<PAGE>
- --------------------------------------------------------------------------------
MORGAN STANLEY
ASIA-PACIFIC
FUND, INC.
- --------------------------------------------------------------------------------
THIRD QUARTER REPORT
SEPTEMBER 30, 1998
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
Barton M. Biggs
CHAIRMAN OF THE BOARD
OF DIRECTORS
Michael F. Klein
PRESIDENT AND DIRECTOR
Peter J. Chase
DIRECTOR
John W. Croghan
DIRECTOR
David B. Gill
DIRECTOR
Graham E. Jones
DIRECTOR
John A. Levin
DIRECTOR
William G. Morton, Jr.
DIRECTOR
Stefanie V. Chang
VICE PRESIDENT
Harold J. Schaaff, Jr.
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Valerie Y. Lewis
SECRETARY
Joanna M. Haigney
TREASURER
Belinda A. Brady
ASSISTANT TREASURER
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- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
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ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
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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
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LEGAL COUNSEL
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
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- --------------------------------------------------------------------------------
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.
<PAGE>
LETTER TO SHAREHOLDERS
- ------
For the nine months ended September 30, 1998, the Morgan Stanley Asia-Pacific
Fund, Inc. (the "Fund") had a total return, based on net asset value per share,
of -15.18% compared to its benchmark (as defined below) of -20.31%. For the
one year period ended September 30, 1998 and the period since the Fund's
commencement of operations on August 2, 1994 through September 30, 1998, the
Fund's total return, based on net asset value per share, was -35.04% and
- -37.65%, respectively, compared with -37.88% and -49.39 respectively, for the
benchmark. (The benchmark for investment performance is the weighted average of
the percentage change month-on-month of each of two Morgan Stanley Capital
International (MSCI) indices, Japan and All-Country Asia-Pacific 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, 1998, the closing
price of the Fund's shares on the New York Stock Exchange was $5 13/16
representing a 21.8% discount to the net asset value per share.
During the beginning of the third quarter 1998, the Japanese equity market
rebounded based on optimism that the joint currency intervention between the
U.S. and Japan signaled that Japan would take imminent action addressing their
ballooning non-performing loans held by financial institutions. These optimists
believed that the U.S. only agreed to the coordinated intervention to stem a
steadily weakening yen based on confidence that Japan's announcement of the
"Total Plan" and "Bridge Bank" would be rapidly implemented. Unfortunately,
this was not the case and in fact the general elections held in early July
challenged the existing government leadership. A huge turnout of 58.5% of
Japanese voters called for new leadership and Prime Minister Obuchi was elected.
In August, stemming from the collapse of the Russian economy and subsequent
sell-off in world equity markets, Japanese equities declined sharply. The free
market economy since the end of the Cold War which determined pricing of
financial assets around the world was abruptly put to question. From Asia and
Japan, a fierce deflationary spiral was exported globally and when compounded
with the political instability of leadership in both Japan, Russia and the U.S.,
financial assets had the highest volatility in recent history. Moreover,
Japan's domestic political turmoil did not allow Japan to show the necessary
leadership role in Asia at a critical time while the U.S. could do little to
help neighbors in Latin America as commodity prices and currencies collapsed.
This nightmarish vicious circle was punctuated by the near collapse of Long Term
Capital Management as the world's liquidity and credit squeeze accelerated.
Japan showed no signs of positive economic activity during the third quarter and
domestic demand came to a halt and was sucked into a deflationary vortex.
Official Government gross domestic product forecasts in a matter of weeks turned
from +1.9% growth to -1.8%, a slump of 3.7%, while the diffusion Index of
leading corporate manufacturers (September Bank of Japan survey) stood at a 5
year low of minus 51. These statistics rang alarm bells at the Bank of Japan
and the non-collateralized call rate was lowered to a historical low of 25 basis
points. Corporate earnings estimates were also negatively affected and downward
revisions were announced even by the best managed Japanese companies. The
international blue chips which supported the market and benefited from a weak
yen also began lowering earnings estimates because of the anticipated weakness
for demand of consumer goods in Europe and the U.S. Moreover, during the six
month fiscal reporting period ended September 30, 1998 the dramatic decline in
domestic equity prices led to huge "hidden losses" in the cross-holdings of
listed Japanese companies. Importantly, to many observers, the tug of war
between the acting Government and leading opposition parties regarding the use
of public funds for troubled Long Term Credit Bank became a metaphor for the
inability of the Government to implement critically necessary reform in Japan.
