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
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THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
466 Lexington Avenue, New York, New York 10017-3140
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(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, 2005 to April 30, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
THE EMERGING MARKETS
TELECOMMUNICATIONS
FUND, INC.
SEMI-ANNUAL REPORT
APRIL 30, 2006
(unaudited)
[AMERICAN STOCK EXCHANGE(R) LISTED ETF LOGO]
ETF-SAR-0406
CONTENTS
Letter to Shareholders 1
Portfolio Summary 4
Schedule of Investments 6
Statement of Assets and Liabilities 11
Statement of Operations 12
Statement of Changes in Net Assets 13
Statement of Cash Flows 14
Financial Highlights 16
Notes to Financial Statements 18
Results of Annual Meeting of Shareholders 26
Privacy Policy Notice 27
Description of InvestLink(SM) Program 28
Advisory Agreement Approval Disclosure 31
Proxy Voting and Portfolio Holdings Information 35
LETTER TO SHAREHOLDERS
MAY 31, 2006
DEAR SHAREHOLDER:
For the six month period ended April 30, 2006, The Emerging Markets
Telecommunications Fund, Inc. (the "Fund") had a return of 21.38%, based on net
asset value, vs. a same-period increase of 37.60% for the Morgan Stanley Capital
International Emerging Markets Index* (MSCI EM) and an increase of 24.32% for
the telecommunications services subsector of the MSCI EM. Based on market price,
the Fund had a gain of 25.76% for the period.
FUND NOW TRADING ON AMEX
Effective May 11, 2006, the Fund is listed on, and has commenced trading on, the
American Stock Exchange, LLC ("AMEX"). The Fund opted to make the move based on
listing costs: The Fund estimates that the Fund's annual listing fees will
decline substantially. The Fund continues to trade under the same ticker symbol
(ETF).
MARKET OVERVIEW: TELECOMS PARTICIPATE IN STRONG RALLY
The period through April 30, 2006, was a positive one for stock markets around
the world, aided by improving global economic growth and generally favorable
earnings reports. Emerging markets as a group had overall strong returns in
absolute terms and as compared with developed stock markets, helped in part by
high and rising commodity prices. Increased investor interest in the "BRIC"
concept--the economic potential of Brazil, Russia, India and China--boosted
performance, with all four markets up more than 40% in dollar terms for the
period. Of course, emerging equity markets were periodically volatile, with
investors quick to take profits, for example, on concerns over rising U.S.
interest rates.
Emerging market telecom stocks collectively had a strong gain in absolute terms,
but trailed the broad emerging markets universe as investors tended to favor
more commodity sensitive companies.
PERFORMANCE: GROWTH WIRELESS SHINES, BRAZILIAN FIXED LINE TRAILS
The Fund's public equity holdings outperformed the MSCI EM telecom services
index in the period on a gross basis, but the Fund as a whole underperformed due
to overall weakness in its private equity holdings (which accounted for about
13.9% of the Fund's net assets as of April 30, 2006). Our strategic overweight
exposure to growth wireless stocks contributed positively to performance, led by
America Movil S.A. de C.V. (16.1% of the Fund's net assets as of April 30,
2006). In addition, our underweight positions in slow growth fixed line stocks
also added significant relative value, as Index heavyweights SK Telecom Co., Ltd
(4.0% of the Fund's net assets as of April 30, 2006) and Chunghwa Telecom Co.,
Ltd., (not held in the Fund as of April 30, 2006) lagged the rally in the
markets. Stock selection in Brazil was the main negative factor over the period
among our public holdings, with our overweight in fixed line stocks detracting
from performance. Lastly, the Fund's increased exposure to the infrastructure
sector in the latter half of the period was positive for performance, with both
Inversiones Aguas Metropolitanas, and Urbi, Desarrollos Urbanos, S.A. de C.V.
(1.5% and 1.4% of the Fund's net assets, respectively, as of April 30, 2006)
adding value.
PORTFOLIO ACTIVITY: FOCUS ON WIRELESS GROWTH ALONG WITH SELECT FIXED LINE
We continued to strategically overweight growth wireless companies, a stance we
adopted in mid 2005. While we remain comfortable with the growth wireless theme,
for the first time in over a year we recently reduced our holding in Bharti
Airtel Ltd. ("Bharti") (1.8% of the Fund's net assets as of April 30, 2006), the
leading wireless stock in India. We still have a positive view on the company's
longer-term prospects, but market expectations seem to have discounted much of
the good news and the valuation had become richer. As we remain positive on the
Indian telecommunications market, we shifted some of the Bharti proceeds into
Hutchison Telecommunications International Ltd. (1.4% of the Fund's net assets
as of April 30, 2006).
1
Other late-period noteworthy portfolio adjustments included increasing our
exposure to Russian fixed line telecom stocks, on the possible emergence of
government privatization news going forward. We are maintaining the Fund's
increased exposure to infrastructure companies. We believe that a number of
emerging market counties have under-committed to infrastructure spending, which
could provide good investment opportunities as they seek to catch up.
LOOKING AHEAD: DEMOGRAPHICS AND DEMAND
In the wake of several years of strong emerging market performance through April
30, valuations for many telecom stocks are no longer cheap in our view. Thus, a
correction of some sort would not be unexpected, and we would view any such
correction as a buying opportunity in specific stocks. We are of the opinion
that the emerging market economies remain on track to generate good economic
growth over the long term despite recent fluctuations, which we believe might
incentivize a growing middle class eager to participate in the use of wireless
telecommunication services. We believe that the Fund could be in a position to
benefit from this potential long-term trend.
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 and even some increase 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 increased significantly from the previous six
months ($3.3 million as compared to $1.1 million); as a result of improvements
in the technology sector, in combination with the maturation of the underlying
portfolio companies, which are 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 almost $0.5
million of capital calls made by the fund investments during the period. We
believe that the current commitments are being done at better valuations and at
a later stage in companies' development. Therefore, we hope that the "post
technology bubble" will be successful over time.
Respectfully,
/s/ Neil Gregson /s/ Steven B. Plump
------------------------------------- ----------------------------------------
Neil Gregson Steven B. Plump
Chief Investment Officer** Chief Executive Officer and President***
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 ("Credit Suisse Ltd."), 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
Credit Suisse Ltd. 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. He is also the Chief Investment Officer
of The First Israel Fund, Inc.
*** Steven B. Plump is a Managing Director of Credit Suisse Asset Management,
LLC ("Credit Suisse") and CEO/President of the Fund. He joined Warburg Pincus
Asset Management ("WPAM") in 1995 and came to Credit Suisse in 1999 when it
acquired WPAM.
