[ANNOTATED FORM N-CSR FOR ANNUAL REPORTS]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED
SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number |
811-06403 |
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Morgan Stanley Emerging Markets Fund, Inc. |
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(Exact name of registrant as specified in charter) |
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1221 Avenue of the Americas 22nd Floor New York, NY |
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10020 |
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(Address of principal executive offices) |
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(Zip code) |
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Ronald E. Robison |
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(Name and address of agent for service) |
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Registrants telephone number, including area code: |
1-800-221-6726 |
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Date of fiscal year end: |
12/31 |
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Date of reporting period: |
12/31/05 |
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Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Funds annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows:
|
2005 Annual Report |
|
|
|
December 31, 2005 |
Morgan Stanley
Emerging Markets Fund, Inc.
Morgan Stanley
Investment Management Inc.
Investment Adviser
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Letter to Stockholders |
Overview |
Performance
For the year ended December 31, 2005, the Morgan Stanley Emerging Markets Fund, Inc. (the Fund) had total returns, based on net asset value and market value per share of 34.44%, net of fees and 31.97%, respectively, compared to 34.00% for the Morgan Stanley Capital International (MSCI) Emerging Markets Free Net Index (the Index). On December 31, 2005, the closing price of the Funds shares on the New York Stock Exchange was $21.92, representing a 11.5% discount to the Funds net asset value per share.
Factors Affecting Performance
Global emerging markets posted a third consecutive calendar year of double-digit returns. The asset class appreciated 34.00% in 2005, following returns of 25.60% in 2004 and 55.30% in 2003. Emerging markets continued to outperform developed markets as well, beating the S&P 500® Index by 29 percentage points and developed international markets, as measured by the MSCI EAFE Index, by 20 percentage points.
During the year, the emerging market asset class benefited from strong macroeconomic growth, good corporate governance, and attractive commodity prices. Latin America was the star performer, appreciating 50% (Index return); followed by Europe, Middle East and Africa (EMEA), returning 38.4%; and Asia, gaining 26.8%.
Egypt, Colombia, Russia, Jordan and Argentina were among the best performing countries in the emerging markets region. Countries posting negative returns in the region were Venezuela, which lagged most significantly, followed by Malaysia and Taiwan.
Overall country allocation contributed favorably to the Funds performance. The Funds underweight to Taiwan, and overweights to Mexico, Brazil and India were among the key drivers of relative performance. Overweights to Russia, up 73% for the year, and Egypt, up 161%, further enhanced performance.
Stock selection detracted from performance. The Funds underweight in energy companies in China, South Africa and Russia slowed its pace.
An underweight to South Korea, which rose 58%, tempered relative performance as well.
Management Strategies
Relative to the Index, the Fund is overweight in Latin America and EMEA and underweight in Asia. As of the close of the period, Russia, Mexico, Brazil, Turkey and Poland were the focal areas of the Fund. In contrast, the Fund is underweight in South Korea, Taiwan, Israel, Malaysia and China.
The Fund is positioned for secular growth with overweights versus the Index in the consumer staples, consumer discretionary and wireless telecommunications sectors.
We increased the Funds exposure to select Chinese banking stocks, given the improved banking dynamics in the country and the rising consumer credit sector.
On a country level, we trimmed the Funds position in Egypt and exited the market prior to the close of the reporting period. This strategy reflected our analysis of the slowdown in reform momentum and expensive valuations. We increased the Funds position in South Korea and South Africa by focusing on stocks with visible growth supported by domestic demand. We continued to emphasize Russia from a bottom-up and top-down perspective, given its overall economic conditions. Throughout the year, we increased the Funds exposure to Russia, focusing on domestic-oriented sectors and select energy stocks.
Sincerely, |
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Ronald E. Robison |
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President and Principal Executive Officer |
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|
January 2006 |
The Fund announced in February 2006, that it will be managed by the Emerging Markets team. Current members of the team, all of Morgan Stanley Investment Management Inc., include Narayan Ramachandran, a Managing Director, Ruchir Sharma, a Managing Director and Paul Psaila, an Executive Director.
2
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Morgan Stanley Emerging Markets Fund, Inc. |
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Portfolio of Investments |
December 31, 2005 |
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|
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|
Value |
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|
|
|
Shares |
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(000) |
|
|
COMMON STOCKS (97.2%) |
|
|
|
|
|
|
(Unless Otherwise Noted) |
|
|
|
|
|
|
Austria (0.3%) |
|
|
|
|
|
|
Commercial Banks |
|
|
|
|
|
|
Raiffeisen International Bank |
|
|
|
|
|
|
Holding AG |
|
(a)22,687 |
|
$ |
1,492 |
|
Bermuda (0.3%) |
|
|
|
|
|
|
Media |
|
|
|
|
|
|
Central European Media |
|
22,900 |
|
1,326 |
|
|
Brazil (12.5%) |
|
|
|
|
|
|
Aerospace & Defense |
|
|
|
|
|
|
Empresa Brasileira de |
|
71,180 |
|
2,783 |
|
|
Commercial Banks |
|
|
|
|
|
|
Banco Itau Holding Financeira |
|
91,920 |
|
2,213 |
|
|
Banco Itau Holding |
|
177,215 |
|
4,257 |
|
|
Banco Nacional |
|
(a)(b)(f)61,598,720 |
|
@ |
|
|
Investimentos Itau |
|
544,535 |
|
1,723 |
|
|
Unibanco - Uniao de Bancos |
|
51,431 |
|
646 |
|
|
Unibanco - Uniao de Bancos |
|
66,950 |
|
4,256 |
|
|
|
|
|
|
13,095 |
|
|
Diversified Telecommunication Services |
|
|
|
|
|
|
Embratel Participacoes SA |
|
(a)625,892,200 |
|
1,820 |
|
|
Electric Utilities |
|
|
|
|
|
|
CEMIG SA (Preference) |
|
6,607,608 |
|
268 |
|
|
CEMIG SA ADR |
|
37,000 |
|
1,364 |
|
|
Cia Paranaense de Energia |
|
52,200 |
|
393 |
|
|
Cia Paranaense de Energia, |
|
108,221,000 |
|
833 |
|
|
CPFL Energia SA |
|
116,010 |
|
1,389 |
|
|
CPFL Energia SA ADR |
|
8,210 |
|
286 |
|
|
|
|
|
|
4,533 |
|
|
Food & Staples Retailing |
|
|
|
|
|
|
Cia Brasileira de Distribuicao |
|
29,600 |
|
974 |
|
|
Food Products |
|
|
|
|
|
|
Perdigao SA (Preference) |
|
31,400 |
|
1,060 |
|
|
Independent Power Producers & |
|
|
|
|
|
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Tractebel Energia SA |
|
143,000 |
|
920 |
|
|
Metals & Mining |
|
|
|
|
|
|
CVRD ADR (Preference) |
|
223,092 |
|
$ |
8,087 |
|
CVRD ADR |
|
13,500 |
|
555 |
|
|
CVRD, A (Preference) |
|
4,313 |
|
155 |
|
|
Gerdau SA (Preference) |
|
110,700 |
|
1,861 |
|
|
Gerdau SA ADR |
|
39,627 |
|
661 |
|
|
|
|
|
|
11,319 |
|
|
Oil, Gas & Consumable Fuels |
|
|
|
|
|
|
Petrobras SA (Preference) |
|
114,316 |
|
1,819 |
|
|
Petrobras SA ADR |
|
85,363 |
|
6,084 |
|
|
Petrobras SA ADR |
|
129,056 |
|
8,307 |
|
|
|
|
|
|
16,210 |
|
|
Road & Rail |
|
|
|
|
|
|
All America Latina Logistica SA |
|
38,120 |
|
1,626 |
|
|
Wireless Telecommunication Services |
|
|
|
|
|
|
Telesp Celular Participacoes SA |
|
(a)14,157 |
|
51 |
|
|
Telesp Celular |
|
(a)278,676 |
|
1,055 |
|
|
|
|
|
|
1,106 |
|
|
|
|
|
|
55,446 |
|
|
Chile (0.6%) |
|
|
|
|
|
|
Electric Utilities |
|
|
|
|
|
|
Enersis SA ADR |
|
245,870 |
|
2,702 |
|
|
China/Hong Kong (5.4%) |
|
|
|
|
|
|
Airlines |
|
|
|
|
|
|
Air China Ltd., H |
|
(a)210,000 |
|
67 |
|
|
Commercial Banks |
|
|
|
|
|
|
China Construction Bank, H |
|
(a)(d)6,756,000 |
|
2,353 |
|
|
Communications Equipment |
|
|
|
|
|
|
China Techfaith Wireless |
|
29,300 |
|
396 |
|
|
Computers & Peripherals |
|
|
|
|
|
|
TPV Technology Ltd. |
|
1,929,000 |
|
1,902 |
|
|
Electric Utilities |
|
|
|
|
|
|
Huadian Power International Co. |
|
2,708,000 |
|
691 |
|
|
Electronic Equipment & Instruments |
|
|
|
|
|
|
Kingboard Chemical |
|
473,000 |
|
1,281 |
|
|
Food Products |
|
|
|
|
|
|
Global Bio-Chem Technology |
|
3,451,000 |
|
1,513 |
|
|
Health Care Equipment & Supplies |
|
|
|
|
|
|
Moulin Global Eyecare |
|
(a)(b)(f)568,000 |
|
@ |
|
|
The accompanying notes are an integral part of the financial statements. |
3 |
|
Morgan Stanley Emerging Markets Fund, Inc. |
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|
Portfolio of Investments (contd) |
December 31, 2005 |
|
|
|
|
Value |
|
|
|
|
Shares |
|
(000) |
|
|
China/Hong Kong (contd) |
|
|
|
|
|
|
Household Durables |
|
|
|
|
|
|
Grande Holdings Ltd. |
|
536,000 |
|
$ |
415 |
|
Independent Power Producers & |
|
|
|
|
|
|
China Resources Power |
|
1,887,000 |
|
1,065 |
|
|
Insurance |
|
|
|
|
|
|
China Life Insurance Co., Ltd. |
|
(a)1,863,000 |
|
1,646 |
|
|
Ping An Insurance Group |
|
792,000 |
|
1,461 |
|
|
|
|
|
|
3,107 |
|
|
Metals & Mining |
|
|
|
|
|
|
Asia Aluminum Holdings Ltd. |
|
(a)7,284,000 |
|
629 |
|
|
Oil, Gas & Consumable Fuels |
|
|
|
|
|
|
PetroChina Co., Ltd., H |
|
3,536,000 |
|
2,896 |
|
|
