<PAGE>
MORGAN STANLEY
EMERGING MARKETS FUND, INC.
- ---------------------------------------------
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
Barton M. Biggs William G. Morton, Jr.
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS James W. Grisham
Michael F. Klein VICE PRESIDENT
PRESIDENT AND DIRECTOR Harold J. Schaaff, Jr.
Peter J. Chase VICE PRESIDENT
DIRECTOR Joseph P. Stadler
John W. Croghan VICE PRESIDENT
DIRECTOR Valerie Y. Lewis
David B. Gill SECRETARY
DIRECTOR Joanna M. Haigney
Graham E. Jones TREASURER
DIRECTOR Belinda A. Brady
John A. Levin ASSISTANT TREASURER
DIRECTOR
</TABLE>
- ---------------------------------------------
INVESTMENT ADVISER
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
- --------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
- --------------------------------------------------------
CUSTODIANS
Morgan Stanley Trust Company
One Pierrepont Plaza
Brooklyn, New York 11201
The Chase Manhattan Bank
770 Broadway
New York, New York 10003
- --------------------------------------------------------
SHAREHOLDER SERVICING AGENT
Boston Equiserve
Investor Relations Department
P.O. Box 644
Boston, Massachusetts 02102-0644
(617) 575-3120
- --------------------------------------------------------
LEGAL COUNSEL
Rogers & Wells
200 Park Avenue
New York, New York 10166
- --------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
- --------------------------------------------------------
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.
- ----------------------------------------------------------
MORGAN STANLEY
EMERGING MARKETS
FUND, INC.
---------------
SEMI-ANNUAL REPORT
JUNE 30, 1997
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- --------
For the six months ended June 30, 1997, the Morgan Stanley Emerging Markets
Fund, Inc. (the "Fund") had a total return, based on net asset value per share,
of 28.36% compared with 17.10% for the IFC Global Total Return Composite Index
(the "Index"). For the one year ended June 30, 1997, the Fund had a total
return, based on net asset value per share, of 21.19% compared with 11.31% for
the Index. For the period from commencement of operations on November 1, 1991
through June 30, 1997 the Fund's total return, based on net asset value per
share, was 169.44% compared with 91.19% for the Index. On June 30, 1997, the
closing price of the Fund's shares on the New York Stock Exchange was $17 7/8,
representing an 11.3% discount to the Fund's net asset value per share.
The second quarter was volatile, with returns ranging from -26.0% in Thailand to
44.5% in Russia. Latin America continued its outperformance in the second
quarter. All markets in the region were up during the second quarter. Brazil, up
51.2% year-to-date and 25.0% during the second quarter, remains the anchor in
the region. Privatization and strong earnings growth underpinned the region's
20.9% return in U.S. dollars terms over the quarter. While we remain optimistic
about the positive impact that privatization will have in the region, we are
concerned that the market may be anticipating too much good news on the horizon,
and are lightening up our exposure to Brazil. Going forward, our exposure in
Brazil will be concentrated in those stocks that have compelling valuations,
superior management expertise or limited downside risk to a macro shock. We
continue to like Mexico, where falling interest rates and a stable peso
contribute to a solid economic recovery. Positive news on the consumer front
further supports this market.
Asia continues to convulse with macro-economic imbalances created by
overinvestment, growth of current account deficits and inflexible exchange
rates. In May, a speculative attack on the Thai baht prompted officials to raise
interest rates precipitously and to institute a two-tiered currency system,
further diminishing badly needed inflows of foreign capital to this market.
The Bank of Thailand moved to a managed float of the baht in July. The value of
the baht would be set by market forces, but the flotation would be managed by
the authorities. The baht peg to a basket of currencies has been discontinued.
We hedged our Thai currency exposure in May as we believed that the Thai market
represented value but we also believed that a devaluation was in the offing. The
hedge was put on when the baht traded at 26. It subsequently went to 20 and
finally to 29. The baht has been trading in a range since the announcement, but
we believe that there could be further depreciation near term. We also believe
that the Thai market has bottomed and that this event is bullish for the stock
market, although bearish for the economy. Our projection for the baht level in
the near term is in the 31-32 area. We have maintained approximately 50% of our
hedge in the aftermath of the devaluation. We achieved a return of approximately
8% on the portion of the hedge that was closed out. We will continue to monitor
this situation closely to determine if and when we should unwind our remaining
baht hedges. Possible next steps include a financial sector restructuring
package and the elimination of the two tier foreign exchange system. Thailand
needs foreign capital flows to finance its economic recovery and these controls
are hampering capital inflows. Also, as the currency stabilizes the need for
these controls should disappear.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI EMERGING MARKETS INDICES
<S> <C>
Performance ($US)
3 Months to June 30 1997
% Change
THAILAND -26.0%
CZECH REPUBLIC -20.4%
POLAND -15.5%
PHILIPPINES -14.3%
MALAYSIA -12.1%
TURKEY -0.6%
PAKISTAN 1.1%
SOUTH AFRICA 1.3%
GREECE 6.4%
INDONESIA 6.9%
COLOMBIA 7.7%
JORDAN 10.3%
ISRAEL 12.0%
CHINA 12.9%
KOREA 13.4%
PORTUGAL 14.4%
ARGENTINA 15.0%
CHILE 15.2%
TAIWAN 15.6%
PERU 16.0%
MEXICO 18.1%
HONGKONG 19.4%
BRAZIL 25.0%
HUNGARY 26.0%
INDIA 27.4%
SRI LANKA 29.5%
VENEZUELA 44.2%
RUSSIA 44.5%
</TABLE>
Further in the region, markets like Malaysia (-12.2% year-to-date) and the
Philippines (-12.2% year-to-date) have suffered as fears of Thai style property
and finance problems led to sell-offs. We are significantly
2
<PAGE>
underweight Malaysia and are out of the Philippines, which has positively
impacted portfolio performance. With these two markets 20-25% off their highs,
we are re-examining our extreme underweight in these countries.
In Russia, falling interest rates and significant progress on both the economic
restructuring and tax reform fronts supported the market. Russia was up 44.5%
during the second quarter and 117.3% year-to-date. Lower rates are luring local
investors, further boosting returns. The inclusion of Russia in the IFC's
investable index also favorably impacted performance. We favor energy and
electric utility stocks in this market, as valuations remain attractive and
growth prospects long-term are solid.
India has shaken off the malaise of political instability and is refocussed on
the business of market liberalization and reform. Tax cuts, lower interest rates
and the new coalition government have brought local and foreign investors into
the market, which is up 27.4% in the second quarter and 36.4% so far this year.
The market has been led so far by a select few companies, but with easing rates
and projected pick-ups in industrial production, we expect to see an increasing
breadth in advances. Pakistan has followed its political rival. Similar problems
have led to similar opportunities. The market continues to rise on the back of
low valuations and stabilizing politics. We will continue to raise our weight in
Pakistan, mainly through Pakistan Telecom, as we expect some positive
developments on tariff rates.
Sincerely,
/S/ MICHAEL F. KLEIN
Michael F. Klein
PRESIDENT AND DIRECTOR
/S/ MADHAV DHAR
Madhav Dhar
CHIEF PORTFOLIO MANAGER
/S/ ROBERT L. MEYER
Robert L. Meyer
PORTFOLIO MANAGER
July 1997
- --------------------------
Robert L. Meyer has assumed the portfolio co-manager responsibilities of the
Fund from Marianne L. Hay, effective April 1, 1997. Mr. Meyer is a Managing
Director of Morgan Stanley Asset Management Inc. and co-manager of MSAM's global
emerging market equity portfolios.