3
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
PORTFOLIO SUMMARY - AS OF APRIL 30, 2006 (UNAUDITED)
SECTOR ALLOCATION
[CHART]
APRIL 30, OCTOBER 31,
2006 2005
--------- -----------
AS A PERCENT OF NET ASSETS
Cable Television/Television 1.82% 1.10%
Cellular Telecommunications 49.85% 44.04%
Electric Generation 0.43% 1.13%
Internet Services 0.88% 1.00%
Technology 0.66% 0.84%
Telecommunications 18.99% 24.65%
Telephone-Integrated 13.01% 14.69%
Venture Capital 8.01% 10.88%
Water Utilities 1.46% 0.00%
Other 2.26% 0.15%
Cash & Other Assets 2.63% 1.52%
GEOGRAPHIC ASSET BREAKDOWN
[CHART]
APRIL 30, OCTOBER 31,
2006 2005
--------- -----------
AS A PERCENT OF NET ASSETS
Africa 8.10% 7.65%
Asia 39.01% 39.05%
Europe 1.28% 4.33%
Latin America 29.81% 25.90%
Middle East 12.75% 14.29%
North America 2.46% 1.00%
Global 3.96% 6.26%
Cash & Other Assets 2.63% 1.52%
4
SUMMARY OF SECURITIES BY COUNTRY/REGION
[CHART]
APRIL 30, OCTOBER 31,
2006 2005
--------- -----------
AS A PERCENT OF NET ASSETS
Asia 1.90% 2.20%
Brazil 7.67% 8.83%
China 12.48% 13.69%
Egypt 4.03% 7.11%
India 2.01% 2.58%
Indonesia 4.88% 3.01%
Israel 7.05% 7.18%
Mexico 20.19% 15.69%
Poland 1.28% 3.28%
Russia 10.63% 8.37%
South Africa 8.10% 7.65%
South Korea 3.98% 3.70%
Global 3.96% 6.26%
Other 9.21% 8.93%
TOP 10 HOLDINGS, BY ISSUER
COUNTRY/ PERCENT OF
HOLDING SECTOR REGION NET ASSETS
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1. America Movil S.A. de C.V. Cellular Telecommunications Mexico 16.1
2. China Mobile (Hong Kong) Ltd. Cellular Telecommunications China 11.3
3. MTN Group Ltd. Cellular Telecommunications South Africa 6.6
4. PT Telekomunikasi Indonesia Telecommunications Indonesia 4.3
5. SK Telecom Co., Ltd. Cellular Telecommunications South Korea 4.0
6. Emerging Markets Ventures I, L.P. Venture Capital Global 3.0
7. Orascom Telecom Holding SAE Telecommunications Egypt 2.9
8. Telefonos de Mexico S.A. de C.V. Telephone-Integrated Mexico 2.7
9. Brasil Telecom Participacoes S.A. Telephone-Integrated Brazil 2.5
10. Mobile Telesystems Cellular Telecommunications Russia 2.4
5
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
SCHEDULE OF INVESTMENTS - APRIL 30, 2006 (UNAUDITED)
NO. OF
DESCRIPTION SHARES/UNITS VALUE
--------------------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-97.37%
EQUITY OR EQUITY-LINKED SECURITIES OF
TELECOMMUNICATION COMPANIES IN EMERGING
COUNTRIES-91.99%
ASIA-1.90%
TELECOMMUNICATIONS-1.90%
TVG Asian Communications
Fund II, L.P.+@# (Cost $2,691,985) 3,661,411 $ 2,528,878
-----------
BRAZIL-7.67%
CABLE TELEVISION-1.07%
Net Servicos de Comunicacao SA., ADR+(Y) 127,200 783,552
Vivax S.A.+ 43,600 646,312
-----------
1,429,864
-----------
CELLULAR TELECOMMUNICATIONS-1.54%
Tim Participacoes S.A., ADR(Y) 19,900 765,155
Vivo Participacoes S.A., ADR(Y) 312,800 1,291,864
-----------
2,057,019
-----------
ELECTRIC GENERATION-0.43%
AES Tiete S.A., PN 20,143,000 565,882
-----------
TELEPHONE-INTEGRATED-4.63%
Brasil Telecom Participacoes S.A., ADR 81,400 3,325,190
Embratel Participacoes S.A., ADR(Y) 42,900 569,283
Tele Norte Leste Participacoes S.A., ADR 124,800 2,268,864
Telecomunicacoes de Sao Paulo S.A., ADR 200 4,900
-----------
6,168,237
-----------
TOTAL BRAZIL (Cost $8,390,749) 10,221,002
-----------
NO. OF
DESCRIPTION SHARES VALUE
--------------------------------------------------------------------------------
CHINA-12.48%
CELLULAR TELECOMMUNICATIONS-11.29%
China Mobile (Hong Kong) Ltd. 1,273,500 $ 7,367,548
China Mobile (Hong Kong) Ltd., ADR(Y) 265,800 7,670,988
-----------
15,038,536
-----------
TELECOMMUNICATIONS-1.19%
China Telecom Corp. Ltd. 4,543,000 1,588,481
-----------
TOTAL CHINA (Cost $11,868,158) 16,627,017
-----------
EGYPT-4.03%
CELLULAR TELECOMMUNICATIONS-0.75%
Vodafone Egypt Telecommunications Co. SAE 66,700 996,907
-----------
TELECOMMUNICATIONS-2.94%
Orascom Telecom Holding SAE+ 72,786 3,921,726
-----------
TELEPHONE-INTEGRATED-0.34%
Telecom Egypt+ 181,000 450,455
-----------
TOTAL EGYPT (Cost $4,447,275) 5,369,088
-----------
HONG KONG-1.37%
CELLULAR TELECOMMUNICATIONS-1.37%
Hutchison Telecommunications International Ltd.+
(Cost $1,625,404) 1,034,000 1,820,290
-----------
INDIA-2.01%
CELLULAR TELECOMMUNICATIONS-1.75%
Bharti Airtel Ltd.+ 258,874 2,334,805
-----------
TELECOMMUNICATIONS-0.26%
Videsh Sanchar Nigam Ltd. 36,727 339,806
-----------
TOTAL INDIA (Cost $1,666,750) 2,674,611
-----------
See accompanying notes to financial statements.