Specialty Retail |
|
|
|
|
|
|
GOME Electrical Appliances |
|
3,172,000 |
|
2,148 |
|
|
Textiles, Apparel & Luxury Goods |
|
|
|
|
|
|
Victory City International |
|
1,051,000 |
|
305 |
|
|
Trading Companies & Distributors |
|
|
|
|
|
|
Shougang Concord Century |
|
3,415,000 |
|
163 |
|
|
Transportation Infrastructure |
|
|
|
|
|
|
Hopewell Highway |
|
1,226,000 |
|
814 |
|
|
Wireless Telecommunication Services |
|
|
|
|
|
|
China Mobile Hong Kong Ltd. |
|
598,000 |
|
2,830 |
|
|
China Unicom Ltd. |
|
1,480,000 |
|
1,203 |
|
|
|
|
|
|
4,033 |
|
|
|
|
|
|
23,778 |
|
|
Colombia (0.5%) |
|
|
|
|
|
|
Commercial Banks |
|
|
|
|
|
|
BanColombia SA ADR |
|
70,470 |
|
2,032 |
|
|
Hungary (0.7%) |
|
|
|
|
|
|
Pharmaceuticals |
|
|
|
|
|
|
Gedeon Richter Rt. |
|
18,119 |
|
3,255 |
|
|
India (6.7%) |
|
|
|
|
|
|
Automobiles |
|
|
|
|
|
|
Hero Honda Motors Ltd. |
|
93,400 |
|
1,784 |
|
|
Mahindra & Mahindra Ltd. |
|
141,000 |
|
1,605 |
|
|
|
|
|
|
3,389 |
|
|
Commercial Banks |
|
|
|
|
|
|
HDFC Bank Ltd. |
|
88,000 |
|
1,386 |
|
|
ICICI Bank Ltd. ADR |
|
12,000 |
|
346 |
|
|
Punjab National Bank Ltd. |
|
(b)91,500 |
|
1,005 |
|
|
UTI Bank Ltd. |
|
(a)66,000 |
|
$ |
420 |
|
UTI Bank Ltd. GDR |
|
83,000 |
|
530 |
|
|
|
|
|
|
3,687 |
|
|
Construction & Engineering |
|
|
|
|
|
|
Punj Lloyd Ltd. |
|
2,869 |
|
44 |
|
|
Construction Materials |
|
|
|
|
|
|
Gujarat Ambuja Cements |
|
547,500 |
|
958 |
|
|
Gujarat Ambuja Cements Ltd. |
|
127,500 |
|
226 |
|
|
|
|
|
|
1,184 |
|
|
Electrical Equipment |
|
|
|
|
|
|
ABB Ltd. |
|
35,281 |
|
1,509 |
|
|
Bharat Heavy Electricals Ltd. |
|
146,200 |
|
4,507 |
|
|
Siemens India Ltd. |
|
14,000 |
|
1,124 |
|
|
|
|
|
|
7,140 |
|
|
Household Products |
|
|
|
|
|
|
Hindustan Lever Ltd. |
|
354,500 |
|
1,554 |
|
|
Internet Software & Services |
|
|
|
|
|
|
IndiaInfo.com PCL |
|
(b)(f)116,052 |
|
@ |
|
|
IT Services |
|
|
|
|
|
|
Infosys Technologies Ltd. |
|
54,408 |
|
3,624 |
|
|
Wipro Ltd. |
|
101,000 |
|
1,040 |
|
|
|
|
|
|
4,664 |
|
|
Metals & Mining |
|
|
|
|
|
|
Hindalco Industries Ltd. |
|
178,000 |
|
567 |
|
|
Oil, Gas & Consumable Fuels |
|
|
|
|
|
|
Reliance Industries Ltd. |
|
49,000 |
|
969 |
|
|
Pharmaceuticals |
|
|
|
|
|
|
Aventis Pharma Ltd. |
|
26,000 |
|
957 |
|
|
Cipla Ltd. |
|
105,500 |
|
1,040 |
|
|
Glenmark Pharmaceuticals Ltd. |
|
115,000 |
|
803 |
|
|
|
|
|
|
2,800 |
|
|
Road & Rail |
|
|
|
|
|
|
Container Corp. of India Ltd. |
|
34,635 |
|
1,116 |
|
|
Thrifts & Mortgage Finance |
|
|
|
|
|
|
Housing Development |
|
53,500 |
|
1,435 |
|
|
Tobacco |
|
|
|
|
|
|
ITC Ltd. |
|
180,000 |
|
568 |
|
|
ITC Ltd. GDR (Registered) |
|
140,500 |
|
437 |
|
|
|
|
|
|
1,005 |
|
|
|
|
|
|
29,554 |
|
|
Indonesia (0.2%) |
|
|
|
|
|
|
Commercial Banks |
|
|
|
|
|
|
Bank Mandiri Persero Tbk PT |
|
4,730,500 |
|
789 |
|
4 |
The accompanying notes are an integral part of the financial statements. |
|
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Portfolio of Investments (contd) |
December 31, 2005 |
|
|
|
|
Value |
|
|
|
|
Shares |
|
(000) |
|
|
Israel (0.0%) |
|
|
|
|
|
|
Aerospace & Defense |
|
|
|
|
|
|
Elbit Systems Ltd. |
|
1 |
|
$ |
@ |
|
Malaysia (1.3%) |
|
|
|
|
|
|
Commercial Banks |
|
|
|
|
|
|
Commerce Asset Holdings Bhd |
|
503,000 |
|
759 |
|
|
Construction & Engineering |
|
|
|
|
|
|
Road Builder (M) Holdings Bhd |
|
434,500 |
|
160 |
|
|
Electric Utilities |
|
|
|
|
|
|
Tenaga Nasional Bhd |
|
613,200 |
|
1,606 |
|
|
Food Products |
|
|
|
|
|
|
IOI Corp. Bhd |
|
202,000 |
|
663 |
|
|
Hotels, Restaurants & Leisure |
|
|
|
|
|
|
Magnum Corp. Bhd |
|
1,084,000 |
|
545 |
|
|
Resorts World Bhd |
|
210,000 |
|
622 |
|
|
|
|
|
|
1,167 |
|
|
Multi-Utilities |
|
|
|
|
|
|
YTL Corp. Bhd |
|
789,933 |
|
1,118 |
|
|
Real Estate |
|
|
|
|
|
|
Bandar Raya Developments Bhd |
|
729,000 |
|
167 |
|
|
MK Land Holdings Bhd |
|
973,700 |
|
131 |
|
|
|
|
|
|
298 |
|
|
|
|
|
|
5,771 |
|
|
Mexico (10.5%) |
|
|
|
|
|
|
Beverages |
|
|
|
|
|
|
Femsa ADR |
|
58,800 |
|
4,264 |
|
|
Construction & Engineering |
|
|
|
|
|
|
Empresas ICA Sociedad |
|
6,275 |
|
183 |
|
|
Empresas ICA Sociedad |
|
(a)219,866 |
|
538 |
|
|
|
|
|
|
721 |
|
|
Food & Staples Retailing |
|
|
|
|
|
|
Wal-Mart de Mexico SA de CV, V |
|
2,036,258 |
|
11,299 |
|
|
Wal-Mart de Mexico SA de |
|
49,915 |
|
2,769 |
|
|
|
|
|
|
14,068 |
|
|
Household Products |
|
|
|
|
|
|
Kimberly-Clark de Mexico |
|
395,190 |
|
1,412 |
|
|
Media |
|
|
|
|
|
|
Grupo Televisa SA ADR |
|
146,590 |
|
11,801 |
|
|
Wireless Telecommunication Services |
|
|
|
|
|
|
America Movil SA de CV, L ADR |
|
492,831 |
|
14,420 |
|
|
|
|
|
|
46,686 |
|
|
Morocco (0.8%) |
|
|
|
|
|
|
Commercial Banks |
|
|
|
|
|
|
Attijariwafa Bank |
|
3,099 |
|
$ |
416 |
|
Banque Marocaine du |
|
16,900 |
|
1,374 |
|
|
|
|
|
|
1,790 |
|
|
Industrial Conglomerates |
|
|
|
|
|
|
ONA SA |
|
16,800 |
|
1,946 |
|
|
|
|
|
|
3,736 |
|
|
Pakistan (0.5%) |
|
|
|
|
|
|
Commercial Banks |
|
|
|
|
|
|
National Bank of Pakistan |
|
232,600 |
|
776 |
|
|
Diversified Telecommunication Services |
|
|
|
|
|
|
Pakistan Telecommunication Co., |
|
1,180,800 |
|
1,292 |
|
|
|
|
|
|
2,068 |
|
|
Peru (0.2%) |
|
|
|
|
|
|
Commercial Banks |
|
|
|
|
|
|
Credicorp Ltd. |
|
42,200 |
|
962 |
|
|
Poland (3.6%) |
|
|
|
|
|
|
Commercial Banks |
|
|
|
|
|
|
Bank Millennium SA |
|
297,265 |
|
481 |
|
|
Bank Pekao SA |
|
54,905 |
|
2,949 |
|
|
Powszechna Kasa Oszczednosci |
|
308,037 |
|
2,750 |
|
|
|
|
|
|
6,180 |
|
|
Diversified Telecommunication Services |
|
|
|
|
|
|
Telekomunikacja Polska SA GDR |
|
207,000 |
|
1,487 |
|
|
Food & Staples Retailing |
|
|
|
|
|
|
Central European |
|
59,800 |
|
2,400 |
|
|
Media |
|
|
|
|
|
|
Agora SA |
|
79,967 |
|
1,698 |
|
|
TVN SA |
|
(a)136,093 |
|
3,268 |
|
|
|
|
|
|
4,966 |
|
|
Oil, Gas & Consumable Fuels |
|
|
|
|
|
|
Polski Koncern Naftowy |
|
53,736 |
|
1,037 |
|
|
|
|
|
|
16,070 |
|
|
Russia (10.3%) |
|
|
|
|
|
|
Beverages |
|
|
|
|
|
|
Efes Breweries International |
|
(a)47,959 |
|
1,364 |
|
|
Commercial Banks |
|
|
|
|
|
|
Sberbank RF |
|
51,050 |
|
6,672 |
|
|
Electric Utilities |
|
|
|
|
|
|
Unified Energy System ADR |
|
31,418 |
|
1,332 |
|
|
The accompanying notes are an integral part of the financial statements. |
5 |
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Portfolio of Investments (contd) |
December 31, 2005 |
|
|
|
|
Value |
|
|
|
|
Shares |
|
(000) |
|
|
Russia (contd) |
|
|
|
|
|
|
Food & Staples Retailing |
|
|
|
|
|
|
Pyaterochka Holding GDR |
|
(a)(d)90,061 |
|
$ |
1,301 |
|
Pyaterochka Holding N.V. GDR |
|
100,939 |
|
1,459 |
|
|
|
|
|
|
2,760 |
|
|
Food Products |
|
|
|
|
|
|
Wimm-Bill-Dann Foods OJSC ADR |
|
107,600 |
|
2,586 |
|
|
Metals & Mining |
|
|
|
|
|
|
Highland Gold Mining Ltd. |
|
390,800 |
|
1,651 |
|
|
MMC Norilsk Nickel ADR |
|
20,200 |
|
1,915 |
|
|
|
|
|
|
3,566 |
|
|
Oil, Gas & Consumable Fuels |
|
|
|
|
|
|
LUKOIL ADR |
|
287,796 |
|
17,124 |
|
|
OAO Gazprom ADR |
|
55,600 |
|
4,058 |
|
|
Surgutneftegaz ADR |
|
40,860 |
|
2,227 |
|
|
|
|
|
|
23,409 |
|
|
Paper & Forest Products |
|
|
|
|
|
|
Alliance Cellulose Ltd., B |
|
(b)(f)156,075 |
|
@ |
|
|
Wireless Telecommunication Services |
|
|
|
|
|
|
Mobile Telesystems ADR |
|
41,600 |
|
1,456 |
|
|
Mobile Telesystems GDR |
|
69,600 |
|
2,438 |
|
|
|
|
|
|
3,894 |
|
|
|
|
|
|
45,583 |
|
|
South Africa (12.7%) |
|
|
|
|
|
|
Commercial Banks |
|
|
|
|
|
|
Standard Bank Group Ltd. |
|
594,217 |
|
7,119 |
|
|
Construction & Engineering |
|
|
|
|
|
|
Aveng Ltd. |
|
881,100 |
|
2,505 |
|
|
Construction Materials |
|
|
|
|
|
|
Pretoria Portland Cement |
|
41,700 |
|
2,022 |
|
|
Diversified Financial Services |
|
|
|
|
|
|
African Bank Investments Ltd. |
|
984,500 |
|
3,812 |
|
|
Food & Staples Retailing |
|
|
|
|
|
|
Massmart Holdings Ltd. |
|
90,826 |
|
741 |
|
|
Shoprite Holdings Ltd. |
|
802,600 |
|
2,338 |
|
|
|
|
|
|
3,079 |
|
|
Food Products |
|
|
|
|
|
|
Tiger Brands Ltd. |
|
223,490 |
|
5,139 |
|
|
Household Durables |
|
|
|
|
|
|
Steinhoff International |
|
1,060,100 |
|
3,141 |
|
|
Industrial Conglomerates |
|
|
|
|
|
|
Murray & Roberts Holdings Ltd. |
|
503,380 |
|
1,559 |
|
|
Media |
|
|
|
|
|
|
Naspers Ltd., N |
|
370,060 |
|
$ |
6,551 |
|
Metals & Mining |
|
|
|
|
|
|
Harmony Gold Mining Co., Ltd. |
|
(a)188,229 |
|
2,526 |
|
|
Harmony Gold Mining Co., |
|
176,496 |
|
2,303 |
|
|
Impala Platinum Holdings Ltd. |
|
18,235 |
|
2,686 |
|
|
|
|
|
|
7,515 |
|
|
Multiline Retail |
|
|
|
|
|
|
Woolworths Holdings Ltd. |
|
146,900 |
|
330 |
|
|
Specialty Retail |
|
|
|
|
|
|
Edgars Consolidated Stores Ltd. |
|
574,200 |
|
3,191 |
|
|
J.D. Group Ltd. |
|
213,600 |
|
2,587 |
|
|
|
|
|
|
5,778 |
|
|
Wireless Telecommunication Services |
|
|
|
|
|
|
MTN Group Ltd. |
|
757,540 |
|
7,441 |
|
|
|
|
|
|
55,991 |
|
|
South Korea (14.1%) |
|
|
|
|
|
|
Auto Components |
|
|
|
|
|
|
Hankook Tire Co., Ltd. |
|
(a)93,430 |
|
1,321 |
|
|
Hyundai Mobis |
|
(a)29,960 |
|
2,748 |
|
|
|
|
|
|
4,069 |
|
|
Automobiles |
|
|
|
|
|
|
Hyundai Motor Co. |
|
(a)30,050 |
|
2,902 |
|
|
Hyundai Motor Co. (2nd |
|
(a)23,730 |
|
1,616 |
|
|
|
|
|
|
4,518 |
|
|
Commercial Banks |
|
|
|
|
|
|
Kookmin Bank |
|
(a)54,080 |
|
4,106 |
|
|
Pusan Bank |
|
(a)79,430 |
|
1,045 |
|
|
Shinhan Financial Group Co., Ltd. |
|
(a)90,750 |
|
3,697 |
|
|
Woori Finance Holdings Co., Ltd. |
|
(a)99,000 |
|
1,975 |
|
|
|
|
|
|
10,823 |
|
|
Construction & Engineering |
|
|
|
|
|
|
Daelim Industrial Co. |
|
(a)12,670 |
|
906 |
|
|
Doosan Heavy Industries and |
|
(a)92,420 |
|
3,481 |
|
|
GS Engineering & Construction |
|
(a)52,200 |
|
2,746 |
|
|
|
|
|
|
7,133 |
|
|
Electronic Equipment & Instruments |
|
|
|
|
|
|
Samsung SDI Co., Ltd. |
|
(a)18,940 |
|
2,190 |
|
|
Food Products |
|
|
|
|
|
|
Orion Corp. |
|
(a)13,749 |
|
3,828 |
|
|
Household Durables |
|
|
|
|
|
|
Woongjin Coway Co., Ltd. |
|
40,620 |
|
966 |
|
6 |
The accompanying notes are an integral part of the financial statements. |
|
