<PAGE>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
Barton M. Biggs William G. Morton, Jr.
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS
James W. Grisham
Michael F. Klein VICE PRESIDENT
PRESIDENT AND DIRECTOR
Harold J. Schaaff, Jr.
Peter J. Chase VICE PRESIDENT
DIRECTOR
Joseph P. Stadler
John W. Croghan VICE PRESIDENT
DIRECTOR
Valerie Y. Lewis
David B. Gill SECRETARY
DIRECTOR
Joanna M. Haigney
Graham E. Jones TREASURER
DIRECTOR
Belinda A. Brady
John A. Levin ASSISTANT TREASURER
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
One Pierrepont Plaza
Brooklyn, New York 11201
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
THIRD QUARTER REPORT
SEPTEMBER 30, 1997
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- ---------
For the nine months ended September 30, 1997, the Morgan Stanley Asia-Pacific
Fund, Inc. (the "Fund") had a total return, based on net asset value per
share, of -3.85% compared to -7.76% for its benchmark (as defined below).
For the one year ended September 30, 1997, the Fund had a total return, based
on net asset value per share, of -6.98% compared with -14.33% for the
benchmark. For the period since the Fund's commencement of operations on
August 2, 1994 through September 30, 1997, the Fund's total return, based on
net asset value per share, was -3.98% compared with -18.53% for the
benchmark. (The benchmark for investment purposes is the weighted average of
the percentage change month-on-month of each of two Morgan Stanley Capital
International (MSCI) indices; Japan, and Combined Asia Free ex-Japan, where
the weights are based on the respective market capitalizations of these
indices at the beginning of each month). On September 30, 1997, the closing
price of the Fund's shares on the New York Stock Exchange was $9 3/16
representing a 20.0% discount to the net asset value per share.
The Fund suffered a pyrrhic victory for the three months ended September 30,
1997 as its total return, based on net asset value per share was -12.29%
compared to -13.59% for the Index.
The economic outlook for Japan dropped dramatically during the last quarter.
Primarily led by declines in automobile sales, housing starts and overall
retail sales, consumption spending slumped in July and August. Several Tokyo
Stock Exchange first section listed companies such as Tokai Kogyo, Tada
Construction, Daito and Yaohan declared bankruptcy. Moreover, the
credibility of the overall balance sheet of many domestic companies
deteriorated sharply during this period, causing severe concern regarding the
viability of construction, insurance and some leading financial institutions.
The termination of the previously announced merger between Hokkaido Bank and
Hokkaido Takushoku Bank seemed to further amplify these concerns. Moreover,
the turmoil in the Asian currencies and equity markets together with the
volatility in the U.S. markets further caused a deterioration of investor
sentiment. In fact, second quarter GDP for Japan showed a 11.2% decline, the
steepest since the oil crisis in the mid-seventies.
Additionally, the Bank of Japan "Tankan" report suggested an unexpected
weakening regarding the outlook of the economy by Japanese corporations,
reversing the strong previous reading in June. Nissan Life Insurance, which
went bankrupt earlier in the year was reported to be a major seller in the
Japanese market, liquidating their entire portfolio as part of the bankruptcy
proceedings. Japan's Big 4 brokerage firms, all involved in inappropriate
dealings with "Sokaiya", dealt a final blow of confidence for investors in
Japan and as a result of all of the above the yield on long term Japanese
government bonds fell below 2%, an unprecedented occurrence in any major
economy over the last 50 years.
Importantly, the brighter economic conditions during the second half of 1997
which was expected to materialize in Japanese equities reversed course.
Therefore, the market declined sharply and potential buyers disappeared.
Although blue chip issues were also sold, companies such as TDK, Sony and
Tokyo Electron performed well relative to the overall market contributing to
our outperformance.
It is difficult to become optimistic on the near term outlook for the
Japanese economy because of the continuing drag from non-performing loans and
ill-timed changes in fiscal policy. While Japan has deregulated and reformed
many industries, bureaucrats now appear frozen in their action to implement
critically important changes in areas such as corporate and personnel income
tax cuts as well as a more effective means of re-cycling.
Japan's enormous individual wealth is held primarily in bank deposits.