In such an environment the long term Japanese Government Bond yielded 70 basis
points in a flight to quality while the equity market fell to 12-year lows.
OUTLOOK
Previously, we believed that the key to the outlook for Japan was the effective
and immediate resolution for Japan's non-performing loans. Today, these
problems are pronounced by the global deflationary cycle, credit crunch and lack
of strong unified political leadership to tackle such problems. Moreover,
emerging economies such as Pakistan and India are exhibiting their anxiety over
weak local economics by acts of nuclear testing, terrorists bombing of the U.S.
Embassy in Africa, and North Korea has fired missiles over the Japanese Islands
for the first time in history.
We are hopeful that the G7 and IMF will begin addressing the mounting global
recession. Encouraging signs, such as Japan pledging $30 billion through the
Japan Import/Export Bank to South Asia, are beginning to emerge. However, as of
yet we see no concrete proposals which may resolve the growing global crisis in
both credit liquidity and deflationary spiral. While we believe that Japan will
eventually address the non-performing loans and will put forth new stimulus
programs to help the ailing economy, it will likely take some time to see a
positive impact to the real economy. The Japanese equity market has been in a
steady decline for almost 10 years and valuation measures such as price to book
and cash flow are compelling on a global and his-
2
<PAGE>
torical basis and are beginning to discount the severe economy. We therefore
believe the market will hover near the current 12-year lows and support will
emerge from domestic public pension funds and global investors which will look
to Japan for relative performance and Japan's negative correlation with
non-Japanese equity markets.
We are forecasting a "soft landing" for the U.S. economy. If our assumptions are
incorrect our portfolio strategy will need to remain flexible and shift to more
domestic oriented defensive sectors and lower our weight in international blue
chips.
The third quarter of 1998 was another difficult quarter for the Asian stock
markets as the MSCI All-Country Asia-Pacific Free ex-Japan Index fell 14.3%.
This performance did not materially differ from the quarterly returns for the
MSCI EAFE Index. Late in the quarter, when the U.S. and European markets went
through a particularly rough stretch, the Asian markets actually outperformed, a
phenomenon not seen for some time. A number of conditions, both technical and
fundamental, have coincided to create an environment in which Asia can perform
well in the near term. The paragraphs below outline these conditions,
requirements for sustained performance, the key risk factors and our portfolio
strategy.
Macroeconomic trends have improved in a number of the crisis countries (for
example, Thailand and South Korea) as current account balances have shifted into
surplus and foreign reserves have been rebuilt. Painful IMF programs stabilized
and then strengthened currencies in Thailand and South Korea, at the expense of
deep economic contractions. Currency stability subsequently allowed these
countries to relax monetary policy. For example, Korean won corporate bond
rates have fallen from 30%+ levels in December to just over 10% currently. Lower
interest rates and fiscal expansion will ultimately lead to improvements in
economic performance. Foreign direct investment, primarily in the form of
investments in existing companies, has improved domestic liquidity, highlighted
value in certain sectors and will help facilitate corporate restructuring.
One disappointing area has been the weak export performance among the Asian
countries following the devaluations. Conventional economics would have
suggested that exports would boom, as they did in Mexico following the 1995
devaluation. However, exports as measured in U.S. dollars have declined
year-on-year in most countries due to a decline in intra-Asian trade (including
trade with Japan) and declines in export prices (despite export volumes rising
in most cases). Volume exports to the U.S. and Europe have actually performed
reasonably well in 1998. Prices have been weak due to the number of crisis
countries involved; a single devaluing country might have increased exports but
region-wide competitive devaluations mitigated currency advantages. An
improvement in exports would definitely speed recovery in Asia, but this is not
our base case scenario. Our current strategy anticipates limited but positive
export growth from Asia which when coupled with a slow improvement in domestic
consumption and government spending should result in the first glimmer of gross
domestic product growth in selected countries.