3
<PAGE>
Morgan Stanley Emerging Markets Fund, Inc.
Investment Summary as of June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION
TOTAL RETURN (%)
-------------------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
-------------------------- --------------------------- ----------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
-------------------------- --------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR TO DATE 28.83% -- 28.36% -- 17.10% --
ONE YEAR 11.22 11.22% 21.19 21.19% 11.31 11.31%
FIVE YEAR 99.28+ 14.79+ 118.62+ 16.93+ 78.63 12.30
SINCE INCEPTION* 139.15+ 16.90+ 169.44+ 19.12+ 91.19 12.12
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
A BAR CHART REFLECTING THE DATA BELOW IS REFLECTED HERE.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31:
TOTAL RETURN 1991* 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share $14.71 $16.74 $28.20 $20.30 $14.69 $15.69
Market Value Per Share $14.25 $18.13 $31.63 $21.50 $15.50 $13.88
Premium/(Discount) -3.1% 8.3% 12.2% 5.9% 5.5% -11.5%
Income Dividends $0.04 $0.01 - - - $0.05
Capital Gains Distributions - $0.01 $1.49 $6.50 $1.29 $0.98
Fund Total Return (2) 4.61% 13.94% 95.22%+ -5.33% -16.30%+ 13.84%
Index Total Return (3) 3.25% 0.33% 67.52% -0.51% -12.34% 7.84%
Morgan Stanley Emerging Markets Funds, Inc. (2)
IFC Global Total Return Composite Index (3)
<CAPTION>
YEARS ENDED DECEMBER 31: SIX MONTHS ENDED
TOTAL RETURN JUNE 30, 1997
<S> <C>
Net Asset Value Per Share $20.14
Market Value Per Share $17.88
Premium/(Discount) -11.3%
Income Dividends -
Capital Gains Distributions -
Fund Total Return (2) 28.36%
Index Total Return (3) 17.10%
Morgan Stanley Emerging Markets Funds, Inc. (2)
IFC Global Total Return Composite Index (3)
</TABLE>
(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. These percentages are not an indication of the performance of a
shareholder'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 IFC Global Total Return Composite Index is an unmanaged index of common
stocks of developing countries in Latin America, East and South Asia,
Europe, the Middle East and Africa, including dividends.
* 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.
4
<PAGE>
Morgan Stanley Emerging Markets Fund, Inc.
Portfolio Summary as of June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equity Securities 98.6%
Debt Securities 0.7%
Short-Term Invest-
ments 0.7%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Banking 15.1%
Beverages & Tobacco 7.6%
Chemicals 4.4%
Electronic Components & Instruments 3.1%
Energy Equipment & Services 6.6%
Energy Sources 3.9%
Food & Household Products 2.8%
Multi-Industry 8.0%
Telecommunications 16.2%
Utilities - Electrical & Gas 8.8%
Other 23.5%
</TABLE>
- --------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Brazil 16.8%
Mexico 11.3%
India 11.1%
South Africa 7.7%
Korea 7.2%
Russia 6.8%
Indonesia 5.6%
Thailand 5.3%
Taiwan 4.7%
Turkey 4.2%
Other 19.3%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<C> <S> <C>
1. Bharat Heavy Electricals Ltd. 6.6%
2. Telebras 3.0
3. CRT 3.0
4. Telmex 2.8
5. Eletrobras 2.5
<CAPTION>
PERCENT OF
NET ASSETS
----------
<C> <S> <C>
6. FEMSA 2.4%
7. Cemig 2.4
8. SASOL Ltd. 2.3
9. Brahma 2.0
10. Samsung Electronics Co. 2.0
-----
29.0%
-----
-----
</TABLE>
5
<PAGE>
FINANCIAL STATEMENTS
- ---------
INVESTMENTS (UNAUDITED)
- ---------
JUNE 30, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------------
- -------------
COMMON STOCKS (99.1%)
(Unless otherwise noted)
- --------------------------------------------------
- ----------
ARGENTINA (2.5%)
AUTOMOBILES
CIADEA 1 U.S.$ --@
--------------
BEVERAGES & TOBACCO
Quilmes 97,340 997
--------------
ENERGY SOURCES
YPF ADR 74,725 2,298
--------------
TELECOMMUNICATIONS
Nortel ADR 28,685 778
Telecom Argentina ADR 24,701 1,297
Telefonica Argentina ADR 175,590 6,080
--------------
8,155
--------------
11,450
--------------
- -----------------------------------------------------------------
- -------------
BRAZIL (16.8%)
BANKING
(g)Banco Bradesco (Preferred) 93,425,363 942
(a,c,g)Banco Nacional (Preferred) 61,598,720 3
(g)Itaubanco (Preferred) 4,658,500 2,609
(g)Unibanco (Preferred) GDR 76,650 2,846
--------------
6,400
--------------
BEVERAGES & TOBACCO
(g)Brahma (Preferred) 10,564,209 8,046
(g)Brahma (Preferrred) ADR 78,950 1,209
--------------
9,255
--------------
ENERGY SOURCES
(g)Petrobras (Preferred) 16,365,999 4,545
--------------
MERCHANDISING
(g)Lojas Arapua (Preferred) 30,412,000 494
(g)Lojas Arapua (Preferred) ADR 31,540 523
(g)Lojas Renner (Preferred) 14,237,000 730
(a,g)Pao de Acucar (Preferred) 6,460,000 147
(a,g)Pao de Acucar (Preferred) ADR 52,360 1,191
--------------
3,085
--------------
TELECOMMUNICATIONS
(a)CRT 319,800 481
(a,g)CRT (Preferred) 'A' 8,699,400 13,090
(a)CRT (Preferred Rights) 309,856 71
Telebras 20,246,000 2,746
(g)Telebras (Preferred) 72,870,183 11,053
(a)Telesp 905,117 267
(g)Telesp (Preferred) 1,905,535 623
Telesp Receipts 125,313 41
--------------
28,372
--------------
TEXTILES & APPAREL
(g)Coteminas (Preferred) 2,980,000 1,163
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
UTILITIES -- ELECTRICAL & GAS
(a,g)Celesc (Preferred) 'B' GDR 144A 5,680 U.S.$ 790
(g)Cemig (Preferred) 143,411,867 7,393
(g)Cemig (Preferred) ADR 62,440 3,144
(g)Cemig (Preferred) GDR 7,525 388
Eletrobras 10,616,078 5,936
Eletrobras ADR 98,560 2,750
(g)Eletrobras (Preferred) 'B' 4,993,138 2,977
Lightpar 2,591,000 1,032
--------------
24,410
--------------
77,230
--------------
- -----------------------------------------------------------------
- -------------
CANADA (0.1%)
MULTI-INDUSTRY
(a)International UNP Holdings Ltd. 2,280,000 330
--------------
- -----------------------------------------------------------------
- -------------
CHILE (0.7%)
BEVERAGES & TOBACCO
CCU ADR 41,390 908
--------------
MERCHANDISING
Santa Isabel ADR 48,962 1,579
--------------
UTILITIES -- ELECTRICAL & GAS
Enersis ADR 18,305 651
--------------
3,138
--------------
- -----------------------------------------------------------------
- -------------
CHINA (0.3%)
ENERGY SOURCES
Zhenhai Refining & Chemical Co. Ltd.
