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.
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(Exact name of registrant as specified in charter)
1221 AVENUE OF THE AMERICAS 22ND FLOOR NEW YORK, NY 10020
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(Address of principal executive offices) (Zip code)
RONALD E. ROBISON
1221 AVENUE OF THE AMERICAS 34TH FLOOR NEW YORK, NY 10020
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(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: 6/30/04
-------------------------
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, 2004
DIRECTORS
CHARLES A. FIUMEFREDDO JOSEPH J. MCALINDEN
MICHAEL BOZIC VICE PRESIDENT
EDWIN J. GARN
WAYNE E. HEDIEN BARRY FINK
JAMES F. HIGGINS VICE PRESIDENT
DR. MANUEL H. JOHNSON
JOSEPH J. KEARNS STEFANIE V. CHANG
MICHAEL NUGENT VICE PRESIDENT
FERGUS REID
AMY R. DOBERMAN
OFFICERS VICE PRESIDENT
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD JAMES W. GARRETT
TREASURER AND CHIEF
MITCHELL M. MERIN FINANCIAL OFFICER
PRESIDENT
MICHAEL J. LEARY [MORGAN STANLEY LOGO]
RONALD E. ROBISON ASSISTANT TREASURER
EXECUTIVE VICE PRESIDENT
AND PRINCIPAL EXECUTIVE MARY E. MULLIN MORGAN STANLEY
OFFICER SECRETARY EMERGING MARKETS FUND, INC.
INVESTMENT ADVISER
MORGAN STANLEY INVESTMENT MANAGEMENT INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
ADMINISTRATOR
JPMORGAN INVESTOR SERVICES COMPANY
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
1 (800) 278-4353
LEGAL COUNSEL
CLIFFORD CHANCE US LLP
31 WEST 52ND STREET
NEW YORK, NEW YORK 10019
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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) 2004 MORGAN STANLEY INVESTMENT ADVISER
MORGAN STANLEY EMERGING MARKETS FUND, INC.
LETTER TO STOCKHOLDERS Overview
PERFORMANCE
For the six months ended June 30, 2004, the Morgan Stanley Emerging Markets
Fund, Inc. (the "Fund") had a total return, based on net asset value per share
of -1.82%, compared to -0.97% for the Morgan Stanley Capital International
(MSCI) Emerging Markets Free Net Index (the "Index"). On June 30, 2004, the
closing price of the Fund's shares on the New York Stock Exchange was $13.23,
representing a 13.9% discount to the Fund's net asset value per share.
FACTORS AFFECTING PERFORMANCE
- Overall, stock selection was positive while country allocation detracted
from performance.
- Stock selection in Russia, Israel, Brazil and Mexico coupled with
country allocation scores in Russia, Egypt and China were all positive
contributors to relative performance.
- Holdings in South Korea and Taiwan were among the strongest contributors
last year, gave back gains in the severe market sell-off while our
underweight stance in Israel (+19.1% Index return) and overweight
position in the recently underperforming markets of Thailand (-13.7%)
and Turkey added to overall declines. Thailand and Turkey were the best
performing markets in 2003 and despite recent weakness we still remain
overweight the market given attractive valuations and improving
fundamentals.
- Emerging Markets had mixed results for the six months ended June 30,
2004, leading the world for the first half of the period while
underperforming in the in the second. Emerging Markets finished the
period in review down 1.0%, the asset class' worst performance in over
twelve months after gaining 55.8% in 2003 and another 9.6% in the first
three months of 2004.
- The asset class started the year strong as it continued to re-rate given
a recovery in global growth, improved domestic economies, rising
corporate earnings and attractive valuations. After many months of
relative tranquility, volatility in the Emerging Markets spiked in the
second quarter with the asset class coming under selling pressure in
April and May before stabilizing in June.
- The recent difficulties in Emerging Markets were primarily due to
exogenous factors, namely fears of future U.S. interest rate hikes,
instability in Iraq and slower global growth. Concerns of a Chinese
economic slowdown also put significant pressure on commodity prices and
major cyclical markets in Asia.
- The recent sell-off, which saw stocks fall indiscriminately was not
driven by usual triggers such as political scandal, debt default or even
devaluation but by markets anticipating a change in liquidity conditions
and the subsequent rise in global risk aversion.
MANAGEMENT STRATEGIES
- Long-term, we remain positive on Emerging Markets as valuations and
fundamentals remain attractive. We believe markets are in a better
position than in past times to withstand the tough global environment.
- Balance of payment positions across many Emerging Market countries are
superior and currently 9 of the top 10 Emerging Market countries are
rated investment grade versus only 4 before the 1997 Asia crisis.
- Markets are significantly cheaper while stronger fiscal positions and
lower interest rates could be a boost to growth prospects. Aggregate
gross domestic product growth is expected to average above 6.0% in 2004.
- Emerging Market's growth has been both export-driven as well as
consumer-led, which marks an improvement from foreign investment-led
cycles of the late 1990s.
