<PAGE>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
- ---------------------------------------------
OFFICERS AND DIRECTORS
Barton M. Biggs William G. Morton, Jr.
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS James W. Grisham
Frederick B. Whittemore VICE PRESIDENT
VICE-CHAIRMAN OF THE Michael F. Klein
BOARD OF DIRECTORS VICE PRESIDENT
Warren J. Olsen Harold J. Schaaff, Jr.
PRESIDENT AND DIRECTOR VICE PRESIDENT
Peter J. Chase Joseph P. Stadler
DIRECTOR VICE PRESIDENT
John W. Croghan Valerie Y. Lewis
DIRECTOR SECRETARY
David B. Gill James R. Rooney
DIRECTOR TREASURER
Graham E. Jones Belinda A. Brady
DIRECTOR ASSISTANT TREASURER
John A. Levin
DIRECTOR
- ---------------------------------------------
INVESTMENT ADVISER
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
- --------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
- --------------------------------------------------------
CUSTODIANS
Morgan Stanley Trust Company (International)
One Pierrepont Plaza
Brooklyn, New York 11201
The Chase Manhattan Bank (Domestic)
770 Broadway
New York, New York 10003
- --------------------------------------------------------
SHAREHOLDER SERVICING AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
(800) 278-4353
- --------------------------------------------------------
LEGAL COUNSEL
Rogers & Wells
200 Park Avenue
New York, New York 10166
- --------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
- --------------------------------------------------------
For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726.
------------------------
MORGAN STANLEY
ASIA-PACIFIC
FUND, INC.
---------------------
SEMI-ANNUAL REPORT
JUNE 30, 1996
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- --------
For the six months ended June 30, 1996, the Morgan Stanley Asia-Pacific Fund,
Inc. had a total return, based on net asset value per share, of 6.59% compared
to its benchmark (as defined following) of 2.74%. For the period since the
Fund's commencement of operations on August 2, 1994 through June 30, 1996, the
Fund's total return, based on net asset value per share, was 9.52% compared with
- -0.09% for the benchmark. (The benchmark for investment purposes is the weighted
average of the percentage change month-on-month of each of four Morgan Stanley
Capital International (MSCI) indices; Japan, Combined Asia Free ex-Japan,
Australia, and New Zealand, where the weights are based on the respective market
capitalizations of these indices at the beginning of the month). On June 28,
1996, the closing price of the Fund's shares on the New York Stock Exchange was
$12.00 representing a 10.8% discount to the net asset value per share.
JAPAN
During the first half of 1996 macro conditions regarding the Japanese
economy showed evidence of a meaningful recovery underway, supported by a
weakening yen, economic stimulus packages and record low interest rates.
Interest rate differentials between the U.S. and Japan continued to widen while
the G-7 supported further strength for the dollar stating the "dollar rise is
positive and promising" during the Lyon summit. With comment, it appears
unanimous support for Japan sustaining a solid economic recovery remains a top
priority by G-7.
A low interest rate weaker yen environment coupled with a 14 trillion yen
stimulus package announced in September 1995 had a very profound impact on GDP,
corporate profits and business sentiment during the first half of 1996. In fact,
GDP rose to 12.7% annualized for the quarter January to March 1996 (highest on
record for the past 23 years), the Bank of Japan ("BOJ") May "Tankan" reported
significant business confidence improvement, while corporate earnings for 1,057
listed non-financial companies rose 98% year over year on a consolidated basis.
With such robust gains, concerns about monetary policy began to also rise. In
February, finance minister Kubo hinted at a possible rate hike to help
pensioners; also BOJ Governor Matsushita commented he was also considering a
rate hike "in the future." While these comments only served to cool financial
markets, in reality there was no change in policy. We believe any interest rate
rises in Japan will be modest. There is no evidence to date that real demand for
money has yet occurred, suggesting further stimulus to the economy is necessary
for a sustainable recovery. Moreover, monetary policy comments by the
authorities seem to be timed with overheating markets - and are more geared to
securing a long term gradual recovery - than slowing a fragile economy just
emerging from 5 straight years of decline.
The solid fundamental improvements during the first half of 1996 propelled
equities to the highest closing levels since 1992. While some profit taking and
consolidation occurred during May as the market entered a transition from a
macro driven environment to a more earnings driven market, we believe the trend
is in place for the bull market to resume. Supply and demand is improving as
local pension funds have begun shifting assets from fixed income to equity,
prompted by the lowering of guaranteed return by life insurance companies from
4.5 to 2.5% during the last quarter. Evidence of an earnings driven market is
also suggested by the all-time highs for Honda and Canon, among others. On the
other hand weak DRAM prices have put pressure on semi-conductor issues, which
was also one of the best relative performance sectors over the last 12 months.
The main reason for the outperformance of the Fund is the big overweight
position in non-Japan
2
<PAGE>
Asia, which had outperformed the overall benchmark by a significant margin. The
Fund was also overweight in several countries that rose sharply in the period
with India being the most notable.
ASIA EX-JAPAN
The Asian markets started off on a strong note in the beginning of the year.
By late February, the Combined Far East Free ex-Japan Index had already risen
12% from the start of the year. The strong run was on the back of falling global
interest rates and strong portfolio flows into the Asian Pacific equities.
Sentiment turned sour in early March spooked by the 3% single day drop in the
Dow Jones Industrial Index. Escalating political tensions between mainland China
and Taiwan depressed sentiment further. Most Asian markets recovered from their
corrections and powered ahead in the second quarter of the year. The strongest
gains were made in India (up 24.5%), the Philippines (up 23.3%), Indonesia (up
16.1%), Malaysia (up 15.7%), China (up 12.9%) and Hong Kong (up 10.9%). Of the
major markets, the worst performing ones were South Korea (down 14.9%), Thailand
(down 1.7%) and Singapore (down 0.3%).
The Indian market started the year on a weak note, as investors awaited the
outcome of the election. The market picked up momentum heading into the
election, as investors expected a victory for the ruling Congress party. The
defeat of the Congress party and the formation of a coalition government only
dented the market rally slightly. The market went on to make new highs for the
year as strong corporate earnings came in.
In the Philippines, stock indices reached record highs buoyed by bullish
sentiment and record earnings. Strong economic growth and upward earnings
revisions propelled the market further. Many big cap blue chip stocks made
all-time highs, notably Ayala Land.
Indonesia performed strongly led by index heavyweight PT Telekom, the state
telecommunications company and the largest listed entity on the stock exchange.
Stock indices also climbed to record setting highs. The market however corrected
towards the end of the period sparked by political uncertainty. Rioting in the
streets and the run-up to the next Presidential election dampened investor
sentiment. The market however was well supported by strong earnings growth.
The Malaysian market did unexpectedly well as foreign and domestic buying lifted
the broad market. Resolutions on the tariff structures on Telekom and Tenaga,
two of the largest listed entities on the stock exchange. and improving
macroeconomic numbers drew investors into the market. Good reported earnings
also provided support.
In Singapore, measures introduced to curb property speculation sparked heavy
selling in property issues. Weak economic growth and export numbers drew another
wave of selling pressure. Corporate earnings were not encouraging. This was a
reversal from the more bullish tone at the beginning of the year. The Thailand
market was one of the worst performing markets in Asia in the first half of this
year. After a brief rally in the beginning of the year, the market headed down
for the most part during the period. A series of extremely weak-corporate
earnings for both 1995 and first quarter 1996 prompted selling across the board.
Rumors about bad debts and finance companies and banks sparked selling. On the
macroeconomic front, growth continues to weaken and fears that the slowdown may
accelerate further prompted the central bank to allow some commercial banks to
lower lending rates and earnings were revised down sharply.
The South Korea market was plagued by concerns over the twin deficits in trade
and current accounts. This was caused primarily by a slowdown in major exports
like seminconductors,
3
<PAGE>
textiles and automobiles. The governments planned W2.5 trillion new equity
supply in the third quarter of 1996 also discouraged stock investments. The
liquidation of close to W1 trillion worth of outstanding margin positions
worsened market conditions. Uncertainties over North Korea also caused concerns.
