<PAGE>
---------------------------------------------------------
MORGAN STANLEY DEAN WITTER
EMERGING MARKETS FUND, INC.
---------------------------------------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1999
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
MORGAN STANLEY DEAN WITTER
EMERGING MARKETS FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
Barton M. Biggs
CHAIRMAN OF THE BOARD
OF DIRECTORS
Michael F. Klein
PRESIDENT AND DIRECTOR
Peter J. Chase
DIRECTOR
John W. Croghan
DIRECTOR
David B. Gill
DIRECTOR
Graham E. Jones
DIRECTOR
John A. Levin
DIRECTOR
William G. Morton, Jr.
DIRECTOR
Stefanie V. Chang
VICE PRESIDENT
Harold J. Schaaff, Jr.
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Mary E. Mullin
SECRETARY
Belinda A. Brady
ASSISTANT TREASURER
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- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
- --------------------------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
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CUSTODIAN
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT
Boston Equiserve
Investor Relations Department
P.O. Box 644
Boston, Massachusetts 02102-0644
(800) 730-6001
- --------------------------------------------------------------------------------
LEGAL COUNSEL
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
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INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
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- --------------------------------------------------------------------------------
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.msdw.com/institutional/investmentmanagement.
<PAGE>
LETTER TO SHAREHOLDERS
- ---------
For the six months ended June 30, 1999, the Morgan Stanley Dean Witter Emerging
Markets Fund, Inc. (the "Fund") had a total return, based on net asset value per
share, of 40.95% compared with 39.87% for the Morgan Stanley Capital
International (MSCI) Emerging Markets Free Index (the "Index") and 38.27% for
the IFC Global Total Return Composite Index. For the period since commencement
of operations on November 1, 1991 through June 30, 1999, the Fund's total
return, based on net asset value per share, was 135.53% compared with 83.57%
for the Index and 55.29% for the IFC Global Total Return Composite Index. On
June 30, 1999, the closing price of the Fund's shares on the New York Stock
Exchange was $11 11/16, representing a 19.7% discount to the Fund's net asset
value per share.
Overall, outperformance relative to the Index resulted from our country
selection, particularly our overweight positions in Russia (+133.7%), Indonesia
(+110.9%) and South Korea (+77.9%) coupled with our underweight positions in
Argentina (+24.8%), Colombia (-17.3%), Greece (+19.5%) and South Africa
(+30.2%). Strong stock selection in Brazil, Mexico, Taiwan, Thailand and Turkey
also helped performance.
Despite positive returns on an absolute basis, poor stock selection in Greece,
Indonesia and South Korea detracted from performance. Stock selection in
Indonesia and South Korea had strong absolute returns of 71% and 62%,
respectively, yet these gains lagged the index returns.
With few exceptions, the emerging markets performed well during the first
half of 1999, supported by an amalgam of endogenous and global factors.
Positive signs of growth in Japan and increasingly resilient macro numbers
from Western Europe emerged. The powerful recovery in selected commodity
prices (e.g. oil and copper) engendered a strong rally in the share prices of
many commodity-related and deep cyclical companies. Brazil's ability to
quickly recover from its currency devaluation resulted in improved investor
sentiment. Finally, a widely anticipated interest rate hike by the Fed at the
end of June relieved many anxieties regarding U.S. inflation and interest
rate tightening. These factors have provided the emerging markets with a
benign environment for future growth.
The Latin American region gained 31.0% during the first half of 1999. The most
notable market event throughout all the emerging markets was the devaluation of
the Brazilian currency, the real. The currency plunged 40% in January, then
retraced some of its decline to end the first quarter down 30%. Most emerging
markets investors anticipated the devaluation, but few, if any, expected the
Brazilian equity market to recover so quickly. By the end of March, the equity
market had gained 5.5% in U.S. dollars and by June month-end, it had appreciated
18.7%. Fueling the market was the unexpected appointment of Arminio Fraga, the
former portfolio manager of George Soros' Quantum Emerging Markets Growth Fund,
as head of the Central Bank. Fraga offers financial market expertise and
shareholder focus, which has aided market sentiment.
We were underweight Brazil going into the devaluation and then quickly moved to
a neutral weight after the devaluation, which was favorable for performance. We
continued to add to our Brazilian positions and are now modestly overweight the
Index. We anticipate lower inflation and better than expected economic
performance to allow for continued interest rate reductions and, in turn, for a
contraction in the country risk premium. The expected reduction in real interest
rates is requisite for controlling the fiscal deficit and for stemming the
growth in the stock of public sector debt. We continue to focus on the
telecommunications industry in Brazil, where the privatization of the sector
last year has allowed for the introduction of many new efficiencies, fostering
margin expansion under new managements. Additionally, the inelasticity of the
telecommunication sector to a weak economy coupled with pent-up demand for
telecommunication services should allow for strong top-line growth.
Mexico (+52.3%) is our favorite Latin American market based on good economic
management and attractive stock opportunities. A stronger peso coupled with
better than expected consumer demand should allow for positive U.S. dollar
earnings surprises from domestic consumer plays (e.g. beverages, cement, media,
retail). We have increased our overweight and are focusing on consumer-related
stocks, which should benefit from both a recovery in domestic demand as well as
continued strong U.S. economic growth (more than 80% of Mexico's exports are
absorbed by the U.S.).
Asia, gaining 55.4%, led the emerging markets during the first half of the year.
Liquidity from local participants, as well as from foreign investors seeking to
participate in the broadening Asian recovery, helped drive the markets.
Fundamental factors contributing to the stellar gains of many of the Asian
markets include: current account and fiscal surpluses, strong FDI (foreign
2
<PAGE>
direct investment), micro-level reforms (e.g. bankruptcy laws), declining
interest rates (below pre-crisis levels in some countr ies) and lower costs of
capital. Indonesia was the star performer, rising 110.9%. Government
recapitalization plans, lower inflation and a successful, nonviolent election in
June fueled Indonesian equities. We added to our position during the second
quarter and are now overweight Indonesia.
Taiwan (+42.3%) has shown acceleration in exports and is best positioned within
Asia to benefit from increased outsourcing from Japan. The increasing cyclical
upturn and trend in outsourcing various computer components augurs well for Fund
holdings such as Compal Electronics, Hon Hai Precision, Quanta Computer and
Taiwan Semiconductor. During the second quarter, we reduced some of our strong
overweights in the electronic components and instruments industry, taking
advantage of significant price appreciation.
Our favorite market in Asia is South Korea, which gained 77.9% during the
first half of the year on the back of an improving macroeconomic scenario and
continued progress with financial and chaebol (large conglomerates)
restructuring. Strong domestic liquidity and declining interest rates have
also buoyed the market. We added to our South Korean overweight, favoring
stocks such as Korea Telecom (an attractively valued telecom stock with a
well-developed network and a promising tariff rebalancing), LG Chemi cal and
Samsung Electronics (restructuring chaebol opportunities).
India (+36.9%) has performed respectably given political uncertainties and
heightened tensions on the border with Pakistan. Most recently, India has
witnessed a sharp inflow of foreign funds and the outperformance of cyclical
sectors. For example, petrochemicals, refineries, auto and cement were
revived in part by cheap valuations and positive news on volumes and/or
prices. We have added to our overweight position in India based on these
attractive valuations coupled with signs of an economic recovery and what we
perceive as appealing (return on investment focused) corporate governance. We
are adding stocks such as State Bank of India (SBI), India's largest bank,
which should benefit from a turnaround in the economic cycle.
Emerging Europe and the Middle East gained 28.4%, posting more modest returns
than the other regions. Russia (+133.7%) was the star performer in the region.