In the countries most severely impacted by the Asian financial crisis, bank
recapitalization and corporate debt restructuring are necessary to sustain
strong market performance. In Korea, Thailand, Malaysia and Indonesia, banks
are the key financial intermediaries yet they are saddled with massive
non-performing loan portfolios. As Japan has demonstrated, insolvent banks are
unable to intermediate loans regardless of how low interest rates may be. Bank
recapitalization programs will include government financed capital injections,
schemes to transfer bad loans into separate vehicles and incentives to encourage
foreign and domestic capital injections. The Koreans are probably furthest
along in their bank recapitalization; the Thai government has designed a
sensible plan but implementation will take time. Banks also need strengthened
bankruptcy and foreclosure laws to force large corporate borrowers to
restructure their debt. Passage of a foreclosure law, probably in January, will
be a key milestone for the Thai market. Foreign banks will also have to forgive
some debt as part of this debt restructuring process. In general, we expect
Thailand and South Korea, which have been most diligent in complying with the
IMF reforms, to achieve the needed restructuring more quickly than Indonesia
whose truculence with the IMF has delayed progress.
We continue to believe that asset price corrections are not over in Hong Kong
and that the key service sectors of finance and port services continue to face
difficult conditions. Costs of doing business in Hong Kong, such as container
handling charges at the port, are very high by regional standards yet volumes
are weak. Deflationary forces remain strong due to the strength of the Hong
Kong dollar relative to regional currencies. We do not expect currency
devaluation but we do expect an extended recession, outright price deflation and
persistent high interest rates. Recent yen strength has reduced pressure on the
currency and should lead to lower rates. Given this development we have
increased our property and finance exposure, but we remain underweight those
sectors and the market.
We have maintained an overweight position in Taiwan with an emphasis on
technology stocks for most of the year. These positions were based on bottom-up
work at the individual company level; we met impressive, professional management
teams with tangible business plans who manufacture strong, niche products with
good growth prospects. While these positions have outperformed year-to-date,
the technology sector has re-
3
<PAGE>
cently suffered relatively from downward revisions of expectations of global
demand. We are vigilantly monitoring these companies for signs of erosion in
their operating performance but currently believe that we hold a technology
portfolio which should outperform.
Last quarter we expressed our reservations about growth in China. Short-term
growth prospects have improved due to heavy government spending on
infrastructure. It is now likely that the government will report gross domestic
product growth numbers near its target for the year. Unfortunately, due to this
short term obsession with growth, the government has postponed its state-owned
enterprise, bank and housing reforms proposed in the first quarter. These
reforms would have placed long term growth on a more sustainable, higher quality
level but would have reduced growth in the short run. In addition, prices are
deflating in China whether measured on a consumer or producer price basis.
Interest rate cuts have not kept pace with deflation; real rates have
consequently remained high despite several cuts this year. Given capital flight
and nominal rates near U.S. dollar rates, it is difficult for the Chinese to cut
rates faster than the Fed. It is unlikely that a mix of state sponsored growth
and high real rates will be conducive to earnings prospects of most listed
Chinese companies. We continue, however, to closely monitor individual Chinese
companies, regularly meeting with management and reviewing financial statements
to maintain our research base on the best Chinese companies. China's actions
during the Asian crisis have furthered its economic leadership of the region,
and its companies still benefit from cheap labor and an immense domestic market.
When the macro-economic situation stabilizes, we will be in a position to
quickly accumulate the Chinese companies likely to lead growth in the world's
largest market.
Malaysia has chosen to opt out of the conventional IMF remedies for the
financial crisis and has implemented capital controls while pursuing its own
solutions. Malaysia has a very large stock of internal debt and had followed a
"shadow IMF" program of tight money and tight fiscal policy in the first half of
1998. These policies proved to be very painful and during the summer the
government began to ease monetary policy. When this easing led to ringgit
weakness, the government imposed capital controls and adopted a policy of
aggressive monetary and fiscal expansion. These policies would have accelerated
ringgit weakness if the currency were tradable. The capital controls have
frozen foreign portfolio investors in Malaysia for at least a one-year holding
period. In this environment, we have focused on companies with the strongest
market positions or franchises, preferably with some dividend support.
