N-Q 1 a08-15280_3nq.htm N-Q

 

[Annotated Form N-Q]

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

 

 

 

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number

811-08346

 

MORGAN STANLEY EASTERN EUROPE FUND, INC.

(Exact name of registrant as specified in charter)

522 FIFTH AVENUE, NEW YORK, NY

10036

(Address of principal executive offices)

(Zip code)

RONALD E. ROBISON
522 Fifth Avenue, New York, NY  10036

(Name and address of agent for service)

 

 

 

Registrant’s telephone number, including area code:

1-800-231-2608

 

 

Date of fiscal year end:

12/31

 

 

Date of reporting period:

3/31/08

 

 


 

Item 1.  Schedule of Investments.

 

The Fund’s schedule of investment as of the close of the reporting period prepared pursuant to Rule 12-12 Regulation S-X is as follows:

 


 

Morgan Stanley Eastern Europe Fund, Inc.

Portfolio of Investments

First Quarter Report

March 31, 2008 (unaudited)

 

 

 

Shares

 

Value
(000)

 

COMMON STOCKS (92.6%)

 

 

 

 

 

(Unless Otherwise Noted)

 

 

 

 

 

Austria (0.3%)

 

 

 

 

 

Commercial Banks

 

 

 

 

 

Raiffeisen International Bank Holding AG

 

3,320

 

$

455

 

Czech Republic (3.8%)

 

 

 

 

 

Commercial Banks

 

 

 

 

 

Komercni Banka A.S.

 

6,000

 

1,434

 

Media

 

 

 

 

 

Central European Media Enterprises Ltd. ‘A’

 

(a)48,000

 

4,091

 

 

 

 

 

5,525

 

Poland (16.3%)

 

 

 

 

 

Commercial Banks

 

 

 

 

 

Bank Millennium S.A.

 

376,017

 

1,405

 

Bank Pekao S.A.

 

41,355

 

3,671

 

Bank Zachodni WBK S.A.

 

4,818

 

400

 

Getin Holding S.A.

 

(a)282,000

 

1,577

 

 

 

 

 

7,053

 

Construction & Engineering

 

 

 

 

 

Budimex S.A.

 

(a)28,223

 

1,064

 

PBG S.A.

 

(a)12,564

 

1,808

 

Polimex Mostostal S.A.

 

429,034

 

1,544

 

 

 

 

 

4,416

 

Hotels Restaurants & Leisure

 

 

 

 

 

AmRest Holdings N.V.

 

(a)86,644

 

3,936

 

Media

 

 

 

 

 

TVN S.A.

 

316,610

 

3,267

 

Metals & Mining

 

 

 

 

 

Zaklad Przetworstwa Hutniczego Stalprodukt S.A.

 

10,958

 

3,701

 

Multiline Retail

 

 

 

 

 

Eurocash S.A.

 

212,378

 

1,214

 

 

 

 

 

23,587

 

Romania (1.1%)

 

 

 

 

 

Capital Markets

 

 

 

 

 

SIF 3 Transilvania Brasov

 

(a)567,400

 

360

 

Food Products

 

 

 

 

 

Albalact S.A.

 

(a)6,067,931

 

1,225

 

 

 

 

 

1,585

 

Russia (71.1%)

 

 

 

 

 

Automobiles

 

 

 

 

 

Severstal-Avto JSC

 

(a)56,400

 

3,325

 

Chemicals

 

 

 

 

 

Uralkali JSC GDR

 

(a)26,066

 

1,068

 

Commercial Banks

 

 

 

 

 

Bank St. Petersburg GDR

 

203,304

 

976

 

Sberbank RF

 

567,759

 

1,774

 

Vozrozhdenie Bank

 

18,837

 

1,104

 

 

 

 

 

3,854

 

Electrical Equipment

 

 

 

 

 

Siloviye Mashiny

 

(a)17,129,400

 

3,426

 

Food Products

 

 

 

 

 

Wimm-Bill-Dann Foods OJSC ADR

 

25,186

 

2,581

 

Hotels, Restaurants & Leisure

 

 

 

 

 

Rosinter Restaurants Holdings OJSC

 

(a)45,702

 

2,296

 

Machinery

 

 

 

 

 

KamAZ JSC

 

(a)581,100

 

3,635

 

Marine

 

 

 

 

 

Far Eastern Shipping Co.

 

(a)2,905,100

 

2,920

 

Media

 

 

 

 

 

CTC Media, Inc.

 

(a)128,853

 

3,576

 

 


 

Metals & Mining

 

 

 

 

 

Evraz Group S.A. GDR

 

44,387

 

3,830

 

Mechel OAO ADR

 

46,577

 

5,300

 

MMC Norilsk Nickel ADR

 

441,653

 

12,441

 

Severstal JSC GDR

 

154,687

 

3,499

 

 

 

 

 

25,070

 

Oil & Gas Consumable Fuels

 

 

 

 

 

LUKOIL ADR

 

93,706

 

8,048

 

NovaTek OAO GDR

 

62,900

 

5,079

 

OAO Gazprom ADR

 

341,904

 

17,451

 

OAO Gazprom ADR, London

 

81,700

 

4,170

 

Rosneft Oil Co.

