<PAGE>
--------------------------------------------------------------------------------
MORGAN STANLEY
DEAN WITTER
EMERGING MARKETS
FUND, INC.
--------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
JUNE 30, 2000
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
Harold J. Schaaff, Jr.
PRESIDENT AND DIRECTOR
John D. Barrett II
DIRECTOR
Gerard E. Jones
DIRECTOR
Graham E. Jones
DIRECTOR
John A. Levin
DIRECTOR
Andrew McNally IV
DIRECTOR
William G. Morton, Jr.
DIRECTOR
Samuel T. Reeves
DIRECTOR
Fergus Reid
DIRECTOR
Frederick O. Robertshaw
DIRECTOR
Stefanie V. Chang
VICE PRESIDENT
Arthur J. Lev
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Mary E. Mullin
SECRETARY
Belinda A. Brady
TREASURER
Robin L. Conkey
ASSISTANT TREASURER
================================================================================
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
--------------------------------------------------------------------------------
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
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
--------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
================================================================================
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/im.
<PAGE>
LETTER TO SHAREHOLDERS
---------
For the six months ended June 30, 2000, the Morgan Stanley Dean Witter Emerging
Markets Fund, Inc. (the "Fund") had a total return, based on net asset value per
share, of -4.19% compared with -7.99% for the Morgan Stanley Capital
International (MSCI) Emerging Markets Free Index (the "MSCI Index") and -6.82%
for the IFC Global Total Return Composite Index. For the period from
commencement of operations on November 1, 1991 through June 30, 2000, the Fund's
total return, based on net asset value per share, was 229.52% compared with
100.96% for the MSCI Index and 70.24% for the IFC Global Total Return Composite
Index. On June 30, 2000, the closing price of the Fund's shares on the New York
Stock Exchange was $15, representing a 26.4% discount to the Fund's net asset
value per share.
Outperformance relative to the Index resulted primarily from our country
selection, particularly our overweight positions in China (country index total
return was +0.9% in U.S. dollars), Israel (+26.5%), Malaysia (+4.1%) and South
Korea (-2.9%) coupled with our underweight stance in Greece (-25.7%), India
(-3.3%), the Philippines (-35.9%), South Africa (-15.3%) and Thailand (-34.6%).
Strong stock selection in Brazil, Greece, Mexico and Taiwan also helped
performance. Our overweight position in Egypt (-23.3%) and our underweight
stance in Venezuela (+19.0%) weakened performance. Our allocation in Russia and
stock selection in China, India, Israel, South Africa and South Korea detracted
from performance.
Many first quarter gains in emerging markets were given back during the second
quarter of 2000, as positive macroeconomic and political developments within the
emerging markets countries were overshadowed by the sharp NASDAQ declines in
April 2000, volatility in developed markets, and heightened investor
skittishness regarding U.S. interest rates. However, towards the end of June
2000, most emerging markets rebounded as economic numbers pointed to a soft
landing for the U.S. economy, allaying investor fears of sharply tighter U.S.
interest rates, and promising signs of economic recovery appeared from various
emerging countries.
The Latin American region fell 3.8% during the first half of 2000. Latin
American markets advanced during the beginning of the year as investors rewarded
continued signs of macroeconomic improvements in the region and steps towards
increasing fiscal responsibility. However, Latin American markets declined
overall during the second quarter, amidst the backdrop of poor performance and
massive volatility in the developed markets. Technology stocks were particularly
hit, declining in sympathy with some of the NASDAQ's sharp falls during the
second quarter of 2000. Latin American markets fell as the region's positive
economic fundamentals were overshadowed by investor concerns over higher U.S.
interest rates and market volatility. However, the markets rebounded towards
quarter end as good U.S. economic numbers allayed investor concerns surrounding
inflation and necessary interest rate hikes. Notable events during these past
six months included Telefonica de Espana's (TEF) tender offers for its Latin
American subsidiaries and changes within the Mexican banking sector. We are
encouraged by signs of economic recovery and we believe corporate restructuring
and the possibility for lower real interest rates should lead to improved
earnings for many Latin companies.
Equities in Brazil were relatively flat during the first half of 2000, as
positive economic fundamentals and the country's commitment to adopt greater
fiscal discipline and to meet IMF targets were eclipsed by investor skittishness
and the volatile performance of technology and telecommunication stocks. During
the second quarter, Brazil's performance on the fiscal primary surplus,
inflation, and industrial production figures surpassed expectations. The
government demonstrated perseverance towards fiscal constraint and improving
corporate governance, as evidenced by Congress' passage of the Minimum Wage Bill
and Lower House approval of a corporate legislation bill. Investor sentiment
during the second quarter of 2000 was aggravated by a Supreme Court case on
retroactive monetary readjustment to workers' accounts, with a potential fiscal
cost to the government of U.S.$30 billion. Investor sentiment was also weighed
down by the sharp declines in the NASDAQ, but market confidence was restored in
June as investor concerns regarding sharp U.S. interest rate hikes were allayed
and Brazil continued to reveal positive economic developments. The Central Bank
proved aggressive in June 2000, surprising the market by lowering the benchmark
Selic rate by 100 basis points to 17.5%. It also lowered reserve requirements
while adopting an easing bias for its monetary stance.
Mexican equities (-6.0%) were weighed down by investor fears of higher U.S.
interest rates and a U.S. economic slowdown (more than 80% of Mexico's exports
are to the U.S.) and uncertainty regarding the presidential election on July 2,
2000. Equities rallied during June as concerns regarding higher U.S. rates were
allayed and sentiment focused on continued signs of a robust domestic economic
recovery. Recent highlights include the approved takeover of Mexican bank GF
Bancomer by Spain's Banco Bilbao Vizcaya Argentaria (BBVA), which we believe may
foster an expansion of bank credit, spearheading further GDP growth. Strong U.S.
economic performance and high oil prices have also benefited Mexico, as the U.S.
is the largest market for Mexican exports and oil is one of Mexico's largest
exports. The Mexican peso was increasingly volatile during the second quarter
and lost ground prior to the presidential elections on July 2, 2000. Although we
are cautiously monitoring pressures on the peso, we believe a weaker peso may
help Mexico's trade balance, which remains vulnerable when oil exports are
excluded. We anticipate equities should fare well following a more certain
scenario post the elections, which should restore investor confidence. We are
likely to add to equities in Brazil and Mexico, notably to media,
telecommunication and conglomerate industries, as we believe equities in these
markets shall continue to be supported by positive economic trends coupled with
attractive valuations and companies with great earnings growth potential.
2
<PAGE>
Asian equities fell 9.7% during the first half of 2000, weighed down by investor
skittishness induced by the NASDAQ volatility, by heightened political tensions
within Indonesia and between China and Taiwan, and by concerns over financial
reforms in South Korea. Asian markets rebounded towards quarter-end, as market
sentiment was buoyed by reduced fears regarding U.S. interest rate hikes and
investors focused once again on trends in improving macroeconomic fundamentals
coupled with strong earnings stories throughout the region. We are maintaining
and adding to our overweight stance in Asia, as we are encouraged by signs of
strong economic recovery, robust exports and global outsourcing opportunities
that enhance prospects for the region.