Risk factors faced by the markets throughout the region include a potential U.S.
economic slowdown, which would hurt exports to the U.S., a continued global
credit contraction, which could inhibit debt refinancing or limit the financing
of future growth, and a resumption of yen weakness, which could increase
volatility in non-Japan Asian currencies. Upside surprises could include a
successful recapitalization of Japanese banks or a strong economic recovery in
Japan, which would drive non-Japan Asian exports to Japan.
Year-to-date we have run a fairly defensive portfolio, emphasizing consumer and
technology companies and utilities while limiting our exposure to banks and
property stocks. While banking and property troubles are not yet behind us,
enough positive trends are forming that we have begun to increase our bank and
property positions selectively. We are focusing more of our research time and
company visits on names that will benefit from lower interest rates and
corporate or financial restructuring. We believe that 1999 will present us with
the opportunity to invest in a number of corporate recapitalizations across the
crisis economies and we want to make sure that we have identified the right
franchises in advance.
On January 23, 1998, the Fund commenced a share repurchase program of its Common
Stock for purposes of enhancing shareholder value and reducing the discount at
which the Fund's shares traded from their net asset value. From that date
through September 30, 1998, the Fund repurchased 3,327,434 shares of its Common
Stock at an average price per share of $6.48 and an average discount of 17.53%
per share. The Fund will continue to repurchase its outstanding shares at such
time and in such amounts as it believes will further the accomplishments of the
foregoing objectives, subject to review by the Board of Directors. We will
update you on the progress of the repurchase program in future shareholder
reports.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
October 1998
4
<PAGE>
Morgan Stanley Asia-Pacific Fund, Inc.
Investment Summary as of September 30, 1998 (Unaudited)
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION TOTAL RETURN (%)
---------------------------------------------------------------------
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 -21.75% -- -15.18% -- -20.31% --
One Year -36.44 -36.44% -35.04 -35.04% -37.88 -37.88%
Since Inception* -51.23+ -15.84+ -37.65+ -10.73+ -49.39+ -15.09+
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
[GRAPH]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS
ENDED
SEPTEMBER 30,
1994* 1995 1996 1997 1998
------- ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value Per Share. . . . . . . . $ 13.20 $ 14.34 $11.95 $ 8.77 $ 7.43
Market Value Per Share . . . . . . . . . $ 12.25 $ 13.33 $ 9.75 $ 7.44 $ 5.81
Premium/(Discount) . . . . . . . . . . . -7.2% -7.0% -18.4% -15.2% -21.8%
Income Dividends . . . . . . . . . . . . $ 0.04 $ 0.05 $ 0.61 $ 0.02 $ 0.01
Capital Gains Distributions. . . . . . . $ 0.01 $ 0.02 -- -- --
Fund Total Return (2). . . . . . . . . . -5.94% 9.24% -2.87% -26.36% -15.18%
Index Total Return (3) . . . . . . . . . -5.90% 0.87% -9.17% -28.09% -20.31%
</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 All-Country Asia-Pacific Free
ex-Japan, where the weights are based on the respective market
capitalizations of these indices at the beginning of each 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 Investment Summary as of September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIVERSIFICATION OF TOTAL INVESTMENTS
[CHART]
<TABLE>
<S> <C>
Equity Securities (99.1%)
Short-Term Investments (0.9%)
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
[CHART]
<TABLE>
<S> <C>
Telecommunications (4.2%)
Other (45.8%)
Automobiles (5.2%)
Banking (3.0%)
Beverages & Tobacco (3.5%)
Chemicals (5.5%)
Electrical & Electronics (12.7%)
Electronic Components & Instruments (6.3%)
Financial Services (3.0%)
Health & Personal Care (4.5%)
Machinery & Engineering (6.3%)
</TABLE>
- --------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
[CHART]
<TABLE>
<S> <C>
Hong Kong (5.9%)
Australia (5.2%)
Singapore (4.0%)
Malaysia (2.6%)
Pakistan (2.4%)
Thailand (1.9%)
Indonesia (1.4%)
Philippines (0.7%)
Other (19.1%)
Japan (45.6%)
India (11.2%)
</TABLE>
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TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<S> <C>
1. Bharat Heavy Electricals Ltd. (India) 2.8%
2. Housing Development Finance Corp., Ltd. (India) 2.3
3. Nintendo Ltd. (Japan) 2.2
4. Sony Corp. (Japan) 1.8
5. Container Corp. of India Ltd. (India) 1.7
6. Hong Kong Telecommunications Ltd. (Hong Kong) 1.6
7. Hero Honda Ltd. (India) 1.6
8. BEC World Public Co., Ltd. (Foreign) (Thailand) 1.5
9. National Australia Bank Ltd. (Australia) 1.5
10. Fuji Photo Film Ltd. (Japan) 1.5
-----
18.5%
-----
-----
</TABLE>
* Excludes short-term investments.