'H' 1,843,000 666
--------------
TRANSPORTATION -- ROAD & RAIL
Guangshen Railway Co. Ltd. 1,134,000 498
Guangshen Railway Co. Ltd. ADR 20,000 438
--------------
936
--------------
1,602
--------------
- -----------------------------------------------------------------
- -------------
COLOMBIA (0.2%)
BANKING
Banco de Colombia 3,032,000 1,112
--------------
- -----------------------------------------------------------------
- -------------
EGYPT (1.5%)
BANKING
Commercial International Bank 53,890 1,127
(a)Egypt American Bank 2,839 112
Egyptian Finance & Industrial 14,850 887
--------------
2,126
--------------
BEVERAGES & TOBACCO
Eastern Tobacco 47,790 1,209
--------------
BUILDING MATERIALS & COMPONENTS
Ameriyah Cement Co. 35,900 875
Helwan Portland Cement 34,500 730
Tora Portland Cement Co. 37,150 940
--------------
2,545
--------------
FOOD & HOUSEHOLD PRODUCTS
North Cairo Flour Mills 7,910 412
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
EGYPT (CONTINUED)
REAL ESTATE
Madinet Nasr Housing & Development 7,000 U.S.$ 494
--------------
6,786
--------------
- -----------------------------------------------------------------
- -------------
HONG KONG (2.6%)
MULTI-INDUSTRY
(a)China Everbright-IHD Pacific Ltd. 546,000 1,631
China Resources Enterprise Ltd. 639,000 3,134
Hutchison Whampoa Ltd. 114,000 986
Shanghai Industrial Holdings Ltd. 292,000 1,817
--------------
7,568
--------------
REAL ESTATE
Cheung Kong (Holdings) Ltd. 186,000 1,837
China Resources Beijing Land 1,820,000 1,351
New World Development Co. Ltd. 156,000 930
--------------
4,118
--------------
11,686
--------------
- -----------------------------------------------------------------
- -------------
HUNGARY (0.5%)
CHEMICALS
(a)BorsodChem Rt. GDR 5,500 214
(a)Tiszai Vegyi Kombinat Rt. GDR 28,600 490
--------------
704
--------------
ENERGY SOURCES
(a)MOL Magyar Olaj-es Gazipari Rt. GDR 36,100 803
--------------
HEALTH & PERSONAL CARE
Richter Gedeon Rt. 7,400 682
Richter Gedeon Rt. GDR 3,100 285
--------------
967
--------------
2,474
--------------
- -----------------------------------------------------------------
- -------------
INDIA (10.8%)
AUTOMOBILES
Apollo Tyres Ltd. 33,200 103
(a)Hero Honda Ltd. 11,518 165
Tata Engineering & Locomotive Ltd. 3,572 45
--------------
313
--------------
BANKING
State Bank of India Ltd. 798,700 7,591
--------------
BEVERAGES & TOBACCO
ITC Ltd. 122,318 1,923
--------------
CHEMICALS
Indian Petro Chemical Corp. Ltd. 2,520 10
Reliance Industries Ltd. 802 8
--------------
18
--------------
ENERGY EQUIPMENT & SERVICES
Bharat Heavy Electricals Ltd. 2,800,900 30,258
--------------
FINANCIAL SERVICES
Housing Development Finance Corp. Ltd. 49,175 5,608
--------------
HEALTH & PERSONAL CARE
E. Merck (India) Ltd. 16,683 86
--------------
MULTI-INDUSTRY
(a,d)Morgan Stanley Growth Fund 6,881,800 1,230
--------------
RECREATION, OTHER CONSUMER GOODS
Tube Investments of India Ltd. 149,500 244
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
TEXTILES & APPAREL
(a)Raymond Ltd. 248 U.S.$ 1
(c)Raymond Ltd.-New 40,575 68
--------------
69
--------------
TRANSPORTATION -- ROAD & RAIL
Container Corp. of India Ltd. 147,500 2,155
--------------
TRANSPORTATION -- SHIPPING
Great Eastern Shipping Co. Ltd. 400 1
--------------
UTILITIES -- ELECTRICAL & GAS
Tata Power Co. Ltd. 50 --@
--------------
49,496
--------------
- -----------------------------------------------------------------
- -------------
INDONESIA (5.6%)
AUTOMOBILES
(a)Astra International (Foreign) 1,577,500 6,486
--------------
BANKING
(c)Bank International Indonesia
(Foreign) 3,705,003 3,199
(a,c)Bank International Indonesia
(Foreign) (Warrants), expiring
1/17/00 329,334 129
(c)Bank Negara Indonesia (Foreign) 5,428,000 3,459
--------------
6,787
--------------
BEVERAGES & TOBACCO
(c)Gudang Garam (Foreign) 605,800 2,541
(c)HM Sampoerna (Foreign) 839,000 3,200
--------------
5,741
--------------
FINANCIAL SERVICES
(c)Putra Surya Multidana (Foreign) 94,000 150
--------------
FOOD & HOUSEHOLD PRODUCTS
(c)Indofood Sukses Makmur (Foreign) 554,400 1,277
(c)Mayora Indah (Foreign) 231,000 131
--------------
1,408
--------------
FOREST PRODUCTS & PAPER
(c)Indah Kiat Pulp & Paper (Foreign) 1,338,421 784
(a,c)Indah Kiat Pulp & Paper (Rights) 1,204,579 210
(a,c)Indah Kiat Pulp & Paper
(Warrants), expiring 7/11/02 214,147 37
--------------
1,031
--------------
MERCHANDISING
(c)Matahari Putra Prima (Foreign) 929,500 1,873
--------------
MULTI-INDUSTRY
(c)Bimantara Citra (Foreign) 1,214,000 2,122
--------------
25,598
--------------
- -----------------------------------------------------------------
- -------------
ISRAEL (2.2%)
BANKING
(a)Bank Hapoalim Ltd. 162,500 338
First International Bank of Israel '5' 2,064 1,590
--------------
1,928
--------------
ELECTRICAL & ELECTRONICS
Elbit Systems Ltd. 66,365 793
Scitex Ltd. 55,467 489
--------------
1,282
--------------
FOOD & HOUSEHOLD PRODUCTS
Osem Investment Ltd. 94,176 499
Super Sol Ltd. 963,400 3,090
--------------
3,589
--------------
MERCHANDISING