Turkey (+45.2%) and Poland (+30.9%) also performed well. We added to and are now
overweight Russia. Despite the devaluation of the ruble last year, the Russian
economy has performed better than expected. In May, monthly industrial
production, boosted by domestic consumption, showed signs of growth. Russian
equities have been extremely strong based in part on the recovery in global
commodity prices, which particularly helps the Russian export sector. We are
concentrating on stocks in the oil sector such as LUKoil and Surgutneftegaz,
which stand to benefit from both a weaker exchange rate (due to predominantly
ruble-based costs with larger volumes of export sales) and higher crude prices.
Turkey, while appreciating 45.2% during the first half of the year, fell 3.5%
during the second quarter due to politics. The elections on April 18th
eventually resulted in the newly formed majority coalition government that
finally received a vote of confidence in June, ending the political
uncertainty. The coalition has promised immediate action to reduce inflation
to single digits including passing difficult structural reform laws (e.g. the
new banking law, and social security and agricultural subsidy reforms). Key
legislation may also soon be passed which would facilitate the privatization
of state-owned utilities. We are overweight the banking sector as we expect
real interest rates to decline markedly in the near future. We expect the
equity market to react positively if negotiations with the International
Monetary Fund conclude favorably.
We maintain our overweight position in Poland to which we recently
added. The Polish economy continues to recover from the Western European
induced slowdown. Support from the nascent recovery in Germany, Poland's
largest export market, should accelerate economic growth. Excise taxes were
increased to help raise revenues in light of the growing budget deficit. The
Polish equities market continues to derive strength from consolidation and
successful privatizations. We particularly like Telekomunikacja Polska, which
we feel is undervalued relative to other telecommunication companies in the
region, and should benefit from the planned strategic sale of a 25-35%
government stake by year-end.
We continued to trim Greece, which returned 19.5%, and maintain our market
underweight. Despite recent positive inflation numbers and a marginal decline in
the rate of private sector credit expansion, an imminent reduction in Greek
interest rates seems unlikely. We do not expect Greek interest rates to be
lowered until the
3
<PAGE>
fourth quarter of 1999, as the Greek government wants to contain inflation to
below 2% in accordance with European Union standards. Greek equities have become
expensively valued and we find other markets more attractively valued in the
near term.
We lightened our position in Israel (+25.5%) during the second quarter, and are
now underweight. A new Israeli government led by Ehud Barak was elected in June.
We expect interest rate reductions later in the third quarter, after the new
government has been formed and its policies have been announced. We reduced our
exposure to certain stocks which had performed well and were close to being
fully valued, and re-deployed the funds in sectors such as banking, which we
feel should perform particularly well if interest rate cuts take place.
South Africa, which had its second all-race presidential elections, rose 30.2%.
We added to our South African holdings and will continue to increase our
weighting while maintaining an underweight position relative to the Index. Thabo
Mbeki's election as President, enhancing expectations of a continuance in
economic policies, is likely to accelerate privatization and deregulation of the
labor market. Continued interest rate reductions, made possible by the
stabilization of emerging markets, falling inflation, good fiscal discipline and
a slightly looser monetary stance by the Reserve Bank, will help stimulate the
economy. However, the economy is still very anemic. A recovery in commodity
prices, especially base metals, should also provide a boost to exports and the
economy as a whole.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
July 1999
THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED.
- --------------------------------------------------------------------------------
DAILY NET ASSET AND MARKET VALUES, AS WELL AS MONTHLY PORTFOLIO INFORMATION FOR
THE FUND, ARE AVAILABLE ON OUR WEBSITE AT
www.msdw.com/institutional/investmentmanagement.
4
<PAGE>
Morgan Stanley Dean Witter Emerging Markets Fund, Inc.
Investment Summary as of June 30, 1999 (Unaudited)
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION
TOTAL RETURN (%)
------------------------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) MSCI INDEX (3) IFC INDEX (4)
--------------------- --------------------- --------------------- ---------------------
AVERAGE AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- ------- ---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fiscal Year to Date 43.85% -- 40.95% -- 39.87% -- 38.27% --
One Year 24.67 24.67% 23.29 23.29% 28.71 28.71% 29.66 29.66%
Five Year -18.22+ -3.94+ 11.38+ 2.18+ -4.06+ -0.83+ -5.02+ -1.03+
Since Inception* 89.06+ 8.66+ 135.53+ 11.82+ 83.57+ 8.25+ 55.29+ 5.91+
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
[GRAPH]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS
ENDED
JUNE 30,
1991* 1992 1993 1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share. . . . . $14.71 $16.74 $28.20 $20.30 $14.69 $15.69 $15.52 $10.33 $14.56
Market Value Per Share . . . . . . $14.25 $18.13 $31.63 $21.50 $15.50 $13.88 $13.06 $ 8.13 $11.69
Premium/(Discount) . . . . . . . . -3.1% 8.3% 12.2% 5.9% 5.5% -11.5% -15.9% -21.3% -19.7%
Income Dividends . . . . . . . . . $ 0.04 $ 0.01 -- -- -- $ 0.05 $ 0.01 $ 0.11 --
Capital Gains Distributions. . . . -- $ 0.01 $ 1.49 $ 6.50 $ 1.29 $ 0.98 $ 0.01 $ 2.18 --
Fund Total Return (2). . . . . . . 4.61% 13.94% 95.22%+ -5.33% -16.30%+ 13.84% -0.97% -19.61% 40.95%
MSCI Index Total Return (3). . . . 9.58% 11.40% 74.84% -7.32% -5.21% 6.03% -11.59% -25.34% 39.87%
IFC Index Total Return (4) . . . . 5.29% 0.33% 67.50% -0.53% -12.32% 7.88% -14.54% -21.09% 38.27%
</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 Morgan Stanley Capital International Emerging Markets Free Index (the
"MSCI Index") is a market capitalization weighted index composed of
companies that are representative of the market structure of developing
countries in Latin America, Asia, Eastern Europe, the Middle East and
Africa.
(4) The IFC Global Total Return Composite Index (the "IFC 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.
5
<PAGE>
Morgan Stanley Dean Witter Emerging Markets Fund, Inc.
Portfolio Summary as of June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIVERSIFICATION OF TOTAL INVESTMENTS
[PIE CHART]
<TABLE>
<S> <C>
Debt Instruments (0.1%)
Equity Securities (98.2%)
Short-Term Investments (1.7%)
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
[PIE CHART]
<TABLE>
<S> <C>
Banking (13.3%)
Beverages & Tobacco (7.2%)
Broadcasting & Publising (4.1%)
Electrical & Electronics (3.9%)
Electronics Components, Instruments (6.1%)
Energy Sources (4.0%)
Metals -- Steel (3.2%)
Other (28.7%)
Telecommunications -- Integrated (19.6%)
Telecommunications -- Wireless (4.5%)
Utilities -- Electrical & Gas (5.4%)
</TABLE>
- --------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
[PIE CHART]
<TABLE>
<S> <C>
Brazil (10.9%)
India (8.9%)
Indonesia (4.4%)
Israel (2.8%)
Mexico (13.1%)
Other (14.0%)
Russia (3.6%)
South Africa (7.1%)
South Korea (16.7%)
Taiwan (11.1%)
Thailand (3.4%)
Turkey (4.0%)
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
<S> <C> <C>
1. Korea Telecom Corp. (South Korea) 4.0%
2. Telmex (Mexico) 3.6
3. Televisa (Mexico) 2.8
4. Korea Electric Power Corp. (South Korea) 2.7
5. Samsung Electronics Co. (South Korea) 2.7
6. FEMSA (Mexico) 2.2
7. Taiwan Semiconductor Co. (Taiwan) 2.2
8. Hellenic Telecommunication Organization
(OTE) (Greece) 2.0
9. Cemex (Mexico) 2.0
10. Asustek Computer, Inc. (Taiwan) 1.8
----
26.0%
----
----
</TABLE>
* Excludes short-term investments.