 

253,768

 

2,288

 

 

 

 

 

37,036

 

Oil & Gas Exploration & Production

 

 

 

 

 

Eurasia Drilling Co., Ltd. GDR

 

(a)(b)16,245

 

381

 

Eurasia Drilling Co., Ltd. GDR

 

(a)133,400

 

3,129

 

 

 

 

 

3,510

 

Wireless Telecommunication Services

 

 

 

 

 

Mobile Telesystems OJSC ADR

 

46,418

 

3,521

 

Vimpel-Communications OJSC ADR

 

230,671

 

6,895

 

 

 

 

 

10,416

 

 

 

 

 

102,713

 

TOTAL COMMON STOCKS
(Cost $106,549)

 

 

 

133,865

 

 

 

No. of
Warrants

 

 

 

WARRANTS (2.3%)

 

 

 

 

 

United States (2.3%)

 

 

 

 

 

Diversified Financial Services

 

 

 

 

 

UBS AG, expiring 6/29/09 (Cost $2,508)

 

(a)250

 

3,338

 

 

 

Shares

 

 

 

SHORT-TERM INVESTMENT (5.3%)

 

 

 

 

 

Investment Company (5.3%)

 

 

 

 

 

Morgan Stanley Institutional Liquidity Money Market Portfolio — Institutional Class (Cost $7,595)

 

(c)7,595,320

 

7,595

 

TOTAL INVESTMENTS + (100.2%)
(Cost $116,652)

 

 

 

(d)144,798

 

LIABILITIES IN EXCESS OF OTHER ASSETS (-0.2%)

 

 

 

(314

)

NET ASSETS (100%)

 

 

 

$

144,484

 

 

(a)

 

Non-income producing security.

(b)

 

144A Security — Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.

(c)

 

The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Money Market Portfolio (the “Liquidity Fund”), an open-end management investment company managed by the Adviser. Investment Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Liquidity Fund. For the three months ended March 31, 2008, advisory fees paid were reduced by approximately $1,000 relating to the Fund’s investment in the Liquidity Fund. For the same period, income distributions earned by the Fund are recorded as dividends from affiliates and totaled approximately $52,000. During the three months ended March 31, 2008, the approximate cost of purchases and sales in the Liquidity Fund were $17,642,000 and $52,575,000, respectively.

(d)

 

The approximate market value and percentage of the investments, $107,901,000 and 74.5%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments.

ADR

 

American Depositary Receipt

GDR

 

Global Depositary Receipt

+

 

At March 31, 2008, the U.S. Federal income tax cost basis of investments was approximately $116,652,000 and, accordingly, net unrealized appreciation for U.S. Federal income tax purposes was $28,146,000 of which $31,970,000 related to appreciated securities and $3,824,000 related to depreciated securities.

 


 

Foreign Currency Exchange Contract Information:

 

The Fund had the following foreign currency exchange contract(s) open at period end:

 

Currency
to
Deliver
(000)

 

Value
(000)

 

Settlement
Date

 

In
Exchange
For
(000)

 

Value
(000)

 

Net
Unrealized
Appreciation
(Depreciation)
(000)

 

USD

 

277

 

$

277

 

4/2/08

 

EUR

 

176

 

$

277

 

$

@—

 

USD

 

183

 

183

 

4/3/08

 

EUR

 

116

 

183

 

@—

 

USD

 

1,421

 

1,421

 

4/2/08

 

PLN

 

3,170

 

1,424

 

3

 

USD

 

90

 

90

 

4/3/08

 

PLN

 

201

 

90

 

@—

 

EUR

 

999

 

1,578

 

4/2/08

 

USD

 

1,581

 

1,581

 

3

 

 

 

 

 

$

3,549

 

 

 

 

 

 

 

$

3,555

 

$

6

 

 

EUR

— Euro

PLN

— Polish New Zloty

USD

— United States Dollar

@

— Value is less than $500.

 


 

Notes to Portfolio of Investments (unaudited)

 

The Fund adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”), effective January 1, 2008. In accordance with SFAS 157, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. SFAS 157 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund’s investments. The inputs are summarized in the three broad levels listed below.

 

Level 1 – quoted prices in active markets for identical investments

Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

The following is a summary of the inputs used as of March 31, 2008 in valuing the Fund’s investments carried at value:

 

 

 

Investments in
Securities

 

Other Financial
Instruments*

 

Valuation Inputs

 

(000)

 

(000)

 

Level 1 - Quoted Prices

 

$

19,069

 

$

—

 

Level 2 - Other Significant Observable Inputs

 

125,729

 

6

 

Level 3 - Significant Unobservable Inputs

 

—

 

—

 

Total

 

$

144,798

 

$

6

 

 

*Other financial instruments include futures, forwards and swap contracts.

 

At March 31, 2008 there were no Level 3 Portfolio investments for which significant unobservable inputs were used to determine fair value.

 

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 market 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 issuer’s 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.

 


 

Item 2.  Controls and Procedures.

 

(a) The Fund’s principal executive officer and principal financial officer have concluded that the Fund’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-Q was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s 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 Fund’s internal control over financial reporting that occurred during the registrant’s fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

 

Item 3.  Exhibits.

 


 

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 Eastern Europe Fund, Inc.

 

By:

/s/ Ronald E. Robison

 

Name:

Ronald E. Robison

 

Title:

Principal Executive Officer

 

Date:

May 20, 2008

 

 

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

 

Name:

Ronald E. Robison

 

Title:

Principal Executive Officer

 

Date:

May 20, 2008

 

 

 

 

By:

/s/ James Garrett

 

Name:

James Garrett

 

Title:

Principal Financial Officer

 

Date:

May 20, 2008