ANNUAL REPORT
Morgan Stanley Emerging Markets Fund, Inc. December 31, 2002
DIRECTORS AND OFFICERS
Barton M. Biggs William G. Morton, Jr.
CHAIRMAN OF THE DIRECTOR
BOARD OF DIRECTORS
Michael Nugent
Ronald E. Robison DIRECTOR
PRESIDENT AND DIRECTOR
Fergus Reid
John D. Barrett II DIRECTOR
DIRECTOR
Stefanie V. Chang
Thomas P. Gerrity VICE PRESIDENT
DIRECTOR
Lorraine Truten [MORGAN STANLEY LOGO]
Gerard E. Jones VICE PRESIDENT
DIRECTOR Morgan Stanley
James W. Garrett Emerging Markets Fund, Inc.
Joseph J. Kearns TREASURER
DIRECTOR
Mary E. Mullin
Vincent R. McLean SECRETARY
DIRECTOR
Belinda A. Brady
C. Oscar Morong, Jr. ASSISTANT TREASURER
DIRECTOR
INVESTMENT ADVISER
Morgan Stanley Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
ADMINISTRATOR
JPMorgan Chase Bank
73 Tremont Street
Boston, Massachusetts 02108
CUSTODIAN
JPMorgan Chase Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
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.
Letter To Stockholders Overview
For the year ended December 31, 2002, the Morgan Stanley Emerging Markets Fund,
Inc. (the "Fund") had a total return, based on net asset value per share of
-5.49% compared with -6.17% for the Morgan Stanley Capital International (MSCI)
Emerging Markets Free Net Index (the "Index"). On December 31, 2002, the closing
price of the Fund's shares on the New York Stock Exchange was $8.34,
representing a 17.3% discount to the Fund's net asset value per share.
MARKET REVIEW
Overall, country allocation contributed positively to the Fund's performance
while the impact of stock selection was mixed. Country allocations in Israel
(primarily driven by stock selection as the country index was down 31.3%),
coupled with underweights in Argentina (-50.7%) and our overweights in Indonesia
(+41.9%) and South Korea (+8.3%) were strong contributors to relative
performance. Our overweight position in Turkey (-35.8%) hurt performance. The
Fund's holdings in Israel, India and China were positive contributors to
relative performance while stock selection in Russia was weak.
In 2002, overall emerging market performance was hampered by weak global
economic growth, domestic concerns in select emerging markets, the continued
sell off of U.S. equities and increased geo-political risk. Nevertheless, in
2002 the asset class outperformed both the U.S. and developed international
markets. The Index fell 6.2% versus a 15.9% decline in MSCI Europe, Australasia
and Far East index and a 22.1% decline in the S&P 500.
Emerging markets started the year in positive territory as equities in this
asset class were supported by early year expectations of a U.S. led economic
recovery and positive economic data from select emerging markets countries.
However, after outperforming for much of the year and rebounding over 40.0% from
September 2001 lows, performance in this asset class turned negative during the
second and third quarters. The sharp sell-off in Latin America (down 40.5%
during the two quarters ended September 30, 2002) and profit taking within
cyclical markets such as South Korea and Taiwan were the primary reasons for
declines. Risk aversion increased on a global basis during the second quarter,
dominated by negative sentiment toward Brazil (due to poor political outlook)
and greater uncertainty over the global backdrop. Increased reports of corporate
accounting fraud and concerns over the strength of the U.S. economic recovery
coupled with geopolitical risks in the Asian sub-continent and the Middle East
served to undermine investor confidence for much of the year. Nevertheless, amid
a more favorable tone in U.S. equities, particularly in the months of October
and November, global emerging markets rebounded given reduced political concerns
in Brazil and better than expected corporate earnings and export data from
select emerging markets. Global emerging markets ended the period in review with
a strong 10.0% fourth quarter return.
MARKET OUTLOOK
Our long-term outlook for emerging markets remains positive. We believe the
emerging markets are well positioned to continue to outperform global markets
given valuations, corporate fundamentals, relative growth and leveraged exposure
to the pick-up in global sentiment and economic activity. Near-term, however,
global equities are likely to remain volatile given concerns over high oil
prices due to the crisis in Iraq and Venezuela, and economic uncertainties in
the U.S., Japan and Germany. Nevertheless, our expectations are for oil prices
to fall to more normal levels once the crises in Iraq passes and for global
economies to recover in the second half of this year. Emerging markets are
likely to be supported by reduced fears of a U.S. double dip recession as the
economy begins to show the benefits of U.S. monetary easing that has lowered
rates to 1.25%, a 41 year low. Signs of fundamental improvements in Turkey,
Central Europe and Russia, along with patches of decent domestic strength in
Asia, continue to support overall sentiment in emerging markets. On a bottom-up
basis, we continue to focus on earnings visibility as a driver of medium-term
returns.
OTHER DEVELOPMENTS
In our ongoing efforts to reduce Fund expenses, the Fund will discontinue the
distribution of first and third quarter stockholder reports. The Fund will
continue to produce and distribute semi-annual and annual stockholder reports.
Additionally, the Fund's portfolio holdings information that was contained in
the first and third quarter reports will be available on our web site, which is
www.morganstanley.com/im, beginning in May of 2003. If you have difficulty
accessing or navigating the site, or if you would like us to send you a copy of
the portfolio holdings, please call us at 1-800-221-6726 and we will be happy to
assist you.
On February 13, 2003, Barton M. Biggs resigned as Director and Chairman of the
Board of Directors of the Fund. On that same day, Mitch Merin, President and
Chief Operating Officer of the Adviser, was elected by the Fund's Board of
Directors to serve as a Director and Chairman of the Board of Directors of the
Fund.
Sincerely,
/s/ Ronald E. Robison
Ronald E. Robison
President and Director January 2003
2
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Investment Summary (Unaudited) December 31, 2002
Historical Information
TOTAL RETURN (%)
-----------------------------------------------------------------------
MARKET VALUE(1) NET ASSET VALUE(2) INDEX(3)
-----------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
-------------------------------------------------------------------------------------------------------------------------
One Year (3.28)% (3.28)% (5.49)% (5.49)% (6.17)% (6.17)%
Five Year (5.90) (1.21) (4.23) (0.86) (21.23) (4.66)
Ten Year 27.57 2.46 67.02 5.26 13.44 1.27
Since Inception* 64.63 4.57 99.07 6.37 38.48 2.96
Past performance is not predictive of future performance.