Sincerely,
/s/ Ronald E. Robison
Ronald E. Robison
Executive Vice President--
Principal Executive Officer
July 2004
2
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS June 30, 2004 (unaudited)
VALUE
SHARES (000)
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COMMON STOCKS (96.8%)
(UNLESS OTHERWISE NOTED)
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ARGENTINA (0.1%)
ENERGY EQUIPMENT & SERVICES
Tenaris SA ADR 9,300 $ 305
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BRAZIL (8.8%)
AIRLINES
Gol Linhas Aereas Inteligentes
SA ADR (a)30,300 515
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COMMERCIAL BANKS
Banco Bradesco SA ADR 16,786 771
Banco Bradesco SA
(Preference) (a)25,775 1,189
Banco Itau Holding Financeira
SA ADR 45,110 2,104
Banco Itau SA (Preference) 12,759,246 1,181
Unibanco GDR 42,100 832
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6,077
----------------------------------------------------------------------------
ELECTRIC UTILITIES
CEMIG SA (Preference) 50,064,000 751
CEMIG SA ADR 51,200 769
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1,520
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FOOD & DRUG RETAILING
Cia Brasileira de Distribuicao
Grupo Pao de Acucar ADR 26,200 453
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METALS & MINING
CSN ADR 54,400 661
CVRD (Preference) ADR 76,113 2,976
CVRD ADR 3,000 143
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3,780
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OIL & GAS
Petrobras SA (Preference) 9,153 228
Petrobras SA (Preference) ADR 147,956 3,728
Petrobras SA ADR 86,663 2,433
----------------------------------------------------------------------------
6,389
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PAPER & FOREST PRODUCTS
Aracruz Celulose SA ADR 21,500 702
Votorantim Celulose e Papel SA
ADR 45,600 1,450
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2,152
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PHARMACEUTICALS
Natura Cosmeticos SA (a)35,000 565
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WIRELESS TELECOMMUNICATION SERVICES
Telesp Celular Participacoes SA
(Preference) (a)589,917,369 1,859
Telesp Celular Participacoes SA
ADR (a)102,000 804
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2,663
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24,114
============================================================================
CHILE (0.7%)
ELECTRIC UTILITIES
Enersis SA ADR 311,400 $ 1,856
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CHINA/HONG KONG (6.4%)
AUTO COMPONENTS
Norstar Founders Group Ltd. (a)971,000 271
Shougang Concord Century
Holdings Ltd. 3,415,000 319
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590
----------------------------------------------------------------------------
AUTOMOBILES
AviChina Industry & Technology
Co., 'H' 2,963,000 346
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BUILDING PRODUCTS
Asia Aluminum Holdings Ltd. 7,698,000 750
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COMPUTERS & PERIPHERALS
TPV Technology Ltd. 2,038,000 1,447
----------------------------------------------------------------------------
ELECTRIC UTILITIES
China Resources Power
Holdings Co. (a)707,000 399
Huaneng Power International,
Inc., 'H' 1,292,000 1,151
----------------------------------------------------------------------------
1,550
----------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Byd Co., Ltd., 'H' 147,000 434
Kingboard Chemicals Holdings
Ltd 401,000 697
----------------------------------------------------------------------------
1,131
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ENERGY EQUIPMENT & SERVICES
China Oilfield Services Ltd., 'H' 3,291,000 939
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HEALTH CARE EQUIPMENT & SUPPLIES
Moulin International Holdings
Ltd 568,000 348
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HOUSEHOLD DURABLES
Grande Holdings Ltd. 536,000 522
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INSURANCE
Ping An Insurance Group Co. of
China Ltd., 'H' (a)837,000 1,137
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INTERNET SOFTWARE & SERVICES
Sina Corp. (a)8,200 271
Tom Online, Inc. (a)948,000 160
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431
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METALS & MINING
Yanzhou Coal Mining Co., Ltd., 'H' 622,000 678
----------------------------------------------------------------------------
MULTILINE RETAIL
Lianhua Supermarket Holdings
Co., Ltd., 'H' 552,000 556
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 3
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS (CONT'D) June 30, 2004 (unaudited)
VALUE
SHARES (000)
----------------------------------------------------------------------------
CHINA/HONG KONG (CONT'D)
MULTILINE RETAIL (CONT'D)
Wumart Stores, Inc., 'H' (a)280,000 $ 538
----------------------------------------------------------------------------
1,094
----------------------------------------------------------------------------
OIL & GAS
China Petroleum & Chemical
Corp., 'H' 1,594,000 582
CNOOC Ltd. 4,525,000 1,915
Sinopec Zhenhai Refining &
Chemical Co., Ltd., 'H' 1,182,000 1,137
----------------------------------------------------------------------------
3,634
----------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
Fountain Set Holdings Ltd. 1,239,000 826
Victory City International
Holdings Ltd. 1,051,000 381
----------------------------------------------------------------------------
1,207
----------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE
China Merchants Holdings
International Co., Ltd. 500,000 673
Hainan Meilan International
Airport Co., Ltd., 'H' 636,000 485
Hopewell Highway
Infrastructure Ltd. 1,296,000 769
----------------------------------------------------------------------------
1,927
----------------------------------------------------------------------------
17,731
============================================================================
COLOMBIA (0.2%)