6
<PAGE>
FINANCIAL STATEMENTS
- --------
STATEMENTS OF NET ASSETS (UNAUDITED)
- --------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS(98.4%)
Unless otherwise noted)
- -----------------------------------------------------------------------------
ARGENTINA(0.7%)
AUTOMOBILES
CIADEA 1 U.S.$ -- @
------------
TELECOMMUNICATIONS -- INTEGRATED
Telecom Argentina ADR 72,969 1,952
Telefonica Argentina ADR 7,995 251
------------
2,203
------------
BRAZIL(10.9%)
BANKING
(a,c)Banco Nacional (Preferred) 61,598,720 2
Unibanco (Preferred) GDR 157,195 3,782
------------
3,784
------------
BEVERAGES & TOBACCO
Brahma (Preferred) 1,557,108 878
------------
ENERGY SOURCES
Petrobras (Preferred) 18,804,000 2,912
(b)Petrobras (Preferred) ADR 7,470 115
------------
3,027
------------
FOOD & HOUSEHOLD PRODUCTS
Pao de Acucar (Preferred) 6,460,000 120
Pao de Acucar (Preferred) ADR 8,110 152
------------
272
------------
MERCHANDISING
(a)Lojas Arapua (Preferred) 30,412,000 -- @
(a,b)Lojas Arapua (Preferred) ADR 31,540 -- @
------------
-- @
------------
METALS -- STEEL
CVRD (Preferred) 1,386 27
CVRD (Preferred) 'A' 74,877 1,481
CVRD (Preferred) ADR 78,609 1,562
(a)Usiminas (Preferred) 'A' 79,200 267
Usiminas (Preferred) ADR 13,735 47
------------
3,384
------------
TELECOMMUNICATIONS -- INTEGRATED
(a)Celular CRT (Preferred) 3,218,000 437
(a)CRT (Preferred) 'A' 9,425,376 2,312
Tele Centro-Sul (Preferred) 89,934,945 996
Tele Centro-Sul ADR 8,727 484
Tele Norte-Leste (Preferred) 28,703,945 519
Tele Norte-Leste (Preferred) ADR 31,507 585
Telebras (Preferred) 31,554,200 2,823
Telebras Holders 16,394 1,479
Telesp (Preferred) 16,880,945 386
Telesp ADR 18,890 432
------------
10,453
------------
TELECOMMUNICATIONS -- LONG DISTANCE
Embratel (Preferred) 28,703,945 396
Embratel ADR 46,592 646
------------
1,042
------------
TELECOMMUNICATIONS -- WIRELESS
(a)Celular CRT 6,207,376 842
Tele Celular Sul (Preferred) 111,952,845 234
Tele Celular Sul ADR 6,805 148
Tele Nordeste Celular (Preferred) 76,067,945 102
Tele Nordeste Celular ADR 2,340 63
Tele Sudeste Celular (Preferred) 100,153,945 566
Tele Sudeste Celular ADR 9,363 271
Telemig Celular (Preferred) 119,640,945 151
Telemig Celular ADR 2,910 72
Telerj Celular (Preferred) 'B' 3,756,000 123
Telesp Celular (Preferred) 76,194,945 788
Telesp Celular (Preferred) 'B' 24,484,313 1,273
(a)Telesp Celular ADR 48,736 1,304
------------
5,937
------------
TEXTILES & APPAREL
Coteminas 2,200,500 112
(b)Coteminas ADR 23,460 59
------------
171
------------
UTILITIES -- ELECTRICAL & GAS
Cemig (Preferred) 81,847,627 1,721
Cemig (Preferred) ADR 43,123 916
(b)Cemig (Preferred) ADR 9,208 196
Eletrobras 5,627,080 106
Eletrobras (Preferred) 'B' 8,490,000 171
Eletrobras (Preferred) ADR 59,900 603
------------
3,713
------------
32,661
------------
- -----------------------------------------------------------------------------
CHILE(0.6%)
BEVERAGES & TOBACCO
CCU ADR 19,008 544
------------
MERCHANDISING
(a)Santa Isabel ADR 8,598 87
------------
UTILITIES -- ELECTRICAL & GAS
Endesa ADR 26,945 327
Enersis ADR 32,850 751
------------
1,078
------------
1,709
------------
- -----------------------------------------------------------------------------
CHINA(0.8%)
ENERGY SOURCES
Yanzhou Coal Mining Co.,
Ltd. ADR 45,130 801
Zhenhai Refining & Chemical Co.,
Ltd. 'H' 2,832,000 858
------------
1,659
------------
UTILITIES -- ELECTRICAL & GAS
Huaneng Power
International, Inc. ADR 33,350 571
------------
2,230
------------
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
COLOMBIA(0.0%)
BANKING
Bancolombia (Preferred) 6,249 U.S.$ 8
------------
- -----------------------------------------------------------------------------
CZECH REPUBLIC(0.7%)
TELECOMMUNICATIONS -- INTEGRATED
SPT Telecom 94,776 1,529
(a)SPT Telecom GDR 27,650 448
------------
1,977
------------
- -----------------------------------------------------------------------------
EGYPT(0.6%)
BEVERAGES & TOBACCO
(a)Al-Ahram Beverages Co. GDR 16,852 479
Eastern Tobacco 20,448 498
------------
977
------------
BUILDING MATERIALS & COMPONENTS
Industrial & Engineering
Enterprises Co. 10,516 83
------------
TELECOMMUNICATIONS -- WIRELESS
Egyptian Company for Mobile
Services 25,344 571
------------
UTILITIES -- ELECTRICAL & GAS
Egypt Gas Co. 6,100 250
------------
1,881
------------
- -----------------------------------------------------------------------------
GREECE(2.1%)
BANKING
Commercial Bank of Greece 1,563 112
------------
TELECOMMUNICATIONS -- INTEGRATED
Hellenic Telecommunication
Organization (OTE) 156,681 3,363
Hellenic Telecommunication
Organization (OTE) ADR 241,709 2,674
------------
6,037
------------
6,149
------------
- -----------------------------------------------------------------------------
HUNGARY(0.9%)
BANKING
OTP Bank Rt. 14,728 615
------------
ENERGY SOURCES
MOL Magyar Olaj-es Gazipari
Rt. GDR 9,170 220
------------
TELECOMMUNICATIONS -- INTEGRATED
Matav Rt. 49,028 266
Matav Rt. ADR 52,755 1,450
------------
1,716
------------
2,551
------------
- -----------------------------------------------------------------------------
INDIA(8.8%)
AUTOMOBILES
Hero Honda Ltd. 99,900 2,486
Tata Engineering &
Locomotive Co. Ltd. 118,729 561
------------
3,047
------------
BANKING
State Bank of India Ltd. 239,300 1,306
(a)State Bank of India Ltd. 3,650 20
------------
1,326
------------
BEVERAGES & TOBACCO
(c)ITC Ltd. 66,902 1,689
------------
BROADCASTING & PUBLISHING
(a)Zee Telefilms Ltd. 46,000 1,542
------------
BUILDING MATERIALS & COMPONENTS
Gujarat Ambuja Cements Ltd. 57,000 420
------------
CHEMICALS
Reliance Industries Ltd. 1,349 6
------------
DATA PROCESSING & REPRODUCTION
Aptech Ltd. 3,800 63
Infosys Technology Ltd. 55,800 4,662
NIIT Ltd. 27,000 1,264
Satyam Computer Services Ltd. 62,620 1,829
------------
7,818
------------
ELECTRICAL & ELECTRONICS
Bharat Heavy Electricals Ltd. 384,500 2,179
Digital Equipment (India) Ltd. 11,000 109
------------
2,288
------------
FINANCIAL SERVICES
Housing Development
Finance Corp., Ltd. 18,111 927
------------
FOOD & HOUSEHOLD PRODUCTS
Hindustan Lever Ltd. 39,900 2,188
------------
INDUSTRIAL COMPONENTS
(a)Apollo Tyres Ltd. 8,450 12
MRF Ltd. 10,000 441
------------
453
------------
MACHINERY & ENGINEERING
Larsen & Toubro Ltd. 160,630 1,060
------------
MULTI-INDUSTRY
(e)Morgan Stanley Growth Fund 6,881,800 1,142
------------
TELECOMMUNICATIONS -- INTEGRATED
Mahanagar Telephone Nigam Ltd. 105,000 450
Mahanagar Telephone Nigam Ltd.