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Portfolio of Investments (contd) |
December 31, 2005 |
|
|
|
|
Value |
|
|
|
|
Shares |
|
(000) |
|
|
South Korea (contd) |
|
|
|
|
|
|
Insurance |
|
|
|
|
|
|
Samsung Fire & Marine |
|
17,245 |
|
$ |
2,191 |
|
Internet Software & Services |
|
|
|
|
|
|
NHN Corp. |
|
(a)6,530 |
|
1,750 |
|
|
Machinery |
|
|
|
|
|
|
Doosan Infracore Co., Ltd. |
|
(a)49,380 |
|
887 |
|
|
Hanjin Heavy Industries & |
|
(a)51,580 |
|
1,203 |
|
|
|
|
|
|
2,090 |
|
|
Metals & Mining |
|
|
|
|
|
|
Korea Zinc Co., Ltd. |
|
(a)24,600 |
|
1,245 |
|
|
Oil, Gas & Consumable Fuels |
|
|
|
|
|
|
S-Oil Corp. |
|
11,550 |
|
809 |
|
|
SK Corp. |
|
(a)44,690 |
|
2,311 |
|
|
|
|
|
|
3,120 |
|
|
Personal Products |
|
|
|
|
|
|
Amorepacific Corp. |
|
(a)2,717 |
|
852 |
|
|
Pharmaceuticals |
|
|
|
|
|
|
Hanmi Pharm Co., Ltd. |
|
(a)6,573 |
|
907 |
|
|
Semiconductors & Semiconductor Equipment |
|
|
|
|
|
|
Samsung Electronics Co., Ltd. |
|
14,471 |
|
9,466 |
|
|
Samsung Electronics Co., |
|
6,581 |
|
3,207 |
|
|
|
|
|
|
12,673 |
|
|
Textiles, Apparel & Luxury Goods |
|
|
|
|
|
|
Cheil Industries, Inc. |
|
(a)42,610 |
|
1,188 |
|
|
Tobacco |
|
|
|
|
|
|
KT&G Corp. |
|
(a)58,990 |
|
2,638 |
|
|
|
|
|
|
62,181 |
|
|
Taiwan (8.8%) |
|
|
|
|
|
|
Airlines |
|
|
|
|
|
|
Eva Airways Corp. |
|
294 |
|
@ |
|
|
Auto Components |
|
|
|
|
|
|
Cheng Shin Rubber Industry |
|
586,967 |
|
518 |
|
|
Commercial Banks |
|
|
|
|
|
|
Chinatrust Financial Holding Co. |
|
1,736,345 |
|
1,375 |
|
|
Taishin Financial Holdings |
|
1,386,139 |
|
727 |
|
|
|
|
|
|
2,102 |
|
|
Computers & Peripherals |
|
|
|
|
|
|
Acer, Inc. |
|
539,000 |
|
1,355 |
|
|
Compal Electronics, Inc. |
|
1,538,000 |
|
1,387 |
|
|
High Tech Computer Corp. |
|
110,000 |
|
2,064 |
|
|
Infortrend Technology, Inc. |
|
261,000 |
|
$ |
396 |
|
|
|
|
|
5,202 |
|
|
Construction & Engineering |
|
|
|
|
|
|
CTCI Corp. |
|
829,258 |
|
347 |
|
|
Diversified Financial Services |
|
|
|
|
|
|
Polaris Securities Co., Ltd. |
|
1,031,907 |
|
467 |
|
|
Electrical Equipment |
|
|
|
|
|
|
Phoenixtec Power Co., Ltd. |
|
577,730 |
|
630 |
|
|
Electronic Equipment & Instruments |
|
|
|
|
|
|
AU Optronics Corp. |
|
3,366,150 |
|
5,025 |
|
|
Delta Electronics, Inc. |
|
1,053,479 |
|
2,160 |
|
|
Delta Electronics, Inc. GDR |
|
70,867 |
|
726 |
|
|
HON HAI Precision Industry |
|
538,821 |
|
2,954 |
|
|
Radiant Opto-Electronics |
|
291,785 |
|
711 |
|
|
|
|
|
|
11,576 |
|
|
Household Durables |
|
|
|
|
|
|
Tsann Kuen Enterprise Co., Ltd. |
|
643,347 |
|
1,076 |
|
|
Insurance |
|
|
|
|
|
|
Cathay Financial Holding |
|
1,036,000 |
|
1,878 |
|
|
Shin Kong Financial Holding |
|
3,562,895 |
|
2,773 |
|
|
|
|
|
|
4,651 |
|
|
Leisure Equipment & Products |
|
|
|
|
|
|
Asia Optical Co., Inc. |
|
16,000 |
|
110 |
|
|
Largan Precision Co., Ltd. |
|
117,798 |
|
1,859 |
|
|
|
|
|
|
1,969 |
|
|
Machinery |
|
|
|
|
|
|
Kaulin Manufacturing Co., Ltd. |
|
368,602 |
|
335 |
|
|
Metals & Mining |
|
|
|
|
|
|
China Steel Corp. |
|
1,088,550 |
|
829 |
|
|
Oil, Gas & Consumable Fuels |
|
|
|
|
|
|
Formosa Petrochemical Corp. |
|
703,000 |
|
1,246 |
|
|
Semiconductors & Semiconductor Equipment |
|
|
|
|
|
|
MediaTek, Inc. |
|
260,597 |
|
3,072 |
|
|
Taiwan Semiconductor |
|
684,000 |
|
1,302 |
|
|
Vanguard International |
|
1,398,913 |
|
1,066 |
|
|
|
|
|
|
5,440 |
|
|
Software |
|
|
|
|
|
|
Cyberlink Corp. |
|
32,000 |
|
88 |
|
|
Springsoft, Inc. |
|
466,641 |
|
765 |
|
|
|
|
|
|
853 |
|
|
Wireless Telecommunication Services |
|
|
|
|
|
|
Far EasTone Telecommunications |
|
704,000 |
|
797 |
|
|
The accompanying notes are an integral part of the financial statements. |
7 |
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Portfolio of Investments (contd) |
December 31, 2005 |
|
|
|
|
Value |
|
|
|
|
Shares |
|
(000) |
|
|
Taiwan (contd) |
|
|
|
|
|
|
Wireless Telecommunication Services (contd) |
|
|
|
|
|
|
Taiwan Mobile Co., Ltd. |
|
958,000 |
|
$ |
837 |
|
|
|
|
|
1,634 |
|
|
|
|
|
|
38,875 |
|
|
Thailand (2.5%) |
|
|
|
|
|
|
Commercial Banks |
|
|
|
|
|
|
Bangkok Bank PCL |
|
442,600 |
|
1,241 |
|
|
Kasikornbank PCL (Foreign) |
|
485,100 |
|
887 |
|
|
Siam City Bank PCL |
|
741,700 |
|
439 |
|
|
Siam Commercial Bank PCL |
|
238,600 |
|
302 |
|
|
|
|
|
|
2,869 |
|
|
Construction & Engineering |
|
|
|
|
|
|
CH. Karnchang PCL |
|
(b)1,305,300 |
|
385 |
|
|
Italian-Thai Development |
|
(b)4,172,300 |
|
839 |
|
|
|
|
|
|
1,224 |
|
|
Diversified Telecommunication Services |
|
|
|
|
|
|
True Corp. PCL (Foreign) |
|
(a)1,570,800 |
|
383 |
|
|
Food & Staples Retailing |
|
|
|
|
|
|
CP Seven Eleven PCL |
|
(b)5,122,000 |
|
737 |
|
|
Siam Makro PCL (Foreign) |
|
(b)100,700 |
|
170 |
|
|
|
|
|
|
907 |
|
|
Household Durables |
|
|
|
|
|
|
Asian Property |
|
(b)3,878,600 |
|
323 |
|
|
Lalin Property PCL (Foreign) |
|
(b)1,145,300 |
|
138 |
|
|
Land & Houses PCL |
|
2,547,100 |
|
553 |
|
|
|
|
|
|
1,014 |
|
|
Oil, Gas & Consumable Fuels |
|
|
|
|
|
|
PTT PCL (Foreign) |
|
(b)278,300 |
|
1,533 |
|
|
Thai Oil PCL (Foreign) |
|
(b)365,800 |
|
566 |
|
|
|
|
|
|
2,099 |
|
|
Real Estate |
|
|
|
|
|
|
MBK PCL (Foreign) |
|
(b)207,300 |
|
225 |
|
|
Wireless Telecommunication Services |
|
|
|
|
|
|
Advanced Info Service PCL |
|
582,200 |
|
1,505 |
|
|
Total Access |
|
|
|
|
|
|
Communication PCL |
|
(a)321,000 |
|
1,040 |
|
|
|
|
|
|
2,545 |
|
|
|
|
|
|
11,266 |
|
|
Turkey (4.7%) |
|
|
|
|
|
|
Airlines |
|
|
|
|
|
|
Turk Hava Yollari AS |
|
(a)444,308 |
|
$ |
2,780 |
|
Commercial Banks |
|
|
|
|
|
|
Turkiye Garanti Bankasi AS |
|
(a)563,401 |
|
2,044 |
|
|
Turkiye Vakiflar Bankasi Tao AS |
|
(a)221,200 |
|
1,171 |
|
|
Yapi ve Kredi Bankasi AS |
|
(a)687,963 |
|
3,210 |
|
|
|
|
|
|
6,425 |
|
|
Construction Materials |
|
|
|
|
|
|
Akcansa Cimento AS |
|
285,781 |
|
1,735 |
|
|
Diversified Financial Services |
|
|
|
|
|
|
Haci Omer Sabanci Holding AS |
|
369,600 |
|
2,094 |
|
|
Food & Staples Retailing |
|
|
|
|
|
|
BIM Birlesik Magazalar AS |
|
(a)70,330 |
|
1,744 |
|
|
Industrial Conglomerates |
|
|
|
|
|
|
Enka Insaat ve Sanayi AS |
|
37,038 |
|
461 |
|
|
Media |
|
|
|
|
|
|
Dogan Yayin Holding AS |
|
(a)671,973 |
|
2,662 |
|
|
Hurriyet Gazetecilik ve |
|
702,092 |
|
2,755 |
|
|
|
|
|
|
5,417 |
|
|
|
|
|
|
20,656 |
|
|
TOTAL COMMON STOCKS |
|
|
|
|
|
|
(Cost $289,074) |
|
|
|
430,219 |
|
|
INVESTMENT COMPANIES (1.1%) |
|
|
|
|
|
|
India (0.8%) |
|
|
|
|
|
|
Morgan Stanley Growth Fund |
|
(a)(c)4,694,400 |
|
3,458 |
|
|
Poland (0.3%) |
|
|
|
|
|
|
Narodowy Fundusz |
|
(a)762,586 |
|
1,596 |
|
|
TOTAL INVESTMENT COMPANIES |
|
|
|
|
|
|
(Cost $2,299) |
|
|
|
5,054 |
|
|
|
|
|
Face |
|
|
|
|
|
|
|
Amount |
|
|
|
|
|
|
|
(000) |
|
|
|
DEBT INSTRUMENTS (0.0%) |
|
|
|
|
|
|
|
India (0.0%) |
|
|
|
|
|
|
|
Metals & Mining |
|
|
|
|
|
|
|
Shri Ishar Alloy Steels Ltd. |
|
INR |
|
(b)(f)581 |
|
@ |
|
8 |
The accompanying notes are an integral part of the financial statements. |
|
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Portfolio of Investments (contd) |
December 31, 2005 |
|
|
Face |
|
|
|
||
|
|
Amount |
|
Value |
|
||
|
|
(000) |
|
(000 |
|
||
SHORT-TERM INVESTMENT (7.0%) |
|
|
|
|
|
||
United States (7.0%) |
|
|
|
|
|
||
Repurchase Agreement |
|
|
|
|
|
||
J.P. Morgan Securities, Inc., 4.05%, |
|
$ |
(e)31,025 |
|
$ |
31,025 |
|
TOTAL INVESTMENTS (105.3%) |
|
|
|
|
|
||
(Cost $322,807) |
|
|
|
466,298 |
|
||
LIABILITIES IN EXCESS OF OTHER ASSETS (-5.3%) |
|
|
|
(23,564) |
|
||
NET ASSETS (100%) |
|
|
|
$ |
442,734 |
|
|
(a) Non-income producing security.
(b) Security was valued at fair value At December 31, 2005, the Fund held $5,921,000 of fair valued securities, representing 1.3% of net assets.
(c) The Morgan Stanley Growth Fund, acquired at a cost of $891,309, is advised by an affiliate of the Adviser. During the year ended December 31, 2005, there were no purchases or sales of this security. The Fund derived no income from this security during the year ended December 31, 2005.
(d) 144A Security Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(e) Represents the Funds undivided interest in a joint repurchase agreement which has a total value of $1,000,707,000. The repurchase agreement was fully collateralized by U.S. government agency securities at the date of this Portfolio of Investments as follows: Federal Farm Credit Bank: 2.00% to 7.35%, due 1/11/06 to 10/25/33; Federal Home Loan Mortgage Corp.: 1.88% to 7.22%, due 2/9/06 to 7/15/32; Federal National Mortgage Association: 2.50% to 7.25%, due 2/15/06 to 11/15/30, which had a total value of $1,020,741,791. The investment in the repurchase agreement is through participation in a joint account with affiliated parties pursuant to exemptive relief received by the Fund from the SEC.
(f) Security has been deemed illiquid At December 31, 2005.
@ Face Amount/Value is less than $500.
ADR American Depositary Receipt
GDR Global Depositary Receipt
INR Indian Rupee
Foreign Currency Exchange Contract Information:
The Fund had the following foreign currency exchange contract(s) open at period end:
Currency |
|
Value |
|
Settlement |
|
In |
|
Value |
|
Net |
|
|||||||
HKD |
592 |
|
$ |
76 |
|
1/3/06 |
|
|
USD |
76 |
|
$ |
76 |
|
$ |
@ |
|
|
USD |
5 |
|
5 |
|
1/3/06 |
|
|
ZAR |
33 |
|
5 |
|
@ |
|
|
|||
USD |
44 |
|
44 |
|
1/4/06 |
|
|
ZAR |
280 |
|
44 |
|
@ |
|
|
|||
USD |
25 |
|
25 |
|
1/4/06 |
|
|
ZAR |
160 |
|
25 |
|
@ |
|
|
|||
USD |
103 |
|
103 |
|
1/5/06 |
|
|
ZAR |
652 |
|
103 |
|
@ |
|
|
|||
ZAR |
484 |
|
77 |
|
1/6/06 |
|
|
USD |
77 |
|
77 |
|
@ |
|
|
|||
ZAR |
1,892 |
|
298 |
|
1/9/06 |
|
|
USD |
298 |
|
298 |
|
@ |
|
|
|||
ZAR |
80,455 |
|
12,530 |
|
8/14/06 |
|
|
USD |
11,908 |
|
11,908 |
|
(622) |
|
|
|||
|
|
$ |
13,158 |
|
|
|
|
|
$ |
12,536 |
|
$ |
(622) |
|
|
HKD Hong Kong Dollar
USD United States Dollar
ZAR South African Rand
Graphic Presentation of Portfolio Holdings
The following graph depicts the Funds holdings by industry and/or security type, as a percentage of total investments.
