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OMB APPROVAL
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OMB Number: 3235-0570
Expires: November 30, 2005
Estimated average burden
hours per response....... 5.0
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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 number 811-06403
---------------------------------------------
Morgan Stanley Emerging Markets Fund, Inc.
-------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 AVENUE OF THE AMERICAS 22ND FLOOR NEW YORK, NY 10020
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
RONALD E. ROBISON
1221 AVENUE OF THE AMERICAS 34TH FLOOR NEW YORK, NY 10020
-------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-221-6726
----------------------------
Date of fiscal year end: 12/31
--------------------------
Date of reporting period: 6/30/03
-------------------------
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Fund's semi-annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
SEMI-ANNUAL REPORT
MORGAN STANLEY EMERGING MARKETS FUND, INC.
JUNE 30, 2003
DIRECTORS
MICHAEL BOZIC RONALD E. ROBISON
CHARLES A. FIUMEFREDDO EXECUTIVE VICE PRESIDENT
EDWIN J. GARN AND PRINCIPAL EXECUTIVE
WAYNE E. HEDIEN OFFICER
JAMES F. HIGGINS
DR. MANUEL H. JOHNSON JOSEPH McALINDEN
JOSEPH J. KEARNS VICE PRESIDENT
MICHAEL NUGENT
PHILIP J. PURCELL BARRY FINK
FERGUS REID VICE PRESIDENT
OFFICERS STEFANIE V. CHANG
CHARLES A. FIUMEFREDDO VICE PRESIDENT
CHAIRMAN OF THE BOARD
JAMES W. GARRETT [MORGAN STANLEY LOGO]
MITCHELL M. MERIN TREASURER AND CHIEF
PRESIDENT FINANCIAL OFFICER
MICHAEL LEARY MORGAN STANLEY
ASSISTANT TREASURER EMERGING MARKETS FUND, INC.
MARY E. MULLIN
SECRETARY
INVESTMENT ADVISER
MORGAN STANLEY INVESTMENT MANAGEMENT INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
ADMINISTRATOR
JPMORGAN INVESTOR SERVICES
73 TREMONT STREET
BOSTON, MASSACHUSETTS 02108
CUSTODIAN
JPMORGAN CHASE BANK
270 PARK AVENUE
NEW YORK, NEW YORK 10017
STOCKHOLDER SERVICING AGENT
AMERICAN STOCK TRANSFER & TRUST COMPANY
59 MAIDEN LANE
NEW YORK, NEW YORK 10030
(800) 278-4353
LEGAL COUNSEL
CLIFFORD CHANCE US LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116
FOR ADDITIONAL FUND INFORMATION,
INCLUDING THE FUND'S NET ASSET VALUE PER
SHARE AND INFORMATION REGARDING THE
INVESTMENTS COMPRISING THE FUND'S
PORTFOLIO, PLEASE CALL 1-800-221-6726 OR
VISIT OUR WEBSITE AT
www.morganstanley.com/im.
MORGAN STANLEY
INVESTMENT MANAGEMENT INC.
(C) 2003 MORGAN STANLEY INVESTMENT ADVISER
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Overview
LETTER TO STOCKHOLDERS
PERFORMANCE
For the six months ended June 30, 2003, the Morgan Stanley Emerging Markets
Fund, Inc. (the "Fund") had a total return of 15.22%, compared to 15.90% for the
Morgan Stanley Capital International (MSCI) Emerging Markets Free Index (the
"Index"). On June 30, 2003, the closing price of the Fund's shares on the
New York Stock Exchange was $9.75, representing a 16.1% discount to the Fund's
net asset value per share.
FACTORS AFFECTING PERFORMANCE
- Global emerging markets performance hampered earlier in the year by
concerns over war and high price of oil rebounded in the second quarter.
- Investor sentiment worldwide appeared to improve during the most recent
quarter as expectations for better economic growth grew following the
successful U.S. campaign in Iraq, and the subsequent easing in the price
of oil.
- All emerging markets regions experienced strong double-digit gains with
particular strength in Latin America as Brazil outperformed given reduced
political and debt concerns. Asia also performed well as the threat of
Severe Acute Respiratory Syndrome (SARS) eased for most markets in the
region at mid-year. Meanwhile, oil-producing countries continued to
benefit from firm oil prices.
- All sectors were positive performers with particular strength in health
care (+43.6%, Index return), utilities (+28.2%), and energy (+26.1%).
- In terms of relative performance, stock selection was positive while
country allocation was mixed. Stock selection in Asia was a strong
contributor during the quarter particularly in South Korea, India and
Indonesia. Country overweights in Indonesia and Russia coupled with an
underweight stance in Malaysia also added to relative performance.
- Primary detractors to performance during the period in review were stock
selection in Thailand (primarily due to stock selection within banking and
airline stocks) and Israel.
MANAGEMENT STRATEGIES
- In terms of portfolio positioning, we continued to focus on countries
where gross domestic product (GDP) growth, fiscal policy and reform
agendas remain strong, and on companies that exhibited strong management
and earnings visibility.
- Our key overweight positions going into July are in Russia, South Africa,
Indonesia and Thailand. China, Malaysia and Israel are our largest
underweight countries.
