UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File No. 811-08076
---------------------------------------------
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
---------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
466 Lexington Avenue, New York, New York 10017-3140
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(Address of Principal Executive Offices) (Zip Code)
Hal Liebes, Esq.
The Emerging Markets Telecommunications Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
----------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code:(212) 875-3500
Date of fiscal year end: November 30, 2003
Date of reporting period: May 31, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
THE EMERGING MARKETS
TELECOMMUNICATIONS
FUND, INC.
SEMI-ANNUAL REPORT
MAY 31,2003
[ETF LISTED NYSE(R) LOGO]
3018-SA-03
CONTENTS
Letter to Shareholders 1
Portfolio Summary 5
Schedule of Investments 7
Statement of Assets and Liabilities 10
Statement of Operations 11
Statement of Changes in Net Assets 12
Statement of Cash Flows 13
Financial Highlights 14
Notes to Financial Statements 16
Results of Annual Meeting of Shareholders 24
Privacy Policy Notice 25
LETTER TO SHAREHOLDERS
July 2, 2003
DEAR SHAREHOLDER:
We are writing to report on the activities of The Emerging Markets
Telecommunications Fund, Inc. (the "Fund") for the six months ended May 31,
2003. The Fund's total return for the period, based on net asset value ("NAV"),
was down 4.11%, vs. an increase of 6.22% for the Morgan Stanley Capital
International Emerging Markets Free ("EMF") Index* and an increase of 7.99% for
the telecommunications services subsector of the EMF Index.
As of May 31, 2003, the Fund's NAV was $7.00 per share, compared with $7.30 per
share on November 30, 2002. Total net assets were $64,174,729.
PERFORMANCE: HINDERED BY PRIVATE PLACEMENTS
The Fund's underperformance of its benchmark is attributable largely to its
private holdings, some of which were negatively revalued (based on the
underlying issuers' book values) during the period. On the positive side,
factors that aided the Fund included its overweighting in Indonesia, which had a
solid rally in the period.
THE MARKET: UP AND AWAY?
Over the past six months, emerging market telecoms, along with global equities
generally, were subject to wide swings in investor sentiment related to the
health of the U.S. economy, the performance of the nation's equity marketplace
and the events leading up to and through the U.S.-led war with Iraq.
Setting the stage, in the first three months of this reporting period, emerging
telecoms were the worst performing category in the emerging markets universe.
Driving this underperformance, in part, were investor concerns about a possible
contagion effect from developed world telecoms, particularly wireless companies,
which experienced considerable volatility in the wake of proposed cuts in
wireless interconnection fees, a major source of revenues for these companies.
Beyond this, emerging telecoms suffered from many of the same issues that have
plagued most telecoms globally for the past several years: declining profits;
increasing competition; weak pricing power; overcapacity; the cannibalization of
voice communications from wireline to wireless/mobile; and the yet unrealized
potential of 3G data-traffic services, demand for which remains weak years after
developed telecoms paid enormous licensing fees to provide them.
In retrospect, however, these issues were subordinate to those emerging from the
United States, notably the performance of the U.S. economy and equity market,
and the war with Iraq.
We saw this with particular clarity during the second three months of this
reporting period, when emerging telecoms outperformed the market as a whole and
moved from the worst performing emerging markets category to one of the best.
During this period, emerging telecom fundamentals did not change appreciably
from the first quarter, when an anemic U.S. economy and a world divided by war
served to undermine global equities as a whole. The only real difference between
the first quarter and the second was the successful conclusion of the war with
Iraq, some middling
1
positive news about the U.S. economy and a sustained rally in U.S. equities.
This latter development aided equities worldwide, particularly telecoms, which,
with their more utility-like, defensive characteristics, were widely sought by
investors.
Overall, we believe that the emerging telecom category is in better shape than
many others in the emerging and developed equity markets. Most operators are
generating free cash flow and have cleaned up their balance sheets, or are
making progress in doing so.
Our focus has been and continues to be on those emerging telecoms that we feel
have clear strategies on the deployment of capital, and thus are likely to pay
increasing dividends, as opposed to those who do not, and thus are more likely
to underperform.
In this regard, we presently favor South Korean operators, which are among the
most advanced in the deployment of data transfer services. Additionally,
competition there is mostly friendly in nature, serving to expand, rather than
weaken, existing markets.
China is a different story, one in which two large wireless companies and one
national wireline operator are locked in a harsh struggle for dominance of the
wireless market. Here, we have elected to invest in a company in the wireline
sector, one which enjoys high market share and the support of China's
government.
Elsewhere in Asia, many operators are cash flow positive, and those we own
either currently pay high dividends, or could begin to pay higher dividends
soon.
In Latin America, we like Brazilian wireline operators over their wireless
counterparts. The new administration there has supported the idea of higher
tariffs for wireline companies, at the expense of wireless operators, which in
any event are suffering from corrosive competition and market fragmentation.
In Mexico, the opposite is true. There we favor wireless companies that stand to
benefit from strong growth, low penetration rates and an improving economy. In
the rest of Latin America, we are keeping a close watch on mergers and
acquisitions activity with an eye toward investing in stronger operators and
their targets in other Latin American nations.
In Russia, we are invested in the wireless sector, where penetration rates are
still very low. There, a few major operators could benefit from rising consumer
purchasing power and long pent-up demand.
As for the remainder of the emerging markets, the story is much more fragmented
and more company specific. Here, again, we are looking for good valuations and
clear capital allocation strategies that could lead to near-term increases in
dividend payouts.
OUTLOOK: VARIABLE, BUT MOSTLY POSITIVE
We believe that the road ahead will most likely resemble that of the recent
past, with the fortunes of emerging and developed telecoms alike tied to the
continuing recovery of the U.S. and global economies. In this regard, we look
for
2
the U.S. economy to grow during this year's second half and, hopefully, continue
that trend in 2004, given plentiful liquidity and favorable fiscal policies
there.
Thematically, we are closely monitoring re-regulation efforts in emerging
markets, possible changes in tariffs that could favor either wireline or
wireless operators, the effects of increasing competition and the allotment of
3G and 2.5G licenses in some markets.
If regulations are stiffer and interconnection fees paid by wireless operators
to wireline operators are much higher than anticipated, investors may choose to
exit the market, or sit on the sidelines, while these developments play out.
This would probably cause the emerging telecom category to decouple from and
underperform emerging markets, generally. The same might occur if the present
movement to mandate the portability of mobile telephone numbers in the developed
world spreads to the emerging markets. This would likely result in higher churn
rates and greater costs for wireless operators, along with increasingly negative
investor sentiment.
If, on the other hand, regulatory changes are milder, if the cost of networking
equipment continues to fall, and if 3G platforms in Western Europe, the U.S. and
Japan show signs of improvement, then emerging telecoms could decouple from and
outperform the remainder of the emerging markets universe.
Over the near term, however, emerging telecoms could benefit from liquidity
conscious investors looking for the higher dividend yields they provide over
bond market alternatives.
In this environment, we will stay overweight in Asian telecoms, in light of
their lower capital requirements, high dividends and greater operational
transparency. In Latin America, we will continue to look for growth
opportunities related to projected growth in wireless market share (Mexico) and
anticipated growth in mergers and acquisitions activity throughout the region.