* Industries which do not appear in the above graph, as well as those which represent less than 5% of total investments, if applicable, are included in the category labeled Other.
|
The accompanying notes are an integral part of the financial statements. |
9 |
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
|
Financial Statements |
Statement of Assets and Liabilities |
|
December 31, 2005 |
|
|
Assets: |
|
|
|
|
Investments in Securities of Unaffiliated Issuers, at Value (Cost $321,916) |
|
$ |
462,840 |
|
Investment in Security of Affiliated Issuer, at Value (Cost $891) |
|
3,458 |
|
|
Receivable for Investments Sold |
|
1,253 |
|
|
Foreign Currency, at Value (Cost $1,175) |
|
1,174 |
|
|
Dividends Receivable |
|
1,037 |
|
|
Tax Reclaims Receivable |
|
340 |
|
|
Interest Receivable |
|
7 |
|
|
Unrealized Appreciation on Foreign Currency Exchange Contracts |
|
1 |
|
|
Other |
|
10 |
|
|
Total Assets |
|
470,120 |
|
|
Liabilities: |
|
|
|
|
Payable For: |
|
|
|
|
Dividends Declared |
|
24,971 |
|
|
Investments Purchased |
|
932 |
|
|
Unrealized Depreciation on Foreign Currency Exchange Contracts |
|
623 |
|
|
Investment Advisory Fees |
|
479 |
|
|
Deferred Capital Gain Country Tax |
|
152 |
|
|
Custodian Fees |
|
85 |
|
|
Directors Fees and Expenses |
|
24 |
|
|
Bank Overdraft Payable |
|
16 |
|
|
Administration Fees |
|
11 |
|
|
Other Liabilities |
|
93 |
|
|
Total Liabilities |
|
27,386 |
|
|
Net Assets |
|
|
|
|
Applicable to 17,872,440, Issued and Outstanding $0.01 |
|
$ |
442,734 |
|
Net Asset Value Per Share |
|
$ |
24.77 |
|
Net Assets Consist of: |
|
|
|
|
Common Stock |
|
$ |
179 |
|
Paid-in Capital |
|
283,116 |
|
|
Undistributed (Distributions in Excess of) Net Investment Income |
|
(2,754 |
) |
|
Accumulated Net Realized Gain (Loss) |
|
18,011 |
|
|
Unrealized Appreciation (Depreciation) on Investments, Foreign Currency Exchange Contracts and Translations (Net of $152 Deferred Capital Gain Country Tax) |
|
144,182 |
|
|
Net Assets |
|
$ |
442,734 |
|
10 |
The accompanying notes are an integral part of the financial statements. |
|
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
|
Financial Statements |
Statement of Operations |
|
Year Ended |
||
Investment Income |
|
|
|
|
Dividends (Net of $698 of Foreign Taxes Withheld) |
|
$ |
9,247 |
|
Interest |
|
512 |
|
|
Total Investment Income |
|
9,759 |
|
|
Expenses |
|
|
|
|
Investment Advisory Fees (Note B) |
|
4,840 |
|
|
Custodian Fees (Note D) |
|
539 |
|
|
Administration Fees (Note C) |
|
310 |
|
|
Professional Fees |
|
131 |
|
|
Stockholder Reporting Expenses |
|
71 |
|
|
Stockholder Servicing Agent |
|
15 |
|
|
Directors Fees and Expenses |
|
12 |
|
|
Other Expenses |
|
74 |
|
|
Total Expenses |
|
5,992 |
|
|
Waiver of Administration Fees (Note C) |
|
(191 |
) |
|
Expense Offset (Note D) |
|
@ |
|
|
Net Expenses |
|
5,801 |
|
|
Net Investment Income (Loss) |
|
3,958 |
|
|
Net Realized Gain (Loss) on: |
|
|
|
|
Investments (Net of Country Taxes of $24) |
|
72,364 |
|
|
Foreign Currency Transactions |
|
121 |
|
|
Net Realized Gain (Loss) |
|
72,485 |
|
|
Change in Unrealized Appreciation (Depreciation) on: |
|
|
|
|
Investments (Net of Decrease in Deferred Capital Gain Country Tax Accruals of $84) |
|
42,365 |
|
|
Foreign Currency Translations |
|
694 |
|
|
Change in Unrealized Appreciation (Depreciation) |
|
43,059 |
|
|
Total Net Realized Gain (Loss) and Change in Unrealized Appreciation (Depreciation) |
|
115,544 |
|
|
Net Increase (Decrease) in Net Assets Resulting from Operations |
|
$ |
119,502 |
|
@ Amount is less than $500.
Statements of Changes in Net Assets |
|
Year Ended |
|
Year Ended |
|||
Increase (Decrease) in Net Assets |
|
|
|
|
|
||
Operations: |
|
|
|
|
|
||
Net Investment Income (Loss) |
|
$ |
3,958 |
|
$ |
3,404 |
|
Net Realized Gain (Loss) |
|
72,485 |
|
41,598 |
|
||
Change in Unrealized Appreciation (Depreciation) |
|
43,059 |
|
24,635 |
|
||
Net Increase (Decrease) in Net Assets Resulting from Operations |
|
119,502 |
|
69,637 |
|
||
Distributions from and/or in Excess of: |
|
|
|
|
|
||
Net Investment Income |
|
(6,540 |
) |
(1,620 |
) |
||
Net Realized Gains |
|
(18,432 |
) |
|
|
||
Total Distributions |
|
(24,972 |
) |
(1,620 |
) |
||
Capital Share Transactions: |
|
|
|
|
|
||
Repurchase of Shares (40,408 and 87,409 shares, respectively) |
|
(730 |
) |
(1,179 |
) |
||
Total Increase (Decrease) |
|
93,800 |
|
66,838 |
|
||
Net Assets: |
|
|
|
|
|
||
Beginning of Period |
|
348,934 |
|
282,096 |
|
||
End of Period (Including Undistributed (Distributions in Excess of) Net Investment Income of $(2,754) and $(659), respectively) |
|
$ |
442,734 |
|
$ |
348,934 |
|
|
The accompanying notes are an integral part of the financial statements. |
11 |
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Selected Per Share Data and Ratios |
Financial Highlights |
|
|
Year Ended December 31, |
|
|||||||||||||
|
|
2005 |
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
|||||
Net Asset Value, Beginning of Period |
|
$ |
19.48 |
|
$ |
15.67 |
|
$ |
10.08 |
|
$ |
10.68 |
|
$ |
11.03 |
|
Net Investment Income (Loss) |
|
0.22 |
|
0.19 |
|
0.14 |
|
0.03 |
|
0.03 |
|
|||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
6.46 |
|
3.70 |
|
5.58 |
|
(0.65 |
) |
(0.43 |
) |
|||||
Total from Investment Operations |
|
6.68 |
|
3.89 |
|
5.72 |
|
(0.62 |
) |
(0.40 |
) |
|||||
Distributions from and/or in Excess of: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Net Investment Income |
|
(0.37 |
) |
(0.09 |
) |
(0.17 |
) |
(0.01 |
) |
|
|
|||||
Net Realized Gain |
|
(1.03 |
) |
|
|
|
|
|
|
|
|
|||||
Total Distributions |
|
(1.40 |
) |
(0.09 |
) |
(0.17 |
) |
(0.01 |
) |
|
|
|||||
Anti-Dilutive Effect of Share Repurchase Program |
|
0.01 |
|
0.01 |
|
0.04 |
|
0.03 |
|
0.05 |
|
|||||
Net Asset Value, End of Period |
|
$ |
24.77 |
|
$ |
19.48 |
|
$ |
15.67 |
|
$ |
10.08 |
|
$ |
10.68 |
|
Per Share Market Value, End of Period |
|
$ |
21.92 |
|
$ |
17.57 |
|
$ |
14.71 |
|
$ |
8.34 |
|
$ |
8.63 |
|
TOTAL INVESTMENT RETURN: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Market Value |
|
31.97 |
% |
20.11 |
% |
78.24 |
% |
(3.28% |
) |
(1.37% |
) |
|||||
Net Asset Value (1) |
|
34.44 |
% |
25.07 |
% |
57.02 |
% |
(5.49% |
) |
(3.17% |
) |
|||||
RATIOS, SUPPLEMENTAL DATA: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Net Assets, End of Period (Thousands) |
|
$ |
442,734 |
|
$ |
348,934 |
|
$ |
282,096 |
|
$ |
186,568 |
|
$ |
201,117 |
|
Ratio of Expenses to Average Net Assets(2) |
|
1.50 |
% |
1.53 |
% |
1.67 |
% |
1.75 |
% |
1.85 |
% |
|||||
Ratio of Net Investment Income (Loss) to
Average Net |
|
1.02 |
% |
1.15 |
% |
1.17 |
% |
0.23 |
% |
0.21 |
% |
|||||
Portfolio Turnover Rate |
|
54 |
% |
57 |
% |
83 |
% |
75 |
% |
83 |
% |
|||||
(2) Supplemental Information on the Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Ratios Before Expenses Waived by Administrator: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Ratio of Expenses to Average Net Assets |
|
1.55 |
% |
1.54 |
% |
N/A |
|
N/A |
|
N/A |
|
|||||
Ratio of Net Investment Income (Loss) to
Average |
|
0.97 |
% |
1.14 |
% |
N/A |
|
N/A |
|
N/A |
|
(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 stockholders investment in the Fund based on market value due to differences between the market price of the stock and the net asset value per share of the Fund.
Per share amounts are based on average shares outstanding.
12 |
The accompanying notes are an integral part of the financial statements. |
|
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Notes to Financial Statements |
December 31, 2005 |
The Morgan Stanley Emerging Markets Fund, Inc. (the Fund) was incorporated on August 27, 1991 and is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940 (the 1940 Act), as amended. The Funds investment objective is long-term capital appreciation through investments primarily in equity securities.
A. Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles. Such policies are consistently followed by the Fund in the preparation of its financial statements. U.S. 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: Securities listed on a foreign exchange are valued at their closing price. Unlisted securities and listed securities not traded on the valuation date for which market quotations are readily available are valued at the mean between the current bid and asked prices obtained from reputable brokers. Equity securities listed on a U.S. exchange are valued at the latest quoted sales price on the valuation date. Equity securities listed or traded on NASDAQ, for which market quotations are available, are valued at the NASDAQ Official Closing Price. Debt securities purchased with remaining maturities of 60 days or less are valued at amortized cost, if it approximates value.
All other securities and investments for which market values are not readily available, including restricted securities, and those securities for which it is inappropriate to determine prices in accordance with the aforementioned procedures, are valued at fair value as determined in good faith under procedures adopted by the Board of Directors (the Directors), although the actual calculations may be done by others. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuers financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.
Most foreign markets close before the New York Stock Exchange (NYSE). Occasionally, developments that could affect the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If these developments are expected to materially affect the value of the securities, the valuations may be adjusted to reflect the estimated fair value as of the close of the NYSE, as determined in good faith under procedures established by the Directors.
2. Repurchase Agreements: The Fund may enter into repurchase agreements under which the Fund lends excess cash and takes possession of securities with an agreement that the counterparty will repurchase such securities. In connection with transactions in repurchase agreements, a bank as custodian for the Fund takes possession of the underlying securities (collateral), with a market value at least equal to the amount of the repurchase transaction, including principal and accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to determine the adequacy of the collateral. In the event of default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the counterparty to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings.
3. Foreign Currency Translation: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the mean of the bid and asked prices of such currencies against U.S. dollars last quoted by a major bank as follows:
investments, other assets and liabilities at the prevailing rates of exchange on the valuation date;
investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of the securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized
13
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Notes to Financial Statements (contd) |
December 31, 2005 |
foreign currency gains (losses) due to securities transactions are included in the reported net realized and unrealized gains (losses) on investment transactions and balances.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from sales and maturities of foreign currency exchange contracts, disposition of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Funds 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 Assets and Liabilities. The change in net unrealized currency gains (losses) on foreign currency translations for the period is reflected in the Statement of Operations.
A substantial portion of the Funds 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.
Prior governmental approval for foreign investments may be required under certain circumstances in some countries, and the extent of foreign investments in domestic companies may be subject to limitation in other countries. Foreign ownership limitations also may be imposed by the charters of individual companies to prevent, among other concerns, violations of foreign investment limitations. As a result, an additional class of shares (identified as Foreign in the Portfolio of Investments) may be created and offered for investment. The local and foreign shares market values may differ. In the absence of trading of the foreign shares in such markets, the Fund values the foreign shares at the closing exchange price of the local shares. Such securities, if any, are identified as fair valued on the Portfolio of Investments.
4. Derivatives: 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 Funds investment objectives and policies, the Fund may use derivatives for non-hedging as well as hedging purposes.
Following is a description of derivative instruments that the Fund has utilized and their associated risks:
Foreign Currency Exchange Contracts: The Fund may enter into foreign currency exchange contracts generally to attempt to protect securities and related receivables and payables against changes in future foreign exchange rates and, in certain situations, to gain exposure to a foreign currency. A foreign currency exchange contract is an agreement between two parties to buy or sell currency at a set price on a future date. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is marked-to-market daily and the change in market value is recorded by the Fund as unrealized gain or loss. The Fund records realized gains or losses when the contract is closed equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Risk may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and is generally limited to the amount of unrealized gain on the contracts, if any, at the date of default. Risks may also arise from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
5. Other: Security transactions are accounted for on the date the securities are purchased or sold. Realized gains and losses on the sale of investment securities are determined on the specific identified cost basis. Interest income is recognized on the accrual basis. Dividend income and distributions are recorded on the ex-dividend date, (except for certain dividends that may be recorded as soon as the Fund is informed of such dividends) net of applicable withholding taxes.
14
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Notes to Financial Statements (contd) |
December 31, 2005 |
B. Investment Advisory Fees: Morgan Stanley Investment Management Inc. (the Adviser or MS Investment Management) 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 Funds average weekly net assets.
C. Administration Fees: MS Investment Management also serves as Administrator to the Fund pursuant to an Administration Agreement. Under the Administration Agreement, the administration fee is 0.08% of the Funds average weekly net assets. MS Investment Management has agreed to limit the administration fee so that it will be no greater than the previous administration fee of 0.02435% of the Funds average weekly net assets plus $24,000 per annum. This waiver is voluntary and may be terminated at any time. For the year ended December 31, 2005, $191,000 of administration fees were waived pursuant to this arrangement. Under a sub-administration agreement between the Administrator and J.P. Morgan Investor Services Co. (JPMIS), a corporate affiliate of JPMorgan Chase Bank, N.A., JPMIS provides certain administrative services to the Fund. For such services, the Administrator pays JPMIS a portion of the fee the Administrator receives from the Fund. An employee of JPMIS is an officer of the Fund. Administration costs (including out-of-pocket expenses) incurred in the ordinary course of providing services under the agreement, except pricing services and extraordinary expenses, will be covered under the administration fee.