Sincerely,
/s/ Ronald E. Robison
Ronald E. Robison
Executive Vice President and Principal Executive Officer
July 2003
2
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS
June 30, 2003 (unaudited)
STATEMENT OF NET ASSETS
VALUE
SHARES (000)
-----------------------------------------------------------------------------------------------
COMMON STOCKS (95.1%)
(UNLESS OTHERWISE NOTED)
===============================================================================================
ARGENTINA (0.2%)
ENERGY EQUIPMENT & SERVICES
Tenaris SA ADR 16,600(a) $ 423
===============================================================================================
BRAZIL (7.1%)
BANKS
Banco Bradesco SA ADR 24,573 459
Banco Itau SA 4,143,000 279
Banco Itau SA ADR 38,910 1,319
Banco Nacional SA (Preferred) 61,598,720(a),(b) --@
-----------------------------------------------------------------------------------------------
2,057
-----------------------------------------------------------------------------------------------
BEVERAGES
AmBev (Preferred) ADR 124,389 2,531
-----------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Tele Norte Leste
Participacoes SA
(Preferred) ADR 50,200 586
Tele Norte Leste
Participacoes SA
(Preferred) 32,887,000 385
-----------------------------------------------------------------------------------------------
971
-----------------------------------------------------------------------------------------------
ELECTRIC UTILITIES
CEMIG (Preferred) 13,322,000 124
CEMIG ADR 22,900 211
-----------------------------------------------------------------------------------------------
335
-----------------------------------------------------------------------------------------------
METALS & MINING
CSN ADR 25,500 633
CVRD (Preferred) ADR 74,813 2,076
CVRD ADR 9,800 291
-----------------------------------------------------------------------------------------------
3,000
-----------------------------------------------------------------------------------------------
MULTILINE RETAIL
Lojas Arapua SA (Preferred) 30,412,000(a),(b) --@
Lojas Arapua SA GDR 31,540(a),(b) --@
-----------------------------------------------------------------------------------------------
--@
-----------------------------------------------------------------------------------------------
OIL & GAS
Petrobras SA (Preferred)
ADR 162,956 2,894
Petrobras SA ADR 110,163 2,177
Petrobras SA 9,153 164
-----------------------------------------------------------------------------------------------
5,235
-----------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS
Aracruz Celulose SA ADR 16,700 352
Votorantim Celulose e Papel
SA ADR 20,600 $ 398
-----------------------------------------------------------------------------------------------
750
-----------------------------------------------------------------------------------------------
14,879
===============================================================================================
CHINA/HONG KONG (3.7%)
AUTOMOBILES
Denway Motors Ltd. 1,376,000 622
-----------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS
TPV Technology Ltd. 2,154,000 746
-----------------------------------------------------------------------------------------------
ELECTRIC UTILITIES
Huaneng Power
International, Inc., 'H' 1,112,000 1,269
-----------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Byd Co., Ltd. 308,000 693
-----------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES
China Oilfield Services, Ltd. 1,805,000 405
-----------------------------------------------------------------------------------------------
MARINE
China Shipping
Development Co., Ltd. 1,837,000 654
-----------------------------------------------------------------------------------------------
OIL & GAS
CNOOC Ltd. 2,255,000 3,326
-----------------------------------------------------------------------------------------------
7,715
===============================================================================================
CZECH REPUBLIC (0.4%)
BANKS
Komercni Banka AS 1,200 87
Komercni Banka AS GDR 3,300 79
-----------------------------------------------------------------------------------------------
166
-----------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Cesky Telecom AS 60,540 623
-----------------------------------------------------------------------------------------------
789
===============================================================================================
EGYPT (0.9%)
BANKS
Commercial International
Bank 33,808 208
-----------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
Orascom Construction
Industries 39,241 317
Orascom Construction
Industries GDR 60,448(a) 958
-----------------------------------------------------------------------------------------------
1,275
-----------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
Egyptian Mobile Phone
Network 57,125 511
-----------------------------------------------------------------------------------------------
1,994
===============================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS
June 30, 2003 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
VALUE
SHARES (000)
-----------------------------------------------------------------------------------------------
HUNGARY (0.5%)
BANKS
OTP Bank Rt. 40,686(a) $ 394
OTP Bank Rt. GDR 2,300(a) 45
-----------------------------------------------------------------------------------------------
439
-----------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Matav Rt. 45,545 156
Matav Rt. ADR 23,199 399
-----------------------------------------------------------------------------------------------
555
-----------------------------------------------------------------------------------------------
994
===============================================================================================
INDIA (4.6%)
AUTOMOBILES
Hero Honda Motors Ltd. 87,700 478
Tata Engineering &
Locomotive Co., Ltd. 143,000 609
-----------------------------------------------------------------------------------------------
1,087
-----------------------------------------------------------------------------------------------
BANKS
State Bank of India Ltd. 164,550(b) 1,426
-----------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Gujarat Ambuja Cements
Ltd. 104,500 462
-----------------------------------------------------------------------------------------------
CONSUMER FINANCE
Housing Development
Finance Corp., Ltd. 90 1
-----------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Mahanagar Telephone
Nigam Ltd. 157,430 385
-----------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
Bharat Heavy Electricals
Ltd. 138,700 804
-----------------------------------------------------------------------------------------------
FOOD & STAPLES
Colgate-Palmolive (India)
Ltd. 92,940 276
Hindustan Lever Ltd. 120,500(b) 463
-----------------------------------------------------------------------------------------------
739
-----------------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES
IndiaInfo.com PCL 116,052(b) --@
-----------------------------------------------------------------------------------------------
IT SERVICES
Infosys Technologies Ltd. 7,850 552
-----------------------------------------------------------------------------------------------
METALS & MINING
Hindalco Industries Ltd. 19,600 315
Steel Authority of India Ltd. 1,025,066(a) 381
Tata Iron & Steel Co., Ltd. 83,000 303
-----------------------------------------------------------------------------------------------
999
-----------------------------------------------------------------------------------------------
OIL & GAS
Oil & Natural Gas Corp.,
Ltd. 77,000 801
Reliance Industries Ltd. 67,433 $ 472
-----------------------------------------------------------------------------------------------
1,273
-----------------------------------------------------------------------------------------------
PHARMACEUTICALS
Glaxosmithkline
Pharmaceuticals Ltd. 27,000 207
Ranbaxy Laboratories Ltd. 40,400 683
-----------------------------------------------------------------------------------------------
890
-----------------------------------------------------------------------------------------------
ROAD & RAIL
Container Corp. of India
Ltd. 59,600 442
-----------------------------------------------------------------------------------------------
TOBACCO
ITC Ltd. 37,000 611
-----------------------------------------------------------------------------------------------
9,671
===============================================================================================
INDONESIA (3.6%)
AUTOMOBILES
Astra International Tbk PT 6,457,038(a) 2,798
-----------------------------------------------------------------------------------------------