However, with 10 year JGB yields approaching 1.7%, considerable pessimism
regarding the economy is already reflected in stock prices. Prime Minister
Hashimoto has also publicly recognized the severe weakness in the economy and
will likely take action with land tax reforms and pass a 2% to 3% corporate
income tax cut later this year. We believe that the overall market will
become less volatile as a result of the above.
International blue chips involved in promising new industries such as
multimedia and digital production still offer the best value and growth
relative to other sectors in the Japanese market, particularly as the yen
appears to be in consolidation at Y120. The stabilization of currency
markets in Asia, addressed recently by G7 in Hong Kong and the announcement
of the Asia Currency Fund will likely keep the volatile currency market in
check.
2
<PAGE>
Therefore, we believe that the two tier market will resume in the near future as
investors flee to companies with good earnings prospect and global standards of
transparency in management. We will also continue to overweight the
international blue chips but may also consider switches from those which are
beginning to show excess valuation into those issues which appear to offer
better value and are laggards within the two-tier market.
The regional markets as represented by the MSCI Combined Far East Free ex Japan
Index fell 19.0% over the third quarter 1997. This represents one of the
steepest ever quarterly declines in the Index, comparable to the 21.6% fall in
fourth quarter 1994 and the 22.1% fall during the first quarter of 1994.
The collapse was precipitated by the de-pegging of the Thai baht on July 2nd
1997, which subsequently caused the currency to collapse 46.8% over the quarter.
The contagion effect of the Thai baht debacle was severe as the regional
currencies succumbed one after another, with the Indonesian rupiah, the
Philippine peso and the Malaysian ringgit falling by as much as 34.5%, 30.3% and
28.6%, respectively. Even the normally stable Singapore dollar fell 8.6% over
the quarter.
The fallout in the regional currency markets was quickly transmitted to the
equity markets as concerns about the over-leveraged economies, excessive
lending, and property bubble took their toll.
This dislocation in the currency and stock markets in effect marks the end of
one era and the beginning of a new one for the region. The region had prospered
spectacularly by offering itself as a cheap manufacturing base and then
exporting itself to prosperity. This formula depended on a cheap and trainable
labor force, low tax rates, and a fixed and stable exchange rate pegged to the
U.S. Dollar.
Unfortunately, the world has changed. Years of extremely high growth have
brought the attendant problems of rising costs and labor constraints. Meanwhile,
the tremendous inflow of foreign investment and loans has flooded the market
with cheap money, inevitably leading to over-gearing and foolish investments.
This situation has finally resulted in bad loans and over-investment.
Furthermore, the rest of the emerging markets have started to mimic the success
formula of Asia and are beginning to beat Asia at its own game. Many U.S.
multinationals have decided to set up manufacturing bases in NAFTA member Mexico
while China has proven not only to be a large potential market but also a huge
competitor to the Asian economies in low-end manufacturing.
In the end, what precipitated the collapse of the Asian currencies was the
unsustainable practice of using cheap U.S. dollars to finance ever larger and
sometimes questionable projects. Once the pegs were gone, however, easy
access to credit vanished and the Asian corporates and economies have now
been forced to painfully adjust to this paradigm shift. Though the
Northeastern Asian markets of Hong Kong, Taiwan and Korea have outperformed
the Southeast Asian market up to now, we expect the contagion effect to
filter trough the whole region.
It is expected that the currency rates should begin to stabilize within the next
quarter or so but that the flow-through effects of such a major dislocation in
exchange rates and their subsequent impact on interest rates will take at least
a year to work through the system.
Those who emerge as winners will be economies and companies that are best able
to compete on a value added basis in an increasingly information and technology
based world, rather than on pure export prowess. A further prerequisite for
success would be strict financial discipline, rather than growth simply for
growth's sake.
In this context, we would expect service economies like Hong Kong Special
Administrative Region (SAR) and Singapore to be the primary winners. Low taxes,
professional management and now direct access to the Chinese growth engine will
power Hong Kong, although the SAR continues to suffer from a ridiculously
over-priced property market. Singapore's world class infrastructure,
well-educated English-speaking populace and competent national government will
provide a solid bedrock, though the disarray in its traditional interland of
Southeast Asia will be a drag for the next year or so.
What will prove most important in the emerging scenario will be stock selection.