Equities in Taiwan (-2.7%) advanced at the beginning of the year, yet were later
pulled down in sympathy with the NASDAQ sell-off and by the renewal of mainland
China military posturing in the Taiwan strait. Equities failed to rebound in
June 2000 due to a lack of interest by retail investors, who had already priced
in most of the good May sales figures. Voters elected Democratic Progressive
Party candidate Chen Shui-bian as their new president on March 19, 2000, ending
more than half a century of Nationalist (KMT) rule. We believe Chen's victory
should be positive for the market over the longer-term, and recent conciliatory
remarks directed at China have helped to reduce political uncertainty in the
near-term. We believe Taiwan's strong economic fundamentals coupled with
attractive valuations, strong earnings growth potential and world-class
technology companies continue to make this an exciting market. Taiwan's weight
in the MSCI indices increased from 50% to 65% of market capitalization effective
after the close on May 31, 2000. This increase in Taiwan's weighting could
potentially yield increased inflows in the future. We are modestly overweight in
Taiwan and we have favored companies that we believe represent exciting
opportunities leveraged to trends in technology and outsourcing.
Our largest country overweight position is South Korea (-2.9%), where we believe
equities should continue to benefit from upward revisions of GDP growth
forecasts, a strong current account surplus, and market sentiment buoyed by the
government's prudent handling and restructuring of troubled chaebols and
investment trusts. South Korean equities were weighed down as investors were
wary of financial reforms and potential problems at investment trust companies.
However, South Korea led the Asian equities in June, as upward revisions of GDP
growth forecasts, a strong current account surplus figure for May 2000, and a
historic summit meeting with North Korea boosted sentiment. During the first
half of 2000, we increased our exposure to South Korean banks, as we believe
they should be supported by strong economic growth, a benign interest rate
environment and improving market confidence.
Chinese equities advanced 0.9%, buoyed by better-than-expected first quarter
2000 GDP growth and promising economic activity based on a surge in overseas
demand, industrial production and direct investment. We are adding to our
overweight stance in China, which we believe will be supported by domestic
demand recovery, including robust growth in retail sales and positive CPI after
a period of deflation. On May 31, 2000 MSCI revised the construction of the MSCI
China Free Index to better represent the investment opportunities available to
foreign investors, which significantly increased the market capitalization of
the Index. Consequently, China's weight in the MSCI Emerging Markets Free Index
increased considerably.
Equities in India fell 3.3% over the past six months, yet were boosted toward
the latter half by the strong performance of technology, media and
telecommunication stocks. Although we continue to believe India's market should
fare well over the longer term, with robust economic growth forecast for
6.5%-7.0% this year, we are somewhat disappointed by the government's
follow-through with privatization plans. Within India, the Fund is focused on
well-managed data processing and reproduction companies such as Infosys, which
provides managed software solutions to clients worldwide, specifically targeting
the distribution, banking, telecommunications, and manufacturing sectors.
Emerging Europe and the Middle East (EEMEA) declined 6.0%, although posting
mixed returns. We maintain our underweight stance in Greek equities, which
declined 25.7% as the market has already discounted most of the good news
surrounding European Monetary Union convergence. We believe telecommunication
services providers are attractively valued and reduced our underweight in Greek
equities during the quarter via this sector, by adding to OTE. Israeli equities
advanced 26.5%, supported by a positive macroeconomic environment, strong
corporate earnings results and tax reforms. We took advantage of strong
performance to trim our overweight position in various Israeli
technology-related companies, given the combination of rich valuations and a
more cautious outlook on U.S. interest rates and the market overall. Within
Israel, which remains our largest overweight in the EEMEA region, we are
attracted to companies with core competencies in communications, software and
semiconductor equipment, possessing strong management and with great earnings
growth potential.
Russian equities fell 5.6%, despite strong oil prices and continued signs of
economic strength, such as a stable Ruble, increasing foreign reserves, and
robust GDP growth, as sentiment has been tempered by the hostilities in Chechnya
and the need for substantive economic reform. We added to oil stocks Lukoil and
Surgutneftegaz, as we believe Russian equities are attractively valued and that
oil stocks should benefit in the near-term from the strength of oil prices.
Turkish equities declined 10.2%, as a higher-than-expected current account
deficit and political uncertainty surrounding corruption allegations against key
officials dampened market sentiment. We may add to our modest overweight stance
in Turkey as we anticipate equities should appreciate once political tensions
subside. We
3
<PAGE>
are cautiously watching inflation figures for signs of improving trends but are
encouraged by the currency's stability, improving industrial production and
fiscal surplus figures that indicate the economy is turning around. Encouraged
by Turkey's progress with its reform program, we added to Yapi Kredi Bank and
telecommunications equipment supplier Netas Telecom. The Czech Republic (+6.2%),
Hungary (-7.8%) and Poland (+1.5%) have faced subdued investor interest given a
somewhat disappointing macroeconomic environment in the near-term. We are
underweight these markets.
South African equities declined 15.3%, weighed down by disappointing inflation
and first quarter 2000 GDP figures, and investor wariness fueled by the tensions
in trading partner Zimbabwe. A better-than-expected trade surplus in May and
recent Rand strength helped equities perform well towards the end of the second
quarter of 2000. We continue to underweight South Africa, as lackluster economic
growth has been exacerbated by rising oil prices and education and health care
costs adversely affecting inflation as well as by capital flight.
Sincerely,
/s/ Harold J. Schaaff, Jr.
Harold J. Schaaff, Jr.
PRESIDENT AND DIRECTOR
July 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.
FOREIGN INVESTING INVOLVES CERTAIN RISKS, INCLUDING CURRENCY FLUCTUATIONS AND
CONTROLS, RESTRICTIONS ON FOREIGN INVESTMENTS, LESS GOVERNMENTAL SUPERVISION AND
REGULATION, LESS LIQUIDITY AND THE POTENTIAL FOR MARKET VOLATILITY AND POLITICAL
INSTABILITY.
--------------------------------------------------------------------------------
DAILY NET ASSET AND MARKET VALUES, AS WELL AS MONTHLY PORTFOLIO INFORMATION FOR
THE FUND, ARE AVAILABLE ON OUR WEBSITE AT www.msdw.com/im.
4
<PAGE>
Morgan Stanley Dean Witter Emerging Markets Fund, Inc.
Investment Summary as of June 30, 2000 (Unaudited)
================================================================================
<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>
YEAR TO DATE -8.05% -- -4.19% -- -7.99% -- -6.82% --
ONE YEAR 28.34 28.34% 39.90 39.90% 9.47 9.47% 9.60 9.60%
FIVE YEAR 26.46 4.81 78.84 12.33 5.04 0.99 5.45 1.07
SINCE INCEPTION* 142.65 10.77 229.52 14.75 100.96 8.39 70.24 6.34
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
--------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
[CHART]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1991* 1992 1993 1994 1995
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value Per Share ...$ 14.71 $ 16.74 $ 28.20 $ 20.30 $ 14.69
Market Value Per Share ......$ 14.25 $ 18.13 $ 31.63 $ 21.50 $ 15.50
Premium/(Discount) .......... -3.1% 8.3% 12.2% 5.9% 5.5%
Income Dividends ............$ 0.04 $ 0.01 -- -- --
Capital Gains Distributions . -- $ 0.01 $ 1.49 $ 6.50 $ 1.29
Fund Total Return (2) ....... 4.61% 13.94% 95.22%+ -5.33% -16.30%+
MSCI Index Total Return (3) . 9.58% 11.40% 74.84% -7.32% -5.21%
IFC Index Total Return (4) .. 5.29% 0.33% 67.50% -0.53% -12.32%
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
ENDED
JUNE 30,
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value Per Share ...$ 15.69 $ 15.52 $ 10.33 $ 21.26 $ 20.37
Market Value Per Share ......$ 13.88 $ 13.06 $ 8.13 $ 16.31 $ 15.00
Premium/(Discount) .......... -11.5% -15.9% -21.3% -23.3% -26.4%
Income Dividends ............$ 0.05 $ 0.01 $ 0.11 -- --
Capital Gains Distributions .$ 0.98 $ 0.01 $ 2.18 -- --
Fund Total Return (2) ....... 13.84% -0.97% -19.61% 105.81% -4.19%
MSCI Index Total Return (3) . 6.03% -11.59% -25.34% 66.41% -7.99%
IFC Index Total Return (4) .. 7.88% -14.54% -21.09% 62.69% -6.82%
</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 comprised 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.