(Demat) 115,000 477
Videsh Sanchar Nigam Ltd. GDR 21,800 279
------------
1,206
------------
TRANSPORTATION -- ROAD & RAIL
Container Corp. of India Ltd. 268,600 1,126
------------
26,238
------------
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
INDONESIA(4.4%)
BEVERAGES & TOBACCO
Gudang Garam 1,375,460 U.S.$ 3,736
------------
BUILDING MATERIALS & COMPONENTS
Semen Gresik 558,200 1,216
------------
FOREST PRODUCTS & PAPER
(a)Asia Pulp & Paper Co., Ltd. ADR 281,625 2,711
Indah Kait Pulp & Paper 3,009,805 1,399
------------
4,110
------------
TELECOMMUNICATIONS -- INTEGRATED
Telekomunikasi Indonesia ADR 324,864 4,040
------------
13,102
------------
- -----------------------------------------------------------------------------
ISRAEL(2.8%)
BANKING
Bank Hapoalim Ltd. 239,000 614
Bank Leumi Le-Israel 313,800 593
------------
1,207
------------
DATA PROCESSING & REPRODUCTION
(a)BackWeb Technologies Ltd. 5,660 155
------------
ELECTRICAL & ELECTRONICS
(a)Comverse Technology, Inc. 7,290 550
ECI Telecommunications Ltd. 40,192 1,334
(a)Elbit Systems Ltd. 1 --
(a)Gilat Satellite Networks Ltd. 25,150 1,320
(a)Nice Systems Ltd. 4,294 117
(a)Nice Systems Ltd. ADR 14,782 408
------------
3,729
------------
ELECTRONIC COMPONENTS, INSTRUMENTS
(a)Orbotech Ltd. 12,895 672
------------
HEALTH & PERSONAL CARE
Teva Pharmaceutical Industries
Ltd. ADR 16,368 802
------------
MULTI-INDUSTRY
Koor Industries Ltd. 2,976 343
Koor Industries Ltd. ADR 6,240 146
------------
489
------------
TELECOMMUNICATIONS -- INTEGRATED
(a)Amdocs Ltd. 56,300 1,281
------------
8,335
------------
- -----------------------------------------------------------------------------
MALAYSIA(2.3%)
BANKING
Commerce Asset Holding Bhd 357,000 883
Malayan Banking Bhd 449,600 1,349
Public Bank Bhd 610,000 464
------------
2,696
------------
BEVERAGES & TOBACCO
Rothmans of Pall Mall Bhd 139,200 1,053
------------
FOOD & HOUSEHOLD PRODUCTS
Nestle Bhd 109,000 430
------------
TELECOMMUNICATIONS -- INTEGRATED
Telekom Malaysia Bhd 540,000 2,018
------------
UTILITIES -- ELECTRICAL & GAS
Tenaga Nasional Bhd 279,000 643
------------
6,840
------------
- -----------------------------------------------------------------------------
MEXICO(13.1%)
BANKING
(a)Banacci 'L' 45,447 111
(a)Banamex 'O' 702,757 1,775
(b)Bancomer 'B' ADR 64,825 470
Bancomer 'O' 1,222,481 441
------------
2,797
------------
BEVERAGES & TOBACCO
FEMSA 982,865 3,932
FEMSA ADR 64,986 2,592
------------
6,524
------------
BROADCASTING & PUBLISHING
(a)Televisa CPO GDR 188,344 8,440
------------
BUILDING MATERIALS & COMPONENTS
Cemex 'B' 46,258 230
Cemex 'B' ADR 173,149 1,710
Cemex CPO 462,936 2,289
Cemex CPO ADR 171,419 1,628
------------
5,857
------------
HEALTH & PERSONAL CARE
Kimberly 'A' 303,688 1,250
------------
MERCHANDISING
(a)Cifra 'C' 327,398 600
(a)Cifra 'V' 247,189 480
(a)Cifra 'V' ADR 46,036 883
------------
1,963
------------
MULTI-INDUSTRY
ALFA 'A' 172,475 717
(a)Grupo Carso 'A1' 169,674 787
------------
1,504
------------
TELECOMMUNICATIONS -- INTEGRATED
Telmex 'L' ADR 132,144 10,680
------------
39,015
------------
- -----------------------------------------------------------------------------
PAKISTAN(0.7%)
CHEMICALS
Fauji Fertilizer Co., Ltd. 1,029,800 800
------------
ENERGY SOURCES
Pakistan State Oil Co., Ltd. 200,301 353
------------
TELECOMMUNICATIONS -- INTEGRATED
Pakistan Telecommunications
Co., Ltd. 2,641,700 999
------------
2,152
------------
- -----------------------------------------------------------------------------
PHILIPPINES(1.0%)
BEVERAGES & TOBACCO
San Miguel Corp. 'B' 661,936 1,447
------------
REAL ESTATE
SM Prime Holdings, Inc. 'B' 3,862,580 875
------------
UTILITIES ELECTRICAL & GAS
Manila Electric Co. 'B' 222,040 801
------------
3,123
------------
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
POLAND(2.7%)
BANKING
(a)Pekao Bank 11,234 U.S.$ 130
Powszechny Bank Kredytowy 6,975 168
(a,c)Powszechny Bank Kredytowy 'C' 1,743 31
Wielkopolski Bank Kredytowy 19,705 115
------------
444
------------
CHEMICALS
(a,d)Eastbridge 33,600 2,259
------------
DATA PROCESSING & REPRODUCTION
Prokom GDR 21,845 358
------------
FOOD & HOUSEHOLD PRODUCTS
(a)Agros Holdings 'C' 1,182 8
------------
TELECOMMUNICATIONS -- INTEGRATED
(a)Telekomunikacja Polska GDR 559,680 3,946
------------
WHOLESALE & INTERNATIONAL TRADE
Elektrim 65,400 923
------------
7,938
------------
- -----------------------------------------------------------------------------
RUSSIA(3.5%)
BROADCASTING & PUBLISHING
(a,c)Storyfirst Communications,
Inc. 'C' (Preferred) 270 102
(a,c)Storyfirst Communications,
Inc. 'D' (Preferred) 720 272
(a,c)Storyfirst Communications,
Inc. 'E' (Preferred) 780 294
(a,c)StoryFirst Communications,
Inc. 'F' (Preferred) 139 105
------------
773
------------
ENERGY SOURCES
LUKoil Holdings ADR 89,482 3,658
(a)Surgutneftegaz ADR 358,307 3,023
Tatneft ADR 10,600 40
------------
6,721
------------
FOREST PRODUCTS & PAPER
(a,c)Alliance Cellulose Ltd. 'B' 156,075 375
------------
TELECOMMUNICATIONS -- LONG DISTANCE
(a)Rostelecom ADR 34,500 339
------------
TELECOMMUNICATIONS -- WIRELESS
(a,c)Russian Telecom
Development Corp. 176,000 633
(a) Vimpel-Communications ADR 21,790 505
------------
1,138
------------
UTILITIES -- ELECTRICAL & GAS
Unified Energy Systems ADR 11,000 107
Unified Energy Systems GDR 95,530 925
------------
1,032
------------
10,378
------------
- -----------------------------------------------------------------------------
SOUTH AFRICA(7.1%)
BANKING
Nedcor Ltd. 59,041 U.S.$ 1,354
------------
BEVERAGES & TOBACCO
Rembrandt Group Ltd. 212,185 1,769
(a)South African Breweries plc 238,690 2,134
------------
3,903
------------
BROADCASTING & PUBLISHING
Primedia Ltd. 87,790 131
------------
BUSINESS & PUBLIC SERVICES
Educor 365,634 345
------------
CHEMICALS
SASOL Ltd. 49,100 350
------------
ELECTRICAL & ELECTRONICS
Comparex Holdings Ltd. 63,710 401
------------
FINANCIAL SERVICES
ABSA Group Ltd. 256,370 1,451
B.O.E. Corp. Ltd. 'N' 2,079,976 1,655
B.O.E Ltd. 269,856 268
FirstRand Ltd. 1,544,760 1,766
------------
5,140
------------
INSURANCE
Liberty Life Association of
Africa Ltd. 51,168 656
(a)New Africa Investments Ltd.
