<PAGE>
-----------------------------------------------------
MORGAN STANLEY
DEAN WITTER
EMERGING MARKETS
FUND, INC.
-----------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1999
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
MORGAN STANLEY DEAN WITTER
EMERGING MARKETS FUND, INC.
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- --------------------------------------------------------------------------------
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
TREASURER
Robin L. Conkey
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
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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
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SHAREHOLDER SERVICING AGENT
Boston Equiserve
Investor Relations Department
P.O. Box 644
Boston, Massachusetts 02102-0644
(800) 730-6001
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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 year ended December 31, 1999, the Morgan Stanley Dean Witter Emerging
Markets Fund, Inc. (the "Fund") had a total return, based on net asset value per
share, of 105.81% compared with 66.41% for the Morgan Stanley Capital
International (MSCI) Emerging Markets Free Index (the "MSCI Index") and 62.69%
for the IFC Global Total Return Composite Index. For the period from
commencement of operations on November 1, 1991 through December 31, 1999, the
Fund's total return, based on net asset value per share, was 243.92% compared
with 118.41% for the MSCI Index and 82.70% for the IFC Global Total Return
Composite Index. On December 31, 1999, the closing price of the Fund's shares on
the New York Stock Exchange was $16 5/16, representing a 23.3% discount to the
Fund's net asset value per share.
Outperformance compared to the MSCI Index was attributable to both strong stock
selection and country allocation. Stock selection in Mexico and South Korea
contributed markedly to performance. Other notable contributors were equity
selections in India, Israel, Taiwan and Thailand. Our overweight position in
Indonesia (+93.5%) and Turkey (+252.4%) coupled with our underweight stance in
Argentina (+34.3%), Chile (+39.0%) and Greece (+49.6%) contributed positively to
performance. Detracting from performance was poor stock selection in Greece,
Indonesia, South Africa and Russia and country allocation in Taiwan (+52.7%).
The emerging markets rallied in 1999, boosted by a supportive global environment
and heartier investor risk appetites. Continued strength in commodity prices and
improving economic fundamentals, coupled with positive election results (India,
Mexico and Russia) and IMF agreements (Russia and Turkey), further boosted the
emerging markets. Although emerging markets faced great adversities during the
year, including heightened political tensions (Indonesia), scandals (Indonesia
and South Korea) and earthquakes (Greece, Turkey, Taiwan and Mexico), many
emerging markets proved their buoyancy by year-end. During the fourth quarter,
Taiwan and Turkey evidenced their resilience in light of the earthquakes they
suffered during the third quarter, and investors rewarded countries such as
India and Turkey for their commitment to reforms.
Latin American markets advanced 58.9% in 1999, led by the large liquid markets
of Brazil and Mexico. Driving the performance within the region were increased
global risk appetite, commodity price strength, improving liquidity conditions,
a turnaround in regional economic growth and benign political outcomes in
elections in Argentina, Chile and Mexico. However, Latin America remains the
most vulnerable to a significant change in U.S. interest rates as it has large
external financing needs. We will continue to be underweight the Latin American
region in the near term, as we believe other regions within the emerging markets
currently offer more exciting investment opportunities.
Brazilian equities advanced 67.2% during the year, reflecting the economy's
resilience in light of the devaluation of the Brazilian currency in January.
Fiscal figures continued to surprise on the upside and the Brazilian real
strengthened during the fourth quarter, reflecting in part its undervaluation as
well as the government's new focus of targeting inflation. Both locals and
foreign institutions returned to the market towards year-end, further boosting
the market. Investors will focus their attention on the extraordinary session at
the beginning of the year in which votes regarding tax reform and fiscal reform
will take place. During the fourth quarter, we increased our exposure to
Brazilian banks based on attractive valuations and our expectations that
interest rates will continue to trend downward in the coming quarter.
Mexico is our favorite market within Latin America, and Mexican equities rose
80.1% during 1999 on the back of a strong U.S. market and solid domestic
fundamentals. Gross domestic product growth was better than expected,
inflation was well behaved, oil prices remained buoyant and the PRI
presidential primary result in November indicated a relatively calm political
environment. Mexico signed a trade agreement with the EU improving its trade
prospects and, over the longer term, diversifying its reliance from the U.S.
economy. We believe that rating agencies will raise Mexico to investment
grade after the presidential elections in July 2000, thereby lowering
financing costs to Mexican corporates and lending overall support to the
market. Although domestic fundamentals remain strong, we are cautiously
monitoring the risk of a slowdown in the U.S. economy and are also wary of a
sell-off in the Mexican peso, which we presently believe to be over-valued.
During the fourth quarter, we reduced some of our significant overweight in
beverage company Femsa and added to one of our larger overweights, Cemex
(cement), as the company remains attractively valued given its solid
operating fundamentals and superior underlying profitability.
Asian equities gained 69.4% during the year. We continue to focus on Asia, a
region benefiting from trade surpluses, export growth and export market
competitiveness vis-a-vis yen strength versus the U.S. dollar. South Korea
(+92.4%) remains our largest overweight within Asia, based on the aforementioned
positive trends coupled with neutral interest rates, strong local retail
investor interest in equities and increasing clarity on the restructuring of
failed chaebol Daewoo. We have added to non-chaebol related companies that
possess technological expertise in specialized markets, strong management
qualities and sound business models as well as increasing our exposure to the
banking sector.
Taiwanese equities advanced 52.7% during 1999, boosted by robust exports, trends
in global outsourcing (notably in
2
<PAGE>
electronics and semiconductor-related arenas) and investor optimism that the
Sino-U.S. trade agreement would also hasten Taiwan's membership into the World
Trade Organization (WTO). We maintain our overweight stance in Taiwan, and
purchases during the fourth quarter included Chartered Semiconductor, the third
largest foundry globally, and various niche technology-related and
communications stocks.
During the year, Chinese equities gained 13.3% and, on November 16, China
announced a trade agreement with the U.S. that bodes well for China's entry into
the World Trade Organization. Although increased trade should bring positive
longer-term consequences, including increased FDI inflows and reforms, the
reform process will take time to implement and not all areas of the economy will
benefit equally. Additions to our holdings in China during the year included
telecommunications company China Telecom and TCL International, China's third
largest color TV manufacturer and the only home electronics manufacturer
providing Internet content via WebTV, cable modem and cable set top boxes.
Philippine equities (+3.3%) finished the year relatively flat, and we sold our
Philippine assets as we find the valuations relatively expensive and are unable
to find a catalyst that will move this market forward.
Indian equities gained 87.3% during the year, boosted by continued indications,
including industrial production trends, that cyclical recovery remains on track.
November's elections yielded a sizable majority for the BJP party, and this
bodes well for more cohesive policies and a willingness to focus on reforms to
help meet India's large fiscal problems. We maintain our overweight stance in
India and during the fourth quarter we added more cyclically related companies
such as Gujurat Ambuja (cement) and State Bank of India.
We are modestly underweight Emerging Europe and the Middle East, a region that
advanced 79.6% during 1999, although posting mixed returns. Russia and Turkey,
rising 247.1% and 252.4%, respectively, were the star performing markets of this
region. We maintain our underweight stance in Greek equities, which gained
49.6%, yet modestly reduced our significant underweight in Greek banks as we
believe they should benefit from future reductions in interest rates and reserve
requirements. Optimism over low inflation, the prospects for future rate cuts
and strong corporate earnings helped Israeli equities gain 59.7%. We added to
our overweight stance in Israel through purchases in niche-oriented
telecommunications and software-related stocks, including Gilat Satellite
Networks, Amdocs, Comverse and ECI Telecom.