Blue Square-Israel Ltd. ADR 87,700 1,513
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
ISRAEL (CONTINUED)
MULTI-INDUSTRY
Koor Industries Ltd. 10,850 U.S.$ 961
(a)Pec Israel Economic Corp. 43,870 1,053
--------------
2,014
--------------
10,326
--------------
- -----------------------------------------------------------------
- -------------
KOREA (7.2%)
APPLIANCES & HOUSEHOLD DURABLES
(c)Samsung Electronics Co. (Foreign) 67,817 7,592
(a)Samsung Electronics Co. GDR -- New
144A 28,636 1,607
--------------
9,199
--------------
BANKING
Cho Hung Bank Co. Ltd. (Foreign) 43,900 292
Cho Hung Bank Co. Ltd. GDR 107,100 776
(c)Housing & Commercial Bank, Korea 115,980 2,165
(a,c)Kookmin Bank 134,480 2,481
Kookmin Bank GDR 97,798 2,066
Korea Exchange Bank 76,700 505
(c)Shinhan Bank Co. Ltd. (Foreign) 111,750 1,620
--------------
9,905
--------------
CHEMICALS
(a)Hanwha Chemical Corp. 2,125 17
--------------
CONSTRUCTION & HOUSING
(a)Hyundai Engineering (Foreign) 74,014 1,900
--------------
FOREST PRODUCTS & PAPER
Hansol Paper Co. 60,310 1,528
--------------
METALS -- STEEL
Pohang Iron & Steel Ltd. ADR 26,130 836
(c)Pohang Iron & Steel Ltd. (Foreign) 20,740 2,124
--------------
2,960
--------------
TELECOMMUNICATIONS
LG Information & Communication Ltd. 36,950 4,577
--------------
UTILITIES -- ELECTRICAL & GAS
Korea Electric Power Corp. (Foreign) 104,240 3,111
--------------
33,197
--------------
- -----------------------------------------------------------------
- -------------
MALAYSIA (1.2%)
BANKING
Commerce Asset Holding Bhd 508,000 1,339
(a)Commerce Asset Holding Bhd (Rights) 101,600 6
(a)Commerce Asset Holding Bhd
(Warrants), expiring 3/16/02 63,500 --@
--------------
1,345
--------------
FINANCIAL SERVICES
Rashid Hussain Bhd 121,000 767
--------------
LEISURE & TOURISM
Genting Bhd 267,400 1,282
Resorts World Bhd 383,000 1,153
--------------
2,435
--------------
MACHINERY & ENGINEERING
United Engineers (Malaysia) Bhd 104,000 750
--------------
5,297
--------------
- -----------------------------------------------------------------
- -------------
MAURITIUS (0.4%)
BANKING
State Bank of Mauritius 3,050,000 1,730
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
MEXICO (11.3%)
BANKING
(a)Banacci 'B' 276,057 U.S.$ 710
(a)Banacci 'L' 805,847 1,882
(a)Bancomer 'B' 914,690 442
(a)Bancomer 'B' ADR 144A 228,148 2,224
--------------
5,258
--------------
BEVERAGES & TOBACCO
FEMSA 'B' 1,885,625 11,244
--------------
BROADCASTING & PUBLISHING
(a)Televisa CPO ADR 250,488 7,609
--------------
BUILDING MATERIALS & COMPONENTS
Apasco 101,703 728
Cemex 'B' 154,660 757
Cemex 'B' ADR 175,320 1,688
Cemex CPO 555,486 2,416
Cemex CPO ADR 188,969 1,639
--------------
7,228
--------------
FOOD & HOUSEHOLD PRODUCTS
(a)Gruma ADR (Registered) 13,790 255
Gruma 'B' 48,180 223
Kimberly 'A' 644,141 2,582
Maseca 'B' 280,405 307
--------------
3,367
--------------
MERCHANDISING
Cifra 'A' 36,785 68
Cifra 'C' 300,754 482
--------------
550
--------------
MULTI-INDUSTRY
Carso ADR 61,710 870
Carso 'A1' 232,405 1,620
Desc ADR 34,754 1,012
(a)Sidek 'A' 1,000 --@
--------------
3,502
--------------
TELECOMMUNICATIONS
Telmex 'L' ADR 271,930 12,985
--------------
51,743
--------------
- -----------------------------------------------------------------
- -------------
PAKISTAN (2.8%)
CHEMICALS
Engro Chemicals Ltd. 292,000 1,033
Fauji Fertilizer Co. Ltd. 1,643,700 3,233
--------------
4,266
--------------
ENERGY SOURCES
Pakistan State Oil Co. Ltd. 351,700 2,832
--------------
TELECOMMUNICATIONS
Pakistan Telecommunications 5,407,000 4,113
(a)Pakistan Telecommunications GDR 7,650 578
--------------
4,691
--------------
TEXTILES & APPAREL
(a)Nishat Mills Ltd. 471,926 234
--------------
UTILITIES -- ELECTRICAL & GAS
Hub Power Co. 20,000 20
(a)Karachi Electric Supply Corp. 554,400 165
(a)Sui Northern Gas Co. 771,300 606
--------------
791
--------------
12,814
--------------
- -----------------------------------------------------------------
- -------------
PERU (0.5%)
TELECOMMUNICATIONS
Tel Peru 'B' ADR 90,550 2,371
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
POLAND (1.6%)
BANKING
(a)Bank Handlowy W Warszawie 17,000 U.S.$ 181
Bank Rozwoju Eksportu 22,750 478
Bank Slaski 6,900 493
--------------
1,152
--------------
CHEMICALS
(a,b)Eastbridge 33,600 2,259
Polifarb Wroclaw 125,000 468
--------------
2,727
--------------
CONSTRUCTION & HOUSING
(a)Exbud 46,500 468
--------------
FOOD & HOUSEHOLD PRODUCTS
(a)Agros Holding 'C' 29,000 772
(a)Agros Holding 'D' 9,880 211
--------------
983
--------------
INDUSTRIAL COMPONENTS
Debica 31,500 647
--------------
WHOLESALE & INTERNATIONAL TRADE
Elektrim 148,500 1,292
--------------
7,269
--------------
- -----------------------------------------------------------------
- -------------
RUSSIA (6.8%)
BROADCASTING & PUBLISHING
(a,b)Storyfirst Communications, Inc.
'C' (Preferred) 270 180
(a,b)Storyfirst Communications, Inc.
'D' (Preferred) 720 540
(a,b)Storyfirst Communications, Inc.
'E' (Preferred) 780 780
(a,b)Storyfirst Communications, Inc.