OUTLOOK
The Asia Pacific region continued to be one of the fastest growing regions
in the world. Relatively strong economic growth in the rest of the OECD world
should also buoy economic growth in this region. While there could be upward
pressures on interest rates stemming from the U.S., the impact should be quite
minimal. On the positive side, China is likely to begin its cyclical recovery.
This will benefit the region as a whole. Countries like Thailand and South
Korea, whose economies have slowed first, are also likely to see lower interest
rates, which should be a good boost to their economies.
The Fund successfully completed a rights offering on May 8, 1996 raising
approximately $173 million (after deducting offering expenses) in order to take
advantage of market opportunities in the Asia Pacific region. As of June 30,
1996, a substantial portion of the proceeds have been invested.
Sincerely,
[SIGNATURE]
Warren J. Olsen
PRESIDENT AND DIRECTOR
[SIGNATURE]
Ean Wah Chin
SENIOR PORTFOLIO MANAGER
August 14, 1996
4
<PAGE>
Morgan Stanley Asia-Pacific Fund, Inc.
Investment Summary as of June 30, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION (UNAUDITED)
TOTAL RETURN (%)
----------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (1)(3)
------------------------ ------------------------ ------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR TO DATE 2.35%+ -- 6.59%+ -- 2.74% --
ONE YEAR 23.26+ 23.26%+ 15.65+ 15.65%+ 10.13 10.13%
SINCE INCEPTION* -2.29+ -1.20+ 9.52+ 4.87+ -0.09 -0.05
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
A BAR CHART REFLECTING THE DATA BELOW IS REFLECTED HERE.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31: SIX MONTHS ENDED
1994* 1995 JUNE 30, 1996 (UNAUDITED)
<S> <C> <C> <C>
Net Asset Value Per Share $13.20 $14.34 $13.45
Market Value Per Share $12.25 $13.33 $12.00
Premium/(Discount) -7.2% -7.0% -10.8%
Income Dividends $0.04 $0.05 $0.35
Capital Gains Distributions $0.01 $0.02 --
Fund Total Return (2) -5.94% 9.24% 6.59%+
Index Total Return (1)(3)
** -5.90% 0.87% 2.74%
</TABLE>
(1) Assumes dividends and distributions, if any, were reinvested.
(2) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. This return does not include the effect of dilution in
connection with the Rights Offering. These percentages are not an indication
of the performance of a shareholder's investment in the Fund based on market
value due to differences between the market price of the stock and the net
asset value per share of the Fund.
(3) The benchmark for investment performance is the weighted average of the
percentage change month-on-month of each of four Morgan Stanley Capital
International (MSCI) indices; Japan, Combined Asia Free ex-Japan, Australia,
and New Zealand, where the weights are based on the respective market
capitalizations of these indices at the beginning of the month.
* The Fund commenced operations on August 2, 1994.
** Unaudited.
+ Adjusted for Rights Offering.
5
<PAGE>
Morgan Stanley Asia-Pacific Fund, Inc.
Portfolio Summary as of June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equity Securities 96.1%
Fixed Income Securities 0.1%
Short-Term Investments 3.8%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Automobiles 4.1%
Banking 10.5%
Chemicals 5.9%
Construction & Housing 3.9%
Electrical & Electronics 11.3%
Financial Services 5.4%
Machinery & Engineering 6.0%
Multi-Industry 7.1%
Real Estate 8.4%
Telecommunications 6.5%
Other 30.9%
</TABLE>
- --------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Japan 39.7%
India 15.7%
Hong Kong 9.9%
Australia 6.4%
Thailand 6.4%
Singapore 6.1%
Indonesia 3.6%
Korea 2.9%
Philippines 2.9%
Malaysia 2.7%
China 0.3%
Other 3.4%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS
PERCENT OF NET
ASSETS
---------------
<C> <S> <C>
1. Western Mining Corp. Ltd. 2.0%
2. Cheung Kong (Holdings) Ltd. 1.7
3. Lend Lease Corp. Ltd. 1.5
4. National Australia Bank Ltd. 1.5
5. Hutchison Whampoa Ltd. 1.4
<CAPTION>
PERCENT OF NET
ASSETS
---------------
<C> <S> <C>
6. Broken Hill Proprietary Co.
Ltd. 1.4%
7. HSBC Holdings plc 1.4
8. Housing Development Finance
Corp. Ltd. 1.4
9. Bangkok Bank Ltd. 1.3
10. Toshiba Corp. 1.2
---
14.8%
---
---
</TABLE>
6
<PAGE>
FINANCIAL STATEMENTS
- ---------
STATEMENT OF NET ASSETS (UNAUDITED)
- ---------
JUNE 30, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------------
- -------------
COMMON STOCKS (95.5%)
(Unless otherwise noted)
- --------------------------------------------------
- ----------
AUSTRALIA (6.4%)
BANKING
National Australia Bank Ltd. 1,571,884 U.S.$ 14,516
--------------
ENERGY SOURCES
Broken Hill Proprietary Co. Ltd. 985,964 13,615
--------------
METALS -- NON-FERROUS
Western Mining Corp. Ltd. 2,645,655 18,922
--------------
REAL ESTATE
Lend Lease Corp. Ltd. 959,277 14,702
--------------
61,755
--------------
- -----------------------------------------------------------------
- -------------
CHINA (0.3%)
AUTOMOBILES
+Shenzhen North Jianshe Motorcycle 'B' 722,900 252
--------------
CHEMICALS
Jilin Chemical Industrial Co. Ltd. ADR "H" 68,000 1,250
--------------
TRANSPORTATION -- ROAD & RAIL
+Guangshen Railway ADR 'H' 21,000 402
--------------
UTILITIES -- ELECTRICAL & GAS
Shandong Huaneng Power Co. Ltd. ADR
'H' 125,700 1,037
--------------
2,941
--------------
- -----------------------------------------------------------------
- -------------
HONG KONG (9.9%)
BANKING
HSBC Holdings plc 899,148 13,590
--------------
FOOD & HOUSEHOLD PRODUCTS
Charoen Pokphand Co. Ltd. 4,686,000 1,862
--------------
MULTI-INDUSTRY
Citic Pacific Ltd. 1,530,000 6,187
Guangdong Investments Ltd. 9,368,000 5,930
Hutchison Whampoa Ltd. 2,195,000 13,810
Swire Pacific Ltd. 'A' 900,000 7,703
--------------
33,630
--------------
REAL ESTATE
Cheung Kong (Holdings) Ltd. 2,247,000 16,183
Hopewell Holdings 4,472,000 2,426
New World Development Co. Ltd. 1,648,000 7,643
Sun Hung Kai Properties Ltd. 708,000 7,157
Wharf (Holdings) Ltd. 1,090,000 3,901
--------------
37,310
--------------
TELECOMMUNICATIONS
+Asia Satellite Telcom Holdings 260,000 771
Hong Kong Telecom Ltd. 2,971,200 5,335
--------------
6,106
--------------
UTILITIES -- ELECTRICAL & GAS
**China Light & Power Co. Ltd. 564,000 2,557
--------------
95,055
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
INDIA (15.4%)
APPLIANCES & HOUSEHOLD DURABLES
Peico Electronics & Electric Ltd. 123,600 U.S.$ 453
--------------
AUTOMOBILES
Apollo Tyres Ltd. 650,950 3,349
+Apollo Tyres Ltd. (Warrants), expiring 2/28/98 190,368 407
Autolec Industries Ltd. 152,800 442
Autolite Ltd. 232,100 1,257
Autopal Industries Ltd. 65,000 86
Escorts Ltd. 'A' 966,450 3,820
Hero Honda Ltd. 37,150 297
Jay Bharat Maruti Ltd. 53,200 83
Lumax Automatic Parts Industries Ltd. 100,825 326
+Nippondenso India Ltd. 71,400 280
Patheja Forgings and Auto Ltd. 'B' 677,700 1,520
Rico Auto Industries Ltd. 82,000 315
Sona Steering System Ltd. 92,500 207
Tata Engineering & Locomotive Ltd. 309,502 4,568
--------------
16,957
--------------
BANKING
State Bank of India Ltd. 793,481 6,762
--------------
BEVERAGES
ITC Ltd. 442,200 3,913
United Breweries Ltd. 149,100 123
--------------
4,036
--------------
BUILDING MATERIALS & COMPONENTS
Associated Cement Co. Ltd. 136,552 9,358
Gujarat Ambuja Cements Ltd. 256,100 2,719
India Cements Ltd. 75,000 354
Kesoram Industries Ltd. 311,100 678
Madras Cements Ltd. 'B' 3,695 1,290
Murudeshwar Ceramics Ltd. 'B' 46,000 75
Saurashtra Cement & Chemicals Ltd. 'B' 26,200 52
--------------
14,526
--------------
CHEMICALS
Asian Paints Ltd. 71,650 887
#Gujarat Narmada Valley Fertilizers Ltd. 275,000 1,512
Gujarat Narmada Valley Fertilizers Ltd.