6
<PAGE>
FINANCIAL STATEMENTS
- -------
STATEMENT OF NET ASSETS (UNAUDITED)
- -------
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (81.5%)
(Unless otherwise noted)
- --------------------------------------------------------------------------------
AUSTRALIA (5.2%)
BANKING
National Australia Bank Ltd. 636,000 U.S.$ 7,692
Westpac Banking Corp., Ltd. 1,054,000 5,805
------------
13,497
------------
BROADCASTING & PUBLISHING
News Corp., Ltd. 527,600 3,405
------------
REAL ESTATE
Lend Lease Corp., Ltd. 109,000 2,328
------------
TELECOMMUNICATIONS
Telstra Corp., Ltd. 1,798,000 5,041
------------
TRANSPORTATION -- ROAD & RAIL
Brambles Industries Ltd. 104,200 2,251
------------
26,522
------------
- --------------------------------------------------------------------------------
HONG KONG (5.9%)
BROADCASTING & PUBLISHING
Television Broadcasts Ltd. 901,000 2,302
------------
ELECTRICAL & ELECTRONICS
VTech Holdings Ltd. 258,000 1,029
------------
MULTI-INDUSTRY
Hutchison Whampoa Ltd. 528,200 2,781
------------
REAL ESTATE
Li & Fung Ltd. 1,060,000 1,710
------------
TELECOMMUNICATIONS
Hong Kong Telecommunications Ltd. 4,056,500 7,983
Smartone Telecommunications 486,000 1,327
------------
9,310
------------
UTILITIES -- ELECTRICAL & GAS
CLP Holdings Ltd. 935,000 4,561
Hong Kong & China Gas Co., Ltd. 2,803,300 3,437
Hong Kong Electric Holdings Ltd. 1,365,000 4,695
------------
12,693
------------
29,825
------------
- --------------------------------------------------------------------------------
INDIA (11.2%)
APPLIANCES & HOUSEHOLD DURABLES
Supreme Industries Ltd. 150 1
------------
AUTOMOBILES
Autolite Ltd. 500 --@
Autopal Industries Ltd. 100 --@
Bajaj Auto Ltd. 250 4
Bajaj Tempo Ltd. 707 2
Bajaj Tempo Ltd. (Rights) 1,717 1
Escorts Ltd. 1,450 3
Hero Honda Ltd. 526,526 7,929
MRF Ltd. 18,000 680
Punjab Tractors Ltd. 80,900 1,558
------------
10,177
------------
- --------------------------------------------------------------------------------
BANKING
State Bank of India Ltd. 11,312 53
------------
BEVERAGES & TOBACCO
ITC Ltd. 17,153 279
------------
BUILDING MATERIALS & COMPONENTS
Associated Cement Co., Ltd. 876 23
Saurashtra Cement & Chemicals Ltd. 50 --@
23
------------
CHEMICALS
Birla VXL Ltd. 25 --@
Gujarat Narmada Valley
Fertilizers Co. Ltd. GDR 324 --@
Jaysynth Dyechem Ltd. 400 --@
------------
--@
------------
CONSTRUCTION & HOUSING
Alacrity Housing Ltd. 127,600 11
Hindustan Construction Ltd. 2,300 1
Hindustan Development Corp., Ltd. 100 --@
------------
12
------------
ELECTRONIC COMPONENTS & INSTRUMENTS
Infosys Technology Ltd. 44,200 2,614
------------
ENERGY EQUIPMENT & SERVICES
Bharat Heavy Electricals Ltd. 2,110,800 13,989
------------
ENERGY SOURCES
Esab India Ltd. 65 --@
------------
FINANCIAL SERVICES
Housing Development Finance
Corp., Ltd. 206,452 11,767
Industrial Finance Corp.,
(India) Ltd. 1,500 1
UTI-MasterShares Ltd. 15,600 4
------------
11,772
------------
FOOD & HOUSEHOLD PRODUCTS
Smithkline Beecham
Consumer Health Care Ltd. 384,600 4,351
------------
INDUSTRIAL COMPONENTS
Apollo Tyres Ltd. 2,900 5
Apollo Tyres Ltd. (Warrants) 2,150 --
------------
5
------------