D. Custodian Fees: JPMorgan Chase Bank, N.A. (the Custodian) serves as Custodian for the Fund. The Custodian holds cash, securities, and other assets of the Fund as required by the 1940 Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.
The Fund has entered into an arrangement with its Custodian whereby credits realized on uninvested cash balances were used to offset a portion of the Funds expenses. These custodian credits are shown as Expense Offset on the Statement of Operations.
E. Federal Income Taxes: It is the Funds intention to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for Federal income taxes is required in the financial statements. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/ or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned.
The tax character of distributions paid may differ from the character of distributions shown on the Statements of Changes in Net Assets due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during 2005 and 2004 were as follows:
2005 Distributions |
|
2004 Distributions |
|
||||
Ordinary |
|
Long-term |
|
Ordinary |
|
Long-term |
|
$6,150 |
|
$18,822 |
|
$1,620 |
|
$ |
|
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 U.S. generally accepted accounting principles. These book/tax differences are considered either temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains and losses on certain investment transactions and the timing of the deductibility of certain expenses.
Permanent differences, primarily due to differing treatments of gains and losses related to foreign currency transactions and distribution reclasses, resulted in the following reclassifications among the components of net assets at December 31, 2005:
Increase (Decrease) |
|
||||
Accumulated |
|
Accumulated |
|
Paid-in |
|
$487 |
|
$(487) |
|
$ |
|
At December 31, 2005, the components of distributable earnings on a tax basis were as follows:
Undistributed |
|
Undistributed |
|
$ |
|
$18,568 |
|
15
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Notes to Financial Statements (contd) |
December 31, 2005 |
At December 31, 2005, the U.S. Federal income tax cost basis of investments was $325,930,000 and, accordingly, net unrealized appreciation for U.S. Federal income tax purposes was $140,368,000 of which $153,066,000 related to appreciated securities and $12,698,000 related to depreciated securities.
During the year ended December 31, 2005, the Fund utilized capital loss carryforward for U.S. Federal income tax purposes of approximately $34,791,000.
Net capital, currency and passive foreign investment company losses incurred after October 31, and within the taxable year are deemed to arise on the first day of the Funds next taxable year. For the year ended December 31, 2005, the Fund deferred to January 3, 2006, for U.S. Federal income tax purposes, post-October currency losses of $788,000.
F. Contractual Obligations: The Fund enters into contracts that contain a variety of indemnifications. The Funds maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
G. Other: During the year ended December 31, 2005, the Fund made purchases and sales totaling approximately $204,509,000 and $223,684,000, respectively, of investment securities other than long-term U.S. Government securities and short-term investments. There were no purchases or sales of long-term U.S. Government securities.
For the year ended December 31, 2005, the Fund incurred $7,100 of brokerage commissions with Morgan Stanley & Co., an affiliate of the Adviser.
Additionally, during the year ended December 31, 2005, the Fund paid $2,100 in brokerage commissions to China International Capital Corporation (Hong Kong) Limited (CICC), an affiliated broker/dealer.
On July 30, 1998, the Fund commenced a share repurchase program for purposes of enhancing stockholder value and reducing the discount at which the Funds shares traded from their net asset value. For the year ended December 31, 2005, the Fund repurchased 40,408 of its shares at an average discount of 12.23% from net asset value per share. Since the inception of the program, the Fund has repurchased 4,951,910 of its shares at an average discount of 19.55% from net asset value per share. The Fund expects to continue to repurchase its outstanding shares at such time and in such amounts as it believes will further the accomplishment of the foregoing objectives, subject to review by the Board of Directors.
On December 15, 2005, the Officers of the Fund, pursuant to authority granted by the Directors declared a distribution of $0.3659 per share, derived from net investment income and $1.0313 per share, derived from long-term capital gains, payable on January 6, 2006, to stockholders of record on December 23, 2005.
Federal Income Tax Information (Unaudited)
For the year ended December 31, 2005 qualified dividend income totaled $6,322,000.
For the year ended December 31, 2005, the Fund intends to pass through to stockholders foreign tax credits of approximately $173,000 and has derived gross income from sources within foreign countries in the amount of approximately $9,938,000.
The Fund hereby designates $18,822,000 as long-term capital gain dividends for the purpose of the dividend paid deduction on its federal income tax return.
16
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Notes to Financial Statements (contd) |
December 31, 2005 |
Reporting to Stockholders (Unaudited)
Each Morgan Stanley Fund provides a complete schedule of portfolio holdings in its semi-annual and annual reports within 60 days of the end of the Funds second and fourth fiscal quarters by filing the schedule electronically with the Securities and Exchange Commission (SEC). The semi-annual reports are filed on Form N-CSRS and the annual reports are filed on Form N-CSR. Morgan Stanley also delivers the semi-annual and annual reports to Fund stockholders and makes these reports available on its public website, www.morganstanley.com/im. Each Morgan Stanley Fund also files a complete schedule of portfolio holdings with the SEC for the Funds first and third fiscal quarters on Form N-Q. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to stockholders, nor are the reports posted to the Morgan Stanley public website. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SECs website, www.sec.gov. You may also review and copy them at the SECs Public Reference Room in Washington, DC. Information on the operation of the SECs Public Reference Room may be obtained by calling the SEC at 1(800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SECs email address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102.
Proxy Voting Policy and Procedures and Proxy Voting Record (Unaudited)
You may obtain a copy of the
Funds Proxy Voting Policy and Procedures without charge, upon request, by
calling toll free
1-800-281-2715 or by visiting our website at www.morganstanley.com/im. It
is also available on the Securities and Exchange Commissions website at
http://www.sec.gov.
You may obtain information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 by calling 1-800-281-2715. This information is also available on the Securities and Exchange Commissions website at http://www.sec.gov.
17
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Report of Independent Registered Public Accounting Firm |
December 31, 2005 |
To the
Stockholders and Board of Directors of
Morgan Stanley Emerging Markets Fund, Inc.
We have audited the accompanying statement of assets and liabilities of Morgan Stanley Emerging Markets Fund, Inc. (the Fund), including the portfolio of investments, as of December 31, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then end, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Morgan Stanley Emerging Markets Fund, Inc. at December 31, 2005, 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 U.S. generally accepted accounting principles.
|
|
|
|
|
|
Boston, Massachusetts |
|
February 13, 2006 |
18
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Director and Officer Information (unaudited) |
December 31, 2005 |
Independent Directors:
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Portfolios in |
|
|
|
|
|
|
Term of |
|
|
|
Fund |
|
|
|
|
|
|
Office and |
|
|
|
Complex |
|
|
|
|
Position(s) |
|
Length of |
|
|
|
Overseen |
|
|
Name, Age and Address of |
|
Held with |
|
Time |
|
|
|
by |
|
|
Director |
|
Registrant |
|
Served* |
|
Principal Occupation(s) During Past 5 Years |
|
Director** |
|
Other Directorships Held by Director |
Michael Bozic (64) |
|
Director |
|
Director |
|
Private investor; Director or Trustee of the Retail Funds (since April 1994) and the Institutional Funds (since July 2003) formerly Vice Chairman of Kmart Corporation (December 1998-October 2000), Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991-July 1995); formerly variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears Roebuck & Co. |
|
197 |
|
Director of various business organizations. |
|
|
|
|
|
|
|
|
|
|
|
Edwin J. Garn (73) |
|
Director |
|
Director |
|
Consultant; Director or Trustee of the Retail Funds (since January 1993) and the Institutional Funds (since July 2003); member of the Utah Regional Advisory Board of Pacific Corp. (Utility Company); formerly Managing Director of Summit Ventures LLC (2000-2004) (lobbying and consulting firm); United States Senator (R-Utah) (1974-1992) and Chairman, Senate Banking Committee (1980-1986), Mayor of Salt Lake City, Utah (1971- 1974), Astronaut, Space Shuttle Discovery (April 12-19, 1985), and Vice Chairman, Huntsman Corporation (Chemical Company). |
|
197 |
|
Director of Franklin Covey (time management systems), BMW Bank of North America, Inc. (industrial loan corporation), Escrow Bank USA (industrial loan corporation), United Space Alliance (joint venture between Lockheed Martin and The Boeing Company) and Nuskin Asia Pacific (multi-level marketing); member of the board of various civic and charitable organizations. |
|
|
|
|
|
|
|
|
|
|
|
Wayne E. Hedien (71) |
|
Director |
|
Director |
|
Retired; Director or Trustee of the Retail Funds (since September 1997) and the Institutional Funds (since July 2003); formerly associated with the Allstate Companies (1966-1994), most recently as Chairman of The Allstate Corporation (March 1993-December 1994) and Chairman and Chief Executive Officer of its wholly-owned subsidiary, Allstate Insurance Company (July 1989-December 1994). |
|
197 |
|
Director of the PMI Group Inc. (private mortgage insurance); Director and Vice Chairman of The Field Museum of Natural History; director of various other business and charitable organizations. |
|
|
|
|
|
|
|
|
|
|
|
Dr. Manuel H. Johnson (56) |
|
Director |
|
Director |
|
Senior Partner, Johnson Smick International, Inc., a consulting firm; Chairman of the Audit Committee and Director or Trustee of the Retail Funds (since July 1991) and the Institutional Funds (since July 2003); Co-Chairman and a founder of the Group of Seven Council (G7C), an international economic commission; formerly Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury. |
|
197 |
|
Director of NVR, Inc. (home construction), Director of KFX Energy; Director of RBS Greenwich Capital Holdings (financial holdings company). |
|
|
|
|
|
|
|
|
|
|
|
Joseph J. Kearns (63) |
|
Director |
|
Director |
|
President, Kearns & Associates LLC (investment consulting); Deputy Chairman of the Audit Committee and Director or Trustee of the Retail Funds (since July 2003) and the Institutional Funds (since August 1994); previously Chairman of the Audit Committee of the Institutional Funds (October 2001-July 2003); formerly CFO of the J. Paul Getty Trust. |
|
198 |
|
Director of Electro Rent Corporation (equipment leasing), The Ford Family Foundation and the UCLA Foundation. |
|
|
|
|
|
|
|
|
|
|
|
Michael E. Nugent (69) |
|
Director |
|
Director |
|
General Partner of Triumph Capital, L.P., a private investment partnership; Chairman of the Insurance Committee and Director or Trustee of the Retail Funds (since July 1991) and the Institutional Funds (since July 2001); formerly Vice President, Bankers Trust Company and BT Capital Corporation (1984-1988). |
|
197 |
|
None. |
|
|
|
|
|
|
|
|
|
|
|
Fergus Reid (73) |
|
Director |
|
Director |
|
Chairman of Lumelite Plastics Corporation; Chairman of the Governance Committee and Director or Trustee of the Retail Funds (since July 2003) and the Institutional Funds (since June 1992). |
|
198 |
|
Trustee and Director of certain investment companies in the J.P. Morgan Funds complex managed by JPMorgan Investment Management Inc. |
19
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Director and Officer Information (contd) |
December 31, 2005 |
Interested Directors:
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Portfolios in |
|
|
|
|
|
|
Term of |
|
|
|
Fund |
|
|
|
|
|
|
Office and |
|
|
|
Complex |
|
|
|
|
Position(s) |
|
Length of |
|
|
|
Overseen |
|
|
Name, Age and Address of |
|
Held with |
|
Time |
|
|
|
by |
|
|
Director |
|
Registrant |
|
Served* |
|
Principal Occupation(s) During Past 5 Years |
|
Director** |
|
Other Directorships Held by Director |
Charles A. Fiumefreddo (72) |
|
Chairman |
|
Chairman |
|
Chairman and Director or Trustee of the Retail Funds (since July 1991) and the Institutional Funds (since July 2003); formerly Chief Executive Officer of the Retail Funds (until September 2002). |
|
197 |
|
None. |
|
|
|
|
|
|
|
|
|
|
|
James F. Higgins (57) |
|
Director |
|
Director |
|
Director or Trustee of the Retail Funds (since June 2000) and the Institutional Funds (since July 2003); Senior Advisor of Morgan Stanley (since August 2000); Director of Morgan Stanley Distributors Inc. and Dean Witter Realty Inc.; previously President and Chief Operating Officer of the Private Client Group of Morgan Stanley (May 1999-August 2000), and President and Chief Operating Officer of Individual Securities of Morgan Stanley (February 1997-May 1999). |
|
197 |
|
Director of AXA Financial, Inc. and The Equitable Life Assurance Society of the United States (financial services). |
* Each Director serves an indefinite term, until his or her successor is elected.
** The Fund Complex includes all funds advised by Morgan Stanley Investment Management Inc. and funds that have an investment advisor that is an affiliated entity of Morgan Stanley Investment Management Inc. (including, but not limited to, Morgan Stanley Investments LP and Morgan Stanley Investment Advisors Inc.).