There is likely to be a wide disparity in performance both between markets and
individual companies, as those with the discipline and flexibility to adapt to
the new environment will continue to succeed; those which cannot will be
relegated to stagnation and failure. Real recovery will be slow and painful.
3
<PAGE>
In the midst of these problems, however, it is important to remember that the
drivers behind economic growth in the long-term remain largely intact. Asia's
superior savings rates, its large pool of flexible, well-educated labor, and
general acceptance of market forces will continue to propel the Asian economies.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
October 1997
4
<PAGE>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
INVESTMENT SUMMARY AS OF SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL TOTAL RETURN (%)
INFORMATION ---------------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
---------------------- ---------------------- ------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR TO DATE -5.77% -- -3.85% -- -7.76% --
ONE YEAR -13.34 -13.34% -6.98 -6.98% -14.33 -14.33%
SINCE INCEPTION* -23.26+ -8.03+ -3.98+ -1.28+ -18.53 -6.28
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
<TABLE>
<CAPTION>
[BAR GRAPH]
YEARS ENDED DECEMBER 31:
NINE MONTHS
ENDED
1994* 1995 1996 SEPTEMBER 30, 1997
----- ---- ---- ------------------
<S> <C> <C> <C> <C>
Net Asset Value Per Share $ 13.20 $ 14.34 $ 11.95 $ 11.49
Market Value Per Share. . . $ 12.25 $ 13.33 $ 9.75 $ 9.19
Premium/(Discount). . . . . -7.2 % -7.0 % -18.4 % -20.0 %
Income Dividends. . . . . . $ 0.04 $ -0.05 $ 0.61 --
Capital Gains
Distributions. . . . . . . $ 0.01 $ -0.02 -- --
Fund Total Return (2) . . . -5.94% 9.24% -2.87%+ -3.85%
Index Total Return (3). . . -5.90% 0.87% -9.17% -7.76%
</TABLE>
(1) Assumes dividends and distributions, if any, were reinvested.
(2) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. These percentages are not an indication of the performance of a
shareholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund.
(3) The benchmark for investment performance is the weighted average of the
percentage change month-on-month of two Morgan Stanley Capital
International (MSCI) indices; Japan and Combined Asia Pacific Free
ex-Japan, 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.
+ This return does not include the effect of the rights issued in connection
with the Rights Offering.
5
<PAGE>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
PORTFOLIO SUMMARY AS OF SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
[PIE CHART]
Equity Securities(92.1%)
Short-Term Investments(7.9%)
- --------------------------------------------------------------------------------
SECTORS
[PIE CHART]
Other(33.6%)
Real Estate(7.1%)
Multi-Industry(7.1%)
Machinery & Engineering(5.6%)
Automobiles(3.9%)
Banking(15.0%)
Chemicals(4.2%)
Electrical & Electronics(12.4%)
Electronic Components & Instruments(4.2%)
Energy Equipment & Services(3.6%)
Financial Services(3.3%)
- --------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
[PIE CHART]
Other(8.1%)
Malaysia(0.7%)
Philippines(1.2%)
Indonesia(1.3%)
Thailand(2.5%)
Korea(2.5%)
Hong Kong(7.4%)
Australia(9.4%)
Singapore(11.7%)
Japan(42.1%)
India(13.1%)
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
NET ASSETS NET ASSETS
---------- ----------
<S> <C> <C> <C>
1. Bharat Heavy Electricals Ltd. 3.5% 6. United Overseas Bank (Foreign) 2.2%
2. Housing Development Finance Corp. Ltd. 2.6 7. Cheung Kong (Holdings) Ltd. 2.2
3. Oversea-Chinese Banking Corp. (Foreign) 2.4 8. Lend Lease Corp. Ltd. 2.1
4. Development Bank of Singapore (Foreign) 2.3 9. Amcor Ltd. 2.0
5. National Australia Bank Ltd. 2.3 10. Sony Corp. 1.7
-----
23.3%
-----
-----
* Excludes short-term investments.