COMMERCIAL BANKS
BanColombia SA ADR 101,800 680
============================================================================
EGYPT (1.5%)
CONSTRUCTION & ENGINEERING
Orascom Construction
Industries (a)156,035 2,315
----------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
MobiNil 148,552 1,788
----------------------------------------------------------------------------
4,103
============================================================================
INDIA (4.6%)
AUTOMOBILES
Hero Honda Motors Ltd. 68,900 761
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COMMERCIAL BANKS
Industrial Development Bank of
India Ltd. 456,000 415
Punjab National Bank Ltd. 70,000 429
State Bank of India Ltd. (b)70,550 696
----------------------------------------------------------------------------
1,540
----------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Mahanagar Telephone Nigam Ltd. 196,000 563
----------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
ABB Ltd. 35,929 $ 525
Bharat Heavy Electricals Ltd. 138,700 1,514
----------------------------------------------------------------------------
2,039
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HOUSEHOLD PRODUCTS
Hindustan Lever Ltd. 177,500 492
----------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES
Grasim Industries Ltd. 31,500 693
Siemens India Ltd. 13,000 249
----------------------------------------------------------------------------
942
----------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES
IndiaInfo.com PCL (b)116,052 @--
----------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES
Infosys Technologies Ltd. 10,227 1,229
----------------------------------------------------------------------------
METALS & MINING
Hindalco Industries Ltd. 19,600 426
Steel Authority of India Ltd. (a)565,066 336
Tata Iron & Steel Co., Ltd. 52,000 340
----------------------------------------------------------------------------
1,102
----------------------------------------------------------------------------
OIL & GAS
Hindustan Petroleum Corp., Ltd. 120,500 881
Mahindra & Mahindra Ltd. 42,000 404
Oil & Natural Gas Corp., Ltd. 37,700 516
----------------------------------------------------------------------------
1,801
----------------------------------------------------------------------------
PHARMACEUTICALS
Cipla Ltd. 163,000 753
GlaxoSmithkline
Pharmaceuticals Ltd. 34,000 440
----------------------------------------------------------------------------
1,193
----------------------------------------------------------------------------
ROAD & RAIL
Container Corp. of India Ltd. 45,600 560
----------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE
Housing Development Finance
Corp., Ltd. 33,000 371
----------------------------------------------------------------------------
12,593
============================================================================
INDONESIA (3.1%)
AUTOMOBILES
Astra International Tbk PT 2,062,538 1,207
----------------------------------------------------------------------------
COMMERCIAL BANKS
Bank Central Asia Tbk PT 3,951,000 789
Bank Internasional Indonesia
Tbk PT (a)22,596,000 349
Bank Mandiri Persero Tbk PT 7,629,500 954
4 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS (CONT'D) June 30, 2004 (unaudited)
VALUE
SHARES (000)
----------------------------------------------------------------------------
INDONESIA (CONT'D)
COMMERCIAL BANKS (CONT'D)
Bank Rakyat Indonesia (a)4,627,500 $ 825
----------------------------------------------------------------------------
2,917
----------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Indocement Tunggal Prakarsa
Tbk PT (a)3,667,000 556
----------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Telekomunikasi Indonesia Tbk PT (a)1,241,000 978
----------------------------------------------------------------------------
METALS & MINING
Bumi Resources Tbk PT 26,588,500 1,627
----------------------------------------------------------------------------
MULTILINE RETAIL
Ramayana Lestari
Sentosa Tbk PT (a)1,800,500 853
----------------------------------------------------------------------------
TOBACCO
Gudang Garam Tbk PT (a)356,000 519
----------------------------------------------------------------------------
8,657
============================================================================
ISRAEL (1.6%)
AEROSPACE & DEFENSE
Elbit Systems Ltd. 1 @--
----------------------------------------------------------------------------
SOFTWARE
Check Point Software
Technologies Ltd. (a)159,144 4,295
----------------------------------------------------------------------------
4,295
============================================================================
JAPAN ( 0.0%)
HOUSEHOLD DURABLES
Sansui Electric Co., Ltd. (a)268,000 84
============================================================================
MALAYSIA (1.2%)
COMMERCIAL BANKS
Commerce Asset Holdings Bhd 532,000 681
----------------------------------------------------------------------------
ELECTRIC UTILITIES
YTL Corp. Bhd 419,000 518
----------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE
Magnum Corp. Bhd 1,145,000 732
Resorts World Bhd 222,000 523
----------------------------------------------------------------------------
1,255
----------------------------------------------------------------------------
REAL ESTATE
SP Setia Bhd 733,500 764
----------------------------------------------------------------------------
3,218
============================================================================
MEXICO (7.8%)
BEVERAGES
Coca-Cola Femsa SA ADR 46,400 1,030
Femsa ADR 15,800 724
----------------------------------------------------------------------------
1,754
----------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Cemex SA de CV 28,194 164
Cemex SA de CV ADR 70,590 $ 2,054
----------------------------------------------------------------------------
2,218
----------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Telmex, 'L' ADR 28,135 936
----------------------------------------------------------------------------
FOOD & STAPLES