* 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, 2000 (Unaudited)
================================================================================
DIVERSIFICATION OF TOTAL INVESTMENTS
[CHART]
<TABLE>
<S> <C>
Short-Term Investments (3.4%)
Equity Securities (96.5%)
Debt Instruments (0.1%)
</TABLE>
--------------------------------------------------------------------------------
INDUSTRIES
[CHART]
<TABLE>
<S> <C>
Other (22.2%)
Wireless Telecommunication Services (12.5%)
Semiconductor Equipment & Products (17.0%)
Banks (6.4%)
Communications Equipment (6.0%)
Computer & Peripherals (2.6%)
Diversified Telecommunication Services (17.4%)
Electronic Equipment & Instruments (4.2%)
IT Consulting & Services (3.9%)
Media (3.6%)
Oil & Gas (4.2%)
</TABLE>
--------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
[CHART]
<TABLE>
<S> <C>
Other (15.0%)
Russia (3.3%)
South Africa (3.9%)
Turkey (4.2%)
China (6.8%)
India (6.8%)
Israel (7.2%)
Korea (21.1%)
Taiwan (13.3%)
Mexico (9.5%)
Brazil (8.9%)
</TABLE>
--------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<S> <C>
1. Samsung Electronics Co. (South Korea) 7.5%
2. Korea Telecom Corp. (South Korea) 4.3
3. Telmex (Mexico) 4.0
4. Taiwan Semiconductor Co. (Taiwan) 3.3
5. China Telecom Ltd. (China) 3.0
6. SK Telecom Co., Ltd. (South Korea) 2.7
7. Hellenic Telecommunication Org. (Greece) 2.3
8. ECI Telecommunications Ltd. (Israel) 2.2
9. Infosys Technologies Ltd. (India) 2.1
10. United Microelectronics Corp. Ltd. (Taiwan) 2.0
----
32.2%
====
</TABLE>
* Excludes short-term investments.
6
<PAGE>
FINANCIAL STATEMENTS
---------
STATEMENT OF NET ASSETS (UNAUDITED)
---------
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES VALUE
(000)
--------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (96.4%)
(Unless otherwise noted)
--------------------------------------------------------------------------------
BRAZIL (8.9%)
BANKS
(a,c)Banco Nacional SA (Preferred) 61,598,720 U.S.$ 2
Unibanco (Preferred) GDR 116,655 3,354
------------
3,356
------------
DIVERSIFIED TELECOMMUNICATION SERVICES
(a)CRT (Preferred)'A' 8,235,976 2,786
Embratel (Preferred) 79,501,000 1,900
Embratel ADR 92,900 2,195
Tele Centro-Sul (Preferred) 133,773,445 1,936
Tele Norte-Leste (Preferred) 34,560,520 809
Tele Norte-Leste (Preferred) ADR 85,329 2,016
------------
11,642
------------
ELECTRIC UTILITIES
(b)Cemig (Preferred) 9,789,127 171
(b)Cemig (Preferred) ADR 42,671 738
------------
909
------------
METALS & MINING
CVRD (Preferred)'A' 34,253 967
CVRD (Preferred) ADR 74,769 2,112
------------
3,079
------------
MULTILINE RETAIL
(a)Lojas Arapua SA (Preferred) 30,412,000 --@
(b,c)Lojas Arapua SA (Preferred) ADR 31,540 --@
------------
--@
------------
OIL & GAS
Petrobras (Preferred) 87,188 2,635
Petrobras (Preferred) ADR 7,470 225
------------
2,860
------------
PAPER & FOREST PRODUCTS
Votorantim Celulose e Papel SA ADR 38,900 715
------------
TEXTILES & APPAREL
Coteminas 2,170,800 126
(b)Coteminas ADR 23,460 68
------------
194
------------
WIRELESS TELECOMMUNICATION SERVICES
(a)Celular CRT (Preferred) 11,587,625 5,076
Tele Celular Sul (Preferred) 137,409,345 663
Tele Celular Sul ADR 18,707 847
Tele Centro-Sul ADR 17,962 1,312
Tele Nordeste Celular (Preferred) 76,067,945 283
Tele Nordeste Celular ADR 2,255 156
Telemig Celular (Preferred) 193,414,795 696
Telemig Celular ADR 5,343 382
Telesp Celular (Preferred) "B" 143,080,934 2,586
Telesp Celular ADR 32,982 1,480
------------
13,481
------------
36,236
------------
--------------------------------------------------------------------------------
CHILE (0.2%)
DIVERSIFIED TELECOMMUNICATION SERVICES
CTC ADR 40,300 730
------------
--------------------------------------------------------------------------------
CHINA (6.8%)
COMMERCIAL SERVICES & SUPPLIES
Cosco Pacific Ltd. 1,180,000 931
------------
COMMUNICATIONS EQUIPMENT
Nanjing Panda Electronics 1,842,000 662
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Great Wall Technology Co., Ltd. 3,980,500 2,757
------------
HOUSEHOLD DURABLES
Guangdong Kelon Electrical Holdings Co. Ltd. 'H' 297,000 161
(a)TCL International Holdings Ltd. 4,086,000 1,494
------------
1,655
------------
INDUSTRIAL CONGLOMERATES
China Merchants Holdings International Co. Ltd. 1,027,000 705
------------
INTERNET SOFTWARE & SERVICES
(a)Asiainfo Holdings Inc. 370 16
------------
METALS & MINING
Yanzhou Coal Mining Co. ADR 28,730 287
------------
OIL & GAS
(a)PetroChina Company Ltd. 17,117,000 3,557
(a)PetroChina Company Ltd. ADR 5,300 111
Zhenhai Refining & Chemical Co., Ltd. 'H' 1,151,400 179
------------
3,847
------------
WIRELESS TELECOMMUNICATION SERVICES
(a)China Telecom Ltd. 815,000 7,187
(a)China Telecom Ltd. ADR 27,200 4,836
(a)China Unicom 2,030,000 4,310
(a)China Unicom ADR 16,000 340
------------
16,673
------------
27,533
------------
--------------------------------------------------------------------------------
COLOMBIA (0.0%)
BANKS
(a)Bancolombia (Preferred) 6,249 5
------------
--------------------------------------------------------------------------------
CZECH REPUBLIC (0.4%)
DIVERSIFIED TELECOMMUNICATION SERVICES
(a)Cesky Telecom 66,734 1,120
(a)Cesky Telecom AS GDR 23,830 389
------------
1,509
------------
--------------------------------------------------------------------------------
EGYPT (1.0%)
BEVERAGES
(a)Al-Ahram Beverages Co. GDR 24,118 414
------------
GAS UTILITIES
Egypt Gas Co. 6,100 277
------------
TOBACCO
Eastern Tobacco 12,767 279
------------
WIRELESS TELECOMMUNICATION SERVICES
(a)Egyptian Company for Mobile Services 98,309 3,199
------------
4,169
------------
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE
(000)
--------------------------------------------------------------------------------
<S> <C> <C>
GREECE (2.3%)
DIVERSIFIED TELECOMMUNICATION SERVICES
Hellenic Telecommunication Organization (OTE) 230,729 U.S.$ 5,625
Hellenic Telecommunication Organization (OTE) ADR 312,409 3,808
------------
9,433
------------
--------------------------------------------------------------------------------
HONG KONG (1.3%)
COMPUTERS & PERIPHERALS
Legend Holdings Ltd. 1,706,000 1,652
------------
INDUSTRIAL CONGLOMERATES
Citic Pacific Ltd. 276,000 1,445
------------
INTERNET SOFTWARE & SERVICES
(a)SINA.COM 3,700 95
(a)Timeless Software Ltd. 848,000 383
------------
478
------------
MEDIA
Asia Satellite Telecom Holdings 139,000 475
(a)Phoenix Satellite TV 1,416,000 197
------------
672
------------
SOFTWARE
(a)Founder Holdings Ltd. 1,128,000 503
------------