'A' 305,750 336
Gujarat State Fertilisers Ltd. 6,550 21
+Gujarat State Fertilisers Ltd. (Rights) 1,310 --
Hoechst India Ltd. 50,650 503
Indian Dyestuff Industries Ltd. 304,250 153
Indian Organic Chemical Ltd. 275,480 160
Indian Petro Chemical Corp. Ltd. 1,143,300 5,054
Jaysynth Dyechem Ltd. 145,800 257
Sudarshan Chemicals Inds. Ltd. 4,600 18
United Phosphorous Ltd. 97,500 888
--------------
9,789
--------------
CONSTRUCTION & HOUSING
Hindustan Construction Co. 257,700 344
Nagarjuna Construction Ltd. 151,200 436
--------------
780
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
INDIA (CONTINUED)
DATA PROCESSING & REPRODUCTION
Modi Xerox Ltd. 16,850 U.S.$ 69
--------------
ELECTRICAL & ELECTRONICS
Bajaj Electricals Ltd. 16,350 257
BPL Ltd. 263,000 455
Rolta India Ltd. 999,500 532
--------------
1,244
--------------
ELECTRONIC COMPONENTS & INSTRUMENTS
Vikas WSP Ltd. 196,000 946
Viral Filaments Ltd. 5,000 10
--------------
956
--------------
ENERGY EQUIPMENT & SERVICES
Bharat Heavy Electricals Ltd. 2,114,400 10,773
Crompton Greaves Ltd. 490,580 3,492
Esab India Ltd. 307,265 770
Samtel India Ltd. 1,000 2
S & S Power Switchgear Ltd. 63,550 303
--------------
15,340
--------------
FINANCIAL SERVICES
Housing Development Finance Corp. Ltd. 161,356 13,456
+Industrial Finance Corp. (India) Ltd. 1,306,200 1,678
Tube Investments of India Ltd. 109,450 377
--------------
15,511
--------------
FOOD & HOUSEHOLD PRODUCTS
Dhampur Sugar Mills Ltd. 141,850 483
--------------
FOREST PRODUCTS & PAPER
Ballarpur Industries Ltd. 232,264 1,070
ITC Bhadrachalam Paperboards Ltd. 193,750 583
JK Corp. Ltd. 41,200 126
+JK Corp. Ltd. GDR 61,140 191
+#JK Corp. Ltd. GDR 249,240 779
--------------
2,749
--------------
HEALTH & PERSONAL CARE
Godrej Soaps Ltd. 203,700 301
Sun Pharmaceutical Industries Ltd. 162,100 1,277
TTK Biomed Ltd. 21,500 25
--------------
1,603
--------------
INDUSTRIAL COMPONENTS
Indian Rayon & Industries Ltd. 38,700 541
Thermax Ltd. 128,000 1,454
--------------
1,995
--------------
LEISURE & TOURISM
ITC Hotels Ltd. 279,300 1,586
--------------
MACHINERY & ENGINEERING
Artson Engineering Ltd. 235,600 120
DGP Windsor India Ltd. 218,800 876
Flat Products Equipments (India) Ltd. 104,900 581
+Hindustan Power Plus Ltd. 67,000 309
Veejay Lakshmi Engineering Ltd. 150,700 496
--------------
2,382
--------------
MANUFACTURING
DCL Polyesters Ltd. 195,000 91
--------------
METALS -- NON-FERROUS
Hindalco Industries Ltd. 5,000 178
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
METALS -- STEEL
KEC International Ltd. 350,000 U.S.$ 1,306
Special Steels Ltd. 464,850 1,194
+Special Steels Ltd. (Rights) 10 --
Tata Iron & Steel Co. Ltd. 257,240 1,769
--------------
4,269
--------------
MISCELLANEOUS MATERIALS & COMMODITIES
Amforge Industries Ltd. 35,000 50
+***Amforge Industries Ltd. (Rights) 37 --
+***Amforge Industries Ltd.
(Warrants), expiring 7/1/97 5,150 2
Bharat Forge Co. Ltd. 260,000 1,314
Cosmo Films Ltd. 175,000 601
Essel Packaging Ltd. 146,300 714
Hindustan Development Corp. 1,088,500 754
+ITW Signode India Ltd. 329,900 965
MRF Ltd. 9,550 956
+Panyam Cements & Minerals Ltd. 27,190 1,009
Polyplex Ltd. 225,000 418
Supreme Industries Ltd. 178,670 1,681
Wimco Ltd. 422,200 321
--------------
8,785
--------------
MULTI-INDUSTRY
Bajaj Hindustan Ltd. 21,000 53
Ceat Tyres Ltd. 368,000 992
Container Corp. of India Ltd. 1,199,600 7,151
EID Parry Ltd. 64,300 175
Max India Ltd. -- New 100,000 898
@+Morgan Stanley Growth Fund 13,110,100 2,568
Suashish Diamonds Ltd. 71,600 264
UTI MasterShares Ltd. 2,270,030 902
Voltas Ltd. 147,950 252
VXL Ltd. 847,000 565
--------------
13,820
--------------
REAL ESTATE
Alacrity Housing Ltd. 381,000 173
--------------
TELECOMMUNICATIONS
Infosys Technology Ltd. 9,600 195
Mahanagar Telephone Nigam Ltd. 412,600 2,972
Videsh Sanchar Nigam Ltd. 260,000 9,963
--------------
13,130
--------------
TEXTILES & APPAREL
Century Textile & Industry Ltd. 11,040 1,700
Coates of India Ltd. 100,700 547
Garware Plastics & Polyester Ltd. 191,250 1,061
G.T.N. Textiles Ltd. 243,000 640
Indo Rama Synthetics Ltd. 483,000 590
+Indo Rama Synthetics Ltd. -- New 46,170 56
+***Indo Rama Synthetics Ltd. (Rights) 180 --
+J.K. Synthetics Ltd. 690,400 426
Mahavir Spinning Mills Ltd. 173,900 444
Morajee Goculdas Spinning Ltd. 125,000 429
Raymond Ltd. 253,850 2,441
+Viniyoga Clothes Ltd. 486,600 90
Viral Syntex Ltd. 5,000 4
--------------
8,428
--------------
TRANSPORTATION -- SHIPPING
Great Eastern Shipping Ltd. 'A' 1,885,355 2,703
--------------
148,798
--------------
- -----------------------------------------------------------------
- -------------
INDONESIA (3.6%)
AUTOMOBILES
**Astra International (Foreign) 1,166,500 1,691
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
INDONESIA (CONTINUED)
BANKING
**Bank International Indonesia
(Foreign) 443,000 U.S.$ 2,189
--------------
BUILDING MATERIALS & COMPONENTS
**Indocement Tunggal Perkasa (Foreign) 120,000 412
**Semen Gresik (Foreign) 538,500 1,567
--------------
1,979
--------------
CHEMICALS
**Sorini Corp. (Foreign) 600,000 3,300
--------------
FOREST PRODUCTS & PAPER
**Barito Pacific Timber (Foreign) 1,387,000 909
**Indah Kiat Pulp & Paper (Foreign) 2,012,000 1,967
--------------
2,876
--------------
HEALTH & PERSONAL CARE
**Kalbe Farma (Foreign) 883,500 1,974
--------------
MACHINERY & ENGINEERING
**United Tractors (Foreign) 28,000 44
--------------
MISCELLANEOUS MATERIALS & COMMODITIES
**Charoen Pokphand Indonesia (Foreign) 874,000 1,690
--------------
TELECOMMUNICATIONS
**Indosat (Foreign) 997,500 3,354
**Telekomunikasi Indonesia (Foreign) 5,559,000 8,419
--------------
11,773
--------------
TOBACCO
**Hanjaya Mandala Sampoerna (Foreign) 194,500 2,215
+**Gudang Garam (Foreign) 1,076,000 4,611
--------------
6,826
--------------
34,342
--------------
- -----------------------------------------------------------------