</TABLE>
6
<PAGE>
INVESTMENTS (UNAUDITED)
- -----------------------
SEPTEMBER 30, 1997
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (92.4%)
(Unless otherwise noted)
- --------------------------------------------------------------------------------
AUSTRALIA (9.4%)
BANKING
Australia & New Zealand Banking
Group Ltd. 991,000 U.S.$ 8,110
Commonwealth Bank of Australia 334,000 4,129
National Australia Bank Ltd. 1,229,384 18,925
-------------
31,164
-------------
ENERGY SOURCES
Broken Hill Proprietary Co. Ltd. 1,052,964 12,283
-------------
FOREST PRODUCTS & PAPER
Amcor Ltd. 2,630,455 16,581
-------------
REAL ESTATE
Lend Lease Corp. Ltd. 721,207 17,156
-------------
77,184
-------------
- -------------------------------------------------------------------------------
HONG KONG (7.4%)
AUTOMOBILES
Qingling Motors Co. 2,674,000 1,693
-------------
BANKING
Dao Heng Bank Group Ltd. 420,000 1,894
Hang Seng Bank Ltd. 181,000 2,228
-------------
4,122
-------------
MULTI-INDUSTRY
China Resources Enterprise Ltd. 2,590,000 10,845
Hutchison Whampoa Ltd. 922,000 9,085
Ng Fung Hong Ltd. 860,000 1,034
Shanghai Industrial Holdings Ltd. 707,000 4,395
-------------
25,359
-------------
REAL ESTATE
Cheung Kong (Holdings) Ltd. 1,573,000 17,686
Henderson Land Development
Co. Ltd. 721,000 6,196
New World Development Co. Ltd. 317,000 1,917
Sun Hung Kai Properties Ltd. 373,000 4,387
-------------
30,186
-------------
61,360
-------------
- -------------------------------------------------------------------------------
INDIA (13.1%)
APPLIANCES & HOUSEHOLD DURABLES
Phillips India Ltd. 123,582 226
Supreme Industries Ltd. 178,449 785
-------------
1,011
-------------
AUTOMOBILES
Autolec Industries Ltd. 152,600 186
Autolite Ltd. 231,900 295
Autopal Industries Ltd. 62,600 13
Bajaj Auto Ltd. 2,000 30
Bajaj Tempo Ltd. 2,148 15
Bajaj Tempo Ltd. (Rights) 1,717 6
Bharat Forge Co., Ltd. 217,996 374
Ceat Ltd. 368,000 265
- --------------------------------------------------------------------------------
VALUE
SHARES (000)
- -------------------------------------------------------------------------------
Denso India Ltd. 71,200 U.S.$ 124
Escorts Ltd. 305,125 791
Hero Honda Ltd. 400 8
MRF Ltd. 18,000 1,468
Patheja Forgings and Auto Ltd. 677,700 187
Tata Engineering & Locomotive Ltd. 223,022 2,077
-------------
5,839
-------------
BANKING
Industrial Finance Corp. (India) Ltd. 507,400 414
State Bank of India Ltd. 954,862 7,307
-------------
7,721
-------------
BEVERAGES & TOBACCO
ITC Ltd. 16,273 265
United Breweries Ltd. 149,100 87
-------------
352
-------------
BUILDING MATERIALS & COMPONENTS
Asian Paints Ltd. 250 2
Associated Cement Co. Ltd. 2,182 73
Gujarat Ambuja Cements Ltd. 42,150 359
India Cements Ltd. 75,000 200
Murudeshwar Ceramics Ltd. 37,600 22
Panyam Cements & Minerals Ltd. 33,765 448
Saurashtra Cement & Chemicals Ltd. 50 --@
-------------
1,104
-------------
CHEMICALS
Birla VXL Ltd. 846,998 314
E.I.D. Parry Ltd. 64,300 181
Gujarat Narmada Valley
Fertilizers Ltd. 275,000 963
Gujarat Narmada Valley
Fertilizers Ltd. GDR 144A 303,924 204
Indian Petro Chemical Corp. Ltd. 179,010 564
Jaysynth Dyechem Ltd. 145,800 69
United Phosphorous Ltd. 97,490 431
-------------
2,726
-------------
CONSTRUCTION & HOUSING
Alacrity Housing Ltd. 381,000 74
Hindustan Construction Co. 254,675 155