TEXTILES & APPAREL
YUE Yuen Industrial Holdings 267,000 593
------------
5,343
------------
--------------------------------------------------------------------------------
HUNGARY (0.7%)
DIVERSIFIED TELECOMMUNICATION SERVICES
Matav Rt. 68,664 477
Matav Rt. ADR 69,002 2,376
------------
2,853
------------
--------------------------------------------------------------------------------
INDIA (6.2%)
AUTO COMPONENTS
Apollo Tyres Ltd. 8,450 18
------------
AUTOMOBILES
Hero Honda Motors Ltd. 20,653 457
Tata Engineering & Locomotive Co. Ltd. 140,170 387
------------
844
------------
BANKS
State Bank of India Ltd. GDR 3,350 17
------------
CHEMICALS
Indo Gulf Corp., Ltd. 140,000 133
Reliance Industries Ltd. 141,849 1,083
------------
1,216
------------
CONSTRUCTION & ENGINEERING
Larsen & Toubro Ltd. 28,500 157
------------
CONSTRUCTION MATERIALS
Gujarat Ambuja Cements Ltd. 152,800 667
------------
DIVERSIFIED FINANCIALS
Housing Development Finance Corp., Ltd. 97,600 1,222
------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Mahanagar Telephone Nigam Ltd. 262,430 1,261
Mahanagar Telephone Nigam Ltd. GDR 55,050 506
Videsh Sanchar Nigam Ltd. 10,955 297
------------
2,064
------------
ELECTRIC UTILITIES
BSES Ltd. 57,500 316
BSES Ltd. GDR 7,000 130
------------
446
------------
ELECTRICAL EQUIPMENT
Bharat Heavy Electricals Ltd. 251,700 752
Sterlite Industries 14,500 271
------------
1,023
------------
FOOD PRODUCTS
Tata Tea Ltd. 47,850 355
------------
HOUSEHOLD PRODUCTS
(a)Hindustan Lever Ltd. 17,550 1,115
------------
INTERNET SOFTWARE & SERVICES
(a,c)India-Info.com Private Co., Ltd. 116,052 499
------------
IT CONSULTING & SERVICES
(a)HCL Technologies Ltd. 18,200 525
Infosys Technologies Ltd. 46,150 8,598
------------
9,123
------------
MACHINERY
Larsen & Toubro Ltd. 630 3
------------
MEDIA
Zee Telefilms Ltd. 93,500 938
------------
PHARMACEUTICALS
Dabur India Ltd. 13,000 190
Lupin Laboratories Ltd. 36,000 158
(b)Strides Arcolab Ltd. 31,000 172
------------
520
------------
ROAD & RAIL
Container Corp. of India Ltd. 242,600 935
------------
SOFTWARE
Aptech Ltd. 13,000 246
NIIT Ltd. 17,500 867
(a)Satyam Computer Services 41,670 2,783
------------
3,896
------------
TOBACCO
ITC Ltd. 650 12
------------
25,070
------------
--------------------------------------------------------------------------------
INDONESIA (0.6%)
CONSTRUCTION MATERIALS
Semen Gresik 421,200 383
------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Telekomunikasi Indonesia ADR 65,064 451
------------
PAPER & FOREST PRODUCTS
(a)Indah Kiat Pulp & Paper 1,460,805 296
------------
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE
(000)
--------------------------------------------------------------------------------
<S> <C> <C>
INDONESIA (CONTINUED)
TOBACCO
Gudang Garam 903,960 U.S.$ 1,462
------------
2,592
------------
--------------------------------------------------------------------------------
ISRAEL (7.2%)
COMMUNICATIONS EQUIPMENT
(a)BATM Advanced Communications Ltd. 12,825 1,119
(a)BreezeCom Ltd. 16,120 701
ECI Telecommunications Ltd. 248,392 8,880
(a)Gilat Satellite Networks Ltd. 36,066 2,502
Nice Systems Ltd. 6,363 495
(a)Nice Systems Ltd. ADR 9,622 743
(a)Optibase Ltd. 48,440 851
(a)Vcon Telecommunications Ltd. 16,830 177
------------
15,468
------------
COMPUTERS & PERIPHERALS
(a)M-Systems Flash Disk Pioneers 12,401 966
------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Orckit Communications Ltd. 29,080 872
(a)TTI Team Telecom International Ltd. 62,300 2,243
------------
3,115
------------
HEALTH & PERSONAL CARE
Teva Pharmaceutical Industries Ltd. ADR 9,400 521
------------
INTERNET SOFTWARE & SERVICES
(a)Aladdin Knowledge Systems 35,140 555
(a)RADWARE Ltd. 18,560 492
------------
1,047
------------
IT CONSULTING & SERVICES
(a)Check Point Software Technologies 24,520 5,192
------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS
(a)Galileo Technology Ltd. 124,630 2,680
------------
SOFTWARE
(a)Tecnomatix Technologies Ltd. 35,886 489
------------
29,478
------------
--------------------------------------------------------------------------------
MALAYSIA (2.0%)
BANKS
Commerce Asset Holding Bhd 146,000 423
Malayan Banking Bhd 372,600 1,510
(a)Public Bank Bhd 807,000 743
------------
2,676
------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Telekom Malaysia Bhd 466,000 1,606
------------
ELECTRIC UTILITIES
Tenaga Nasional Bhd 233,000 760
------------
HOTELS RESTAURANTS & LEISURE
Resorts World Bhd 221,000 605
------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS
Malaysian Pacific Industries Bhd 80,000 821
------------
TOBACCO
British American Tobacco Bhd 153,200 1,250
------------
WIRELESS TELECOMMUNICATION SERVICES
(a)Digi Swisscom Bhd 289,000 529
------------
8,247
------------
--------------------------------------------------------------------------------
MEXICO (9.5%)
BANKS
(a)Banacci 'L' 45,447 184
(a)Banamex 'O' 475,297 2,028
(a)Bancomer 'O' 1,462,481 743
(a,b)Bancomer 'O' ADR 64,825 659
------------
3,614
------------
BEVERAGES
(a)FEMSA 712,475 3,041
FEMSA ADR 10,348 446
Grupo Modelo 'C' 73,400 164
------------
3,651
------------
CONSTRUCTION MATERIALS
Cemex SA 290,127 1,360
Cemex SA ADR 87,562 2,047
------------
3,407
------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Telmex 'L' ADR 283,503 16,195
------------
INDUSTRIAL CONGLOMERATES
Alfa SA 'A' 301,955 692
(a)Grupo Carso 'A1' 402,074 1,426
------------
2,118
------------
MEDIA
(a)Grupo Televisa GDR 95,623 6,592
------------
MULTILINE RETAIL
(a)Grupo Sanborns 22,350 36
(a)Wal-mart De Mexico 'C' 442,133 1,020
(a)Wal-mart De Mexico 'V' 197,559 463
(a)Wal-mart De Mexico ADR 28,162 661
------------
2,180
------------
PAPER & FOREST PRODUCTS
Kimberly 'A' 315,458 897
------------
38,654
------------
--------------------------------------------------------------------------------
POLAND (1.1%)
DIVERSIFIED TELECOMMUNICATION SERVICES
Telekomunikacja Polska GDR 256,870 1,774
------------
ELECTRICAL EQUIPMENT
Elektrim 27,237 313
------------
MULTILINE RETAIL
Eastbridge 33,600 2,259
------------
OIL & GAS
Polski Koncern Naftowy SA GDR 4,380 42
------------
4,388
------------
--------------------------------------------------------------------------------
RUSSIA (3.2%)
DIVERSIFIED TELECOMMUNICATION SERVICES
Rostelecom ADR 43,530 593
------------
ELECTRIC UTILITIES
Unified Energy Systems ADR 11,000 127
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE
(000)
--------------------------------------------------------------------------------