- -------------
JAPAN (39.0%)
AEROSPACE & MILITARY TECHNOLOGY
Mitsubishi Heavy Industries Ltd. 1,150,000 10,025
--------------
APPLIANCES & HOUSEHOLD DURABLES
+Rinnai Corp. 84,100 2,000
--------------
AUTOMOBILES
Asahi Tec Corp. 443,000 3,217
Kansei Corp. 154,000 1,437
Nissan Motor Co. 900,000 8,010
Suzuki Motor Co. Ltd. 630,000 8,298
--------------
20,962
--------------
BUILDING MATERIALS & COMPONENTS
Nippon Pillar Packing 157,000 1,766
Sangetsu Co. Ltd. 100,000 2,680
Sanwa Shutter Corp. Ltd. 412,000 3,882
+Sanwa Shutter Corp. Ltd. (Warrants),
expiring 1/20/98 1,400 770
--------------
9,098
--------------
BUSINESS & PUBLIC SERVICES
Dai Nippon Printing Co. Ltd. 370,000 7,175
--------------
CHEMICALS
Daicel Chemical Industries 912,000 5,631
Fuji Photo Film Ltd. 240,000 7,596
Kaneka Corp. 899,000 6,060
Mitsubishi Chemical Corp. 1,510,000 6,989
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
Nifco 330,300 U.S.$ 4,260
Okura Industrial Co. Ltd. 434,000 3,116
Sekisui Chemical Co. 703,000 8,617
--------------
42,269
--------------
CONSTRUCTION & HOUSING
Kyudenko Co. Ltd. 389,000 5,231
Matsui Construction 171,000 1,370
+Nishio Rent All Co. 111,000 2,660
Nishio Rent All Co. (Warrants),
expiring 2/20/98 1,055 475
Ohbayashi Corp. 820,000 7,433
Taisei Corp. Ltd. 1,080,000 7,686
Yahagi Construction 238,000 1,896
--------------
26,751
--------------
ELECTRICAL & ELECTRONICS
Canon, Inc. 400,000 8,342
Hitachi Ltd. 1,185,000 11,056
Kyocera Corp. 60,000 4,253
+Kyocera Corp. (Warrants), expiring
1/23/98 1,450 1,695
Matsushita Communication Industries 281,000 7,325
Matsushita Electric Industries Ltd. 562,000 10,487
NEC Corp. 975,000 10,613
Nintendo Ltd. 110,000 8,210
Ricoh Co. Ltd. 706,000 7,491
Sony Corp. 155,000 10,222
Stanley Electric Co. 690,000 4,797
Tokyo Electron Ltd. 245,000 7,149
Toshiba Corp. 1,630,000 11,630
--------------
103,270
--------------
ELECTRONIC COMPONENTS & INSTRUMENTS
Mitsumi Electric Co. Ltd. 388,000 6,175
Murata Manufacturing 130,000 4,935
TDK Corp. 155,000 9,272
--------------
20,382
--------------
FINANCIAL SERVICES
Hitachi Credit Corp. 188,000 3,336
Nikko Securities Co. 757,000 8,517
Nomura Securities Co. 435,000 8,515
+Sumitomo Lease 102,000 621
--------------
20,989
--------------
HEALTH & PERSONAL CARE
Sankyo Co. Ltd. 323,000 8,391
Secom Co. 130,000 8,609
Yamanouchi Pharmaceutical Co. 290,000 6,313
--------------
23,313
--------------
INSURANCE
Nichido Fire & Marine Insurance Co. 215,250 1,668
Sumitomo Marine & Fire 642,000 5,608
--------------
7,276
--------------
MACHINERY & ENGINEERING
Amada Co. Ltd. 667,000 7,199
Daifuku 431,000 6,623
Daikin Kogyo Co. 600,000 6,586
Fuji Machine Co. 329,000 9,299
Kurita Water Industries 274,600 6,706
Tsubakimoto Chain 872,000 5,958
--------------
42,371
--------------
REAL ESTATE
Daibiru Corp. 308,000 4,113
Keihanshin Real Estate Co. 205,000 1,785
Mitsubishi Real Estate Co. Ltd. 597,000 8,246
--------------
14,144
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
JAPAN (CONTINUED)
RECREATION, OTHER CONSUMER GOODS
Square Co. Ltd. 76,400 U.S.$ 4,494
--------------
TELECOMMUNICATIONS
Nippon Telephone & Telegraph 982 7,294
--------------
TEXTILES & APPAREL
Japan Vilene Co. Ltd. 304,000 2,086
--------------
TRANSPORTATION -- ROAD & RAIL
Nippon Konpo Unyu Soko 245,000 2,230
--------------
WHOLESALE & INTERNATIONAL TRADE
FamilyMart 162,000 7,231
Inabata & Co. 406,000 3,068
--------------
10,299
--------------
376,428
--------------
- -----------------------------------------------------------------
- -------------
KOREA (2.9%)
APPLIANCES & HOUSEHOLD DURABLES
Samsung Electronics Co. (Foreign) 41,873 3,515
Samsung Electronics Co. RFD 12,619 1,059
--------------
4,574
--------------
BANKING
+Korea Housing Bank 60,550 1,665
**Shinhan Bank Co. Ltd. (Foreign) 42,040 982
--------------
2,647
--------------
CONSTRUCTION & HOUSING
**Hyundai Engineering (Foreign) 135,502 6,192
--------------
METALS -- STEEL
**Pohang Iron & Steel ADR 161,500 3,936
--------------
TELECOMMUNICATIONS
**Korea Mobile Telecom (Foreign) 5,560 6,580
--------------
UTILITIES -- ELECTRICAL & GAS
**Korea Electric Power (Foreign) 95,920 3,874
--------------
27,803
--------------
- -----------------------------------------------------------------
- -------------
MALAYSIA (2.7%)
BANKING
Malayan Banking Bhd 430,000 4,137
--------------
LEISURE & TOURISM
Genting Bhd 441,000 3,447
--------------
MACHINERY & ENGINEERING
+United Engineers Ltd. 584,000 4,050
--------------
MULTI-INDUSTRY
Renong Bhd 2,468,000 3,938
+Renong Bhd (Warrants), expiring
11/21/00 683,500 310
Renong Bhd 4.00%, 5/21/01 CULS 1,093,600 412
--------------
4,660
--------------
TELECOMMUNICATIONS
Telekom Malaysia Bhd 847,000 7,538
--------------
UTILITIES -- ELECTRICAL & GAS
Tenaga Nasional Bhd 563,000 2,370
--------------
26,202
--------------
- -----------------------------------------------------------------
- -------------
PHILIPPINES (2.9%)
BEVERAGES
San Miguel Corp. 'B' 145,800 504
--------------
CONSTRUCTION & HOUSING
+DMCI Holdings, Inc. 4,947,000 3,540
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
ENERGY SOURCES
Petron Corp. 8,909,375 U.S.$ 4,081
--------------
MULTI-INDUSTRY
Ayala Corp. 'B' 1,455,400 2,749
JG Summit Holdings 'B' 6,423,700 2,403
--------------
5,152
--------------
REAL ESTATE
Ayala Land, Inc. 'B' 1,417,350 2,543
C&P Homes, Inc. 2,963,600 2,573
SM Prime Holdings, Inc. 9,637,680 2,501
--------------
7,617
--------------
TELECOMMUNICATIONS
Philippine Long Distance Telephone 'B' 64,250 3,826
--------------
UTILITIES -- ELECTRICAL & GAS
Manila Electric Co. 'B' 285,270 2,994
--------------
27,714
--------------
- -----------------------------------------------------------------
- -------------
SINGAPORE (6.1%)
BANKING
Development Bank of Singapore
(Foreign) 706,000 8,806
Oversea-Chinese Banking Corp.