Wal-Mart de Mexico SA ADR 49,133 1,457
Wal-Mart de Mexico SA, 'V' 1,030,119 3,067
----------------------------------------------------------------------------
4,524
----------------------------------------------------------------------------
MEDIA
Grupo Televisa SA ADR 103,600 4,690
----------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
America Movil SA de CV, 'L'
ADR 200,277 7,284
----------------------------------------------------------------------------
21,406
============================================================================
PERU (0.7%)
METALS & MINING
Cia de Minas Buenaventura SA ADR 91,600 2,024
============================================================================
POLAND (1.1%)
DIVERSIFIED TELECOMMUNICATION SERVICES
Telekomunikacja Polska SA 160,878 666
Telekomunikacja Polska SA GDR 601,400 2,442
----------------------------------------------------------------------------
3,108
============================================================================
RUSSIA (8.1%)
DIVERSIFIED TELECOMMUNICATION SERVICES
Uralsvyazinform ADR 100,700 775
----------------------------------------------------------------------------
METALS & MINING
MMC Norilsk Nickel ADR 37,900 2,104
----------------------------------------------------------------------------
OIL & GAS
Gazprom (Registered) ADR 134,100 3,848
LUKOIL ADR 47,719 5,020
Surgutneftegaz (Preferred) ADR 16,139 694
Surgutneftegaz ADR 71,372 2,334
YUKOS ADR 50,799 1,617
----------------------------------------------------------------------------
13,513
----------------------------------------------------------------------------
PAPER & FOREST PRODUCTS
Alliance Cellulose Ltd., 'B' (b)156,075 @--
----------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
Mobile Telesystems ADR 16,100 1,964
Mobile Telesystems GDR (a)17,400 2,132
Vimpel-Communications ADR (a)10,300 993
VolgaTelecom ADR 132,000 739
----------------------------------------------------------------------------
5,828
----------------------------------------------------------------------------
22,220
============================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 5
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS (CONT'D) June 30, 2004 (unaudited)
VALUE
SHARES (000)
----------------------------------------------------------------------------
SOUTH AFRICA (13.3%)
COMMERCIAL BANKS
Standard Bank Group Ltd. 330,380 $ 2,307
----------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES
African Bank Investments Ltd. 1,915,700 3,670
----------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Telkom SA Ltd. 202,470 2,615
----------------------------------------------------------------------------
FOOD & STAPLES
Massmart Holdings Ltd. 398,026 2,113
Shoprite Holdings Ltd. 1,430,800 2,184
----------------------------------------------------------------------------
4,297
----------------------------------------------------------------------------
HOUSEHOLD DURABLES
Steinhoff International Holdings Ltd. 1,459,300 1,979
----------------------------------------------------------------------------
INSURANCE
African Life Assurance Co., Ltd. 640,800 1,373
----------------------------------------------------------------------------
METALS & MINING
Anglo American Platinum Corp., Ltd. 36,000 1,374
Anglo American plc 137,938 2,847
Anglo American plc
(London Shares) 61,472 1,261
AngloGold Ashanti Ltd. 25,000 822
AngloGold Ashanti Ltd. ADR 14,492 466
Gold Fields Ltd. 44,300 470
Harmony Gold Mining Co., Ltd. 72,554 769
Harmony Gold Mining Co., Ltd. ADR 43,600 462
Impala Platinum Holdings Ltd. 22,535 1,723
Iscor Ltd. 206,100 1,292
Kumba Resources Ltd. 160,800 861
----------------------------------------------------------------------------
12,347
----------------------------------------------------------------------------
PAPER & FOREST PRODUCTS
Sappi Ltd. 136,800 2,103
Sappi Ltd. ADR 2,400 37
----------------------------------------------------------------------------
2,140
----------------------------------------------------------------------------
SPECIALTY RETAIL
Edgars Consolidated Stores Ltd. 60,600 1,456
----------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
MTN Group Ltd. 955,940 4,424
----------------------------------------------------------------------------
36,608
============================================================================
SOUTH KOREA (15.2%)
AIRLINES
Korean Air Lines Co., Ltd. (a)111,900 1,454
----------------------------------------------------------------------------
AUTO COMPONENTS
Hankook Tire Co., Ltd. 300,780 2,631
Hyundai Mobis 64,450 $ 2,864
----------------------------------------------------------------------------
5,495
----------------------------------------------------------------------------
CAPITAL MARKETS
Daishin Securities Co., Ltd. 107,900 1,219
Daishin Securities Co., Ltd.
(Preferred) 49,260 286
LG Investment & Securities
Co., Ltd. (a)259,490 1,859
----------------------------------------------------------------------------
3,364
----------------------------------------------------------------------------
COMMERCIAL BANKS
Kookmin Bank (a)18,690 581
Pusan Bank 92,520 513
Shinhan Financial Group Co.,
Ltd 53,890 784
----------------------------------------------------------------------------
1,878
----------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Samsung SDI Co., Ltd. 79,270 8,342
----------------------------------------------------------------------------
FOOD PRODUCTS
Orion Corp. 14,000 866
----------------------------------------------------------------------------
MACHINERY
Daewoo Shipbuilding & Marine
Engineering Co., Ltd. 92,580 1,119
STX Shipbuilding Co., Ltd. 71,290 747
----------------------------------------------------------------------------
1,866
----------------------------------------------------------------------------
MULTILINE RETAIL
Hyundai Department Store Co.,
Ltd 58,800 1,459
----------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT
Samsung Electronics Co., Ltd. 28,632 11,830
Samsung Electronics Co., Ltd.