'F' (Preferred) 139 347
(a,b)Storyfirst Communications, Inc.,
First Section, Tranche I
(Convertible) 542 644
(a,b)Storyfirst Communications, Inc.,
Second Section, Tranche II
(Convertible) 137 163
(a,b)Storyfirst Communications, Inc.,
Tranche IV (Convertible) 207 246
--------------
2,900
--------------
ENERGY SOURCES
(a)Lukoil Holdings ADR 144A 27,065 2,124
(a)Lukoil Holdings 149,900 2,942
Surgutneftegaz ADR 10,000 535
Tatneft ADR 10,000 1,065
--------------
6,666
--------------
FOREST PRODUCTS & PAPER
(a,c)Alliance Cellulose Ltd. 'B' 156,075 1,049
--------------
MERCHANDISING
TSUM 2,880,000 2,261
--------------
TELECOMMUNICATIONS
(a,c)Global Tele-Systems Ltd. 214,285 4,286
(a)Rostelecom 528,500 2,050
(b)Russian Telecom Development Corp. 176,000 836
--------------
7,172
--------------
UTILITIES -- ELECTRICAL & GAS
(a)Edinaya Energetiches 62,500 23
(a)Irkutskenergo 3,460,000 1,178
(a)Mosenergo 2,525,000 3,538
(a)Unified Energy System 18,022,500 6,522
--------------
11,261
--------------
31,309
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
SINGAPORE (0.4%)
FOOD & HOUSEHOLD PRODUCTS
(a)Want Want Holdings 590,400 U.S.$ 1,960
--------------
- -----------------------------------------------------------------
- -------------
SOUTH AFRICA (7.7%)
APPLIANCES & HOUSEHOLD DURABLES
Ellerine Holdings Ltd. 324,000 2,307
--------------
BANKING
First National Bank Holdings Ltd. 148,200 1,274
--------------
BUSINESS & PUBLIC SERVICES
Persetel Holdings Ltd. 265,000 1,863
--------------
CHEMICALS
(a)SASOL Ltd. 800,000 10,491
--------------
ELECTRICAL & ELECTRONICS
Reunert Ltd. 38,500 132
--------------
FINANCIAL SERVICES
Amalgamated Banks of South Africa 91,000 653
--------------
FOOD & HOUSEHOLD PRODUCTS
Foodcorp Ltd. 26,727 203
Illovo Sugar Ltd. 403,600 925
--------------
1,128
--------------
HEALTH & PERSONAL CARE
South African Druggists Ltd. 39,295 329
--------------
MISCELLANEOUS MATERIALS & COMMODITIES
De Beers Centenary AG 43,600 1,610
--------------
MULTI-INDUSTRY
Barlow Ltd. 287,100 3,123
Bidvest Group Ltd. 106,110 819
Gencor Ltd. 452,300 2,084
Malbak Ltd. 238,300 378
(d)Morgan Stanley Africa Investment
Fund, Inc. 141,445 2,528
Rembrandt Group Ltd. 542,700 5,789
--------------
14,721
--------------
TELECOMMUNICATIONS
Plessey Corp. Ltd. 559,500 1,073
--------------
35,581
--------------
- -----------------------------------------------------------------
- -------------
TAIWAN (4.7%)
CHEMICALS
Formosa Plastics Corp. 437,090 1,053
--------------
CONSTRUCTION & HOUSING
(a)Kuoyang Construction 496,540 1,197
--------------
ELECTRONIC COMPONENTS & INSTRUMENTS
(a)Acer, Inc. 653,000 2,349
(a)Asustek Computer Inc. 468,000 6,195
(a)Compal Electronics 999,700 3,956
Siliconware Precision Industries Co. 518,000 1,751
--------------
14,251
--------------
FINANCIAL SERVICES
(a)China Development Corp. 255,000 1,316
--------------
TEXTILES & APPAREL
Far East Textile 2,332,000 3,666
--------------
21,483
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
THAILAND (5.3%)
BANKING
Bangkok Bank Ltd. (Foreign) 850,600 U.S.$ 5,845
Siam Commercial Bank Co. Ltd.
(Foreign) 784,300 3,209
Thai Farmers Bank Ltd. (Foreign) 1,267,960 5,384
(a)Thai Farmers Bank Ltd. (Warrants),
expiring 9/30/99 200,000 60
(a)Thai Farmers Bank Ltd. (Warrants),
expiring 9/15/02 259,720 113
--------------
14,611
--------------
BUILDING MATERIALS & COMPONENTS
Siam Cement Co. Ltd. (Foreign) 36,800 636
Tipco Asphalt Co. Ltd. 94,900 495
--------------
1,131
--------------
CHEMICALS
(c)National Petrochemical Ltd.
(Foreign) 596,000 610
--------------
ELECTRICAL & ELECTRONICS
(c)Shinawatra Computer Co. Ltd.
(Foreign) 355,200 2,454
Shinawatra Computer Co. Ltd. 1,700 12
--------------
2,466
--------------
ENERGY SOURCES
Banpu Co. Ltd. (Foreign) 12,000 175
--------------
FINANCIAL SERVICES
Industrial Finance Corp. (Foreign) 292,300 372
National Finance & Securities Co. Ltd. 320,700 201
National Finance & Securities Co. Ltd.
(Foreign) 297,300 187
--------------
760
--------------
MINING
Lanna Lignite Co. Ltd. 12,400 88
Lanna Lignite Co. Ltd. (Foreign) 54,000 358
--------------
446
--------------
REAL ESTATE
Central Pattana Co. Ltd. (Foreign) 200,900 279
--------------
TELECOMMUNICATIONS
Advanced Information Services Co. Ltd.
(Foreign) 357,800 2,555
Advanced Information Services Co. Ltd. 5,500 48
United Communications Industry Ltd. 342,200 1,414
(c)United Communications Industry Ltd.
(Foreign) 18,000 74
--------------
4,091
--------------
24,569
--------------
- -----------------------------------------------------------------
- -------------
TURKEY (4.2%)
APPLIANCES & HOUSEHOLD DURABLES
Aksa Arcelik 1,195,500 161
--------------
BANKING
(a)Turkiye Garanti Bankasi 53,288,940 2,009
Yapi Ve Kredi Bankasi 268,394,850 6,144
--------------
8,153
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
BEVERAGES & TOBACCO
(a,c)Efes Sinai Yatirim 30,236,087 U.S.$ 815
Ege Biracilik Ve Malt Sanayii 12,231,000 2,841
--------------
3,656
--------------
BROADCASTING & PUBLISHING
Sabah Yayincilik AS 16,407,000 146
--------------
ELECTRICAL & ELECTRONICS
Vestel Elektronik Sanayi ve Ticaret AS 9,440,000 528
--------------
MERCHANDISING
Migros Turk TAS 2,773,750 1,961
--------------
METALS -- STEEL
Eregli Demir Ve Celik Fabrikalari TAS 24,694,000 4,115
--------------
TEXTILES & APPAREL
Aksa Akrilik Kimya Sanayii AS-New 3,898,360 315
Bossa Ticaret Sanayii Isletme 5,470,500 123
--------------
438
--------------
19,158
--------------
- -----------------------------------------------------------------
- -------------
VENEZUELA (0.3%)
TELECOMMUNICATIONS
CANTV ADR 20,250 873
--------------
UTILITIES -- ELECTRICAL & GAS
Electricidad de Caracas 264,000 423
--------------
1,296
--------------
- -----------------------------------------------------------------
- -------------
ZIMBABWE (0.9%)
MULTI-INDUSTRY
Delta Corp. 456,000 700
Trans Zambezi Industries Ltd. 4,000,000 3,577
--------------
4,277
--------------
- -----------------------------------------------------------------
- -------------
TOTAL COMMON STOCKS
(Cost U.S. $371,064) 455,282
--------------
- -----------------------------------------------------------------
- -------------
CONVERTIBLE PREFERRED STOCK (0.0%)
- -----------------------------------------------------------------
- -------------
SOUTH AFRICA (0.0%)
CHEMICALS
SASOL Ltd. 8.5% (Cost U.S.$40) 3,200 40
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- -----------------------------------------------------------------
- -------------
DEBT INSTRUMENTS (0.7%)
- -----------------------------------------------------------------
- -------------
BULGARIA (0.4%)
FOREIGN GOVERNMENT BONDS
The Republic of Bulgaria Discount Bond
'A' Euro 6.5625%, 7/28/24 U.S.$ 1,200 885
(f)The Republic of Bulgaria Front
Loaded Interest Reduction Bond 'A'
2.25%, 7/28/12 1,750 1,000
--------------
1,885
--------------
- -----------------------------------------------------------------
- -------------
INDIA (0.3%)
CHEMICALS
(c)Supreme Petrochem Ltd. 2.25%,
4/22/02 INR 550,400 187
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
INDIA (CONTINUED)
METALS -- STEEL
(c)Shri Ishar Alloy Steels Ltd.
15.00%, 4/21/01 INR 581 U.S.$ 236
--------------
MULTI-INDUSTRY
(c,e)DCM Shriram Industries Ltd.
9.90%, 2/21/02 335 471
(c)DCM Shriram Industries Ltd.