(Foreign) 480,000 5,613
+Oversea-Chinese Banking Corp.
(Foreign) (Rights) 48,000 386
United Overseas Bank (Foreign) 979,200 9,369
--------------
24,174
--------------
BEVERAGES
Fraser & Neave 388,400 4,019
--------------
BROADCASTING & PUBLISHING
Singapore Press Holdings (Foreign) 120,000 2,356
--------------
FINANCIAL SERVICES
Kay Hian James Capel Holdings Ltd.
(Foreign) 1,416,000 1,495
--------------
MACHINERY & ENGINEERING
Keppel Corp. 978,000 8,179
Sembawang Corp. 250,000 1,240
--------------
9,419
--------------
MULTI-INDUSTRY
Singapore Technologies Industrial
Corp. 1,990,000 5,275
Straits Steamship Land Ltd. 1,469,000 4,914
--------------
10,189
--------------
REAL ESTATE
+City Developments Ltd. 323,000 2,518
DBS Land Ltd. 1,276,000 4,377
--------------
6,895
--------------
58,547
--------------
- -----------------------------------------------------------------
- -------------
THAILAND (6.3%)
BANKING
Bangkok Bank Ltd. (Foreign) 958,300 12,987
Siam Commercial Bank Co. Ltd.
(Foreign) 632,500 9,169
Thai Farmers Bank Ltd. (Foreign) 1,024,000 11,214
--------------
33,370
--------------
BUILDING MATERIALS & COMPONENTS
Siam Cement Co. Ltd. (Foreign) 48,700 2,390
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
THAILAND (CONTINUED)
ELECTRICAL & ELECTRONICS
Shinawatra Computer Co. Ltd. (Foreign) 186,800 U.S.$ 4,047
--------------
FINANCIAL SERVICES
Finance One Co. Ltd. (Foreign) 1,119,527 7,233
National Finance & Securities Co. Ltd.
(Foreign) 792,400 3,527
Phatra Thanakit Co. Ltd. (Foreign) 513,135 3,578
--------------
14,338
--------------
TELECOMMUNICATIONS
Advanced Information Services Co. Ltd.
(Foreign) 127,100 1,883
+**TelecomAsia Corp. Ltd. (Foreign) 920,000 1,957
**United Communication Industry (Foreign) 175,000 2,344
--------------
6,184
--------------
60,329
--------------
- -----------------------------------------------------------------
- -------------
TOTAL COMMON STOCKS
(Cost U.S. $883,501) 919,914
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
FIXED INCOME SECURITIES (0.1%)
- ---------------------------------------------------------
- ------------
INDIA (0.1%)
METALS -- STEEL
**Special Steels Ltd. 14.00%, 12/6/02 INR 2,980 11
--------------
MISCELLANEOUS MATERIALS & COMMODITIES
**Amforge Industries, zero coupon 12/1/96 5,150 7
--------------
MULTI-INDUSTRY
Max India Part B, zero coupon 12/1/96 100,000 898
--------------
- -----------------------------------------------------------------
- -------------
TOTAL FIXED INCOME SECURITIES
(Cost U.S. $759) 916
--------------
- -----------------------------------------------------------------
- -------------
SHORT-TERM INVESTMENT (2.7%)
- ---------------------------------------------------------
- ------------
UNITED STATES (2.7%)
REPURCHASE AGREEMENT
Chase Securities, Inc. 5.15%, dated
6/28/96, due 7/1/96, to be
repurchased at U.S.$26,278,
collateralized by U.S.$25,805 United
States Treasury Notes 7.125%, due
9/30/99, valued at U.S.$26,382 (Cost
U.S.$26,267) U.S.$ 26,267 26,267
--------------
- -----------------------------------------------------------------
- -------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (1.0%)
Australian Dollar AUD 2 1
Hong Kong Dollar HKD 3,003 388
Indian Rupee INR 58,082 1,649
Indonesian Rupiah IDR 1,690,154 726
Japanese Yen JPY 611,711 5,595
Korean Won KRW 70,958 88
Malaysian Ringgit MYR 432 173
Singapore Dollar SGD 190 135
Thai Baht THB 32,957 1,298
--------------
(Cost U.S. $10,134) 10,053
--------------
- -----------------------------------------------------------------
- -------------
TOTAL INVESTMENTS (99.3%)
(Cost U.S. $920,661) 957,150
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
AMOUNT AMOUNT
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
OTHER ASSETS (1.7%)
Cash U.S.$ 9
Net Unrealized Gain on Forward Foreign
Currency Exchange Contracts 8,657
Receivable for Investments Sold 4,911
Dividends Receivable 2,389
Foreign Withholding Tax Reclaim
Receivable 44
Deferred Organization Costs 34
Interest Receivable 11
Other Assets 69 U.S.$ 16,124
--------------- --------------
- -----------------------------------------------------------------
- -------------
LIABILITIES (-1.0%)
Deferred Indian Taxes (1,000)
Payable for:
Investments Purchased (6,280)
Investment Advisory Fees (770)
Custodian Fees (530)
Rights Offering Costs (467)
Professional Fees (89)
Administrative Fees (75)
Shareholder Reporting Expenses (61)
Directors' Fees and Expenses (18)
Other Liabilities (319) (8,609)
--------------- --------------
- -----------------------------------------------------------------
- -------------
NET ASSETS (100%)
Applicable to 71,654,508 issued and outstanding U.S.
$0.01 par value shares (200,000,000 shares
authorized) U.S.$ 963,665
</TABLE>
-------------
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------
- -------------
NET ASSET VALUE PER SHARE U.S.$ 13.45
</TABLE>
-------------
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------
- -------------
AT JUNE 30, 1996, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------
Common Stock U.S.$ 717
Capital Surplus 927,925
Accumulated Net Investment Loss (25,150)
Accumulated Net Realized Gain 16,056
Unrealized Appreciation on Investments and Foreign
Currency Translations (net of accrued foreign tax of
U.S.$1,013 on unrealized appreciation) 44,117
- -----------------------------------------------------------------
- -------------
TOTAL NET ASSETS U.S.$ 963,665
</TABLE>
-------------
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------
- -------------
</TABLE>
<TABLE>
<C> <C> <S>
+ -- Non-income producing.
** -- Securities (totaling U.S.$62,782 or 6.5% of net assets
at June 30, 1996) valued at fair value -- see note A-1
to financial statements.
*** -- Security valued at fair value as determined based on the
market value of the underlying security less
subscription costs.
@ -- The Fund is advised by an affiliate.
# -- 144A Security -- certain conditions for public sale may
exist.
ADR -- American Depositary Receipt.
CULS -- Convertible Unsecured Loan Stock.