The gains by Russian equities were fueled by robust oil prices, positive
economic fundamentals and greater political stability. In December, the Duma
(Russia's Lower House of Parliament) held elections. The election results
(Centrist-oriented majority) coupled with President Yeltsin's surprise
resignation on December 31 (with Putin appointed as acting president until
elections on March 26) have accentuated the uncertainty in Russia with regard
to Yeltsin's probable successor and his ability to push reform through the
Duma. The remarkable performance by Turkish equities during the year, in
light of a devastating earthquake in August, was supported by the passage of
key reform bills (social security and international arbitration), IMF and
World Bank agreements, and government measures, including banking legislation
and efforts to control inflation. Positive investor sentiment regarding the
prospect of significant inflation and interest rate reductions was further
enhanced in December when Turkey was named an official candidate for the
European Monetary Union. Turkey remains one of our most significant
overweight positions and within Turkey we are focusing on domestic themes,
adding to those companies best positioned to take advantage of a lower
interest rate and inflation environment and higher consumer spending.
South African equities rose 57.2% during the year, buoyed by commodity price
strength, foreign exchange inflows from the listing of South African companies
in London, falling inflation and fiscal discipline. During the year, we
increased holdings in some commodity stocks, including Billiton and Anglo
American, which mine aluminum and platinum, respectively, in addition to stocks
in South Africa's information technology sector. We remain underweight South
Africa based on its mild attractiveness compared to other emerging markets.
Amidst the backdrop of global growth and sustainable commodity prices, we
believe those emerging markets benefiting from improving economic fundamentals
and structural reforms should fare well in 2000.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
January 2000
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.
3
<PAGE>
Morgan Stanley Dean Witter Emerging Markets Fund, Inc.
Investment Summary as of December 31, 1999 (Unaudited)
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<TABLE>
<CAPTION>
HISTORICAL TOTAL RETURN (%)
INFORMATION -------------------------------------------------------------------------------------
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>
One Year 100.77% 100.77% 105.81% 105.81% 66.41% 66.41% 62.69% 62.69%
Five Year 13.11 2.49 56.13 9.32 10.41 2.00 3.79 0.75
Since Inception* 163.88 12.61 243.92 16.32 118.41 10.04 82.70 7.66
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
[GRAPH]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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 $21.26
Market Value Per Share ....... $14.25 $18.13 $31.63 $21.50 $15.50 $13.88 $13.06 $8.13 $16.31
Premium/(Discount) ........... -3.1% 8.3% 12.2% 5.9% 5.5% -11.5% -15.9% -21.3% -23.3%
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% 105.81%
MSCI Index Total Return (3) .. 9.58% 11.40% 74.84% -7.32% -5.21% 6.03% -11.59% -25.34% 66.41%
IFC Index Total Return (4) ... 5.29% 0.33% 67.50% -0.53% -12.32% 7.88% -14.54% -21.09% 62.69%
</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.
4
<PAGE>
Morgan Stanley Dean Witter Emerging Markets Fund, Inc.
Portfolio Summary as of December 31, 1999
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- --------------------------------------------------------------------------------
DIVERSIFICATION OF TOTAL INVESTMENTS
[CHART]
<TABLE>
<S> <C>
Equity Securities (97.4%)
Debt Instruments (0.1%)
Short-Term Investments (2.5%)
</TABLE>
- --------------------------------------------------------------------------------
INDUSTRIES
[CHART]
<TABLE>
<S> <C>
Appliances & Household Durables (7.8%)
Banking (9.1%)
Beverages & Tobacco (3.5%)
Broadcasting & Publishing (3.3%)
Data Processing & Reproduction (4.3%)
Electrical & Electronics (12.1%)
Electronic Components, Instruments (9.3%)
Financial Services (4.5%)
Telecommunications -- Integrated (13.3%)
Telecommunications -- Wireless (10.3%)
Other (22.5%)
</TABLE>
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COUNTRY WEIGHTINGS
[CHART]
<TABLE>
<S> <C>
South Korea (20.0%)
Taiwan (12.3%)
Mexico (10.5%)
India (9.2%)
Brazil (8.3%)
Turkey (8.0%)
Israel (6.5%)
South Africa (5.5%)
China (3.6%)
Russia (2.9%)
Other (13.2%)
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<S> <C>
1. Samsung Electronics Co. (South Korea) 7.0%
2. SK Telecom Co., Ltd. (South Korea) 4.5
3. Telmex (Mexico) 3.7
4. Yapi Ve Kredi Bankasi (Turkey) 2.8
5. Infosys Technology Ltd. (India) 2.6
6. Taiwan Semiconductor Co. (Taiwan) 2.6
7. China Telecom Ltd. (China) 2.1
8. Grupo Televisa (Mexico) 2.1
9. Korea Telecom Corp. (South Korea) 1.7
10. United Microelectronics Corp. Ltd. (Taiwan) 1.6
----
30.7%
----
----
</TABLE>
* Excludes short-term investments.