(Convertible) 7.50%, 2/21/02 330 367
--------------
838
--------------
1,261
--------------
- -----------------------------------------------------------------
- -------------
POLAND (0.0%)
FOREIGN GOVERNMENT BOND
Polish People's Republic Past Due
Interest Bond 4.00%, 10/27/14 U.S.$ 28 24
--------------
- -----------------------------------------------------------------
- -------------
TOTAL DEBT INSTRUMENTS
(Cost U.S. $3,056) 3,170
--------------
- -----------------------------------------------------------------
- -------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (0.7%)
Argentine Peso ARP 6 6
Brazilian Real BRL 862 801
Colombian Peso COP 40,521 37
Egyptian Pound EGP 47 14
Hong Kong Dollar HKD 517 67
Hungarian Forint HUF 1,184 6
Indian Rupee INR 8,789 246
Indonesian Rupiah IDR 3,528 1
Malaysian Ringgit MYR 58 23
Pakistani Rupee PKR 28,671 709
Peruvian New Sol PSS 4 1
Philippines Peso PHP 1,875 71
Polish Zloty PLZ 32 10
South African Rand ZAR 4 1
South Korean Won KRW 367,914 414
Taiwan Dollar TWD 17,826 641
Thai Baht THB 7,401 286
Turkish Lira TRL 5,647,518 38
Venezuelan Bolivar VEB 30,442 63
--------------
(Cost U.S. $3,440) 3,435
--------------
- -----------------------------------------------------------------
- -------------
TOTAL INVESTMENTS (100.5%)
(Cost U.S. $377,600) 461,927
--------------
- -----------------------------------------------------------------
- -------------
OTHER ASSETS (2.8%)
Receivable for Investments Sold U.S.$ 11,084
Dividends Receivable 1,448
Interest Receivable 245
Foreign Withholding Tax Reclaim
Receivable 29
Other Assets 95 12,901
--------------- --------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
AMOUNT AMOUNT
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
LIABILITIES (-3.3%)
Deferred Country Tax U.S.$ (3,025)
Payable for:
Investments Purchased U.S.$ (8,753)
Bank Overdraft (2,140)
Investment Advisory Fees (441)
Custodian Fees (340)
Net Unrealized Loss on Foreign
Currency Exchange Contracts (104)
Professional Fees (80)
Shareholder Reporting Expenses (72)
Directors' Fees and Expenses (70)
Administrative Fees (52)
Other Liabilities (92) (12,144)
--------------- --------------
- -----------------------------------------------------------------
- -------------
NET ASSETS (100%)
Applicable to 22,824,344 issued and outstanding U.S.
$0.01 par value shares (100,000,000 shares
authorized) U.S.$ 459,659
--------------
--------------
- -----------------------------------------------------------------
- -------------
NET ASSET VALUE PER SHARE U.S.$ 20.14
--------------
--------------
- -----------------------------------------------------------------
- -------------
AT JUNE 30, 1997, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------
Common Stock U.S.$ 23
Capital Surplus 341,636
Accumulated Net Investment Loss (827)
Accumulated Net Realized Gain 37,667
Unrealized Appreciation on Investments and Foreign
Currency Translations (net of accrued Indian tax of
U.S. $3,025 on unrealized appreciation) 81,160
- -----------------------------------------------------------------
- -------------
TOTAL NET ASSETS U.S.$ 459,659
--------------
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
(a) -- Non-income producing.
(b) -- Security valued at cost -- see note A-1 to
financial statements.
(c) -- Security valued at fair value -- see note A-1 to
financial statements.
(d) -- The Fund is advised by an affiliate.
(e) -- Variable/floating rate security -- rate disclosed
is as of June 30, 1997.
(f) -- Step Bond -- coupon rate increases in increments
to maturity. Rate disclosed is as of June 30,
1997. Maturity date disclosed is the ultimate
maturity.
(g) -- Non-voting stock.
@ -- Amount is less than U.S. $500.
144A -- Certain conditions for public sale may exist.
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
NOTE: Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging markets, and foreign ownership
limitations may also be imposed by the charters of individual companies in
emerging markets. As a result, an additional class of shares designated as
"foreign" may be created and offered for investment. The "local" and
"foreign" shares' market values may vary.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------
- ---------
JUNE 30, 1997 EXCHANGE RATES:
- ------------------------------------------------------
ARP Argentine Peso 1.000 = U.S. $1.00
BRL Brazilian Real 1.077 = U.S. $1.00
CAD Canadian Dollar 1.381 = U.S. $1.00
COP Colombian Peso 1,091.000 = U.S. $1.00
EGP Egyptian Pound 3.399 = U.S. $1.00
HKD Hong Kong Dollar 7.473 = U.S. $1.00
HUF Hungarian Forint 187.235 = U.S. $1.00
IDR Indonesian Rupiah 2,432.000 = U.S. $1.00
ISS Israeli Shekel 3.594 = U.S. $1.00
INR Indian Rupee 35.800 = U.S. $1.00
KRW South Korean Won 888.000 = U.S. $1.00
MUR Mauritius Rupee 20.805 = U.S. $1.00
MXP Mexican Peso 7.932 = U.S. $1.00
MYR Malaysian Ringgit 2.524 = U.S. $1.00
PHP Philippines Peso 26.376 = U.S. $1.00
PKR Pakistani Rupee 40.420 = U.S. $1.00
PLZ Polish Zloty 3.287 = U.S. $1.00
PSS Peruvian New Sol 2.652 = U.S. $1.00
THB Thai Baht 25.905 = U.S. $1.00
TRL Turkish Lira 148,525.000 = U.S. $1.00
TWD Taiwan Dollar 27.800 = U.S. $1.00
VEB Venezuelan Bolivar 486.805 = U.S. $1.00
ZAR South African Rand 4.537 = U.S. $1.00
ZWD Zimbabwe Dollar 11.405 = U.S. $1.00
- ------------------------------------------------------
- -------------
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of foreign currency exchange
contracts open at June 30, 1997, the Fund is
obligated to deliver or is to receive foreign
currency in exchange for U.S. dollars as indicated
below:
</TABLE>
<TABLE>
<CAPTION>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE GAIN
DELIVER VALUE SETTLEMENT FOR VALUE (LOSS)
(000) (000) DATE (000) (000) (000)
- ------------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
U.S.$ 873 U.S.$ 873 07/01/97 ZAR 3,940 U.S.$ 869 U.S.$ (4)
946 946 07/01/97 4,290 946 --
679 679 07/02/97 THB 17,569 678 (1)
THB 112,254 4,255 08/18/97 U.S.$ 4,200 4,200 (55)
26,820 1,017 08/18/97 1,000 1,000 (17)
U.S.$ 334 334 08/19/97 THB 9,001 341 7
THB 122,485 4,642 08/19/97 U.S.$ 4,550 4,550 (92)
265,867 9,963 09/16/97 10,022 10,021 58
----------- ----------- ----------
U.S.$22,709 U.S.$22,605 U.S.$(104)
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY
CLASSIFICATION -- JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
<S> <C> <C>
- -----------------------------------------------------------------
- ------------
Appliances & Household Durables U.S.$ 11,667 2.5%
Automobiles 6,799 1.5
Banking 69,372 15.1
Beverages & Tobacco 34,933 7.6
Broadcasting & Publishing 10,655 2.3
Building Materials & Components 10,904 2.4
Business & Public Services 1,863 0.4
Chemicals 20,113 4.4
Construction & Housing 3,565 0.8
Electrical & Electronics 4,408 0.9
Electronic Components & Instruments 14,251 3.1
Energy Equipment & Services 30,258 6.6
Energy Sources 17,985 3.9
Financial Services 9,254 2.0
Food & Household Products 12,847 2.8
Foreign Government Bonds 1,909 0.4
Forest Products & Paper 3,608 0.8
Health & Personal Care 1,382 0.3
Industrial Components 647 0.1
Leisure & Tourism 2,435 0.5
Machinery & Engineering 750 0.2
Merchandising 12,822 2.8
Metals -- Steel 7,311 1.6
Mining 446 0.1
Miscellaneous Materials & Commodities 1,610 0.3
Multi-Industry 36,602 8.0
Real Estate 4,891 1.1
Recreation, Other Consumer Goods 244 0.1
Telecommunications 74,360 16.2
Textiles & Apparel 5,570 1.2
Transportation -- Road & Rail 3,091 0.7
Transportation -- Shipping 1 0.0
Utilities -- Electrical & Gas 40,647 8.8
Wholesale & International Trade 1,292 0.3
Other 3,435 0.7
------------ ---------
U.S.$461,927 100.5%
------------ ---------
------------ ---------
- ---------------------------------------------------------
- ------------
</TABLE>
SUMMARY OF TOTAL INVESTMENTS BY COUNTRY -- JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PERCENT
VALUE OF NET
COUNTRY (000) ASSETS
<S> <C> <C>
- -----------------------------------------------------------------
- ------------
Argentina U.S.$ 11,450 2.5%
Brazil 77,230 16.8
Bulgaria 1,885 0.4
Canada 330 0.1
Chile 3,138 0.7
China 1,602 0.3
Colombia 1,112 0.2
Egypt 6,786 1.5
Hong Kong 11,686 2.6
Hungary 2,474 0.5
India 50,757 11.1
Indonesia 25,598 5.6
Israel 10,326 2.2