6
NO. OF
DESCRIPTION SHARES/UNITS VALUE
--------------------------------------------------------------------------------
INDONESIA-4.88%
TELECOMMUNICATIONS-4.88%
PT Indosat Tbk 1,265,500 $ 779,216
PT Telekomunikasi Indonesia 6,651,000 5,715,782
-----------
TOTAL INDONESIA (Cost $3,772,443) 6,494,998
-----------
ISRAEL-6.99%
TECHNOLOGY-0.66%
SVE Star Ventures Enterprises
GmbH & Co. No. IX KG+++# 1,500,000 875,010
-----------
TELECOMMUNICATIONS-0.63%
Lynx Photonic Networks* 375,394 344,048
Lynx Series E* 493,000 498,488
-----------
842,536
-----------
TELEPHONE-INTEGRATED-1.19%
Bezeq Israeli Telecommunication Corporation Ltd. 1,236,635 1,584,392
-----------
VENTURE CAPITAL-4.51%
BPW Israel Ventures LLC+@# 1,674,587 1,040,389
Concord Ventures II Fund L.P.+@# 3,840,000 1,283,363
Formula Ventures L.P.+@@ 1,500,000 108,900
Giza GE Venture Fund III, L.P.+@# 2,530,000 1,543,452
K.T. Concord Venture Fund L.P.+@ 2,000,000 888,062
Neurone Ventures II, L.P.+@# 573,684 250,418
Walden-Israel Ventures III, L.P.+@# 953,563 898,332
-----------
6,012,916
-----------
TOTAL ISRAEL (Cost $12,615,814) 9,314,854
-----------
LATIN AMERICA-0.49%
VENTURE CAPITAL-0.49%
J.P. Morgan Latin America Capital
Partners (Cayman), L.P.+++ 835,097 $ 346,340
J.P. Morgan Latin America Capital Partners
(Delaware), L.P.+@# 1,355,207 311,725
-----------
TOTAL LATIN AMERICA (Cost $1,076,408) 658,065
-----------
MEXICO-18.79%
CELLULAR TELECOMMUNICATIONS-16.14%
America Movil S.A. de C.V., Series L, ADR(Y) 582,500 21,500,075
-----------
TELEPHONE-INTEGRATED-2.65%
Telefonos de Mexico S.A. de C.V., Class L, ADR(Y) 160,300 3,524,997
-----------
TOTAL MEXICO (Cost $9,427,521) 25,025,072
-----------
MOROCCO-0.90%
TELECOMMUNICATIONS-0.90%
Maroc Telecom (Cost $863,786) 73,406 1,201,649
-----------
PHILIPPINES-1.59%
TELEPHONE-INTEGRATED-1.59%
Philippine Long Distance Telephone Co.
(Cost $1,572,792) 53,350 2,110,244
-----------
POLAND-1.28%
TELECOMMUNICATIONS-1.28%
Telekomunikacja Polska S.A. (Cost $1,554,000) 233,603 1,704,424
-----------
See accompanying notes to financial statements.
7
NO. OF
DESCRIPTION SHARES/UNITS VALUE
--------------------------------------------------------------------------------
RUSSIA-10.63%
CELLULAR TELECOMMUNICATIONS-4.12%
AO VimpelCom, ADR+ 50,700 $ 2,360,085
Mobile Telesystems, ADR 96,000 3,135,360
------------
5,495,445
------------
INTERNET CONTENT-INFORMATION/NEWS-0.80%
RBC Information Systems, ADR+ 35,100 1,063,530
------------
TELECOMMUNICATIONS-4.06%
AFK Sistema, GDR+(Y) 23,272 570,164
AFK Sistema, 144A, GDR+ 76,711 1,841,064
Comstar United Telesystems, 144A, GDR+ 246,636 1,849,770
Uralsvyazinform 13,533,617 561,645
VolgaTelecom, ADR 68,500 582,250
------------
5,404,893
------------
TELEPHONE-INTEGRATED-0.90%
Rostelecom, ADR(Y) 28,800 662,688
Sibirtelecom 6,100,200 533,768
------------
1,196,456
------------
TELEVISION-0.75%
Independent Network
Television Holding Ltd.,
Series II+++ 1,000,000 1,000,000
------------
TOTAL RUSSIA (Cost $12,758,097) 14,160,324
------------
SOUTH AFRICA-8.10%
CELLULAR TELECOMMUNICATIONS-6.56%
MTN Group Ltd. 881,927 8,738,614
------------
TELEPHONE-INTEGRATED-1.54%
Telkom South Africa Ltd. 86,920 2,049,864
------------
TOTAL SOUTH AFRICA (Cost $7,330,475) 10,788,478
------------
SOUTH KOREA-3.98%
CELLULAR TELECOMMUNICATIONS-3.98%
SK Telecom Co., Ltd. 18,490 $ 4,362,245
SK Telecom Co., Ltd., ADR 35,000 934,500
------------
TOTAL SOUTH KOREA (Cost $4,114,586) 5,296,745
------------
THAILAND-0.17%
TELEPHONE-INTEGRATED-0.17%
True Corporation Public Co. Ltd., Foreign
Registered+ 877,300 230,008
True Corporation Public Co. Ltd., Foreign
Registered, Warrants (expiring 04/03/08)+ 1,717,483 0
------------
TOTAL THAILAND (Cost $177,329) 230,008
------------
UNITED ARAB EMIRATES-0.77%
CELLULAR TELECOMMUNICATIONS-0.77%
Investcom LLC, GDR+ (Cost $970,301) 67,603 1,024,185
------------
GLOBAL-3.96%
TELECOMMUNICATIONS-0.95%
TeleSoft Partners L.P.+@ 1,250,000 0
TeleSoft Partners II QP, L.P.+@# 1,740,000 1,271,279
------------
1,271,279
------------
VENTURE CAPITAL-3.01%
Emerging Markets Ventures I, L.P.+@# 7,248,829 4,006,355
------------
TOTAL GLOBAL (Cost $5,623,690) 5,277,634
------------
TOTAL EMERGING COUNTRIES (Cost $92,547,563) 122,527,566
------------
See accompanying notes to financial statements.