5
<PAGE>
FINANCIAL STATEMENTS
- ---------
STATEMENT OF NET ASSETS
- ---------
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.6%)
(Unless otherwise noted)
- ------------------------------------------------------------------------
ARGENTINA (0.8%)
AUTOMOBILES
Renault Argentina 1 U.S.$ -- @
-------------
TELECOMMUNICATIONS -- INTEGRATED
Telecom Argentina ADR 70,595 2,418
Telefonica Argentina ADR 39,310 1,214
-------------
3,632
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- ------------------------------------------------------------------------
BRAZIL (8.3%)
BANKING
(a,c)Banco Nacional (Preferred) 61,598,720 2
Unibanco (Preferred) GDR 152,140 4,583
-------------
4,585
-------------
ENERGY SOURCES
Petrobras (Preferred) 14,428,763 3,674
(b)Petrobras (Preferred) ADR 7,470 192
-------------
3,866
-------------
MERCHANDISING
(a,c)Lojas Arapua (Preferred) 30,412,000 -- @
(a,c)Lojas Arapua (Preferred) ADR 31,540 -- @
-------------
-- @
-------------
METALS -- STEEL
CVRD (Preferred) 'A' 76,263 2,111
CVRD (Preferred) ADR 78,609 2,171
-------------
4,282
-------------
TELECOMMUNICATIONS -- INTEGRATED
(a)Celular CRT (Preferred) 13,397,625 2,336
CRT (Preferred) 'A' 9,425,376 2,922
Tele Centro-Sul (Preferred) 97,923,445 1,788
Tele Centro-Sul ADR 11,122 1,009
Tele Norte-Leste (Preferred) 31,599,945 849
Tele Norte-Leste (Preferred) ADR 59,057 1,506
Telebras (Preferred) ADR 7,740 995
Telesp (Preferred) 16,880,945 409
Telesp ADR 3,390 83
-------------
11,897
-------------
TELECOMMUNICATIONS -- WIRELESS
Tele Celular Sul (Preferred) 137,409,345 456
Tele Celular Sul ADR 18,707 594
Tele Centro Oeste Celular
Participacoes (Preferred) 5,994,678 13
Tele Nordeste Celular (Preferred) 76,067,945 198
Tele Nordeste Celular ADR 2,340 118
Tele Sudeste Celular (Preferred) 125,798,055 930
Tele Sudeste Celular ADR 36,494 1,416
Telemig Celular (Preferred) 193,414,795 423
Telemig Celular ADR 5,343 247
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TELECOMMUNICATIONS -- WIRELESS (CONTINUED)
Telerj Celular (Preferred) 'B' 3,756,000 U.S.$ 104
Telesp Celular (Preferred) 80,008,045 1,417
Telesp Celular (Preferred) 'B' 10,639,001 842
Telesp Celular ADR 51,312 2,174
-------------
8,932
-------------
TEXTILES & APPAREL
Coteminas 2,200,500 140
(b,c)Coteminas GDR 23,460 65
-------------
205
-------------
UTILITIES -- ELECTRICAL & GAS
Cemig (Preferred) 58,212,527 1,305
Cemig (Preferred) ADR 37,013 833
(b)Cemig (Preferred) ADR 9,208 207
-------------
2,345
-------------
36,112
-------------
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CHILE (0.2%)
MERCHANDISING
(a)Santa Isabel ADR 8,598 84
-------------
UTILITIES -- ELECTRICAL & GAS
Endesa ADR 26,945 382
Enersis ADR 22,550 530
-------------
912
-------------
996
-------------
- ------------------------------------------------------------------------
CHINA (3.6%)
APPLIANCES & HOUSEHOLD DURABLES
Guangdong Kelon
Electrical Holdings Co. Ltd. 'H' 297,000 226
-------------
BUSINESS & PUBLIC SERVICES
(a)Timeless Software Ltd. 448,000 259
-------------
ELECTRICAL & ELECTRONICS
(a)Great Wall Technology Co., Ltd. 1,942,500 1,887
(a)TCL International Holdings Ltd. 2,836,000 1,988
-------------
3,875
-------------
ELECTRONIC COMPONENTS, INSTRUMENTS
Legend Holdings Ltd. 334,000 829
-------------
ENERGY SOURCES
Yanzhou Coal Mining Co., Ltd. ADR 28,730 406
Zhenhai Refining & Chemical Co.,
Ltd. 'H' 1,151,400 204
-------------
610
-------------
TELECOMMUNICATIONS -- WIRELESS
China Telecom Ltd. 901,000 5,633
(a)China Telecom Ltd. ADR 27,200 3,497
-------------
9,130
-------------
TEXTILES & APPAREL
(a)YUE Yuen Industrial Holdings 267,000 639
-------------
15,568
-------------
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The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
COLOMBIA (0.0%)
BANKING
Bancolombia (Preferred) 6,249 U.S.$ 7
-------------
- ------------------------------------------------------------------------
CZECH REPUBLIC (0.4%)
TELECOMMUNICATIONS -- INTEGRATED
SPT Telecom 78,954 1,271
SPT Telecom GDR 23,830 383
-------------
1,654
-------------
- ------------------------------------------------------------------------
EGYPT (1.1%)
BEVERAGES & TOBACCO
(a)Al-Ahram Beverages Co. GDR 33,704 664
Eastern Tobacco 12,767 335
-------------
999
-------------
TELECOMMUNICATIONS -- WIRELESS
Egyptian Company for
Mobile Services 75,412 3,456
-------------
UTILITIES -- ELECTRICAL & GAS
Egypt Gas Co. 6,100 374
-------------
4,829
-------------
- ------------------------------------------------------------------------
GREECE (1.1%)
BANKING
National Bank of Greece 10,450 772
(a)National Bank of Greece ADR 27,070 381
-------------
1,153
-------------
FINANCIAL SERVICES
Alpha Credit Bank 9,360 737
-------------
TELECOMMUNICATIONS -- INTEGRATED
Hellenic Telecommunication
Organization (OTE) 41,011 977
Hellenic Telecommunication
Organization (OTE) ADR 77,429 924
-------------
1,901
-------------
TELECOMMUNICATIONS -- WIRELESS
Panafon Hellenic Telecom Co. 42,290 571
(a)Panafon Hellenic Telecom Co. GDR 33,170 445
-------------
1,016
-------------
4,807
-------------
- ------------------------------------------------------------------------
HUNGARY (0.8%)
BANKING
OTP Bank Rt. 5,433 318
(a)OTP Bank Rt. GDR 4,150 242
-------------
560
-------------
TELECOMMUNICATIONS -- INTEGRATED
Matav Rt. 62,163 436
Matav Rt. ADR 69,002 2,484
-------------
2,920
-------------
3,480
-------------
- ------------------------------------------------------------------------
INDIA (9.1%)
AUTOMOBILES
Hero Honda Motors Ltd. 108,400 U.S.$ 2,813
Tata Engineering & Locomotive
Co. Ltd. 218,729 1,011
-------------
3,824
-------------
BANKING
Bank of Baroda 42,250 62
Corporation Bank 96,763 247
(a)Oriental Bank of Commerce 157,200 166
State Bank of India Ltd. 139,700 722
State Bank of India Ltd. GDR 3,650 19
-------------
1,216
-------------
BEVERAGES & TOBACCO
ITC Ltd. 650 10
Tata Tea Ltd. 47,850 577
-------------
587
-------------
BROADCASTING & PUBLISHING
Zee Telefilms Ltd. 138,500 3,479
-------------
BUILDING MATERIALS & COMPONENTS
(a)Associated Cement Companies Ltd. 98,500 562
Gujarat Ambuja Cements Ltd. 148,800 1,115
-------------
1,677
-------------
CHEMICALS
Indo Gulf Corp., Ltd. 140,000 203
Reliance Industries Ltd. 216,849 1,165
-------------
1,368
-------------
DATA PROCESSING & REPRODUCTION
(a,c)HCL Technologies Ltd. 13,500 180
Infosys Technology Ltd. 34,550 11,530
NIIT Ltd. 17,500 1,334
Satyam Computer Services Ltd. 63,370 3,203
-------------
16,247
-------------
ELECTRICAL & ELECTRONICS
Bharat Heavy Electricals Ltd. 369,500 1,784
-------------
FINANCIAL SERVICES
(c)Housing Development