Lastly, in Eastern Europe, Russia, the Middle East and Africa, we will focus on
what we believe are attractively valued stocks of companies that our analysis
suggests will likely increase future dividend payments to minority shareholders,
such as ourselves.
Respectfully,
/s/ Yaroslaw Aranowicz
Yaroslaw Aranowicz
Chief Investment Officer**
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.
3
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 Free Index is an
unmanaged index (with no defined investment objective) of emerging-market
equities that includes reinvestment of dividends, and is the exclusive property
of Morgan Stanley Capital International Inc. Investors cannot invest directly in
an index.
** Yaroslaw Aranowicz, who is a Vice President of Credit Suisse Asset
Management, LLC ("CSAM"), is primarily responsible for management of the Fund's
assets. Mr. Aranowicz joined CSAM in 1998 from Trans-National Research
Corporation, a proprietary securities research firm, where he was Director of
Research for Europe and the Middle East. Previously, he was an analyst for Latin
American equities and fixed income at John Hancock Financial Services in New
York. He completed a five-year integrated program in international business
relations from the Central School of Commerce in Warsaw, and holds an M.B.A. in
finance and international business from New York University's Stern School of
Business. Mr. Aranowicz is the Chief Investment Officer of the Fund, The Chile
Fund, Inc. and The First Israel Fund, Inc. He is also an Investment Officer of
The Brazilian Equity Fund, Inc. and The Latin America Equity Fund, Inc.
4
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
PORTFOLIO SUMMARY - AS OF MAY 31, 2003 (UNAUDITED)
[CHART]
SECTOR ALLOCATION
AS A PERCENT OF NET ASSETS
MAY 31, 2003 NOVEMBER 30, 2002
Cellular Telecommunications 30.57% 40.58%
Diversified Operations 1.91% 1.51%
Internet Services 1.73% 1.36%
Investment & Holding Companies 2.80% 5.49%
Telecommunications 19.06% 16.56%
Telephone-Integrated 23.17% 13.01%
Venture Capital 15.74% 16.51%
Other 2.60% 1.95%
Cash & Other Assets 2.42% 3.03%
[CHART]
GEOGRAPHIC ASSET BREAKDOWN
AS A PERCENT OF NET ASSETS
MAY 31, 2003 NOVEMBER 30, 2002
Africa 1.52% 0.00%
Asia 44.17% 49.40%
Caribbean 2.63% 4.53%
Latin America 27.96% 21.92%
Middle East 11.43% 11.79%
North America 1.69% 1.32%
Global 8.18% 8.01%
Cash & Other Assets 2.42% 3.03%
5
[CHART]
SUMMARY OF SECURITIES BY COUNTRY/REGION
AS A PERCENT OF NET ASSETS
MAY 31, 2003 NOVEMBER 30, 2002
Asia 2.47% 2.46%
Brazil 6.97% 0.00%
Chile 2.13% 2.26%
China 10.07% 0.00%
Hong Kong 0.00% 12.67%
Indonesia 3.33% 3.32%
Israel 11.43% 11.79%
Jamaica 2.63% 4.53%
Mexico 16.95% 17.40%
Russia 7.11% 6.75%
South Korea 18.76% 19.95%
Global 8.18% 8.01%
Other 7.55% 7.83%
TOP 10 HOLDINGS, BY ISSUER
PERCENT OF
HOLDING SECTOR COUNTRY/REGION NET ASSETS
----------------------------------------------------------------------------------------------------------------
1. America Movil, S.A. de C.V. Cellular Telecommunications Mexico 12.1
2. SK Telecom Co., Ltd. Cellular Telecommunications South Korea 10.4
3. China Telecom Corp. Ltd. Telecommunications China 10.1
4. KT Corp. Telephone-Integrated South Korea 7.4
5. Emerging Markets Ventures I L.P. Venture Capital Global 7.0
6. Tele Norte Leste Participacoes S.A. Telephone-Integrated Brazil 5.2
7. Telefonos de Mexico, S.A. de C.V. Telephone-Integrated Mexico 4.8
8. AO VimpelCom Cellular Telecommunications Russia 3.9
9. PT Telekomunikasi Indonesia Telecommunications Indonesia 3.3
10. Jamaican Assets I, L.P. Investment& Holding Companies Jamaica 2.6
See accompanying notes to financial statements.
6
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
SCHEDULE OF INVESTMENTS - MAY 31, 2003 (UNAUDITED)
NO. OF
DESCRIPTION SHARES/UNITS VALUE
-----------------------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-97.58%
EQUITY OR EQUITY-LINKED SECURITIES OF
TELECOMMUNICATION COMPANIES IN EMERGING
COUNTRIES-92.10%
ASIA-2.47%
INVESCO AsiaNET Fund plc+ 97,560 $ 368,289
Nirvana Capital Ltd.+#* 42,000 23,359
TVG Asian Communications
Fund II, L.P.+ ++# 1,831,361 1,194,789
------------
TOTAL ASIA (Cost $3,109,781) 1,586,437
------------
BRAZIL-6.97%
Brasil Telecom Participacoes
S.A., ADR 30,600 1,140,768
Tele Norte Leste Participacoes
S.A., ADR 278,600 3,334,842
------------
TOTAL BRAZIL (Cost $3,954,761) 4,475,610
------------
CHILE-2.13%
Compania de Telecomunicaciones
de Chile S.A., ADR
(Cost $1,277,118) 116,700 1,365,390
------------
CHINA-10.07%
China Telecom Corp. Ltd.
(Cost $5,719,199) 29,832,000 6,464,719
------------
INDIA-0.05%
The India Media, Internet and
Communications Fund Ltd.+*
(Cost $115,005) 87,623 29,792
------------
INDONESIA-3.33%
PT Telekomunikasi Indonesia
(Cost $1,557,737) 3,803,500 2,139,755
------------
ISRAEL-11.26%
BPW Israel Ventures LLC+ ++# 1,139,220 696,829
Concord Ventures II Fund L.P.+ ++# 3,120,000 1,489,685
Formula Ventures L.P.+ ++# 1,440,234 600,722
Giza GE Venture Fund III L.P.+ ++# 1,540,000 818,941
Global Wireless Holdings
Inc. C.V., PNB+* 48,122 0
K.T. Concord Venture Fund L.P.+ ++ 2,000,000 $ 1,272,226
Lynx Photonic Networks+* 375,394 781,378
Lynx Series E+* 493,000 498,488
Neurone Ventures II, L.P.+ ++# 300,000 165,887
Partner Communications
Co. Ltd.+ 72,091 317,233
SVE Star Ventures Enterprises
GmbH & Co. No. IX KG+ ++# 750,000 416,265
Walden-Israel Ventures III, L.P.+ ++# 288,750 171,168
------------
TOTAL ISRAEL (Cost $10,928,483) 7,228,822
------------
LATIN AMERICA-1.91%
J.P. Morgan Latin America Capital
Partners (Cayman), L.P.+ ++ 737,483 642,392
J.P. Morgan Latin America Capital
Partners (Delaware), L.P.+ ++# 1,244,560 585,901
------------
TOTAL LATIN AMERICA (Cost $1,654,570) 1,228,293
------------
MALAYSIA-1.50%
Maxis Communications Berhad
(Cost $935,984) 635,000 960,855
------------
MEXICO-16.95%
America Movil, S.A. de C.V.,
Series L, ADR 425,300 7,765,978
Telefonos de Mexico, S.A. de C.V.,
Class L, ADR 102,600 3,108,780
------------
TOTAL MEXICO (Cost $10,895,372) 10,874,758
------------
RUSSIA-7.11%
AO VimpelCom, ADR+ 56,000 2,520,000
Independent Network Television,
Series II+ ++ 1,000,000 500,000
Mobile Telesystems, ADR+ 13,800 742,440
Rostelecom, ADR 73,200 803,736
------------
TOTAL RUSSIA (Cost $3,360,501) 4,566,176
------------
SOUTH AFRICA-1.52%
Telkom South Africa Ltd.+ 80,160 329,733
Venfin Ltd.+ 305,400 642,967
------------
TOTAL SOUTH AFRICA (Cost $929,019) 972,700
------------
See accompanying notes to financial statements.