8
NO. OF
DESCRIPTION SHARES/UNITS VALUE
--------------------------------------------------------------------------------
EQUITY SECURITIES OF TELECOMMUNICATION COMPANIES IN DEVELOPED COUNTRIES-2.46%
UNITED STATES-2.46%
CELLULAR TELECOMMUNICATIONS-1.58%
NII Holdings Inc., Class B+ 35,200 $ 2,108,480
------------
INTERNET SERVICES-0.88%
Technology Crossover Ventures IV, L.P.+@# 1,708,800 1,167,794
------------
TOTAL DEVELOPED COUNTRIES (Cost $2,404,648) 3,276,274
------------
EQUITY SECURITES OF COMPANIES PROVIDING OTHER
ESSENTIAL SERVICES IN THE DEVELOPMENT OF AN
EMERGING COUNTRY'S INFRASTRUCTURE-2.92%
ARGENTINA-0.00%
INVESTMENT & HOLDING COMPANY-0.00%
Exxel Capital Partners V, L.P.+@ (Cost $380,019) 1,897,761 0
------------
CHILE-1.46%
WATER UTILITIES-1.46%
Inversiones Aguas Metropolitanas S.A., 144A, ADR+
(Cost $1,512,800) 80,700 1,945,483
------------
ISRAEL-0.06%
INVESTMENT & HOLDING COMPANY-0.06%
The Renaissance Fund LDC+@ (Cost $483,692) 160 82,735
------------
NO. OF
DESCRIPTION SHARES VALUE
--------------------------------------------------------------------------------
MEXICO-1.40%
BUILDING-RESIDENTIAL/COMMERCIAL-1.40%
Urbi, Desarrollos Urbanos, S.A. de C.V.+
(Cost $1,699,977) 227,440 $ 1,862,682
------------
TOTAL OTHER ESSENTIAL SERVICES (Cost $4,076,488) 3,890,900
------------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES
(Cost $99,028,699) 129,694,740
------------
PRINCIPAL
AMOUNT (000'S)
--------------
SHORT-TERM INVESTMENTS-7.54%
GRAND CAYMAN-3.12%
Wachovia Bank, overnight deposit, 3.89% 05/01/06**
(Cost $4,153,000) $4,153 4,153,000
----------
UNITED STATES-4.42%
Bear, Stearns & Co. Inc., repurchase agreement
(Agreement dated 04/28/2006 to be repurchased
at $3,772,835), 2.44%***, 05/01/06,
collateralized by U.S. Treasury STRIPS**** 3,772 3,772,068
Bear, Stearns & Co. Inc., repurchase agreement
(Agreement dated 04/28/2006 to be repurchased
at $2,120,614), 4.88%*****, 05/01/06,
collaterized by U.S. Treasury STRIPS**** 2,120 2,119,753
----------
TOTAL UNITED STATES
(Cost $5,891,821) 5,891,821
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $10,044,821) 10,044,821
----------
See accompanying notes to financial statements.
9
DESCRIPTION VALUE
--------------------------------------------------------------------------------
TOTAL INVESTMENTS-104.91% (Cost $109,073,520) (Notes B,E,G) $139,739,561
------------
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS-(4.91)% (6,537,909)
------------
NET ASSETS-100.00% $133,201,652
============
+ 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 B and H)
(Y) Security or a portion thereof is out on loan.
# As of April 30, 2006, the aggregate amount of open commitments for the
Fund is $4,922,748. (See Note H)
* 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 B)
** Variable rate account. Rate resets on a daily basis; amounts are available
on the same business day.
*** Interest rate after any rebate earned by borrower of securities.
**** Represents security purchased with cash collateral received for securities
on loan.
***** Interest rate before any rebate earned by borrower of securities.
ADR American Depository Receipts.
GDR Global Depository Receipts.
PN Preferred Shares.
See accompanying notes to financial statements.
10
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - APRIL 30, 2006 (UNAUDITED)
ASSETS
Investments, at value, including collateral for securities on
loan of $5,891,821 (1)
(Cost $109,073,520) (Notes B, E, G) $139,739,561
Receivables:
Investments sold 1,775,684
Dividends receivable 180,675
Prepaid expenses 12,491
------------
Total Assets 141,708,411
------------
LIABILITIES
Due to custodian 8,457
Payables:
Upon return of securities loaned (Note B) 5,891,821
Investments purchased 2,338,496
Investment advisory fee (Note C) 106,055
Directors' fees 17,648
Administration fees (Note C) 9,824
Other accrued fees 134,458
------------
Total Liabilities 8,506,759
------------
NET ASSETS (applicable to 8,629,261 shares of common stock
outstanding) (Note D) $133,201,652
============
NET ASSETS CONSIST OF
Capital stock, $0.001 par value; 8,629,261 shares issued and
outstanding (100,000,000 shares authorized) $ 8,629
Paid-in capital 165,954,548
Undistributed net investment income 271,756
Accumulated net realized loss on investments and foreign
currency related transactions (63,696,653)
Net unrealized appreciation in value of investments and
translation of other assets and liabilities denominated in
foreign currencies 30,663,372
------------
Net assets applicable to shares outstanding $133,201,652
============
NET ASSET VALUE PER SHARE ($133,201,652 DIVIDED BY 8,629,261) $ 15.44
============
MARKET PRICE PER SHARE $ 13.72
============
----------
(1) Includes securities out on loan to brokers with a market value of
$5,818,342.
See accompanying notes to financial statements.
11
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED)
INVESTMENT INCOME
Income (Note B):
Dividends $ 1,290,977
Interest 45,791
Securities lending 17,651
Less: Foreign taxes withheld (106,249)
-----------
Total Investment Income 1,248,170
-----------
Expenses:
Investment advisory fees (Note C) 656,670
Custodian fees 74,419
Administration fees (Note C) 48,388
Legal fees 42,203
Printing (Note C) 42,028
Directors' fees 35,661
Audit and tax fees 29,883
Accounting fees 19,521
Stock exchange listing fees 11,740
Shareholder servicing fees 10,861
Insurance 905
Brazilian taxes (Note B) 3,666
Miscellaneous 8,438
-----------
Total Expenses 984,383
Less: Fee waivers (Note C) (7,969)
-----------
Net Expenses 976,414
-----------
Net Investment Income 271,756
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gain from:
Investments 10,027,162
Foreign currency related transactions 86,266
Net change in unrealized appreciation in value of investments and
translation of other assets and liabilities denominated in
foreign currencies 13,035,650
-----------
Net realized and unrealized gain on investments and foreign
currency related transactions 23,149,078
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $23,420,834
===========
See accompanying notes to financial statements.
12
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE FISCAL
MONTHS ENDED YEAR ENDED
APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005
-------------- --------------
INCREASE IN NET ASSETS
Operations:
Net investment income $ 271,756 $ 144,112
Net realized gain on investments and foreign currency related transactions 10,113,428 15,094,287
Net change in unrealized appreciation in value of investments and translation
of other assets and liabilities denominated in foreign currencies 13,035,650 8,684,985
------------ ------------
Net increase in net assets resulting from operations 23,420,834 23,923,384
------------ ------------
Capital share transactions (Note I):
Cost of 3,600 and 47,160 shares purchased under the share repurchase
program, respectively (41,868) (451,752)
------------ ------------
Total increase in net assets 23,378,966 23,471,632
------------ ------------
NET ASSETS
Beginning of period 109,822,686 86,351,054
------------ ------------
End of period $133,201,652* $109,822,686
============ ============
----------
* Includes undistributed net investment income of $271,756.
See accompanying notes to financial statements.