(Preferred) 7,060 1,853
----------------------------------------------------------------------------
13,683
----------------------------------------------------------------------------
SPECIALTY RETAIL
Handsome Co., Ltd. 109,500 907
----------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
Cheil Industries, Inc. 91,620 1,063
----------------------------------------------------------------------------
TOBACCO
KT&G Corp. 53,780 1,244
----------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
SK Telecom Co., Ltd. 1,310 216
----------------------------------------------------------------------------
41,837
============================================================================
TAIWAN (10.7%)
AUTO COMPONENTS
Cheng Shin Rubber Industry
Co., Ltd. 479,000 628
----------------------------------------------------------------------------
COMMERCIAL BANKS
China Development Financial
Holding Corp. 3,002,000 1,538
6 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS (CONT'D) June 30, 2004 (unaudited)
VALUE
SHARES (000)
----------------------------------------------------------------------------
TAIWAN (CONT'D)
COMMERCIAL BANKS (CONT'D)
Chinatrust Financial Holding
Co., Ltd. 1,591,250 $ 1,777
Taishin Financial Holdings Co., Ltd. 1,318,000 1,088
----------------------------------------------------------------------------
4,403
----------------------------------------------------------------------------
COMPUTERS & PERIPHERALS
Acer, Inc. 623,364 878
Infortrend Technology, Inc. 378,500 1,083
----------------------------------------------------------------------------
1,961
----------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
CTCI Corp. 1,532,000 757
----------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Taiwan Cement Corp. 3,498,360 1,584
----------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES
Fubon Financial Holding Co., Ltd. 1,060,000 925
Polaris Securities Co., Ltd. (a)1,987,520 1,048
----------------------------------------------------------------------------
1,973
----------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
Catcher Technology Co., Ltd. 143,000 458
Phoenixtec Power Co., Ltd. (a)695,730 684
Richtek Technology Corp. (a)76,000 221
Waffer Technology Co., Ltd. 409,000 828
----------------------------------------------------------------------------
2,191
----------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Hon Hai Precision Industry Co.,
Ltd. 711,560 2,650
Ya Hsin Industrial Co., Ltd. 1,220,000 1,508
----------------------------------------------------------------------------
4,158
----------------------------------------------------------------------------
INSURANCE
Cathay Financial Holding Co.,
Ltd. 335,000 604
----------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS
Asia Optical Co., Inc. 380,200 2,310
Largan Precision Co., Ltd. 121,830 1,169
----------------------------------------------------------------------------
3,479
----------------------------------------------------------------------------
MACHINERY
Kaulin Manufacturing Co., Ltd. 287,000 393
----------------------------------------------------------------------------
MARINE
Evergreen Marine Corp. 1,154,120 976
Taiwan Navigation Co., Ltd. 188,000 131
----------------------------------------------------------------------------
1,107
----------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT
Faraday Technology Corp. 122,000 229
MediaTek, Inc. 217,000 1,732
Novatek Microelectronics
Corp., Ltd. 245,550 $ 812
Sunplus Technology Co., Ltd. 459,000 800
----------------------------------------------------------------------------
3,573
----------------------------------------------------------------------------
SOFTWARE
Cyberlink Corp. 214,000 529
Springsoft, Inc. 344,000 789
----------------------------------------------------------------------------
1,318
----------------------------------------------------------------------------
SPECIALTY RETAIL
Tsann Kuen Enterprise Co., Ltd. 335,000 419
----------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
Taiwan Cellular Corp. 1,075,000 1,025
----------------------------------------------------------------------------
29,573
============================================================================
THAILAND (6.5%)
AIRLINES
Thai Airways International
PCL (Foreign) 636,100 878
----------------------------------------------------------------------------
CHEMICALS
Thai Plastic & Chemicals
PCL (Foreign) 66,100 299
----------------------------------------------------------------------------
COMMERCIAL BANKS
Bangkok Bank PCL (Foreign) (a)(b)1,336,100 3,215
Kasikornbank PCL (Foreign) (a)(b)1,022,600 1,299
Kasikornbank PCL NVDR (a)(b)746,600 921
Krung Thai Bank PCL (Foreign) 4,472,200 1,202
Siam City Bank PCL (Foreign) 476,600 289
Siam Commercial Bank PCL
(Foreign) (b)712,700 805
----------------------------------------------------------------------------
7,731
----------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
Italian-Thai Development PCL
(Foreign) 4,820,000 1,189
Sino Thai Engineering &
Construction PCL (Foreign) 1,619,200 439
----------------------------------------------------------------------------
1,628
----------------------------------------------------------------------------
ELECTRIC UTILITIES
Ratchaburi Electricity
Generating Holding PCL 292,000 264
----------------------------------------------------------------------------
FOOD & STAPLES
CP Seven Eleven PCL (Foreign) 512,200 770
----------------------------------------------------------------------------
HOUSEHOLD DURABLES
Land & Houses PCL (Foreign) 3,789,300 903
----------------------------------------------------------------------------
METALS & MINING
Banpu PCL (Foreign) 200,100 650
----------------------------------------------------------------------------
MULTILINE RETAIL
Siam Makro PCL (Foreign) 118,400 153
----------------------------------------------------------------------------
OIL & GAS
PTT PCL (Foreign) 448,000 1,685
----------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 7
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS (CONT'D) June 30, 2004 (unaudited)
VALUE
SHARES (000)
----------------------------------------------------------------------------
THAILAND (CONT'D)
REAL ESTATE
Asian Property Development PCL 3,878,600 $ 409
Lalin Property PCL (Foreign) 1,145,300 186
MBK PCL (Foreign) 207,300 256
----------------------------------------------------------------------------
851
----------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
Advanced Info Service
PCL (Foreign) 674,600 1,500
Total Access Communication
PCL (a)228,000 590
----------------------------------------------------------------------------
2,090
----------------------------------------------------------------------------
17,902
============================================================================
TURKEY (4.9%)
BUILDING PRODUCTS
Trakya Cam Sanayii AS 343,481,777 786
----------------------------------------------------------------------------
COMMERCIAL BANKS
Akbank TAS 548,075,115 2,011
Turkiye Garanti Bankasi AS (a)486,970,000 1,450
Turkiye Is Bankasi AS 338,005,600 1,229
Yapi ve Kredi Bankasi AS (a)452,614,000 1,082
----------------------------------------------------------------------------
5,772
----------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Akcansa Cimento AS 483,468,125 976
----------------------------------------------------------------------------
HOUSEHOLD DURABLES
Arcelik AS (a)260,310,000 1,288
----------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES
Enka Insaat ve Sanayi AS 48,254,503 991
----------------------------------------------------------------------------
MEDIA
Hurriyet Gazetecilik ve
Matbaacilik AS 566,253,000 1,553
----------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
Turkcell Iletisim Hizmetleri AS 162,976,000 2,008
----------------------------------------------------------------------------
13,374
============================================================================
VENEZUELA (0.3%)
DIVERSIFIED TELECOMMUNICATION SERVICES
CANTV, 'D' ADR 45,243 912
============================================================================
TOTAL COMMON STOCKS
(Cost $223,874) 266,600
============================================================================
INVESTMENT COMPANIES (1.1%)
----------------------------------------------------------------------------
INDIA (0.5%)
Morgan Stanley Growth Fund (c)4,694,400 1,365
============================================================================
POLAND (0.6%)
Norodowy Fundusz
Inwestycyjny Hetman SA 762,586 $ 1,786
============================================================================
TOTAL INVESTMENT COMPANIES
(Cost $2,299) 3,151
============================================================================
FACE
AMOUNT
(000)
----------------------------------------------------------------------------
DEBT INSTRUMENTS (0.0%)
INDIA (0.0%)
CONSTRUCTION MATERIALS
DCM Shriram Industries
Ltd. 0.00%,(expired
maturity) INR (b)(d)335 @--
DCM Shriram Investments Ltd.