(Preferred) 'N' 977,910 575
(a)Sanlam Ltd. 881,300 1,044
------------
2,275
------------
MERCHANDISING
Ellerine Holdings Ltd. 152,380 606
------------
METALS -- NON FERROUS
Billiton plc 120,700 417
------------
MISC. MATERIALS & COMMODITIES
Anglo American Corp. ADR 560 27
Anglo American Corp. of
South Africa 27,530 1,287
(a)Anglo American plc 6,300 299
(a)Anglo American plc 18,400 860
Billiton plc 100 -- @
De Beers 27,350 655
De Beers ADR 13,200 315
------------
3,443
------------
MULTI-INDUSTRY
Bidvest Group Ltd. 319,503 2,668
(e)Morgan Stanley Dean Witter Africa
Investment Fund, Inc. 9,670 98
------------
2,766
------------
REAL ESTATE
(a)Liberty International plc 23,855 158
------------
21,289
------------
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
SOUTH KOREA(16.6%)
APPLIANCES & HOUSEHOLD DURABLES
Samsung Electronics Co. 64,822 U.S.$ 7,112
------------
BANKING
Hana Bank 84,190 1,236
Housing & Commercial Bank 95,750 3,019
Kookmin Bank 166,080 3,372
Kookmin Bank GDR 4,302 88
Koram Bank 83,420 1,045
Korea Exchange Bank 207,940 1,168
Shinhan Bank Co. Ltd. (Foreign) 89,280 1,003
------------
10,931
------------
CHEMICALS
L.G. Chemical Ltd. 30,600 833
------------
ELECTRICAL & ELECTRONICS
Samsung Electro-Mechanics Co. 25,307 875
------------
FINANCIAL SERVICES
Daewoo Securities Co. 45,830 891
Good Morning Securities Co. Ltd. 178,180 1,101
L.G. Securities Co. 11,950 201
------------
2,193
------------
METALS -- STEEL
(c)Pohang Iron & Steel Co., Ltd. 38,250 4,708
------------
MISC. MATERIALS & COMMODITIES
Hankuk Glass Industry Co., Ltd. 23,420 627
------------
TELECOMMUNICATIONS INTEGRATED
Korea Telecom Corp. 95,020 6,305
(a)Korea Telecom Corp. ADR 140,900 5,636
------------
11,941
------------
TELECOMMUNICATIONS WIRELESS
(c)SK Telecom Co., Ltd. 1,324 1,817
SK Telecom Co., Ltd. ADR 32,355 550
------------
2,367
------------
UTILITIES ELECTRICAL & GAS
Korea Electric Power Corp. 79,740 3,314
Korea Electric Power Corp. ADR 228,904 4,692
------------
8,006
------------
49,593
------------
- -----------------------------------------------------------------------------
TAIWAN(11.1%)
BANKING
Bank Sinopac 1,028,000 716
Chang Hwa Commercial Bank 302,000 452
Chinatrust Commercial Bank 789,000 948
(a)E. Sun Commercial Bank 430,000 240
First Commercial Bank 274,000 522
Hua Nan Commercial Bank 332,000 658
International Commercial
Bank of China 641,000 829
(a)Taishin International Bank 1,151,000 855
United World Chinese
Commercial Bank 191,000 296
------------
5,516
------------
CHEMICALS
Formosa Plastics Corp. 529,000 U.S.$ 1,114
Nan Ya Plastic Corp. 685,000 1,134
------------
2,248
------------
DATA PROCESSING & REPRODUCTION
Quanta Computer Inc. 61,640 738
------------
ELECTRICAL & ELECTRONICS
(a)Acer, Inc. 342,000 868
(a)Siliconware Precision
Industries Co. 545,874 1,040
------------
1,908
------------
ELECTRONIC COMPONENTS, INSTRUMENTS
(a)Advanced Semiconductor
Engineering, Inc. 451,000 1,522
Asustek Computer, Inc. 487,169 5,490
Compal Electronics, Inc. 374,021 1,471
(a)Hon Hai Precision Industry 285,800 2,584
(a)Taiwan Semiconductor Co. 1,526,430 5,836
(a)Taiwan Semiconductor
Manufacturing Co., Ltd. ADR 17,967 611
------------
17,514
------------
FINANCIAL SERVICES
(a)China Development Corp. 116,000 289
------------
INSURANCE
Cathay Life Insurance Co. Ltd. 277,000 995
------------
MERCHANDISING
(a)President Chain Store Corp. 158,274 536
------------
METALS -- STEEL
China Steel Corp. 1,692,600 1,279
------------
TEXTILES & APPAREL
(a)Far East Textile Ltd. 1,395,000 2,073
------------
33,096
------------
- -----------------------------------------------------------------------------
THAILAND(3.0%)
BANKING
(a)Siam Commercial Bank
Public Co., Ltd. 593,300 845
Thai Farmers Bank Ltd. (Foreign) 71,200 220
------------
1,065
------------
BROADCASTING & PUBLISHING
BEC World Public Co., Ltd.
(Foreign) 150,800 940
------------
BUILDING MATERIALS & COMPONENTS
Siam City Cement Public Co.,
Ltd. (Foreign) 350,833 1,446
------------
ELECTRICAL & ELECTRONICS
Delta Electronics Public Co.,
Ltd. (Foreign) 134,640 1,131
Shinawatra Computer Public
Co., Ltd. (Foreign) 296,500 1,383
------------
2,514
------------
TELECOMMUNICATIONS -- WIRELESS
Advanced Info. Services
Public Co., Ltd. (Foreign) 229,200 3,107
------------
9,072
------------
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
TURKEY(4.0%)
APPLIANCES & HOUSEHOLD DURABLES
(a)Vestel Elektronik Sanayi Ve
Ticaret AS 11,253,292 U.S.$ 1,227
------------
BANKING
(b)Akbank TAS 13,960 41
Akbank TAS 86,934,550 1,278
(a)Turkiye Garanti Bankasi 94,989,600 710
Turkiye Is Bankasi 37,005,800 658
Yapi Ve Kredi Bankasi 279,662,661 4,046
------------
6,733
------------
BEVERAGES & TOBACCO
Ege Biracilik Ve Malt 8,817,000 659
(a)Erciyas Biracilik 4,524,000 104
------------
763
------------
BUSINESS & PUBLIC SERVICES
Dogan Holding 108,498,000 1,441
------------
FINANCIAL SERVICES
Sabanci Holdings 25,256,000 563
------------
MERCHANDISING
Migros Turk TAS 430,000 535
------------
MULTI-INDUSTRY
Koc Holding 7,203,000 453
------------
WHOLESALE & INTERNATIONAL TRADE
Tupras-Turkiye Petrol
Rafinerileri AS 4,619,000 307
------------
12,022
------------
- -----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost U.S.$253,006) 293,562
------------
- -----------------------------------------------------------------------------
<CAPTION>
NO. OF
RIGHTS
- -----------------------------------------------------------------------------
<S> <C> <C>
RIGHTS(0.1%)
- -----------------------------------------------------------------------------
BRAZIL(0.0%)
TELECOMMUNICATIONS -- INTEGRATED
Tele Centro Oeste Celular 5,283,765 5
------------
- -----------------------------------------------------------------------------
SOUTH KOREA(0.1%)
TELECOMMUNICATIONS--WIRELESS
(a,c)SK Telecom Co., Ltd. ADR 1,324 166
------------
- -----------------------------------------------------------------------------
TOTAL RIGHTS
(Cost U.S.$5) 171
------------
- -----------------------------------------------------------------------------
<CAPTION>
NO. OF VALUE
WARRANTS (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
WARRANTS(0.4%)
- -----------------------------------------------------------------------------
THAILAND(0.4%)
BANKING
(a,c)Siam Commercial Bank Co. Ltd.