13
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
STATEMENT OF CASH FLOWS - FOR THE SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED)
DECREASE IN CASH FROM
Operating Activities:
Investment income received $ 1,202,838
Operating expenses paid (938,061)
Purchases of long-term portfolio investments (29,478,456)
Proceeds from disposition of long-term portfolio investments 32,586,131
Net purchase of short-term portfolio investments (3,347,000)
Cost of shares repurchased (41,868)
------------
Net decrease in cash from operating activities $ (16,416)
Cash at beginning of period 7,959
------------
Due to custodian at end of period $ (8,457)
============
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 $ 23,420,834
Adjustments:
Increase in accrued expenses $ 44,411
Increase in receivables (45,332)
Increase in prepaid expenses (6,058)
Net decrease in cash from investment transactions (239,325)
Cost of shares repurchased (41,868)
Net realized and unrealized gain on investments and foreign
currency related transactions (23,149,078)
------------
Total adjustments (23,437,250)
------------
NET DECREASE IN CASH FROM OPERATING ACTIVITIES $ (16,416)
============
See accompanying notes to financial statements.
14
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15
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
FINANCIAL HIGHLIGHTS SECTION
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
SIX MONTHS FOR THE FOR THE
ENDED FISCAL YEAR ELEVEN MONTHS FOR THE FISCAL YEARS
APRIL 30, ENDED ENDED ENDED NOVEMBER 30,
2006 OCTOBER 31, OCTOBER 31, -------------------------------
(UNAUDITED) 2005 2004@@ 2003 2002 2001
----------- ----------- ------------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 12.72 $ 9.95 $ 8.17 $ 7.30 $ 8.42 $ 10.35
-------- -------- ------- ------- ------- -------
Net investment income/(loss) 0.04+ 0.02+ 0.01+ (0.10)+ (0.15)+++ (0.12)++
Net realized and unrealized gain/(loss)
on investments and foreign currency
related transactions 2.68 2.74 1.70 0.97 (1.03) (1.88)
-------- -------- ------- ------- ------- -------
Net increase/(decrease) in net assets
resulting from operations 2.72 2.76 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 0.00* 0.01 0.07 -- 0.06 0.07
-------- -------- ------- ------- ------- -------
Net asset value, end of period $ 15.44 $ 12.72 $ 9.95 $ 8.17 $ 7.30 $ 8.42
-------- -------- ------- ------- ------- -------
Market value, end of period $ 13.72 $ 10.91 $ 8.52 $ 6.85 $ 6.22 $ 6.88
-------- -------- ------- ------- ------- -------
Total investment return (a) 25.76% 28.05% 24.38% 10.13% (9.59)% (10.50)%
-------- -------- ------- ------- ------- -------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $133,202 $109,823 $86,351 $74,899 $66,937 $90,771
Ratio of expenses to average net assets (b) 1.62%(c) 1.93% 1.81%(c) 1.77% 1.90% 1.76%
Ratio of expenses to average net assets,
excluding taxes 1.61%(c) 1.92% 1.81%(c) 1.77% 1.77% 1.74%
Ratio of net investment income/(loss) to
average net assets 0.22%(c) 0.15% 0.13%(c) (1.33)% (1.89)% (1.18)%
Portfolio turnover rate 25.20% 80.95% 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.
@@ On August 9, 2004, the Fund's Board of Directors approved a change in
the Fund's fiscal year-end from November 30 to October 31. The
financial highlights for 2004 represent the eleven-month period
beginning on December 1, 2003 and ending October 31, 2004.
+ 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.
* This represents less than $0.01 per share.
(a) Total investment return at market value is based on the changes in
market price of a share during the period and assumes reinvestment of
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.
16
FOR THE
SIX MONTHS
ENDED FOR THE FISCAL YEARS ENDED MAY 31,
NOVEMBER 30, -------------------------------------------
2000 2000 1999 1998 1997
------------ -------- ------- -------- --------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 18.36 $ 12.13 $ 16.37 $ 21.54 $ 20.95
----------- -------- ------- -------- --------
Net investment income/(loss) (0.14)+ (0.20)+ (0.04)+ (0.06) 0.10
Net realized and unrealized gain/(loss)
on investments and foreign currency
related transactions (4.78) 6.14 (2.41) (1.40) 2.86
----------- -------- ------- -------- --------
Net increase/(decrease) in net assets
resulting from operations (4.92) 5.94 (2.45) (1.46) 2.96
----------- -------- ------- -------- --------
Dividends and distributions to shareholders:
Net investment income -- -- -- (0.09) (0.27)
Net realized gain on investments and
foreign currency related transactions (3.09) -- (1.96) (3.62) (2.10)
----------- -------- ------- -------- --------
Total dividends and distributions
to shareholders (3.09) -- (1.96) (3.71) (2.37)
----------- -------- ------- -------- --------
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
----------- -------- ------- -------- --------
Market value, end of period $ 7.688 $ 13.508 $ 9.819 $ 13.008 $ 17.385
----------- -------- ------- -------- --------
Total investment return (a) (28.46)% 37.58% (9.99)% (4.57)% 14.31%
----------- -------- ------- -------- --------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 131,325 $130,300 $94,026 $138,023 $181,627
Ratio of expenses to average net assets (b) 1.91%(c) 2.24% 2.09% 2.32% 1.90%
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%
Portfolio turnover rate 51.72% 113.75% 179.66% 162.58% 42.14%
17
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE A. ORGANIZATION
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.
NOTE B. SIGNIFICANT ACCOUNTING POLICIES
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. Investments in mutual funds are
valued at the mutual fund's closing net asset value per share on the day of
valuation.
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. When fair-value pricing is employed, the prices of securities used
by a fund to calculate its net asset value may differ from quoted or published
prices for the same securities. At April 30, 2006, the Fund held 13.85% 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
$23,084,391 and fair value of $18,445,568. 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.
TAXES: No provision is made for U.S. income or excise taxes as it is the Fund's
intention to continue to qualify
18
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, 2006, the Fund did not incur such expense.
Brazil imposes a CONTRIBUCAO PROVISORIA SOBRE MOVIMENTACAOES FINANCIERAS
("CPMF") tax that applies to foreign exchange transactions related to dividends
carried out by financial institutions. The tax rate is 0.38%. For the six months
ended April 30, 2006, the Fund incurred $3,666 of such expense.
For Chilean securities 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 would owe if the securities were sold on valuation date. 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. federal 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, 2006, was $5,818,342, for which the Fund has received cash as
collateral of $5,891,821. 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. Treasury STRIPS with a value of $6,064,266.
Security loans are required at all times to have collateral at least equal to
100% of the market value of the securities on loan; however, in the event of
19
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings. During the six
months ended April 30, 2006, total earnings from the investment of cash
collateral received by the Fund in a securities lending arrangement with Bear,
Stearns Securities Corp. as the sole borrower was $159,026, of which $141,375
was rebated to Bear, Stearns Securities Corp. The Fund retained $17,651 from the
cash collateral investment.