[CHART]
Returns and Per Share Information
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
------------------------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share $28.20 $20.30 $14.69 $15.69 $15.52 $10.33 $21.26 $11.03 $10.68 $10.08
------------------------------------------------------------------------------------------------------------------------------
Market Value Per Share $31.63 $21.50 $15.50 $13.88 $13.06 $ 8.13 $16.31 $ 8.75 $ 8.63 $ 8.34
------------------------------------------------------------------------------------------------------------------------------
Premium/(Discount) 12.2% 5.9% 5.5% (11.5)% (15.9)% (21.3)% (23.3)% (20.7)% (19.2)% (17.3)%
------------------------------------------------------------------------------------------------------------------------------
Income Dividends -- -- -- $ 0.05 $ 0.01 $ 0.11 -- -- -- $0.01
------------------------------------------------------------------------------------------------------------------------------
Capital Gains Distributions $ 1.49 $ 6.50 $ 1.29 $0.98 $ 0.01 $ 2.18 -- $ 2.31 -- --
------------------------------------------------------------------------------------------------------------------------------
Fund Total Return(2) 95.22%+ (5.33)% (16.30)%+ 13.84% (0.97)% (19.61)% 105.81% (36.74)% (3.17)% (5.49)%
------------------------------------------------------------------------------------------------------------------------------
Index Total Return(3) 74.84% (7.32)% (5.21)% 6.03% (11.59)% (25.34)% 66.48% (30.97)% (2.62)% (6.17)%
------------------------------------------------------------------------------------------------------------------------------
(1) Assumes dividends and distributions, if any, were reinvested.
(2) 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. Total returns do not reflect the deduction of taxes that a
stockholder would pay on Fund distributions or the redemption of fund
shares. These percentages are 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.
(3) The Morgan Stanley Capital International Emerging Markets Free Net Index is
a market capitalization weighted index comprised of companies that are
representative of the market structure of developing countries in Latin
America, Asia, Eastern Europe, the Middle East and Africa. Dividends are
assumed to be reinvested after deduction of withholding tax, applying the
rate applicable to non-resident individuals who do not benefit from double
taxation treaties.
* The Fund commenced operations on November 1, 1991.
+ This return does not include the effect of the rights issued in connection
with the rights offering.
FOREIGN INVESTING INVOLVES CERTAIN RISKS, INCLUDING CURRENCY FLUCTUATIONS
AND CONTROLS, RESTRICTIONS ON FOREIGN INVESTMENTS, LESS GOVERNMENTAL
SUPERVISION AND REGULATION, LESS LIQUIDITY AND THE POTENTIAL FOR MARKET
VOLATILITY AND POLITICAL INSTABILITY. IN ADDITION, INVESTING IN EMERGING
MARKETS MAY INVOLVE A RELATIVELY HIGHER DEGREE OF VOLATILITY.
3
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Portfolio Summary (Unaudited) December 31, 2002
[CHART]
Allocation of Total Investments
Equity Securities 98.1%
Short-Term Investments 1.9%
[CHART]
Industries
Semiconductor Equipment & Products 13.0%
Banks 12.9%
Metals & Mining 11.1%
Oil & Gas 8.4%
Wireless Telecommunication Services 8.4%
Other 46.2%
[CHART]
Country Weightings
South Korea 21.7%
Taiwan 13.9%
South Africa 13.0%
Mexico 7.8%
India 5.9%
Other 37.7%
Ten Largest Holdings*
PERCENT OF
NET ASSETS
-------------------------------------------------------------------
1. Samsung Electronics Co., Ltd. (South Korea) 8.8%
2. Anglo American plc (South Africa) 4.0
3. Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan) 2.8
4. SK Telecom Co., Ltd. (South Korea) 2.6
5. Telmex (Mexico) 2.6
6. Teva Pharmaceutical Industries Ltd. (Israel) 2.0
7. POSCO (South Korea) 1.9
8. China Mobile (Hong Kong) Ltd. (China) 1.8
9. America Movil SA de CV (Mexico) 1.6
10. LUKoil Holdings (Russia) 1.5
----
29.6%
====
* Excludes Short-Term Investments
4
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS
Statement of Net Assets December 31, 2002
VALUE
SHARES (000)
---------------------------------------------------------------------------------------------
COMMON STOCKS (98.0%)
(UNLESS OTHERWISE NOTED)
=============================================================================================
BRAZIL (4.8%)
AEROSPACE & DEFENSE
Embraer ADR 45,058 $ 716
---------------------------------------------------------------------------------------------
BANKS
Banco Bradesco SA ADR 24,573 366
Banco Itau SA ADR 36,710 874
Banco Nacional SA (Preferred) 61,598,720(a),(b) --@
---------------------------------------------------------------------------------------------
1,240
---------------------------------------------------------------------------------------------
BEVERAGES
AmBev (Preferred) ADR 104,689 1,629
---------------------------------------------------------------------------------------------
ELECTRIC UTILITIES
CEMIG ADR 43,144 316
---------------------------------------------------------------------------------------------
METALS & MINING
CVRD (Preferred) ADR 74,013 2,036
CVRD ADR 12,600 364
---------------------------------------------------------------------------------------------
2,400
---------------------------------------------------------------------------------------------
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 106,756 1,431
Petrobras SA ADR 48,663 727
---------------------------------------------------------------------------------------------
2,158
---------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS
Aracruz Celulose SA ADR 5,700 106
Votorantim Celulose e Papel SA ADR 20,600 338
---------------------------------------------------------------------------------------------
444
---------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
Celular CRT (Preferred), 'A' 1,182,547 103
---------------------------------------------------------------------------------------------
9,006
=============================================================================================
CHINA/HONG KONG (5.7%)
AIRLINES
China Southern Airlines Co., Ltd. 3,866,000 1,041
---------------------------------------------------------------------------------------------
CHEMICALS
Sinopec Shanghai Petrochemical Co., Ltd., 'H' 2,656,000(a) 402
---------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS
TPV Technology Ltd. 2,201,000 679
---------------------------------------------------------------------------------------------
ELECTRIC UTILITIES
Huaneng Power International, Inc., 'H' 1,374,000 1,101
---------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Byd Co., Ltd. 177,000(a) 356
---------------------------------------------------------------------------------------------
MARINE
China Shipping Development Co., Ltd. 573,000 120