BANKS
Bank Central Asia Tbk PT 2,250,500 784
Bank Mandiri Persero Tbk
PT 2,110,500(a) 173
Bank Pan Indonesia Tbk PT 2,082,000(a) 78
-----------------------------------------------------------------------------------------------
1,035
-----------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Telekomunikasi Indonesia
Tbk PT 3,769,000 2,113
-----------------------------------------------------------------------------------------------
MULTILINE RETAIL
Ramayana Lestari Sentosa
Tbk PT 2,307,000 902
-----------------------------------------------------------------------------------------------
TOBACCO
HM Sampoerna Tbk PT 1,272,000 640
-----------------------------------------------------------------------------------------------
7,488
===============================================================================================
ISRAEL (2.0%)
AEROSPACE & DEFENSE
Elbit Systems Ltd. 1 --@
-----------------------------------------------------------------------------------------------
BANKS
Bank Hapoalim Ltd. 379,900(a) 806
Bank Leumi Le-Israel 262,500(a) 421
-----------------------------------------------------------------------------------------------
1,227
-----------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT
ECI Telecom Ltd. 129,462(a) 381
-----------------------------------------------------------------------------------------------
SOFTWARE
Check Point Software
Technologies Ltd. 130,744(a) 2,556
-----------------------------------------------------------------------------------------------
4,164
===============================================================================================
JORDAN (0.1%)
BANKS
Arab Bank plc 480 146
===============================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS
June 30, 2003 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
VALUE
SHARES (000)
-----------------------------------------------------------------------------------------------
MALAYSIA (3.0%)
AUTOMOBILES
Perusahaan Otomobil
Nasional Bhd 186,000 $ 396
-----------------------------------------------------------------------------------------------
BANKS
Commerce Asset Holdings
Bhd 532,000 485
Malayan Banking Bhd 783,900 1,774
-----------------------------------------------------------------------------------------------
2,259
-----------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
Gamuda Bhd 820,000 1,327
-----------------------------------------------------------------------------------------------
ELECTRIC UTILITIES
YTL Corp. 419,000 441
-----------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE
Magnum Corp. Bhd 1,233,000 866
Resorts World Bhd 222,000 573
-----------------------------------------------------------------------------------------------
1,439
-----------------------------------------------------------------------------------------------
REAL ESTATE
SP Setia Bhd 733,500 552
-----------------------------------------------------------------------------------------------
6,414
===============================================================================================
MEXICO (7.1%)
BANKS
Grupo Financiero BBVA
Bancomer, 'B' 1,947,481(a) 1,644
-----------------------------------------------------------------------------------------------
BEVERAGES
Coca-Cola Femsa SA ADR 12,400(a) 266
Femsa UBD 275,475 1,133
-----------------------------------------------------------------------------------------------
1,399
-----------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Telmex 'L' ADR 128,435 4,036
-----------------------------------------------------------------------------------------------
FOOD & STAPLES
Wal-Mart de Mexico SA ADR 28,162 832
Wal-Mart de Mexico SA, 'C' 304,748 819
Wal-Mart de Mexico SA, 'V' 439,019 1,294
-----------------------------------------------------------------------------------------------
2,945
-----------------------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE
Grupo Aeroportuario
del Sureste SA ADR 40,070 586
-----------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
America Movil SA de CV
ADR 226,777 4,252
-----------------------------------------------------------------------------------------------
14,862
===============================================================================================
POLAND (1.6%)
BANKS
Bank Pekao SA 67,666(a) 1,753
Bank Pekao SA GDR 7,705(a) 194
-----------------------------------------------------------------------------------------------
1,947
-----------------------------------------------------------------------------------------------
MULTILINE RETAIL
Eastbridge NV 33,600(b) $ 1,344
-----------------------------------------------------------------------------------------------
3,291
===============================================================================================
RUSSIA (8.7%)
ELECTRIC UTILITIES
United Energy System GDR 64,100 1,631
-----------------------------------------------------------------------------------------------
METALS & MINING
MMC Norilsk Nickel ADR 32,800(a) 1,122
-----------------------------------------------------------------------------------------------
OIL & GAS
Gazprom (Registered) ADR 175,800 3,305
Lukoil Holdings ADR 45,619 3,604
Surgutneftegaz ADR 91,975 1,922
Surgutneftegaz
(Preferred) ADR 10,739 273
Yukos ADR 47,071 2,636
-----------------------------------------------------------------------------------------------
11,740
-----------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS
Alliance Cellulose Ltd., 'B' 156,075(b) --@
-----------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
AO VimpelCom ADR 16,900(a) 785
Mobile Telesystems ADR 33,800 1,994
Mobile Telesystems GDS 17,400 1,016
-----------------------------------------------------------------------------------------------
3,795
-----------------------------------------------------------------------------------------------
18,288
===============================================================================================
SOUTH AFRICA (16.0%)
BANKS
ABSA Group Ltd. 88,200 415
FirstRand Ltd. 2,013,520 2,058
Nedcor Ltd. 69,900 837
Standard Bank Group Ltd. 669,880 2,939
-----------------------------------------------------------------------------------------------
6,249
-----------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Telkom SA Ltd. 99,000(a) 513
Telkom SA Ltd. ADR 12,000(a) 250
-----------------------------------------------------------------------------------------------
763
-----------------------------------------------------------------------------------------------
FOOD & STAPLES
Metro Cash & Carry Ltd. 1,175,642(a) 363
-----------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES
Bidvest Group Ltd. 125,615 723
-----------------------------------------------------------------------------------------------
INSURANCE
Liberty Group Ltd. 38,720 262
Old Mutual plc 183,000 270
Old Mutual plc (London
Shares) 1,047,717 1,518
Sanlam Ltd. 883,910 828
-----------------------------------------------------------------------------------------------
2,878
-----------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS
June 30, 2003 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
VALUE
SHARES (000)
-----------------------------------------------------------------------------------------------
SOUTH AFRICA (CONT'D)
MEDIA
Naspers Ltd. 120,500 $ 419
-----------------------------------------------------------------------------------------------
METALS & MINING
Anglo American plc 368,348 5,711
Anglo American plc
(London Shares) 283,325 4,338
AngloGold Ltd. 25,000 793
AngloGold Ltd. ADR 26,692 852
Gold Fields Ltd. 192,900 2,311
Gold Fields Ltd. ADR 16,600 202
Harmony Gold Mining Co.,
Ltd. 58,200 767
Harmony Gold Mining
Co., Ltd. ADR 28,800 388
Impala Platinum Holdings
Ltd. 22,515 1,343
-----------------------------------------------------------------------------------------------
16,705
-----------------------------------------------------------------------------------------------
OIL & GAS
Sasol Ltd. 259,370 2,899
-----------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS
Sappi Ltd. 66,670 805
Sappi Ltd. ADR 9,070 112
-----------------------------------------------------------------------------------------------
917
-----------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
MTN Group Ltd. 763,340(a) 1,663
-----------------------------------------------------------------------------------------------
33,579
===============================================================================================
SOUTH KOREA (17.7%)
AUTO COMPONENTS
Hyundai Mobis 71,130 1,824
-----------------------------------------------------------------------------------------------
AUTOMOBILES
Hyundai Motor Co., Ltd.