7
NO. OF
DESCRIPTION SHARES/UNITS VALUE
-----------------------------------------------------------------------------------
SOUTH KOREA-17.77%
KT Corp. 123,020 $ 4,731,538
SK Telecom Co., Ltd., ADR 371,600 6,670,220
------------
TOTAL SOUTH KOREA (Cost $11,221,117) 11,401,758
------------
TAIWAN-0.79%
MediaTek Inc.
(Cost $465,767) 57,000 506,667
------------
THAILAND-0.09%
TelecomAsia Corp. Public Co.
Ltd., Foreign Registered,
Warrants (expiring 04/03/08)
(Cost $0) 1,717,483 56,509
------------
GLOBAL-8.18%
Emerging Markets Ventures
I L.P.+ ++# 7,038,940 4,468,671
International Wireless
Communications Holdings
Corp.+ ++ 15,092 0
TeleSoft Partners L.P.+ ++ 1,250,000 292,000
TeleSoft Partners II QP, L.P.+ ++# 1,140,000 489,413
------------
TOTAL GLOBAL (Cost $8,795,137) 5,250,084
------------
TOTAL EMERGING COUNTRIES
(Cost $64,919,551) 59,108,325
------------
EQUITY SECURITIES OF TELECOMMUNICATION
COMPANIES IN DEVELOPED COUNTRIES-1.69%
FRANCE-0.00%
Alcatel S.A., ADR+
(Cost $2,822) 199 1,839
------------
UNITED STATES-1.69%
Global TeleSystems, Inc.+ 91,876 0
Technology Crossover
Ventures IV, L.P.+ ++# 1,272,200 1,081,764
------------
TOTAL UNITED STATES (Cost $3,122,483) 1,081,764
------------
TOTAL DEVELOPED COUNTRIES
(Cost $3,125,305) 1,083,603
------------
EQUITY SECURITES OF COMPANIES PROVIDING OTHER
ESSENTIAL SERVICES IN THE DEVELOPMENT OF AN
EMERGING COUNTRY'S INFRASTRUCTURE-3.79%
ARGENTINA-0.00%
Exxel Capital Partners V, L.P.+ ++
(Cost $2,075,284) 1,897,761 $ 0
------------
CANADA-0.00%
Officeland Inc., PNA+*(a) 168,067 0
Officeland Inc., PNC+*(b) 133,654 0
------------
TOTAL CANADA (Cost $638,256) 0
------------
ISRAEL-0.17%
The Renaissance Fund LDC+ ++
(Cost $521,435) 160 106,195
------------
JAMAICA-2.63%
Jamaican Assets I, L.P.+ ++
(Cost $730,859) 600,442 1,688,942
------------
SOUTH KOREA-0.99%
Cheil Communications Inc.
(Cost $648,315) 6,210 636,923
------------
TOTAL OTHER ESSENTIAL SERVICES
(Cost $4,614,149) 2,432,060
------------
TOTAL EQUITY OR EQUITY-LINKED
SECURITIES (Cost $72,659,005) 62,623,988
------------
SHORT-TERM INVESTMENTS-11.82%
GRAND CAYMAN-0.60%
PRINCIPAL
AMOUNT
(000'S)
----------
Brown Brothers Harriman& Co.,
overnight deposit, 0.52%,
06/02/03** (Cost $383,000) $ 383 383,000
------------
See accompanying notes to financial statements.
8
PRINCIPAL
AMOUNT
DESCRIPTION (000'S) VALUE
-----------------------------------------------------------------------------------
UNITED STATES-11.22%
Bear, Stearns & Co. Inc.,
repurchase agreement,
(Agreement dated 05/30/03 to
be repurchased at $4,447,262),
0.6875%, 06/02/03*** $ 4,447 $ 4,447,007
------------
Bear, Stearns & Co. Inc.,
repurchase agreement,
(Agreement dated 05/30/03 to
be repurchased at $2,753,664),
1.50%, 06/02/03*** 2,753 2,753,300
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $7,200,307) 7,200,307
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $7,583,307) 7,583,307
------------
TOTAL INVESTMENTS-109.40%
(Cost $80,242,312) (Notes A,D, F) 70,207,295
------------
LIABILITIES IN EXCESS OF
CASH AND OTHER ASSETS-(9.40)% (6,032,566)
------------
NET ASSETS-100.00% $ 64,174,729
============
----------
+ Security is non-income producing.
++ Restricted security, not readily marketable; security is valued at fair
value as determined in good faith by the Board of Directors. (See Notes A
and G.)
# As of May 31, 2003, the Fund has committed to investing additional capital
as follows: Nirvana Capital Ltd. ($180,000), TVG Asian Communications Fund
II, L.P. ($2,168,639), BPW Israel Ventures LLC ($1,160,780), Concord
Ventures II Fund L.P. ($880,000), Formula Ventures L.P. ($59,766), Giza GE
Venture Fund III L.P. ($1,210,000), Neurone Ventures II, L.P. ($450,000),
SVE Star Ventures Enterprises GmbH& Co. No. IX KG ($1,250,000),
Walden-Israel Ventures III, L.P. ($1,086,250), J.P. Morgan Latin America
Capital Partners (Delaware), L.P. ($3,459,860), Emerging Markets Ventures I
L.P. ($1,061,060), TeleSoft Partners II QP, L.P. ($1,260,000) and
Technology Crossover Ventures IV, L.P. ($727,800). The aggregate amount of
open commitments for the Fund is $14,954,155.
* Not readily marketable security; security is valued at fair value as
determined in good faith by the Board of Directors. (See Note A.)
** Variable rate account. Rate resets on a daily basis; amounts are available
on the same business day.
*** Represents security purchased with cash collateral received
forsecuritiesonloan.
(a) With an additional 134,454 warrants, expiring 04/21/05, with no market
value.
(b) With an additional 133,654 warrants, expiring 04/21/05, with no market
value.
ADR American Depositary Receipts.
PNA Preferred Shares, Class A.
PNB Preferred Shares, Class B.
PNC Preferred Shares, Class C.
The following is a breakdown of the equity or equity-linked securities portion
of the Fund, by sector classification, as of May 31, 2003.