Hindustan Development Corp. Ltd. 988,780 336
Nagarjuna Construction Ltd. 151,100 105
-------------
670
-------------
ELECTRONIC COMPONENTS & INSTRUMENTS
Infosys Technology Ltd. 19,200 845
Rolta India Ltd. 999,500 503
S&S Power Switchgear Ltd. 63,550 91
-------------
1,439
-------------
ENERGY EQUIPMENT & SERVICES
Bharat Heavy Electricals Ltd. 2,881,000 28,678
-------------
ENERGY SOURCES
Esab India Ltd. 346,865 1,134
-------------
- -------------------------------------------------------------------------------
7
<PAGE>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
INDIA (CONTINUED)
FINANCIAL SERVICES
Housing Development Finance
Corp. Ltd. 238,282 U.S.$ 21,501
UTI MasterShares Ltd. 2,268,170 831
------------
22,332
------------
FOOD & HOUSEHOLD PRODUCTS
Dhampur Sugar Mills Ltd. 141,575 295
------------
FOREST PRODUCTS & PAPER
Ballarpur Industries Ltd. 100,000 102
------------
HEALTH & PERSONAL CARE
Sun Pharmaceutical Industries Ltd. 161,200 1,348
------------
INDUSTRIAL COMPONENTS
Apollo Tyres Ltd. 686,525 1,447
Apollo Tyres Ltd. (Warrants),
expiring 2/28/98 189,543 53
Essel Packaging Ltd. 146,300 496
ITW Signode India Ltd. 571,132 1,453
KEC International Ltd. 881,750 963
------------
4,412
------------
LEISURE & TOURISM
ITC Hotels Ltd. 212,880 680
------------
MACHINERY & ENGINEERING
Artson Engineering Ltd. 221,800 49
Crompton Greaves Ltd. 415,210 459
DGP Windsor India Ltd. 218,800 177
Flat Products Equipments
(India) Ltd. 174,900 230
Hindustan Power Plus Ltd. 75,600 173
Thermax Ltd. 31,200 246
Veejay Lakshmi Engineering Ltd. 149,100 153
------------
1,487
------------
METALS -STEEL
Tata Iron & Steel Co., Ltd. 1,425 7
Tata SSL Ltd. - New 467,790 362
------------
369
------------
MISCELLANEOUS MATERIALS & COMMODITIES
Vikas WSP Ltd. 304,600 952
------------
MULTI-INDUSTRY
Century Textile & Industry Ltd. 5,866 154
Indian Rayon & Industries Ltd. 75 --@
JK Corp. Ltd. 100 --@
JK Corp. Ltd. GDR 61,140 38
JK Corp. Ltd. GDR 144A 249,240 156
Kesoram Industries Ltd. 310,238 311
Max India Ltd. - New 170,000 698
* Morgan Stanley Growth Fund 32,892,200 5,912
Voltas Ltd. 207,950 145
------------
7,414
------------
RECREATION, OTHER CONSUMER GOODS
Suashish Diamonds Ltd. 148,100 115
Tube Investments of India Ltd. 109,400 123
Wimco Ltd. 422,200 198
------------
436
------------
TELECOMMUNICATIONS
Mahanagar Telephone Nigam Ltd. 383,700 2,727
------------
- --------------------------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
TEXTILES & APPAREL
Coates of India Ltd. 100,680 U.S.$ 413
G.T.N. Textiles Ltd. 243,000 331
Garware Plastics & Polyester Ltd. 275,525 261
Indo Rama Synthetics Ltd. 211,100 123
Indo Rama Synthetics Ltd. - New 46,170 24
J.K. Synthetics Ltd. 686,901 62
Mahavir Spinning Mills Ltd. 173,686 288
Morajee Goculdas Spinning Ltd. 125,000 97
Raymond Ltd. 208,627 392
Viniyoga Clothes Ltd. 5,400 --@
------------
1,991
------------
TRANSPORTATION - ROAD & RAIL
Container Corp. of India Ltd. 1,059,600 12,306
------------
TRANSPORTATION - SHIPPING
Great Eastern Shipping Ltd. 369,034 518
------------
UTILITIES - ELECTRICAL & GAS
Hindustan Power Plus Ltd. - New 17,400 40
------------
108,083
------------
- --------------------------------------------------------------------------------
INDONESIA (1.3%)
AUTOMOBILES
Astra International (Foreign) 3,631,000 3,283