(Preferred) 47,900 619
-----------------------------------------------------------------------------------------------
BANKS
Shinhan Financial Group
Co., Ltd. 81,880 853
-----------------------------------------------------------------------------------------------
CAPITAL MARKETS
Daishin Securities Co., Ltd. 93,990 1,628
Good Morning Shinhan
Securities Co., Ltd. 91,010(a) 404
Samsung Securities Co.,
Ltd. 47,180 1,143
-----------------------------------------------------------------------------------------------
3,175
-----------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Samsung SDI Co., Ltd. 30,750 2,329
-----------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING
LG Household & Health
Care Ltd. 34,870 900
-----------------------------------------------------------------------------------------------
FOOD PRODUCTS
Tongyang Confectionery
Corp. 14,000 $ 865
-----------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES
LG Electronics, Inc. 51,787 2,158
-----------------------------------------------------------------------------------------------
MACHINERY
Daewoo Shipbuilding &
Marine Engineering Co.,
Ltd. 32,830(a) 277
Daewoo Shipbuilding &
Marine Engineering Co.,
Ltd. GDR 50,900(a) 822
Samsung Heavy Industries
Co., Ltd. 169,810 681
-----------------------------------------------------------------------------------------------
1,780
-----------------------------------------------------------------------------------------------
MEDIA
CJ Home Shopping 23,524 1,221
-----------------------------------------------------------------------------------------------
METALS & MINING
POSCO 8,780 911
-----------------------------------------------------------------------------------------------
MULTILINE RETAIL
Hyundai Department Store
Co., Ltd. 50,970 1,134
Shinsegae Co., Ltd. 2,180 340
-----------------------------------------------------------------------------------------------
1,474
-----------------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS
Samsung Electronics Co.,
Ltd. 43,162 12,822
Samsung Electronics Co.,
Ltd. (Preferred) 13,260 1,892
-----------------------------------------------------------------------------------------------
14,714
-----------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
Pantech Co., Ltd. 30,320 286
SK Telecom Co., Ltd. 24,330 4,153
-----------------------------------------------------------------------------------------------
4,439
-----------------------------------------------------------------------------------------------
37,262
===============================================================================================
TAIWAN (12.4%)
AIRLINES
Eva Airways Corp. 2,462,628(a) 883
-----------------------------------------------------------------------------------------------
BANKS
Chinatrust Financial Holding
Co., Ltd. 1,999,748 1,615
Taishin Financial Holdings
Co., Ltd. 1,788,000(a) 931
-----------------------------------------------------------------------------------------------
2,546
-----------------------------------------------------------------------------------------------
CHEMICALS
Nan Ya Plastics Corp. 795,000 863
-----------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS
Ambit Microsystems Corp. 180,000 557
Compal Electronics, Inc. 321,000 431
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS
June 30, 2003 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
VALUE
SHARES (000)
-----------------------------------------------------------------------------------------------
TAIWAN (CONT'D)
COMPUTERS & PERIPHERALS (CONT'D)
Quanta Computer,
Inc. 628,200 $ 1,300
Quanta Storage, Inc. 7,000 50
-----------------------------------------------------------------------------------------------
2,338
-----------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
CTCI Corp. 657,000 426
-----------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING
Cheng Loong Co. 775,000 204
-----------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES
Capital Securities Corp. 1,554,000(a) 483
Fubon Financial Holding
Co., Ltd. 1,193,000(a) 956
Polaris Securities Co. 2,420,000(a) 1,162
Yuanta Securities Corp. 1,179,000 618
-----------------------------------------------------------------------------------------------
3,219
-----------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
Phoenixtec Power Co., Ltd. 746,000 628
-----------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Hon Hai Precision Industry
Co., Ltd. 617,300 2,242
-----------------------------------------------------------------------------------------------
INSURANCE
Cathay Financial Holding
Co., Ltd. 1,087,000 1,330
-----------------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS
Asia Optical Co., Inc. 119,000 620
Largan Precision Co., Ltd. 105,300 634
Premier Image
Technology Corp. 669,000 1,035
-----------------------------------------------------------------------------------------------
2,289
-----------------------------------------------------------------------------------------------
MARINE
Evergreen Marine Corp. 1,128,000 803
Yang Ming Marine Transport 784,000(a) 522
-----------------------------------------------------------------------------------------------
1,325
-----------------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS
ASE Test Ltd. 95,600(a) 526
Siliconware Precision
Industries Co. 1,444,692(a) 920
Taiwan Semiconductor
Manufacturing Co., Ltd. 3,742,334(a) 6,172
Zyxel Communications
Corp. 156,000(a) 293
-----------------------------------------------------------------------------------------------
7,911
-----------------------------------------------------------------------------------------------
26,204
===============================================================================================
THAILAND (3.6%)
BANKS
Bangkok Bank PCL 1,158,400(a) 1,858
Bangkok Bank PCL (NVDR) 152,700(a),(b) 203
Kasikornbank PCL (Foreign) 1,146,800(a) $ 1,069
Kasikornbank PCL 746,600(a) 603
Siam Commercial Bank PCL
(Foreign) 712,700(a) 609
-----------------------------------------------------------------------------------------------
4,342
-----------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
Italian Thai Development
PCL 374,200(a) 298
-----------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Siam Cement PCL NVDR 492,000(a) 1,753
-----------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES
Land & House PCL 3,977,800 898
-----------------------------------------------------------------------------------------------
MEDIA
BEC World PCL (Foreign) 35,300(b) 201
-----------------------------------------------------------------------------------------------
7,492
===============================================================================================
TURKEY (1.6%)
AUTOMOBILES
Tofas Turk Otomobil
Fabrikasi AS 165,021,859(a) 192
-----------------------------------------------------------------------------------------------
BANKS
Akbank TAS 78,839,493 233
Turkiye Is Bankasi AS, 'C' 96,780,000(a) 307
-----------------------------------------------------------------------------------------------
540
-----------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Akcansa Cimento AS 130,683,500 336
-----------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES
Arcelik AS 166,474,000 580
-----------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES
Enka Insaat ve Sanayi AS 17,173,094 589
-----------------------------------------------------------------------------------------------
OIL & GAS
Tupras-Turkiye Petrol
Rafinerileri AS 104,886,000(a) 691
-----------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
Turkcell Iletisim Hizmetleri
AS 72,363,000(a) 484
-----------------------------------------------------------------------------------------------
3,412
===============================================================================================
VENEZUELA (0.3%)
DIVERSIFIED TELECOMMUNICATION SERVICES
CANTV, 'D' ADR 45,243 565
===============================================================================================
TOTAL COMMON STOCKS
(Cost $181,272) 199,632
===============================================================================================