% OF NET
SECTOR ASSETS
------ --------
Advertising Agencies 0.99
Cellular Telecommunications 30.57
Diversified Operations 1.91
Electronic Components/Semiconductors 0.79
Internet Services 1.73
Investment & Holding Companies 2.80
Technology 0.04
Telecommunications 19.06
Telephone-Integrated 23.17
Television 0.78
Venture Capital 15.74
-----
Total 97.58
=====
See accompanying notes to financial statements.
9
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - MAY 31, 2003 (UNAUDITED)
ASSETS
Investments, at value, including collateral for securities on loan of $7,200,307 (1)
(Cost $80,242,312) (Notes A, D, F) $ 70,207,295
Cash (including $76 of foreign currencies with a cost of $76) 16,243
Receivables:
Investments sold 3,720,894
Dividends 70,824
Prepaid expenses 17,411
-------------
Total Assets 74,032,667
-------------
LIABILITIES
Payables:
Upon return of securities loaned (Note A) 7,200,307
Investments purchased 2,397,636
Investment advisory fee (Note B) 106,694
Directors' fees 14,325
Administration fees (Note B) 9,035
Other accrued expenses 129,941
-------------
Total Liabilities 9,857,938
-------------
NET ASSETS (applicable to 9,164,221 shares of common stock outstanding) (Note C) $ 64,174,729
=============
NET ASSETS CONSIST OF
Capital stock, $0.001 par value; 9,164,221 shares issued and outstanding
(100,000,000 shares authorized) $ 9,164
Paid-in capital 171,243,678
Undistributed net investment income 28,771
Accumulated net realized loss on investments and foreign currency related transactions (97,071,122)
Net unrealized depreciation in value of investments and translation of other
assets and liabilities denominated in foreign currencies (10,035,762)
-------------
Net assets applicable to shares outstanding $ 64,174,729
=============
NET ASSET VALUE PER SHARE ($64,174,729 DIVIDED BY 9,164,221) $ 7.00
=============
MARKET PRICE PER SHARE $ 5.82
=============
----------
(1) Includes securities out on loan to brokers with a market value of
$7,025,688.
See accompanying notes to financial statements.
10
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED MAY 31, 2003 (UNAUDITED)
INVESTMENT INCOME
Income (Note A):
Dividends $ 336,200
Net investment income allocated from partnerships 278,263
Interest 9,718
Securities lending 3,845
Less: Foreign taxes withheld (27,246)
-------------
Total Investment Income 600,780
-------------
Expenses:
Investment advisory fees (Note B) 320,057
Legal fees 49,104
Administration fees (Note B) 44,250
Custodian fees 32,745
Audit fees 32,235
Printing 23,282
Directors' fees 18,778
Accounting fees 14,209
Transfer agent fees 13,341
NYSE listing fees 12,901
Insurance 5,195
Other 5,912
-------------
Total Expenses 572,009
-------------
Net Investment Income 28,771
-------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments (5,076,138)
Foreign currency related transactions 9,305
Net change in unrealized depreciation in value of investments and translation
of other assets and liabilities denominated in foreign currencies 2,275,705
-------------
Net realized and unrealized loss on investments and foreign currency related transactions (2,791,128)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (2,762,357)
=============
See accompanying notes to financial statements.
11
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS FOR THE FISCAL YEAR
ENDED MAY 31, 2003 ENDED
(UNAUDITED) NOVEMBER 30, 2002
------------------ -------------------
DECREASE IN NET ASSETS
Operations:
Net investment income/(loss) $ 28,771 $ (1,636,771)
Net realized loss on investments and foreign currency related transactions (5,066,833) (17,762,702)
Net change in unrealized depreciation in value of investments and
translation of other assets and liabilities denominated in foreign
currencies 2,275,705 6,126,011
------------ ------------
Net decrease in net assets resulting from operations (2,762,357) (13,273,462)
------------ ------------
Capital share transactions (Note H):
Cost of 1,617,215 shares purchased under tender offer -- (10,560,414)
------------ ------------
Total decrease in net assets (2,762,357) (23,833,876)
------------ ------------
NET ASSETS
Beginning of period 66,937,086 90,770,962
------------ ------------
End of period $ 64,174,729* $ 66,937,086
============ ============
----------
* Includes undistributed net investment income of $28,771.
See accompanying notes to financial statements.
12
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
STATEMENT OF CASH FLOWS - FOR THE SIX MONTHS ENDED MAY 31, 2003 (UNAUDITED)
INCREASE IN CASH FROM
Operating Activities:
Investment income received $ 543,908
Operating expenses paid (679,270)
Purchases of long-term portfolio investments (40,484,944)
Proceeds from disposition of long-term portfolio investments 38,746,806
Net change from transactions in short-term portfolio investments 1,882,000
------------
Net increase in cash from operating activities $ 8,500
Cash at beginning of period 7,743
------------
Cash at end of period $ 16,243
============
RECONCILIATION OF NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS TO NET INCREASE IN CASH
FROM OPERATING ACTIVITIES
Net decrease in net assets resulting from operations $ (2,762,357)
Adjustments:
Decrease in accrued expenses $ (101,607)
Increase in receivables (56,872)
Increase in prepaid expenses (5,654)
Net increase in cash from investing activities 143,862
Net realized and unrealized loss on investments and foreign currency
related transactions 2,791,128
------------
Total adjustments 2,770,857
------------
NET INCREASE IN CASH FROM OPERATING ACTIVITIES $ 8,500
============
See accompanying notes to financial statements.
13
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
FINANCIAL HIGHLIGHTS^
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
FOR THE FOR THE FISCAL YEARS FOR THE
SIX MONTHS ENDED SIX MONTHS
ENDED NOVEMBER 30, ENDED
MAY 31, 2003 --------------------------- NOVEMBER 30,
(UNAUDITED) 2002 2001 2000
------------ ---------- ---------- ------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 7.30 $ 8.42 $ 10.35 $ 18.36
---------- ---------- ---------- ---------
Net investment income/(loss) 0.00## (0.15)+++ (0.12)++ (0.14)+
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions (0.30) (1.03) (1.88) (4.78)
---------- ---------- ---------- ---------
Net increase/(decrease) in net assets
resulting from operations (0.30) (1.18) (2.00) (4.92)
---------- ---------- ---------- ---------
Dividends and distributions to shareholders:
Net investment income -- -- -- --
Net realized gain on investments and
foreign currency related transactions -- -- -- (3.09)
---------- ---------- ---------- ---------
Total dividends and distributions to shareholders -- -- -- (3.09)
---------- ---------- ---------- ---------
Anti-dilutive impact due to capital shares tendered
or repurchased -- 0.06 0.07 --
---------- ---------- ---------- ---------
Net asset value, end of period $ 7.00 $ 7.30 $ 8.42 $ 10.35
========== ========== ========== =========
Market value, end of period $ 5.82 $ 6.22 $ 6.88 $ 7.688
========== ========== ========== =========
Total investment return (a) (6.43)% (9.59)% (10.50)% (28.46)%
========== ========== ========== =========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 64,175 $ 66,937 $ 90,771 $ 131,325
Ratio of expenses to average net assets (b) 1.86%(c) 1.90% 1.76% 1.91%(c)
Ratio of expenses to average net assets, excluding taxes 1.86%(c) 1.77% 1.74% 1.91%(c)
Ratio of net investment income/(loss) to average net assets 0.09%(c) (1.89)% (1.18)% (1.50)%(c)
Portfolio turnover rate 70.56% 94.89% 82.16% 51.72%
----------
^ 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.