Korea 33,197 7.2
Malaysia 5,297 1.2
Mauritius 1,730 0.4
Mexico 51,743 11.3
Pakistan 12,814 2.8
Peru 2,371 0.5
Poland 7,293 1.6
Russia 31,309 6.8
Singapore 1,960 0.4
South Africa 35,621 7.7
Taiwan 21,483 4.7
Thailand 24,569 5.3
Turkey 19,158 4.2
Venezuela 1,296 0.3
Zimbabwe 4,277 0.9
Other 3,435 0.7
------------ ---------
U.S.$461,927 100.5%
------------ ---------
------------ ---------
- ---------------------------------------------------------
- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
(000)
STATEMENT OF OPERATIONS (UNAUDITED)
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends............................................................................... U.S.$ 4,355
Interest................................................................................ 319
Less: Foreign Taxes Withheld............................................................ (291)
- ---------------------------------------------------------------------------------------------------------------
Total Income.......................................................................... 4,383
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees................................................................ 2,557
Custodian Fees.......................................................................... 669
Administrative Fees..................................................................... 231
Professional Fees....................................................................... 75
Shareholder Reporting Expenses.......................................................... 69
Country Tax Expense..................................................................... 37
Directors' Fees and Expenses............................................................ 32
Transfer Agent Fees..................................................................... 12
Other Expenses.......................................................................... 391
- ---------------------------------------------------------------------------------------------------------------
Total Expenses........................................................................ 4,073
- ---------------------------------------------------------------------------------------------------------------
Net Investment Income............................................................. 310
- ---------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold.............................................................. 41,371
Foreign Currency Transactions........................................................... (623)
- ---------------------------------------------------------------------------------------------------------------
Net Realized Gain................................................................. 40,748
- ---------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments............................................................. 62,697
Depreciation on Foreign Currency Translations........................................... (2,322)
- ---------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation.................................... 60,375
- ---------------------------------------------------------------------------------------------------------------
Total Net Realized Gain and Change in Unrealized Appreciation/Depreciation.................. 101,123
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... U.S.$101,433
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income............................................... U.S.$ 310 U.S.$ 2,179
Net Realized Gain................................................... 40,748 14,808
Change in Unrealized Appreciation/Depreciation...................... 60,375 29,076
- ---------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations................ 101,433 46,063
- ---------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income............................................... -- (23)
In Excess of Net Investment Income.................................. -- (1,137)
Net Realized Gain................................................... -- (19,211)
In Excess of Net Realized Gain...................................... -- (3,081)
- ---------------------------------------------------------------------------------------------------------------
Total Distributions................................................. -- (23,452)
- ---------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Reinvestment of Distributions (29,974 and 134,572 shares,
respectively)...................................................... 475 2,261
- ---------------------------------------------------------------------------------------------------------------
Total Increase...................................................... 101,908 24,872
Net Assets:
Beginning of Period................................................. 357,751 332,879
- ---------------------------------------------------------------------------------------------------------------
End of Period (Including accumulated net investment loss of U.S.$827
and distributions in excess of net investment income of U.S.$1,137,
respectively)...................................................... U.S.$459,659 U.S.$357,751
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
SELECTED PER SHARE 1997 --------------------------------------------------------------------------------
DATA AND RATIOS: (UNAUDITED) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF
PERIOD........... U.S.$ 15.69 U.S.$ 14.69 U.S.$ 20.30 U.S.$ 28.20 U.S.$ 16.74 U.S.$ 14.71
- ---------------------------------------------------------------------------------------------------------------------
Offering Costs.... -- -- (0.03) (0.02) (0.03) --
- ---------------------------------------------------------------------------------------------------------------------
Net Investment
Income (Loss).... 0.01 0.10 0.06 (0.12) -- 0.02
Net Realized and
Unrealized Gain
(Loss) on
Investments...... 4.44 1.92 (3.14) (1.30) 13.96 2.03
- ---------------------------------------------------------------------------------------------------------------------
Total from
Investment
Operations... 4.45 2.02 (3.08) (1.42) 13.96 2.05
- ---------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment
Income...... -- -- -- -- -- (0.01)
In Excess of
Net
Investment
Income...... -- (0.05) -- -- -- --
Net Realized
Gain........ -- (0.84) (1.29) (6.50) (1.04) (0.01)
In Excess of
Net Realized
Gain........ -- (0.14) -- -- (0.45) --
- ---------------------------------------------------------------------------------------------------------------------
Total
Distributions... -- (1.03) (1.29) (6.50) (1.49) (0.02)
- ---------------------------------------------------------------------------------------------------------------------
Increase
(Decrease)
in Net Asset
Value from
Capital
Share
Transactions... -- 0.01** (1.21)+++ 0.04++ (0.98)+ --
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD.... U.S.$ 20.14 U.S.$ 15.69 U.S.$ 14.69 U.S.$ 20.30 U.S.$ 28.20 U.S.$ 16.74
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET
VALUE, END OF
PERIOD........... U.S.$ 17.88 U.S.$ 13.88 U.S.$ 15.50 U.S.$ 21.50 U.S.$ 31.63 U.S.$ 18.13
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT
RETURN:
Market
Value....... 28.83% (4.59)% (16.61)%++++ (10.61)% 100.96%++++ 27.38%
Net Asset
Value (1)... 28.36% 13.84% (16.30)%++++ (5.33)% 95.22%++++ 13.94%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
RATIOS,
SUPPLEMENTAL
DATA:
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF
PERIOD
(THOUSANDS)...... U.S.$459,659 U.S.$357,751 U.S.$332,879 U.S.$321,729 U.S.$411,975 U.S.$176,904
- ---------------------------------------------------------------------------------------------------------------------
Ratio of Expenses
to Average Net
Assets........... 1.99%* 1.87% 1.86% 1.75% 1.85% 2.02%
Ratio of Net
Investment Income
(Loss) to Average
Net Assets....... 0.15%* 0.58% 0.30% (0.48)% (0.03)% 0.14%
Portfolio Turnover
Rate............. 42% 67% 61% 52% 68% 60%
Average Commission
Rate (2):
Per Share..... U.S.$0.0012 U.S.$0.0006 N/A N/A N/A N/A
As a
Percentage
of Trade
Amount...... 0.40% 0.42% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
*Annualized.