---------------------------------------------------------------------------------------------
METALS & MINING
Yanzhou Coal Mining Co., Ltd., 'H' 832,000 331
---------------------------------------------------------------------------------------------
OIL & GAS
CNOOC Ltd. 1,675,000 2,180
---------------------------------------------------------------------------------------------
TEXTILES & APPAREL
Texwinca Holdings Ltd. 652,000 485
---------------------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE
Cosco Pacific Ltd. 602,000 494
---------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
China Mobile (Hong Kong) Ltd. 1,415,000(a) 3,366
---------------------------------------------------------------------------------------------
10,555
=============================================================================================
CZECH REPUBLIC (0.3%)
BANKS
Komercni Banka AS 4,200 290
Komercni Banka AS GDR 8,100 186
---------------------------------------------------------------------------------------------
476
=============================================================================================
HUNGARY (2.3%)
BANKS
OTP Bank Rt. 144,682 1,423
OTP Bank Rt. GDR 33,500 658
---------------------------------------------------------------------------------------------
2,081
---------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Matav Rt. 100,736 365
Matav Rt. ADR 23,699 422
---------------------------------------------------------------------------------------------
787
---------------------------------------------------------------------------------------------
OIL & GAS
MOL Magyar Olaj-es Gazipari Rt. 35,236 823
MOL Magyar Olaj-es Gazipari Rt. GDR 24,789 580
---------------------------------------------------------------------------------------------
1,403
---------------------------------------------------------------------------------------------
4,271
=============================================================================================
INDIA (5.4%)
AUTOMOBILES
Hero Honda Motors Ltd. 131,200 743
Tata Engineering & Locomotive Co., Ltd. 87,000(a) 293
---------------------------------------------------------------------------------------------
1,036
---------------------------------------------------------------------------------------------
BANKS
State Bank of India Ltd. 229,550(b) 1,389
---------------------------------------------------------------------------------------------
CHEMICALS
Reliance Industries Ltd. 74,933 465
---------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Gujarat Ambuja Cements Ltd. 102,500 349
---------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
5
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS
Statement of Net Assets (cont'd) December 31, 2002
VALUE
SHARES (000)
---------------------------------------------------------------------------------------------
INDIA (CONT'D)
DIVERSIFIED FINANCIALS
Housing Development Finance Corp., Ltd. 58,510 $ 437
---------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Mahanagar Telephone Nigam Ltd. 157,430 312
---------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
Bharat Heavy Electricals Ltd. 123,700 445
---------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES
Oil & Natural Gas Corp., Ltd. 53,000 387
---------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS
Colgate-Palmolive (India) Ltd. 73,190 206
Hindustan Lever Ltd. 160,500 608
---------------------------------------------------------------------------------------------
814
---------------------------------------------------------------------------------------------
IT CONSULTING & SERVICES
Infosys Technologies Ltd. 12,850 1,279
Wipro Ltd. 6,500 221
Wipro Ltd. ADR 6,000 201
---------------------------------------------------------------------------------------------
1,701
---------------------------------------------------------------------------------------------
METALS & MINING
Hindalco Industries Ltd. 34,600 423
Steel Authority of India Ltd. 1,105,066(a) 236
Tata Iron & Steel Co., Ltd. 167,000 528
---------------------------------------------------------------------------------------------
1,187
---------------------------------------------------------------------------------------------
OIL & GAS
Hindustan Petroleum Corp., Ltd. 66,500 399
---------------------------------------------------------------------------------------------
OTHER
IndiaInfo.com PCL 116,052(b),(f) --@
---------------------------------------------------------------------------------------------
PHARMACEUTICALS
Ranbaxy Laboratories Ltd. 49,400 611
---------------------------------------------------------------------------------------------
ROAD & RAIL
Container Corp. of India Ltd. 107,600 515
---------------------------------------------------------------------------------------------
10,047
=============================================================================================
INDONESIA (3.2%)
AUTOMOBILES
Astra International Tbk PT 5,623,500(a) 1,979
---------------------------------------------------------------------------------------------
BANKS
Bank Central Asia Tbk PT 2,975,500 831
---------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Telekomunikasi Indonesia Tbk PT 4,359,000 1,875
---------------------------------------------------------------------------------------------
MULTILINE RETAIL
Ramayana Lestari Sentosa Tbk PT 1,703,500 481
---------------------------------------------------------------------------------------------
TOBACCO
Hanjaya Mandala Sampoerna Tbk PT 2,081,500 861
---------------------------------------------------------------------------------------------
6,027
=============================================================================================
ISRAEL (2.7%)
AEROSPACE & DEFENSE
Elbit Systems Ltd. 1 --@
---------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT
ECI Telecom Ltd. 180,332(a) 366
---------------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES
Check Point Software Technologies Ltd. 69,044(a) 896
---------------------------------------------------------------------------------------------
PHARMACEUTICALS
Teva Pharmaceutical Industries Ltd. 24,840 927
Teva Pharmaceutical Industries Ltd. ADR 74,514 2,877
---------------------------------------------------------------------------------------------
3,804
---------------------------------------------------------------------------------------------
5,066
=============================================================================================
MALAYSIA(4.0%)
BANKS
Commerce Asset Holdings Bhd 550,000 469
Malayan Banking Bhd 798,900 1,556
Public Bank Bhd 537,875 321
---------------------------------------------------------------------------------------------
2,346
---------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
Gamuda Bhd 840,000 1,216
---------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS
AMMB Holdings Bhd 477,000 477
---------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Celcom (Malaysia) Bhd 1,853,000(a) 1,190
---------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE
Magnum Corp. Bhd 1,288,000 776
Resorts World Bhd 240,000 591
---------------------------------------------------------------------------------------------
1,367
---------------------------------------------------------------------------------------------
REAL ESTATE
SP Setia Bhd 733,500 473
---------------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS
Malaysian Pacific Industries Bhd 118,000 431
---------------------------------------------------------------------------------------------
7,500
=============================================================================================
MEXICO(7.8%)
BANKS
Grupo Financiero BBVA 2,549,181(a) 1,944
Bancomer, 'B'
---------------------------------------------------------------------------------------------
BEVERAGES
Femsa UBD 300,775 1,095
---------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
6
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS
Statement of Net Assets (cont'd) December 31, 2002
VALUE
SHARES (000)
---------------------------------------------------------------------------------------------
MEXICO (CONT'D)
BEVERAGES (CONT'D)
Grupo Modelo SA, 'C' 363,800 $ 895
---------------------------------------------------------------------------------------------
1,990
---------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Telmex, 'L' ADR 149,975 4,796
---------------------------------------------------------------------------------------------
MULTILINE RETAIL
Wal-Mart de Mexico ADR 28,162 641
Wal-Mart de Mexico, 'C' 304,748 593
Wal-Mart de Mexico, 'V' 520,819 1,195
---------------------------------------------------------------------------------------------
2,429
---------------------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE
Grupo Aeroportuario del Sureste SA ADR 26,450 411
Grupo Aeroportuario del Sureste SA, 'B' 149,200 165
---------------------------------------------------------------------------------------------
476
---------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
America Movil SA de CV ADR 204,627 2,938
---------------------------------------------------------------------------------------------
14,573
=============================================================================================
PHILIPPINES (0.1%)
REAL ESTATE
Ayala Land, Inc. 2,814,500 240
=============================================================================================
POLAND (2.8%)
BANKS
Bank Pekao SA 82,349 2,032
Bank Pekao SA GDR 7,705(a) 189
---------------------------------------------------------------------------------------------
2,221
---------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Telekomunikacja Polska SA 36,751(a) 122
Telekomunikacja Polska SA GDR 216,417(a) 725
---------------------------------------------------------------------------------------------
847
---------------------------------------------------------------------------------------------
MULTILINE RETAIL
Eastbridge NV 33,600(b),(f) 1,344
---------------------------------------------------------------------------------------------
OIL & GAS
Polski Koncern Naftowy Orlen SA 94,395 437
Polski Koncern Naftowy Orlen SA GDR 32,100 295
---------------------------------------------------------------------------------------------
732
---------------------------------------------------------------------------------------------
5,144
=============================================================================================
RUSSIA (4.9%)
METALS & MINING
MMC Norilsk Nickel ADR 32,400 655
---------------------------------------------------------------------------------------------
OIL & GAS
Gazprom ADR 22,700 268
LUKoil Holdings ADR 46,719 2,870
Surgutneftegaz ADR 79,825 1,268
Surgutneftegaz (Preferred) ADR 23,039 537
Yukos ADR 9,833 1,386
---------------------------------------------------------------------------------------------
6,329
---------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS
Alliance Cellulose Ltd., 'B' 156,075(b) --@
---------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
AO VimpelCom ADR 18,100(a) 579
Mobile Telesystems ADR 40,200(a) 1,493
---------------------------------------------------------------------------------------------
2,072
---------------------------------------------------------------------------------------------
9,056
=============================================================================================
SOUTH AFRICA (13.0%)
BANKS
FirstRand Ltd. 1,712,920 1,471
Nedcor Ltd. 25,500 331
Standard Bank Group Ltd. 680,880 2,395
---------------------------------------------------------------------------------------------
4,197
---------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES
Bidvest Group Ltd. 134,715 707
---------------------------------------------------------------------------------------------
INSURANCE
Liberty Group Ltd. 38,720 247
Old Mutual plc 326,000 458
Old Mutual plc (London Shares) 1,214,257 1,721
Sanlam Ltd. 682,310 605
---------------------------------------------------------------------------------------------
3,031
---------------------------------------------------------------------------------------------
METALS & MINING
Anglo American Platinum Corp., Ltd. 40,370 1,488
Anglo American plc 250,688 3,700
Anglo American plc (London Shares) 250,287 3,719
AngloGold Ltd. 5,300 180
AngloGold Ltd. ADR 13,192 452
Gold Fields Ltd. 156,100 2,184
Gold Fields Ltd. ADR 7,700 107
Impala Platinum Holdings Ltd. 11,715 745
---------------------------------------------------------------------------------------------
12,575
---------------------------------------------------------------------------------------------
OIL & GAS
Sasol Ltd. 199,770 2,448
---------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS
Sappi Ltd. 66,670 891
Sappi Ltd. ADR 11,970 158
---------------------------------------------------------------------------------------------
1,049
---------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
MTN Group Ltd. 206,340(a) 295
---------------------------------------------------------------------------------------------
24,302
=============================================================================================
The accompanying notes are an integral part of the financial statements.
7
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS
Statement of Net Assets (cont'd) December 31, 2002
VALUE
SHARES (000)
---------------------------------------------------------------------------------------------
SOUTH KOREA (21.7%)
AUTO COMPONENTS
Hyundai Mobis 78,250 $ 1,438
---------------------------------------------------------------------------------------------
AUTOMOBILES
Hyundai Motor Co., Ltd.