* Commencement of investment operations.
** Initial public offering price of $15.01 per share less underwriting
discount of $1.05 per share and offering expenses of $0.11 per share.
# Includes a $0.03 per share increase to the Fund's net asset value per share
resulting from the anti-dilutive impact of shares issued pursuant to the
Fund's automatic Dividend Reinvestment Plan in January 1994.
## Less than $0.01 per share.
+ Based on average shares outstanding.
++ Based on shares outstanding on November 21, 2001 (prior to the 2001 tender
offer) and November 30, 2001.
+++ Based on shares outstanding on November 6, 2002 (prior to the 2002 tender
offer) and November 30, 2002.
(a) Total investment return at market value is based on the changes in market
price of a share during the period and assumes reinvestment of dividends
and distributions, if any, at actual prices pursuant to the Fund's dividend
reinvestment program. Total investment return does not reflect initial
underwriting discounts and has not been annualized.
(b) Ratios shown are inclusive of Brazilian transaction and Chilean
repatriation taxes, if any.
(c) Annualized.
See accompanying notes to financial statements.
14
FOR THE FISCAL YEAR ENDED MAY 31,
--------------------------------------------------------------
2000 1999 1998 1997
---------- ---------- ---------- ---------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 12.13 $ 16.37 $ 21.54 $ 20.95
---------- ---------- ---------- ---------
Net investment income/(loss) (0.20)+ (0.04)+ (0.06) 0.10
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions 6.14 (2.41) (1.40) 2.86
---------- ---------- ---------- ---------
Net increase/(decrease) in net assets
resulting from operations 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. -- (1.96) (3.62) (2.10)
---------- ---------- ---------- ---------
Total dividends and distributions to shareholders -- (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 $ 18.36 $ 12.13 $ 16.37 $ 21.54
========== ========== ========== =========
Market value, end of period $ 13.508 $ 9.819 $ 13.008 $ 17.385
========== ========== ========== =========
Total investment return (a) 37.58% (9.99)% (4.57)% 14.31%
========== ========== ========== =========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 130,300 $ 94,026 $ 138,023 $ 181,627
Ratio of expenses to average net assets (b) 2.24% 2.09% 2.32% 1.90%
Ratio of expenses to average net assets, excluding taxes 2.04% 2.01% 1.82% 1.82%
Ratio of net investment income/(loss) to average net assets (1.15)% (0.33)% (0.29)% 0.52%
Portfolio turnover rate 113.75% 179.66% 162.58% 42.14%
FOR THE PERIOD
JUNE 25,
FOR THE FISCAL YEAR ENDED MAY 31, 1992*
--------------------------------------------- THROUGH
1996 1995 1994 MAY 31, 1993
---------- ---------- ---------- --------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 19.21 $ 20.91 $ 14.96 $ 13.85**
---------- ---------- ---------- ---------
Net investment income/(loss) 0.27 0.11 0.13 0.16
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions 1.91 0.01 7.03# 1.20
---------- ---------- ---------- ---------
Net increase/(decrease) in net assets
resulting from operations 2.18 0.12 7.16 1.36
---------- ---------- ---------- ---------
Dividends and distributions to shareholders:
Net investment income (0.04) (0.04) (0.15) (0.14)
Net realized gain on investments and foreign currency
related transactions. (0.40) (1.78) (1.06) (0.11)
---------- ---------- ---------- ---------
Total dividends and distributions to shareholders (0.44) (1.82) (1.21) (0.25)
---------- ---------- ---------- ---------
Anti-dilutive impact due to capital shares tendered
or repurchased -- -- -- --
---------- ---------- ---------- ---------
Net asset value, end of period $ 20.95 $ 19.21 $ 20.91 $ 14.96
========== ========== ========== =========
Market value, end of period $ 17.385 $ 17.761 $ 22.764 $ 14.509
========== ========== ========== =========
Total investment return (a) 0.21% (13.94)% 64.74% 5.85%
========== ========== ========== =========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 176,628 $ 161,925 $ 176,253 $ 125,338
Ratio of expenses to average net assets (b) 1.77% 1.89% 1.81% 1.99%(c)
Ratio of expenses to average net assets, excluding taxes -- -- -- --
Ratio of net investment income/(loss) to average net assets 1.40% 0.53% 0.63% 2.02%(c)
Portfolio turnover rate 27.71% 14.29% 43.98% 22.55%
15
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE A. SIGNIFICANT ACCOUNTING POLICIES
The Emerging Markets Telecommunications Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940, as amended, as a closed-end,
non-diversified management investment company.
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. on each day
the Exchange is open for business. The Fund's 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. If no sales are reported,
investments are generally valued at the most recent bid price. Debt securities
with a remaining maturity greater than 60 days are valued on the basis of broker
quotations or valuations provided 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 the Board of Directors determines that using this method
would not reflect an investment's value.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by the Board of
Directors under procedures established by the Board of Directors in the absence
of readily ascertainable market values. At May 31, 2003, the Fund held 28.07% of
its net assets in securities valued at fair value as determined in good faith by
the Board of Directors with an aggregate cost of $29,315,922 and fair value of
$18,014,807. Although these securities may be resold in privately negotiated
transactions, the prices realized on such sales could differ from the price
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 deposit
issued by 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
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 as a regulated investment company and to make
the requisite distributions to its shareholders which will be sufficient to
relieve it from all or substantially all U.S. 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 May 31, 2003, the Fund did not incur such expense.
16
The Fund is subject to a 10% Chilean repatriation tax with respect to certain
remittances from Chile and on net unrealized gains on certain securities held in
Chilean pesos. Realized capital gains on the most liquid stocks will not be
subject to the tax. Realized capital gains on illiquid shares, interest and
dividends received will continue to be subject to the remittance tax. For the
six months ended May 31, 2003, 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
fixed-income instruments carried out by financial institutions. The tax rate of
0.38% is effective until the end of 2003, and will decline to 0.08% during 2004.
For the six months ended May 31, 2003, the Fund did not incur such expense.
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 in investments in
equity securities which is due to changes in the foreign exchange rates from
that which is due to changes in market prices of equity securities. Accordingly,
realized and unrealized foreign currency gains and losses with respect to such
securities are included in the reported net realized and unrealized gains and
losses on investment transaction balances.
The Fund reports certain foreign currency related transactions and foreign taxes
withheld on security transactions as components of realized gains for financial
reporting purposes, whereas such foreign currency related transactions are
treated as ordinary income for U.S. income tax purposes.
Net unrealized currency gains or losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected as
a component of net unrealized appreciation/(depreciation) in value of
investments and translation of other assets and liabilities denominated in
foreign currencies.
Net realized foreign exchange losses represent foreign exchange gains and losses
from sales and maturities of debt securities, transactions in foreign currencies
and forward foreign currency contracts, exchange gains or losses realized
between the trade date and settlement date on security transactions, and the
difference between the amounts of interest and dividends recorded on 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 May
31, 2003, was $7,025,688, for which the Fund has received cash as collateral of
$7,200,307. Such cash collateral was reinvested into an overnight repurchase
agreement with Bear, Stearns & Co. Inc., which was in turn collateralized by
U.S. Treasuries and U.S. Government agency securities with a value of
$7,382,926. Security loans are required at all times to have collateral at least
equal to 102% of the market value of the securities on loan; however, in the
event of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral may be subject to legal proceedings.