Officers:
|
|
|
|
Term of Office and |
|
|
|
|
Position(s) Held |
|
Length of Time |
|
|
Name, Age and Address of Executive Officer |
|
with Registrant |
|
Served* |
|
Principal Occupation(s) During Past 5 Years |
Ronald E. Robison (66) |
|
President and |
|
President |
|
Principal Executive Officer of Funds in the Fund complex (since May 2003); Managing Director of Morgan Stanley & Co. Incorporated, Managing Director of Morgan Stanley; Managing Director, Chief Administrative Officer and Director of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc.; Director of Morgan Stanley Trust; Managing Director and Director of Morgan Stanley Distributors Inc.; Executive Vice President and Principal Executive Officer of the Retail Funds (since April 2003) and the Institutional Funds (since July 2003); previously President and Director of the Institutional Funds (March 2001 July 2003) and Chief Global Operations Officer and Managing Director of Morgan Stanley Investment Management Inc. |
|
|
|
|
|
|
|
J. David Germany (51) |
|
Vice President |
|
Vice President |
|
Managing Director and Chief Investment Officer - Global Fixed Income of Morgan Stanley Investment Management Inc., Morgan Stanley Investment Advisors Inc., and Van Kampen Asset Management. Managing Director and Director of Morgan Stanley Investment Management Ltd. Vice President (since February 2006) of the Morgan Stanley Retail Funds and Morgan Stanley Institutional Funds. |
|
|
|
|
|
|
|
Dennis F. Shea (52) |
|
Vice President |
|
Vice President |
|
Managing Director and Chief Investment Officer - Global Equity of Morgan Stanley Investment Advisors Inc., Morgan Stanley Investment Management Inc. and Van Kampen Asset Management. Vice President (since February 2006) of the Morgan Stanley Retail Funds and Morgan Stanley Institutional Funds. Previously, Managing Director and Director of Global Equity Research at Morgan Stanley. |
20
|
Morgan Stanley Emerging Markets Fund, Inc. |
|
|
Director and Officer Information (contd) |
December 31, 2005 |
Officers: (contd)
|
|
|
|
Term of Office and |
|
|
|
|
Position(s) Held |
|
Length of Time |
|
|
Name, Age and Address of Executive Officer |
|
with Registrant |
|
Served* |
|
Principal Occupation(s) During Past 5 Years |
Barry Fink (50) |
|
Vice President |
|
Vice President |
|
General Counsel (since May 2000) and Managing Director (since December 2000) of Morgan Stanley Investment Management; Managing Director (since December 2000) of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc.; Vice President of the Retail Funds; Assistant Secretary of Morgan Stanley DW Inc.; Vice President of the Institutional Funds (since July 2003); Managing Director, Secretary and Director of Morgan Stanley Distributors Inc.; previously Secretary of the Retail Funds and General Counsel (February 1997- April 2004) of the Retail Funds; previously Secretary (1997-2006) and Director (1997-2005) of the Morgan Stanley Investment Advisors Inc. and the Morgan Stanley Services Company Inc.; and Secretary and Director of Morgan Stanley Distributors Inc. (1997-2005). |
|
|
|
|
|
|
|
Amy R. Doberman (43) |
|
Vice President |
|
Vice President |
|
Managing Director and General Counsel, U.S. Investment Management; Managing Director (since July 2004) and Secretary (since February 2006) of Morgan Stanley Investment Management Inc. and Morgan Stanley Investment Advisors Inc., Managing Director and Secretary of Morgan Stanley Distributors Inc. (since February 2006); Managing Director (since February 2005) and Secretary (since February 2006) of Morgan Stanley Services Company Inc.; Vice President of the Institutional and Retail Funds (since July 2004); various positions with the Van Kampen Funds and certain of their service providers; previously, Managing Director and General Counsel Americas, UBS Global Asset Management (July 2000-July 2004). |
|
|
|
|
|
|
|
Carsten Otto (42) |
|
Chief |
|
Chief Compliance |
|
Managing Director and U.S. Director of Compliance for Morgan Stanley Investment Management (since October 2004); Managing Director of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Investment Management Inc.; formerly Assistant Secretary and Assistant General Counsel of the Morgan Stanley Retail Funds. |
|
|
|
|
|
|
|
Stefanie V. Chang (39) |
|
Vice President |
|
Vice President |
|
Executive Director of Morgan Stanley & Co. Incorporated, Morgan Stanley Investment Management Inc. and Morgan Stanley Investment Advisors Inc.; Vice President of the Institutional Funds (since December 1997) and the Retail Funds (since July 2003); various positions with the Van Kampen Funds; formerly practiced law with the New York law firm of Rogers & Wells (now Clifford Chance US LLP). |
|
|
|
|
|
|
|
James W. Garrett (37) |
|
Treasurer and |
|
Treasurer since |
|
Executive Director of Morgan Stanley & Co. Incorporated and Morgan Stanley Investment Management Inc.; Treasurer and Chief Financial Officer of the Institutional Funds; previously with PriceWaterhouse LLP (now PriceWaterhouseCoopers LLP). |
Michael J. Leary (40) |
|
Assistant |
|
Assistant |
|
Director and Vice President of Fund Administration, J.P. Morgan Investor Services Co. (formerly Chase Global Funds Company); formerly Audit Manager at Ernst & Young LLP. |
|
|
|
|
|
|
|
Mary E. Mullin (38) |
|
Secretary |
|
Secretary since |
|
Executive Director of Morgan Stanley & Co. Incorporated, Morgan Stanley Investment Management Inc. and Morgan Stanley Investment Advisors Inc.; Secretary of the Institutional Funds and (since July 2003) the Retail Funds; formerly practiced law with the New York law firms of McDermott, Will & Emery and Skadden, Arps, Slate, Meagher & Flom LLP. |
* Each Officer serves an indefinite term, until his or her successor is elected.
In accordance with Section 303A. 12(a) of the New York Stock Exchange Listed Company Manual, the Funds Annual CEO Certification certifying as to compliance with NYSEs Corporate Governance Listing Standards was submitted to the Exchange on July 19, 2005.
The Funds Principal Executive Officer and Principal Financial Officer Certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 were filed with the Funds N-CSR and are available on the Securities and Exchange Commissions Website at http://www.sec.gov.
21
|
Morgan Stanley Emerging Markets Fund, Inc. |
Dividend Reinvestment and Cash Purchase Plan
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the Plan), each stockholder will be deemed to have elected, unless American Stock Transfer & Trust Company (the Plan Agent) is otherwise instructed by the stockholder in writing, to have all distributions automatically reinvested in Fund shares. Participants in the Plan have the option of making additional voluntary cash payments to the Plan Agent, annually, in any amount from $100 to $3,000, for investment in Fund shares.
Dividend and capital gain distributions will be reinvested on the reinvestment date in full and fractional shares. If the market price per share equals or exceeds net asset value per share on the reinvestment date, the Fund will issue shares to participants at net asset value or, 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 Agents fees for the reinvestment of dividends and distributions will be paid by the Fund. However, each participants account will be charged a pro rata share of brokerage commissions incurred on any open market purchases effected on such participants behalf. A participant will also pay brokerage commissions incurred on purchases made by voluntary cash payments. Although stockholders in the Plan may receive no cash distributions, participation in the Plan will not relieve participants of any income tax which may be payable on such dividends or distributions.
In the case of stockholders, such as banks, brokers or nominees, that hold shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by the stockholder as representing the total amount registered in the stockholders name and held for the account of beneficial owners who are participating in the Plan.
Stockholders who do not wish to have distributions automatically reinvested should notify the Plan Agent in writing. There is no penalty for non-participation or withdrawal from the Plan, and stockholders who have previously withdrawn from the Plan may rejoin at any time. Requests for additional information or any correspondence concerning the Plan should be directed to the Plan Agent at:
Morgan Stanley Emerging Markets Fund, Inc.
American Stock Transfer & Trust Company
Dividend Reinvestment and Cash Purchase Plan
59 Maiden Lane
New York, New York 10038
1(800)278-4353
22
Morgan Stanley Emerging Markets Fund, Inc.
Directors |
|
|
Charles A. Fiumefreddo |
|
Dennis F. Shea |
Michael Bozic |
|
Vice President |
|
|
|
Edwin J. Garn |
|
Barry Fink |
Wayne E. Hedien |
|
Vice President |
|
|
|
James F. Higgins |
|
Amy R. Doberman |
Dr. Manuel H. Johnson |
|
Vice President |
|
|
|
Joseph J. Kearns |
|
Stefanie V. Chang |
Michael Nugent |
|
Vice President |
|
|
|
Fergus Reid |
|
James W. Garrett |
|
|
Treasurer and Chief |
|
|
Financial Officer |
Officers |
|
|
Charles A. Fiumefreddo |
|
Carsten Otto |
Chairman of the Board |
|
Chief Compliance Officer |
|
|
|
Ronald E. Robison |
|
|
President and Principal |
|
Michael J. Leary |
Executive Officer |
|
Assistant Treasurer |
|
|
|
J. David Germany |
|
Mary E. Mullin |
Vice President |
|
Secretary |
Investment Adviser and Administrator
Morgan Stanley Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Custodian
JPMorgan Chase Bank, N.A.
270 Park Avenue
New York, New York 10017
Stockholder Servicing Agent
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
1 (800) 278-4353
Legal Counsel
Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
For additional Fund information, including the Funds net asset value per share and information regarding the investments comprising the Funds portfolio, please call 1(800)221-6726 or visit our website at www.morganstanley.com/im.
© 2006 Morgan Stanley
IS06-00109I-Y12/05
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the Code of Ethics) that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Fund or a third party.
(b) No information need be disclosed pursuant to this paragraph.
(c) The Fund has amended its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto to delete from the end of the following paragraph on page 2 of the Code the phrase to the detriment of the Fund.:
Each Covered Officer must not use his personal influence or personal relationship improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally (directly or indirectly).
Additionally, Exhibit B was amended to remove Mitchell M. Merin as a covered officer.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Funds Code of Ethics is attached hereto as Exhibit A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Funds Board of Directors has determined that it has two audit committee financial experts serving on its audit committee, each of whom are independent Directors: Dr. Manuel H. Johnson and Joseph J. Kearns. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an expert for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Directors in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2005
|
|
Registrant |
|
Covered Entities(1) |
|
|||
Audit Fees |
|
$ |
98,679 |
|
N/A |
|
||
|
|
|
|
|
|
|||
Non-Audit Fees |
|
|
|
|
|
|||
Audit-Related Fees |
|
$ |
|
|
$ |
235,000 |
(2) |
|
Tax Fees |
|
$ |
2,835 |
(3) |
$ |
52,799 |
(4) |
|
All Other Fees |
|
$ |
|
|
$ |
956,268 |
(5) |
|
Total Non-Audit Fees |
|
$ |
2,835 |
|
$ |
1,244,067 |
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
101,514 |
|
$ |
1,244,067 |
|
|
2004
|
|
Registrant |
|
Covered Entities(1) |
|
|||
Audit Fees |
|
$ |
93,980 |
|
N/A |
|
||
|
|
|
|
|
|
|||
Non-Audit Fees |
|
|
|
|
|
|||
Audit-Related Fees |
|
$ |
|
|
$ |
115,000 |
(2) |
|
Tax Fees |
|
$ |
3,350 |
(3) |
$ |
100,829 |
(6) |
|
All Other Fees |
|
$ |
|
|
$ |
60,985 |
(7) |
|
Total Non-Audit Fees |
|
$ |
3,350 |
|
$ |
276,814 |
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
97,330 |
|
$ |
276,814 |
|
|
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant.
(2) Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the Covered Entities and funds advised by the Adviser or its affiliates, specifically attestation services provided in connection with a SAS 70 Report.
(3) Tax Fees represent tax advice and compliance services provided in connection with the review of the Registrants tax returns.
(4) Tax Fees represent tax advice services provided to Covered Entities, including research and identification of PFIC entities.
(5) All Other Fees represent attestation services provided in connection with performance presentation standards and a compliance review project performed.
(6) Tax Fees represent tax advice services provided to Covered Entities, including assistance in obtaining a private letter ruling and the research and identification of PFIC entities.
(7) All Other Fees represent attestation services provided in connection with performance presentation standards.
(e)(1) The audit committees pre-approval policies and procedures are as follows:
APPENDIX A
AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS
AS ADOPTED AND AMENDED JULY 23, 2004,(1)
1. Statement of Principles
The Audit Committee of the Board is required to review and, in its sole discretion, pre-approve all Covered Services to be provided by the Independent Auditors to the Fund and Covered Entities in order to assure that services performed by the Independent Auditors do not impair the auditors independence from the Fund.
The SEC has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as well as the audit committees administration of the engagement of the independent auditor. The SECs rules establish two different approaches to pre-approving services, which the SEC considers to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the Audit Committee (general pre-approval); or require the specific pre-approval of the Audit Committee or its delegate (specific pre-approval). The Audit Committee believes that the combination of these two approaches in this Policy will result in an effective and efficient procedure to pre-approve services performed by the Independent Auditors. As set forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee (or by any member of the Audit Committee to which pre-approval authority has been delegated)
(1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and Procedures (the Policy), adopted as of the date above, supersedes and replaces all prior versions that may have been adopted from time to time.
if it is to be provided by the Independent Auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee.
The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee considers and provides a different period and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the Independent Auditors without obtaining specific pre-approval from the Audit Committee. The Audit Committee will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations.
The purpose of this Policy is to set forth the policy and procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committees responsibilities to pre-approve services performed by the Independent Auditors to management.
The Funds Independent Auditors have reviewed this Policy and believes that implementation of the Policy will not adversely affect the Independent Auditors independence.
2. Delegation
As provided in the Act and the SECs rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
3. Audit Services
The annual Audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the Independent Auditors to be able to form an opinion on the Funds financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Fund structure or other items.
In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that only the Independent Auditors reasonably can provide. Other Audit services may include statutory audits and services associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix B.1. All other Audit services not listed in Appendix B.1 must be specifically pre-approved by the Audit
Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
4. Audit-related Services
Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Funds financial statements and, to the extent they are Covered Services, the Covered Entities or that are traditionally performed by the Independent Auditors. Because the Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the SECs rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as Audit services; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in Appendix B.2. All other Audit-related services not listed in Appendix B.2 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
5. Tax Services
The Audit Committee believes that the Independent Auditors can provide Tax services to the Fund and, to the extent they are Covered Services, the Covered Entities, such as tax compliance, tax planning and tax advice without impairing the auditors independence, and the SEC has stated that the Independent Auditors may provide such services.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved the Tax Services in Appendix B.3. All Tax services in Appendix B.3 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
6. All Other Services
The Audit Committee believes, based on the SECs rules prohibiting the Independent Auditors from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SECs rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix B.4. Permissible All Other services not listed in Appendix B.4 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
7. Pre-Approval Fee Levels or Budgeted Amounts
Pre-approval fee levels or budgeted amounts for all services to be provided by the Independent Auditors will be established annually by the Audit Committee. Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services.
8. Procedures
All requests or applications for services to be provided by the Independent Auditors that do not require specific approval by the Audit Committee will be submitted to the Funds Chief Financial Officer and must include a detailed description of the services to be rendered. The Funds Chief Financial Officer will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by the Independent Auditors. Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the Independent Auditors and the Funds Chief Financial Officer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SECs rules on auditor independence.