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
20
market for these investments, the Fund may take longer to liquidate these
positions than would be the case for publicly traded securities. 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, 2006, 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 C. AGREEMENTS
Credit Suisse Asset Management, LLC ("Credit Suisse"), serves as the Fund's
investment adviser with respect to all investments. Credit Suisse 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. Credit
Suisse has agreed to waive a portion of the advisory fee. For the six months
ended April 30, 2006, Credit Suisse earned $656,670 for advisory services, of
which Credit Suisse waived $7,969. Credit Suisse 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, 2006, Credit Suisse was reimbursed $7,183 for administrative
services rendered to the Fund.
Credit Suisse Asset Management Limited ("Credit Suisse Ltd. U.K.") and Credit
Suisse Asset Management Limited ("Credit Suisse Ltd. Australia"), affiliates of
Credit Suisse, are sub-investment advisers to the Fund. Credit Suisse Ltd. U.K.
and Credit Suisse Ltd. Australia's sub-investment advisory fees are paid by
Credit Suisse out of Credit Suisse'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,
2006, BSFM earned $41,205 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
assets of the Fund.
Merrill Corporation ("Merrill"), an affiliate of Credit Suisse, has been engaged
by the Fund to provide certain financial printing services. For the six months
ended April 30, 2006, Merrill was paid $20,258 for its services to the Fund.
21
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 D. CAPITAL STOCK
The authorized capital stock of the Fund is 100,000,000 shares of common stock,
$0.001 par value. Of the 8,629,261 shares outstanding at April 30, 2006, Credit
Suisse owned 14,333 shares.
NOTE E. INVESTMENT IN SECURITIES
For the six months ended April 30, 2006 purchases and sales of securities, other
than short-term investments, were $31,816,951 and $29,997,919, respectively.
NOTE F. CREDIT FACILITY
The Fund, together with other funds/portfolios advised by Credit Suisse
(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, 2006, the Fund had
no borrowings under the Credit Facility.
NOTE G. 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 April 30, 2006, 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 appreciation from investments were $109,403,710, $36,353,989,
$(6,018,138) and $30,335,851, respectively.
22
NOTE H. 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
OF FAIR PERCENT
UNITS/ ACQUISITION VALUE AT VALUE PER OF NET DISTRIBUTIONS OPEN
SECURITY SHARES DATE(S) COST 04/30/06 UNIT/SHARE ASSETS RECEIVED COMMITMENTS
-------- --------- ------------------- ---------- ---------- ---------- ------- ------------- -----------
BPW Israel
Ventures LLC 1,577,293 10/05/00 - 09/21/05 $1,168,324 $ 979,942 $0.62 0.74
97,294 12/09/05 97,294 60,447 0.62 0.04
--------- ---------- ---------- ---- ---------- --------
1,674,587 1,265,618 1,040,389 0.78 $ -- $625,413
--------- ---------- ---------- ---- ---------- --------
Concord Ventures II
Fund L.P. 3,760,000 03/29/00 - 07/11/05 2,615,107 1,256,626 0.33 0.94
80,000 04/12/06 80,000 26,737 0.33 0.02
--------- ---------- ---------- ---- ---------- --------
3,840,000 2,695,107 1,283,363 0.96 151,554 160,000
--------- ---------- ---------- ---- ---------- --------
Emerging Markets
Ventures I, L.P. 7,215,129 01/22/98 - 06/30/05 4,114,585 3,987,729 0.55 3.00
33,700 01/10/06 33,700 18,626 0.55 0.01
--------- ---------- ---------- ---- ---------- --------
7,248,829 4,148,285 4,006,355 3.01 3,128,680 851,172
--------- ---------- ---------- ---- ---------- --------
Exxel Capital
Partners V, L.P. 1,897,761 05/11/98 - 12/03/98 380,019 0 0.00 0.00 205,185 --
--------- ---------- ---------- ---- ---------- --------
Formula Ventures L.P. 1,500,000 08/06/99 - 06/14/04 464,934 108,900 0.07 0.08 414,249 --
--------- ---------- ---------- ---- ---------- --------
Giza GE Venture
Fund III, L.P. 2,475,000 01/31/00 - 08/10/05 1,707,389 1,509,899 0.61 1.13
55,000 03/02/06 54,295 33,553 0.61 0.03
--------- ---------- ---------- ---- ---------- --------
2,530,000 1,761,684 1,543,452 1.16 259,917 220,000
--------- ---------- ---------- ---- ---------- --------
Independent Network
Television Holding
Ltd, Series II 1,000,000 07/06/98 1,000,000 1,000,000 1.00 0.75 -- --
--------- ---------- ---------- ---- ---------- --------
J.P. Morgan Latin America
Capital Partners
(Cayman), L.P. 835,097 04/10/00 - 08/02/05 492,859 346,340 0.41 0.26 708,606 --
--------- ---------- ---------- ---- ---------- --------
J.P. Morgan Latin America
Capital Partners
(Delaware), L.P. 1,339,000 04/10/00 - 08/02/05 571,558 307,997 0.23 0.23
3,998 12/27/05 0 920 0.23 0.00
12,209 03/09/06 11,991 2,808 0.23 0.00
--------- ---------- ---------- ---- ---------- --------
1,355,207 583,549 311,725 0.23 987,352 667,436
--------- ---------- ---------- ---- ---------- --------
K.T. Concord Venture
Fund L.P. 2,000,000 12/08/97 - 09/29/00 1,623,366 888,062 0.44 0.67 1,089,099 --
--------- ---------- ---------- ---- ---------- --------
Neurone Ventures II,
L.P. 536,184 11/24/00 - 08/15/05 291,621 234,049 0.44 0.18
37,500 04/17/06 37,500 16,369 0.44 0.01
--------- ---------- ---------- ---- ---------- --------
573,684 329,121 250,418 0.19 39,421 187,500
--------- ---------- ---------- ---- ---------- --------
23
NUMBER
OF FAIR PERCENT
UNITS/ ACQUISITION VALUE AT VALUE PER OF NET DISTRIBUTIONS OPEN
SECURITY SHARES DATE(S) COST 04/30/06 UNIT/SHARE ASSETS RECEIVED COMMITMENTS
-------- --------- ------------------- ----------- ----------- ---------- ------- ------------- -----------
SVE Star Ventures
Enterprises GmbH &
Co. No. IX KG 1,500,000 12/21/00 - 03/30/05 $ 1,215,247 $ 875,010 $ 0.58 0.66 $ -- $ 500,000
--------- ----------- ----------- ----- ----------- ----------
Technology Crossover
Ventures IV, L.P. 1,708,800 03/08/00 - 10/24/05 821,044 1,167,794 0.68 0.88 871,679 291,200
--------- ----------- ----------- ----- ----------- ----------
TeleSoft Partners L.P. 1,250,000 07/22/97 - 06/07/01 503,902 0 0.00 0.00 7,203,101 --
--------- ----------- ----------- ----- ----------- ----------
TeleSoft Partners II QP,
L.P. 1,740,000 07/14/00 - 12/09/04 971,503 1,271,279 0.73 0.96 467,815 660,000
--------- ----------- ----------- ----- ----------- ----------
The Renaissance
Fund LDC 160 03/30/94 - 03/21/97 483,692 82,735 517.09 0.06 1,497,612 --
--------- ----------- ----------- ----- ----------- ----------
TVG Asian
Communications
Fund II, L.P. 3,622,118 06/07/00 - 10/27/05 2,691,985 2,501,739 0.69 1.88
39,293 01/25/06 0 27,139 0.69 0.02
--------- ----------- ----------- ----- ----------- ----------
3,661,411 2,691,985 2,528,878 1.90 837,379 338,589
--------- ----------- ----------- ----- ----------- ----------
Walden-Israel
Ventures III, L.P. 774,813 02/23/01 - 06/09/05 614,767 729,936 0.94 0.55
89,375 11/22/05 88,660 84,198 0.94 0.06
89,375 03/29/06 89,375 84,198 0.94 0.06
--------- ----------- ----------- ----- ----------- ----------
953,563 792,802 898,332 0.67 24,949 421,438
--------- ----------- ----------- ----- ----------- ----------
Total $22,224,717 $17,603,032 13.22 $17,886,598 $4,922,748
=========== =========== ===== =========== ==========
The Fund may incur certain costs in connection with the disposition of the above
securities.