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
17
determines annually whether to distribute any net realized long-term capital
gains in excess of net realized short-term capital losses, including capital
loss carryovers, if any. An additional distribution may be made to the extent
necessary to avoid the payment of a 4% U.S. federal excise tax. Dividends and
distributions to shareholders are recorded by the Fund on the ex-dividend date.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
income tax purposes due to U.S. generally accepted accounting principles/tax
differences in the character of income and expense recognition.
PARTNERSHIP ACCOUNTING POLICY: The Fund records its pro-rata share of the
income/(loss) and capital gains/(losses) allocated from the underlying
partnerships and adjusts the cost of the underlying partnerships accordingly.
These amounts are included in the Fund's Statement of Operations.
OTHER: Some countries require governmental approval for the repatriation of
investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if there is a deterioration in a country's balance of
payments or for other reasons, a country may impose temporary restrictions on
foreign capital remittances abroad. Amounts repatriated prior to the end of
specified periods may be subject to taxes as imposed by a foreign country.
The emerging countries' securities markets are substantially smaller, less
liquid and more volatile than the major securities markets in the United States.
A high proportion of the securities of many companies in emerging countries may
be held by a limited number of persons, which may limit the number of securities
available for investment by the Fund. The limited liquidity of emerging country
securities markets may also affect the Fund's ability to acquire or dispose of
securities at the price and time it wishes to do so.
The Fund is sector concentrated and therefore invests a high percentage of its
assets in the telecommunications sector. As a result, the financial, economic,
business and political developments in a particular sector of the market,
positive or negative, have a greater impact on the Fund's net asset value and
will cause its shares to fluctuate more than if the Fund did not concentrate its
investments in a particular sector. Under normal market conditions, it will
invest not less than 80% of its net assets in a group of related industries
within the telecommunications sector of the market.
The Fund, subject to local investment limitations, may invest up to 25% of its
assets (at the time of commitment) in illiquid equity securities, including
securities of private equity funds (whether in corporate or partnership form)
that invest primarily in the emerging markets. When investing through another
investment fund, the Fund will bear its proportionate share of the expenses
incurred by that fund, including management fees. Such securities are expected
to be illiquid which may involve a high degree of business and financial risk
and may result in substantial losses. Because of the current absence of any
liquid trading market for these investments, the Fund may take longer to
liquidate these positions than would be the case for publicly traded securities.
Although these securities may be resold in privately negotiated transactions,
the prices realized on such sales could be substantially less than those
originally paid by the Fund or the current carrying values and these differences
could be material. Further, companies whose securities are not publicly traded
may not be subject to the disclosures and other investor protection requirements
applicable to companies whose securities are publicly traded.
18
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 May 31, 2003, the Fund had no
such agreements, other than the cash collateral received that was reinvested in
a repo under the Fund's securities lending program.
NOTE B. AGREEMENTS
Credit Suisse Asset Management, LLC ("CSAM"), serves as the Fund's investment
adviser with respect to all investments. CSAM receives as compensation for its
advisory services from the Fund, an annual fee, calculated weekly and paid
quarterly, equal to 1.25% of the first $100 million of the Fund's average weekly
market value or net assets (whichever is lower), 1.125% of the next $100 million
and 1.00% of amounts in excess of $200 million. For the six months ended May 31,
2003, CSAM earned $320,057 for advisory services. CSAM also provides certain
administrative services to the Fund and is reimbursed by the Fund for costs
incurred on behalf of the Fund (up to $20,000 per annum). For the six months
ended May 31, 2003, CSAM was reimbursed $7,311 for administrative services
rendered to the Fund.
Credit Suisse Asset Management (Australia) Limited ("Sub-Adviser") serves as the
Fund's sub-investment adviser. CSAM currently pays the Sub-Adviser on a
quarterly basis a fee of $480,000 per annum for services rendered with respect
to the Fund and certain other Credit Suisse Funds for which the Sub-Adviser has
been appointed as such.
Bear Stearns Funds Management Inc. ("BSFM") serves as the Fund's U.S.
administrator. The Fund pays BSFM a monthly fee that is computed weekly at an
annual rate of 0.12% of the Fund's average weekly net assets. For the six months
ended May 31, 2003, BSFM earned $36,939 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 an annual rate of 0.10% of average
month end Brazilian net assets of the Fund.
Merrill Corporation ("Merrill"), an affiliate of CSAM, has been engaged by the
Fund to provide certain financial and tender related printing services. For the
six months ended May 31, 2003, Merrill was paid $56,302 for its services to the
Fund.
On May 8, 2000, the Fund's Board of Directors unanimously approved a proposal by
the Independent Directors to partially compensate Independent Directors in
shares of the Fund. Under this policy, such directors receive fifty percent
(50%) of their annual retainer in the form of shares purchased by the Fund's
19
transfer agent in the open market. Directors as a group own less than 1% of the
Fund's outstanding shares.
NOTE C. CAPITAL STOCK
The authorized capital stock of the Fund is 100,000,000 shares of common stock,
$0.001 par value. Of the 9,164,221 shares outstanding at May 31, 2003, CSAM
owned 14,333 shares.
NOTE D. INVESTMENT IN SECURITIES
For the six months ended May 31, 2003 purchases and sales of securities, other
than short-term investments, were $42,882,580 and $42,290,380, respectively.
NOTE E. CREDIT FACILITY
The Fund, together with other funds/portfolios advised by CSAM (collectively,
the "Participating Funds"), participates in a $100 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%. At May 31, 2003 and during the six months ended May 31, 2003, the Fund
had no borrowings under the Credit Facility.
NOTE F. FEDERAL INCOME TAXES
Income and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments of foreign currency transactions, losses
deferred due to wash sales and Post-October losses (as later defined), and
excise tax regulations.
Under current tax law, certain capital losses realized after October 31 within a
taxable year may be deferred and treated as occurring on the first day of the
following tax year ("Post-October losses"). For the tax period ended November
30, 2002, the Fund incurred and elected to defer net realized losses of $95,167.
At November 30, 2002, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $90,937,950 of which $20,972,304 expires in 2006. This
amount is subject to Internal Revenue Sections limitations. Capital loss
carryforward of $5,308,276, $47,300,891 and $17,356,479 expires in 2007, 2009
and 2010, respectively.
At May 31, 2003, the identified cost for federal income tax purposes, as well as
the gross unrealized appreciation from investments for those securities having
an excess of value over cost, gross unrealized depreciation from investments for
those securities having an excess of cost over value and the net unrealized
depreciation from investments were $73,358,249, $5,610,746, $(15,962,007) and
$(10,351,261), respectively.
20
NOTE G. RESTRICTED SECURITIES
Certain of the Fund's investments are restricted as to resale and are valued at
fair value as determined in good faith by the Board of Directors under
procedures established by the Board of Directors in the absence of readily
ascertainable market values. The table below shows the number of units/shares
held, the acquisition dates, aggregate costs, fair value as of May 31, 2003, per
unit/share of such securities and percent of net assets which the securities
comprise.