GDR -- Global Depositary Receipt.
RFD -- Ranked for Dividend.
NOTE: Prior governmental approval for foreign investments may
be required under certain circumstances in some markets,
and foreign ownership limitations may also be imposed by
the charters of individual companies in such markets. As
a result, an additional class of shares designated as
"foreign" may be created and offered for investment. The
"local" and "foreign" shares' market values may vary.
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
<S> <C> <C>
- ---------------------------------------------
- ---------
JUNE 30, 1996 EXCHANGE RATES:
- ----------------------------------------------------
AUD Australian Dollar 1.272 = U.S.$1.00
HKD Hong Kong Dollar 7.408 = U.S.$1.00
IDR Indonesian Rupiah 2,327.500 = U.S.$1.00
INR Indian Rupee 35.230 = U.S.$1.00
JPY Japanese Yen 109.325 = U.S.$1.00
KRW Korean Won 811.200 = U.S.$1.00
MYR Malaysian Ringgit 2.495 = U.S.$1.00
PHP Philippines Peso 26.200 = U.S.$1.00
SGD Singapore Dollar 1.411 = U.S.$1.00
THB Thai Baht 25.385 = U.S.$1.00
- ----------------------------------------------------
- -------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT
INFORMATION:
Under the terms of forward foreign currency
exchange contracts open at June 30, 1996, the
Fund is obligated to deliver or is to receive
foreign currency in exchange for U.S. dollars as
indicated below:
</TABLE>
<TABLE>
<CAPTION>
CURRENCY IN NET
TO EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN(LOSS)
(000) (000) DATE (000) (000) (000)
- -------------- ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
U.S.$ 628 U.S.$ 628 7/1/96 INR 22,000 U.S.$ 624 U.S.$ (4)
JPY 15,409,500 141,339 7/17/96 U.S.$150,000 150,000 8,661
------------ ------------ -----------
U.S.$141,967 U.S.$150,624 U.S.$ 8,657
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY
CLASSIFICATION -- JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
<S> <C> <C>
- ---------------------------------------------------------------
- ------------
Aerospace & Military Technology U.S.$ 10,025 1.1%
Appliances & Household Durables 7,027 0.7
Automobiles 39,862 4.1
Banking 101,385 10.5
Beverages 8,559 0.9
Broadcasting & Publishing 2,356 0.2
Building Materials & Components 27,993 2.9
Business & Public Services 7,175 0.7
Chemicals 56,608 5.9
Construction & Housing 37,263 3.9
Data Processing & Reproduction 69 0.0
Electrical & Electronics 108,561 11.3
Electronic Components & Instruments 21,338 2.2
Energy Equipment & Services 15,340 1.6
Energy Sources 17,696 1.8
Financial Services 52,333 5.4
Food & Household Products 2,345 0.2
Forest Products & Paper 5,625 0.6
Health & Personal Care 26,890 2.8
Industrial Components 1,995 0.2
Insurance 7,276 0.8
Leisure & Tourism 5,033 0.5
Machinery & Engineering 58,266 6.0
Manufacturing 91 0.0
Metals -- Non-Ferrous 19,100 2.0
Metals -- Steel 8,216 0.9
Miscellaneous Materials & Commodities 10,482 1.1
Multi-Industry 68,349 7.1
Real Estate 80,841 8.4
Recreation, Other Consumer Goods 4,494 0.5
Telecommunications 62,431 6.5
Textiles & Apparel 10,514 1.1
Tobacco 6,826 0.7
Transportation -- Road & Rail 2,632 0.3
Transportation -- Shipping 2,703 0.3
Utilities -- Electrical & Gas 12,832 1.3
Wholesale & International Trade 10,299 1.1
Other 36,320 3.7
------------ -------
U.S.$957,150 99.3%
------------ -------
------------ -------
- ---------------------------------------------------------
- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends............................................................................... U.S.$ 5,880
Interest................................................................................ 756
Less: Foreign Taxes Withheld............................................................ (543)
- ---------------------------------------------------------------------------------------------------------------
Total Income.......................................................................... 6,093
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees................................................................ 4,288
Custodian Fees.......................................................................... 1,109
Administrative Fees..................................................................... 426
Transfer Agent Fees..................................................................... 227
Professional Fees....................................................................... 82
Shareholder Reporting Expenses.......................................................... 51
Directors' Fees and Expenses............................................................ 37
Other Expenses.......................................................................... 107
- ---------------------------------------------------------------------------------------------------------------
Total Expenses........................................................................ 6,327
- ---------------------------------------------------------------------------------------------------------------
Net Investment Loss............................................................... (234)
- ---------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN
Investment Securities Sold.............................................................. 2,289
Foreign Currency Transactions........................................................... 27,142
- ---------------------------------------------------------------------------------------------------------------
Net Realized Gain................................................................. 29,431
- ---------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments............................................................. 31,888
Appreciation on Foreign Currency Translations........................................... (15,888)
- ---------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation.................................... 16,000
- ---------------------------------------------------------------------------------------------------------------
Total Net Realized Gain and Change in Unrealized Appreciation/Depreciation.................. 45,431
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... U.S.$ 45,197
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss)........................................ U.S.$ (234) U.S.$ 2,594
Net Realized Gain (Loss)............................................ 29,431 (10,313)
Change in Unrealized Appreciation/Depreciation...................... 16,000 72,710
- ---------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations................ 45,197 64,991
- ---------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income............................................... (24,783) (2,598)
In Excess of Net Investment Income.................................. -- (133)
In Excess of Net Realized Gain...................................... -- (1,169)
- ---------------------------------------------------------------------------------------------------------------
Total Distributions................................................. (24,783) (3,900)
- ---------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Common Stock Issued Through Rights Offering (18,000,000 shares)..... 174,487 --
Offering Costs...................................................... (650) --
- ---------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Capital Share
Transactions....................................................... 173,837 --
- ---------------------------------------------------------------------------------------------------------------
Total Increase...................................................... 194,251 61,091
Net Assets:
Beginning of Period................................................. 769,414 708,323
- ---------------------------------------------------------------------------------------------------------------
End of Period (including accumulated (distributions in excess of)
net investment income (loss) of U.S.$25,150 and U.S. $133,
respectively)...................................................... U.S.$963,665 U.S.$769,414
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS PERIOD FROM
ENDED YEAR ENDED AUGUST 2, 1994*
JUNE 30, 1996 DECEMBER 31, TO DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS: (UNAUDITED) 1995 1994
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.... U.S.$ 14.34 U.S.$ 13.20 U.S.$ 14.10
- ---------------------------------------------------------------------------------------------
Offering Costs.......................... (0.01) -- (0.03)
- ---------------------------------------------------------------------------------------------
Net Investment Income (Loss)............ (0.01) 0.05 0.05
Net Realized and Unrealized Gain (Loss)
on Investments......................... 0.94 1.16 (0.87)
- ---------------------------------------------------------------------------------------------
Total from Investment Operations.... 0.93 1.21 (0.82)
- ---------------------------------------------------------------------------------------------
Distributions:
Net Investment Income............... (0.35) (0.05) (0.04)
In Excess of Net Investment
Income............................ -- (0.00)# --
In Excess of Net Realized Gain...... -- (0.02) (0.01)
- ---------------------------------------------------------------------------------------------
Total Distributions................. (0.35) (0.07) (0.05)
- ---------------------------------------------------------------------------------------------
Decrease in Net Asset Value due to
Shares Issued through Rights
Offering............................... (1.46) -- --
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.......... U.S.$ 13.45 U.S.$ 14.34 U.S.$ 13.20
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD... U.S.$ 12.00 U.S.$ 13.33 U.S.$ 12.25
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value........................ 2.35%+ 9.38% (12.71)%
Net Asset Value (1)................. 6.59%+ 9.24% (5.94)%
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS)... U.S.$963,665 U.S.$769,414 U.S.$708,323
- ---------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets................................. 1.47%** 1.36% 1.31%**
Ratio of Net Investment Income (Loss) to
Average Net Assets..................... (0.05)%** 0.36% 0.89%**
Portfolio Turnover Rate................. 17% 21% 2%
Average Commission Rate (2)............. U.S.$0.0204 N/A N/A
- ---------------------------------------------------------------------------------------------
*Commencement of Operations.