The Audit Committee has designated the Funds Chief Financial Officer to monitor the performance of all services provided by the Independent Auditors and to determine whether such services are in compliance with this Policy. The Funds Chief Financial Officer will report to the Audit Committee on a periodic basis on the results of its monitoring. Both the Funds Chief Financial Officer and management will immediately report to the chairman of the Audit Committee any breach of this Policy that comes to the attention of the Funds Chief Financial Officer or any member of management.
9. Additional Requirements
The Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the Independent Auditors and to assure the auditors independence from the Fund, such as reviewing a formal written statement from the Independent Auditors delineating all relationships between the Independent Auditors and the Fund, consistent with Independence Standards Board No. 1, and discussing with the Independent Auditors its methods and procedures for ensuring independence.
10. Covered Entities
Covered Entities include the Funds investment adviser(s) and any entity controlling, controlled by or under common control with the Funds investment adviser(s) that provides ongoing services to the Fund(s). Beginning with non-audit service contracts entered into on or after May 6, 2003, the Funds audit committee must pre-approve non-audit services provided not only to the Fund but also to the Covered Entities if the engagements relate directly to the operations and financial reporting of the Fund. This list of Covered Entities would include:
Morgan Stanley Retail Funds
Morgan Stanley Investment Advisors Inc.
Morgan Stanley & Co. Incorporated
Morgan Stanley DW Inc.
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Van Kampen Asset Management
Morgan Stanley Services Company, Inc.
Morgan Stanley Distributors Inc.
Morgan Stanley Trust FSB
Morgan Stanley Institutional Funds
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Advisors Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Morgan Stanley & Co. Incorporated
Morgan Stanley Distribution, Inc.
Morgan Stanley AIP GP LP
Morgan Stanley Alternative Investment Partners LP
(e)(2) Beginning with non-audit service contracts entered into on or after May 6, 2003, the audit committee also is required to pre-approve services to Covered Entities to the extent that the services are determined to have a direct impact on the operations or financial reporting of the Registrant. 100% of such services were pre-approved by the audit committee pursuant to the Audit Committees pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Directors has considered whether the provision of services other than audit services performed by the auditors to the Registrant and Covered Entities is compatible with maintaining the auditors independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Fund has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act whose members are: Michael
Bozic, Edwin J. Garn, Wayne E. Hedien, Manual H. Johnson, Joseph J. Kearns, Michael Nugent and Fergus Reid.
(b) Not applicable.
Item 6. Schedule of Investments
Refer to Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
The Funds and its Investment Advisors Proxy Voting Policies and Procedures are as follows:
MORGAN STANLEY INVESTMENT MANAGEMENT
I. POLICY STATEMENT
Introduction - Morgan Stanley Investment Managements (MSIM) policy and procedures for voting proxies (Policy) with respect to securities held in the accounts of clients applies to those MSIM entities that provide discretionary investment management services and for which a MSIM entity has authority to vote proxies. The Policy will be reviewed and, updated, as necessary, to address new or revised proxy voting issues. The MSIM entities covered by the Policy currently include the following: Morgan Stanley Investment Advisors Inc., Morgan Stanley AIP GP LP, Morgan Stanley Investment Management Inc., Morgan Stanley Investment Management Limited, Morgan Stanley Investment Management Company, Morgan Stanley Asset & Investment Trust Management Co., Limited, Morgan Stanley Investment Management Private Limited, Morgan Stanley Hedge Fund Partners GP LP, Morgan Stanley Hedge Fund Partners LP, Van Kampen Asset Management, and Van Kampen Advisors Inc. (each an MSIM Affiliate and collectively referred to as the MSIM Affiliates).
Each MSIM Affiliate will use its best efforts to vote proxies as part of its authority to manage, acquire and dispose of account assets. With respect to the MSIM registered management investment companies (Van Kampen, Institutional and Advisor Funds)(collectively referred to herein as the MSIM Funds), each MSIM Affiliate will vote proxies under this Policy (except for the Morgan Stanley KLD Social Index Fund, which votes proxies pursuant to the Institutional Shareholder Services Social Investment Research Proxy Voting Guidelines) pursuant to authority granted under its applicable investment advisory agreement or, in the absence of such authority, as authorized by the Board of Directors or Trustees of the MSIM Funds. A MSIM Affiliate will not vote
proxies if the named fiduciary for an ERISA account has reserved the authority for itself, or in the case of an account not governed by ERISA, the investment management or investment advisory agreement does not authorize the MSIM Affiliate to vote proxies. MSIM Affiliates will, in a prudent and diligent manner, vote proxies in the best interests of clients, including beneficiaries of and participants in a clients benefit plan(s) for which the MSIM Affiliates manage assets, consistent with the objective of maximizing long-term investment returns (Client Proxy Standard). In certain situations, a client or its fiduciary may provide a MSIM Affiliate with a proxy voting policy. In these situations, the MSIM Affiliate will comply with the clients policy unless to do so would be inconsistent with applicable laws or regulations or the MSIM Affiliates fiduciary responsibility.
Proxy Research Services - Institutional Shareholder Services (ISS) and Glass Lewis (together with other proxy research providers as MSIM Affiliates may retain from time to time, the Research Providers) are independent advisers that specialize in providing a variety of fiduciary-level proxy-related services to institutional investment managers, plan sponsors, custodians, consultants, and other institutional investors. The services provided include in-depth research, global issuer analysis, and voting recommendations. While the MSIM Affiliates may review and utilize the recommendations of the Research Providers in making proxy voting decisions, they are in no way obligated to follow such recommendations. In addition to research, ISS provides vote execution, reporting, and recordkeeping. MSIMs Proxy Review Committee (see Section IV.A. below) will carefully monitor and supervise the services provided by the Research Providers.
Voting Proxies for Certain Non-U.S. Companies - While the proxy voting process is well established in the United States and other developed markets with a number of tools and services available to assist an investment manager, voting proxies of non-U.S. companies located in certain jurisdictions, particularly emerging markets, may involve a number of problems that may restrict or prevent a MSIM Affiliates ability to vote such proxies. These problems include, but are not limited to: (i) proxy statements and ballots being written in a language other than English; (ii) untimely and/or inadequate notice of shareholder meetings; (iii) restrictions on the ability of holders outside the issuers jurisdiction of organization to exercise votes; (iv) requirements to vote proxies in person, (v) the imposition of restrictions on the sale of the securities for a period of time in proximity to the shareholder meeting; and (vi) requirements to provide local agents with
power of attorney to facilitate the MSIM Affiliates voting instructions. As a result, clients non-U.S. proxies will be voted on a best efforts basis only, after weighing the costs and benefits to MSIMs clients of voting such proxies, consistent with the Client Proxy Standard. ISS has been retained to provide assistance to the MSIM Affiliates in connection with voting their clients non-U.S. proxies.
II. GENERAL PROXY VOTING GUIDELINES
To ensure consistency in voting proxies on behalf of its clients, MSIM Affiliates will follow (subject to any exception set forth herein) this Policy, including the guidelines set forth below. These guidelines address a broad range of issues, including board size and composition, executive compensation, anti-takeover proposals, capital structure proposals and social responsibility issues and are meant to be general voting parameters on issues that arise most frequently. The MSIM Affiliates, however, may, pursuant to the procedures set forth in Section IV. below, vote in a manner that is not in accordance with the following general guidelines, provided the vote is approved by the Proxy Review Committee and is consistent with the Client Proxy Standard. A MSIM Affiliate will not generally vote a proxy if it has sold the affected security between the record date and the meeting date.
III. GUIDELINES
A. Corporate Governance Matters. The following proposals will generally be voted as indicated below, unless otherwise determined by the Proxy Review Committee.
i. General.
1. Generally, routine management proposals will be supported. The following are examples of routine management proposals:
Approval of financial statements, director and auditor reports.
General updating/corrective amendments to the charter.
Proposals related to the conduct of the annual meeting, except those proposals that relate to the transaction of such other business which may come before the meeting.
2. Proposals to eliminate cumulative voting generally will be supported; proposals to establish cumulative voting in the election of directors will not be supported.
3. Proposals requiring confidential voting and independent tabulation of voting results will be supported.
4. Proposals requiring a U.S. company to have a separate Chairman and CEO will not be supported. Proposals requiring non-U.S. companies to have a separate Chairman and CEO will be supported.
5. Proposals by management of non-U.S. companies regarding items that are clearly related to the regular course of business will be supported.
6. Proposals to require the company to expense stock options will be supported.
7. Open-ended requests for adjournment generally will not be supported. However, where management specifically states the reason for requesting an adjournment and the requested adjournment is necessary to permit a proposal that would otherwise be supported under this Policy to be carried out (i.e. an uncontested corporate transaction), the adjournment request will be supported.
8. Proposals to declassify the Board of Directors (if management supports a classified board) generally will not be supported.
9. Proposal requiring that the company prepare reports that are costly to provide or that would require duplicative efforts or expenditures that are of a non-business nature or would provide no pertinent information from the perspective of institutional shareholders generally will not be supported.
ii. Election of Directors. In situations where no conflict exists and where no specific governance deficiency has been noted, unless otherwise determined by the Proxy Review Committee, proxies will be voted in support of nominees of management.
1. The following proposals generally will be supported:
Proposals requiring that a certain percentage (up to 66 2/3%) of the companys board members be independent directors.
Proposals requiring that members of the companys compensation, nominating and audit committees be comprised of independent or unaffiliated directors.
2. Unless otherwise determined by the Proxy Review Committee, a withhold vote will be made in the following circumstances:
(a) If a companys board is not comprised of a majority of disinsterested directors, a withhold vote will be made for interested directors. A director nominee may be deemed to be interested if the nominee has, or any time during the previous five years had, a relationship with the issuer (e.g., investment banker, counsel or other professional service provider, or familial relationship with a senior officer of the issuer) that may impair his or her independence;
(b) If a nominee who is interested is standing for election as a member of the companys compensation, nominating or audit committees;
(c) A direct conflict exists between the interests of the nominee and the public shareholders;
(d) Where the nominees standing for election have not taken action to implement generally accepted governance practices for which there is a bright line test. These would include elimination of dead hand or slow hand poison pills, requiring audit, compensation or nominating committees to be composed of independent directors and requiring a majority independent board;
(e) A nominee has failed to attend at least 75% of board meetings within a given year without a reasonable excuse; or
(f) A nominee serves on the board of directors for more than six companies (excluding investment companies).
iii. Auditors
1. Generally, management proposals for selection or ratification of auditors will be supported. However, such proposals may not be supported if the audit fees are excessive. Generally, to determine if audit fees are excessive, a 50% test will be applied for audit fees in excess of $1 million: if audit fees are $1 million or more, non-audit fees should less than 50% of the total fees paid to the auditor. If audit fees are less than $1 million, the fees will be reviewed case by case by the Proxy Review Committee.
2. Proposals requiring auditors to attend the annual meeting of shareholders will be supported.
3. Proposals to indemnify auditors will not be supported.
iv. Anti-Takeover Matters
1. Proposals to modify or rescind existing supermajority vote requirements to amend the charter or bylaws will be supported; proposals to amend by-laws to require a supermajority shareholder vote to pass or repeal certain provisions will not be supported.
2. Proposals relating to the adoption of anti-greenmail provisions will be supported, provided that the proposal: (i) defines greenmail; (ii) prohibits buyback offers to large block holders (holders of at least 1% of the outstanding shares and in certain cases, a greater amount, as determined by the Proxy Review Committee) not made to all shareholders or not approved by disinterested shareholders; and (iii) contains no anti-takeover measures or other provisions restricting the rights of shareholders.
3. Proposals requiring shareholder approval or ratification of a shareholder rights plan or poison pill will be supported.
B. Capitalization changes. The following proposals generally will be voted as indicated below, unless otherwise determined by the Proxy Review Committee.
1. The following proposals generally will be supported:
Proposals relating to capitalization changes that eliminate other classes of stock and/or eliminate unequal voting rights.
Proposals to increase the authorization of existing classes of common stock (or securities convertible into common stock) if: (i) a clear and legitimate business purpose is stated; (ii) the number of shares requested is reasonable in relation to the purpose for which authorization is requested; and (iii) the authorization does not exceed 100% of shares currently authorized and at least 30% of the new authorization will be outstanding.
Proposals to create a new class of preferred stock or for issuances of preferred stock up to 50% of issued capital.
Proposals for share repurchase plans.
Proposals to reduce the number of authorized shares of common or preferred stock, or to eliminate classes of preferred stock.
Proposals to effect stock splits.
Proposals to effect reverse stock splits if management proportionately reduces the authorized share amount set forth in the corporate charter. Reverse stock splits that do not adjust proportionately to the authorized share amount generally will be approved if the resulting increase in authorized shares coincides with the proxy guidelines set forth above for common stock increases.
2. The following proposals generally will not be supported (notwithstanding management support).
Proposals relating to capitalization changes that add classes of stock which substantially dilute the voting interests of existing shareholders.
Proposals to increase the authorized number of shares of existing classes of stock that carry preemptive rights or supervoting rights.
Proposals to create blank check preferred stock.
Proposals relating to changes in capitalization by 100% or more.
C. Compensation. The following proposals generally will be voted as indicated below, unless otherwise determined by the Proxy Review Committee.
1. The following proposals generally will be supported:
Proposals relating to director fees, provided the amounts are not excessive relative to other companies in the country or industry.
Proposals for employee stock purchase plans that permit discounts up to 15%, but only for grants that are part of a broad-based employee plan, including all non-executive employees.
Proposals for the establishment of employee stock option plans and other employee ownership plans, provided that our research does not indicate that approval of the plan would be against shareholder interest.
Proposals for the establishment of employee retirement and severance plans, provided that our research does not indicate that approval of the plan would be against shareholder interest.
2. Blanket proposals requiring shareholder approval of all severance agreements will not be supported, however, proposals that require shareholder approval for agreements in excess of three times the annual compensation (salary and bonus) generally will be supported.
3. Blanket proposals requiring shareholder approval of executive compensation generally will not be supported.
4. Proposals that request or require disclosure of executive compensation in addition to the disclosure required by the Securities and Exchange Commission (SEC) regulations generally will not be supported.