Finance Corp., Ltd. 97,600 693
-------------
FOOD & HOUSEHOLD PRODUCTS
Hindustan Lever Ltd. 38,400 1,986
-------------
HEALTH & PERSONAL CARE
Dabur India Ltd. 13,000 353
(a)Lupin Laboratories Ltd. 36,000 476
(a,b,c)Strides Arcolab Ltd. 7,000 64
-------------
893
-------------
INDUSTRIAL COMPONENTS
Apollo Tyres Ltd. 8,450 31
-------------
MACHINERY & ENGINEERING
Larsen & Toubro Ltd. 117,130 1,497
-------------
MULTI-INDUSTRY
(e)Morgan Stanley Growth Fund 6,881,800 2,413
-------------
- ------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
INDIA (CONTINUED)
Telecommunications -- Integrated
Videsh Sanchar Nigam Ltd. 11,500 U.S.$ 478
Videsh Sanchar Nigam Ltd. GDR 8,000 197
-------------
675
-------------
TRANSPORTATION -- ROAD & RAIL
Container Corp. of India Ltd. 262,600 1,479
-------------
39,849
-------------
- ------------------------------------------------------------------------
INDONESIA (1.4%)
BEVERAGES & TOBACCO
Gudang Garam 903,960 2,432
-------------
BUILDING MATERIALS & COMPONENTS
Semen Gresik 604,700 958
-------------
FOOD & HOUSEHOLD PRODUCTS
Indofood Sukses Makmur 777,000 973
-------------
FOREST PRODUCTS & PAPER
Indah Kait Pulp & Paper 1,460,805 575
-------------
TELECOMMUNICATIONS -- INTEGRATED
Telekomunikasi Indonesia ADR 108,164 1,190
-------------
6,128
-------------
- ------------------------------------------------------------------------
ISRAEL (6.5%)
DATA PROCESSING & REPRODUCTION
(a)RADWARE Ltd. 6,960 300
(a)Sapiens International Corp. 23,060 379
-------------
679
-------------
ELECTRICAL & ELECTRONICS
(a)BATM Advanced Communications Ltd. 16,142 1,335
(a)Check Point Software Technologies 14,280 2,838
(a)Comverse Technology, Inc. 14,940 2,162
ECI Telecommunications Ltd. 187,922 5,943
(a)Elbit Systems Ltd. 1 -- @
(a)Galileo Technology Ltd. 21,920 529
(a)Gilat Satellite Networks Ltd. 58,780 6,980
(a)Jacada Ltd 5,840 163
(a)Nice Systems Ltd. 6,363 310
(a)Nice Systems Ltd. ADR 21,272 1,046
(a)Orckit Communications Ltd. 11,070 382
Tecnomatix Technologies Ltd. 12,590 362
(a)Zoran Corp. 9,120 508
-------------
22,558
-------------
ELECTRONIC COMPONENTS, INSTRUMENTS
(a)DSP Group, Inc. 16,350 1,520
(a)Orbotech Ltd. 20,642 1,600
-------------
3,120
-------------
TELECOMMUNICATIONS -- INTEGRATED
(a)Amdocs Ltd. 49,860 1,720
(a)TTI Team Telecom International Ltd. 19,270 350
-------------
2,070
-------------
28,427
-------------
- ------------------------------------------------------------------------
MALAYSIA (1.2%)
BANKING
Commerce Asset Holding Bhd 19,000 U.S.$ 49
Malayan Banking Bhd 279,600 993
Public Bank Bhd 718,000 627
-------------
1,669
-------------
BEVERAGES & TOBACCO
British American Tobacco Bhd 139,200 1,062
-------------
FOOD & HOUSEHOLD PRODUCTS
Nestle Bhd 109,000 471
-------------
MULTI-INDUSTRY
Sime Darby Bhd 176,000 223
-------------
TELECOMMUNICATIONS -- INTEGRATED
Telekom Malaysia Bhd 405,000 1,567
-------------
4,992
-------------
- ------------------------------------------------------------------------
MEXICO (10.5%)
BANKING
Banacci 'L' 45,447 175
(a)Banamex 'O' 619,557 2,483
(b)Bancomer 'B' ADR 64,825 543
(a)Bancomer 'O' 1,462,481 611
-------------
3,812
-------------
BEVERAGES & TOBACCO
FEMSA 950,625 4,242
FEMSA ADR 45,066 2,005
-------------
6,247
-------------
BROADCASTING & PUBLISHING
(a)Grupo Televisa GDR 131,843 8,998
-------------
BUILDING MATERIALS & COMPONENTS
Cemex SA 586,714 3,280
(a)Cemex SA ADR 127,885 3,565
-------------
6,845
-------------
HEALTH & PERSONAL CARE
Kimberly 'A' 276,388 1,079
-------------
MERCHANDISING
(a)Cifra 'C' 217,433 414
(a)Cifra 'V' 35,159 71
(a)Cifra 'V' ADR 28,162 564
-------------
1,049
-------------
MULTI-INDUSTRY
(a)ALFA 'A' 156,075 732
(a)Grupo Carso 'A1' 169,674 845
-------------
1,577
-------------
TELECOMMUNICATIONS -- INTEGRATED
Telmex 'L' ADR 141,614 15,932
-------------
45,539
-------------
- ------------------------------------------------------------------------
PAKISTAN (0.3%)
ENERGY SOURCES
Pakistan State Oil Co., Ltd. 188,302 674
-------------
- ------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
PAKISTAN (Continued)
TELECOMMUNICATIONS -- INTEGRATED
Pakistan Telecommunications Co., Ltd. 1,665,200 U.S.$ 666
-------------
1,340
-------------
- ------------------------------------------------------------------------
POLAND(1.3%)
BANKING
Wielkopolski Bank Kredytowy 27,887 189
-------------
CHEMICALS
(a,c)Eastbridge 33,600 2,259
-------------
DATA PROCESSING & REPRODUCTION
Prokom GDR 10,785 168
-------------
FOOD & HOUSEHOLD PRODUCTS
(a)Polski Koncern Naftowy SA GDR 64,780 810
-------------
TELECOMMUNICATIONS -- INTEGRATED
Telekomunikacja Polska GDR 276,370 1,796
-------------
WHOLESALE & INTERNATIONAL TRADE
(a)Elektrim 44,487 441
-------------
5,663
-------------
- ------------------------------------------------------------------------
RUSSIA (2.8%)
BROADCASTING & PUBLISHING
(a,c)Storyfirst Communications,
Inc. 'C' (Preferred) 270 115
(a,c)Storyfirst Communications,
Inc. 'D' (Preferred) 720 307
(a,c)Storyfirst Communications,
Inc. 'E' (Preferred) 780 332
(a,c)Storyfirst Communications,
Inc. 'F' (Preferred) 139 119
-------------
873
-------------
ENERGY SOURCES
LuKoil Holdings ADR 67,562 3,412
Surgutneftegaz ADR 229,147 4,010
-------------
7,422
-------------
FOREST PRODUCTS & PAPER
(a,c)Alliance Cellulose Ltd. 'B' 156,075 431
-------------
TELECOMMUNICATIONS -- INTEGRATED
(c)Russian Telecom Development Corp. 176,000 729
-------------
TELECOMMUNICATIONS -- LONG DISTANCE
(a)Rostelecom ADR 34,500 582
-------------
TELECOMMUNICATIONS -- WIRELESS
(a)Vimpel-Communications ADR 12,190 544
-------------
UTILITIES -- ELECTRICAL & GAS
Unified Energy Systems ADR 11,000 146
Unified Energy Systems GDR 95,530 1,266
-------------
1,412
-------------
11,993
-------------
- ------------------------------------------------------------------------
SINGAPORE (0.5%)
ELECTRICAL & ELECTRONICS
(a)Chartered Semiconductor Ltd. 121,000 U.S.$ 661
(a)Chartered Semiconductor Ltd. ADR 700 51
Natsteel Electronics Ltd. 154,000 814
-------------
1,526
-------------
ELECTRONIC COMPONENTS, INSTRUMENTS
Venture Manufacturing Ltd. 66,000 757
-------------
2,283
-------------
- ------------------------------------------------------------------------
SOUTH AFRICA (5.5%)
BANKING
Nedcor Ltd. 51,839 1,155
-------------
BEVERAGES & TOBACCO
Rembrandt Group Ltd. 159,535 1,520
-------------
BUSINESS & PUBLIC SERVICES
Educor 365,634 307
-------------
CHEMICALS
SASOL Ltd. 132,300 1,086
-------------
ELECTRICAL & ELECTRONICS
Comparex Holdings Ltd. 112,870 791
(a)Dimensions Data Holdings Ltd. 231,348 1,452
-------------