LEISURE & TOURISM
ITC Hotels Ltd. 550 2
------------
MACHINERY & ENGINEERING
Crompton Greaves Ltd. 50 --@
DGP Windsor India Ltd. 203,900 81
Veejay Lakshmi Engineering Ltd. 149,100 79
------------
160
------------
METALS -- STEEL
Tata Iron & Steel Co., Ltd. 150 --@
Tata SSL Ltd. - New 50 --@
------------
--@
------------
MULTI-INDUSTRY
(a)Morgan Stanley Growth Fund 32,888,250 4,651
------------
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INDIA (CONTINUED)
RECREATION -- OTHER CONSUMER GOODS
Wimco Ltd. 300 U.S.$ --@
------------
TEXTILES & APPAREL
G.T.N. Textiles Ltd. 14,300 10
J.K. Synthetics Ltd. 2,984 --@
Mahavir Spinning Mills Ltd. 100 --@
Raymond Ltd. 136 --@
Viniyoga Clothes Ltd. 5,400 --
------------
10
------------
TRANSPORTATION -- ROAD & RAIL
Container Corp. of India Ltd. 1,059,600 8,741
------------
TRANSPORTATION -- SHIPPING
Great Eastern Shipping Ltd. 2,640 1
------------
56,841
------------
- --------------------------------------------------------------------------------
INDONESIA (1.4%)
BEVERAGES & TOBACCO
Bat Indonesia 294,500 410
Gudang Garam 4,441,500 2,377
------------
2,787
------------
FOOD & HOUSEHOLD PRODUCTS
Unilever Indonesia 2,413,500 4,083
------------
HEALTH & PERSONAL CARE
SQUIBB Indonesia 49,000 33
------------
6,903
------------
- --------------------------------------------------------------------------------
JAPAN (45.6%)
APPLIANCES & HOUSEHOLD DURABLES
Rinnai Corp. 160,700 2,519
------------
AUTOMOBILES
Nissan Motor Co. 1,620,000 4,509
Suzuki Motor Co., Ltd. 570,000 5,737
Toyota Motor Corp. 270,000 6,032
------------
16,278
------------
BUILDING MATERIALS & COMPONENTS
Sangetsu Co., Ltd. 147,000 1,685
Sanwa Shutter Corp., Ltd. 582,000 2,208
------------
3,893
------------
BUSINESS & PUBLIC SERVICES
Dai Nippon Printing Co., Ltd. 270,000 3,465
------------
CHEMICALS
Daicel Chemical Industries Ltd. 1,440,000 2,299
Fuji Photo Film Ltd. 222,000 7,643
Kaneka Corp. 939,000 5,275
Mitsubishi Chemical Industries 1,360,000 2,610
Nifco, Inc. 330,000 2,632
Okura Industrial Co., Ltd. 407,000 793
Sekisui Chemical Co. 623,000 2,364
Shin-Etsu Polymer Co., Ltd. 15,000 57
------------
23,673
------------
CONSTRUCTION & HOUSING
Kyudenko Co., Ltd. 389,000 2,308
Sekisui House Ltd. 387,000 3,144
------------
5,452
------------
DATA PROCESSING & REPRODUCTION
Fujitsu Ltd. 760,000 6,569
Nissha Printing Co., Ltd. 105,000 615
Ricoh Co. Ltd. 816,000 7,531
------------
14,715
------------
ELECTRICAL & ELECTRONICS
Canon, Inc. 362,000 7,345
Hitachi Ltd. 1,085,000 4,768
Kyocera Corp. 100,000 4,365
Matsushita Electric Industrial
Co., Ltd. 482,000 6,549
NEC Corp. 895,000 5,802
Nintendo Ltd. 120,000 11,286
Sony Corp. 130,000 9,036
Tokyo Electron Ltd. 163,000 3,976
Toshiba Corp. 1,975,000 7,103
------------
60,230
------------
ELECTRONIC COMPONENTS & INSTRUMENTS
Mitsumi Electric Co., Ltd. 403,000 7,365
Murata Manufacturing Co. 173,000 5,842
TDK Corp. 103,000 7,016
------------
20,223
------------
FINANCIAL SERVICES
Hitachi Credit Corp. 218,000 3,401
------------
HEALTH & PERSONAL CARE
Ono Pharmaceutical Co., Ltd. 100,000 2,403
Sankyo Co., Ltd. 333,000 7,366
Yamanouchi Pharmaceutical Co., Ltd. 315,000 6,783