0.00%, (expired maturity) (b)(d)330 @--
----------------------------------------------------------------------------
@--
============================================================================
METALS & MINING
Shri Ishar Alloy Steels Ltd.
15.00% (b)(d)581 @--
----------------------------------------------------------------------------
TOTAL DEBT INSTRUMENTS
(Cost $1,169) @--
============================================================================
SHORT-TERM INVESTMENT (2.0%)
UNITED STATES (2.0%)
REPURCHASE AGREEMENT (2.0)
J.P. Morgan Securities, Inc.,1.25%,
dated 6/30/04, due 7/1/04,
repurchase price $5,547
(Cost $5,547) $ (e)5,547 5,547
============================================================================
8 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS (CONT'D) June 30, 2004 (unaudited)
VALUE
(000)
----------------------------------------------------------------------------
TOTAL INVESTMENTS (99.9%)
(Cost $232,889) $ 275,298
============================================================================
AMOUNT
(000)
----------------------------------------------------------------------------
OTHER ASSETS (1.2%)
Foreign Currency
(Cost $1,264) $ 1,269
Receivable for Investments
Sold 1,141
Dividends Receivable 714
Tax Reclaim Receivable 88
Other 12 3,224
============================================================================
LIABILITIES (-1.1%)
Payable For:
Investments Purchased (1,220)
Bank Overdraft (743)
Dividends Declared (404)
Investment Advisory Fees (276)
Country Tax Expense (163)
Custodian Fees (48)
Directors' Fees and
Expenses (35)
Administrative Fees (12)
Net Unrealized Depreciation
On Foreign Currency
Exchange Contracts (2)
Other Liabilities (144) (3,047)
============================================================================
NET ASSETS (100%)
Applicable to 17,937,990, issued and
outstanding $ 0.01 par value shares
(100,000,000 shares authorized) $ 275,475
============================================================================
NET ASSET VALUE PER SHARE $ 15.36
============================================================================
AT JUNE 30, 2004, NET ASSETS CONSISTED OF:
Common Stock $ 179
Paid-in Capital 284,361
Undistributed (Distributions in Excess of) Net
Investment Income (130)
Accumulated Net Realized Gain (Loss) (52,624)
Unrealized Appreciation (Depreciation)
on Investments, Foreign Currency Exchange
Contracts and Translations
(Net of $163 Deferred Country Tax) 43,689
----------------------------------------------------------------------------
TOTAL NET ASSETS $ 275,475
============================================================================
(a) Non-income producing.
(b) Security was valued at fair value - At June 30, 2004, the Fund held
$6,936,000 of fair-valued securities, representing 2.5% of net assets.
(c) The Morgan Stanley India Growth Fund, acquired at a cost of $891,309, is
advised by an affiliate of the Adviser. During the six months ended June
30, 2004, there were no purchases or sales of this security. The Fund
derived $155,444 of income from this security during the six months ended
June 30, 2004.
(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 is less than $500.
ADR American Depositary Receipt
GDR Global Depositary Receipt
INR Indian Rupee
NVDR Non-Voting Depositary Receipt
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Fund had the following foreign currency exchange contract(s) open at
period end:
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
----------------------------------------------------------------------------------
TRL 353,375,257 $ 238 7/1/04 US$ 236 $236 $(2)
TRL 64,038,131 43 7/2/04 US$ 43 43 @--
US$ 45 45 7/1/04 BRL 139 45 @--
US$ 1 1 7/2/04 HKD 8 1 @--
US$ 64 64 7/2/04 THB 2,628 64 @--
US$ 104 104 7/2/04 THB 4,235 104 @--
---------------------------------------------------------------------------------
$ 495 $493 $(2)
=================================================================================
BRL -- Brazilian Real
HKD -- Hong Kong Dollar
THB -- Thai Baht
TRL -- Turkish Lira
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 9
MORGAN STANLEY EMERGING MARKETS FUND, INC.