2,243
-------------
FINANCIAL SERVICES
ABSA Group Ltd. 228,758 1,027
B.O.E Corp. Ltd. 'N' 2,079,976 1,579
FirstRand Ltd. 1,049,460 1,502
-------------
4,108
-------------
FOREST PRODUCTS & PAPER
Sappi Ltd. 80,800 799
-------------
INSURANCE
(a)New Africa Investments Ltd. 'N' 977,910 544
-------------
MERCHANDISING
Ellerine Holdings Ltd. 152,380 805
-------------
METALS -- NON-FERROUS
Anglo American plc ADR 36,840 1,120
Billiton plc 239,200 1,375
Billiton plc 20,300 120
-------------
2,615
-------------
MISC. MATERIALS & COMMODITIES
De Beers 123,870 3,605
De Beers ADR 16,900 489
-------------
4,094
-------------
Multi-Industry
Bidvest Group Ltd. 363,482 3,552
(e)Morgan Stanley Dean Witter Africa
Investment Fund, Inc. 9,670 100
-------------
3,652
-------------
TELECOMMUNICATIONS -- INTEGRATED
M-Cell Ltd. 233,860 905
-------------
23,833
-------------
- ------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
SOUTH KOREA (20.0%)
APPLIANCES & HOUSEHOLD DURABLES
L.G. Electronics 26,160 U.S.$ 1,083
Samsung Electronics Co. 130,042 30,463
-------------
31,546
-------------
BANKING
Hana Bank 59,800 466
(a)Hanvit Bank 248,100 839
Hanvit Bank GDR 95,050 613
Housing & Commercial Bank 35,140 1,114
Kookmin Bank 109,692 1,720
-------------
4,752
-------------
BUSINESS & PUBLIC SERVICES
(a)Daou Technology, Inc. 30,198 1,050
-------------
DATA PROCESSING & REPRODUCTION
Trigem Computer, Inc. 16,192 1,797
-------------
ELECTRICAL & ELECTRONICS
Hyundai Electronics Industries Co. 76,622 1,626
Mirae Co. 97,840 761
(a)Pantech Co., Ltd. 51,660 1,160
Samsung Electro-Mechanics Co. 25,397 1,689
-------------
5,236
-------------
ELECTRONIC COMPONENTS, INSTRUMENTS
(a)Humax Co. Ltd. 49,430 836
(a)Telson Electronics Co., Ltd. 53,130 1,039
-------------
1,875
-------------
FINANCIAL SERVICES
Daewoo Securities Co. 52,157 590
Good Morning Securities Co. 163,600 782
Hyundai Securities Co. 26,630 521
(a)Korea Technology Banking Co. 52,900 513
L.G. Securities Co. 28,300 481
Samsung Securities Co., Ltd. 17,930 543
-------------
3,430
-------------
FOOD & HOUSEHOLD PRODUCTS
Cheil Jedang Corp. 18,940 2,185
(a)Digital Chosun Co., Ltd. 2,170 434
(a)Insung Information Ltd. 19,570 668
(a)Serome Technology, Inc. 2,350 501
-------------
3,788
-------------
METALS -- STEEL
(c)Pohang Iron & Steel Co., Ltd. 13,230 1,510
-------------
MISC. MATERIALS & COMMODITIES
Hankuk Glass Industry Co., Ltd. 23,420 443
-------------
TELECOMMUNICATIONS -- INTEGRATED
(a)Dacom Corp. 6,090 3,138
Korea Telecom Corp. ADR 97,900 7,318
-------------
10,456
-------------
TELECOMMUNICATIONS -- WIRELESS
SK Telecom Co., Ltd. 4,377 15,688
SK Telecom Co., Ltd. ADR 101,491 3,895
-------------
19,583
-------------
- ------------------------------------------------------------------------
SOUTH KOREA (CONTINUED)
UTILITIES -- ELECTRICAL & GAS
Korea Electric Power Corp. ADR 103,704 U.S.$ 1,737
-------------
87,203
-------------
- ------------------------------------------------------------------------
TAIWAN(12.3%)
BANKING
(a)Chinatrust Commercial Bank 333,240 387
International Commercial Bank of China 303,700 341
(a)Taishin International Bank 528,120 296
-------------
1,024
-------------
CHEMICALS
Formosa Plastics Corp. 92,000 183
-------------
ELECTRICAL & ELECTRONICS
(a)Accton Technology Corp. 721,000 2,447
(a)Acer, Inc. 1,018,300 3,066
(c)Acer, Inc. GDR 33,120 1,372
D-Link Corp. 310,000 672
(a)Dialer and Business 1,228,000 2,191
(a)Ritek Corp. GDR 66,500 770
(a)Ritek, Inc. 43,000 260
(a)Siliconware Precision
Industries Co. 591,874 1,509
(a)Universal Scientific Industrial
Co., Ltd. 158,000 498
-------------
12,785
-------------
ELECTRONIC COMPONENTS, INSTRUMENTS
(a)Acer Peripherals, Inc. 444,048 1,839
(a)Advanced Semiconductor
Engineering, Inc. 446,257 1,593
(a)Ambit Microsystems Corp. 51,000 379
(a)ASE Test Ltd. 12,400 302
Asustek Computer, Inc. 359,679 3,793
Compal Electronics, Inc. 286,307 962
(a)Compeq Manufacturing Co., Ltd. 267,000 1,455
Delta Electronic Industrial 370,000 1,603
(a)Hon Hai Precision Industry 346,720 2,585
(a)Hon Hai Precision Industry GDR 35,600 688
(a)Taiwan Semiconductor Co. 2,132,430 11,347
(a)United Microelectronics Corp. Ltd. 1,991,000 7,105
Wyse Technology Taiwan Ltd. 204,000 397
-------------
34,048
-------------
MERCHANDISING
President Chain Store Corp. 302,000 1,333
-------------
METALS -- STEEL
China Steel Corp. 1,623,600 1,200
-------------
TEXTILES & APPAREL
Far East Textile Ltd. 1,038,600 2,482
(a,b)Far East Textile Ltd. GDR 20,100 482
-------------
2,964
-------------
53,537
-------------
- ------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
THAILAND (1.9%)
BANKING
Thai Farmers Bank Ltd. (Foreign) 605,500 U.S.$ 1,013
-------------
BROADCASTING & PUBLISHING
(c)BEC World Public Co., Ltd. (Foreign) 109,800 775
-------------
BUILDING MATERIALS & COMPONENTS
Siam City Cement Public
Co., Ltd. (Foreign) 338,233 1,814
-------------
ELECTRICAL & ELECTRONICS
Delta Electronics Public
Co., Ltd. (Foreign) 129,840 1,544
Shinawatra Computer Public Co.,
Ltd. (Foreign) 127,000 1,201
-------------
2,745
-------------
TELECOMMUNICATIONS -- WIRELESS
Advanced Info. Services
Public Co., Ltd. (Foreign) 117,700 1,975
-------------
8,322
-------------
- ------------------------------------------------------------------------
TURKEY (8.0%)
APPLIANCES & HOUSEHOLD DURABLES
(a)Vestel Elektronik Sanayi Ve
Ticaret AS 8,583,428 2,057
-------------
BANKING
Turkiye Garanti Bankasi 133,058,600 2,012
(a)Turkiye Is Bankasi 74,290,800 3,561
Yapi Ve Kredi Bankasi 387,288,661 11,960
Yapi Ve Kredi Bankasi GDR 10,000 295
-------------
17,828
-------------
BEVERAGES & TOBACCO
Ege Biracilik Ve Malt Sanayii 26,451,000 2,023
(a)Erciyas Biracilik 4,524,000 217
-------------
2,240
-------------
ENERGY SOURCES
Tupras-Turkiye Petrol
Rafinerileri AS 7,944,000 893
-------------
FINANCIAL SERVICES
(a)Dogan Sirketler Grubu Holdings 211,370,000 6,235
Dogan Yayin Holdings 113,799,000 1,679
Sabanci Holdings 46,565,000 2,704
-------------
10,618
-------------
MERCHANDISING
Migros Turk TAS 776,000 501
-------------
METALS -- STEEL
(a)Eregli Demir Ve Celik
Fabrikalari TAS 21,575,000 895
-------------
35,032
-------------
- ------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost U.S.$276,080) 425,226
-------------
- ------------------------------------------------------------------------
<CAPTION>
NO. OF VALUE
WARRANTS (000)
- ------------------------------------------------------------------------
<S> <C> <C>
WARRANTS (0.2%)
- ------------------------------------------------------------------------
THAILAND (0.2%)
BANKING
(a)Siam Commercial Bank Co., Ltd.