NOTE I. 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, 2006, the Fund repurchased 3,600 of its shares for a total cost of
$41,868 at a weighted discount of 14.45% from its net asset value. For the
fiscal year ended October 31, 2005, the Fund repurchased 47,160 of its shares
for a total cost of $451,752 at a weighted discount of 14.31% 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.
24
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.
Based upon distributions from private equity investments less capital
commitments during 2005, the Fund was not required to conduct a self-tender in
respect of that year. The self-tender policy may be modified or rescinded by the
Board of Directors based on economic or market conditions or other factors,
including such factors as a significant reduction in the percentage of the
Fund's net assets represented by private equity investments, a risk of material
adverse regulatory or tax consequences or a risk of the Fund's shares becoming
subject to a delisting by the American Stock Exchange.
NOTE J. OTHER MATTERS
On August 18, 2005, the Board of Directors authorized the Fund to reimburse Mr.
Phillip Goldstein, a Director of the Fund, for $13,738 of proxy solicitation
expenses incurred in a proxy contest with the Fund.
25
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On February 10, 2006, the Annual Meeting of Shareholders of The Emerging Markets
Telecommunications Fund, Inc. (the "Fund") was held and the following matter was
voted upon:
(1) To elect four directors to the Board of Directors of the Fund:
NAME OF DIRECTOR FOR WITHHELD
---------------- --------- --------
Walter Eberstadt (Class II) 7,572,324 173,547
Phillip Goldstein (Class I) 7,697,616 48,255
Steven N. Rappaport (Class II) 7,308,922 436,949
Martin M. Torino (Class I) 7,572,288 173,583
In addition to the directors elected at the meeting, Enrique R. Arzac and James
J. Cattano continue to serve as Directors of the Fund.
Effective December 6, 2005, Enrique R. Arzac was appointed as Chairman of the
Board. Michael E. Kenneally, who previously held this position, resigned
effective December 6, 2005.
Effective February 15, 2006, Lawrence Haber was appointed as a Director of the
Fund.
26
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.
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.
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 ("CREDIT SUISSE"), AND CREDIT SUISSE ASSET
MANAGEMENT SECURITIES, INC., AND SHAREHOLDERS AND PROSPECTIVE SHAREHOLDERS IN
CREDIT SUISSE 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, 2006.
27
DESCRIPTION OF INVESTLINK(SM) PROGRAM (UNAUDITED)
The InvestLink(SM) Program is sponsored and administered by Computershare Trust
Company N.A. ("Computershare"), not by The Emerging Markets Telecommunications
Fund, Inc. (the "Fund"). Computershare 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 Computershare. 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
28
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
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.
Computershare, 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.
29
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: Computershare
Trust Company, N.A., InvestLink(SM) Program, P.O. Box 43010, Providence, RI
02940-3010.
InvestLink is a service mark of Computershare Trust Company, N.A.
30
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 ("Credit Suisse") for the Fund, (ii) a
sub-advisory agreement with Credit Suisse Asset Management Limited ("Credit
Suisse Australia") for the Fund, and (iii) a sub-advisory agreement with Credit
Suisse Asset Management Limited ("Credit Suisse U.K.", and together with Credit
Suisse Australia, the "Sub-Advisers"). The investment advisory agreement with
Credit Suisse and the investment sub-advisory agreements with Sub-Advisers are
collectively referred to as the "Advisory Agreements."
More specifically, at a meeting held on November 16-17, 2005, 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 Credit Suisse and Credit Suisse Australia and the re-approval
of the Advisory Agreements. At a meeting held on February 15, 2006, 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 Credit Suisse U.K. and the re-approval of the sub-advisory
agreement.
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 Credit Suisse and
the Sub-Advisers under the Advisory Agreements. The most recent investment
adviser registration forms ("Forms ADV") for Credit Suisse and the Sub-Advisers
were provided to the Board, as were responses of Credit Suisse and the
Sub-Advisers 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 Credit Suisse and the
Sub-Advisers. 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, Credit Suisse and the Sub-Advisers. 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.
31
The Board evaluated the ability of Credit Suisse and the Sub-Advisers, 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 regard, the Board considered information
regarding Credit Suisse's and the Sub-Advisers' 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 Credit Suisse and the
Sub-Advisers.
FUND PERFORMANCE AND EXPENSES
The Board considered the performance results of the Fund over a number of years
and since the inception of the Fund, as well as for recent periods. It also
considered these results in comparison to the Fund's benchmark indices, the MSCI
Emerging Free Markets Index and the MSCI Emerging Markets Free
Telecommunications Services Index. The Board noted that the Fund has
underperformed the benchmarks in some periods, but has outperformed them in
other periods.
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 higher than the Peer Group's median overall ratio, both including and
excluding investment-related expenses and taxes.
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 Credit Suisse
for investment advisory services. The Board also reviewed and considered the
proposed contractual investment sub-advisory fee rates (the "Sub-Advisory
Agreement Rates") payable by Credit Suisse to the Sub-Advisers 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 Credit Suisse 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.