**Annualized.
#Amount is less than U.S.$0.01.
+Adjusted for Rights Offering.
(1)Total investment return based on net asset value per share reflects the effects of changes
in net asset value on the performance of the Fund during each period, and assumes
dividends and distributions, if any, were reinvested. This return does not include the
effect of dilution in connection with the Rights Offering. This percentage is not an
indication of the performance of a shareholder's investment in the Fund based on market
value due to differences between the market price of the stock and the net asset value of
the Fund.
(2)Beginning with fiscal year 1996, the Fund is required to disclose the average commission
rate per share it paid for portfolio trades on which commissions were charged during the
period.
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 (UNAUDITED)
- ------------
The Morgan Stanley Asia-Pacific Fund, Inc. (the "Fund"), was incorporated in
Maryland on February 28, 1994, and is registered as a non-diversified,
closed-end management investment company under the Investment Company Act of
1940, as amended. The Fund's investment objective is long-term capital
appreciation through investments primarily in equity securities.
A. The following significant accounting policies, which are in conformity with
generally accepted accounting principles for investment companies, are
consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: In valuing the Fund's assets, all
listed securities for which market quotations are readily available are
valued at the last sale price on the valuation date, or if there was no sale
on such date, at the mean between the current bid and asked prices.
Securities which are traded over-the-counter are valued at the average of
the mean of current bid and asked prices obtained from reputable brokers.
Short-term securities which mature in 60 days or less are valued at
amortized cost. All other securities and assets for which market values are
not readily available (including investments which are subject to
limitations as to their sale) are valued at fair value as determined in good
faith by the Board of Directors (the "Board"), although the actual
calculations may be done by others.
2. TAXES: It is the Fund's intention to continue to
qualify as a regulated investment company and distribute all of its taxable
income. Accordingly, no provision for U.S. Federal income taxes is required
in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests.
Such taxes are generally based on income and/or capital gains earned or
repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation as such income and/or gains
are earned.
3. REPURCHASE AGREEMENTS: In connection with
transactions in repurchase agreements, a bank as custodian for the Fund takes
possession of the underlying securities, with a market value at least equal
to the amount of the repurchase transaction, including principal and accrued
interest. To the extent that any repurchase transaction exceeds one business
day, the value of the collateral is marked-to-market on a daily basis to
determine the adequacy of the collateral. In the event of default on the
obligation to repurchase, the Fund has the right to liquidate the collateral
and apply the proceeds in satisfaction of the obligation. In the event of
default or bankruptcy by the counter-party to the agreement, realization
and/or retention of the collateral or proceeds may be subject to legal
proceedings.
4. FOREIGN CURRENCY TRANSLATION: The books and
records of the Fund are maintained in U.S. dollars. Foreign currency amounts
are translated into U.S. dollars at the mean of the bid and asked prices of
such currencies against U.S. dollars last quoted by a major bank as follows:
- investments, other assets and liabilities at the prevailing rates of
exchange on the valuation date;
- investment transactions and investment income at the prevailing rates of
exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the period, the Fund does not
isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of the securities held at period end.
Similarly, the Fund does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market
prices of securities sold during the period. Accordingly, realized and
unrealized foreign currency gains (losses) are included in the reported net
realized and unrealized gains (losses) on investment transactions and
balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from sales and maturities of forward foreign
currency exchange contracts, disposition of foreign currencies, currency
gains or losses realized between the trade and settlement dates on
securities transactions, and the difference between the amount of investment
income and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent amounts actually received or paid. Net unrealized
currency gains (losses) from valuing foreign currency denominated assets and
liabilities and forward foreign currency contracts at period end exchange
rates are reflected as a component of unrealized appreciation (depreciation)
in the Statement of Net Assets. The change in net unrealized currency gains
(losses) for the period is reflected in the Statement of Operations.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS:
The Fund may enter into forward foreign currency exchange contracts to
attempt to protect securities and related receivables and payables against
changes in future foreign exchange rates. A forward 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
15
<PAGE>
unrealized gain or loss. The Fund records realized gains or losses when the
contract is closed equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Risk may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and is generally limited
to the amount of unrealized gain on the contracts, if any, at the date of
default. Risks may also arise from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar.
6. OTHER: Security transactions are accounted for on
the date the securities are purchased or sold. Investments in new Indian
securities are made by making applications in the public offerings. The
issue price, or a portion thereof, is paid at the time of application and is
reflected as share application money on the Statement of Net Assets, if any.
Upon allotment of the securities, this amount plus any remaining amount of
issue price is recorded as cost of investments. Realized gains and losses on
the sale of investment securities are determined on the specific identified
cost basis. Interest income is recognized on the accrual basis. Dividend
income is recorded on the ex-dividend date (except certain dividends which
may be recorded as soon as the Fund is informed of such dividend) net of
applicable withholding taxes where recovery of such taxes is not reasonably
assured. Distributions to shareholders are recorded on the ex-date.
The amount and character of income and capital gain distributions to be paid
are determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing book and tax treatments for foreign currency
transactions, the timing of the recognition of gains and losses on
securities and forward foreign currency exchange contracts.
Permanent book and tax basis differences relating to shareholder
distributions may result in reclassifications to undistributed net
investment income (loss), accumulated net realized gain (loss) and capital
surplus.
Adjustments for permanent book-tax differences, if any, are not reflected in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. Morgan Stanley Asset Management Inc. (the "Adviser") provides investment
advisory services to the Fund under the terms of an Investment Advisory and
Management Agreement (the "Agreement"). Under the Agreement, the Adviser is paid
a fee computed weekly and payable monthly at an annual rate of 1.00% of the
Fund's average weekly net assets.
C. The Chase Manhattan Bank, through its affiliate Chase Global Funds Services
Company (the "Administrator"), provides administrative services to the Fund
under an Administration Agreement. Under the Administration Agreement, the
Administrator is paid a fee computed weekly and payable monthly at an annual
rate of .09% of the Fund's average weekly net assets, plus $65,000 per annum. In
addition, the Fund is charged certain out-of-pocket expenses by the
Administrator. The Chase Manhattan Bank acts as custodian for the Fund's assets
held in the United States.
D. Morgan Stanley Trust Company (the "International Custodian"), an affiliate
of the Adviser, acts as custodian for the Fund's assets held outside the United
States in accordance with a Custody Agreement. Custodian fees are payable
monthly based on assets under custody, investment purchase and sale activity, an
account maintenance fee, plus reimbursement for certain out-of-pocket expenses.
Investment transaction fees vary by country and security type. For the six
months ended June 30, 1996, the Fund incurred International Custodian fees of
$1,105,000 of which $528,000 was payable to the International Custodian at June
30, 1996. In addition, for the six months ended June 30, 1996, the Fund has
earned interest income of $17,000 and incurred interest expense of $6,000 on
balances with the International Custodian.
E. For the six months ended June 30, 1996, the Fund made purchases and sales
totaling $291,391,000 and $138,773,000, respectively, of investment securities
other than long-term U.S. Government securities and short-term investments.
There were no purchases and sales of long-term U.S. Government securities. For
the six months ended June 30, 1996, the Fund incurred $72,000 of brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliate of the Adviser.
At June 30, 1996, the U.S. Federal income tax cost basis of securities was
$910,527,000 and accordingly, net unrealized appreciation for U.S. Federal
income tax purposes was $36,570,000 of which $86,117,000 related to appreciated
securities and $49,547,000 related to depreciated securities. At December 31,
1995, the Fund had a capital loss carryforward for U.S. Federal income tax
purposes of approximately $12,396,000 available to offset future capital gains
which will expire on December 31, 2003. To the extent that capital gains are
offset, such gains will not be distributed to the shareholders. For the year
ended December 31, 1995, the Fund expects to defer to January 1, 1996 for U.S.