(Foreign), expiring 12/31/02 1,642,000 U.S.$ 763
(a)Siam Commercial Bank Co., Ltd.,
expiring 5/10/02 280,333 115
- ------------------------------------------------------------------------
TOTAL WARRANTS
(Cost U.S.$--@) 878
-------------
- ------------------------------------------------------------------------
<CAPTION>
NO. OF
RIGHTS
<S> <C>
- ------------------------------------------------------------------------
RIGHTS (0.0%)
- ------------------------------------------------------------------------
SOUTH KOREA (0.0%)
FOOD & HOUSEHOLD PRODUCTS
Serome Technology, Inc., expiring
1/26/00 762 110
-------------
- ------------------------------------------------------------------------
TOTAL RIGHTS
(Cost U.S.$--@) 110
-------------
- ------------------------------------------------------------------------
<CAPTION>
NO. OF
UNITS
- ------------------------------------------------------------------------
<S> <C>
UNITS (0.1%)
- ------------------------------------------------------------------------
RUSSIA (0.1%)
BROADCASTING & PUBLISHING
(a,c)Storyfirst Communications, Inc.,
First Section, First
Section, Tranche 1
(Convertible) 604 257
(a,c)Storyfirst Communications, Inc.,
First Section, First
Section, Tranche I
(Convertible) 35 15
(a,c)Storyfirst Communications, Inc.,
Second Section, Second
Section, Tranche II
(Convertible) 152 65
(a,c)Storyfirst Communications, Inc.,
Tranche IV (Convertible) 207 88
- ------------------------------------------------------------------------
TOTAL UNITS
(Cost U.S.$1,192) 425
-------------
- ------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------
<S> <C> <C>
DEBT INSTRUMENTS (0.1%)
- ------------------------------------------------------------------------
INDIA (0.1%)
MULTI-INDUSTRY
(c,d,f)DCM Shriram Industries
Ltd. 9.90%, 2/21/02 INR 335 U.S.$ 235
(c,d,f)DCM Shriram Industries Ltd.
(Convertible) 7.50%, 2/21/02 330 174
(c)Shri Ishar Alloy Steels Ltd.,
15.00%, 4/21/01 581 103
- ------------------------------------------------------------------------
TOTAL DEBT INSTRUMENTS
(Cost U.S.$1,495) 512
-------------
- ------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (2.3%)
- ------------------------------------------------------------------------
UNITED STATES (2.3%)
REPURCHASE AGREEMENT
Chase Securities, Inc.,
2.60%, dated 12/31/99,
due 1/3/00, to be repurchased
at U.S.$10,086, collateralized by
U.S.$10,315 United States
Treasury Notes, 6.125%, due
12/31/01, valued at U.S.$10,294
(Cost U.S.$10,084) U.S.$10,084 10,084
-------------
- ------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (0.2%)
Brazilian Real BRL 7 4
Colombian Peso COP 156 -- @
Greek Drachma GRD 78,076 239
Hungarian Forint HUF 267 1
Indian Rupee INR 337 8
Malaysian Ringgit MYR 253 67
Mexican Peso MXP 11 1
Pakistani Rupee PKR 3,988 74
Philippine Peso PHP 53 1
Polish Zloty PLZ 95 23
South African Rand ZAR 2,036 331
South Korean Won KRW 243,431 214
Taiwan Dollar TWD 1,099 35
-------------
(Cost U.S.$998) 998
-------------
- ------------------------------------------------------------------------
<CAPTION>
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS (100.5%)
(Cost U.S.$289,849) U.S.$438,233
-------------
- ------------------------------------------------------------------------
OTHER ASSETS (0.4%)
Receivable for Investments Sold U.S.$ 1,096
Dividends Receivable 559
Other Assets 19 1,674
---------- -------------
- ------------------------------------------------------------------------
LIABILITIES (-0.9%)
Deferred Country Taxes (2,101)
Payable For:
Investments Purchased (817)
Investment Advisory Fees (423)
Bank Overdraft (273)
Custodian Fees (118)
Directors' Fees and Expenses (116)
Professional Fees (111)
Shareholder Reporting Expenses (77)
Administrative Fees (47)
Other Liabilities (29) (4,112)
---------- -------------
- ------------------------------------------------------------------------
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.$435,795
-------------
- ------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 21.26
-------------
- ------------------------------------------------------------------------
AT DECEMBER 31, 1999, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------
Common Stock U.S.$ 20
Capital Surplus 316,253
Accumulated Net Investment Loss (1,509)
Accumulated Net Realized Loss (26,357)
Unrealized Appreciation on Investments and
Foreign Currency Translations (net of
accrued foreign taxes of U.S.$2,388 on
unrealized appreciation) 147,388
- ------------------------------------------------------------------------
TOTAL NET ASSETS U.S.$435,795
-------------------
- ------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<CAPTION>
<S><C>
- --------------------------------------------------------------------------------
(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 is in default.
(e) -- The Fund is advised by an affiliate.
(f) -- Variable/floating rate security -- rate disclosed is as of
December 31, 1999.
@ -- Amount is less than U.S.$500.