**Increase (decrease) per share due to reinvestment of distributions.
+Consists of $0.03 per share increase from reinvestment of distributions and $1.01 decrease per share due to Common
Stock issued through Rights Offering during the year.
++Consists of $0.02 per share increase from reinvestment of distributions and $0.02 increase per share due to Common
Stock Offering during the year.
+++Increase (decrease) per share due to Common Stock issued through Rights Offering during the year.
++++This return does not include the effect of the rights issued in connection with the Rights Offering.
(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.
These percentages are not an indication of the performance of a shareholder'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.
(2)For fiscal years beginning on or after September 1, 1995, a fund is required to disclose the average commission
rate per share it paid for trades on which commissions were charged.
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (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, as amended. The
Fund's investment objective is long-term capital appreciation through
investments primarily in equity securities.
A. The following significant accounting policies, which are in conformity with
generally accepted accounting principles for investment companies, are
consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the amounts and disclosures in the
financial statements. Actual reported 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 sales
price on the valuation date, or if there was no sale on such date, at the
mean between the current bid and asked prices. Securities which are traded
over-the-counter are valued at the average of the mean of current bid and
asked prices obtained from reputable brokers. Short-term securities which
mature in 60 days or less are valued at amortized cost. All other securities
and assets for which market values are not readily available (including
investments which are subject to limitations as to their sale) are valued at
fair value as determined in good faith by the Board of Directors (the
"Board"), although the actual calculations may be done by others.
2. 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 U.S. Federal income taxes is required in the financial
statements.
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.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as custodian for the Fund takes possession of the
underlying securities, 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.
4. 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) 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) for the period is reflected in the Statement of
Operations.
5. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into foreign
currency exchange contracts
16
<PAGE>
to attempt to protect securities and related receivables and payables
against changes in future foreign exchange rates. 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.
6. 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-date (except certain dividends which may be recorded as soon as the
Fund is informed of such dividends) net of applicable withholding taxes
where recovery of such taxes is not reasonably assured.
The amount and character of income and capital gain distributions to be paid
are determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing book and tax treatments for foreign currency
transactions, gains on certain securities of corporations designated as
"passive foreign investment companies" and the timing of the recognition of
gains or losses on securities.
Permanent book and tax basis differences relating to shareholder
distributions may result in reclassifications to undistributed net
investment income (loss), accumulated net realized gain (loss) and capital
surplus.
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.
B. Morgan Stanley Asset 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. The Chase Manhattan Bank, through its affiliate Chase Global Funds Services
Company (the "Administrator"), provides administrative services to the Fund
under an Administration Agreement. Under the Administration Agreement, the
Administrator is paid a fee computed weekly and payable monthly at an annual
rate of .08% of the Fund's average weekly net assets, plus $65,000 per annum. In
addition, the Fund is charged certain out-of-pocket expenses by the
Administrator. The Chase Manhattan Bank acts as custodian for the Fund's assets
held in the United States.
D. Morgan Stanley Trust Company (the "International Custodian"), an affiliate
of the Adviser, acts as custodian for the Fund's assets held outside the United
States in accordance with a Custody Agreement. Custodian fees are payable
monthly based on assets under custody, investment purchase and sale activity, an
account maintenance fee, plus reimbursement for certain out-of-pocket expenses.
Investment transaction fees vary by country and security type. For the six
months ended June 30, 1997, the Fund incurred fees of $533,000 with the
International Custodian, of which $237,000 was payable to the International
Custodian at June 30, 1997. In addition, for the six months ended June 30,
1997,the Fund has earned interest income of $4,000 and incurred interest expense
of $47,000, on balances with the International Custodian.
E. For the six months ended June 30, 1997, the Fund made purchases and sales
totaling approximately $173,878,000 and $185,304,000, respectively, of
investment securities other than long-term U.S. Government securities and
short-term investments. These were no purchases or sales of long-term U.S.
Government securities. The Fund incurred brokerage commissions to Morgan
Stanley, Dean Witter, Discover & Co. and Arab Malaysia Securities, Inc.,
affiliates of the Adviser of $74,000 and $8,000, respectively. At June 30, 1997,
the U.S. Federal income tax cost basis of securities was $374,160,000 and
accordingly, net unrealized appreciation for U.S. Federal income tax purposes
was $84,332,000 of which $125,997,000 related to appreciated securities and
$41,665,000 related to depreciated securities.
F. The Fund issued to its shareholders of record as of the close of business on
May 30, 1995 transferable rights to subscribe for up to an aggregate of
5,800,000 shares of Common Stock of the Fund at a rate of one share of Common
Stock for three Rights held at the subscription price of $14.00 per share.
During June 1995, the Fund issued a total of 5,800,000 shares of Common Stock on
exercise of such Rights. Rights offering costs of $525,000 were charged directly
against the proceeds of the offering.
17
<PAGE>
The Fund was advised that Morgan Stanley & Co. Incorporated received commissions
of $2,350,000 and reimbursement of its expenses of $125,000 in connection with
its participation in the Rights Offering.
G. A significant portion of the Fund's net assets consist of securities of
issues located in emerging markets, 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 issues may be
subject to substantial governmental involvement in the economy and greater
social, economic and political uncertainty. 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.
H. 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. The deferred fees payable, under the Plan, at June 30, 1997 totaled
$58,000 and are included in Payable for Directors' Fees and Expenses on the
Statement of Net Assets.
I. Supplemental Proxy Information
The Annual Meeting of the Stockholders of the Morgan Stanley Emerging Markets
Fund, Inc. was held on April 30, 1997. The following is a summary of each
proposal presented and the total number of shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES VOTES
PROPOSAL: FAVOR OF AGAINST WITHHELD ABSTAINED
- ------------------------------------------------------------ ---------- ------- -------- ---------
<S> <C> <C> <C> <C>
1. To elect the following Directors: John W. Croghan 16,434,208 -- 637,918 --
Graham E. Jones 16,425,332 -- 646,794 --
2.To ratify the selection of Price Waterhouse LLP as
independent public accountants of the Fund 16,499,782 229,535 -- 342,809
3.To approve an Investment Advisory and Management Agreement
between the fund and Morgan Stanley Asset Management Inc. 16,322,272 358,107 -- 391,747
</TABLE>
18
<PAGE>
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each shareholder will be deemed to have elected, unless Boston Equiserve (the
"Plan Agent") is otherwise instructed by the shareholder 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
shareholders 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 shareholders, such as banks, brokers or nominees, which 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
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are participating in the
Plan.
Shareholders 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 shareholders 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.
Boston Equiserve
Dividend Reinvestment and Cash Purchase Plan
P.O. Box 1681
Boston, MA 02105-1681
1-800-442-2001
19