(Foreign), expiring 12/31/02 280,333 U.S.$ -- @
(a)Siam Commercial Bank Co., Ltd.,
expiring 5/10/02 1,642,000 1,057
------------
- -----------------------------------------------------------------------------
TOTAL WARRANTS
(Cost U.S.$--) 1,057
------------
- -----------------------------------------------------------------------------
<CAPTION>
NO. OF
UNITS
- -----------------------------------------------------------------------------
<S> <C> <C>
UNITS(0.1%)
- -----------------------------------------------------------------------------
RUSSIA(0.1%)
BROADCASTING & PUBLISHING
(a,c)Storyfirst Communications, Inc.,
First Section,Tranche I
(Convertible) 604 228
(a,c)Storyfirst Communications, Inc.,
First Section,Tranche II
(Convertible) 35 13
(a,c)Storyfirst Communications, Inc.,
Second Section,Tranche I
(Convertible) 152 58
(a,c)Storyfirst Communications, Inc.,
Tranche IV (Convertible) 207 78
------------
377
------------
- -----------------------------------------------------------------------------
TOTAL UNITS
(Cost U.S.$1,192) 377
------------
- -----------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -----------------------------------------------------------------------------
<S> <C> <C>
DEBT INSTRUMENTS(0.1%)
- -----------------------------------------------------------------------------
INDIA(0.2%)
METALS -- STEEL
(c)Shri Ishar Alloy Steels Ltd.
15.00%, 4/21/01 INR 581 99
------------
MULTI-INDUSTRY
(c,f)DCM Shriram Industries Ltd.
9.90%, 2/21/02 335 181
(c)DCM Shriram Industries Ltd.
(Convertible) 7.50%, 2/21/02 330 135
------------
316
------------
- -----------------------------------------------------------------------------
TOTAL DEBT INSTRUMENTS
(Cost U.S.$1,495) 415
------------
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS(1.0%)
- -----------------------------------------------------------------------------
UNITED STATES(1.0%)
REPURCHASE AGREEMENT
Chase Securities, Inc. 4.55%,
dated 6/30/99, due 7/1/99,
to be repurchased at
U.S.$3,092, collateralized
by U.S.$2,875 United States
Treasury Bonds, 7.25%, due
5/15/16, valued at
U.S.$3,195
(Cost U.S.$3,092) U.S.$ 3,092 U.S.$ 3,092
------------
- -----------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN(0.6%)
Brazil Real BRL 177 100
Indian Rupee INR 42,189 972
Israeli Shekel ISS 234 57
Malaysian Ringgit MYR 2 1
Mexican Peso MXP 1,359 144
Pakistani Rupee PKR 669 13
Philippine Peso PHP 1,687 44
South Korean Won KRW 308,809 267
Taiwan Dollar TWD 3,815 118
Thai Baht THB 3,537 96
------------
(Cost U.S.$1,813) 1,812
------------
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS(100.7%)
(Cost $260,603) 300,486
------------
- -----------------------------------------------------------------------------
OTHER ASSETS (2.3%)
Cash U.S.$ 539
Receivable for Investments Sold 5,037
Dividends Receivable 1,359
Interest Receivable 2
Other Assets 46 6,983
------- ------------
- -----------------------------------------------------------------------------
LIABILITIES (-3.0%)
Deferred Country Taxes (2,569)
Payable For:
Investments Purchased (5,275)
Custodian Fees (429)
Investment Advisory Fees (296)
Fund Shares Redeemed (153)
Directors' Fees and Expenses (83)
Professional Fees (75)
Shareholder Reporting Expenses (70)
Administrative Fees (32)
Other Liabilities (107) (6,520)
------- ------------
- -----------------------------------------------------------------------------
<CAPTION>
AMOUNT
(000)
- -----------------------------------------------------------------------------
<S> <C>
NET ASSETS (100%)
Applicable to 20,494,744, issued and
outstanding U.S.$0.01 par value shares
(100,000,000 shares authorized) U.S.$298,380
------------
------------
- -----------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 14.56
------------
------------
- -----------------------------------------------------------------------------
AT JUNE 30, 1999, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------
Common Stock U.S.$ 205
Capital Surplus 320,877
Undistributed Net Investment
Income 84
Accumulated Net Realized Loss (60,282)
Unrealized Appreciation on Investments and
Foreign Currency Translations 37,496
- -----------------------------------------------------------------------------
TOTAL NET ASSETS U.S.$298,380
------------
------------
- -----------------------------------------------------------------------------
(a)--Non-income producing
(b)--144A Security--certain conditions for public sale may exist.
(c)--Security valued at fair value--See note A-1 to financial statements.
(d)--Security fair valued at cost--See note A-1 to financial statements.
(e)--The Fund is advised by an affiliate.
(f)--Variable/floating rate security--rate disclosed is as of
June 30, 1999.
@--Amount is less than U.S.$500.