INVESTMENT COMPANIES (0.5%)
===============================================================================================
INDIA (0.5%)
Morgan Stanley Growth
Fund (Cost $891) 4,694,400(a),(c) 1,003
-----------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS
June 30, 2003 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
FACE
AMOUNT VALUE
(000) (000)
-----------------------------------------------------------------------------------------------
DEBT INSTRUMENTS (0.0%)
===============================================================================================
INDIA (0.0%)
CONSTRUCTION MATERIALS
DCM Shriram Industries
Ltd. 0.00% INR 335(a),(b),(d) $ --@
DCM Shriram Investments
Ltd. 0.00% 330(a),(b),(d) --@
FOOD & STAPLES RETAILING
Hindustan, 9.00%,
1/12/05 121 16
METALS & MINING
Shri Ishar Alloy Steel
15.00%, 4/21/01 581(a),(b),(d) --@
===============================================================================================
TOTAL FIXED INCOME SECURITIES
(Cost $1,495) 16
===============================================================================================
SHORT-TERM INVESTMENT (4.1%)
===============================================================================================
UNITED STATES (4.1%)
REPURCHASE AGREEMENT
J.P. Morgan Securities, Inc.,
1.05%, dated 6/30/03, due
7/1/03 (Cost $8,499) $ 8,499(e) $ 8,499
===============================================================================================
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (0.4%)
===============================================================================================
Brazilian Real BRL 78 27
British Pound GBP 1 1
Euro EUR 43 49
Hong Kong Dollar HKD 1 1
Hungarian Forint HUF 275 1
Indian Rupee INR 8,692 187
Indonesian Rupiah IDR 36,370 5
Moroccan Dirham MAD 68 --@
South African Rand ZAR 68 9
South Korean Won KRW 444 --@
Taiwan Dollar TWD 21,100 611
-----------------------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY
(Cost $883) 891
===============================================================================================
AMOUNT VALUE
(000) (000)
-----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.1%)
(Cost $193,040) $ 210,041
===============================================================================================
OTHER ASSETS (1.5%)
Receivable for Investments
Sold $ 2,313
Dividends Receivable 442
Interest Receivable 312
Tax Reclaim Receivable 87
Net Unrealized Gain on
Foreign Currency
Exchange Contracts 11
Other 31 3,196
===============================================================================================
LIABILITIES (-1.6%)
Payable For:
Investments Purchased (2,499)
Investment Advisory Fees (213)
Custodian Fees (123)
Country Tax Expense (70)
Professional Fees (43)
Directors' Fees and
Expenses (39)
Stockholder Reporting
Expenses (23)
Administrative Fees (10)
Bank Overdraft (10)
Other Liabilities (351) (3,381)
===============================================================================================
NET ASSETS (100%)
Applicable to 18,062,329, issued and
outstanding $0.01 par value shares
(100,000,000 shares authorized) $ 209,856
===============================================================================================
NET ASSET VALUE PER SHARE $ 11.62
===============================================================================================
AT JUNE 30, 2003, NET ASSETS CONSISTED OF:
Common Stock $ 181
Paid-in Capital 285,874
Undistributed (Distributions in Excess of) Net
Investment Income 541
Accumulated Net Realized Gain (Loss) (95,174)
Unrealized Appreciation (Depreciation) on
Investments and Foreign Currency Translations 18,434
===============================================================================================
TOTAL NET ASSETS $ 209,856
===============================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS
June 30, 2003 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
(a) -- Non-income producing.
(b) -- Investments valued at fair value- see Note A-1 to financial
statements. At June 30, 2003, the Fund held $3,637,000 of fair-valued
securities, representing 1.7% of net assets.
(c) -- The Morgan Stanley India Growth Fund is advised by an affiliate of the
Adviser. During the six months ended June 30, 2003, there were no
purchases or sales of this security. The Fund did not derive income from
this security during the six months ended June 30, 2003.
(d) -- Security is in default.
(e) -- The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated funds.
@ -- Value less than $500.
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
GDS -- Global Depositary Shares
NVDR -- Non Voting Depositary Receipt
PCL -- Public Company Limited
UBD -- Unit
MYR -- Malaysian Ringgit
PLN -- Polish Zloty
TRL -- Turkish Lira
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Fund had the following foreign currency exchange contract(s) open at
period end:
CURRENCY IN NET
TO EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
---------------------------------------------------------------------------
MYR 16 $ 4 7/2/03 US$ 4 $ 4 $ --@
PLN 398 102 7/2/03 US$ 102 102 --@
PLN 149 38 7/3/03 US$ 38 38 --@
TRL 104,846,443 74 7/1/03 US$ 74 74 --@
TRL 157,776,718 111 7/3/03 US$ 111 111 --@
ZAR 442 59 7/1/03 US$ 56 56 3
ZAR 6,022 805 7/3/03 US$ 798 798 7
ZAR 1,321 176 7/7/03 US$ 175 175 1
--------------------------------------------------------------------------
$ 1,471 $ 1,460 $ 11
==========================================================================
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY
CLASSIFICATION -- JUNE 30, 2003
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
-------------------------------------------------------------------------------
Automobiles $ 5,714 2.7%
Banks 27,084 12.9
Beverages 3,930 1.9
Capital Markets 3,175 1.5
Computers & Peripherals 3,084 1.5
Construction & Engineering 3,326 1.6
Construction Materials 2,551 1.2
Diversified Financial Services 3,219 1.5
Diversified Telecommunication Services 10,011 4.8
Electric Utilities 3,676 1.8
Electronic Equipment & Instruments 5,264 2.5
Food & Staples 4,047 1.9
Household Durables 3,636 1.7
Insurance 4,208 2.0
Leisure Equipment & Products 2,289 1.1
Metals & Mining 22,737 10.8
Multiline Retail 3,720 1.8
Oil & Gas 25,164 12.0
Semiconductors Equipment & Products 22,625 10.8
Software 2,556 1.2
Wireless Telecommunication Services 15,144 7.2
Other 32,881 15.7
-------------------------------------------------------------------------------
$ 210,041 100.1%
===============================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Financial Statements
STATEMENT OF OPERATIONS
SIX MONTHS ENDED
JUNE 30, 2003
(UNAUDITED)
(000)
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of $265 of foreign taxes withheld) $ 2,987
Interest 165
=============================================================================================================================
TOTAL INCOME 3,152
=============================================================================================================================
EXPENSES
Investment Advisory Fees 1,154
Custodian Fees 191
Professional Fees 79
Country Tax Expense 71
Administrative Fees 43
Stockholder Reporting Expenses 18
Other Expenses 28
=============================================================================================================================
TOTAL EXPENSES 1,584
=============================================================================================================================
NET INVESTMENT INCOME (LOSS) 1,568
=============================================================================================================================
NET REALIZED GAIN (LOSS) ON:
Investments (6,001)
Foreign Currency Transactions (78)
=============================================================================================================================
NET REALIZED GAIN (LOSS) (6,079)
=============================================================================================================================
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments 31,751