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of foreign currency exchange contracts open at December 31,
1999, the Fund is obligated to deliver foreign currency in exchange for U.S.
dollars as indicated below:
<CAPTION>
CURRENCY IN NET
TO EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN
(000) (000) DATE (000) (000) (000)
---------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
GRD 78,075 U.S.$238 01/03/00 U.S.$238 U.S.$238 U.S.$--
ZAR 4,122 670 01/05/00 670 670 --
-------- -------- -------
U.S.$908 U.S.$908 U.S.$--
-------- -------- -------
-------- -------- -------
- --------------------------------------------------------------------------------
DECEMBER 31, 1999 EXCHANGE RATES:
- --------------------------------------------------------------------------------
BRL Brazil Real 1.807= U.S.$1.00
COP Colombian Peso 1875.000= U.S.$1.00
GRD Greek Drachma 327.370= U.S.$1.00
HUF Hungarian Forint 252.500= U.S.$1.00
INR Indian Rupee 43.500= U.S.$1.00
MYR Malaysian Ringgit 3.800= U.S.$1.00
MXP Mexican Peso 9.480= U.S.$1.00
PKR Pakistani Rupee 54.208= U.S.$1.00
PHP Philippine Peso 40.300= U.S.$1.00
PLZ Polish Zloty 4.135= U.S.$1.00
ZAR South African Rand 6.150= U.S.$1.00
KRW South Korean Won 1,135.500= U.S.$1.00
TWD Taiwan Dollar 31.385= U.S.$1.00
- --------------------------------------------------------------------------------
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY
CLASSIFICATION -- DECEMBER 31, 1999
<CAPTION>
PERCENT
VALUE OF NET
COUNTRY (000) ASSETS
- -----------------------------------------------------------
<S> <C> <C>
Appliances & Household Durables U.S.$33,829 7.8%
Automobiles 3,824 0.9
Banking 39,841 9.1
Beverages & Tobacco 15,087 3.5
Broadcasting & Publishing 14,550 3.3
Building Materials & Components 11,294 2.6
Business & Public Services 1,616 0.4
Chemicals 4,896 1.1
Data Processing and Reproduction 18,891 4.3
Electrical & Electronics 52,752 12.1
Electronic Components, Instruments 40,629 9.3
Energy Sources 13,465 3.1
Financial Services 19,586 4.5
Food & Household Products 8,138 1.9
Forest Products & Paper 1,805 0.4
Health & Personal Care 1,972 0.4
Industrial Components 31 0.0
Insurance 544 0.1
Machinery & Engineering 1,497 0.3
Merchandising 3,772 0.9
Metals -- Non-Ferrous 2,615 0.6
Metals -- Steel 7,887 1.8
Misc. Materials & Commodities 4,537 1.1
Multi-Industry 8,377 1.9
Telecommunications -- Integrated 57,990 13.3
Telecommunications -- Long Distance 582 0.1
Telecommunications -- Wireless 44,636 10.3
Textiles & Apparel 3,808 0.9
Transportation -- Road & Rail 1,479 0.3
Utilities -- Electrical & Gas 6,780 1.6
Wholesale & International Trade 441 0.1
Other 11,082 2.5
------------ ------
U.S.$438,233 100.5%
------------ ------
------------ ------
- -----------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
SUMMARY OF TOTAL INVESTMENTS BY COUNTRY --
DECEMBER 31, 1999
<CAPTION>
PERCENT
VALUE OF NET
COUNTRY (000) ASSETS
- -------------------------------------------------------------
<S> <C> <C>
Argentina U.S.$3,632 0.8%
Brazil 36,112 8.3
Chile 996 0.2
China 15,568 3.6
Colombia 7 0.0
Czech Republic 1,654 0.4
Egypt 4,829 1.1
Greece 4,807 1.1
Hungary 3,480 0.8
India 40,361 9.2
Indonesia 6,128 1.4
Israel 28,427 6.5
Malaysia 4,992 1.2
Mexico 45,539 10.5
Pakistan 1,340 0.3
Poland 5,663 1.3
Russia 12,418 2.9
Singapore 2,283 0.5
South Africa 23,833 5.5
South Korea 87,313 20.0
Taiwan 53,537 12.3
Thailand 9,200 2.1
Turkey 35,032 8.0
United States (short-term investment) 10,084 2.3
Other 998 0.2
------------ ------
U.S.$438,233 100.5%
------------ ------
------------ ------
- -------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
STATEMENT OF OPERATIONS (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends ...................................................................................... U.S.$ 4,349
Interest ....................................................................................... 185
Income from Affiliate .......................................................................... 122
Less: Foreign Taxes Withheld ................................................................... (192)
- ------------------------------------------------------------------------------------------------------------------------
Total Income ................................................................................ 4,464
- ------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees ....................................................................... 3,556
Custodian Fees ................................................................................. 571
Administrative Fees ............................................................................ 309
Professional Fees .............................................................................. 139
Country Tax Expense ............................................................................ 118
Shareholder Reporting Expenses ................................................................. 111
Directors' Fees and Expenses ................................................................... 99
Interest Expense ............................................................................... 45
Transfer Agent Fees ............................................................................ 23
Other Expenses ................................................................................. 55
- ------------------------------------------------------------------------------------------------------------------------
Total Expenses .............................................................................. 5,026
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Loss ....................................................................... (562)
- ------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold (net of foreign tax expense of $2,616) .............................. 31,361
Foreign Currency Transactions .................................................................. (1,392)
- ------------------------------------------------------------------------------------------------------------------------
Net Realized Gain ........................................................................... 29,969
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments (net of deferred foreign tax expense of $2,243) .................... 190,188
Appreciation on Foreign Currency Translations .................................................. 3,867
- ------------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation .............................................. 194,055
- ------------------------------------------------------------------------------------------------------------------------
Total Net Realized Gain and Change in Unrealized Appreciation/Depreciation ........................ 224,024
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................................... U.S.$ 223,462
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss) ................................................ U.S.$ (562) U.S.$ 970
Net Realized Gain (Loss) .................................................... 29,969 (48,172)
Change in Unrealized Appreciation/Depreciation .............................. 194,055 (22,002)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations ............. 223,462 (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) ........... (9,276) (10,985)
- ---------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) ................................................... 214,186 (132,528)
Net Assets:
Beginning of Period ......................................................... 221,609 354,137
- ---------------------------------------------------------------------------------------------------------------------------
End of Period (including accumulated net investment loss/distributions in
excess of net investment income of U.S.$(1,509) and U.S.$(284),
respectively) ............................................................. U.S.$ 435,795 U.S.$ 221,609
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SELECTED PER SHARE DATA ------------------------------------------------------------------------
AND RATIOS: 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........... U.S.$10.33 U.S.$15.52 U.S.$ 15.69 U.S.$14.69 U.S.$20.30
- --------------------------------------------------------------------------------------------------------------------------
Offering Costs ................................. -- -- -- -- (0.03)
- --------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) ................... (0.03) 0.04 0.03 0.10 0.06
Net Realized and Unrealized Gain (Loss) on
Investments .................................. 10.87 (3.05) (0.18) 1.92 (3.14)
- --------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations ........... 10.84 (3.01) (0.15) 2.02 (3.08)
- --------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income ........................ -- (0.10) (0.01) -- --
In Excess of Net Investment Income ........... -- (0.01) -- (0.05) --
Net Realized Gain ............................ -- -- (0.01) (0.84) (1.29)
In Excess of Net Realized Gain ............... -- (2.18) -- (0.14) --
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions ........................ -- (2.29) (0.02) (1.03) (1.29)
- --------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Asset Value from
Capital Share Transaction ..................... -- -- -- 0.01* (1.21)+
Anti-Dilutive Effect of Shares Repurchased ..... 0.09 0.11 -- -- --
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ................. U.S.$21.26 U.S.$10.33 U.S.$15.52 U.S.$15.69 U.S.$14.69
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD .......... U.S.$16.31 U.S.$8.13 U.S.$13.06 U.S.$13.88 U.S.$15.50
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value ................................. 100.77% (24.88)% (5.75)% (4.59)% (16.61)%++
Net Asset Value (1) .......................... 105.81% (19.61)% (0.97)% 13.84% (16.30)%++
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) .......... U.S.$435,795 U.S.$221,609 U.S.$354,137 U.S.$357,751 U.S.$332,879
- --------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets ........ 1.76% 1.96% 1.84% 1.87% 1.86%
Ratio of Expenses Excluding Country Tax Expense
and Interest Expense to Average Net Assets ... 1.71% N/A N/A N/A N/A
Ratio of Net Investment Income (Loss) to Average
Net Assets .................................. (0.20)% 0.36% 0.15% 0.58% 0.30%
Portfolio Turnover Rate ....................... 121% 101% 90% 67% 61%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Increase per share due to reinvestment of distributions.