STATEMENT OF NET ASSETS (CONT'D) June 30, 2004 (unaudited)
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY
CLASSIFICATION - JUNE 30, 2004
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
-------------------------------------------------------------------
Commercial Banks $33,986 12.3%
Wireless Telecommunication
Services 27,326 9.9
Oil & Gas 27,022 9.8
Metals & Mining 24,312 8.8
Semiconductors & Semiconductor
Equipment 17,256 6.3
Electronic Equipment & Instruments 13,631 5.0
Diversified Telecommunication
Services 9,887 3.6
Food & Staples 9,591 3.5
Auto Components 6,713 2.4
Media 6,243 2.3
Electric Utilities 5,708 2.1
Diversified Financial Services 5,643 2.1
Software 5,613 2.0
Construction Materials 5,334 1.9
Household Durables 4,776 1.7
Construction & Engineering 4,700 1.7
Paper & Forest Products 4,292 1.6
Electrical Equipment 4,230 1.5
Multiline Retail 3,559 1.3
Leisure Equipment & Products 3,479 1.3
Computers & Peripherals 3,408 1.2
Capital Markets 3,364 1.2
Insurance 3,114 1.1
Airlines 2,847 1.0
Specialty Retail 2,782 1.0
Other 36,482 13.3
-------------------------------------------------------------------
$275,298 99.9%
-------------------------------------------------------------------
10 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Financial Statements
SIX MONTHS ENDED
JUNE 30, 2004
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
----------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of $172 of foreign taxes withheld) $ 3,878
----------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees 1,811
Custodian Fees 252
Professional Fees 82
Administrative Fees 56
Stockholder Reporting Expenses 26
Stockholder Servicing Fees 8
Directors' Fees and Expenses 2
Other Expenses 61
----------------------------------------------------------------------------------------------
TOTAL EXPENSES 2,298
----------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 1,580
----------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments 25,931
Foreign Currency Transactions (86)
----------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 25,845
----------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments (Net of $163 Deferred Country Tax) (32,795)
Foreign Currency Exchange Contracts and Translations (4)
----------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (32,799)
----------------------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (6,954)
----------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (5,374)
----------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss) $ 1,580 $ 2,528
Net Realized Gain (Loss) 25,845 10,777
Change in Unrealized Appreciation (Depreciation) (32,799) 89,821
------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,374) 103,126
------------------------------------------------------------------------------------------------------------------------
Distributions from and/or in excess of:
Net Investment Income (404) (2,982)
------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Repurchase of Shares (62,267 and 499,537 shares, respectively) (843) (4,616)
------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) (6,621) 95,528
------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period 282,096 186,568
------------------------------------------------------------------------------------------------------------------------
END OF PERIOD (INCLUDING UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME OF $(130) AND $(1,306), RESPECTIVELY) $275,475 $282,096
------------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 11
MORGAN STANLEY EMERGING MARKETS FUND, INC.
Financial Highlights
SELECTED PER SHARE DATA AND RATIOS
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2004 --------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.67 $ 10.08 $ 10.68 $ 11.03 $ 21.26 $ 10.33
-------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 0.09+ 0.14+ 0.03+ 0.03 (0.15) (0.03)
Net Realized and Unrealized Gain (Loss) on
Investments (0.39) 5.58 (0.65) (0.43) (8.04) 10.87
-------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.30) 5.72 (0.62) (0.40) (8.19) 10.84
-------------------------------------------------------------------------------------------------------------------------
Distributions from and/or in excess of:
Net Investment Income (0.02) (0.17) (0.01) -- -- --
Net Realized Gain -- -- -- -- (2.31) --
-------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.02) (0.17) (0.01) -- (2.31) --
-------------------------------------------------------------------------------------------------------------------------
Anti-Dilutive Effect of Share Repurchase Program 0.01 0.04 0.03 0.05 0.27 0.09
-------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.36 $ 15.67 $ 10.08 $ 10.68 $ 11.03 $ 21.26
=========================================================================================================================
PER SHARE MARKET VALUE, END OF PERIOD $ 13.23 $ 14.71 $ 8.34 $ 8.63 $ 8.75 $ 16.31
=========================================================================================================================
TOTAL INVESTMENT RETURN:
Market Value (9.91)%** 78.24% (3.28)% (1.37)% (34.60)% 100.77%
Net Asset Value (1) (1.82)%** 57.02% (5.49)% (3.17)% (36.74)% 105.81%
=========================================================================================================================
RATIOS, SUPPLEMENTAL DATA:
-------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) $275,475 $282,096 $186,568 $201,117 $213,205 $435,795
-------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.58% * 1.67% 1.75% 1.85% 1.64% 1.76%
Ratio of Net Investment Income to Average Net
Assets 1.09% * 1.17% 0.23% 0.21% (0.73)% (0.20)%
Portfolio Turnover Rate 33% ** 83% 75% 83% 81% 121%
-------------------------------------------------------------------------------------------------------------------------
(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
** Not Annualized
12 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
MORGAN STANLEY EMERGING MARKETS FUND, INC.
NOTES TO FINANCIAL STATEMENTS June 30, 2004 (unaudited)
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 (the "1940 Act"), 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.
Such policies are consistently followed by the Fund in the preparation of its
financial statements. Accounting principles generally accepted in the United
States 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: Equity securities listed on a U.S. exchange are valued
at the latest quoted sales price on the valuation date. Equity securities
listed or traded on NASDAQ, for which market quotations are available, are
valued at the NASDAQ Official Closing Price. Securities listed on a foreign
exchange are valued at their closing price. Unlisted securities and listed
securities not traded on the valuation date for which market quotations are
readily available are valued at the mean between the current bid and asked
prices obtained from reputable brokers. Debt securities purchased with
remaining maturities of 60 days or less are valued at amortized cost, if it
approximates value.
All other securities and investments for which market values are not readily
available, including restricted securities, and those securities for which
it is inappropriate to determine prices in accordance with the
aforementioned procedures, are valued at fair value as determined in good
faith under procedures adopted by the Board of Directors, although the
actual calculations may be done by others. Factors considered in making this
determination may include, but are not limited to, information obtained by
contacting the issuer, analysts, or the appropriate stock exchange (for
exchange-traded securities), analysis of the issuer's financial statements
or other available documents and, if necessary, available information
concerning other securities in similar circumstances.
Most foreign markets close before the New York Stock Exchange (NYSE).
Occasionally, developments that could affect the closing prices of
securities and other assets may occur between the times at which valuations
of such securities are determined (that is, close of the foreign market on
which the securities trade) and the close of business on the NYSE. If these
developments are expected to materially affect the value of the securities,
the valuations may be adjusted to reflect the estimated fair value as of the
close of the NYSE, as determined in good faith under procedures established
by the Board of Directors.