<S> <C> <C>
RUSSIA (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
Unified Energy Systems GDR 178,206 U.S.$ 2,049
------------
2,176
------------
MEDIA
(a)Storyfirst Communications, Inc. 'C' (Preferred) 270 115
(a)Storyfirst Communications, Inc. 'D' (Preferred) 720 307
(a)Storyfirst Communications, Inc. 'E' (Preferred) 780 332
(a)Storyfirst Communications, Inc. 'F' (Preferred) 139 118
------------
872
------------
OIL & GAS
LUKoil Holdings ADR (Preferred) 19,800 398
LUKoil Holdings ADR 76,174 3,894
(a)Surgutneftegaz ADR (Preferred) 8,400 112
(a)Surgutneftegaz ADR 302,047 4,025
------------
8,429
------------
PAPER & FOREST PRODUCTS
(a,c)Alliance Cellulose Ltd. 'B' 156,075 431
------------
WIRELESS TELECOMMUNICATION SERVICES
(a,c)Russian Telecom Development Corp. 176,000 352
(a)Vimpel-Communications ADR 12,550 278
------------
630
------------
13,131
------------
--------------------------------------------------------------------------------
SOUTH AFRICA (3.9%)
BANKS
Nedcor Ltd. 60,922 1,280
------------
DIVERSIFIED FINANCIALS
African Bank Investments Ltd. 27 --@
Bidvest Group Ltd. 158,082 1,092
BoE Ltd. 324,817 187
Rembrandt Group Ltd. 216,735 2,047
RMB Holdings Ltd. 8,764 13
------------
3,339
------------
HOUSEHOLD DURABLES
Ellerine Holdings Ltd. 116,280 499
------------
INSURANCE
Liberty Life Association of Africa Ltd. 27,590 263
New Africa Investments Ltd. (Preferred) 'N' 977,910 245
------------
508
------------
IT CONSULTING & SERVICES
(a)Dimensions Data Holdings Ltd. 194,638 1,612
------------
MEDIA
(a)MIH Ltd 11,300 339
Nasionale Pers Beperk 'N' 46,500 388
------------
727
------------
METALS & MINING
Anglo American plc, ADR 54,040 1,559
De Beers 31,420 765
De Beers ADR 2,600 63
Impala Platinum Holdings Ltd. 10,200 380
------------
2,767
------------
OIL & GAS
Sasol Ltd. 299,200 2,009
------------
PAPER & FOREST PRODUCTS
Sappi Ltd. 63,330 477
------------
WIRELESS TELECOMMUNICATION SERVICES
M-Cell Ltd. 526,030 2,551
------------
15,769
------------
--------------------------------------------------------------------------------
SOUTH KOREA (21.1%)
BANKS
Hana Bank 30,850 192
(a)Hanvit Bank 248,100 634
Hanvit Bank GDR 143,150 716
Housing & Commercial Bank 52,514 1,229
Kookmin Bank 94,692 1,206
Shinhan Bank Co. Ltd. (Foreign)87,940 828
------------
4,805
------------
COMMUNICATIONS EQUIPMENT
LG Information & Communication Ltd. 4,400 247
(a)Locus Corp. 3,790 308
Pantech Co. Ltd. 31,483 242
Telson Electronics Co. Ltd. 92,164 980
------------
1,777
------------
DIVERSIFIED FINANCIALS
Hyundai Securities Co. 876 9
Korea Technology Banking Co. 52,900 569
LG Securities Co. 64,820 843
Samsung Securities Co., Ltd. 52,630 1,156
------------
2,577
------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Korea Telecom Corp. 141,470 12,459
Korea Telecom Corp. ADR 108,100 5,230
------------
17,689
------------
ELECTRIC UTILITIES
Korea Electric Power Corp. 68,960 2,140
Korea Electric Power Corp. ADR 69,404 1,280
------------
3,420
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
(a)Communication Network Interface Inc. 82,350 454
(a)Humax Co. Ltd. 92,305 1,279
Samsung Electro-Mechanics Co. 57,947 3,633
------------
5,366
------------
FOOD PRODUCTS
Tongyang Confectionery Co. 16,790 365
------------
HOUSEHOLD DURABLES
LG Electronics 30,200 845
------------
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE
(000)
--------------------------------------------------------------------------------
<S> <C> <C>
SOUTH KOREA (CONTINUED)
INTERNET & CATALOG RETAIL
LG Home Shopping Inc. 11,530 U.S.$ 1,096
------------
INTERNET SOFTWARE & SERVICES
Daou Technology, Inc. 266 3
Dreamline Co., Ltd. 2,843 78
------------
81
------------
MEDIA
Cheil Communications Inc. 17,660 2,304
CJ39 Shopping Corp. 16,150 529
------------
2,833
------------
METALS & MINING
Pohang Iron & Steel Co., Ltd. 5,650 494
------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS
Hyundai Electronics Industries Co. 109,550 2,161
Samsung Electronics Co. 92,532 30,622
------------
32,783
------------
WIRELESS TELECOMMUNICATION SERVICES
(a)Korea Telecom Freetel 13,590 905
SK Telecom Co., Ltd. 29,440 9,637
SK Telecom Co., Ltd. ADR 34,635 1,258
------------
11,800
------------
85,931
------------
--------------------------------------------------------------------------------
TAIWAN (13.3%)
BANKS
(a)Chinatrust Commercial Bank 666,240 579
International Commercial Bank of China 654,700 554
Taishin International Bank 356,532 229
------------
1,362
------------
COMMUNICATIONS EQUIPMENT
(a)Accton Technology Corp. 678,000 1,511
D-Link Corp. 633,650 1,485
Microelectronics Technology 100,800 335
(a)Zinwell Corp. 56,000 277
------------
3,608
------------
COMPUTERS & PERIPHERALS
Acer Peripherals, Inc. 824,698 2,335
Advantech Co. Ltd. 81,900 434
Asustek Computer, Inc. 411,643 3,403
Compal Electronics 139,100 342
(a)Ritek Corp. GDR 84,717 677
Wyse Technology Taiwan Ltd. 323,000 578
------------
7,769
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
(a)Ambit Microsystems Corp. 95,000 943
Delta Electronic Industrial 355,000 1,681
(a)Hon Hai Precision Industry 399,720 3,617
(a)Hon Hai Precision Industry GDR 35,600 854
Universal Scientific Industrial Co., Ltd. 406,000 991
------------
8,086
------------
FOOD & DRUG RETAILING
President Chain Store Corp. 407,000 1,524
------------
HOUSEHOLD DURABLES
(a)Dialer and Business 390,000 736
------------
INTERNET SOFTWARE & SERVICES
(a)GigaMedia Ltd. 9,100 110
------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS
(a)Advanced Semiconductor Engineering, Inc. 446,257 1,365
(a)ASE Test Ltd. 30,400 895
(a)Faraday Technology Corp. 26,000 287
Macronix International 431,660 1,082
(a)ProMos Technologies Inc 130,000 527
(a)Siliconware Precision Industries Co. 591,874 1,329
(a)Taiwan Semiconductor Co. 2,807,230 13,339
United Microelectronics Corp. Ltd. 2,949,200 8,207
(a)Winbond Electronics Corp. 882,430 2,556
------------
29,587
------------
TEXTILES & APPAREL
Far Eastern Textile Ltd. 884,600 1,100
(a,b)Far Eastern Textile Ltd. GDR 12,300 154
------------
1,254
------------
54,036
------------
--------------------------------------------------------------------------------
THAILAND (1.2%)
BANKS
Thai Farmers Bank Ltd. (Foreign) 462,700 389
------------
COMMUNICATIONS EQUIPMENT
(a)Shin Corporations PCL 127,000 668
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Delta Electronics PCL (Foreign) 144,624 1,019
------------
MEDIA
BEC World PCL (Foreign 109,800 656