------------
16,552
------------
INDUSTRIAL COMPONENTS
Furakawa Electric Co. 1,083,000 3,078
------------
INSURANCE
Sumitomo Marine & Fire Co. 492,000 2,360
------------
MACHINERY & ENGINEERING
Amada Co., Ltd. 882,000 4,070
Daifuku Co., Ltd. 626,000 2,311
Daikin Kogyo Co. 623,000 4,340
Fuji Machine Co. 253,000 6,634
Fujitec Co., Ltd. 510,000 2,607
Kurita Water Industries Ltd. 304,000 3,162
Mitsubishi Heavy Industries Ltd. 1,300,000 4,447
Tsubakimoto Chain Co. 872,000 1,999
------------
29,570
------------
MERCHANDISING
Family Mart Co., Ltd. 87,200 3,334
------------
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</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (CONTINUED)
MISCELLANEOUS MATERIALS & COMMODITIES
Autobacs Seven Co. 50,000 U.S.$ 1,329
Nippon Pillar Packing Co. 157,000 350
-------------
1,679
-------------
MULTI-INDUSTRY
Lintec Corp. 215,000 1,765
-------------
REAL ESTATE
Keihanshin Real Estate Co. 205,000 661
Mitsubishi Estate Co. Ltd. 415,000 2,714
-------------
3,375
-------------
RECREATION -- OTHER CONSUMER GOODS
Casio Computer Co., Ltd. 522,000 3,330
Yamaha Corp. 299,000 2,256
-------------
5,586
-------------
TELECOMMUNICATIONS
Nippon Telephone & Telegraph Corp. 932 6,793
-------------
TEXTILES & APPAREL
Shimamura Co., Ltd. 78,900 2,658
-------------
WHOLESALE & INTERNATIONAL TRADE
Inabata & Co. 406,000 898
-------------
231,497
-------------
- --------------------------------------------------------------------------------
MALAYSIA (2.6%)
BEVERAGES & TOBACCO
Carlsberg Brewery (Malaysia) Bhd 1,712,000 3,343
Guinness Anchor Bhd 3,592,000 2,360
R.J. Reynolds Bhd 1,714,000 1,183
Rothmans of Pall Mall Bhd 616,600 2,408
-------------
9,294
-------------
FOOD & HOUSEHOLD PRODUCTS
Nestle Bhd 1,194,000 3,866
-------------
13,160
-------------
- --------------------------------------------------------------------------------
NEW ZEALAND (0.3%)
FOREST PRODUCTS & PAPER
Fletcher Challenge Forests 79,520 16
Fletcher Challenge Paper 1,988,000 995
-------------
1,011
-------------
TELECOMMUNICATIONS
Telecom Corp. of New Zealand Ltd. 246,000 437
-------------
1,448
-------------
- --------------------------------------------------------------------------------
PAKISTAN (2.3%)
BANKING
Askari Bank 2,843,925 790
-------------
CHEMICALS
Engro Chemicals Ltd. 916,490 1,103
Fauji Fertilizer Co., Ltd. 1,124,000 1,050
ICI Pakistan Ltd. 4,500,000 1,076
-------------
3,229
-------------
- --------------------------------------------------------------------------------
ENERGY SOURCES
Shell Pakistan Ltd. 499,600 1,707
-------------
HEALTH & PERSONAL CARE
Lever Brothers Pakistan Ltd. 442,880 6,217
-------------
11,943
-------------
- --------------------------------------------------------------------------------
PHILIPPINES (0.7%)
BEVERAGES & TOBACCO
LA Tondena Distillers, Inc. 2,652,600 594
San Miguel Corp. 'B' 891,200 1,151
-------------
1,745
-------------
ELECTRONIC COMPONENTS & INSTRUMENTS
Ionics Circuit, Inc. 1,521,300 264
Music Corp. 4,330,600 117
-------------
381
-------------
REAL ESTATE
Ayala Land, Inc. 'B' 1 --@
SM Prime Holdings, Inc. 'B' 9,637,680 1,190