Foreign Currency Translations 16
=============================================================================================================================
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 31,767
=============================================================================================================================
TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 25,688
=============================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 27,256
=============================================================================================================================
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
(000) (000)
-----------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss) $ 1,568 $ 467
Net Realized Gain (Loss) (6,079) (10,965)
Change in Unrealized Appreciation (Depreciation) 31,767 (766)
=============================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 27,256 (11,264)
=============================================================================================================================
Distributions from and/or in excess of:
Net Investment Income -- (137)
=============================================================================================================================
Capital Share Transactions:
Repurchase of Shares (437,465 and 339,816 shares, respectively) (3,968) (3,148)
=============================================================================================================================
TOTAL INCREASE (DECREASE) 23,288 (14,549)
=============================================================================================================================
Net Assets:
Beginning of Period 186,568 201,117
=============================================================================================================================
END OF PERIOD (INCLUDING UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT
INCOME OF $541 AND $(1,027), RESPECTIVELY) $ 209,856 $ 186,568
=============================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Financial Highlights
SELECTED PER SHARE DATA AND RATIOS
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2003 ---------------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.08 $ 10.68 $ 11.03 $ 21.26 $ 10.33 $ 15.52
--------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 0.09+ 0.03+ 0.03 (0.15) (0.03) 0.04
Net Realized and Unrealized Gain (Loss) on
Investments 1.41 (0.65) (0.43) (8.04) 10.87 (3.05)
--------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.50 (0.62) (0.40) (8.19) 10.84 (3.01)
--------------------------------------------------------------------------------------------------------------------------------
Distributions from and/or in excess of:
Net Investment Income -- (0.01) -- -- -- (0.11)
Net Realized Gain -- -- -- (2.31) -- (2.18)
--------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- (0.01) -- (2.31) -- (2.29)
--------------------------------------------------------------------------------------------------------------------------------
Anti-Dilutive Effect of Share Repurchase Program 0.04 0.03 0.05 0.27 0.09 0.11
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.62 $ 10.08 $ 10.68 $ 11.03 $ 21.26 $ 10.33
================================================================================================================================
PER SHARE MARKET VALUE, END OF PERIOD $ 9.75 $ 8.34 $ 8.63 $ 8.75 $ 16.31 $ 8.13
================================================================================================================================
TOTAL INVESTMENT RETURN:
Market Value 16.91%** (3.28)% (1.37)% (34.60)% 100.77% (24.88)%
Net Asset Value (1) 15.22%** (5.49)% (3.17)% (36.74)% 105.81% (19.61)%
================================================================================================================================
RATIOS, SUPPLEMENTAL DATA:
--------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) $ 209,856 $ 186,568 $ 201,117 $ 213,205 $ 435,795 $ 221,609
--------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.72%* 1.75% 1.85% 1.64% 1.76% 1.96%
Ratio of Net Investment Income to Average Net
Assets 1.69%* 0.23% 0.21% (0.73)% (0.20)% 0.36%
Portfolio Turnover Rate 38%** 75% 83% 81% 121% 101%
--------------------------------------------------------------------------------------------------------------------------------
(1) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. This percentage is not an indication of the performance of a
stockholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund.
+ Per share amounts are based on average shares outstanding.
* Annualized
** Non-Annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
MORGAN STANLEY EMERGING MARKETS FUND, INC.
June 30, 2003 (unaudited)
NOTES TO FINANCIAL STATEMENTS
The Morgan Stanley Emerging Markets Fund, Inc. (the "Fund") was
incorporated on August 27, 1991 and is registered as a non-diversified,
closed-end management investment company under the Investment Company Act of
1940, as amended. The Fund's investment objective is long-term capital
appreciation through investments primarily in equity securities.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with accounting principles generally accepted in the United States of
America. Such policies are consistently followed by the Fund in the preparation
of its financial statements. Accounting principles generally accepted in the
United States of America may require management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: In valuing the Fund's assets, all listed securities for
which market quotations are readily available are valued at the last sale
price on the valuation date, or if there was no sale on such date, at the
mean between the current bid and asked prices or the bid price if only bid
quotations are available. Securities which are traded over-the-counter are
valued at the mean of the current bid and asked prices obtained from
reputable brokers. Securities may be valued by independent pricing
services. The prices provided by a pricing service take into account broker
dealer market price quotations for institutional size trading in similar
groups of securities, security quality, maturity, coupon and other security
characteristics as well as any developments related to the specific
securities. Short-term securities which mature in 60 days or less are
valued at amortized cost. For all other securities and investments for
which market values are not readily available, including restricted
securities, and where prices determined in accordance with the
aforementioned procedures are not reflective of fair market value, values
are determined in good faith, under fair valuation procedures adopted by
the Board of Directors, although actual calculations may be done by others.
2. REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements under
which the Fund lends excess cash and takes possession of securities with an
agreement that the counterparty will repurchase such securities. In
connection with transactions in repurchase agreements, a bank as custodian
for the Fund takes possession of the underlying securities (collateral),
with a market value at least equal to the amount of the repurchase
transaction, including principal and accrued interest. To the extent that
any repurchase transaction exceeds one business day, the value of the
collateral is marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Fund has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy by
the counterparty to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
3. FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars at the mean of the bid and asked prices of such currencies
against U.S. dollars last quoted by a major bank as follows:
- investments, other assets and liabilities at the prevailing rates of
exchange on the valuation date;
- investment transactions and investment income at the prevailing rates of
exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the period, the Fund does not
isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of the securities held at period end.