32
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 noted that the Net Advisory Rate for the Fund was not appreciably
higher than the median rate of the Fund's Peer Group. The Board noted that the
Fund's administrator is not affiliated with Credit Suisse and that the Fund's
administration agreement and corresponding fees were negotiated at arm's-length.
The Board also noted that the Fund's non-management expense rate 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 Rates charged by the
Sub-Advisers. The Board concluded that the Sub-Advisory Agreement Rates were
fair and equitable, based on its consideration of the factors described here.
PROFITABILITY
The Board received and considered an estimated profitability analysis of Credit
Suisse based on the Advisory Agreement Rate and the Net Advisory Rate, as well
as on other relationships between the Fund and Credit Suisse and its affiliates,
including Credit Suisse Australia and Credit Suisse U.K. 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 Credit
Suisse and its affiliates received with regard to providing these services to
the Fund were not unreasonable.
The Board received and considered an estimated profitability analysis of each of
the Sub-Advisers based on the Sub-Advisory Agreement Rates, as well as on other
relationships between the Fund, Credit Suisse Australia and its affiliates, and
Credit Suisse U.K. 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-Advisers by Credit Suisse 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-Advisers and their 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 received and considered information about the nature and extent of
services and fee rates offered by Credit Suisse to other clients, including
other registered investment companies, separate accounts and institutional
investors and investment companies to which Credit Suisse serves as an
unaffiliated sub-adviser. The Board also received and
33
considered information about the nature and extent of services, and general
information about the fees, offered by the Sub-Advisers to other clients. The
Board concluded that the Advisory Agreement Rate and Sub-Advisory Agreement
Rates were reasonable given the nature and extent of services provided and
comparison with fee rates offered to other clients. Where Credit Suisse's rates
offered to its other clients were appreciably lower, the Board considered that
Credit Suisse's voluntary fee waivers would potentially decrease the Advisory
Agreement Rate. The Board concluded, based on information provided by Credit
Suisse, that the costs associated with managing and operating a registered,
closed-end, emerging market fund, compared with other clients or other funds,
provided a justification for the higher fee rates charged to the Fund.
OTHER BENEFITS TO CREDIT SUISSE AND THE SUB-ADVISERS
The Board received and considered information regarding potential "fall-out" or
ancillary benefits received by Credit Suisse and its affiliates, including
Credit Suisse Australia and Credit Suisse U.K., and the Sub-Advisers as a result
of their relationship with the Fund. Such benefits could include, among others,
benefits directly attributable to the relationship of Credit Suisse and the
Sub-Advisers with the Fund (such as soft-dollar credits) and benefits
potentially derived from an increase in the business of Credit Suisse 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 Credit
Suisse and its affiliates or the Sub-Advisers and their affiliates).
The Board also considered the effectiveness of practices of Credit Suisse and
the Sub-Advisers 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. The Board also reviewed the policies of the Sub-Advisers
regarding the allocation of portfolio investment opportunities among the Fund
and their other clients.
OTHER FACTORS AND BROADER REVIEW
As discussed above, the Board reviews detailed materials received from Credit
Suisse and the Sub-Advisers annually as part of the re-approval process under
Section 15(c) of the 1940 Act. The Board also reviews and assesses the quality
of the services that the Fund receives throughout the year. In this regard, the
Board reviews reports of Credit Suisse and the Sub-Advisers 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 various times throughout the year.
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.
34
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, of each year, 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.credit-suisse.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
1-202-551-8090.
35
OTHER FUNDS MANAGED BY CREDIT SUISSE ASSET MANAGEMENT, LLC
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)
LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds listed above at 1-800-293-1232 or visit our website on the
Internet: http://www.credit-suisse.com/us.
OPEN-END FUNDS
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 Blend Fund
Credit Suisse Large Cap Value Fund
Credit Suisse Mid-Cap Growth Fund
Credit Suisse New York Municipal Fund
Credit Suisse Short Duration Bond Fund
Credit Suisse Small Cap Growth Fund
Credit Suisse Small Cap Value Fund
Credit Suisse Strategic Allocation 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.
36
SUMMARY OF GENERAL INFORMATION (UNAUDITED)
The Emerging Markets Telecommunications Fund, Inc.--is a closed-end,
non-diversified management investment company whose shares trade on the American
Stock Exchange, LLC ("AMEX"). The Fund's AMEX trading symbol is ETF. 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, the Fund's investment adviser,
is part of the Asset Management business of Credit Suisse, a leading global
financial services organization headquartered in Zurich, with offices focused on
asset management in 18 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". 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."
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 Chairman of the Board of Directors
James J. Cattano Director
Walter Eberstadt Director
Phillip Goldstein Director
Lawrence Haber Director
Steven N. Rappaport Director
Martin M. Torino Director
Steven B. Plump Chief Executive Officer and President
Neil Gregson Chief Investment Officer
Jonathan S. Ong Investment Officer
J. Kevin Gao Senior Vice President and Secretary
Ajay Mehra Chief Legal Officer
Emidio Morizio Chief Compliance Officer
Michael A. Pignataro Chief Financial Officer
Robert Rizza Treasurer
John Smith Assistant Treasurer
Brooke Brown Assistant Secretary
Karen Regan Assistant Secretary
INVESTMENT ADVISER
Credit Suisse Asset Management, LLC
466 Lexington Avenue
New York, NY 10017
INVESTMENT SUB-ADVISERS
Credit Suisse Asset Management 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
Computershare 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.
[AMERICAN STOCK EXCHANGE(R) LISTED ETF LOGO]
ETF-SAR-0406
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.
PERIOD (a) TOTAL (b) AVERAGE (c) TOTAL NUMBER OF (d) MAXIMUM NUMBER
NUMBER OF PRICE PAID PER SHARES PURCHASED AS OF SHARES THAT MAY
SHARES PURCHASED SHARE PART OF PUBLICLY YET BE PURCHASED
ANNOUNCED PLANS UNDER THE PLAN
----------------- ----------------- ------------------------ ---------------------
November 1st through November 30th 0 $0.00 0 385,062
December 1st through December 31st 3,600 $11.63 3,600 381,462
January 1st through January 31st 0 $0.00 0 381,462
February 1st through February 28th 0 $0.00 0 381,462
March 1st through March 31st 0 $0.00 0 381,462
April 1st through April 30th 0 $0.00 0 381,462
(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 19, 2006.
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 last 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/Steven B. Plump
------------------
Name: Steven B. Plump
Title: Chief Executive Officer
Date: July 5, 2006
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/Steven B. Plump
------------------
Name: Steven B. Plump
Title: Chief Executive Officer
Date: July 5, 2006
/s/Michael A. Pignataro
-----------------------
Name: Michael A. Pignataro
Title: Chief Financial Officer
Date: July 5, 2006