------------
BANKING
Bank International Indonesia
(Foreign) 2,515,319 727
Bank International Indonesia
(Foreign)(Warrants), expiring 1/17/00 401,362 34
Bank Negara Indonesia (Foreign) 4,000,000 1,094
------------
1,855
------------
BEVERAGES & TOBACCO
Gudang Garam (Foreign) 729,500 2,106
HM Sampoerna (Foreign) 389,000 798
------------
2,904
------------
FOOD & HOUSEHOLD PRODUCTS
Indofood Sukses Makmur (Foreign) 250,000 302
------------
FOREST PRODUCTS & PAPER
Indah Kait Pulp & Paper (Foreign) 305,955 119
Indah Kait Pulp & Paper (Warrants),
expiring 7/11/02 54,391 3
------------
122
------------
MERCHANDISING
Matahari Putra Prima (Foreign) 372,000 127
------------
MULTI-INDUSTRY
Bimantara Citra (Foreign) 160,000 163
------------
TELECOMMUNICATIONS
Telekomunikasi Indonesia (Foreign) 1,608,000 1,772
------------
10,528
------------
- --------------------------------------------------------------------------------
JAPAN (42.1%)
APPLIANCES & HOUSEHOLD DURABLES
Rinnai Corp. 160,700 2,688
------------
AUTOMOBILES
Asahi Tec Corp. 443,000 1,259
Nissan Motor Co. 1,000,000 5,963
Suzuki Motor Co. Ltd. 630,000 6,052
Toyota Motor Corp. 270,000 8,273
------------
21,547
------------
- --------------------------------------------------------------------------------
8
<PAGE>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
JAPAN (CONTINUED)
BUILDING MATERIALS & COMPONENTS
Sangetsu Co. Ltd. 147,000 U.S.$ 2,374
Sanwa Shutter Corp. Ltd. 492,000 3,504
Sanwa Shutter Corp. Ltd. (Warrants),
expiring 1/20/98 1,400 53
------------
5,931
------------
BUSINESS & PUBLIC SERVICES
Dai Nippon Printing Co. Ltd. 270,000 5,769
------------
CHEMICALS
Daicel Chemical Industries Ltd. 1,012,000 2,590
Fuji Photo Film Ltd. 222,000 9,156
Kaneka Corp. 949,000 6,051
Mitsubishi Chemical Industries 2,060,000 4,760
Nifco Inc. 330,000 2,320
Okura Industrial Co. Ltd. 434,000 1,290
Sekisui Chemical Co. 703,000 5,292
Shin-Etsu Polymer Co. Ltd. 15,000 61
------------
31,520
------------
CONSTRUCTION & HOUSING
Kyudenko Co. Ltd. 389,000 2,223
Obayashi Corp. 865,000 5,222
Sekisui House Ltd. 387,000 3,686
Taisei Corp. Ltd. 1,000,000 3,735
------------
14,866
------------
COSMETICS & TOILETRIES
Yamanouchi Pharmaceutical Co. 300,000 7,404
------------
DATA PROCESSING & REPRODUCTION
Fujitsu Ltd. 910,000 11,380
Nissha Printing 105,000 913
Ricoh Co. Ltd. 866,000 12,981
------------
25,274
------------
ELECTRICAL & ELECTRONICS
Canon, Inc. 450,000 13,155
Hitachi Ltd. 1,185,000 10,304
Kyocera Corp. 80,000 5,227
Matsushita Electric Industrial Co. Ltd. 562,000 10,146
NEC Corp. 925,000 11,261
Nintendo Ltd. 130,000 12,166
Sony Corp. 145,000 13,690
Stanley Electric Co. 690,000 2,994
Tokyo Electron Ltd. 214,000 13,062
Toshiba Corp. 1,730,000 8,768
------------
100,773
------------
ELECTRONIC COMPONENTS & INSTRUMENTS
Mitsumi Electric Co. Ltd. 423,000 8,933
Murata Manufacturing Co. 180,000 7,781
TDK Corp. 145,000 12,969
------------
29,683
------------
FINANCIAL SERVICES
Hitachi Credit Corp. 198,000 3,919
------------
HEALTH & PERSONAL CARE
Sankyo Co. Ltd. 326,000 11,285
------------
INDUSTRIAL COMPONENTS
Furakawa Electric Co. 1,083,000 5,426
------------
- --------------------------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
INSURANCE
Sumitomo Marine & Fire Co. 542,000 U.S.$ 3,748
------------
MACHINERY & ENGINEERING