NUMBER FAIR PERCENT
OF ACQUISITION VALUE AT VALUE PER OF NET
SECURITY UNITS/SHARES DATE(S) COST 05/31/03 UNIT/SHARE ASSETS
-------- ------------ ------------------- ----------- ----------- ---------- -------
BPW Israel Ventures LLC 1,121,970 10/05/00 - 07/01/02 $ 1,016,898 $ 686,278 $ 0.61 1.07
17,250 01/07/03 17,250 10,551 0.61 0.01
------------ ----------- ----------- -------
1,139,220 1,034,148 696,829 1.08
------------ ----------- ----------- -------
Concord Ventures II Fund L.P. 3,000,000 03/29/00 - 07/29/02 2,755,592 1,432,389 0.48 2.23
120,000 04/03/03 120,000 57,296 0.48 0.09
------------ ----------- ----------- -------
3,120,000 2,875,592 1,489,685 2.32
------------ ----------- ----------- -------
Emerging Markets Ventures I L.P. 7,038,940 01/22/98 - 10/01/02 6,588,234 4,468,671 0.63 6.96
------------ ----------- ----------- -------
Exxel Capital Partners V, L.P. 1,897,761 05/11/98 - 12/03/98 2,075,284 0 0.00 0.00
------------ ----------- ----------- -------
Formula Ventures L.P. 1,399,747 08/06/99 - 07/03/02 1,067,048 583,835 0.42 0.91
40,487 04/03/03 39,472 16,887 0.42 0.02
------------ ----------- ----------- -------
1,440,234 1,106,520 600,722 0.93
------------ ----------- ----------- -------
Giza GE Venture Fund III L.P. 1,375,000 01/31/00 - 05/28/02 1,230,425 731,197 0.53 1.14
165,000 04/30/03 165,000 87,744 0.53 0.14
------------ ----------- ----------- -------
1,540,000 1,395,425 818,941 1.28
------------ ----------- ----------- -------
Independent Network Television,
Series II 1,000,000 07/06/98 1,000,000 500,000 0.50 0.78
------------ ----------- ----------- -------
International Wireless
Communications Holdings Corp. 15,092 12/08/97 414,568 0 0.00 0.00
------------ ----------- ----------- -------
J.P. Morgan Latin America
Capital Partners (Cayman), L.P. 556,734 04/10/00 - 06/28/01 545,081 484,949 0.87 0.76
31,052 04/17/03 31,052 27,048 0.87 0.04
149,697 05/28/03 149,697 130,395 0.87 0.20
------------ ----------- ----------- -------
737,483 725,830 642,392 1.00
------------ ----------- ----------- -------
J.P. Morgan Latin America
Capital Partners (Delaware), L.P. 1,104,766 04/10/00 - 09/30/02 788,827 520,090 0.47 0.81
71,258 12/09/02 71,377 33,546 0.47 0.05
68,536 04/17/03 68,536 32,265 0.47 0.05
------------ ----------- ----------- -------
1,244,560 928,740 585,901 0.91
------------ ----------- ----------- -------
21
NUMBER FAIR PERCENT
OF ACQUISITION VALUE AT VALUE PER OF NET
SECURITY UNITS/SHARES DATE(S) COST 05/31/03 UNIT/SHARE ASSETS
-------- ------------ ------------------- ------------ ------------ ---------- -------
Jamaican Assets I, L.P. 600,442 10/20/97 - 04/18/01 $ 730,859 $ 1,688,942 $ 2.81 2.63
------------ ------------ ------------ -------
K.T. Concord Venture Fund L.P. 2,000,000 12/08/97 - 09/29/00 2,246,245 1,272,226 0.64 1.98
------------ ------------ ------------ -------
Neurone Ventures II, L.P. 270,000 11/24/00 - 06/17/02 229,359 149,298 0.55 0.23
30,000 01/27/03 30,000 16,589 0.55 0.03
------------ ------------ ------------ -------
300,000 259,359 165,887 0.26
------------ ------------ ------------ -------
The Renaissance Fund LDC 160 03/30/94 - 03/21/97 521,435 106,195 663.74 0.17
------------ ------------ ------------ -------
SVE Star Ventures Enterprises
GmbH & Co. No. IX KG 730,000 12/21/00 - 03/04/02 604,202 405,165 0.56 0.63
20,000 01/14/03 0 11,100 0.56 0.02
------------ ------------ ------------ -------
750,000 604,202 416,265 0.65
------------ ------------ ------------ -------
Technology Crossover
Ventures IV, L.P. 1,272,200 03/08/00 - 08/07/02 1,032,320 1,081,764 0.85 1.69
------------ ------------ ------------ -------
TeleSoft Partners L.P. 1,250,000 07/22/97 - 06/07/01 829,940 292,000 0.23 0.46
------------ ------------ ------------ -------
TeleSoft Partners II QP, L.P. 900,000 07/14/00 - 01/25/01 722,395 386,379 0.43 0.60
240,000 12/12/02 240,000 103,034 0.43 0.16
------------ ------------ ------------ -------
1,140,000 962,395 489,413 0.76
------------ ------------ ------------ -------
TVG Asian Communications
Fund II, L.P. 1,727,586 06/07/00 - 09/24/02 1,586,016 1,127,086 0.65 1.76
60,181 01/02/03 60,181 39,262 0.65 0.06
43,594 03/31/03 43,594 28,441 0.65 0.04
------------ ------------ ------------ -------
1,831,361 1,689,791 1,194,789 1.86
------------ ------------ ------------ -------
Walden-Israel Ventures III, L.P. 220,000 02/23/01 - 06/19/02 182,088 130,414 0.59 0.20
68,750 04/01/03 68,750 40,754 0.59 0.07
------------ ------------ ------------ -------
288,750 250,838 171,168 0.27
------------ ------------ ------------ -------
Total $ 27,271,725 $ 16,681,790 25.99
============ ============ =======
The Fund may incur certain costs in connection with the disposition of the above
securities.
22
NOTE H. SELF-TENDER OFFER
In June 2000, the Board of Directors of the Fund approved a self-tender program,
the terms of which included the following: (i) commencing in 2001, the Fund will
make a tender offer to acquire at least 15% of its outstanding shares during
each calendar year of the program and (ii) the per share purchase price will be
at least 95% of the Fund's net asset value per share. Pursuant to this program,
in November 2002, the Fund completed a tender offer for 15% of its outstanding
shares (1,617,215 shares) at a price of $6.53 per share.
The self-tender program is subject to change based on economic or market
conditions or other factors. For example, a sustained reduction in the market
discount at which the Fund's shares trade, a risk of material adverse tax
consequences or a risk of the Fund becoming subject to delisting may lead the
Board of Directors to conclude that it is appropriate to suspend the self-tender
program. In addition, the self-tender program is likely to reduce the Fund's
asset levels over time. Absent substantial appreciation in the Fund's portfolio
or opportunities to raise additional funds, this could lead to higher expense
ratios, the absence of reasonable diversification or investment opportunities or
other factors that adversely affect the Fund and possibly the continued
viability of the Fund as a closed-end fund. The Board will reevaluate the
program from time to time in light of its effect on the Fund.
23
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On March 27, 2003, 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 re-elect one director to the Board of Directors of the Fund.