-------------
1,190
-------------
3,316
-------------
- --------------------------------------------------------------------------------
SINGAPORE (4.0%)
BEVERAGES & TOBACCO
Rothmans Industries Ltd. 838,000 3,552
-------------
BUSINESS & PUBLIC SERVICES
Informatics Holdings Ltd. 2,139,000 640
-------------
ELECTRICAL & ELECTRONICS
Venture Manufacturing Ltd. 693,000 2,136
-------------
ELECTRONIC COMPONENTS & INSTRUMENTS
Creative Technology Ltd. 136,400 1,228
Natsteel Electronics Ltd. 3,201,000 7,020
-------------
8,248
-------------
MACHINERY & ENGINEERING
Singapore Technologies Engineering Ltd. 2,189,000 2,102
-------------
TRANSPORTATION -- AIRLINES
Singapore Airlines Ltd. 659,000 3,614
-------------
20,292
-------------
- --------------------------------------------------------------------------------
SRI LANKA (0.2%)
CHEMICALS
Lanka Lubricants Ltd. 1,800,000 1,091
-------------
- --------------------------------------------------------------------------------
THAILAND (1.9%)
BROADCASTING & PUBLISHING
BEC World Public Co., Ltd.
(Foreign) 1,629,400 7,745
Grammy Entertainment Public
Co., Ltd. (Foreign) 259,200 793
-------------
8,538
-------------
- --------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
THAILAND (CONTINUED)
ELECTRICAL & ELECTRONICS
GSS Array Technology Public
Co., Ltd. (Foreign) 466,200 U.S.$ 884
-------------
ELECTRONIC COMPONENTS & INSTRUMENTS
Delta Electronics Public Co.,
Ltd. (Foreign) 82,500 476
-------------
9,898
-------------
- --------------------------------------------------------------------------------
UNITED KINGDOM (0.2%)
BANKING
HSBC Holdings plc 60,600 1,111
-------------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost U.S.$562,116) 413,847
-------------
- --------------------------------------------------------------------------------
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.$2) INR 2 2
-------------
- --------------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (0.7%)
Australian Dollar AUD 60 35
Hong Kong Dollar HKD 496 64
Indian Rupee INR 54,844 1,292
Japanese Yen JPY 2,615 19
Malaysian Ringgit MYR 671 160
New Zealand Dollar NZD 28 14
Pakistani Rupee PKR 71,175 1,315
Singapore Dollar SGD 1,303 773
-------------
(Cost U.S.$3,948) 3,672
-------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (82.2%)
(Cost U.S.$566,066) 417,521
-------------
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (17.8%)
Other Assets U.S.$ 94,507
Liabilities (4,318) 90,189
-------------- -------------
- --------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 68,333,074 issued and
outstanding U.S.$0.01 par value
shares (100,000,000 shares authorized) U.S.$ 507,710
-------------
-------------
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 7.43
-------------
-------------
- --------------------------------------------------------------------------------
</TABLE>
@ Value is less than U.S.$500.
(a) The Fund is advised by an affiliate.
GDR Global Depositary Receipt
NOTE: Prior governmental 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.
- --------------------------------------------------------------------------------