------------
WIRELESS TELECOMMUNICATION SERVICES
(a)Advanced Info. Services PCL (Foreign) 162,600 2,025
(a)Total Access Communication 38,200 154
------------
2,179
------------
4,911
------------
--------------------------------------------------------------------------------
TURKEY (4.2%)
BANKS
(a)Turkiye Garanti Bankasi 137,785,000 1,666
(a)Yapi Ve Kredi Bankasi 592,767,181 6,592
(a)Yapi Ve Kredi Bankasi GDR 20,900 210
------------
8,468
------------
BEVERAGES
Ege Biracilik Ve Malt Sanayii 24,083,000 1,572
Erciyas Biracilik 3,959,000 185
------------
1,757
------------
COMMUNICATIONS EQUIPMENT
(a)Alcatel Teletas AS Endustri ve Ticaret A.S. 2,224,000 484
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE
(000)
--------------------------------------------------------------------------------
<S> <C> <C>
TURKEY (CONTINUED)
COMMUNICATIONS EQUIPMENT (CONTINUED)
Netas Northern Electric Telekomunikasyon AS 5,401,000 U.S.$ 601
------------
1,085
------------
DIVERSIFIED FINANCIALS
(a)Dogan Sirketler Grubu Holdings 74,042,000 1,790
------------
HOUSEHOLD DURABLES
(a)Vestel Elektronik Sanayi Ve Ticaret 10,335,428 3,123
------------
MEDIA
Dogan Yayin Holdings 44,953,000 761
------------
16,984
------------
--------------------------------------------------------------------------------
UNITED STATES (1.3%)
COMMUNICATIONS EQUIPMENT
(a)Comverse Technology, Inc. 13,454 1,251
------------
DIVERSIFIED TELECOMMUNICATION SERVICES
(a)Amdocs Ltd. 12,990 997
------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS
(a)DSP Group, Inc. 31,519 1,765
(a)Zoran Corp. 21,540 1,421
------------
3,186
------------
5,434
------------
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost U.S.$327,302) 392,436
------------
--------------------------------------------------------------------------------
MUTUAL FUNDS (0.5%)
--------------------------------------------------------------------------------
INDIA (0.5%)
Morgan Stanley Growth Fund 6,881,800 1,826
--------------------------------------------------------------------------------
AFRICA (0.0%)
Morgan Stanley Dean Witter Africa Investment
Fund, Inc. 9,670 77
--------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(Cost U.S.$1,481) 1,903
------------
--------------------------------------------------------------------------------
<CAPTION>
NO. OF
UNITS
--------------------------------------------------------------------------------
<S> <C> <C>
Units (0.1%)
--------------------------------------------------------------------------------
RUSSIA (0.1%)
(a)Storyfirst Communications, Inc., First
Section, Tranche 1 (Convertible) 639 272
(a)Storyfirst Communications, Inc.,Second
Section, Tranche II (Convertible) 152 65
--------------------------------------------------------------------------------
<CAPTION>
NO. OF VALUE
UNITS (000)
--------------------------------------------------------------------------------
<S> <C> <C>
(a)Storyfirst Communications, Inc., Tranche IV
(Convertible) 207 88
------------
TOTAL UNITS
(Cost U.S.$1,192) 425
------------
--------------------------------------------------------------------------------
<CAPTION>
SHARES
--------------------------------------------------------------------------------
<S> <C> <C>
DEBT INSTRUMENTS (0.1%)
--------------------------------------------------------------------------------
INDIA (0.1%)
MULTI-INDUSTRY
(c)DCM Shriram Industries Ltd. 9.90%, 2/21/02 INR 335 229
(c)DCM Shriram Industries Ltd. (Convertible) 7.50%,
2/21/02 330 170
Shri Ishar Alloy Steels Ltd. 15.00%, 4/21/01 581 100
--------------------------------------------------------------------------------
TOTAL DEBT INSTRUMENTS
(Cost U.S.$1,495) 499
------------
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (3.0%)
--------------------------------------------------------------------------------
UNITED STATES (3.0%)
REPURCHASE AGREEMENT
Chase Securities Inc., 6.15%, dated 6/31/00, due
7/03/00, to be repurchased at U.S.$12,299,
collateralized by U.S.$8,645 United States
Treasury Notes, 13.25%, due 5/15/14, valued at
U.S.$12,669
(Cost U.S.$12,293) 12,293 12,293
----------- ------------
--------------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (0.4%)
Brazilian Real BRL 249 138
British Pound GBP 131 198
Hungarian Forint HUF 267 1
Indian Rupee INR 360 8
Indonesian Rupiah IDR 119,154 14
Mexican Peso MXP 18 2
South African Rand ZAR 1,155 171
South Korean Won KRW 245,699 220
Taiwan Dollar TWD 20,378 663
Thai Baht THB 290 7
Turkish Lira TRL 70,029,876 113
--------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY
(Cost U.S.$1,532) 1,535
------------
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AMOUNT
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS (100.5%)
(Cost U.S.$345,295) U.S.$409,091
------------
--------------------------------------------------------------------------------
OTHER ASSETS (0.8%)
Receivable for Investments Sold U.S.$ 2,668
Dividends Receivable 666
Withholding Tax Receivable 2
Other 42 3,378
----------- ------------
--------------------------------------------------------------------------------
LIABILITIES (-1.3%)
Deferred Country Taxes (1,077)
Payable For:
Investments Purchased (2,034)
Bank Overdraft (953)
Investment Advisory Fees (413)
Custodian Fees (277)
Fund Shares Repurchased (273)
Directors' Fees and Expenses (127)
Administrative Fees (82)
Professional Fees (71)
Shareholder Reporting Expenses (58)
Other Liabilities (35) (5,400)
----------- ------------
--------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 19,985,244, issued and outstanding
U.S.$0.01 par value shares (100,000,000 shares
authorized) U.S.$407,069
============
--------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 20.37
============
--------------------------------------------------------------------------------
AT JUNE 30, 2000, NET ASSETS CONSISTED OF:
--------------------------------------------------------------------------------
Common Stock U.S.$ 20
Capital Surplus 308,811
Accumulated Net Investment Loss (2,747)
Accumulated Net Realized Gain 36,818
Unrealized Appreciation on Investments and Foreign
Currency Translations (net of accrued foreign
taxes of U.S.$1,077 on unrealized appreciation) 64,167
--------------------------------------------------------------------------------
TOTAL NET ASSETS U.S.$407,069
============
--------------------------------------------------------------------------------
</TABLE>
(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) -- Issuer is in default.