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
13
MORGAN STANLEY EMERGING MARKETS FUND, INC.
June 30, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
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 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
14
MORGAN STANLEY EMERGING MARKETS FUND, INC.
June 30, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
per annum. In addition, the Fund is charged for certain out-of-pocket expenses
incurred by the Administrator on its behalf. An employee of the Administrator is
an Officer of the Fund
D. CUSTODIAN: JPMorgan Chase Bank serves as custodian for the Fund. The
Custodian holds cash, securities, and other assets of the Fund as required by
the 1940 Act. Custody fees are payable monthly based on assets held in custody,
investment purchases 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/ 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 2003 and 2002 were as follows:
2003 DISTRIBUTIONS 2002 DISTRIBUTIONS
PAID FROM: PAID FROM:
(000) (000)
----------------------- ----------------------
LONG-TERM LONG-TERM
ORDINARY CAPITAL ORDINARY CAPITAL
INCOME GAIN INCOME GAIN
------------------------------------------------------
$2,982 $-- $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.
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 book and tax basis differences may result in reclassifications among
undistributed (distributions in excess of) net investment income (or accumulated
net investment loss), accumulated net realized gain (loss) and paid-in capital.
At December 31, 2003, the components of distributable earnings on a tax basis
were as follows:
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY INCOME LONG-TERM CAPITAL GAIN
(000) (000)
-------------------------------------------
$403 $--
-------------------------------------------
At June 30, 2004, the U.S. Federal income tax cost basis of investments was
$232,889,000 and, accordingly, net unrealized appreciation for U.S. Federal
income tax purposes was $42,409,000 of which $57,458,000 related to appreciated
securities and $15,049,000 related to depreciated securities.
At December 31, 2003, the Fund had a capital loss carry-forward for U.S. Federal
income tax purposes of approximately $76,464,000 available to offset future
capital gains of which $58,682,000 will expire on December 31, 2009 and
$17,782,000 will expire on December 31, 2010.
To the extent that capital loss carryforwards are used to offset any future
capital gains realized during the carryforward period as provided by U.S.
Federal income tax regulations, no capital gains tax liability will be incurred
by the Fund for gains realized and not distributed. To the extent that capital
gains are offset, such gains will not be distributed to the stockholders.
Net 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, 2003, the Fund deferred to January 1, 2004, for U.S.
Federal income tax purposes, post-October currency losses of $47,000.
F. CONTRACTUAL OBLIGATIONS: The Fund enters into contracts that contain a
variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these contracts and expects the risk of loss to be remote.
G. OTHER: During the six months ended June 30, 2004, the Fund made purchases
and sales totaling approximately $94,487,000 and $93,658,000, 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.
For the six months ended June 30, 2004, the Fund incurred $625 of brokerage
commissions with Morgan Stanley & Co., an affiliate of the Adviser.
15
MORGAN STANLEY EMERGING MARKETS FUND, INC.
June 30, 2004 (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, 2004, the
Fund repurchased 62,267 of its shares at an average discount of 14.51% from net
asset value per share. Since the inception of the program, the Fund has
repurchased 4,886,360 of its shares at an average discount of 19.69% 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 June 21, 2004 the Officers of the Fund, pursuant to authority granted by the
Board of Directors declared a distribution of $0.0225 per share, derived from
net investment income, payable on July 15, 2004, to stockholders of record on
June 30, 2004.
H. SUPPLEMENTAL PROXY INFORMATION:
The Annual Meeting of the Stockholders of the Fund was held on June 22, 2004.
The following is a summary of the proposal presented and the total number of
shares voted:
PROPOSAL:
1. To elect the following Directors:
VOTES IN VOTES
FAVOR OF AGAINST
-------------------------------------------------------
Wayne E. Hedien 15,164,989 651,047
James F. Higgins 15,164,989 651,047
Dr. Manuel H. Johnson 15,144,509 671,527
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A copy of (1) the Fund's policies and procedures with respect to the voting of
proxies relating to the Fund's portfolio securities; and (2) how the Fund voted
proxies relating to portfolio securities during the most recent twelve-month
period ended June 30, 2004 is available without charge, upon request, by calling
1-800-548-7786 or by visiting our website at www.morganstanley.com/im. This
information is also available on the Securities and Exchange Commission's
website at www.sec.gov.
16
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
17
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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. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS MORGAN STANLEY CLOSED-END FUNDS SHARE
REPURCHASE PROGRAM
Morgan Stanley Emerging Markets Fund, Inc.*
1/1/04-6/30/04
TOTAL NUMBER OF SHARES MAXIMUM NUMBER OF
PURCHASED AS PART OF SHARES THAT MAY YET BE
TOTAL NUMBER OF AVERAGE PRICE PUBLICLY ANNOUNCED PURCHASED UNDER THE
PERIOD SHARES PURCHASED PAID PER SHARE PLANS OR PROGRAMS PLANS OR PROGRAMS
------ ---------------- -------------- ---------------------- ----------------------
January -- -- -- Unlimited
February -- -- -- Unlimited
March 28,522 $14.63 28,522 Unlimited
April -- -- -- Unlimited
May 33,745 $12.52 33,745 Unlimited
June -- -- -- Unlimited
* The Share Repurchase Program commenced on 7/30/1998
** 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.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 10. CONTROLS AND PROCEDURES.
(a) 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.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 11. 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: /s/ Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 19, 2004
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: /s/ Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 19, 2004
By: /s/ James W. Garrett
Name: James W. Garrett
Title: Principal Financial Officer
Date: August 19, 2004