+ 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
DECEMBER 31, 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 under procedures
approved by the Board of Directors, although the actual calculations may be
done by others.
Events affecting the values of certain Fund securities that occur between
the close of regular trading on the principal market for such securities
(foreign exchanges and over-the-counter markets) and the regular close of
the Exchange will not be reflected in the Fund's calculation of net asset
value unless the Adviser believes that the particular event would
materially affect net asset value, in which case an adjustment would be
made.
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: The Fund may enter into repurchase agreements under
which the Fund lends excess cash and takes possession of securities with an
agreement that the counterparty will repurchase such securities. In
connection with transactions in repurchase agreements, a bank as custodian
for the Fund takes possession of the underlying securities (collateral),
with a market value at least equal to the amount of the repurchase
transaction, including principal and accrued interest. To the extent that
any repurchase transaction exceeds one business day, the value of the
collateral is marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Fund has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy by
the counterparty to the agreement , realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
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) due to securities transactions
are included in the reported net realized and unrealized gains (losses) on
investment transactions and balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses)
17
<PAGE>
from sales and maturities of foreign currency exchange contracts,
disposition of foreign currencies, currency gains or losses realized
between the trade and settlement dates on securities transactions, and the
difference between the amount of investment income and foreign withholding
taxes recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net unrealized currency gains (losses) from
valuing foreign currency denominated assets and liabilities at period end
exchange rates are reflected as a component of unrealized appreciation
(depreciation) on investments and foreign currency translations in the
Statement of Net Assets. The change in net unrealized currency gains
(losses) on foreign currency translations for the period is reflected in
the Statement of Operations.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of U.S. dollar
denominated transactions as a result of, among other factors, the
possibility of lower levels of governmental supervision and regulation of
foreign securities markets and the possibility of political or economic
instability.
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 assets as
segregated on the Fund's records. 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.
18
<PAGE>
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.
Risks also arise from potential losses from adverse market movements, and
such losses could exceed the related amounts shown in the Statement of Net
Assets.
8. FUTURES: The Fund may purchase and sell futures contracts. Futures
contracts provide for the sale by one party and purchase by another party
of a specified amount of a specified security, index, instrument or basket
of instruments. Futures contracts (secured by cash or government securities
deposited with brokers or custodians as "initial margin") are valued based
upon their quoted daily settlement prices; changes in initial settlement
value (represented by cash paid to or received from brokers as "variation
margin") are accounted for as unrealized appreciation (depreciation). When
futures contracts are closed, the difference between the opening value at
the date of purchase and the value at closing is recorded as realized gains
or losses in the Statement of Operations.
The Fund may use futures contracts in order to manage exposure to the stock
and bond markets, to hedge against unfavorable changes in the value of
securities or to remain fully invested and to reduce transaction costs.
Futures contract involve market risk in excess of the amounts recognized in
the Statement of Net Assets. Risks arise from the possible movements in
security values underlying these instruments. The change in value of
futures contracts primarily corresponds with the value of their underlying
instruments, which may not correlate with the change in value of the hedged
investments. In addition, there is the risk that the Fund may not be able
to enter into a closing transaction because of an illiquid secondary
market.
9. 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 ("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.
10. OVER-THE-COUNTERTRADING: Securities and other 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.
The Fund did not invest in Forward Commitments and When-Issued/Delayed Delivery
Securities, Swap Agreements, Futures Contracts, Structured Securities or
participate in Over-the-Counter Trading during the year ended December 31, 1999.
11. 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, 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 by the Fund are determined in accordance with Federal income tax
regulations, which may differ from generally accepted accounting
principles. The book/tax differences are either considered temporary or
permanent in nature.
Temporary differences are attributable to differing book and tax treatments
for the timing of the recognition of gains and losses on certain investment
transactions and the timing of the deductibility of certain expenses.
Permanent book and tax basis differences may result in reclassifications
among undistributed net invest-
19
<PAGE>
ment income (loss), accumulated net realized gain (loss) and paid in
capital.
Adjustments for permanent book-tax differences, if any, are not reflected
in ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
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 year ended December 31, 1999, the Fund made purchases and sales
totaling approximately $337,142,000 and $347,160,000, 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. At December 31, 1999, the U.S. Federal income tax cost
basis of securities was $294,818,000 and, accordingly, net unrealized
appreciation for U.S. Federal income tax purposes was $142,417,000 of which
$171,712,000 related to appreciated securities and $29,295,000 related to
depreciated securities. At December 31, 1999, the Fund had a capital loss
carryforward for U.S. Federal income tax purposes of approximately $21,480,000
available to offset future capital gains all of which will expire on December
31, 2006. During the year ended December 31, 1999, the Fund utilized capital
loss carryforwards, for U.S. Federal income tax purposes, of approximately
$19,071,000.To the extent that capital gains are offset, such gains will not be
distributed to the shareholders. For the year ended December 31, 1999, the Fund
intends to elect to defer to January 1, 2000, for U.S. Federal income tax
purposes, post-October currency losses of $86,000.
F. For the year ended December 31, 1999, the Fund incurred $38,000 of
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliate of
the Adviser.
G. A significant portion of the Fund's net assets consist of securities of
issuers located in emerging markets or which are denominated in foreign
currencies. Changes in currency exchange rates will affect the value of and
investment income from such securities. Emerging market securities are often
subject to greater price volatility, limited capitalization and liquidity, and
higher rates of inflation than U.S. securities. In addition, emerging market
issuers may be subject to substantial governmental involvement in the economy
and greater social, economic and political uncertainty. Such securities may be
concentrated in a limited number of countries and regions and may vary
throughout the year. Accordingly, the price which the Fund may realize upon sale
of securities in such markets may not be equal to its value as presented in the
financial statements.
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. At December 31, 1999, the deferred fees payable, under
the Plan totaled $116,000 and are included in Payable for Directors' Fees and
Expenses on the Statement of Net Assets.
I. 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 year ended December 31,
1999, the Fund repurchased 960,600 or 4.48% shares of its Common Stock at an
average price per share of $9.60, including $48,000 in commissions paid, and an
average discount of 17.50% from net asset value per share. For the year ended
December 31, 1998, the Fund repurchased 1,369,000 shares or 6.00% of its Common
Stock at an average price per share of $8.00, including $69,000 in commissions
paid, and an average discount of 18.54% 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.
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------
To the Shareholders and Board of Directors of
Morgan Stanley Dean Witter Emerging Markets Fund, Inc.
(formerly, Morgan Stanley Emerging Markets Fund, Inc.)
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Morgan Stanley Dean Witter Emerging Markets Fund, Inc. (the "Fund") at December
31, 1999, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
February 18, 2000
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. 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