(e) -- The Fund is advised by an affiliate.
(f) -- Variable/floating rate security -- rate disclosed is as of June 30, 2000.
@ -- Amount is less than U.S.$500.
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
JUNE 30, 2000 EXCHANGE RATES:
--------------------------------------------------------------------------------
<S> <C> <C> <C>
BRL Brazil Real 1.804= U.S.$1.00
GBP British Pound 0.661= U.S.$1.00
HKD Hong Kong Dollar 7.796= U.S.$1.00
HUF Hungarian Forint 272.630= U.S.$1.00
INR Indian Rupee 44.650= U.S.$1.00
IDR Indonesian Rupiah 8,752.500= U.S.$1.00
MXP Mexican Peso 9.842= U.S.$1.00
ZAR South African Rand 6.775= U.S.$1.00
KRW South Korean Won 1115.025= U.S.$1.00
TWD Taiwan Dollar 30.725= U.S.$1.00
THB Thai Baht 39.175= U.S.$1.00
TRL Turkish Lira 620,445= U.S.$1.00
</TABLE>
--------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of foreign currency exchange contracts open at June 30, 2000,
the Fund is obligated to deliver or receive foreign currency in exchange for
U.S. dollars as indicated below:
<TABLE>
<CAPTION>
CURRENCY IN
TO EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN
(000) (000) DATE (000) (000) (000)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IDR 119,154 U.S.$ 14 07/05/00 U.S.$ 14 U.S.$ 14 U.S.$ --
IDR 82,179 9 07/06/00 U.S.$ 9 9 --
IDR 122,204 14 07/07/00 U.S.$ 14 14 --
THB 290 7 07/03/00 U.S.$ 7 7 --
U.S.$ 42 42 07/03/00 HKD 327 42 --
U.S.$ 34 34 07/03/00 THB 1,323 34 --
THB 1,335 34 07/05/00 U.S.$ 34 34 --
THB 598 15 07/05/00 U.S.$ 15 15 --
--------- --------- --------
U.S.$ 169 U.S.$ 169 U.S.$ --
========= ========= ========
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY
CLASSIFICATION -- JUNE 30, 2000
<TABLE>
<CAPTION>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
-----------------------------------------------------------------------------------------
<S> <C> <C>
Auto Components U.S.$ 18 0.0%
Automobiles 844 0.2
Banks 25,972 6.4
Beverages 5,822 1.4
Chemicals 1,216 0.3
Commercial Services & Supplies 931 0.2
Communications Equipment 24,519 6.0
Computers & Peripherals 10,387 2.6
Construction & Engineering 157 0.0
Construction Materials 4,457 1.1
Diversified Financials 8,928 2.2
Diversified Telecommunication Services 70,651 17.4
Electric Utilities 7,711 1.9
Electrical Equipment 1,336 0.3
Electronic Equipment & Instruments 17,228 4.2
Food & Drug Retailing 1,523 0.4
Food Products 721 0.2
Gas Utilities 276 0.1
Health & Personal Care 521 0.1
Hotels Restaurants & Leisure 605 0.1
Household Durables 6,859 1.7
Household Products 1,115 0.3
Industrial Conglomerates 4,267 1.1
Insurance 508 0.1
Internet & Catalog Retail 1,096 0.3
Internet Software & Services 2,232 0.6
IT Consulting & Services 15,927 3.9
Machinery 3 0.0
Media 14,477 3.6
Metals & Mining 6,627 1.6
Multiline Retail 4,938 1.2
Mutual Funds 1,903 0.5
Oil & Gas 17,188 4.2
Paper & Forest Products 2,816 0.7
Pharmaceuticals 520 0.1
Road & Rail 935 0.2
Semiconductor Equipment & Products 69,057 17.0
Software 4,888 1.2
Textiles & Apparel 2,041 0.5
Tobacco 3,001 0.7
Wireless Telecommunication Services 51,042 12.5
Other 13,828 3.4
------------- ------
U.S.$ 409,091 100.5%
============= ======
-----------------------------------------------------------------------------------------
</TABLE>
SUMMARY OF TOTAL INVESTMENTS BY COUNTRY --
JUNE 30, 2000
<TABLE>
<CAPTION>
PERCENT
VALUE OF NET
COUNTRY (000) ASSETS
-----------------------------------------------------------------------------------------
<S> <C> <C>
Brazil U.S.$ 36,236 8.9%
Chile 730 0.2
China 27,533 6.8
Colombia 5 0.0
Czech Republic 1,509 0.4
Egypt 4,169 1.0
Greece 9,433 2.3
Hong Kong 5,343 1.3
Hungary 2,853 0.7
India 27,395 6.8
Indonesia 2,592 0.6
Israel 29,478 7.2
Malaysia 8,247 2.0
Mexico 38,654 9.5
Poland 4,388 1.1
Russia 13,556 3.3
South Africa 15,769 3.9
South Korea 85,931 21.1
Taiwan 54,036 13.3
Thailand 4,911 1.2
Turkey 16,984 4.2
United States
(including short-term investment) 17,727 4.3
Other 1,612 0.4
------------ ------
U.S.$409,091 100.5%
============ ======
-----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
----------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends .................................................................................. U.S.$ 2,138
Interest ................................................................................... 238
Less: Foreign Taxes Withheld ............................................................... (113)
----------------------------------------------------------------------------------------------------------------------
Total Income ............................................................................... 2,263
----------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees ................................................................... 2,689
Custodian Fees ............................................................................. 357
Administrative Fees ........................................................................ 215
Professional Fees .......................................................................... 73
Country Tax Expense ........................................................................ 57
Shareholder Reporting Expenses ............................................................. 55
Directors' Fees and Expenses ............................................................... 22
Transfer Agent Fees ........................................................................ 13
Other Expenses ............................................................................. 20
----------------------------------------------------------------------------------------------------------------------
Total Expenses ............................................................................. 3,501
----------------------------------------------------------------------------------------------------------------------
Net Investment Loss ........................................................................ (1,238)
----------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold (net of foreign tax
expense of U.S.$1,090) ................................................................... 63,646
Foreign Currency Transactions .............................................................. (471)
----------------------------------------------------------------------------------------------------------------------
Net Realized Gain .......................................................................... 63,175
----------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Depreciation on Investments ................................................................ (84,588)
Appreciation on Foreign Currency Translations .............................................. 1,367
----------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation ............................................. (83,221)
----------------------------------------------------------------------------------------------------------------------
Total Net Realized Gain and Change in Unrealized
Appreciation/Depreciation ................................................................ (20,046)
----------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................................... U.S.$ (21,284)
======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Loss ......................................................... U.S.$ (1,238) U.S.$ (562)
Net Realized Gain ........................................................... 63,175 29,969