Federal income tax purposes, post-October currency losses of $197,000.
F. In connection with its organization and initial public offering of shares,
the Fund incurred $55,000 and $1,724,000 of organization and offering costs,
respectively. The organization costs are being amortized on a straight-line
basis over a five year period beginning August 2, 1994, the date the Fund
commenced operations. The offering costs were charged to capital.
16
<PAGE>
G. A significant portion of the Fund's net assets consist of securities of
issuers located in Asia which are denominated in foreign currencies. Changes in
currency exchange rates will affect the value of and investment income from such
securities. Asian securities are subject to greater price volatility, limited
capitalization and liquidity, and higher rates of inflation than securities of
companies based in the United States. In addition, Asian securities may be
subject to substantial governmental involvement in the economy and greater
social, economic and political uncertainty.
H. The Fund issued to its shareholders of record as of the close of business on
April 16, 1996 transferable Rights to subscribe for up to an aggregate of
18,000,000 shares of Common Stock of the Fund at a rate of one share of Common
Stock for three Rights held at the subscription price of $10.00 per share.
During May 1996 the Fund issued a total of 18,000,000 shares of Common Stock on
exercise of such Rights. Rights' offering costs of $650,000 were charged
directly against the proceeds of the Offering. The Fund was advised that Morgan
Stanley & Co. Incorporated, an affiliate of the Adviser, received commissions of
$3,062,000, dealer manager fees of $1,650,000 and reimbursement of its expenses
of $125,000 in connection with its participation in the Rights Offering.
I. Each Director of the Fund who is not an officer of the Fund or an affiliated
person as defined under the Investment Company Act of 1940, as amended, may
elect to participate in the Director's Deferred Compensation Plan (the "Plan").
Under the Plan, such Directors may elect to defer payment of a percentage of
their total fees earned as a Director of the Fund. These deferred portions are
treated, based on an election by the Director, as if they were either invested
in the Fund's shares or invested in U.S. Treasury Bills, as defined under the
Plan. The deferred fees payable, under the Plan, at June 30, 1996 totaled
$22,000 and are included in Payable for Directors' Fees and Expenses on the
Statement of Net Assets.
J. SUPPLEMENTAL PROXY INFORMATION
The Annual Meeting of the Stockholders of the Morgan Stanley Asia-Pacific
Fund, Inc. was held on June 5, 1996. The following is a summary of each proposal
presented and the total number of shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES VOTES
PROPOSAL: FAVOR OF AGAINST WITHHELD ABSTAINED
- ------------------------------------------------------------------------------ ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
1. To elect the following Directors: Peter J. Chase .......................... 42,076,780 -- 479,291 --
David B. Gill ................................. 42,076,278 -- 479,793 --
Warren J. Olsen ............................... 42,076,478 -- 479,592 --
2. To ratify the selection of Price Waterhouse LLP as independent public
accountants of the Fund.................................................... 42,349,325 145,322 -- 61,424
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS* (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET REALIZED
GAIN (LOSS) AND NET INCREASE
CHANGE IN (DECREASE) IN
NET INVESTMENT UNREALIZED NET ASSETS
INVESTMENT APPRECIATION/ RESULTING FROM
INCOME INCOME (LOSS) DEPRECIATION OPERATIONS
---------------- ---------------- ---------------- ----------------
PER PER PER PER
QUARTER ENDED AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- ---------------------------------------- -------- ------ -------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1996........................... $ 3,213 $0.05 $ (389 ) $(0.01) $ 6,716 $0.22 $ 6,327 $0.21
March 31, 1996.......................... 2,880 0.05 155 0.00 38,715 0.72 38,870 0.72
-------- ------ -------- ------ -------- ------ -------- ------
Total............................... $ 6,093 $0.10 $ (234 ) $(0.01) $45,431 $0.94 $45,197 $0.93
-------- ------ -------- ------ -------- ------ -------- ------
-------- ------ -------- ------ -------- ------ -------- ------
December 31, 1995....................... $ 2,242 $0.05 $ (428 ) $(0.01) $38,673 $0.72 $38,245 $0.71
September 30, 1995...................... 2,907 0.05 401 0.01 21,730 0.40 22,131 0.41
June 30, 1995........................... 3,978 0.07 1,660 0.03 24,696 0.46 26,356 0.49
March 31, 1995.......................... 3,185 0.06 961 0.02 (22,702 ) (0.42 ) (21,741 ) (0.40 )
-------- ------ -------- ------ -------- ------ -------- ------
Total............................... $12,312 $0.23 $ 2,594 $0.05 $62,397 $1.16 $64,991 $1.21
-------- ------ -------- ------ -------- ------ -------- ------
-------- ------ -------- ------ -------- ------ -------- ------
December 31, 1994....................... $ 3,669 $0.07 $ 1,255 $0.02 $(42,875) $(0.80) $(41,620) $(0.78)
September 30, 1994**.................... 3,146 0.06 1,503 0.03 (3,452 ) (0.07 ) (2,039 ) (0.04 )
-------- ------ -------- ------ -------- ------ -------- ------
Total............................... $ 6,815 $0.13 $ 2,758 $0.05 $(46,327) $(0.87) $(43,659) $(0.82)
-------- ------ -------- ------ -------- ------ -------- ------
-------- ------ -------- ------ -------- ------ -------- ------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
*Expressed in thousands of U.S. dollars except per share amounts.
**The Fund commenced operations on August 2, 1994
The Fund may purchase shares of its Common Stock in the open market at such
prices and in such amounts as the Board of Directors may deem advisable.
17
<PAGE>
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each shareholder will be deemed to have elected, unless American Stock Transfer
& Trust Company (the "Plan Agent") is otherwise instructed by the shareholder in
writing, to have all distributions automatically reinvested in Fund shares.
Participants in the Plan have the option of making additional voluntary cash
payments to the Plan Agent, annually, in any amount from $100 to $3,000, for
investment in Fund shares.
Dividend and capital gain distributions will be reinvested on the
reinvestment date in full and fractional shares. If the market price per share
equals or exceeds net asset value per share on the reinvestment date, the Fund
will issue shares to participants at net asset value. If net asset value is less
than 95% of the market price on the reinvestment date, shares will be issued at
95% of the market price. If net asset value exceeds the market price on the
reinvestment date, participants will receive shares valued at market price. The
Fund may purchase shares of its Common Stock in the open market in connection
with dividend reinvestment requirements at the discretion of the Board of
Directors. Should the Fund declare a dividend or capital gain distribution
payable only in cash, the Plan Agent will purchase Fund shares for participants
in the open market as agent for the participants.
The Plan Agent's fees for the reinvestment of dividends and distributions
will be paid by the Fund. However, each participant's account will be charged a
pro rata share of brokerage commissions incurred on any open market purchases
effected on such participant's behalf. A participant will also pay brokerage
commissions incurred on purchases made by voluntary cash payments. Although
shareholders in the Plan may receive no cash distributions, participation in the
Plan will not relieve participants of any income tax which may be payable on
such dividends or distributions.
In the case of shareholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are participating in the
Plan.
Shareholders who do not wish to have distributions automatically reinvested
should notify the Plan Agent in writing. There is no penalty for
non-participation or withdrawal from the Plan, and shareholders who have
previously withdrawn from the Plan may rejoin at any time. Requests for
additional information or any correspondence concerning the Plan should be
directed to the Plan Agent at:
Morgan Stanley Asia-Pacific Fund, Inc.
American Stock Transfer & Trust Company
Dividend Reinvestment and Cash Purchase Plan
40 Wall Street
New York, NY 10003
1-800-278-4353
18