Hyundai Motor Co., Ltd. (Preferred) 47,900 561
---------------------------------------------------------------------------------------------
1,223
---------------------------------------------------------------------------------------------
BANKS
Kookmin Bank 10,908 387
Shinhan Financial Group Co., Ltd. 162,530 1,699
---------------------------------------------------------------------------------------------
2,086
---------------------------------------------------------------------------------------------
CHEMICALS
LG Chem Ltd. 36,470 1,248
---------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS
Daishin Securities Co., Ltd. 70,380 849
LG Investment & Securities Co., Ltd. 81,110 909
Samsung Securities Co., Ltd. 58,790(a) 1,420
Seoul Securities Co., Ltd. 136,200 487
---------------------------------------------------------------------------------------------
3,665
---------------------------------------------------------------------------------------------
FOOD PRODUCTS
Tongyang Confectionery Corp. 14,000 685
---------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES
Humax Co., Ltd. 43,540 534
LG Electronics Ltd. 51,857(a) 1,806
---------------------------------------------------------------------------------------------
2,340
---------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS
LG Household & Health Care Ltd. 18,400 583
---------------------------------------------------------------------------------------------
INSURANCE
Hyundai Marine & Fire Insurance Co., Ltd. 20,730 442
---------------------------------------------------------------------------------------------
MEDIA
CJ Home Shopping 23,504 838
---------------------------------------------------------------------------------------------
METALS & MINING
POSCO 35,800 3,562
---------------------------------------------------------------------------------------------
MULTILINE RETAIL
Shinsegae Co., Ltd. 4,520 570
---------------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS
Samsung Electronics Co., Ltd. 53,252 14,098
Samsung Electronics Co., Ltd. (Preferred) 18,120 2,292
---------------------------------------------------------------------------------------------
16,390
---------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
Pantech Co., Ltd. 47,840(a) 577
SK Telecom Co., Ltd. 25,430 $ 4,910
---------------------------------------------------------------------------------------------
5,487
---------------------------------------------------------------------------------------------
40,557
=============================================================================================
TAIWAN (13.9%)
AIRLINES 28,290 662
Eva Airways Corp. 2,603,628(a) 1,101
---------------------------------------------------------------------------------------------
BANKS
Taishin Financial Holdings Co., Ltd. 3,124,000(a) 1,605
---------------------------------------------------------------------------------------------
CHEMICALS
Formosa Chemicals & Fibre Corp. 465,403 494
Formosa Plastics Corp. 829,000 1,091
---------------------------------------------------------------------------------------------
1,585
---------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT
Accton Technology Corp. 1,338,975(a) 1,372
---------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS
Asustek Computer, Inc. 410,553 723
Quanta Computer, Inc. 898,200 1,477
Quanta Storage, Inc. 59,000(a) 397
---------------------------------------------------------------------------------------------
2,597
---------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
CTCI Corp. 487,000 260
---------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS
Cathay Financial Holding Co., Ltd. 589,000 627
Chinatrust Financial Holding Co., Ltd. 3,392,748(a) 2,771
Polaris Securities Co., Ltd. 1,382,000(a) 483
Sinopac Holdings Co. 3,459,162(a) 1,452
---------------------------------------------------------------------------------------------
5,333
---------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
Phoenixtec Power Co., Ltd. 746,000 566
---------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Hon Hai Precision Industry Co., Ltd. 621,300 2,152
Lite-On Technology Corp. 318,000 359
---------------------------------------------------------------------------------------------
2,511
---------------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS
Largan Precision Co., Ltd. 105,300 590
Premier Image Technology Corp. 688,000 1,062
---------------------------------------------------------------------------------------------
1,652
---------------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS
ASE Test Ltd. 52,600(a) 210
Novatek Microelectronics Corp., Ltd. 282,000 533
Siliconware Precision Industries Co. 1,558,692(a) 760
The accompanying notes are an integral part of the financial statements.
8
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS
Statement of Net Assets (cont'd) December 31, 2002
VALUE
SHARES (000)
---------------------------------------------------------------------------------------------
TAIWAN (CONT'D)
SEMICONDUCTOR EQUIPMENT & PRODUCTS
(CONT'D)
Taiwan Semiconductor Manufacturing Co., Ltd. 4,253,334(a) $ 5,229
United Microelectronics Corp. 1,063,439(a) 648
---------------------------------------------------------------------------------------------
7,380
---------------------------------------------------------------------------------------------
25,962
=============================================================================================
THAILAND (2.6%)
BANKS
Bangkok Bank PCL 1,143,100(a),(b) 1,590
Thai Farmers Bank PCL 926,400(a),(b) 645
---------------------------------------------------------------------------------------------
2,235
---------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Siam Cement (The) PCL NVDR 50,200 1,364
---------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES
Land & Houses PCL 225,300 420
---------------------------------------------------------------------------------------------
MEDIA
BEC World PCL (Foreign) 72,300(b) 342
---------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
Advanced Info Service PCL (Foreign) 504,600 418
---------------------------------------------------------------------------------------------
4,779
=============================================================================================
TURKEY (2.5%)
BANKS
Akbank TAS 225,705,736(a) 747
Turkiye Garanti Bankasi AS 380,604,000(a) 493
Turkiye Is Bankasi AS, 'C' 96,524,000(a) 253
---------------------------------------------------------------------------------------------
1,493
---------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Akcansa Cimento AS 39,153,000 229
---------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS
Koc Holding AS 82,789,000(a) 860
---------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES
Arcelik AS 49,286,000(a) 386
---------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES
Enka Insaat ve Sanayi AS 11,943,094(a) 295
---------------------------------------------------------------------------------------------
MEDIA
Hurriyet Gazetecilik ve Matbaacilik AS 209,393,175(a) 549
---------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
Turkcell Iletisim Hizmetleri AS 158,251,000(a) 925
---------------------------------------------------------------------------------------------
4,737
=============================================================================================
VENEZUELA (0.3%)
DIVERSIFIED TELECOMMUNICATION SERVICES
CANTV, 'D' ADR 45,243 570
=============================================================================================
TOTAL COMMON STOCKS
(Cost $196,161) 182,868
=============================================================================================
INVESTMENT COMPANIES (0.5%)
=============================================================================================
INDIA (0.5%)
Morgan Stanley Growth Fund
(Cost $891) 4,694,400(a),(c) 925
---------------------------------------------------------------------------------------------
FACE
AMOUNT
(000)
---------------------------------------------------------------------------------------------
DEBT INSTRUMENTS (0.0%)
=============================================================================================
INDIA (0.0%)
BUILDING PRODUCTS
DCM Shriram Investments Ltd. 0.00% INR 330(b),(d) --@
---------------------------------------------------------------------------------------------
METALS & MINING
DCM Shriram Industries Ltd. 0.00% 335(b),(d) --@
Shri Ishar Alloy Steels Ltd. 15.00% 581(b),(d) --@
---------------------------------------------------------------------------------------------
--@
=============================================================================================
TOTAL DEBT INSTRUMENTS
(Cost $1,495) --@
=============================================================================================
SHORT-TERM INVESTMENT (1.6%)
=============================================================================================
UNITED STATES (1.6%)
REPURCHASE AGREEMENT
J.P. Morgan Securities Inc.,
1.05%, dated 12/31/02,
due 1/02/03 (Cost $2,997)$ 2,997(e) 2,997
=============================================================================================
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (0.3%)
=============================================================================================
Brazilian Real BRL 78 22
Euro EUR 43 45
Hong Kong Dollar HKD 1 --@
Hungarian Forint HUF 275 2
Indian Rupee INR 5,458 114
South Korean Won KRW 350 --@
Taiwan Dollar TWD 13,312 384
Turkish Lira TRL 10,294 --@
---------------------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY
(Cost $563) 567
=============================================================================================
The accompanying notes are an integral part of the financial statements.