Amada Co. Ltd. 817,000 4,729
Daifuku Co. Ltd. 531,000 3,742
Daikin Kogyo Co. 600,000 3,781
Fuji Machine Co. 329,000 11,934
Fujitec Co. Ltd. 400,000 4,174
Kurita Water Industries Ltd. 274,000 5,469
Mitsubishi Heavy Industries Ltd. 1,300,000 7,116
Nishio Rent All Co. 57,000 496
Nishio Rent All Co. (Warrants),
expiring 2/20/98 1,055 7
Tsubakimoto Chain Co. 872,000 3,553
------------
45,001
------------
MERCHANDISING
FamilyMart 87,200 3,813
------------
MISCELLANEOUS MATERIALS & COMMODITIES
Nippon Pillar Packing Co. 157,000 1,144
------------
MULTI-INDUSTRY
Lintec 150,000 2,609
------------
REAL ESTATE
Daibiru Corp. 38,000 441
Keihanshin Real Estate Co. 205,000 1,044
Mitsubishi Estate Co. Ltd. 390,000 5,684
------------
7,169
------------
RECREATION, OTHER CONSUMER GOODS
Yamaha Corp. 199,000 3,098
------------
TELECOMMUNICATIONS
Nippon Telephone &
Telegraph Corp. 1,032 9,487
------------
TEXTILES & APPAREL
Shimamura Co. Ltd. 78,900 2,287
------------
WHOLESALE & INTERNATIONAL TRADE
Inabata & Co. 406,000 2,256
------------
346,697
------------
- --------------------------------------------------------------------------------
KOREA (2.5%)
APPLIANCES & HOUSEHOLD DURABLES
Samsung Electronics Co. (Foreign) 57,197 5,529
------------
BANKING
Housing & Commercial Bank, Korea 89,340 1,514
Kookmin Bank GDR 90,309 1,129
------------
2,643
------------
METALS - STEEL
Pohang Iron & Steel Ltd. (Foreign) 500 39
Pohang Iron & Steel Ltd. ADR 61,690 1,588
------------
1,627
------------
TELECOMMUNICATIONS
LG Information & Communication
Ltd. 61,757 5,973
------------
UTILITIES - ELECTRICAL & GAS
Korea Electric Power Corp. (Foreign) 201,920 4,480
------------
20,252
------------
- --------------------------------------------------------------------------------
9
<PAGE>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
MALAYSIA (0.7%)
BANKING
Malayan Banking Bhd 635,000 U.S.$ 3,190
------------
ELECTRICAL & ELECTRONICS
Lityan Holdings Bhd 104,000 542
------------
ENERGY EQUIPMENT & SERVICES
Dialog Group Bhd 132,000 724
------------
LEISURE & TOURISM
Genting Bhd 522,000 1,625
------------
REAL ESTATE
Malaysian Resources Corp. Bhd 53,333 47
------------
6,128
------------
- --------------------------------------------------------------------------------
NEW ZEALAND (0.5%)
FOREST PRODUCTS & PAPER
Fletcher Challenge Forests 79,520 99
Fletcher Challenge Paper 1,988,000 3,923
------------
4,022
------------
- --------------------------------------------------------------------------------
PHILIPPINES (1.2%)
CONSTRUCTION & HOUSING
DMCI Holdings, Inc. 9,894,000 788
------------
MULTI-INDUSTRY
JG Summit Holdings 'B' 4,390,100 662
------------
REAL ESTATE
Ayala Land, Inc. 'B' 3,273,631 1,589
Fil-Estate Land Inc. 'B' 1,837,000 107
SM Prime Holdings, Inc. 'B' 9,637,680 1,788
------------
3,484
------------
TELECOMMUNICATIONS
Digital Telecommunications
Philippines, Inc. 30,651,000 2,043
------------
UTILITIES - ELECTRICAL & GAS
Manila Electric Co. 'B' 734,306 2,533
------------
9,510
------------
- --------------------------------------------------------------------------------
SINGAPORE (11.7%)
AEROSPACE & MILITARY TECHNOLOGY
Singapore Technologies
Aerospace Ltd. 374,000 1,115
------------
BANKING
Development Bank of Singapore
(Foreign) 1,868,000 19,053
Oversea-Chinese Banking Corp.
