADMINISTRATOR
Bear Stearns Funds Management Inc.
383 Madison Avenue
New York, NY 10179
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
SHAREHOLDER SERVICING AGENT
EquiServe Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
Two Commerce Square
Philadelphia, PA 19103
LEGAL COUNSEL
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. The financial information
included herein is taken from the records of the Fund without examination by
independent registered public accountants who do not express an opinion thereon.
It is not a prospectus, circular or representation intended for use in the
purchase or sale of shares of the Fund or of any securities mentioned in this
report.
[ETF LISTED NYSE(R) LOGO]
ETF-SAR-0405
ITEM 2. CODE OF ETHICS.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 6. SCHEDULE OF INVESTMENTS.
Included as part of the report to shareholders filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
(d) MAXIMUM
(c) TOTAL NUMBER NUMBER OF
(a) TOTAL OF SHARES SHARES THAT MAY
NUMBER OF (b) AVERAGE PURCHASED AS PART YET BE
SHARES PRICE PAID OF PUBLICLY PURCHASED UNDER
PERIOD PURCHASED PER SHARE ANNOUNCED PLANS THE PLAN
-----------------------------------------------------------------------------------------------
November 1st through November 30th 23,400 $ 8.95 23,400 408,822
December 1st through December 31st 6,500 $ 9.28 6,500 402,322
January 1st through January 31st 0 $ 0.00 0 402,322
February 1st through February 28th 0 $ 0.00 0 402,322
March 1st through March 31st 0 $ 0.00 0 402,322
April 1st through April 30th 0 $ 0.00 0 402,322
(a) The plan was announced December 4, 2003.
(b) 10% of the Fund's outstanding shares.
(c) There is no expiration date of the plan.
(d) Not applicable.
(e) Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors since the registrant
last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(g)
of Schedule 14A in its definitive proxy statement dated January 11, 2005.
ITEM 11. CONTROLS AND PROCEDURES.
(a) As of a date within 90 days from the filing date of this report, the
principal executive officer and principal financial officer concluded that the
registrant's disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940 (the "Act")) were effective based on
their evaluation of the disclosure controls and procedures required by Rule
30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934.
(b) There were no changes in registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the
registrant's second fiscal half-year that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) The certifications of the registrant as required by Rule 30a-2(a) under
the Act are exhibits to this report.
(a)(3) Not applicable.
(b) The certifications of the registrant as required by Rule 30a-2(b) under
the Act are an exhibit to this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
/s/Michael E. Kenneally
-----------------------
Name: Michael E. Kenneally
Title: Chief Executive Officer
Date: July 5, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/Michael E. Kenneally
-----------------------
Name: Michael E. Kenneally
Title: Chief Executive Officer
Date: July 5, 2005
/s/Michael A. Pignataro
-----------------------
Name: Michael A. Pignataro
Title: Chief Financial Officer
Date: July 5, 2005