9
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS
Statement of Net Assets (cont'd) December 31, 2002
VALUE
(000)
--------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(Cost $202,107) $ 187,357
================================================================================
AMOUNT
(000)
================================================================================
OTHER ASSETS (0.6%)
Cash $ 1
Receivable for Investments Sold 472
Interest Receivable 302
Dividends Receivable 239
Tax Reclaim Receivable 83
Other 24 1,121
================================================================================
LIABILITIES (-1.0%)
Payable For:
Investments Purchased (958)
Investment Advisory Fees (204)
Dividends Declared (137)
Custodian Fees (102)
Directors' Fees and Expenses (57)
Stockholder Reporting Expenses (47)
Professional Fees (36)
Country Tax Expense (15)
Administrative Fees (11)
Net Unrealized Loss on Foreign
Currency Exchange Contracts (1)
Other Liabilities (342) (1,910)
================================================================================
NET ASSETS (100%)
Applicable to 18,499,794 issued and
outstanding $0.01 par value shares
(100,000,000 shares authorized) $ 186,568
================================================================================
NET ASSET VALUE PER SHARE $ 10.08
================================================================================
AT DECEMBER 31, 2002, NET ASSETS CONSISTED OF:
Common Stock $ 185
Paid-in Capital 289,838
Undistributed (Distributions in Excess of) Net (1,027)
Investment Income
Accumulated Net Realized Gain (Loss) (89,095)
Unrealized Appreciation (Depreciation) on
Investments and Foreign Currency Translations (13,333)
================================================================================
TOTAL NET ASSETS $ 186,568
================================================================================
(a) -- Non-income producing.
(b) -- Investments valued at fair value- see Note A-1 to financial
statements. At December 31, 2002, the Fund held $5,310,000 of fair-valued
securities, representing 2.8% of net assets.
(c) -- Fund is advised by an affiliate.
(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.
(f) -- Restricted security not registered under the Securities Act of 1933.
Eastbridge NV and IndiaInfo.com PCL were acquired 7/93 and 3/00,
respectively, at a cost of $2,259,000 and $511,000, respectively. At
December 31, 2002, these securities had an aggregate market value of
$1,344,000, representing 0.7% of net assets.
@ -- Value less than $500.
ADR -- American Depositary Receipt
GBP -- British Pound
GDR -- Global Depositary Receipt
HKD -- Hong Kong Dollar
IDR -- Indonesian Rupiah
INR -- Indian Rupee
NVDR -- Non Voting Depositary Receipt
PCL -- Public Company Limited
ZAR -- South African Rand
================================================================================
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Fund had the following foreign currency exchange contract(s) open at period
end:
CURRENCY IN NET
TO EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
--------------------------------------------------------------------
US$ 73 $ 73 1/02/03 IDR 652,016 $ 72 $ (1)
US$ 31 31 1/07/03 ZAR 269 31 --@
US$ 27 27 1/02/03 HKD 209 27 --@
US$ 96 96 1/03/03 HKD 748 96 --@
GBP 50 81 1/02/03 US$ 81 81 --@
ZAR 170 20 1/03/03 US$ 20 20 --@
--------------------------------------------------------------------
$ 328 $ 327 $ (1)
--------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
10
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS
Statement of Net Assets (cont'd) December 31, 2002
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY
CLASSIFICATION -- DECEMBER 31, 2002 (UNAUDITED)
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
----------------------------------------------------------
Airlines $ 2,142 1.1%
Automobiles 4,238 2.3
Banks 24,144 12.9
Beverages 3,619 1.9
Chemicals 3,700 2.0
Computers & Peripherals 3,276 1.7
Construction Materials 1,942 1.0
Diversified Financials 10,772 5.8
Diversified Telecommunication Services 10,377 5.6
Electronic Equipment & Instruments 2,867 1.5
Household Durables 3,146 1.7
Insurance 3,473 1.9
Metals & Mining 20,710 11.1
Multiline Retail 4,824 2.6
Oil & Gas 15,649 8.4
Pharmaceuticals 4,415 2.4
Semiconductor Equipment & Products 24,201 13.0
Wireless Telecommunication Services 15,604 8.4
Other 28,258 15.1
----------------------------------------------------------
$ 187,357 100.4%
==========================================================
The accompanying notes are an integral part of the financial statements.
11
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Statement of Operations Financial Statements
YEAR ENDED
DECEMBER 31, 2002
(000)
----------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of $282 foreign taxes withheld) $ 3,985
Interest 57
================================================================================================================
TOTAL INCOME 4,042
================================================================================================================
EXPENSES
Investment Advisory Fees 2,556
Custodian Fees 438
Administrative Fees 185
Professional Fees 141
Country Tax Expense 129
Stockholder Reporting Expenses 105
Stockholder Servicing Fees 15
Directors' Fees and Expenses 5
Other Expenses 1
================================================================================================================
TOTAL EXPENSES 3,575
================================================================================================================
NET INVESTMENT INCOME (LOSS) 467
================================================================================================================
NET REALIZED GAIN (LOSS) ON:
Investments (9,598)
Foreign Currency Transactions (1,367)
================================================================================================================
NET REALIZED GAIN (LOSS) (10,965)
================================================================================================================
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments (1,681)
Foreign Currency Translations 915
================================================================================================================
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (766)
================================================================================================================
TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (11,731)
================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (11,264)
================================================================================================================
Statement of Changes in Net Assets
YEAR ENDED YEAR ENDED
DECEMBER 31, 2002 DECEMBER 31, 2001
(000) (000)
---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss) $ 467 $ 419
Net Realized Gain (Loss) (10,965) (60,086)
Change in Unrealized Appreciation (Depreciation) (766) 51,864
=================================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (11,264) (7,803)
=================================================================================================================================
Distributions from and/or in excess of:
Net Investment Income (137) --
=================================================================================================================================
Capital Share Transactions:
Repurchase of Shares (339,816 and 494,740 shares, respectively) (3,148) (4,285)
=================================================================================================================================
TOTAL INCREASE (DECREASE) (14,549) (12,088)
=================================================================================================================================
Net Assets:
Beginning of Period 201,117 213,205
=================================================================================================================================
END OF PERIOD (INCLUDING UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT
INCOME OF $(1,027) AND $(451), RESPECTIVELY) $ 186,568 $ 201,117
=================================================================================================================================
The accompanying notes are an integral part of the financial statements.