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
- -----------------------------------------------------------------------------
JUNE 30, 1999 EXCHANGE RATES:
- -----------------------------------------------------------------------------
BRL Brazil Real 1.770 = U.S. $1.00
INR Indian Rupee 43.405 = U.S. $1.00
ISS Israeli Shekel 4.083 = U.S. $1.00
MYR Malaysian Ringgit 3.800 = U.S. $1.00
MXP Mexican Peso 9.423 = U.S. $1.00
PKR Pakistani Rupee 52.467 = U.S. $1.00
PHP Philippine Peso 37.975 = U.S. $1.00
KRW South Korean Won 1,157.500 = U.S. $1.00
TWD Taiwan Dollar 32.300 = U.S. $1.00
THB Thai Baht 36.885 = U.S. $1.00
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY CLASSIFICATION -- JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- -----------------------------------------------------------------------------
<S> <C> <C>
Appliances & Household Durables U.S.$ 8,339 2.8%
Automobiles 3,047 1.0
Banking 39,645 13.3
Beverages & Tobacco 21,514 7.2
Broadcasting & Publishing 12,203 4.1
Building Materials & Components 9,022 3.0
Business & Public Services 1,786 0.6
Chemicals 6,496 2.2
Data Processing and Reproduction 9,069 3.0
Electrical & Electronics 11,715 3.9
Electronic Components, Instruments 18,186 6.1
Energy Sources 11,980 4.0
Financial Services 9,112 3.1
Food & Household Products 2,898 1.0
Forest Products & Paper 4,485 1.5
Health & Personal Care 2,052 0.7
Industrial Components 453 0.1
Insurance 3,270 1.1
Machinery & Engineering 1,060 0.4
Merchandising 3,727 1.2
Metals--Non-Ferrous 417 0.1
Metals--Steel 9,470 3.2
Misc. Materials & Commodities 4,070 1.4
Multi-Industry 6,670 2.2
Real Estate 1,033 0.3
Telecommunications--Integrated 58,502 19.6
Telecommunications--Long Distance 1,381 0.5
Telecommunications--Wireless 13,286 4.5
Textiles & Apparel 2,244 0.8
Transportation--Road & Rail 1,126 0.4
Utilities--Electrical & Gas 16,094 5.4
Wholesale & International Trade 1,230 0.4
Other 4,904 1.6
------------ -----
U.S.$300,486 100.7%
------------ -----
------------ -----
</TABLE>
SUMMARY OF TOTAL INVESTMENTS BY COUNTRY -- JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PERCENT
VALUE OF NET
COUNTRY (000) ASSETS
- -----------------------------------------------------------------------------
<S> <C> <C>
Argentina U.S.$ 2,203 0.7%
Brazil 32,666 10.9
Chile 1,709 0.6
China 2,230 0.8
Colombia 8 0.0
Czech Republic 1,977 0.7
Egypt 1,881 0.6
Greece 6,149 2.1
Hungary 2,551 0.9
India 26,653 8.9
Indonesia 13,102 4.4
Israel 8,335 2.8
Malaysia 6,840 2.3
Mexico 39,015 13.1
Pakistan 2,152 0.7
Philippines 3,123 1.0
Poland 7,938 2.7
Russia 10,755 3.6
South Africa 21,289 7.1
South Korea 49,759 16.7
Taiwan 33,096 11.1
Thailand 10,129 3.4
Turkey 12,022 4.0
United States (short-term investment) 3,092 1.0
Other 1,812 0.6
------------ -----
U.S.$300,486 100.7%
------------ -----
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends ........................................................................................ U.S.$ 2,903
Interest ......................................................................................... 44
Less: Foreign Taxes Withheld ..................................................................... (149)
- ---------------------------------------------------------------------------------------------------------------------------
Total Income ................................................................................... 2,798
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees ......................................................................... 1,551
Custodian Fees ................................................................................... 472
Administrative Fees .............................................................................. 137
Professional Fees ................................................................................ 72
Country Tax Expense .............................................................................. 61
Shareholder Reporting Expenses ................................................................... 55
Directors' Fees and Expenses ..................................................................... 51
Transfer Agent Fees .............................................................................. 3
Other Expenses ................................................................................... 28
- ---------------------------------------------------------------------------------------------------------------------------
Total Expenses ................................................................................. 2,430
- ---------------------------------------------------------------------------------------------------------------------------
Net Investment Income ........................................................................ 368
- ---------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold ....................................................................... 2,483
Foreign Currency Transactions .................................................................... (972)
- ---------------------------------------------------------------------------------------------------------------------------
Net Realized Gain .............................................................................. 1,511
- ---------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments ...................................................................... 84,073
Appreciation on Foreign Currency Translations .................................................... 90
- ---------------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation ................................................. 84,163
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Realized Gain and Change in Unrealized Appreciation/Depreciation ........................... 85,674
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................................. U.S.$ 86,042
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income ...................................................... U.S.$ 368 U.S.$ 970
Net Realized Gain (Loss) ................................................... 1,511 (48,172)
Change in Unrealized Appreciation/Depreciation ............................. 84,163 (22,002)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations ............ 86,042 (69,204)
- ---------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income ...................................................... -- (2,318)
In Excess of Net Investment Income ......................................... -- (284)
Net Realized Gain .......................................................... -- (49,737)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions ........................................................ -- (52,339)
- ---------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Repurchase of Shares (960,600 and 1,369,000 shares, respectively) .......... (9,271) (10,985)
- ---------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) .................................................... 76,771 (132,528)
Net Assets:
Beginning of Period ........................................................ 221,609 354,137
- ---------------------------------------------------------------------------------------------------------------------------
End of Period (including undistributed net investment income/(distribution
in excess of net investment income) of U.S.$84 and
U.S.$(284), respectively) ................................................ U.S.$ 298,380 U.S.$ 221,609
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
SELECTED PER SHARE DATA 1999 -----------------
AND RATIOS: (UNAUDITED) 1998
- ----------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . U.S.$ 10.33 U.S.$ 15.52
- ----------------------------------------------------------------------------------
Offering Costs . . . . . . . . . . . . . . . . -- --
- ----------------------------------------------------------------------------------
Net Investment Income (Loss) . . . . . . . . . 0.02 0.04
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . 4.12 (3.05)
- ----------------------------------------------------------------------------------
Total from Investment Operations . . . . . 4.14 (3.01)
- ----------------------------------------------------------------------------------
Distributions:
Net Investment Income . . . . . . . . . . . . -- (0.10)
In Excess of Net Investment Income . . . . . -- (0.01)
Net Realized Gain . . . . . . . . . . . . . . -- --
In Excess of Net Realized Gain . . . . . . . -- (2.18)
- ----------------------------------------------------------------------------------
Total Distributions . . . . . . . . . . . . -- (2.29)
- ----------------------------------------------------------------------------------
Increase (Decrease) in Net Asset
Value from Capital Share
Transaction . . . . . . . . . . . . . . . . -- --
Anti-Dilutive Effect of Shares
Repurchased . . . . . . . . . . . . . . . . 0.09 0.11
- ----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . U.S.$ 14.56 U.S.$ 10.33
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD . . . . U.S.$ 11.69 U.S.$ 8.13
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value . . . . . . . . . . . . . . . . 43.85% (24.88)%
Net Asset Value (1) . . . . . . . . . . . . . 40.95% (19.61)%
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) . . . . U.S.$298,380 U.S.$ 221,609
- ----------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets . . . 1.96%* 1.96%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . 0.30%* 0.36%
Portfolio Turnover Rate . . . . . . . . . . . 74% 101%
- ----------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
SELECTED PER SHARE DATA ---------------------------------------------------------------------
AND RATIOS: 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <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
- ---------------------------------------------------------------------------------------------------------------------
Offering Costs . . . . . . . . . . . . . . . . -- -- (0.03) (0.02)
- ---------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) . . . . . . . . . 0.03 0.10 0.06 (0.12)
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . (0.18) 1.92 (3.14) (1.30)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations . . . . . (0.15) 2.02 (3.08) (1.42)
- ---------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income . . . . . . . . . . . . (0.01) -- -- --
In Excess of Net Investment Income . . . . . -- (0.05) -- --
Net Realized Gain . . . . . . . . . . . . . . (0.01) (0.84) (1.29) (6.50)
In Excess of Net Realized Gain . . . . . . . -- (0.14) -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . . . . . (0.02) (1.03) (1.29) (6.50)
- ---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Asset
Value from Capital Share
Transaction . . . . . . . . . . . . . . . . -- 0.01** (1.21)++ 0.04+
Anti-Dilutive Effect of Shares
Repurchased . . . . . . . . . . . . . . . . -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . U.S.$ 15.52 U.S.$ 15.69 U.S.$ 14.69 U.S.$ 20.30
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD . . . . U.S.$ 13.06 U.S.$ 13.88 U.S.$ 15.50 U.S.$ 21.50
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value . . . . . . . . . . . . . . . . (5.75)% (4.59)% (16.61)%+++ (10.61)%
Net Asset Value (1) . . . . . . . . . . . . . (0.97)% 13.84% (16.30)%+++ (5.33)%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) . . . . U.S.$354,137 U.S.$ 357,751 U.S.$332,879 U.S.$ 321,729
- ---------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets . . . 1.84% 1.87% 1.86% 1.75%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . 0.15% 0.58% 0.30% (0.48)%
Portfolio Turnover Rate . . . . . . . . . . . 90% 67% 61% 52%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Increase (decrease) per share due to reinvestment of distributions.
+ 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. This percentage is 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.
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
- ----------
The Morgan Stanley Dean Witter Emerging Markets Fund, Inc. (formerly 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 reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: In valuing the Fund's assets, all listed securities for
which market quotations are readily available are valued at the last 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)
17
<PAGE>
for the period is reflected in the Statement of Operations.
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 may utilize
and their associated risks:
5. 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.