D. Other Recurring Items. The following proposals generally will be voted as indicated below, unless otherwise determined by the Proxy Review Committee.
1. Proposals to add restrictions related to social, political, environmental or special interest issues that do not relate directly to the business of the company and which do not appear to be directed specifically to the business or financial interest of the company generally will not be supported.
2. Proposals requiring adherence to workplace standards that are not required or customary in market(s) to which the proposals relate will not be supported.
E. Items to be reviewed by the Proxy Review Committee
The following types of non-routine proposals, which potentially may have a substantive financial or best interest impact on an issuer, will be voted as determined by the Proxy Review Committee.
i. Corporate Transactions
Proposals relating to mergers, acquisitions and other special corporate transactions (i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings and recapitalizations) will be examined on a case-by-case basis. In all cases, Research Providers research and analysis will be used along with MSIM Affiliates research and analysis, including, among other things, MSIM internal company-specific knowledge. Proposals for mergers or other significant transactions that are friendly, approved by the Research Providers, and where there is no portfolio manager objection, generally will be supported.
ii. Compensation
Proposals relating to change-in-control provisions in non-salary compensation plans, employment contracts, and severance agreements that benefit management and would be costly to shareholders if triggered. With respect to proposals related to severance and change of control situations, MSIM Affiliates will support a maximum of three times salary and bonus.
Proposals relating to Executive/Director stock option plans. Generally, stock option plans should be incentive based. The Proxy Review Committee will evaluate the the quantitative criteria used by a Research Provider when considering such Research Providers recommendation. If the Proxy Review Committee determines that the criteria used by the Research Provider is reasonable, the proposal will be supported if it falls within a 5% band above the Research Providers threshold.
Compensation proposals that allow for discounted stock options that have not been offered to employees in general.
iii. Other
Proposals for higher dividend payouts.
Proposals recommending set retirement ages or requiring specific levels of stock ownership by directors.
Proposals for election of directors, where a director nominee is related to MSIM (i.e. on an MSIM Funds Board of Directors/Trustees or part of MSIM senior management) must be considered by the Proxy Review Committee. If the proposal relates to a director nominee who is on a Van Kampen Funds Board of Directors/Trustees, to the extent that the shares of the relevant company are held by a Van Kampen Fund, the Van Kampen Board shall vote the proxies with respect to those shares, to the extent practicable. In the event that the Committee
cannot contact the Van Kampen Board in advance of the shareholder meeting, the Committee will vote such shares pursuant to the Proxy Voting Policy.
Proposals requiring diversity of board membership relating to broad based social, religious or ethnic groups.
Proposals to limit directors liability and/or broaden indemnification of directors. Generally, the Proxy Review Committee will support such proposals provided that the officers and directors are eligible for indemnification and liability protection if they have acted in good faith on company business and were found innocent of any civil or criminal charges for duties performed on behalf of the company.
IV. ADMINISTRATION OF POLICY
A. Proxy Review Committee
1. The MSIM Proxy Review Committee (Committee) is responsible for creating and implementing the Policy and, in this regard, has expressly adopted it.
(a) The Committee, which is appointed by MSIMs Chief Investment Officer (CIO), consists of senior investment professionals who represent the different investment disciplines and geographic locations of the firm. The Committee is responsible for establishing MSIMs Policy and determining how MSIM will vote proxies on an ongoing basis.
(b) The Committee will periodically review and have the authority to amend, as necessary, the Policy and establish and direct voting positions consistent with the Client Proxy Standard.
(c) The Committee will meet at least monthly to (among other matters): (1) address any outstanding issues relating to the Policy and (2) review proposals at upcoming shareholder meetings of MSIM portfolio companies in accordance with this Policy including, as appropriate, the voting results of prior shareholder meetings of the same issuer where a similar proposal was presented to shareholders. The Committee, or its designee, will timely communicate to ISS MSIMs Policy (and any amendments to them and/or any additional guidelines or procedures it may adopt).
(d) The Committee will meet on an ad hoc basis to (among other matters): (1) authorize split voting (i.e., allowing certain shares of the same issuer that are the subject of the same proxy
solicitation and held by one or more MSIM portfolios to be voted differently than other shares) and/or override voting (i.e., voting all MSIM portfolio shares in a manner contrary to the Policy); (2) review and approve upcoming votes, as appropriate, for matters for which specific direction has been provided in this Policy; and (3) determine how to vote matters for which specific direction has not been provided in this Policy. Split votes generally will not be approved within a single Global Investor Group investment team. The Committee may take into account Research Providers recommendations and research as well as any other relevant information they may request or receive, including portfolio manager and/or analyst research, as applicable. Generally, proxies related to securities held in accounts that are managed pursuant to quantitative, index or index-like strategies (Index Strategies) will be voted in the same manner as those held in actively managed accounts. Because accounts managed using Index Strategies are passively managed accounts, research from portfolio managers and/or analysts related to securities held in these accounts may not be available. If the affected securities are held only in accounts that are managed pursuant to Index Strategies, and the proxy relates to a matter that is not described in this Policy, the Committee will consider all available information from the Research Providers, and to the extent that the holdings are significant, from the portfolio managers and/or analysts.
(e) In addition to the procedures discussed above, if the Committee determines that an issue raises a potential material conflict of interest, or gives rise to the appearance of a potential material conflict of interest, the Committee will request a special committee to review, and recommend a course of action with respect to, the conflict(s) in question (Special Committee). The Special Committee shall be comprised of the Chairperson of the Proxy Review Committee, the Compliance Director for the area of the firm involved or his/her designee, a senior portfolio manager (if practicable, one who is a member of the Proxy Review Committee) designated by the Proxy Review Committee, and MSIMs Chief Investment Officer or his/her designee. The Special Committee may request the assistance of MSIMs General Counsel or his/her designee and will have sole discretion to cast a vote. In addition to the research provided by Research Providers, the Special Committee may request analysis from MSIM Affiliate investment professionals and outside sources to the extent it deems appropriate.
(f) The Committee and the Special Committee, or their designee(s), will document in writing all of their decisions and actions, which
documentation will be maintained by the Committee and the Special Committee, or their designee(s), for a period of at least 6 years. To the extent these decisions relate to a security held by a MSIM U.S. registered investment company, the Committee and Special Committee, or their designee(s), will report their decisions to each applicable Board of Trustees/Directors of those investment companies at each Boards next regularly scheduled Board meeting. The report will contain information concerning decisions made by the Committee and Special Committee during the most recently ended calendar quarter immediately preceding the Board meeting.
(g) The Committee and Special Committee, or their designee(s), will timely communicate to applicable portfolio managers, the Compliance Departments and, as necessary, to ISS, decisions of the Committee and Special Committee so that, among other things, ISS will vote proxies consistent with their decisions.
B. Identification of Material Conflicts of Interest
1. If there is a possibility that a vote may involve a material conflict of interest, the vote must be decided by the Special Committee in consultation with MSIMs General Counsel or his/her designee.
2. A material conflict of interest could exist in the following situations, among others:
(a) The issuer soliciting the vote is a client of MSIM or an affiliate of MSIM and the vote is on a material matter affecting the issuer;
(b) The proxy relates to Morgan Stanley common stock or any other security issued by Morgan Stanley or its affiliates; or
(c) Morgan Stanley has a material pecuniary interest in the matter submitted for a vote (e.g., acting as a financial advisor to a party to a merger or acquisition for which Morgan Stanley will be paid a success fee if completed).
C. Proxy Voting Reports
(a) MSIM will promptly provide a copy of this Policy to any client requesting them. MSIM will also, upon client request, promptly provide a report indicating how each proxy was voted with respect to securities held in that clients account.
(b) MSIMs legal department is responsible for filing an annual Form N-PX on behalf of each registered management investment company for which such filing is required, indicating how all proxies were voted with respect to such investment companys holdings.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
FUND MANAGEMENT
As of the date of this report, the Fund is managed by members of the Emerging Markets Equity team. The team consists of portfolio managers and analysts. The members of the team jointly and primarily responsible for the day-to-day operation of the Fund are Narayan Ramachandran and Ruchir Sharma, Managing Directors of the Sub-Adviser. Mr. Ramachandran has been associated with the Sub-Adviser in an investment management capacity since July 1996 and joined the team managing the Fund in April 2001. Mr. Sharma has been associated with the Sub-Adviser in an investment management capacity since October 1996 and joined the team managing the Fund in February 2002.
The composition of the team may change without notice from time to time.
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGERS
The following information is as of December 31, 2005.
As of December 31, 2005, Mr. Ramachandran managed nine mutual funds with a total of approximately $5.6 billion in assets; three pooled investment vehicles other than mutual funds with a total of approximately $3.6 billion in assets; and 26 other accounts with a total of approximately $5.1 billion in assets. Of these other accounts, five accounts with a total of approximately $1.4 billion in assets, had performance based fees.
As of December 31, 2005, Mr. Sharma managed eight mutual funds with a total of approximately $5.6 billion in assets; one pooled investment vehicle other than mutual funds with a total of approximately $664.6 million in assets; and two other accounts with a total of approximately $666.4 million in assets.
Because the portfolio managers manage assets for other investment companies, pooled investment vehicles and/or other accounts (including institutional clients, pension plans and certain high net worth individuals), there may be an incentive to favor one client over another resulting in conflicts of interest. For instance, the Investment Adviser may receive fees from certain accounts that are higher than the fee it receives from the Fund, or it may receive a performance-based fee on certain accounts. In those instances, the portfolio managers may have an incentive to favor the higher and/or performance-based fee accounts over the Fund. The Investment Adviser has adopted trade allocation and other policies and procedures that it believes are reasonably designed to address these and other conflicts of interest.
PORTFOLIO MANAGER COMPENSATION STRUCTURE
Portfolio managers receive a combination of base compensation and discretionary compensation, comprising a cash bonus and several deferred compensation programs described below. The methodology used to determine portfolio manager compensation is applied across all funds/accounts managed by the portfolio manager.
BASE SALARY COMPENSATION. Generally, portfolio managers receive base salary compensation based on the level of their position with the Investment Adviser.
DISCRETIONARY COMPENSATION. In addition to base compensation, portfolio managers may receive discretionary compensation.
Discretionary compensation can include:
Cash Bonus;
Morgan Stanleys Equity Incentive Compensation Program (EICP) awards - a mandatory program that defers a portion of discretionary year-end compensation into restricted stock units or other awards based on Morgan Stanley common stock that are subject to vesting and other conditions;
Investment Management Deferred Compensation Plan (IMDCP) awards - a mandatory program that defers a portion of discretionary year-end compensation and notionally invests it in designated funds advised by the Investment Adviser or its affiliates. The award is subject to vesting and other conditions. Portfolio Managers must notionally invest a minimum of 25% to a maximum of 75% of the IMDCP deferral into a combination of the designated open-end mutual funds they manage that are included in the IMDCP fund menu;
Voluntary Deferred Compensation Plans - voluntary programs that permit certain employees to elect to defer a portion of their discretionary year-end compensation and directly or notionally invest the deferred amount: (1) across a range of designated investment funds, including funds advised by the Adviser or its affiliates; and/or (2) in Morgan Stanley stock units.
Several factors determine discretionary compensation, which can vary by portfolio management team and circumstances. In order of relative importance, these factors include:
Investment performance. A portfolio managers compensation is linked to the pre-tax investment performance of the funds/accounts managed by the portfolio manager. Investment performance is calculated for one-, three- and five-year periods measured against a funds/accounts primary benchmark (as set forth in the funds prospectus), indices and/or peer groups. Generally, the greatest weight is placed on the three- and five-year periods.
Revenues generated by the investment companies, pooled investment vehicles and other accounts managed by the portfolio manager.
Contribution to the business objectives of the Investment Adviser.
The dollar amount of assets managed by the portfolio manager.
Market compensation survey research by independent third parties.
Other qualitative factors, such as contributions to client objectives.
Performance of Morgan Stanley and Morgan Stanley Investment Management, and the overall performance of the Global Investor Group, a department within Morgan Stanley Investment Management that includes all investment professionals.
SECURITIES OWNERSHIP OF PORTFOLIO MANAGERS
As of December 31, 2005, the portfolio managers did not own any shares of the Fund.
Item 9. Closed-End Fund Repurchases
Morgan Stanley Emerging Markets Fund, Inc.
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TOTAL NUMBER OF |
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SHARES PURCHASED |
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MAXIMUM NUMBER |
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PART OF PUBLICLY |
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OF SHARES THAT MAY YET |
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TOTAL NUMBER OF |
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AVERAGE PRICE |
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ANNOUNCED PLANS |
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BE PURCHASED UNDER |
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Period |
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SHARES PURCHASED |
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PAID PER SHARE |
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OR PROGRAMS |
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THE PLANS OR PROGRAMS |
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July |
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Unlimited |
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August |
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Unlimited |
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September |
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1,180 |
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$ |
20.80 |
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1,180 |
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Unlimited |
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October |
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9,246 |
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$ |
19.83 |
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9,246 |
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Unlimited |
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November |
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Unlimited |
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December |
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Unlimited |
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The Share Repurchase Program commenced on 7/30/1998.
The Fund expects to continue to repurchase its outstanding shares at such time and in such amounts as it believes will further the accomplishment of the foregoing objectives, subject to review by the Board of Directors.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
(a) The Funds principal executive officer and principal financial officer have concluded that the Funds disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, based upon such officers evaluation of these controls and procedures as of a date within 90 days of the filing date of the report.
(b) There were no changes in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal half-year (the registrants second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting.
Item 12. Exhibits
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is attached hereto.
(b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) |
Morgan Stanley Emerging Markets Fund, Inc. |
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By: |
/s/ Ronald E. Robison |
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Name: |
Ronald E. Robison |
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Title: |
Principal Executive Officer |
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Date: |
February 9, 2006 |
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: |
/s/ Ronald E. Robison |
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Name: |
Ronald E. Robison |
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Title: |
Principal Executive Officer |
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Date: |
February 9, 2006 |
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By: |
/s/ James W. Garrett |
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Name: |
James W. Garrett |
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Title: |
Principal Financial Officer |
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Date: |
February 9, 2006 |
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