12
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Selected Per Share Data and Ratios Financial Highlights
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
2002+ 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.68 $ 11.03 $ 21.26 $ 10.33 $ 15.52
------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 0.03 0.03 (0.15) (0.03) 0.04
Net Realized and Unrealized Gain (Loss) on
Investments (0.65) (0.43) (8.04) 10.87 (3.05)
------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (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 Shares Repurchase Program 0.03 0.05 0.27 0.09 0.11
------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.08 $ 10.68 $ 11.03 $ 21.26 $ 10.33
==============================================================================================================================
PER SHARE MARKET VALUE, END OF PERIOD $ 8.34 $ 8.63 $ 8.75 $ 16.31 $ 8.13
==============================================================================================================================
TOTAL INVESTMENT RETURN:
Market Value (3.28)% (1.37)% (34.60)% 100.77% (24.88)%
Net Asset Value (1) (5.49)% (3.17)% (36.74)% 105.81% (19.61)%
==============================================================================================================================
RATIOS, SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) $ 186,568 $ 201,117 $ 213,205 $ 435,795 $ 221,609
------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.75% 1.85% 1.64% 1.76% 1.96%
Ratio of Net Investment Income to Average Net Assets 0.23% 0.21% (0.73)% (0.20)% 0.36%
Portfolio Turnover Rate 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 for the year ended December 31, 2002 are based on average
shares outstanding.
The accompanying notes are an integral part of the financial statements.
13
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Notes to Financial Statements December 31, 2002
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 currency
denominated assets and liabilities at period end exchange rates are
reflected as a component of unrealized
14
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Notes to Financial Statements December 31, 2002
(cont'd)
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. Under the old
Administration Agreement, effective through September 30, 2002, the
Administrator was paid a fee computed weekly and payable monthly at an annual
rate of 0.08% of the Fund's average weekly net assets, plus $65,000 per annum.
Effective October 1, 2002, under the new 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.
15
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Notes to Financial Statements December 31, 2002
(cont'd)
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/ 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 was 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 net
investment income (loss), accumulated net realized gain (loss) and paid-in
capital. Adjustments for permanent book-tax differences, if any, are not
reflected in ending undistributed net investment income (loss) 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 December 31, 2002, the U.S. Federal income tax cost basis of investments
(excluding foreign currency) was $205,206,000 and, accordingly, net unrealized
depreciation for U.S. Federal income tax purposes was $18,416,000 of which
$16,958,000 related to appreciated securities and $35,374,000 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 year ended December 31, 2002, the Fund made purchases and
sales totaling approximately $149,059,000 and $148,421,000, 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 December 31, 2002, the deferred fees payable, under the Plan, totaled
$56,000 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 fiscal year ended
December 31, 2002, Directors' Fees and Expenses were increased by $523 due to
these fluctuations.
For the year ended December 31, 2002, the Fund incurred $8,000 of brokerage
commissions with Morgan Stanley & Co., an affiliate of the Adviser.
16
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Notes to Financial Statements December 31, 2002
(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 year ended December 31, 2002, the
Fund repurchased 339,816 of its shares at an average discount of 15.60% from net
asset value per share. Since the inception of the program, the Fund has
repurchased 4,324,556 of its shares at an average discount of 20.26% 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.
On December 13, 2002 the Officers of the Fund, pursuant to authority granted by
the Board of Directors declared a distribution of $0.0074 per share, derived
from net investment income, payable on January 10, 2003, to stockholders of
record on December 24, 2002.
--------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
For the year ended December 31, 2002, the Fund expects to pass through to
stockholders foreign tax credits totaling approximately $320,000. In addition,
for the year ended December 31, 2002, gross income derived from sources within a
foreign country totaled $4,334,000.
17
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Independent Auditors' Report December 31, 2002
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF
MORGAN STANLEY EMERGING MARKETS FUND, INC.
We have audited the accompanying statement of net assets of Morgan Stanley
Emerging Markets Fund, Inc. (the "Fund") as of December 31, 2002, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the three years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for each of the two years in the period ended December 31, 1999 were
audited by other auditors whose report, dated February 18, 2000, expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2002 by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Morgan
Stanley Emerging Markets Fund, Inc. at December 31, 2002, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the three years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 7, 2003
18
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Director and Officer Information Overview
(unaudited)
Independent Directors:
TERM OF NUMBER OF
OFFICE PORTFOLIOS
AND IN FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER DIRECTORSHIPS HELD BY
DIRECTOR REGISTRANT SERVED* DURING PAST 5 YEARS DIRECTOR** DIRECTOR
------------------------ ---------- --------- ----------------------- ----------- ---------------------------
John D. Barrett II (67) Director Director Chairman and Director of 71 Director of the Ashforth
565 Fifth Avenue since Barrett Associates, Inc. Company (real estate).
New York, NY 10017 1996 (investment counseling).
Thomas P. Gerrity (61) Director Director Professor of Management, 71 Director, ICG Commerce, Inc.;
219 Grays Lane since formerly Dean, Wharton Sunoco; Fannie Mae; Reliance
Haverford, PA 19041 2001 School of Business, Group Holdings, Inc., CVS
University of Pennsylvania; Corporation and
formerly Director, IKON Knight-Ridder, Inc.
Office Solutions, Inc.,
Fiserv, Digital Equipment
Corporation, Investor Force
Holdings, Inc. and Union
Carbide Corporation.
Gerard E. Jones (65) Director Director Of Counsel, Shipman & 72 Director of Tractor Supply
Shipman & Goodwin, LLP since Goodwin, LLP (law firm). Company, Tiffany Foundation,
43 Arch Street 1996 and Fairfield County
Greenwich, CT 06830 Foundation. Director of The
India Magnum Fund Ltd.
Joseph J. Kearns (60) Director Director Investment consultant; 71 Director, Electro Rent
Kearns & Associates LLC since formerly CFO of The J. Paul Corporation and The Ford
PMB 754 2001 Getty Trust. Family Foundation.
23852 Pacific Coast Hwy.
Malibu, CA 90265
Vincent R. McLean (71) Director Director Formerly, Executive Vice 71 Director, Banner Life
702 Shackamaxon Drive since President, Chief Financial Insurance Co.; William Penn
Westfield, NJ 07090 2001 Officer, Director and Member Life Insurance Company of New
of the Executive Committee York.
of Sperry Corporation (now
part of Unisys Corporation).