Similarly, the Fund does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market
prices of securities sold during the period. Accordingly, realized and
unrealized foreign currency gains (losses) due to securities transactions
are included in the reported net realized and unrealized gains (losses) on
investment transactions and balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from sales and maturities of foreign
currency exchange contracts, disposition of foreign currencies, currency
gains or losses realized between the trade and settlement dates on
securities transactions, and the difference between the amount of
investment income and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent amounts actually received or paid. Net
unrealized currency gains (losses) from valuing foreign
12
MORGAN STANLEY EMERGING MARKETS FUND, INC.
June 30, 2003 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
currency denominated assets and liabilities at period end exchange rates
are reflected as a component of unrealized appreciation (depreciation) on
investments and foreign currency translations in the Statement of Net
Assets. The change in net unrealized currency gains (losses) on foreign
currency translations for the period is reflected in the Statement of
Operations.
A substantial portion of the Fund's net assets consist of securities of
issuers located in emerging markets or which are denominated in foreign
currencies. Changes in currency exchange rates will affect the value of and
investment income from such securities. Emerging market securities are
often subject to greater price volatility, limited capitalization and
liquidity, and higher rates of inflation than U.S. securities. In addition,
emerging market issuers may be subject to substantial governmental
involvement in the economy and greater social, economic and political
uncertainty. Such securities may be concentrated in a limited number of
countries and regions and may vary throughout the year. Accordingly, the
price which the Fund may realize upon sale of securities in such markets
may not be equal to its value as presented in the financial statements.
The Fund may use derivatives to achieve its investment objectives. The Fund may
engage in transactions in futures contracts on foreign currencies, stock
indices, as well as in options, swaps and structured notes. Consistent with the
Fund's investment objectives and policies, the Fund may use derivatives for
non-hedging as well as hedging purposes.
Following is a description of derivative instruments that the Fund has utilized
and their associated risks:
4. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into foreign
currency exchange contracts generally to attempt to protect securities and
related receivables and payables against changes in future foreign exchange
rates and, in certain situations, to gain exposure to a foreign currency. A
foreign currency exchange contract is an agreement between two parties to
buy or sell currency at a set price on a future date. The market value of
the contract will fluctuate with changes in currency exchange rates. The
contract is marked-to-market daily and the change in market value is
recorded by the Fund as unrealized gain or loss. The Fund records realized
gains or losses when the contract is closed equal to the difference between
the value of the contract at the time it was opened and the value at the
time it was closed. Risk may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their
contracts and is generally limited to the amount of unrealized gain on the
contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
5. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Interest
income is recognized on the accrual basis. Dividend income is recorded on
the ex-dividend date, (except for certain dividends that may be recorded as
soon as the Fund is informed of such dividends) net of applicable
withholding taxes. Distributions to stockholders are recorded on the
ex-dividend date.
B. ADVISER: Morgan Stanley Investment Management Inc. (the "Adviser") provides
investment advisory services to the Fund under the terms of an Investment
Advisory Agreement (the "Agreement"). Under the Agreement, the Adviser is paid a
fee computed weekly and payable monthly at an annual rate of 1.25% of the Fund's
average weekly net assets.
C. ADMINISTRATOR: JPMorgan Chase Bank, through its corporate affiliate J.P.
Morgan Investor Services Co. (the "Administrator"), provides administrative
services to the Fund under an Administration Agreement. The Administrator is
paid a fee computed weekly and payable monthly at an annual rate of 0.02435% of
the Fund's average weekly net assets, plus $24,000 per annum. In addition, the
Fund is charged for certain out-of-pocket expenses incurred by the Administrator
on its behalf.
D. CUSTODIAN: JPMorgan Chase Bank serves as custodian for the Fund. Custody fees
are payable monthly based on assets held in custody, investment purchase and
sales activity and account maintenance fees, plus reimbursement for certain
out-of-pocket expenses.
E. FEDERAL INCOME TAXES: It is the Fund's intention to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required in the financial
statements. Dividend income and distributions to stockholders are recorded on
the ex-dividend date.
The Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income and/
13
MORGAN STANLEY EMERGING MARKETS FUND, INC.
June 30, 2003 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
or capital gains earned or repatriated. Taxes are accrued and applied to net
investment income, net realized gains and net unrealized appreciation as such
income and/or gains are earned.
The tax character of distributions paid may differ from the character of
distributions shown on the Statement of Changes in Net Assets due to short-term
capital gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2002 and 2001 were as follows:
2002 DISTRIBUTIONS 2001 DISTRIBUTIONS
PAID FROM: PAID FROM:
(000) (000)
------------------------------- -------------------------
LONG-TERM LONG-TERM
ORDINARY CAPITAL ORDINARY CAPITAL
INCOME GAIN INCOME GAIN
----------------------------------------------------------
$ 137 $ -- $ -- $ --
The amount and character of income and capital gain distributions to be paid by
the Fund are determined in accordance with Federal income tax regulations, which
may differ from accounting principles generally accepted in the United States of
America. The book/tax differences are considered either temporary or permanent
in nature.
Temporary differences are attributable to differing book and tax treatments for
the timing of the recognition of gains and losses on certain investment
transactions and the timing of the deductibility of certain expenses.
Permanent differences may result in reclassifications among undistributed
(distributions in excess of) net investment income, accumulated net realized
gain (loss) and paid-in capital. Adjustments for permanent book-tax differences,
if any, are not reflected in ending undistributed (distributions in excess of)
net investment income for the purpose of calculating net investment income
(loss) per share in the financial highlights.
At December 31, 2002, the components of distributable earnings on a tax basis
were as follows:
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY INCOME LONG-TERM CAPITAL GAIN
(000) (000)
----------------------------------------------------------
$ 5 $ --
----------------------------------------------------------
At June 30, 2003, the U.S. Federal income tax cost basis of investments
(excluding foreign currency) was $192,157,000 and, accordingly, net unrealized
appreciation for U.S. Federal income tax purposes was $16,993,000 of which
$32,473,000 related to appreciated securities and $15,480,000 related to
depreciated securities.
At December 31, 2002, the Fund had a capital loss carry-forward for U.S. Federal
income tax purposes of approximately $83,769,000 available to offset future
capital gains of which $65,987,000 will expire on December 31, 2009 and
$17,782,000 will expire on December 31, 2010. To the extent that capital gains
are offset, such gains will not be distributed to the stockholders.
Net capital and currency losses incurred after October 31, and within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. For the year ended December 31, 2002, the Fund deferred to January
1, 2003, for U.S. Federal income tax purposes, post-October currency losses of
$31,000 and post-October capital losses of $1,966,000.