NAME OF DIRECTOR FOR WITHHELD
---------------- --------- --------
George W. Landau 7,803,871 228,515
In addition to the director re-elected at the meeting, Enrique R. Arzac, James
J. Cattano, William W. Priest, Jr. and Martin M. Torino continue to serve as
directors of the Fund.
Effective May 21, 2003, Joseph D. Gallagher was appointed as Chairman of the
Fund, Chief Executive Officer and President. Laurence R. Smith who previously
held these positions has resigned from the Fund effective May 21, 2003.
24
PRIVACY POLICY NOTICE (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 ("CSAM"), CSAM CAPITAL INC., AND CREDIT SUISSE
ASSET MANAGEMENT SECURITIES, INC., AND SHAREHOLDERS AND PROSPECTIVE SHAREHOLDERS
IN CSAM SPONSORED AND ADVISED INVESTMENT COMPANIES, INCLUDING CREDIT SUISSE
FUNDS, AND OTHER CONSUMERS AND CUSTOMERS, AS APPLICABLE. THIS NOTICE IS NOT
INTENDED TO BE INCORPORATED IN ANY OFFERING MATERIALS BUT IS MERELY A STATEMENT
OF OUR CURRENT PRIVACY POLICY, AND MAY BE AMENDED FROM TIME TO TIME UPON NOTICE
TO YOU. THIS NOTICE IS DATED AS OF MARCH 20, 2003.
25
OTHER FUNDS MANAGED BY CREDIT SUISSE ASSET MANAGEMENT, LLC
Credit Suisse Capital Appreciation Fund
Credit Suisse Cash Reserve Fund
Credit Suisse Emerging Growth Fund
Credit Suisse Emerging Markets Fund
Credit Suisse Fixed Income Fund
Credit Suisse Global Fixed Income Fund
Credit Suisse Global Post-Venture Capital Fund
Credit Suisse High Income Fund
Credit Suisse International Focus Fund
Credit Suisse Japan Equity Fund
Credit Suisse Large Cap Value Fund
Credit Suisse Municipal Money Fund
Credit Suisse New York Municipal Fund
Credit Suisse New York Tax Exempt Fund
Credit Suisse Select Equity Fund
Credit Suisse Short Duration Bond Fund
Credit Suisse Small Cap Growth Fund
Credit Suisse Small Cap Value Fund
Credit Suisse Strategic Small Cap Fund
Credit Suisse Tax Efficient Fund
Credit Suisse U.S. Government Money 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, 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.
26
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SUMMARY OF GENERAL INFORMATION
The Fund--The Emerging Markets Telecommunications Fund, Inc.--is a closed-end,
non-diversified management investment company whose shares trade on The New York
Stock Exchange, Inc. Its investment objective is long-term capital appreciation
through investments primarily in equity securities of telecommunications
companies in emerging countries. Credit Suisse Asset Management, LLC (New York),
the Fund's investment adviser, is part of Credit Suisse Asset Management
("CSAM"), the institutional and mutual-fund asset-management arm of Credit
Suisse First Boston. As of March 31, 2003, CSAM managed over $45 billion in the
U.S. and, together with its global affiliates, managed assets of over $292
billion in 14 countries.
SHAREHOLDER INFORMATION
The market price is published in: THE NEW YORK TIMES (daily) under the
designation "EmMktTel" and THE WALL STREET JOURNAL (daily), and BARRON'S (each
Monday) under the designation "EmergMktTele". The Fund's New York Stock
Ex-change trading symbol is ETF. Weekly comparative net asset value (NAV) and
market price information about The Emerging Markets Telecommunications Fund,
Inc.'s shares are published each Sunday in THE NEW YORK TIMES and each Monday in
THE WALL STREET JOURNAL and BARRON'S, as well as other newspapers, in a table
called "Closed-End Funds."
THE CSAM GROUP OF FUNDS
LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds listed below at 1-800-293-1232 or visit our website on the
Internet: http://www.csam-americas.com.
CLOSED-END FUNDS
SINGLE COUNTRY
The Chile Fund, Inc. (CH)
The First Israel Fund, Inc. (ISL)
The Indonesia Fund, Inc. (IF/INDF)
MULTIPLE COUNTRY
The Latin America Equity Fund, Inc. (LAQ)
FIXED INCOME
Credit Suisse Asset Management Income Fund, Inc. (CIK)
Credit Suisse High Yield Bond Fund (DHY)
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that The Emerging Markets Telecommunications
Fund, Inc. may from time to time purchase shares of its capital stock in the
open market.
DIRECTORS AND CORPORATE OFFICERS
Enrique R. Arzac Director
James J. Cattano Director
George W. Landau Director
William W. Priest, Jr. Director
Martin M. Torino Director
Joseph D.Gallagher Chairman of the Fund,
Chief Executive Officer
and President
Yaroslaw Aranowicz Chief Investment Officer
Emily Alejos Investment Officer
Hal Liebes Senior Vice President
Michael A. Pignataro Chief Financial Officer and
Secretary
Rocco A. Del Guercio Vice President
Robert M. Rizza Treasurer
INVESTMENT ADVISER
Credit Suisse Asset Management, LLC
466 Lexington Avenue
New York, NY 10017
INVESTMENT SUB-ADVISER
Credit Suisse Asset Management (Australia) Limited
Level 32, Gateway Building
1 Macquarie Place
Sydney NSW 2000
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
Fleet National Bank
(c/o EquiServe, L.P.)
P.O. Box 43010
Providence, RI 02940
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
Two Commerce Square
Philadelphia, PA 19103
LEGAL COUNSEL
Willkie Farr & Gallagher
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 accountants who do not express an opinion thereon. It is not a
prospectus, circular or representation intended for use in the purchase or sale
of shares of the Fund or of any securities mentioned in this report.
[ETF LISTED NYSE (R) LOGO]
3018-SA-03
ITEM 2. CODE OF ETHICS.
Form N-CSR disclosure requirement not yet effective with respect to the
Registrant.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Form N-CSR disclosure requirement not yet effective with respect to the
Registrant.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Form N-CSR disclosure requirement not yet effective with respect to the
Registrant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Form N-CSR disclosure requirement not yet effective with respect to the
Registrant.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Form N-CSR disclosure requirement not yet effective with respect to the
Registrant.
Item 8. [Reserved]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The Principal Executive Officer and Principal Financial Officer concluded
that the Registrant's Disclosure Controls and Procedures are effective based on
their evaluation of the Disclosure Controls and Procedures as of a date within
90 days of the filing date of this report.
(b) There were no significant changes in Registrant's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS.
(a)(1) Form N-CSR disclosure requirement not yet effective with respect to the
Registrant.
(a)(2) The certifications of the Registrant as required by Rule 30a-2(a) under
the Act are exhibits to this report.
(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/ Joseph D. Gallagher
-----------------------
Name: Joseph D. Gallagher
Title: Chief Executive Officer
Date: July 29, 2003
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/ Joseph D. Gallagher
------------------------
Name: Joseph D. Gallagher
Title: Chief Executive Officer
Date: July 29, 2003
/s/ Michael A. Pignataro
------------------------
Name: Michael A. Pignataro
Title: Chief Financial Officer
Date: July 29, 2003