C. Oscar Morong, Jr. (67) Director Director Managing Director, Morong 71 Trustee of the mutual funds
1385 Outlook Drive West since Capital Management; in the Smith Barney/CitiFunds
Mountainside, NJ 07092 2001 formerly, Senior Vice fund complex.
President and Investment
Manager for CREF, TIAA-CREF
Investment Management, Inc.
(investment management);
formerly, Director, The
Indonesia Fund (mutual fund).
William G. Morton, Jr. Director Director Chairman Emeritus and former 71 Director of Radio Shack
(65) since Chief Executive Officer of Corporation (electronics).
304 Newbury Street, #560 2000 Boston Stock Exchange.
Boston, MA 02115
Michael Nugent (66) Director Director General Partner, Triumph 194 Director of various business
c/o Triumph Capital, L.P. since Capital, L.P. (private organizations; Chairman of
237 Park Avenue 2001 investment partnership); the Insurance Committee and
New York, NY 10017 formerly, Vice President, Director or Trustee of the
Bankers Trust Company and BT retail families of funds
Capital Corporation. advised by Morgan Stanley
Investment Advisors Inc.
Fergus Reid (70) Director Director Chairman and Chief Executive 72 Trustee and Director of
85 Charles Colman Blvd. since Officer of Lumelite Plastics approximately 30 investment
Pawling, NY 12564 1996 Corporation. companies in the JPMorgan
Funds complex managed by
JPMorgan Investment
Management Inc. Director of
The India Magnum Fund Ltd.
19
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Director and Officer Information Overview
(cont'd)
Interested Directors:
TERM OF NUMBER OF
OFFICE PORTFOLIOS
AND IN FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER DIRECTORSHIPS HELD BY
DIRECTOR REGISTRANT SERVED* DURING PAST 5 YEARS DIRECTOR** DIRECTOR
------------------------ ---------- --------- ----------------------- ----------- ---------------------------
Barton M. Biggs (70) Chairman Chairman Chairman, Director and 72 Member of the Yale
1221 Avenue of the Americas and Director and Managing Director of Development Board
New York, NY 10020 Director Morgan Stanley Investment
since Management Inc. and
1996 Chairman and Director
of Morgan Stanley
Investment Management
Limited; Managing
Director of Morgan
Stanley & Co.
Incorporated; Director
and Chairman of the Board
of various U.S.
registered companies
managed by Morgan Stanley
Investment Management
Inc.
Ronald E. Robison (63) President President President and Trustee; 72
1221 Avenue of the Americas and Director and Chief Global Operations
New York, NY 10020 Director Officer and Managing
since Director of Morgan
2001 Stanley Investment
Management, Inc.;
Managing Director of
Morgan Stanley & Co.
Incorporated; formerly,
Managing Director and
Chief Operating Officer
of TCW Investment
Management Company;
Director and President of
various funds in the Fund
Complex.
----------
* Each Director serves an indefinite term, until his or her successor is
elected.
** The Fund Complex includes all funds advised by Morgan Stanley Investment
Management Inc. and any funds that have an investment advisor that is an
affiliated entity of Morgan Stanley Investment Management Inc. (including,
but not limited to, Morgan Stanley Investments LP, Morgan Stanley Investment
Advisors Inc. and Van Kampen Asset Management Inc.).
20
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Director and Officer Information Overview
(cont'd)
Officers:
POSITION(S) TERM OF OFFICE
HELD WITH AND LENGTH OF
NAME, AGE AND ADDRESS OF EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
------------------------------------------ ----------- -------------- ----------------------------------------------------------
Ronald E. Robison (63) President President and Chief Global Operations Officer and Managing Director of
Morgan Stanley Investment Management Inc. and Director Director since Morgan Stanley Investment Management Inc.; Director and
1221 Avenue of the Americas 2001 President of various U.S. registered investment companies
New York, NY 10020 managed by Morgan Stanley Investment Management Inc.;
previously, Managing Director and Chief Operating Officer
of TCW Investment Management Company.
Stefanie V. Chang (36) Vice Vice President Executive Director of Morgan Stanley & Co. Incorporated
Morgan Stanley Investment Management Inc. President since 1997 and Morgan Stanley Investment Management Inc.; formerly,
1221 Avenue of the Americas practiced law with New York law firm of Rogers & Wells
New York, NY 10020 (now Clifford Chance US LLP); Vice President of certain
funds in the Fund Complex.
Lorraine Truten (41) Vice Vice President Executive Director of Morgan Stanley Investment Management
Morgan Stanley Investment Management Inc. President since 2001 Inc.; Head of Global Client Services, Morgan Stanley
1221 Avenue of the Americas Investment Management Inc.; President, Morgan Stanley Fund
New York, NY 10020 Distribution, Inc. formerly, President of Morgan Stanley
Institutional Fund Trust; Vice President of certain funds
in the Fund Complex.
Mary E. Mullin (35) Secretary Secretary since Vice President of Morgan Stanley & Co., Incorporated and
Morgan Stanley Investment Management Inc. 1999 Morgan Stanley Investment Management, Inc.; formerly,
1221 Avenue of the Americas practiced law with the New York law firms of McDermott,
New York, NY 10020 Will & Emery and Skadden, Arps, Slate, Meagher & Flom LLP;
Secretary of certain funds in the Fund Complex.
James W. Garrett (34) Treasurer Treasurer since Executive Director of Morgan Stanley & Co. Incorporated
Morgan Stanley Investment Management Inc. 2002 and Morgan Stanley Investment Management Inc. and
1221 Avenue of the Americas Treasurer of various U.S. registered investment companies
New York, NY 10020 managed by Morgan Stanley Investment Management Inc.;
formerly, with Price Waterhouse LLP (now
PricewaterhouseCoopers LLP).
Belinda A. Brady (34) Assistant Assistant Fund Administration Senior Manager, J.P. Morgan Investor
J.P. Morgan Investor Services Co. Treasurer Treasurer since Services Co. (formerly Chase Global Funds Services
73 Tremont Street 2001 Company); formerly, Senior Auditor at Price Waterhouse
Boston, MA 02108-3913 LLP (now PricewaterhouseCoopers LLP). Assistant Treasurer
of certain funds in the Fund Complex.
----------
* Each Officer serves an indefinite term, until his or her successor is elected.
21
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
22