F. OTHER: During the six months ended June 30, 2003, the Fund made purchases and
sales totaling approximately $69,895,000 and $78,929,000, respectively, of
investment securities other than long-term U.S. Government securities and
short-term investments. There were no purchases or sales of long-term U.S.
Government securities.
Each Director of the Fund who is not an officer of the Fund or an affiliated
person as defined under the Investment Company Act of 1940, as amended, may
elect to participate in the Directors' Deferred Compensation Plan (the "Plan").
Under the Plan, such Directors may elect to defer payment of a percentage of
their total fees earned as a Director of the Fund. These deferred portions are
treated, based on an election by the Director, as if they were either invested
in the Fund's shares or invested in U.S. Treasury Bills, as defined under the
Plan. At June 30, 2003, the deferred fees payable, under the Plan, totaled
$38,000 and are included in Payable for Directors' Fees and Expenses on the
Statement of Net Assets. The deferred portion of Directors' Fees and Expenses
shown on the Statement of Operations is impacted by fluctuations in the market
value of the investments selected by each Director. For the six months ended
June 30, 2003, Directors' Fees and Expenses were decreased by $4,000 due to
these fluctuations.
For the six months ended June 30, 2003, the Fund incurred $4,000 of brokerage
commissions with Morgan Stanley & Co., an affiliate of the Adviser.
14
MORGAN STANLEY EMERGING MARKETS FUND, INC.
June 30, 2003 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
On July 30, 1998, the Fund commenced a share repurchase program for purposes of
enhancing stockholder value and reducing the discount at which the Fund's shares
traded from their net asset value. For the six months ended June 30, 2003, the
Fund repurchased 437,465 of its shares at an average discount of 14.80% from net
asset value per share. Since the inception of the program, the Fund has
repurchased 4,762,021 of its shares at an average discount of 19.84% from net
asset value per share. The Fund expects to continue to repurchase its
outstanding shares at such time and in such amounts as it believes will further
the accomplishment of the foregoing objectives, subject to review by the Board
of Directors.
PROPOSAL:
1. To elect the following Directors, effective July 31, 2003:
VOTES IN VOTES
FAVOR OF AGAINST
------------------------
1) Michael Bozic 15,925,167 1,035,439
2) Charles A. Fiumefreddo 15,929,511 1,031,094
3) Edwin J. Garn 15,929,551 1,031,054
4) Wayne E. Hedien 15,929,511 1,031,094
5) James F. Higgins 15,929,551 1,031,054
6) Dr. Manuel H. Johnson 15,929,551 1,031,054
7) Philip J. Purcell 15,929,511 1,031,094
2. That stockholders recommend that the Board of Directors act to adopt
interval-fund status for the Fund, under which the Fund will make repurchase
offers at three-month intervals for not less than 10% of the Fund's shares
outstanding at not less than 98% of net asset value (NAV), and to effect the
first such repurchase offer not later than September 20, 2003:
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
5,791,503 6,168,085 204,404
Also effective July 31, 2003, John D. Barrett II, Thomas P. Gerrity, Gerard E.
Jones, Vincent R. McLean, C. Oscar Morong, Jr. and William G. Morton, Jr. have
resigned from the Board of Directors.
15
MORGAN STANLEY EMERGING MARKETS FUND, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each stockholder will be deemed to have elected, unless American Stock Transfer
& Trust Company (the "Plan Agent") is otherwise instructed by the stockholder in
writing, to have all distributions automatically reinvested in Fund shares.
Participants in the Plan have the option of making additional voluntary cash
payments to the Plan Agent, annually, in any amount from $100 to $3,000, for
investment in Fund shares.
Dividend and capital gain distributions will be reinvested on the
reinvestment date in full and fractional shares. If the market price per share
equals or exceeds net asset value per share on the reinvestment date, the Fund
will issue shares to participants at net asset value. If net asset value is less
than 95% of the market price on the reinvestment date, shares will be issued at
95% of the market price. If net asset value exceeds the market price on the
reinvestment date, participants will receive shares valued at market price. The
Fund may purchase shares of its Common Stock in the open market in connection
with dividend reinvestment requirements at the discretion of the Board of
Directors. Should the Fund declare a dividend or capital gain distribution
payable only in cash, the Plan Agent will purchase Fund shares for participants
in the open market as agent for the participants.
The Plan Agent's fees for the reinvestment of dividends and distributions
will be paid by the Fund. However, each participant's account will be charged a
pro rata share of brokerage commissions incurred on any open market purchases
effected on such participant's behalf. A participant will also pay brokerage
commissions incurred on purchases made by voluntary cash payments. Although
stockholders in the Plan may receive no cash distributions, participation in the
Plan will not relieve participants of any income tax which may be payable on
such dividends or distributions.
In the case of stockholders, such as banks, brokers or nominees, that hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
stockholder as representing the total amount registered in the stockholder's
name and held for the account of beneficial owners who are participating in the
Plan.
Stockholders who do not wish to have distributions automatically reinvested
should notify the Plan Agent in writing. There is no penalty for
non-participation or withdrawal from the Plan, and stockholders who have
previously withdrawn from the Plan may rejoin at any time. Requests for
additional information or any correspondence concerning the Plan should be
directed to the Plan Agent at:
Morgan Stanley Emerging Markets Fund, Inc.
American Stock Transfer & Trust Company
Dividend Reinvestment and Cash Purchase Plan
59 Maiden Lane
New York, New York 10030
1-800-278-4353
16
ITEM 2. CODE OF ETHICS. Not applicable for semi-annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable for semi-annual
reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable for semi-annual
reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable for semi-annual
reports.
ITEM 6. [RESERVED.]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. Not applicable for semi-annual reports.
ITEM 8. [RESERVED.]
ITEM 9. CONTROLS AND PROCEDURES.
The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Fund's internal controls
or in other factors that could significantly affect the Fund's internal controls
subsequent to the date of their evaluation.
ITEM 10. EXHIBITS.
(a) Code of Ethics - Not applicable for semi-annual reports.
(b) Certifications of Principal Executive Officer and Principal Financial
Officer attached hereto as part of EX-99.CERT.
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.
(Registrant) Morgan Stanley Emerging Markets Fund, Inc.
By: Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 19, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 19, 2003
By: James W. Garrett
Name: James W. Garrett
Title: Principal Financial Officer
Date: August 19, 2003