Change in Unrealized Appreciation/Depreciation .............................. (83,221) 194,055
----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations ............. (21,284) 223,462
----------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Repurchase of Shares (509,500 and 960,600 shares, respectively) ............. (7,442) (9,276)
----------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) ................................................... (28,726) 214,186
Net Assets:
Beginning of Period ......................................................... 435,795 221,609
----------------------------------------------------------------------------------------------------------------------
End of Period (including accumulated net investment loss of U.S.$(2,747)
and U.S.$(1,509), respectively) ............................................. U.S.$407,069 U.S.$ 435,795
======================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
SELECTED PER SHARE DATA ENDED YEARS ENDED DECEMBER 31,
AND RATIOS: JUNE 30, 2000 -----------------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD U.S.$ 21.26 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) ....... (0.21) (0.03) 0.04 0.03 0.10 0.06
Net Realized and Unrealized Gain
(Loss) on Investments ............ (0.80) 10.87 (3.05) (0.18) 1.92 (3.14)
------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations ... (1.01) 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
Transactions ..................... -- -- -- -- 0.01* (1.21)+
------------------------------------------------------------------------------------------------------------------------------------
Anti-Dilutive Effect of Shares
Repurchased ...................... 0.12 0.09 0.11 -- -- --
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ..... U.S.$ 20.37 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.$ 15.00 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 ....................... (8.05)% 100.77% (24.88)% (5.75)% (4.59)% (16.61)%++
Net Asset Value (1) ................ (4.19)% 105.81% (19.61)% (0.97)% 13.84% (16.30)%++
====================================================================================================================================
RATIOS, SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(THOUSANDS) ...................... U.S.$407,069 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 ........................... 1.62%** 1.76% 1.96% 1.84% 1.87% 1.86%
Ratio of Net Investment Income
(Loss) to Average Net Assets ..... (0.57)%** (0.20)% 0.36% 0.15% 0.58% 0.30%
Portfolio Turnover Rate ............ 47% 121% 101% 90% 67% 61%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Increase per share due to reinvestment of distributions.
** Annualized.
+ 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
JUNE 30, 2000 (UNAUDITED)
----------
The Morgan Stanley Dean Witter 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 contracts 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-COUNTER TRADING: Securities and other derivative instruments that
may be purchased or sold by the Fund may 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.
During the six month period ended June 30, 2000, the Fund's investments in the
derivative instruments described above only included foreign currency exchange
contracts.
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 investment income (loss), accumulated net realized
gain (loss) and paid-in capital.
19
<PAGE>
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 month period ended June 30, 2000, the Fund made purchases
and sales totaling approximately $199,010,000 and $211,173,000, 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 June 30, 2000, the U.S. Federal income tax cost basis
of securities was $343,763,000 and, accordingly, net unrealized appreciation for
U.S. Federal income tax purposes was $63,793,000 of which $99,603,000 related to
appreciated securities and $35,810,000 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. To the extent that
capital gains are offset, such gains will not be distributed to shareholders.
F. For the six month period ended June 30, 2000, the Fund incurred $6,000 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 June 30, 2000, the deferred fees payable, under the
Plan, totaled $127,000 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 six month period ended
June 30, 2000, the Fund repurchased 509,500 or 2.49% of its Common Stock at an
average price per share of $14.56, excluding $25,000 in commissions paid, and an
average discount of 25.39% from net asset value per share. For the year ended
December 31, 1999, the Fund repurchased 960,600 shares or 4.48% of its Common
Stock at an average price per share of $9.60, excluding $48,000 in commissions
paid, and an average discount of 17.50% from net asset value per share. Since
the inception of the program, the Fund has repurchased 2,839,100 shares or
12.44% of its Common Stock at an average price per share of $9.72, excluding
$142,000 in commissions paid, and an average discount of 19.42% 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>
J. Supplemental Proxy Information
The Annual Meeting of the Stockholders of the Fund was held on June 15, 2000.
The following is a summary of the proposal presented and the total number of
shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
PROPOSAL: FAVOR OF AGAINST ABSTAINED
--------- -------- ------- ---------
<S> <C> <C> <C>
1. To elect the following Directors: Andrew McNally IV ............ 14,408,529 178,826 --
Frederick O. Robertshaw ...... 14,402,728 184,627 --
Harold J. Schaaff, Jr ........ 14,403,920 183,435 --
Fergus Reid .................. 14,432,482 154,873 --
Graham E. Jones .............. 14,431,160 156,195 --
John D. Barrett II ........... 14,401,761 185,594 --
Samuel T. Reeves. ............ 14,115,430 471,925 --
Gerard E. Jones .............. 14,405,594 181,761 --
</TABLE>
The Annual Meeting of the Stockholders of the Fund was reconvened on August 1,
2000. The following is a summary of the proposal presented and the total number
of shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
PROPOSAL: FAVOR OF AGAINST ABSTAINED
--------- -------- ------- ---------
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP as independent
accountants of the Fund .......................................... 14,262,142 3,092,406 18,167
</TABLE>
--------------------------------------------------------------------------------
CHANGE IN INDEPENDENT ACCOUNTANTS:
ON JULY 5, 2000, PRICEWATERHOUSECOOPERS LLP RESIGNED AS INDEPENDENT ACCOUNTANTS
OF THE FUND. THE REPORTS OF PRICEWATERHOUSECOOPERS LLP ON THE FINANCIAL
STATEMENTS OF THE FUND FOR THE PAST TWO FISCAL YEARS CONTAINED NO ADVERSE
OPINION OR DISCLAIMER OF OPINION AND WERE NOT QUALIFIED OR MODIFIED AS TO
UNCERTAINTY, AUDIT SCOPE OR ACCOUNTING PRINCIPLE. IN CONNECTION WITH ITS AUDITS
FOR THE TWO MOST RECENT FISCAL YEARS AND THROUGH JULY 5, 2000, THERE HAVE BEEN
NO DISAGREEMENTS WITH PRICEWATERHOUSECOOPERS LLP ON ANY MATTER OF ACCOUNTING
PRINCIPLES OR PRACTICES, FINANCIAL STATEMENT DISCLOSURE, OR AUDITING SCOPE OR
PROCEDURE, WHICH DISAGREEMENTS, IF NOT RESOLVED TO THE SATISFACTION OF
PRICEWATERHOUSECOOPERS LLP, WOULD HAVE CAUSED THEM TO MAKE REFERENCE THERETO IN
THEIR REPORT ON THE FINANCIAL STATEMENTS FOR SUCH YEARS. THE FUND, WITH THE
APPROVAL OF ITS BOARD OF DIRECTORS, AUDIT COMMITTEE AND SHAREHOLDERS, ENGAGED
ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS AS OF AUGUST 1, 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