(Foreign) 2,789,200 19,330
United Overseas Bank (Foreign) 2,417,200 17,858
------------
56,241
------------
BROADCASTING & PUBLISHING
Singapore Press Holdings (Foreign) 439,000 6,458
------------
ELECTRICAL & ELECTRONICS
SM Summit Holdings Ltd. 918,000 435
Venture Manufacturing Ltd. 115,000 489
------------
924
------------
ELECTRONIC COMPONENTS & INSTRUMENTS
Advanced Systems Automation 42,000 120
Electronic Resources Ltd. 1,648,500 2,996
------------
3,116
------------
- --------------------------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS
Super Coffeemix Manufacturing Ltd. 1,932,000 U.S.$ 840
Want Want Holdings 1,474,800 3,746
------------
4,586
------------
MULTI-INDUSTRY
Natsteel Ltd. 3,665,000 10,016
Parkway Holdings 2,218,000 8,991
Wing Tai Holdings Ltd. 1,553,000 3,209
------------
22,216
------------
TRANSPORTATION - SHIPPING
Singapore Technologies Shipbuilding
& Engineering Ltd. 1,103,000 2,026
------------
96,682
------------
- --------------------------------------------------------------------------------
THAILAND (2.5%)
BANKING
Bangkok Bank Ltd. (Foreign) 1,901,800 9,693
Thai Farmers Bank Ltd. (Foreign) 1,924,000 6,731
------------
16,424
------------
BROADCASTING & PUBLISHING
Nation Multimedia Group (Foreign) 545,000 473
------------
CHEMICALS
National Petrochemical Ltd.
(Foreign) 107,600 68
------------
FINANCIAL SERVICES
Industrial Finance Corp.
(Foreign) 601,000 782
------------
REAL ESTATE
Central Pattana Co. Ltd. (Foreign) 25,834 44
Central Pattana Co., Ltd. 22,066 36
------------
80
------------
TELECOMMUNICATIONS
United Communications Industry
Ltd. (Foreign) 701,000 2,047
------------
UTILITIES - ELECTRICAL & GAS
Eastern Water Resources
Development and Management 257,000 347
------------
20,221
------------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost U.S.$805,910) 760,667
------------
- --------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
FIXED INCOME SECURITIES (0.0%)
- --------------------------------------------------------------------------------
INDIA (0.0%)
METALS - STEEL
Tata SSL Ltd. - New 14.00%,
12/6/02 (Cost U.S.$5) INR 3 3
------------
- --------------------------------------------------------------------------------
10
<PAGE>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (6.7%)
- --------------------------------------------------------------------------------
UNITED STATES (6.7%)
REPURCHASE AGREEMENT
Chase Securities, Inc., 5.75%,
dated 9/30/97, due
10/1/97, to be repurchased
at U.S.$54,674,
collateralized by United
States Treasury Notes,
5.875%, 11/15/05, valued at
U.S.$56,083
(Cost U.S.$54,665) U.S.$ 54,665 U.S.$ 54,665
------------
- --------------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (1.2%)
Australian Dollar AUD 361 262
Hong Kong Dollar HKD 275 36
Indian Rupee INR 300,970 8,322
Indonesian Rupiah IDR 50,365 15
Japanese Yen JPY 99,274 822
Malaysian Ringgit MYR 273 84
Philippine Peso PHP 4,085 118
Singapore Dollar SGD 148 97
South Korean Won KRW 200,658 219
Thai Baht THB 6,369 176
------------
(Cost U.S.$10,268) 10,151
------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(Cost U.S.$870,848) 825,486
------------
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.3%)
Other Assets U.S.$ 63,802
Liabilities (66,136) (2,334)
------------
- --------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 71,654,508 issued and outstanding
U.S.$0.01 par value shares (100,000,000 shares
authorized) U.S.$823,152
------------
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 11.49
------------
- --------------------------------------------------------------------------------
@ -- Value is less than U.S.$500.
* -- Advised by an affiliate.
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
NOTE: Prior government approval for foreign investments may be required
under certain circumstances in some emerging markets, and foreign
ownership limitations may also be imposed by the charters of
individual companies in emerging 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.
11