6. FORWARD COMMITMENTS AND WHEN-ISSUED/DELAYED DELIVERY SECURITIES: The Fund
may make forward commitments to purchase or sell securities. Payment and
delivery for securities which have been purchased or sold on a forward
commitment basis can take place a month or more (not to exceed 120 days)
after the date of the transaction. Additionally, the Fund may purchase
securities on a when-issued or delayed delivery basis. Securities purchased
on a when-issued or delayed delivery basis are purchased for delivery
beyond the normal settlement date at a stated price and yield, and no
income accrues to the Fund on such securities prior to delivery. When the
Fund enters into a purchase transaction on a when-issued or delayed
delivery basis, it either establishes a segregated account in which it
maintains liquid assets in an amount at least equal in value to the Fund's
commitments to purchase such securities or denotes such securities on the
custody statement for its regular custody account. Purchasing securities on
a forward commitment or when-issued or delayed-delivery basis may involve a
risk that the market price at the time of delivery may be lower than the
agreed upon purchase price, in which case there could be an unrealized loss
at the time of delivery.
7. SWAP AGREEMENTS: The Fund may enter into swap agreements to exchange the
return generated by one security, instrument or basket of instruments for
the return generated by another security, instrument or basket of
instruments. The following summarizes swaps which may be entered into by
the Fund:
INTEREST RATE SWAPS: Interest rate swaps involve the exchange of
commitments to pay and receive interest based on a notional principal
amount. Net periodic interest payments to be received or paid are accrued
daily and are recorded in the Statement of Operations as an adjustment to
interest income. Interest rate swaps are marked-to-market daily based upon
quotations from market makers and the change, if any, is recorded as
unrealized appreciation or depreciation in the Statement of Operations.
TOTAL RETURN SWAPS: Total return swaps involve commitments to pay interest
in exchange for a market-linked return based on a notional amount. To the
extent the total return of the security, instrument or basket of
instruments underlying the transaction exceeds or falls short of the
offsetting interest obligation, the Fund will receive a payment from or
make a payment to the counterparty, respectively. Total return swaps are
marked-to-market daily based upon quotations from market makers and the
change, if any, is recorded as unrealized gains or losses in the Statement
of Operations. Periodic payments received or made at the end of each
measurement period, but prior to termination, are recorded as realized
gains or losses in the Statement of Operations.
Realized gains or losses on maturity or termination of interest rate and
total return swaps are presented in the Statement of Operations. Because
there is no organized market for these swap agreements, the value reported
in the Statement of Net Assets may differ from that which would be realized
in the event the Fund terminated its position in the agreement. Risks may
arise upon entering into these agreements from the potential inability of
the counterparties to meet the terms of the agreements and are generally
limited to the amount of net interest payments to be received and/or
favorable movements in the value of the underlying security, instrument or
basket of instruments, if any, at the date of default.
8. STRUCTURED SECURITIES: The Fund may invest in interests in entities
organized and operated solely for the purpose of restructuring the
investment characteristics of sovereign debt obligations. This type of
restructuring involves the deposit with or purchase by an entity of
specified instruments and the issuance by that entity of one or more
classes of securities
18
<PAGE>
("Structured Securities") backed by, or representing interests in, the
underlying instruments. Structured Securities generally will expose the
Fund to credit risks of the underlying instruments as well as of the issuer
of the Structured Security. Structured Securities are typically sold in
private placement transactions with no active trading market. Investments
in Structured Securities may be more volatile than their underlying
instruments, however, any loss is limited to the amount of the original
investment.
9. OVER-THE-COUNTER TRADING: Derivative instruments that may be purchased or
sold by the Fund are expected to regularly consist of instruments not
traded on an exchange. The risk of nonperformance by the obligor on such an
instrument may be greater, and the ease with which the Fund can dispose of
or enter into closing transactions with respect to such an instrument may
be less, than in the case of an exchange-traded instrument. In addition,
significant disparities may exist between bid and asked prices for
derivative instruments that are not traded on an exchange. Derivative
instruments not traded on exchanges are also not subject to the same type
of government regulation as exchange traded instruments, and many of the
protections afforded to participants in a regulated environment may not be
available in connection with such transactions.
10. 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 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", net operating losses 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 Dean Witter 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. The Chase Manhattan Bank, through its corporate 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 0.08% 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.
D. The Chase Manhattan Bank serves as custodian for the Fund. Custody fees are
payable monthly based on assets held in custody, investment purchase and sales
activity and account maintenance fees, plus reimbursement for certain
out-of-pocket expenses.
E. During the six months ended June 30, 1999, the Fund made purchases and
sales totaling approximately $180,926,000 and $182,620,000, 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, 1999, the Fund incurred
$52,000 as brokerage commissions to Morgan Stanley & Co. Incorporated, an
affiliate of the Adviser. At June 30, 1999, the U.S. Federal income tax cost
basis of securities was $258,790,000 and, accordingly, net unrealized
appreciation for U.S. Federal income tax purposes was $39,884,000 of which
$78,367,000 related to appreciated securities and $38,483,000 related to
depreciated securities. At December 31, 1998, the Fund had a capital loss
carryforward for U.S. Federal income tax purposes of approximately $40,551,000
available to offset future capital gains all of which will expire on December
31, 2006. To the extent that capital gains are offset, such gains will not be
distributed to the shareholders.
F. 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
19
<PAGE>
may not be equal to its value as presented in the financial statements.
G. 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
30,1999 totaled $80,000 and are included in Payable for Directors' Fees and
Expenses on the Statement of Net Assets.
H. On July 30, 1998, the Fund commenced a share repurchase program for
purposes of enhancing shareholder value and reducing the discount at which the
Fund's shares traded from their net asset value. For the six months ended June
30, 1999, the Fund repurchased 960,600 shares of its Common Stock at an average
price per share of $9.60 and an average discount of 17.50% 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.
I. Supplemental Proxy Information
The Annual Meeting of the Stockholders of the Morgan Stanley Emerging Markets
Fund, Inc. was held on June 21, 1999. The following is a summary of each
proposal presented and the total number of shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES AUTHORITY VOTES
PROPOSAL: FAVOR OF AGAINST WITHHELD ABSTAINED
- --------- ----------- ------- --------- ---------
<S> <C> <C> <C> <C>
1. To elect the following Directors: Peter J. Chase. . . . 15,898,717 -- 128,708 --
David B. Gill . . . . 15,897,499 -- 129,927 --
Michael F. Klein. . . 15,718,095 -- 309,330 --
2. To ratify the selection of PricewaterhouseCoopers LLP as
independent accountants of the Fund. . . . . . . . . . . 15,956,196 41,563 -- 29,667
3. To approve an amendment to the Fund's Articles of
Incorporation to change the name of the Fund to
Morgan Stanley Dean Witter Emerging Markets Fund, Inc. . 15,861,472 124,800 -- 41,153
</TABLE>
20
<PAGE>
YEAR 2000 DISCLOSURE (UNAUDITED):
The investment advisory services provided to the Fund by the Adviser depend on
the smooth operation of its computer systems. Many computer and software systems
in use today cannot recognize the year 2000, but revert to 1900 or some other
date, due to the manner in which dates were encoded and calculated. That failure
could have a negative impact on the handling of securities trades, pricing and
account services. The Adviser has been actively working on necessary changes to
its own computer systems to deal with the year 2000 problem and expects that its
systems will be adapted before that date. There can be no assurance, however,
that the Adviser will be successful. In addition, other unaffiliated service
providers may be faced with similar problems. The Adviser is monitoring their
remedial efforts, but, there can be no assurance that they and the services they
provide will not be adversely affected.
In addition, it is possible that the markets for securities in which the Fund
invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
21
<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 Dean Witter Emerging Markets Fund, Inc.
Boston Equiserve
Dividend Reinvestment Unit
P.O. Box 1681
Boston, MA 02105-1681
1-800-730-6001
22
